Document:

EXHIBIT
10.1

 

DEVELOPMENT AGREEMENT

 

BETWEEN

 

UNITED PROPERTIES INVESTMENT
LLC

 

AND

 

GRANITE CITY FOOD &
BREWERY, LTD.

 

April 30, 2008

 

 

DEVELOPMENT AGREEMENT

 

THIS DEVELOPMENT AGREEMENT
(hereinafter referred to as this “Agreement”), made, entered into and effective
this 30th day of April, 2008, by and between GRANITE CITY FOOD &
BREWERY, LTD., a Minnesota corporation, hereinafter referred to as “Granite
City”, and UNITED PROPERTIES INVESTMENT LLC, a Minnesota limited liability
company, hereinafter referred to as “Developer.”

 

WITNESSETH:

 

WHEREAS, Granite City operates
casual dining restaurants featuring on-premises breweries under the name
“Granite City Food & Brewery®”; and

 

WHEREAS, Granite City desires
to enter into a development agreement with Developer for the purpose of
Developer building such facilities and leasing them to Granite City; and

 

WHEREAS, Developer desires to
construct and develop Granite City Food & Brewery restaurants (each a
“Restaurant” and in the aggregate, the “Project”) at locations as determined by
Granite City and Developer; and

 

WHEREAS, Granite City is
willing to provide Developer with building plans and specifications and
construction management expertise about the Granite City Food &
Brewery Restaurants that has been developed by Granite City; and

 

WHEREAS, Developer shall
provide human resources and expertise to finance, construct and develop the
Restaurants;

 

NOW, THEREFORE, in
consideration of the mutual promises and covenants set forth in this Agreement
and for other good and valuable consideration, the parties hereby contract as
follows:

 

SECTION 1

DEVELOPMENT SERVICES

 

1.1                                 Developer
shall perform all services relating to the development of the Restaurants,
oversee the construction of each Restaurant, and perform such services and
carry out such responsibilities with respect to the Restaurants as are set
forth herein, and such additional duties and responsibilities as are reasonably
within the general scope of such services and responsibilities.

 

1.2                                 Developer’s
services shall consist of the duties set forth in the following subparagraphs
of this Section 1.2 and as provided elsewhere in this Agreement:

 

(a)                                Developer
shall be responsible for developing and constructing all elements of the
Restaurant except for the Tenant’s Work and except for any task specifically
allocated to Granite City in Section 2.1 herein.

 

2

 

(b)                               Work
with Granite City to establish mutually acceptable Project cost goals and to
establish a Total Project Cost (as defined in Section 7.1(c) herein)
for each Restaurant approved by Granite City (“Approved Total Project Cost”).

 

(c)                                Negotiate
the terms and conditions of the purchase agreements or ground lease agreements
between Developer and land owners to be used to acquire all properties related
to the development (“Land Agreement”).

 

(i)                                     Prior
to negotiating a Land Agreement for a Restaurant site, Developer shall consult
with Granite City concerning the basic terms and conditions of such
agreement.  The final Land Agreement
shall be subject to the written consent of Granite City which shall not be
unreasonably withheld.

 

(ii)                                  Developer
shall provide Granite City copies of the following documents prior to closing
the Land Agreement for such property for each Restaurant:

 

(1)                                  Title
Insurance Commitment and copies of all documents constituting an exception to
title.

 

(2)                                  Survey
meeting ALTA/ACSM Land Title Standards, whenever possible, and if not possible,
such surveys as can be procured as close to such standards as possible at
reasonable cost.

 

(3)                                  All
environmental audits, tests and reports.

 

(4)                                  All
geotechnical investigation reports.

 

(iii)                               Enter
into the Lease with Granite City or with a subsidiary of Granite City
guarantied by Granite City pursuant to Section 7 herein.  The Lease shall be based on the standard
Granite City form to be negotiated and agreed upon by the parties and attached
as Exhibit A, all post-execution of this Agreement.

 

(iv)                              Close
the Land Agreement and thereby acquire the Restaurant site in time to commence
construction per the Development Schedule in Section 3 herein.

 

(d)                               Negotiate
the terms and conditions of a Guaranteed Maximum Cost construction contract
between Developer and a general contractor (“Construction Contract”) after
obtaining bids on the construction of the Restaurant from three general
contractors for the construction work being performed by Developer at a
specific site (“Contractor’s Work”).  The
total construction cost of Contractor’s Work shall be limited to a “Guaranteed
Maximum Cost.”  Prior to negotiating a
Construction Contract, the Developer 

 

 

shall consult with
Granite City concerning the basic terms and conditions of such contract, and
perform appropriate financial due diligence. 
The final Construction Contract shall be subject to the written consent
of Granite City not to be unreasonably withheld including but not limited to
approval of all contractor warranties, allowable costs, disallowed costs, fee
amount, overhead amount, insurance requirements, indemnities, and “Completion
Date.”  The Developer shall cause the
general contractor to coordinate Tenant’s Work as set forth on Exhibit C in conjunction with Contractor’s Work to
achieve substantial completion.  Provided
the General Contractor has adequate expertise in Tenant Work, Developer and
Granite City anticipate to attempt to utilize the same contractor for
Contractor’s Work and Tenant’s Work with separate contracts between the
contractor and each party for the specific work.  The Developer may select a related party as
the general contractor but only with Granite City’s prior written consent.

 

(e)                                The
Restaurant Project will be deemed substantially complete when
(i) governmental approvals, permits and inspections have been achieved or
passed for Contractor’s Work, and (ii) the only legal or functional
impediment to Granite City conducting its Restaurant operations in the
Restaurant is completion of the Tenants Work, and (iii) when the
Restaurant Project’s external and internal appearance is appropriate for public
operations; subject to minor punchlist items to be completed during the
completion of the Tenants Work.  The
parties shall discuss the selection of each general contractor prior to
selection and such general contractor shall be subject to Granite City’s
written approval which shall not be unreasonably withheld.

 

(f)                                  Consult
with Granite City prior to entering into any Construction Contract as to which
contracts Granite City believes should be awarded on a competitive bidding
process, not to require acceptance of the lowest bid and further to provide for
such bidding process.  Developer, through
its Project Manager, will obtain at least three competitive bids for each site.

 

(g)                               Consult
with Granite City as to which furniture, fixtures and equipment shall be
included or excluded from the Construction Contract.

 

(h)                               Determine
local code requirements in order to assure that such code requirements are
satisfied by the plans and specifications referenced in the initial request for
construction bids and construction contracts (as opposed to requiring change
orders).

 

(i)                                   Negotiate
the terms and conditions of a contract with an architectural firm, which firm
and contract is acceptable to Granite City, such contract shall include
provisions to provide final drawings and construction plans and specifications
for each Restaurant.  Developer shall pay
the architect’s fee which shall be part of the Total Project Cost.  Developer shall be entitled to utilize the
plans and specifications now and in the future for the Project.  Granite City shall own exclusive rights in
the plans and specifications for the Restaurants, and 

 

 

shall own the
plans and specifications for purposes of constructing the Tenant’s Work on each
Restaurant and for purposes of being the sole party authorized to permit use of
the plans and specifications or modifications thereof at other sites (subject
to architect’s rights to the plans and specifications which the parties will
try to minimize in negotiations). 
Granite City shall advise Developer on various final plan details and
site plans, and the final construction plans and specifications shall be
subject to Granite City’s written approval. 
Such plans and specifications shall not be modified, supplemented, or
amended without Granite City’s prior written consent and approval; provided,
however, that Developer shall be allowed to amend non-material items throughout
the period of construction, if such item would not have a material effect on
the operation of the Restaurant and if such change would not increase the
construction cost of the Project by more than $1,000 for any single amendment
nor by more than $5,000 for all such amendments collectively.

 

(j)                                   Negotiate
the terms and conditions of other necessary and appropriate contracts between
Developer and contractors and professionals (i.e. appraisers, soil engineers,
environmental engineers, civil engineers, etc.) as required to complete
facilities.  Developer shall require
(i) the general contractor to carry and maintain adequate builder’s risk
insurance; (ii) all such contractors to carry and maintain adequate
general liability insurance,  and
(iii) professionals to have adequate liability and errors and omissions
insurance, and all such contracts shall have adequate indemnity and insurance
provisions so as to protect both Developer and Granite City from errors and
omissions and negligent acts by such contractors and professionals.

 

(k)                                Secure
all financing and funds necessary to fund the Total Project Cost.

 

(l)                                   Coordinate
with the project engineers and architects obtaining the approvals needed from
local, state, and federal, governmental units and agencies as required to
obtain all needed permits for all Restaurant facilities and improvements.  Developer shall periodically review with
Granite City any design or site plan negotiations with such governmental units
and agencies and all final agreements regarding site plans shall be subject to
Granite City’s written approval which shall not be unreasonably withheld.

 

(m)                             Provide
a secure, web-based application that provides real-time project status,
expected completion date and project management tools to allow Granite City to
monitor the Project from the Internet.

 

(n)                               Approval
or Disapproval of any Restaurant site.

 

(o)                               Approval
or Disapproval of the Total Project Cost.

 

(p)                               Provide
periodic cost estimates to Granite City for completion of facilities, and use
reasonable efforts to cause revisions to be made to plans and 

 

 

specifications
which are approved by Granite City to cause costs to be equal to or less than
the Guaranteed Maximum Cost.

 

(q)                               Conduct
meetings pursuant to a construction strip schedule with any and all architects,
engineers, contractors, consultants, suppliers, Granite City, and all other
involved individuals and entities.

 

(r)                                  Coordinate
and communicate development activities between all parties, contractors,
governmental agencies, representatives, and Granite City.

 

(s)                                Assist
in supervising construction including consultation with contractors,
architects, engineers, Granite City and all other involved individuals and
entities.

 

(t)                                  Permit
periodic formal inspections of the construction process and Project by Granite
City and its agents at such times and frequency as Granite City may require.

 

(u)                               Perform
and observe in timely fashion each and all of its covenants conditions,
obligations and agreements under the construction contract in accordance with
the terms and conditions thereof.

 

(v)                               Promptly
notify Granite City of any default or breach of or under the Construction
Contract by any party thereto or of any failure of performance or other
condition that with the giving of notice or the passage of time, or both, would
become a default.

 

(w)                             Coordinate
payments to contractors and suppliers and assist in making recommendations for
payment for dispute work.

 

(x)                                 Arrange
for the construction of required public infrastructure (sewers, streets, etc.)
by governmental bodies and advise Granite City as to any estimated special
assessments which need to be taken into account in Granite City’s budget.

 

(y)                               Assemble
all Project documents and records including, but not limited to, guarantees,
warranties, lien releases, operating manuals, drawings, and other documents
referred to in the specifications of the facilities.

 

(z)                                 Prepare
punch lists with Granite City upon substantial completion of each facility and
supervise corrections of the items and work on such punchlists pending final
completion of each facility.

 

(aa)                         Provide
timely reporting of Project status to all parties.  Developer acknowledges that it is critical to
deliver each Restaurant substantially completed by the construction contract
Completion Date because Granite City (i) will expend substantial amounts
for the purchase of furniture, fixtures, and equipment which will be delivered
and paid for at a time that is prior to the Completion Date 

 

 

and
(ii) will, at significant cost, hire and train a substantial number of
employees some of whom will have to be paid whether or not the Restaurant is
substantially complete on the Completion Date.

 

(bb)                          Developer
shall be obligated to deliver the Restaurant substantially complete by the
Completion Date subject to Unavoidable Delay. 
Unavoidable Delay shall mean delays in the performance of obligations
under this Agreement due to acts of God, acts of the public enemy, acts of
Granite City, other than customary performance by Granite City of Tenant’s Work
or performance in accordance with the Schedule in Section 3.1,
performance, which delays the completion of Developer’s work or late delivery
by Granite City’s suppliers, failure of unrelated third parties to perform
binding contracts with Developer, the direct unavoidable result of strikes,
walk outs and lockouts which could not be reasonably anticipated, fire, floods,
epidemics and quarantines, unavailability of power, unavailability of materials
which would not reasonably be anticipated, the requirement to remediate
environmental conditions other than as noted in environmental audits procured
prior to commencing construction, the requirement to correct concealed
conditions not revealed by adequate soil tests, action or inaction of
governmental authorities, unusually severe weather not reasonably
anticipatable, casualty to the Project improvements, and litigation which
delays construction by injunction, provided no such occurrence shall constitute
“Unavoidable Delay” for a party unless the party gives written notice to the
other party of such occurrence within thirty (30) days of the party’s knowledge
of its first occurrence.  For each day of
Unavoidable Delay, one day shall be added to the Development Schedule under
this Agreement for completion of the affected task and any subsequent task the
commencement of which is dependent on completion of the affected task.  The parties may amend the Development
Schedule by change order to incorporate those changes in completion dates for
affected tasks in order to assure agreement on such matters.

 

(cc)                            Subject
to Unavoidable Delays, deliver to Granite City first class quality Restaurants
constructed in accordance with approved plans and specifications within time
frames provided by this agreement and the leases to be entered into by
Developer and Granite City.

 

1.3                                 Restaurant
Fee.  For each Restaurant developed,
Developer will earn a $75,000 fee (“Restaurant Fee”).  The Restaurant Fee shall be part of the Total
Project Cost.  Developer shall not be
entitled to additional reimbursement for site selection expenses or travel
expenses.

 

SECTION 2

RESPONSIBILITIES OF GRANITE CITY

 

2.1                                 Granite
City’s obligations are set forth in the following subparagraphs of this
Section 2, and as provided elsewhere in this Agreement; provided, however,
that if the performance of any duty of Granite City set forth in this Agreement
is beyond the reasonable control of Granite City, Granite City shall
nonetheless be obligated to (1) use 

 

 

its best efforts to perform such duty and
(2) promptly notify Developer that the performance of such duty is beyond
its reasonable control.  Granite City
shall:

 

(a)                                Review
and provide written consent or rejection for all site selections for each
Restaurant as provided by Developer.

 

(b)                               Negotiate
and enter into a lease with Developer in accordance with Sections 3 and 7
herein.

 

(c)                                Approve
or disapprove, in writing, the plans and specifications of each Restaurant.

 

(d)                               Approve
or disapprove, in writing, the Guaranteed Maximum Cost in the construction
contract and approval or disapproval in writing of the Total Project Cost.

 

(e)                                Provide
all communication to Developer in a timely manner to expedite development
activities between all parties, contractors, governmental agencies, and other
representatives.

 

(f)                                  Provide
written materials containing the instructions, requirements, standards,
specifications and procedures for the development and construction of Granite
City Food & Brewery Restaurants.

 

(g)                               Acquire,
construct, and install the Tenant’s Work described in Exhibit C
herein.

 

(h)                               Obtain
the liquor license and brewing license for each Restaurant.

 

SECTION 3

DEVELOPMENT SCHEDULE

 

3.1                                 Development
Process.  Recognizing that time is of
the essence, Developer (D) and Granite City (GC) acknowledge and agree
that a material provision of this Agreement is that the following development
schedule must be completed within ten (10) days of the parties selecting a
site and adhered to during the term of this Agreement.  The Development Schedule for Restaurants
subject to this Agreement will be completed with Exhibit D
as a guide:

 

	
  a.

  	
   

  	
  Identification of city or metropolitan area (“Market”) for Project
  (GC)

  	
   

  	
  As initiated by GC

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  b.

  	
   

  	
  Site Selection (GC & D)

  	
   

  	
       days after Market Identification

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  c.

  	
   

  	
  Executed Land Agreement (D)

  	
   

  	
       days after Site Selection

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  d.

  	
   

  	
  Modified Plans and Specifications (GC)

  	
   

  	
       days after Site Selection

  

 

 

	
  e.

  	
   

  	
  Estimate of Project Cost (D)

  	
   

  	
       days after delivery of Plans and
  Specifications

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  f. 

  	
   

  	
  Approval or Disapproval of Total Project Cost Budget (GC and D) 

  	
   

  	
       days after estimate of costs 

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  g.

  	
   

  	
  Approval or Disapproval of Restaurant Site (D and GC)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  h.

  	
   

  	
  Execution of Lease (D and GC)

  	
   

  	
       days after

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  i.

  	
   

  	
  Acquisition of Liquor License (GC)*

  	
   

  	
       days after

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  j.

  	
   

  	
  Acquisition of Brewing License (GC)

  	
   

  	
       days after

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  k.

  	
   

  	
  Expiration of Contingency Period under Land Agreement (D and GC)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  l.

  	
   

  	
  Closing of Land Purchase under Land Agreement (D)

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  m.

  	
   

  	
  Commencement of Developer Construction (D)**

  	
   

  	
       months after Land Agreement executed

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  n.

  	
   

  	
  Commencement of Granite City Construction (GC)

  	
   

  	
       days after

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  o.

  	
   

  	
  Completion of Developer Construction (D)

  	
   

  	
       months after commencement of
  construction

  
	
   

  	
   

  	
   

  	
   

  	
   

  
	
  p.

  	
   

  	
  Completion of Granite City Construction (GC)

  	
   

  	
       days after

  

 

*                                         Granite
City may waive acquisition of liquor license on schedule if Granite City has
entered into a purchase agreement to purchase a liquor license

 

**                                  Construction
of a Restaurant shall be deemed to commence upon Developer commencing material
and continuous work under the general construction contract.

 

3.2                                 Failure
to Comply with Development Schedule. 
The Developer or Granite City’s failure to comply with the above
Development Schedule without material contribution to such failure by the other
party will constitute a material breach of this Agreement by the defaulting
party and, in that event, the non-defaulting party will have the right to
terminate this Agreement as provided in Section 4.2.  Termination of this Agreement as a result of
the defaulting party’s failure to meet the Development Schedule set forth above
will not affect an individual Restaurant which is in compliance with the
Development Schedule or for which a lease has been executed, but will terminate
the contract with respect to the obligation to construct or lease additional
Restaurants with Developer.

 

 

SECTION 4

EVENTS OF DEFAULT

 

4.1                                 Defined.  The term “Event of Default” shall mean any
failure by any party to observe or perform any material covenant, condition,
obligation or agreement on its part to be observed or performed under this
Agreement, insolvency of a party, the filing of a petition in bankruptcy by a
party or the filing of a petition in bankruptcy against such party which is not
dismissed within sixty (60) days.

 

4.2                                 Remedies.

 

(a)                                  Default
by Developer.  Whenever any Event of
Default occurs as a result of an act or omission of Developer, after providing
thirty (30) days written notice to Developer of the Event of Default, and only
if the Event of Default has not been cured within thirty (30) days of Developer
receiving such notice, Granite City may, as its sole and exclusive remedies:

 

(i)                                     suspend
Granite City’s performance under this Agreement; and/or

 

(ii)                                  cancel,
rescind or terminate this Agreement.

 

(b)                                 Default
by Granite City.  Whenever an Event
of Default occurs as a result of an act or omission of Granite City set forth
in this Agreement, Developer shall have, as its sole and exclusive remedy, the
right to terminate this Agreement after providing thirty (30) days written
notice to Granite City of the event of default, but only if the event of
default has not been cured within said thirty (30) days.  Developer’s inability to sell Restaurants
sites shall not be an Event of Default that entitles Developer to exercise its
remedies.

 

4.3                                 Termination.  Upon termination of the Agreement,

 

(a)                                  Developer
will have no further right or obligation to construct Restaurants.

 

(b)                                 Granite
City will have the right to develop and construct Restaurants in any location
and to contract with another party for development in any location.

 

(c)                                  Neither
party shall have further liabilities under this Agreement except as provided in
Section 4.3(d) and 4.3(e) below but both parties shall remain
obligated under any lease they have entered into pursuant to this Agreement.

 

(d)                                 Granite
City will have the right but not the obligation to take assignment from
Developer of any existing land purchase agreements for sites identified as
Restaurant sites pursuant to this agreement for a purchase price equal to the
amount, if any, of Developer’s out of pocket costs relating to such site, and

 

 

the right but not
the obligation to purchase from Developer any uncompleted Restaurant facility
subject to this Agreement, and not subject to an executed lease between the
parties, for a price equal to the lesser of the Total Project Cost or the
amount of allowable costs incurred by Developer to date of exercise of Granite
City’s purchase.

 

(e)                                  Notwithstanding
the above, neither Granite City or the Developer shall terminate this Agreement
on account of a default which is not a material default (as defined below),
provided the defaulting party uses commercially reasonable efforts to cure the
default.  For purposes of this Agreement
a Material Default means a default which either delays the Completion Date by
at least 30 days or causes the nondefaulting party at least $50,000 in damages.

 

(f)                                    Notwithstanding
the above, termination of this Agreement will not affect an individual
Restaurant which is in compliance with the Development Schedule or for which a
lease has been executed.

 

4.4                                 Dispute
Resolution.  In the event the parties
cannot agree on any matter set out in this Agreement, the parties, at the
option of either party, may election to have the matter resolved by
mediation.  The mediation shall take
place in Hennepin County, State of Minnesota. 
The party exercising the option to mediate shall give not less than ten
(10) days’ written notice of the mediation.  The notice shall state the place and time of
mediation and the name of the mediator, who shall be agreed upon by the parties
or attorneys for the parties after consultation, or in absence of such
agreement, shall be a licensed lawyer with prior experience as a mediator
designated by the party calling for the mediation.  In the event mediation does not successfully
resolve the matter, or in the event the option to mediate is not timely
exercised, the parties may seek their remedies at law, including but not
limited to the right to pursue such remedies in any state or federal court of
competent jurisdiction, with the law of the State of Minnesota, without regard
to its conflict of law provisions, to govern the construction and
interpretation of this Agreement.

 

4.5                                 Remedies.  Each and every such remedy set forth in this
Agreement shall be cumulative and shall be in addition to every other remedy
given under this Agreement, provided that in no event shall a party be entitled
to double recovery or multiple remedies which if effected in their totality
would be inequitable or in bad faith.  No
delay or omission to exercise any remedy or power accruing upon any event of
default shall impair any such remedy or power or shall be construed to be a
waiver thereof.  Any such remedy and
power may be exercised from time to time and as often as may be deemed
expedient.  In order to entitle either
party to exercise any remedy reserved to it, it shall not be necessary to give
notice, other than such notice as may be required in this Section 4.

 

4.6                                 No
Additional Waiver Implied by One Waiver. 
In the event any Event of Default is waived by the non-defaulting party,
such waiver shall be limited to the particular Event of Default so waived and
shall not be deemed to waive any other concurrent, previous or subsequent Event
of Default hereunder.

 

 

SECTION 5

SITE SELECTION

 

Developer will assume all cost,
liability, expense and responsibility for locating and obtaining sites for each
Restaurant, provided Granite City has fulfilled its obligations related to
review and cooperation in approval of such sites.  Developer will be responsible for
coordination of constructing or renovating each Restaurant at such sites.

 

5.1                                 Prior
to the acquisition of each site for a Restaurant, Granite City will, at its
expense, submit to the Developer in writing, a description of the site and a
market feasibility study including demographic information, land site plans,
photographs, and such other information or materials as the Developer may
reasonably require.  The Developer will have
thirty (30) days after receipt of such information and materials from Granite
City to review and approve the proposed site as the location for a
Restaurant.  If Developer disapproves of
any site, Developer will state in writing its reasons for disapproval.

 

5.2                                 If
the phase one environmental audit for a potential site indicates a material
risk of contamination, the Developer may elect not to develop the site.  In such an event Granite City shall agree not
to develop such site as well.  Developer
and Granite City will then endeavor to locate an alternative site.

 

5.3                                 After
the location for a Restaurant has been reviewed and agreed upon by the
Developer and Granite City, Developer shall purchase or lease the site in
accordance with Development Schedule deadline set forth in Section 3.

 

5.4                                 Granite
City shall select all furniture, fixtures and equipment necessary for the
operation of each Restaurant.  Developer
shall use its best efforts to secure a financing package for the furniture,
fixtures and equipment for the four Restaurants for which construction is
scheduled herein to commence in 2009.

 

5.5                                 As
part of the services being provided by Developer under this Agreement,
Developer is acting as Granite City’s exclusive agent in locating sites for
Restaurant development, except for specific transactions which Granite City
provides written notice to Developer prior to Developer’s contact with the
owner of a site or the owner’s representative. 
As such, Granite City acknowledges and agrees that Developer may be
entitled to an additional brokerage commission paid by the owner of a
site.  When reasonable to do so, Granite
City agrees to support Developer in obtaining such a commission.

 

SECTION 6

INSPECTION

 

Upon receipt thereof, Developer
agrees to provide Granite City copies of all proposed and executed construction
contracts, subcontracts and purchase orders related to the construction of the
Restaurant.  Granite City or its agents,
contractors or employees shall be entitled, but not obligated, to inspect
construction of the Restaurant, all records relating to the Project real
estate, and the books and other financial records of Developer

 

 

or the
Contractor and Developer relating to the Project.  Developer shall require Contractor to
cooperate with Granite City in enabling Granite City to accomplish such
inspection.  At the completion of
construction of the Restaurant, all items set forth on any inspection report or
punchlist shall be completed before final payment is made to the Contractor.  The right of inspection is for the benefit of
Granite City.  Granite City shall not be
deemed to have assumed any responsibility to Developer or the Contractor, or
any third party as a result of any such action nor shall Granite City be deemed
to have waived any claims or warranties either by exercising such rights or by
declining to exercise such rights.

 

SECTION 7

LEASE AGREEMENT

 

7.1                                 Leases.  For each Restaurant site developed by
Developer, Granite City shall enter into a lease agreement (the “Lease”) with
Developer or an assignee of Developer substantially in Granite City’s standard
form to be finalized by the parties to be consistent with the terms and
conditions of this Agreement and attached as Exhibit A
prior to May 30, 2008 or such other date to which the parties may mutually
agree in writing.  If the Parties cannot
reach an agreement, this Agreement shall become null and void.  Each lease agreement shall contain the
following terms:

 

(a)                                  Triple
Net.  Each lease shall be a “pure”
triple net lease in which the Developer will incur no additional operating expenses
whatsoever, except for certain capital costs specified in the lease.

 

(b)                                 Term
of Lease.  Each lease term shall be
for twenty (20) years with three (3) seven-year options to renew, unless
the underlying ground lease term is for a lesser term and Granite City
specifically approves a lesser term for that reason.

 

(c)                                  Project
Costs.  The Approved Total Project
Cost of construction of the Restaurant shall be equal to the sum of
(i) the Guaranteed Maximum Cost amount set forth in the AIA Guaranteed
Maximum Cost Construction Contract, and (ii) the “Approved Soft Cost
Budget” and (iii) “Approved Land Costs.” 
The Approved Total Project Cost will not change unless Granite City
initiates a change to the plans and specifications and both parties execute a
change order or in the event that the Total Project Cost changes as a result of
actions of Granite City or its suppliers. 
Granite City will not be responsible for increases in costs resulting
from change orders required as a result of failure of Developer to correctly
determine conditions of a site prior to purchasing the site.  Except for the Restaurant Fee and a fee that
may be paid by the owner of a site to Developer as Granite City’s
representative, there will be no development fee, management, financing or other
fee earned or due by the Developer it being agreed that such fees and the rent
fully compensates Developer.  Project
costs are more specifically defined in Exhibit B.

 

 

(d)                                 Rent.  The annual Base Rent (as defined in the
Lease) shall be determined by multiplying the approved Total Project Cost, by
9.5%.  Annual Base Rent shall be
increased on the 5th, 10th and 15th
anniversaries of the Lease Commencement Date for the following five lease years
by seven and one-half percent (7.5%). 
Annual Base Rent shall be increased on each of the 20th, 27th
and 34th anniversaries of the Lease Commencement Date for the
following seven lease years by 10%.

 

For example, if the first
Project has a Approved Total Project Cost of $3,000,000 and an actual Total
Project Cost of $3,002,000 the annual Base Rent for the first lease year would
be (9.5%) ($3,000,000) = $285,000.  On
the fifth anniversary of the Lease Commencement Date the annual Base Rent would
increase to $306,375.

 

Beginning on January 1,
2010, the parties shall annually review the market condition for the terminal
cap rate used to calculate the Expected Sales Price in subsection 7.1(g).  The market terminal cap rate as of the date
of this Agreement has been calculated at 8.25%. 
The market terminal cap rate shall be reviewed to determine whether the
percent used to calculate the annual base rent for a Restaurant site where a
lease has not been executed between the parties needs to be adjusted.  If market conditions have changed, the
parties shall use good faith efforts to agree upon a changed percent used to
calculate the annual base rent that is 125 basis points over the changed market
terminal cap rate.  In the event that the
parties cannot in good faith agree on changed percent used to calculate the
annual base rent to reflect market conditions related to the Expected Sales
Price, either party may terminate this Agreement upon written thirty (30) day
notice with the further opportunity to agree upon the changed percent during
the thirty (30) day period.

 

(e)                                  Rent
Commencement Date.  Rent shall
commence for each site the earlier of (i) the day Granite City commences
to operate as a public Restaurant, or (ii) the twenty-first (21) day after
the issuance of a certificate of occupancy, provided that Granite City shall be
liable for rent that would have been due and payable except for any delay in
obtaining a certificate of occupancy beyond the approved Development Schedule
to the extent such delay results solely from Granite City failing to complete
the Tenant Improvements specified on Exhibit C
per the approved Development Schedule without contribution to such delay by any
acts or omissions of Developer.

 

(f)                                    Right
of First Offer.  Granite City shall
have the right of first offer to purchase the Restaurant real estate,
improvements and, if owned by the Developer, the Restaurant furniture, fixtures
and equipment, (“Restaurant Property”) prior to any sale of the Restaurant by
Developer to a third party.  Developer
shall provide notice to Granite City of acceptable terms of sale.  Granite City shall have ten (10) days to
enter into a purchase agreement with Developer. 
If Granite City does not enter into a purchase agreement with Developer within
such ten (10) day period, Granite City’s right of first offer with

 

 

respect to such
sale shall expire.  If Developer does not
enter into a purchase agreement at a purchase price of at least 90% of the
purchase price Developer offered Granite City and close the purchase, within
one (1) year of the expiration of Granite City’s ten day acceptance period
or such purchase agreement is terminated prior to closing, Developer may not
sell the Restaurant Property to a third party without first offering to sell
the Restaurant Property to Granite City pursuant to the terms and conditions of
the Right of First Offer.  The Right of
First Offer shall not be included in the lease but may be recorded.  Provided that Granite City’s Right of First
Offer has terminated pursuant to the terms of this subsection (f), Granite City
shall execute and deliver to Developer a written recordable acknowledgement of
the termination of Granite City’s Right of First Offer drafted by Developer and
reasonably acceptable to Granite City.

 

(g)                                 Profit
Split.  The Lease will provide that
when Developer sells any Restaurant developed pursuant to this Agreement
(“Restaurant”) and/or assigns the landlord’s interest in such Lease,
(collectively, the Restaurant and Lease are sometimes called the “Property”),
Developer will pay half of any “Excess Profit” to Granite City upon closing of
the sale.  Excess Profit is defined as
the amount of the sales price for the Property in excess of the sum of
“Expected Sales Price” and Costs of Sale. 
“Costs of Sale” means customary costs incurred to sell the Restaurant
Property inclusive of transfer taxes, recording costs, title costs, due
diligence costs incurred by Developer under the purchase agreement, brokerage
commissions and legal fees.  The
Developer may select a related party as the broker for such sale.  The Expected Sales Price is the annual Base
Rent (as defined in the Lease) on the day the purchase agreement for the
Property is fully executed divided by 8.25%.  
For example, a Restaurant that cost $2,450,000 would be leased to
Granite City at 9.5% of the cost, or $232,750 annually.  The terminal cap rate of 8.25% would imply an
Expected Sales Price of $2,821,212 (i.e. $232,750/8.25%).  The excess of any sale price above $2,821,212
would be split 50/50 between United and Granite City.  If, for example the building sold at a cap
rate of 7.5% or $3,103,333 (i.e. $232,750/7.5%) then each party would split the
excess profit of $282,121 (i.e. $3,103,333 - $2,821,212).  Any loss on the sale of a property would be
borne solely by Developer.

 

(h)                                 It
is anticipated that Granite City will need to make substantial improvements to
the Restaurant every 5 to 7 years during the term of the Lease.  After obtaining written approval of such
improvements from Developer, which shall not be unreasonably withheld or
delayed, Granite City may enter into a construction contract with a general
contractor to construct such improvements. 
In such event Granite City will not commence construction unless
Developer approves the contractor, the contract, and builders risk insurance,
such approvals not to be unreasonably withheld or delayed and until Granite
City has satisfied Developer that Granite City has the funds necessary to pay
the cost of such improvements.  Granite
City may finance such improvements with a leasehold mortgage reasonably
acceptable to Developer.  The terms of
this Section 7.1(i) shall be incorporated in more detail in the
Lease.

 

 

7.2                                 Lease
to Govern.  Once a lease is executed
for a specific Restaurant site, the terms of the lease shall govern and control
the relationship of the parties with respect to the specific Restaurant
site.  To the extent that any provisions
of this Agreement are inconsistent with or contrary to the provisions of the
executed lease, the provisions of the executed lease shall control.

 

SECTION 8

NUMBER OF SITES

 

8.1                                 Developer
agrees to develop, build and lease up to twenty-two (22) Restaurants in the
period commencing January 1, 2009 through December 31, 2012.  Except as hereinafter provided, during such
period, Developer shall be the exclusive developer for Granite City during the
term of this Agreement except as set forth in Sections 8.2, 8.3 and 8.4.  Granite City shall not utilize any other
developer as long as this Agreement is in effect.  Developer shall be owner of Restaurants
developed pursuant to this Agreement.  Granite City and Developer agree upon the
following development schedule:

 

	
  2009

  	
   

  	
  4 Restaurants

  
	
  2010

  	
   

  	
  6 Restaurants

  
	
  2011

  	
   

  	
  6 Restaurants

  
	
  2012

  	
   

  	
  6 Restaurants

  

 

8.2                                 Notwithstanding
the above, without penalty or liability, and without waiving any rights under
this Agreement, Granite City may:

 

(a)                                  Use
another developer to develop Restaurants if the Agreement is terminated
pursuant to Section 3 or 4.2 because of a Developer Default.

 

(b)                                 Use
another developer to develop a particular Restaurant if Developer declines to
develop such Restaurant for any reason including Developer’s unwillingness to
approve the Guaranteed Maximum Cost, the Total Project Cost, or the Restaurant
Site.

 

In addition to the foregoing, Granite City may, without liability to
Developer, utilize its existing developer to develop three planned Restaurants;
one in South Bend, Indiana; one in Indianapolis, Indiana in 2008, and one in
Troy, Michigan in 2009.  Such Restaurants
shall not be counted toward the 22-Restaurant Project to be developed by
Developer pursuant to this Agreement.

 

8.3                                 Notwithstanding
any other clause herein to the contrary, if Granite City elects to develop a
greater number of Restaurants during the term of this Agreement than provided
in this Agreement, it shall: 
(a) notify Developer in writing of the locations and tentative
schedule for developments; and (b) agree to promptly meet with Developer
to discuss such increased development. 
Developer shall have thirty (30) days following the date of written
notice from Granite City to elect to increase the number of Restaurants by some
or all of the additional Restaurants requested by Granite City.  If such election is

 

 

made, such additional Restaurants shall be added to
the number of Restaurants to be developed pursuant to Section 8.1.  If Developer declines to develop some or all
of such additional Restaurants, Granite City may pursue development of such
Restaurants utilizing other developers, free of any obligation to Developer under
this Agreement with respect to such additional Restaurants, and the parties
hereto shall remain obligated under this Agreement in accordance with its
terms.

 

8.4                                 The
parties anticipate that the preferred project is for Developer to purchase fee
title to a site and construct a Restaurant for lease to Granite City.  However, the parties recognize that
occasionally it might be preferable for Developer to purchase and rehab an
existing building or to ground lease land for construction of a Restaurant to
be leased to Granite City.  On such
occasions, Developer and Granite City shall enter into exclusive negotiations
for a period of sixty (60) days to attempt to determine a fee arrangement
acceptable to the parties.  If a mutually
acceptable fee arrangement can not be agreed upon within such time frame, Granite
City can utilize another developer for such site.

 

SECTION 9

TERM

 

9.1                                 This
Agreement shall terminate on the later of i) December 31, 2012 or
ii) the date of completion of the last Restaurant to be completed for
which construction was commenced prior to December 31, 2012.

 

9.2                                 Notwithstanding
any other clause herein to the contrary, Granite City may terminate this
Agreement without penalty or payment by written notice to Developer within
ninety (90) days of another party acquiring substantially all the stock or
assets of Granite City by merger or otherwise. 
In such event, Granite City shall comply with the terms of this
Agreement with respect to any Restaurant for which Developer has previously
entered into a binding agreement to acquire the land for such Restaurant but
Granite City shall not be obligated to develop other Restaurants with
Developer.

 

SECTION 10

GENERAL PROVISIONS

 

10.1                           Notice.  Unless otherwise required by law, any notices
required or permitted to be given hereunder may be, and shall be deemed, given
when delivered in person, by overnight courier or deposited in the United
States Mail, postage prepaid, addressed to the party or parties to whom notice
is to be given, at the following addresses, or to such other addresses as the
parties may for themselves designate in writing by notice hereunder:

 

 

	
  If to Developer:

  	
   

  	
  With a Copy to:

  
	
  John Breitinger

  	
   

  	
  Greg Brenny

  
	
  3500 American Blvd. W, Ste 200

  	
   

  	
  Fafinski Mark & Johnson, P.A.

  
	
  Minneapolis, MN 55431

  	
   

  	
  775 Prairie Center Drive, Suite 400

  
	
   

  	
   

  	
  Eden Prairie, Minnesota 55344

  
	
   

  	
   

  	
   

  
	
  If to Granite City Food & Brewery, Ltd.:

  	
   

  	
  With a Copy to:

  
	
  Steven J. Wagenheim

  	
   

  	
  Avron Gordon, Esq.

  
	
  5402 Parkdale Drive, Ste 101

  	
   

  	
  Briggs and Morgan, P.A.

  
	
  St. Louis Park, MN 55416

  	
   

  	
  2400 IDS Center

  
	
   

  	
   

  	
  Minneapolis, MN 55402

  

 

10.2                           Miscellaneous.  This Agreement (i) shall be construed
under and in accordance with the laws of the State of Minnesota; (ii) may
be executed in one or more counterparts, all of which shall be considered one
and the same agreement; (iii) embodies the entire agreement and
understanding, and supersedes all prior agreements and understandings between
Developer and Granite City relating to the subject matter hereof; and
(iv) may be amended or modified only in writing or as specifically
provided herein.

 

10.3                           Successors
and Assigns.  Developer shall have no
right to assign this Agreement or any of its rights or obligations hereunder,
except to an entity of which Developer has a controlling interest.  Subject to the preceding sentence, this
Agreement shall be binding on and inure to the benefit of the parties hereto
and their respective personal representatives, successors and assigns.

 

10.4                           Exhibits.  All exhibits attached hereto are incorporated
herein and form a part of this Agreement.

 

10.5                           Binding
Effect.  This Agreement shall be
binding on the parties hereto, their heirs, executors, personal
representatives, successors and assigns and supersedes any prior agreement for
the development of the Project between the parties hereto.

 

10.6                           Headings.  All section headings in this Agreement are
for convenience of reference only and are not intended to qualify the meaning
of any section.

 

10.7                           Pronouns.  All personal pronouns used in this Agreement,
whether used in the masculine, feminine or neuter gender, shall include all
other genders, the singular shall include the plural, and vice versa as the
context may require.

 

10.8                           Benefit
of Agreement.  The obligations and
undertakings of the Developers set forth in this Agreement are made for the
benefit of the parties and shall not inure to the benefit of any creditor of
the parties or any owner of the parties or any other third party,
notwithstanding any pledge or assignment by a party of this Agreement or any
rights hereunder.

 

10.9                           Counterparts.  This agreement may be executed by the parties
in counterpart and the signature pages assembled into one agreement.  In such event each

 

 

such assembled agreement shall be deemed a complete
agreement binding on both parties to the Agreement.

 

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

 

	
   

  	
  GRANITE CITY
  FOOD & BREWERY,

  LTD.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ James G.
  Gilbertson

  
	
   

  	
  Its

  	
  Chief
  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  UNITED
  PROPERTIES INVESTMENT

  LLC

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/

  	
  Keith A. Ulstad

  
	
   

  	
  Print

  	
  Keith A.
  Ulstad

  
	
   

  	
  Its

  	
  Vice
  President

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
  /s/ John
  Breitinger

  
	
   

  	
  Print

  	
  John
  Breitinger

  
	
   

  	
  Its

  	
  Vice
  President

  
					

 

 

EXHIBIT A

 

LEASE

 

[To be filed when prepared.]

 

A-1

 

EXHIBIT B

 

PROJECT COSTS

 

The following items are included in, but not
limited to, “Total Project Cost”:

 

HARD COSTS TO INCLUDE:

 

·                                          Building
Permit(s)

·                                          Soil
Test(s)

·                                          Survey &
Stakeout

·                                          Demolition
and Clearing of Site

·                                          Excavation,
Fill, Grading, Final Grade

·                                          Sewer
and Water

·                                          Footings
and Foundations

·                                          Damproofing

·                                          Building
Floor

·                                          Exterior
Concrete/Flatwork

·                                          Patio

·                                          Curb &
Gutter

·                                          Asphalt
Paving

·                                          Parking
Lot Striping

·                                          Lawn
Sprinkler System, Sod, Landscaping

·                                          Fences
and Enclosures

·                                          Exterior
Signage (illuminated and non-illuminated)

·                                          Tools
and Equipment

·                                          Clean
Up

·                                          Temporary
Power and Utilities

·                                          Temporary
Facilities

·                                          Miscellaneous
Materials & Labor

·                                          HVAC

·                                          Plumbing

·                                          Electrical

·                                          Electrical
Fixtures (Some)

·                                          Building
Sprinkler Systems

·                                          Framing

·                                          Insulation

·                                          Drywall

·                                          Finish
Labor

·                                          Painting
and Staining

·                                          Acoustical
Ceiling

·                                          Quarry/Ceramic
Tile, Carpet, Vinyl, Cove Base

·                                          Building
Package System, Building Materials, Trusses, Steel, Finish Materials

·                                          Aluminum Entrance
Assemblies/Exterior Doors

 

B-1

 

·                                          Impact
Fees, SAC and WAC, park dedication fees and other government entitlement costs

·                                          Soil
Treatment for Termite Inspection (if locally advisable)

·                                          Windows

·                                          Roof,
Gutters, Downspouts

·                                          Fire
Extinguishers (if purchased by Developer)

·                                          Mini-Blinds
(if purchased by Developer)

·                                          Bathroom
Accessories (if purchased by Developer)

·                                          Cabinets
(if purchased by Developer)

·                                          Shelving
(if purchased by Developer)

·                                          Laminate/Marble
Tops

·                                          Furniture,
Fixtures or Equipment installed and paid for by Landlord, if any

 

HARD COSTS TO BE EXCLUDED FROM TOTAL PROJECT
COST:

 

The following costs shall be excluded from
the Project Costs:

 

·                                          Tenant
Work constructed and paid for by Tenant

·                                          Furniture,
Fixtures and Equipment installed or constructed and paid for by Tenant

 

LAND AND SOFT COSTS TO BE INCLUDED IN TOTAL
PROJECT COST:

 

The following costs shall be included in the
Total Project Cost:

 

·                                          Land
Cost

·                                          Title
Insurance

·                                          Architect
fees (even if architect contract is with Granite City)

·                                          Civil
Engineer

·                                          Mechanical
Engineer

·                                          Electrical
Engineer

·                                          Project
Management Fee

·                                          Appraisal

·                                          Recording
Fees

·                                          Financing
Fees

·                                          Construction
Interest

·                                          Real
Estate Taxes

·                                          Drafting
Fees

·                                          Builders
Risk Insurance

·                                          Blueprints
and Spec Books

·                                          Project
Sign

·                                          Geotechnical
Fees

·                                          Environmental
audits

·                                          Legal
fees for site specific legal matters such as zoning, land use, environmental
matters or negotiating contracts specifically for the site 

 

B-2

 

(this category
excludes among other things legal fees incurred by either party negotiating
non-site specific contracts and base forms between the parties, or advising a
party as to the parties corporate matters)

·                                          Travel
expenses subsequent to site approval within an agreed upon budget

·                                          Restaurant
Fee

 

SOFT COSTS TO BE EXCLUDED FROM TOTAL PROJECT
COST

 

·                                          Costs
to set up and administer the relationship inclusive of legal fees for this
Development Agreement and lease forms

·                                          Costs
to develop, build and maintain the secure web based applications

·                                          Travel
expenses prior to site approval

·                                          Market
analysis costs

·                                          Developer
overhead and professional time expended

 

B-3

 

EXHIBIT C

 

TENANT’S WORK

 

Tenant’s Work to include furniture, fixtures
and equipment (“FF&E”)

 

Back of House

 

·                                          Kitchen
Equipment

·                                          Coolers
and freezers

·                                          Shelving

·                                          Pots,
pans, and other food preparation small goods

·                                          Dinnerware

·                                          Bar
casework and tops

 

Front of House

 

·                                          POS
Station Casework and tops

·                                          Host
Station Casework and tops

·                                          Furniture
room divider and tops

·                                          Public
Restroom vanities and tops

·                                          Booths,
Tables, Chairs and Bar Stools

·                                          Hammered
metal Trim and Railings

·                                          Artwork

·                                          Other
loose decorations

 

Brewery

 

·                                          All
Brewery Equipment (Provided by GCFB, installed by Developer via General
Contractor

·                                          Cooler

 

C-1

 

EXHIBIT D

 

GCFB DEVELOPMENT SCHEDULE

 

 

D-1Exhibit 4.1

 

REGISTRATION RIGHTS AGREEMENT

 

This
Registration Rights Agreement (this “Agreement”) is made and entered into as of
September 7, 2007, by and among Chase Packaging Corporation, a Texas
corporation (the “Company”), and the persons and entities listed on Exhibit A
hereto (each, a “Purchaser” and, collectively, the “Purchasers”).

 

RECITALS

 

WHEREAS,
upon the terms and subject to the conditions of the Securities Purchase and
Subscription Agreement dated as of September 7, 2007 (the “Purchase Agreement”),
the Company has agreed to issue and sell to the Purchasers up to 13,334 Units
(the “Units”), each Unit consisting of one share of Series A 10%
convertible preferred stock (the “Preferred Stock”), five hundred (500) shares
(the “Shares”)  of the Company’s ten cent
($0.10) par value common stock (the “Common Stock”); and five hundred (500)
warrants (the “Warrants”), with each Warrant exercisable into one share of
Common Stock at fifteen cents ($0.15) per share; and

 

WHEREAS,
to induce the Purchasers to execute and deliver the Agreement and to purchase
the Preferred Stock, the Shares, and the Warrants, the Company has agreed to
exercise its best efforts to provide certain registration rights under the
Securities Act of 1933, as amended, with respect to the Preferred Stock, the
Shares, and the Warrants.

 

NOW,
THEREFORE, in consideration of the representations, warranties, and agreements
contained herein and other good and valuable consideration, the receipt and
legal adequacy of which are hereby acknowledged by the parties, the Company and
each Purchaser hereby agrees as follows:

 

1.             Definitions.

 

Capitalized
terms used but not otherwise defined herein shall have the meanings given such
terms in the Purchase Agreement. As used in this Agreement, the following terms
shall have the following meanings:

 

“Affiliate” means any Person that,
directly or indirectly through one or more intermediaries, controls or is
controlled by or is under common control with a Person, as such terms are used
in and construed under Rule 144 under the Securities Act.  With respect to a Purchaser, any investment
fund or managed account that is managed on a discretionary basis by the same
investment manager as such Purchaser will be deemed to be an Affiliate of such
Purchaser.

 

“Blackout
Period” shall have the meaning set forth in Section 2.(g).

 

“Board”
shall have the meaning set forth in Section 2.(g).

 

“Business Day” means any day other than
Saturday, Sunday, or other day on which the Federal Reserve Bank of New York is
closed.

 

“Closing Date” means the date of the
purchase and sale of the Registrable Securities.

 

“Commission”
means the Securities and Exchange Commission.

 

“Common
Stock” means the common stock of the Company, par value $0.10 per share.

 

 

“Effectiveness
Date” means, with respect to the Registration Statement, the 5th
Business Day after the date on which the Commission informs the Company: (a) that
the Commission will not review the Registration Statement; or (b) that the
Company may request acceleration of the effectiveness of the Registration
Statement.

 

“Effectiveness
Period” shall have the meaning set forth in Section 2(a).

 

“Exchange
Act” means the Securities Exchange Act of 1934, as amended.

 

“Holder”
means, collectively, each holder from time to time of Registrable Securities
including, without limitation, each Purchaser and its assignees. To the extent
this Agreement refers to an election, consent, waiver, request, or approval of
or by the Holder, such reference shall mean an election, consent, waiver,
request, or approval by the holders of a majority in interest of the
then-outstanding Registrable Securities (on an as exercised basis).

 

“Indemnified
Party” shall have the meaning set forth in Section 5(c).

 

“Indemnifying
Party” shall have the meaning set forth in Section 5(c).

 

“Losses”
shall have the meaning set forth in Section 5(a).

 

“Person” means any individual or
corporation, partnership, trust, incorporated or unincorporated association,
joint venture, limited liability company, joint stock company, government (or
an agency or subdivision thereof) or any court or other federal, state, local,
or other governmental authority or other entity of any kind.

 

“Proceeding”
means an action, claim, suit, investigation, or proceeding (including, without
limitation, an investigation or partial proceeding, such as a deposition),
whether commenced or threatened.

 

“Prospectus”
means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.

 

“Registrable
Securities” means all of: (1) the Preferred Stock; (2) the Shares;
and (3) the Warrants.

 

“Registration
Statement” means the registration statement required to be filed hereunder,
including the Prospectus, amendments, and supplements to such registration
statement or Prospectus, including pre- and post-effective amendments, all
exhibits thereto, and all material incorporated by reference or deemed to be
incorporated by reference in such registration statement.

 

“Required
Filing Date” means the 270th day immediately following the Closing
Date.

 

“Rule 144”
means Rule 144 promulgated by the Commission pursuant to the Securities
Act, as such Rule may be amended from time to time, or any similar rule or
regulation hereafter adopted by the Commission having substantially the same
effect as such Rule.

 

“Rule 415”
means Rule 415 promulgated by the Commission pursuant to the Securities
Act, as such

 

 

Rule may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such Rule.

 

“Securities
Act” means the Securities Act of 1933, as amended.

 

2.             Registration Procedures; Company’s
Obligations.

 

In
connection with the registration of the Registrable Securities, the Company
shall:

 

(a)           Registration.  On or
prior to the Required Filing Date, prepare and file with the Commission a
Registration Statement covering, among such other securities as may be offered
from time to time by the Company, the resale of the Registrable Securities for
an offering to be made on a continuous basis pursuant to Rule 415. The
Registration Statement shall be on Form SB-2 or Form S-1 (except if
the Company is then eligible to register for resale the Registrable Securities
on Form S-3, in which case such registration shall be on Form S-3).  Subject to the terms of this Agreement, the
Company shall use commercially reasonable efforts to cause the Registration
Statement to be declared effective under the Securities Act (including filing
with the Commission a request for acceleration of effectiveness in accordance
with Rule 12dl-2 promulgated under the Exchange Act within five (5) Business
Days after the date that the Company is notified (orally or in writing,
whichever is earlier) by the Commission that the Registration Statement will
not be “reviewed,” or not be subject to further review) as soon as possible
after the filing thereof, but in any event prior to the Effectiveness Date, and
shall use commercially reasonable efforts to keep such Registration Statement
continuously effective under the Securities Act until the earlier of: (A) the
second anniversary of the Closing Date; (B) the date on which the
Purchasers may sell the Registrable Securities then held by the Purchasers
without restriction by the volume limitations of Rule 144(e) of the
Securities Act; or (C) such time as all Registrable Securities held by the
Purchasers and registered under a Registration Statement have been sold (i) pursuant
to a Registration Statement, (ii) to or through a broker, dealer, or
underwriter in a public distribution or a public securities transaction, or (iii) in
a transaction exempt from the registration and prospectus delivery requirements
of the Securities Act under Section 4(1) thereof so that all transfer
restrictions and restrictive legends with respect thereto, if any, are removed
upon the consummation of such sale (the “Effectiveness Period”).  No assurance can be given that such
registration will be declared effective by the SEC.  In the event such registration is not
declared effective by the SEC, each Holder of Registrable Securities
acknowledges his, her, or its understanding (and acceptance of the risk) that
his, her, or its ability to sell such Securities will be limited to sales under
Rule 144 and/or transactions exempt under Section 4(1) of the
Securities Act.

 

(b)           Furnish to each Holder of Registrable
Securities, without charge, at least one conformed copy of each Registration
Statement and each amendment thereto, including financial statements and
schedules, all documents incorporated or deemed to be incorporated therein by
reference, and all exhibits to the extent requested by such Holder (including
those previously furnished or incorporated by reference) promptly after the
filing of such documents with the Commission.

 

(c)           Promptly deliver to the Holder,
without charge, as many copies of the Registration Statement, Prospectus, or
Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Holder may reasonably request; and the Company
hereby consents to the use of such Prospectus and each amendment or supplement
thereto by the selling Holder in connection with the offering and sale of the
Registrable Securities covered by such Prospectus and any amendment or supplement
thereto. Should a Holder offer or sell the Registrable Securities, such Holder
agrees to comply with all applicable securities laws.

 

(d)           Prior to any public offering of
Registrable Securities, use its commercially reasonable

 

 

efforts
to register or qualify or cooperate with each selling Holder in connection with
the registration or qualification (or exemption from such registration or
qualification) of such Registrable Securities for offer and sale under the
securities or Blue Sky laws of such jurisdictions within the United States as
such Holder reasonably requests in writing, to keep each such registration or
qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things reasonably necessary or
advisable to enable the disposition in such jurisdictions of the Registrable
Securities covered by a Registration Statement; provided, however,
that the Company shall not be required to qualify generally to do business in
any jurisdiction where it is not then so qualified or to take any action that
would subject it to general service of process in any such jurisdiction where
it is not then so subject or subject the Company to any tax in any such
jurisdiction where it is not then so subject.

 

(e)           Cooperate with each Holder to
facilitate the timely preparation and delivery of certificates representing
Registrable Securities to be sold pursuant to a Registration Statement and to
enable such Registrable Securities to be in such denominations and registered
in such names as such Holder may request at least two (2) Business Days
prior to any sale of Registrable Securities.

 

(f)            Comply in all material respects with
all applicable rules and regulations of the Commission.

 

(g)           If: (i) there is material non-public
information regarding the Company which the Company’s Board of Directors (the “Board”)
reasonably determines not to be in the Company’s best interest to disclose and
which the Company is not otherwise required to disclose; or (ii) there is
a significant business opportunity (including, but not limited to, the
acquisition or disposition of assets (other than in the ordinary course of
business) or any merger, consolidation, tender offer, or other similar
transaction) available to the Company which the Board reasonably determines not
to be in the Company’s best interest to disclose and which the Company would be
required to disclose under the Registration Statement, then the Company may
suspend effectiveness of a Registration Statement and suspend the sale of
Registrable Securities under a Registration Statement two (2) times in any
twelve month period, each of which may not exceed sixty (60) days (each, a “Blackout
Period”).

 

(h)           Within two (2) Business Days
after the Registration Statement which includes the Registrable Securities is
ordered effective by the Commission, the Company shall deliver, and shall cause
legal counsel for the Company to deliver (with copies to each Holder whose
Registrable Securities are included in such Registration Statement)
confirmation that the Registration Statement has been declared effective by the
Commission.

 

3.             Registration Procedures; Holder’s
Obligations

 

In
connection with the registration of the Registrable Securities, each Holder
shall:

 

(a)           If the Registration Statement refers
to the Holder by name or otherwise as the holder of any securities of the
Company, have the right to require (if such reference to the Holder by name or
otherwise is not required by the Securities Act or any similar federal statute
then in force) the deletion of the reference to the Holder in any amendment or
supplement to the Registration Statement that will be filed or prepared
subsequent to the time that such reference ceases to be required.

 

(b)           Not sell any Registrable Securities
under the Registration Statement until he, she, or it has received copies of
the Prospectus (as then amended or supplemented) and notice that such
Registration Statement and any post-effective amendments thereto have become
effective; comply with the prospectus delivery requirements of the Securities
Act as applicable to him, her, or it in connection with sales of 

 

 

Registrable
Securities pursuant to the Registration Statement; and furnish to the Company
information regarding such Holder and the distribution of such Registrable
Securities as is required by law to be disclosed in the Registration Statement,
and the Company may exclude from such registration the Registrable Securities
of the Holder if he, she, or it fails to furnish such information within a reasonable
time prior to the filing of each Registration Statement, supplemented
Prospectus, and/or amended Registration Statement.

 

(c)           Upon receipt of a notice from the
Company of the occurrence of any event of the kind described in Section 2(g),
forthwith discontinue disposition of such Registrable Securities under the
Registration Statement until he, she, or it is advised in writing by the
Company that the use of the applicable Prospectus may be resumed.

 

Each
Holder hereby: (i) acknowledges to the Company that the Commission
currently takes the position that coverage of short sales of shares of Common
Stock “against the box” made prior to the Effectiveness Date with any security
covered by any Prospectus is a violation of Section 5 of the Securities
Act, as set forth in Item 65, Section 5 under Section A, of the
Manual of Publicly Available Telephone Interpretations, dated June 1997,
compiled by the Office of Chief Counsel, Division of Corporation Finance; (ii) agrees
(on behalf of himself, herself, or itself or any Person over which he, she, or
it has direct control) not to use any of the securities covered by any
Prospectus to cover any short sales, hedging, or similar transactions with the
same economic effect as a short sale, made prior to the Effectiveness Date; and
(iii) agrees to comply with Regulation M under the federal securities
laws.

 

4.             Registration Expenses

 

All
reasonable fees and expenses incident to the performance of or compliance with
this Agreement by the Company (other than the costs incurred by a Holder in
connection with his, her, or its own sale of Registrable Securities) shall be
borne by the Company whether or not the Registration Statement is filed or
becomes effective and whether or not any Registrable Securities are sold
pursuant to the Registration Statement. The fees and expenses referred to in
the foregoing sentence shall include, without limitation, the following: (i) all
registration and filing fees (including, without limitation, fees, and expenses
(A) with respect to filings required to be made with each securities
exchange or other market on which Registrable Securities are listed, (B) with
respect to filings required to be made with the Commission, and (C) in
compliance with state securities or Blue Sky laws); (ii) printing expenses
(including, without limitation, expenses of printing certificates for
Registrable Securities and of printing prospectuses if the printing of
prospectuses is requested by the holders of a majority of the Registrable
Securities included in the Registration Statement); (iii) messenger,
telephone, and delivery expenses of the Company; (iv) fees and
disbursements of counsel for the Company; and (v) fees and expenses of all
other Persons retained by the Company in connection with the consummation of
the transactions contemplated by this Agreement, including, without limitation,
the Company’s independent public accountants (including the expenses of any
comfort letters or costs associated with the delivery by independent public
accountants of a comfort letter or comfort letters). In addition, the Company
shall be responsible for all of its internal expenses incurred in connection
with the consummation of the transactions contemplated by this Agreement
(including, without limitation, all salaries and expenses of its officers and
employees performing legal or accounting duties), the expense of any annual
audit, and the fees and expenses incurred in connection with the listing of the
Registrable Securities on any securities exchange.

 

5.             Indemnification

 

(a)           Indemnification by the Company.
The Company shall, notwithstanding any termination of this Agreement, indemnify
and hold harmless each Purchaser, his, her, or its permitted assignees,
officers, directors, agents, brokers (including brokers who offer and sell
Registrable Securities as principal as a result of a pledge or any failure to
perform under a margin call of Common Stock), investment 

 

 

advisors
and employees, each Person who controls any such Purchaser or permitted
assignee (within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act) and the officers, directors, agents, and employees of each
such controlling Person, and the respective successors, assigns, estate and
personal representatives of each of the foregoing, to the fullest extent
permitted by applicable law, from and against any and all claims, losses,
damages, liabilities, penalties, judgments, costs (including, without
limitation, costs of investigation) and expenses (including, without
limitation, reasonable attorneys’ fees and expenses) (collectively, “Losses”),
as incurred, arising out of or relating to any untrue or alleged untrue
statement of a material fact contained in the Registration Statement, any
Prospectus, as supplemented or amended, if applicable, or arising out of or
relating to any omission or alleged omission of a material fact required to be
stated therein or necessary to make the statements therein (in the case of any
Prospectus or supplement thereto, in the light of the circumstances under which
they were made) not misleading, except: (i) to the extent, but only to the
extent, that such untrue statements or omissions are based solely upon
information regarding the Holder furnished in writing to the Company by the
Holder expressly for use therein, which information was reviewed and expressly
approved by the Holder expressly for use in the Registration Statement, such
Prospectus, or in any amendment or supplement thereto; or (ii) as a result
of the failure of the Holder to deliver a Prospectus, as amended or
supplemented, to a purchaser in connection with an offer or sale. The Company
shall notify the Holder promptly of the institution, threat, or assertion of
any Proceeding of which the Company is aware in connection with the
transactions contemplated by this Agreement. Such indemnity shall remain in
full force and effect regardless of any investigation made by or on behalf of
an Indemnified Party (as defined in Section 5(c) hereof) and shall
survive the transfer of the Registrable Securities by the Holder.

 

(b)           Indemnification by Purchaser.
Each Purchaser and his, her, or its permitted assignees shall, severally and
not jointly, indemnify and hold harmless the Company, its directors, officers,
agents, and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange
Act), and the directors, officers, agents, or employees of such controlling
Persons, and the respective successors, assigns, estate and personal
representatives of each of the foregoing, to the fullest extent permitted by
applicable law, from and against any and all Losses, as incurred, arising out
of or relating to: (i) the failure of the Holder to deliver a Prospectus,
as amended or supplemented, to a purchaser in connection with a purchase or
sale; (ii) the Holder’s use of a representation or prospectus other than
the Prospectus, as amended or supplemented, in connection with a purchase or
sale; or (iii) any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus, as supplemented or
amended, if applicable, or arising out of or relating to any omission or
alleged omission of a material fact required to be stated therein or necessary
to make the statements therein (in the case of any Prospectus or supplement
thereto, in the light of the circumstances under which they were made) not
misleading, to the extent, but only to the extent, that: (A) such untrue
statement or omission is contained in or omitted from any information so
furnished in writing by the Holder to the Company specifically for inclusion in
the Registration Statement or such Prospectus; and (B) such information
was reasonably relied upon by the Company for use in the Registration
Statement, such Prospectus or, to the extent that such information relates to
the Holder or the Holder’s proposed method of distribution of Registrable
Securities, was reviewed and expressly approved in writing by the Holder
expressly for use in the Registration Statement, such Prospectus or such form
of Prospectus Supplement. Notwithstanding anything to the contrary contained
herein, the Holder shall be liable under this Section 5(b) for only
that amount as does not exceed the net proceeds to the Holder as a result of
the sale of Registrable Securities pursuant to such Registration Statement.

 

(c)           Conduct of Indemnification
Proceedings. If any Proceeding shall be brought or asserted against any
Person entitled to indemnity pursuant to Section 5(a) or 5(b) hereunder
(an “Indemnified Party”), such Indemnified Party promptly shall notify the
Person from whom indemnity is sought (the “Indemnifying Party”) in writing, and
the Indemnifying Party shall assume the defense thereof, including the
employment of counsel reasonably satisfactory to the Indemnified Party and the
payment of all fees and 

 

 

expenses
incurred in connection with defense thereof; provided, that the failure
of any Indemnified Party to give such notice shall not relieve the Indemnifying
Party of his, her, or its obligations or liabilities pursuant to this
Agreement, except (and only) to the extent that it shall be finally determined
by a court of competent jurisdiction (which determination is not subject to
appeal or further review) that such failure shall have materially and adversely
prejudiced the Indemnifying Party.

 

An
Indemnified Party shall have the right to employ separate counsel in any such
Proceeding and to participate in the defense thereof, but the fees and expenses
of such counsel shall be at the expense of such Indemnified Party or Parties
unless: (i) the Indemnifying Party has agreed in writing to pay such fees
and expenses; or (ii) the Indemnifying Party shall have failed promptly to
assume the defense of such Proceeding and to employ counsel reasonably
satisfactory to such Indemnified Party in any such Proceeding; or (iii) the
named parties to any such Proceeding (including any impleaded parties) include
both such Indemnified Party and the Indemnifying Party, and such Indemnified
Party shall have been advised by counsel that a conflict of interest is likely
to exist if the same counsel were to represent such Indemnified Party and the
Indemnifying Party (in which case, if such Indemnified Party notifies the
Indemnifying Party in writing that it elects to employ separate counsel at the
expense of the Indemnifying Party, the Indemnifying Party shall not have the
right to assume the defense thereof, and such counsel shall be at the expense
of the Indemnifying Party). The Indemnifying Party shall not be liable for any
settlement of any such Proceeding effected without his, her, or its written
consent, which consent shall not be unreasonably withheld, conditioned, or
delayed. No Indemnifying Party shall, without the prior written consent of the
Indemnified Party, which consent shall not unreasonably be withheld, conditioned,
or delayed, effect any settlement of any pending Proceeding in respect of which
any Indemnified Party is a party, unless such settlement includes an
unconditional release of such Indemnified Party from all liability on claims
that are the subject matter of such Proceeding.

 

All
reasonable fees and expenses of the Indemnified Party (including reasonable
fees and expenses to the extent incurred in connection with investigating or
preparing to defend such Proceeding in a manner not inconsistent with this Section)
shall be paid to the Indemnified Party, as incurred, within ten (10) Business
Days of written notice thereof to the Indemnifying Party (regardless of whether
it is ultimately determined that an Indemnified Party is not entitled to
indemnification hereunder; provided, that the Indemnifying Party may
require such Indemnified Party to undertake to reimburse all such fees and
expenses to the extent it is finally judicially determined that such
Indemnified Party is not entitled to indemnification hereunder or pursuant to
applicable law).

 

(d)           Contribution.  If a claim for indemnification under Section 5(a) or
5(b) is unavailable to an Indemnified Party because of a failure or
refusal of a governmental authority to enforce such indemnification in
accordance with its terms (by reason of public policy or otherwise), then each
Indemnifying Party, in lieu of indemnifying such Indemnified Party, shall
contribute to the amount paid or payable by such Indemnified Party as a result
of such Losses, in such proportion as is appropriate to reflect the relative
fault of the Indemnifying Party and Indemnified Party in connection with the
actions, statements, or omissions that resulted in such Losses as well as any
other relevant equitable considerations. The relative fault of such
Indemnifying Party and Indemnified Party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties’ relative intent,
knowledge, access to information, and opportunity to correct or prevent such
action, statement, or omission. The amount paid or payable by a party as a
result of any Losses shall be deemed to include, subject to the limitations set
forth in Section 5(c), any reasonable attorneys’ or other reasonable fees
or expenses incurred by such party in connection with any Proceeding to the
extent such party would have been indemnified for such fees or expenses if the
indemnification provided for under Section 5(a) or 5(b) was
available to such party in accordance with its terms. Notwithstanding anything
to the contrary contained herein, the Holder shall be liable or required to 

 

 

contribute
under this Section 5(d) for only that amount as does not exceed the
net proceeds to the Holder as a result of the sale of Registrable Securities
pursuant to the Registration Statement.

 

The
parties hereto agree that it would not be just and equitable if contribution
pursuant to this Section 5(d) were determined by pro rata allocation
or by any other method of allocation that does not take into account the
equitable considerations referred to in the immediately preceding paragraph. No
Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of
the Securities Act) shall be entitled to contribution from any Person who was
not guilty of such fraudulent misrepresentation.

 

The
indemnity and contribution agreements contained in this Section are in
addition to any liability that the Indemnifying Parties may have to the
Indemnified Parties.

 

6.             Rule 144.

 

As
long as a Holder owns Registrable Securities, the Company covenants to timely
file (or obtain extensions in respect thereof and file within the applicable
grace period) all reports required to be filed by the Company after the date
hereof pursuant to Section 13(a) or 15(d) of the Exchange Act.
As long as a Holder owns Registrable Securities, if the Company is not required
to file reports pursuant to Section 13(a) or 15(d) of the
Exchange Act, it will prepare and furnish to the Holder and make publicly
available in accordance with Rule 144(c) promulgated under the Securities
Act annual and quarterly financial statements, together with a discussion and
analysis of such financial statements in form and substance substantially
similar to those that would otherwise be required to be included in reports
required by Section 13(a) or 15(d) of the Exchange Act, as well
as any other information required thereby, in the time period that such filings
would have been required to have been made under the Exchange Act. The Company
further covenants that it will take such further action as the Holder may
reasonably request, all to the extent required from time to time to enable the
Holder to sell Registrable Securities without registration under the Securities
Act within the limitation of the exemptions provided by Rule 144
promulgated under the Securities Act. Upon the request of any Holder, the
Company shall deliver to such Holder a written certification of a duly
authorized officer as to whether it has complied with such requirements.

 

7.             Miscellaneous.

 

(a)           Remedies.  The
remedies provided in this Agreement are cumulative and not exclusive of any
remedies provided by law. In the event of a breach by the Company or by the
Holder of any of their obligations under this Agreement, the Holder or the
Company, as the case may be, in addition to being entitled to exercise all
rights granted by law and under this Agreement, including recovery of damages,
will be entitled to specific performance of his, her, or its rights under this
Agreement. The Company and the Holder agree that monetary damages would not
provide adequate compensation for any losses incurred by reason of a breach by
him, her, or it of any of the provisions of this Agreement and hereby further
agrees that, in the event of any action for specific performance in respect of
such breach, he, she, or it shall waive the defense that a remedy at law would
be adequate.

 

(b)           No Inconsistent Agreements.  Neither
the Company nor any of its Affiliates has as of the date hereof entered into,
nor shall the Company or any of its Affiliates, on or after the date of this
Agreement, enter into, any agreement with respect to its securities that is
inconsistent with the rights granted to the Holder in this Agreement or
otherwise conflicts with the provisions hereof. Without limiting the generality
of the foregoing, without the written consent of the Holder, the Company shall
not grant to any Person the right to request the Company to register any
securities of the Company under the Securities Act if the rights so granted are
inconsistent with the rights granted to the Holder set forth herein, or
otherwise prevent the Company with complying with all of its obligations
hereunder.

 

 

(c)           Consent to Jurisdiction.  The Company and each Purchaser: (i) hereby
irrevocably submit to the exclusive jurisdiction of the United States District
Court for the City of New York, Borough of Manhattan, and the courts of the
State of New York located in City of New York, Borough of Manhattan for the
purposes of any suit, action, or proceeding arising out of or relating to this
Agreement; and (ii) hereby waive, and agree not to assert in any such
suit, action, or proceeding, any claim that it is not personally subject to the
jurisdiction of such court, that the suit, action or proceeding is brought in
an inconvenient forum or that the venue of the suit, action, or proceeding is
improper. The Company and each Purchaser consent to process being served in any
such suit, action, or proceeding by mailing a copy thereof to such party at the
address in effect for notices to it under this Agreement and agrees that such
service shall constitute good and sufficient service of process and notice
thereof. Nothing in this Section 8(c) shall affect or limit any right
to serve process in any other manner permitted by law.

 

(d)           Amendments and Waivers.  The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified, or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by the Company and the
Purchasers.

 

(e)           Notices.  Any and all notices or other communications
or deliveries required or permitted to be provided hereunder shall be in
writing and shall be deemed given and effective on the earlier of: (i) the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified for notice prior to 5:00 p.m.,
Central Time, on a Business Day; (ii) the first Business Day after the
date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified for notice later than
5:00 p.m., Eastern Time, on any date and earlier than 11:59 p.m.,
Central Time, on such date; (iii) the Business Day following the date of
mailing, if sent by nationally recognized overnight courier service; or (iv) actual
receipt by the party to whom such notice is required to be given.

 

(x)            If to the Company:

Chase Packaging Corporation

636 River Road

Fair Haven, New Jersey 07704

Facsimile No.:  (732) 741-1500

Telephone No.:  (732) 741-1925

Attn: Mr. Allen T. McInnes

 

 

With a copy to:

Haynes and Boone, LLP

201 Main Street, Suite 2200

Fort Worth, TX  76102

Facsimile No.:  817.348.2384

Telephone No.:  817.347.6611

Attn:  Rice M. Tilley, Jr., Esq.

 

(y)           If to any Purchaser:

At the address of such Purchaser set forth on Exhibit A to
this Agreement.

 

or
to such other address or addresses or facsimile number or numbers as any such
party may most recently have designated in writing to the other parties hereto
by such notice.

 

 

(f)            Successors and Assigns.  This Agreement shall be binding upon and
inure to the benefit of the parties and their successors and permitted assigns
and shall inure to the benefit of the Holder and its successors and assigns.
The Company may not assign this Agreement or any of its respective rights or
obligations hereunder without the prior written consent of the Purchasers,
except in connection with an acquisition of the Company. Each Purchaser may
assign his, her, or its rights hereunder in the manner and to the Persons as
permitted under the Purchase Agreement.

 

(g)           Assignment of Registration
Rights. The rights of each Holder hereunder, including the right to have the
Company register for resale Registrable Securities in accordance with the terms
of this Agreement, shall be assignable by each Holder to any transferee of the
Holder of all or a portion of
the shares of Registrable Securities if: (i) the Holder agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to the Company within a reasonable time after such
assignment; (ii) the Company is, within a reasonable time after such
transfer or assignment, furnished with written notice of (A) the name and
address of such transferee or assignee, and (B) the securities with
respect to which such registration rights are being transferred or assigned; (iii) following
such transfer or assignment the further disposition of such securities by the
transferee or assignees is restricted under the Securities Act and applicable
state securities laws; (iv) at or before the time the Company receives the
written notice contemplated by clause (ii) of this Section, the transferee
or assignee agrees in writing with the Company to be bound by all of the
provisions of this Agreement; and (v) such transfer shall have been made
in accordance with the applicable requirements of the Purchase Agreement and
shall be for no less than $50,000 in value of the Registrable Securities.  In addition, the Holder shall have the right
to assign his, her, or its rights hereunder to any other Person with the prior
written consent of the Company, which consent shall not be unreasonably
withheld, conditioned, or delayed. The rights to assignment shall apply to the
Holder (and to subsequent) successors and assigns. In the event of an
assignment pursuant to this Section 7(g), the Purchaser shall pay all
incremental costs and expenses incurred by the Company in connection with
filing a Registration Statement (or an amendment to the Registration Statement)
to register the shares of Registrable Securities assigned to any assignee or
transferee of the Purchaser.

 

(h)           Counterparts.  This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original, and all of which taken together shall constitute one and the same
Agreement. In the event that any signature is delivered by facsimile
transmission, such signature shall create a valid binding obligation of the
party executing (or on whose behalf such signature is executed) the same with
the same force and effect as if such facsimile signature were the original
thereof.

 

(i)            Governing Law.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to principles of conflicts of law thereof. This Agreement shall not be
interpreted or construed with any presumption against the party causing this
Agreement to be drafted.

 

(j)            Cumulative Remedies.  The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.

 

(k)           Termination.  This Agreement shall terminate on the date on
which all remaining Registrable Securities may be sold without restriction
pursuant to Rule 144(k) of the Securities Act, or any successor rule or
regulation.

 

(l)            Severability.  If any term, provision, covenant, or
restriction of this Agreement is held to be invalid, illegal, void, or
unenforceable in any respect, the remainder of the terms, provisions,
covenants, and restrictions set forth herein shall remain in full force and
effect and shall in no way be affected, impaired, 

 

 

or
invalidated, and the parties hereto shall use their reasonable efforts to find
and employ an alternative means to achieve the same or substantially the same
result as that contemplated by such term, provision, covenant, or restriction.
It is hereby stipulated and declared to be the intention of the parties that
they would have executed the remaining terms, provisions, covenants, and
restrictions without including any of such that may be hereafter declared
invalid, illegal, void, or unenforceable.

 

(m)          Headings. The headings
herein are for convenience only, do not constitute a part of this Agreement and
shall not be deemed to limit or affect any of the provisions hereof.

 

IN
WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed by their respective authorized persons as of the date first indicated
above.

 

 

	
   

  	
  CHASE PACKAGING CORPORATION

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/
  Herbert M. Gardner

  
	
   

  	
   

  	
       Herbert
  M. Gardner

  
	
   

  	
   

  	
       Vice
  President

  

 

 

[Signatures of Purchasers to follow on next
pages.]

 

 

[Signature Page of Purchaser]

 

Name of Holder:

 

Signature of Authorized Signatory of Purchaser:

 

Name of Authorized Signatory: 

 

Title of Authorized Signatory: 

 

	
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  Telephone#:

  	
   

  
	
   

  	
   

  
	
  Attn:

  	
   

  
			

 

 

Exhibit A

 

PURCHASERS

 

Nicholas
A Baker III

William
J Barrett Jr. IRA Rollover

Sara
Barrett

William
J. Barrett

William
R. Cast IRA

Donald
E Cutler IRA Rollover

Robert
Deputy

Edward
L. Flynn

Leona
T. Flynn

Arthur
J Gajarsa

Arthur
J Gajarsa IRA

David
S. Gardner

Elizabeth
R. Gardner

Herbert
M. Gardner

Herbert
M. Gardner Keogh

Mary
Gardner

Peter
H. Gardner and Linda Gardner

Stuart
M. Gerson & Pamela E. Somers, JTWROS

Ann
C W Green IRA

Tammy
Klein

Richard
Leibner

William
D. Marohn

Allen
T. McInnes

C
Richard Stafford IRA

William
Sutherland IRA Rollover

Sidney
Todres IRA

Esther
K. Zyskind

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