Document:

CONFIDENTIAL TREATMENT REQUESTED

 

EXHIBIT 10.3

 

SEPARATION
AGREEMENT AND GENERAL RELEASE

 

This Separation Agreement and
General Release is made and entered into by and between MACROPORE BIOSURGERY,
INC. (“MACROPORE”) and ARI BIZIMIS.

WHEREAS, ARI BIZIMIS has been
employed by MACROPORE as its Chief Financial Officer since April 1, 2000.

 

WHEREAS, ARI BIZIMIS has
decided to resign from employment with MACROPORE (including all positions from
any of its subsidiaries) where he served as Chief Financial Officer and
Director, effective as of September 30, 2003.

WHEREAS, MACROPORE and ARI BIZIMIS do
not believe that there are or will be any disputes between them or legal claims
arising from ARI BIZIMIS’S employment 
relationship with MACROPORE, but nevertheless desire to ensure a
completely amicable end to that relationship and to fully and finally settle
any and all differences or claims that might otherwise arise out of ARI
BIZIMIS’S resignation.

 

NOW, THEREFORE, in
consideration of the mutual promises contained herein, it is agreed as follows:

1.             Resignation From Employment
Relationship.  The
employment relationship between MACROPORE and ARI BIZIMIS shall cease effective
September 30, 2003 and the payment of any sums, pursuant to this Agreement,
after September 30, 2003, shall not be considered to be wages. MACROPORE shall,
however, withhold the ordinary and customary federal and state taxes and
withholdings to such extent as required by law.

 

2.             Consideration.  In consideration of this Agreement and
Release, MACROPORE agrees to pay ARI BIZIMIS a sum of Two Hundred Thousand Euro
€ 200,000. less standard tax and withholding requirements (if required under
applicable law “Withholdings”). MACROPORE agrees that the outstanding stock
option grants to ARI BIZIMIS shall be treated as described on Exhibit “1”
(subject only to formal resolution of MACROPORE’s Board of Directors) which is
attached hereto and fully incorporated into this agreement. In addition, ARI BIZIMIS will be given
title to his current MACROPORE  personal
computer, printer and fax machine.

 

3.             Contingent Additional Consideration.  MACROPORE agrees to pay ARI BIZIMIS a
contingent bonus payment in the amount of *** of any *** Consideration (defined
below) actually received by MACROPORE from *** 
, or any other legal entity that will act as *** pursuant to the  *** 
described in the   ***   Agreement (the consummation of which is not
yet complete or certain) between MACROPORE and ***. The “*** Consideration”
refers to the cash consideration *** of $*** as currently identified in Section
2.3 of the *** Agreement, and does not relate to any other payments that might
be made under the *** Agreement, or any related agreement.  Any contingent bonus payments will be made
within 30 days of (and shall be solely contingent upon and proportional to)
MACROPORE’s receipt of *** payments from ***. 
For purpose of clarification, the *** Agreement currently anticipates
that the *** shall be paid in three installments, and pursuant to this
Separation Agreement, ARI BIZIMIS would be entitled to

 

	
  *** 

  	
  Portions of
  this page have been omitted pursuant to a request for Confidential Treatment
  and filed separately with the Commission.

  

 

 

 

CONFIDENTIAL TREATMENT REQUESTED

 

a payment of *** of each *** installment (in U.S. Dollars and less any
Withholdings required by law) within 30 days after that installment is actually
received by MACROPORE.

 

4.             Confidentiality.  Each party agrees to keep the facts and
terms of this Separation Agreement and General Release in strict confidence and
refrain from making any negative or critical remarks about the other party.
Except for litigation relating to the breach or enforcement of this agreement,
this agreement shall not be admissible in any legal proceeding.

5.             References.  ARI BIZIMIS agrees that any requests for
references will be directed to CHRISTOPHER J. CALHOUN. MACROPORE agrees that in
response to such reference requests, that only positive references will be
provided. MACROPORE will not be liable with respect to any requests for references
that are directed to anyone other than CHRISTOPHER J. CALHOUN.

 

6.             Release of Claims. 
In consideration of the payment of money (as specified in #2 and #3
above) by MACROPORE and all other promises contained herein, and as a material
inducement to MACROPORE to enter this agreement, ARI BIZIMIS hereby irrevocably
and unconditionally releases, acquits, and forever discharges MACROPORE and its
assigns, agents, directors, officers, employees, representatives, attorneys,
parent companies, divisions, subsidiaries, affiliates (and agents, directors,
officers, employees, representatives, and attorneys of such parent companies,
divisions, subsidiaries, and affiliates), and all persons acting by, through,
under, or in concert with any of them (hereinafter ‘the Releasees’), from any
and all claims, demands, or liabilities whatsoever, whether known or unknown or
suspected to exist by ARI BIZIMIS which ARI BIZIMIS ever had or may now have
against the Releasees, or any of them, including, without limitation, any claims,
demands, or liabilities (including attorneys' fees and costs actually incurred)
in connection with ARI BIZIMIS’ employment and resignation from such
employment. This release expressly covers, but is not limited to, any claims
that ARI BIZIMIS may raise or have raised under any state or federal law
prohibiting discrimination in employment on the basis of age or on any other
basis prohibited by law.

 

7.             California
Civil Code Section 1542 Waiver.  ARI BIZIMIS expressly acknowledges and
agrees that all rights under Section 1542 of the California Civil Code are
expressly waived.  That section
provides:

 

A
GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR
SUSPECT TO EXIST IN HIS FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR.

8.             Employer Property And Trade Secrets.  ARI BIZIMIS will return to MACROPORE all of
the MACROPORE equipment not specified above currently in his possession.

 

 

ARI BIZIMIS  further agrees never to disclose to any
person or entity any confidential or proprietary information of or about
MACROPORE, except upon the express authorization and consent of MACROPORE.
MACROPORE agrees that ARI BIZIMIS may disclose such trade

 

	
  *** 

  	
  Portions of
  this page have been omitted pursuant to a request for Confidential Treatment
  and filed separately with the Commission.

  

 

 

CONFIDENTIAL TREATMENT REQUESTED

 

secrets to *** that are
reasonably necessary to aid in the consummation of the pending *** Agreement
identified in paragraph #3 above.

 

9.             No Admission Of Wrongdoing. This Agreement shall not in
any way be construed as an admission by the released parties of any acts of
wrongdoing whatsoever against ARI BIZIMIS or any other person.

 

10.          Entire
Agreement. This Agreement and Release sets forth the entire
agreement between the parties hereto, and fully supersedes any and all prior
agreements or understandings between the parties hereto pertaining to the
subject matter hereof.

 

11.          Venue.
Any proceeding brought to enforce this agreement shall be brought in San Diego
Co., CA.

12.          Construction.  If any provision herein shall be deemed
void, invalid, unenforceable, or otherwise stricken, in whole or in part, this
Agreement shall be deemed amended to delete or modify, as necessary, the
offending provision or provisions and to alter the bounds thereof in order to
render it valid and enforceable. The parties hereby agree to substitute a valid
provision that will most closely approximate the economic/legal effect and
intent or the invalid provision. The parties agree to execute any additional
documents that may reasonably be necessary to effectuate the purposes of this
agreement.

 

I HAVE READ
AND CAREFULLY CONSIDERED THIS SEPARATION AGREEMENT AND GENERAL RELEASE, AND
HAVE HAD AN OPPORTUNITY TO ASK QUESTIONS ABOUT IT AND HAVE HAD MY QUESTIONS
ANSWERED. FURTHER, MACROPORE HAS INDICATED THAT I AM FREE TO DISCUSS THIS
AGREEMENT WITH MY FAMILY AND MY ATTORNEY PRIOR TO SIGNING. I AM SIGNING THIS
AGREEMENT FREELY AND VOLUNTARILY.

 

 

 

	
  Signed: 

  	
  /s/ Ari
  Bizimis

  	
   

  	
  Date:
  9/30/03

  
	
   

  	
  ARI BIZIMIS

  	
   

  

 

 

MACROPORE BIOSURGERY, INC.

 

 

	
  Signed:

  	
  /s/
  Christopher J. Calhoun

  	
   

  	
  Date:
  9/30/03

  
	
   

  	
  CHRISTOPHER
  J. CALHOUN

  	
   

  

 

 

	
  *** 

  	
  Portions of
  this page have been omitted pursuant to a request for Confidential Treatment
  and filed separately with the Commission.Exhibit
10.1

 

LOAN AGREEMENT

 

BETWEEN

 

GRANITE CITY FOOD & BREWERY LTD.

 

AND

 

FIRST NATIONAL BANK

 

 

August 28, 2003

 

 

LOAN AGREEMENT

 

Dated as of August 28, 2003

 

GRANITE CITY FOOD & BREWERY LTD., a Minnesota corporation (the
“Borrower”) located at 5831 Cedar Lake Road, St. Louis Park, Minnesota 55416,
and FIRST NATIONAL BANK, a national banking association (the “Bank”) located at
125 West Sioux Avenue, Pierre, South Dakota 57501, agree as follows:

 

ARTICLE I

 

DEFINITIONS

 

Section 1.1.  Definitions.  As used in this Agreement the following
terms shall have the following meanings (and such meanings shall be equally
applicable to singular and plural forms of the terms defined):

 

(a)           “Affiliate” shall mean (i) a person which
owns directly or indirectly 10% or more of the equity of the Borrower, a person
which is directly or indirectly owned 10% or more by a person described above
in subparagraph (i), and a person in which the Borrower owns directly or
indirectly 10% or more of the equity.

 

(b)           “Business Day” shall mean any day other than
a Saturday, Sunday or a public holiday or the equivalent under the laws of the
State of Minnesota.

 

(c)           “Debt” means (i)
indebtedness for borrowed money or for the deferred purchase price of property
or services, (ii) obligations as lessee under leases including the Lease (as
hereinafter defined), and (iii) obligations under direct or indirect
guaranties in respect of, and obligations (contingent or otherwise) to purchase
or otherwise acquire, or otherwise to assure a creditor against loss in respect
of, indebtedness or obligations of others of the kinds referred to in clauses
(i) or (ii) above except endorsements for collection, deposit or negotiation of
instruments in the ordinary course of business.

 

(d)           “Event of Default” shall mean one of the
events specified in Section 6.1.

 

(e)           “Guarantor” shall mean Steven J. Wagenheim.

 

(f)            “Lease” shall mean the lease between Dunham
Capital Management, L.L.C., a South Dakota limited liability company, and
Borrower dated February 7, 2003, for the property legally described as Lot 1
Huntington Ridge Commercial Plat 2, Clive, Polk County, Iowa (the “Leased
Property”).

 

(g)           “Lien” shall mean any mortgage, deed of
trust, pledge, security interest, assignment, deposit arrangement, encumbrance,
lien (statutory or otherwise), or preference, priority, or other security

 

2

 

agreement, or preferential arrangement, charge, or encumbrance of any
kind or nature whatsoever including, without limitation, any conditional sale
or other title retention agreement, any financing lease having substantially
the same economic effect as any of the foregoing, or the filing of any
financing statement under the Uniform Commercial Code or comparable law of any
jurisdiction to evidence any of the foregoing.

 

(h)           “Loan Documents” shall mean this Agreement,
the Term Note, the Security Agreement, the Financing Statements, the Assignment
of Leases and Rents, the Guaranty of Steven J. Wagenheim, and Landlord Waiver
and Consent, and all other documents to be executed and delivered in connection
with this Agreement.

 

(i)            “Loan Parties” shall mean the Borrower and
the Guarantor.

 

(j)            “Person” shall mean an individual,
corporation, partnership, joint venture, trust or unincorporated organization
or government or other agency or political subdivision thereof.

 

(k)           “Project” shall mean
the equipping of a Granite City Food & Brewery at the Leased Property.

 

(l)            “Term Note” shall mean the Term Note
described in Section 2.5.

 

Section 1.2.  Accounting and
Other Terms.  All accounting terms
not specifically defined in this Agreement shall be construed in accordance
with generally accepted accounting principles. 
Other terms defined herein shall have the meanings ascribed to them
herein.

 

ARTICLE II

 

THE LOAN

 

Section 2.1.  Loan Commitment.  In accordance with the terms and conditions
herein, the Bank agrees to lend to the Borrower, and the Borrower agrees to
borrow from the Bank, the amount of $750,000 (the “Loan”) for the purpose of
the Project.

 

Section 2.2  Making of
Advances.

 

(a)           Borrower may request
advances under this Agreement directly from the Bank, not more often than four
times each month, for the purpose of the Project.  Borrower shall deliver to Bank in connection with each request
under this Subsection 2.2(a) invoices, bills of lading, or any other written
schedules or information satisfactory to the Bank listing and describing the
items to be purchased by Borrower.

 

(b)           Any request for an advance under this
Section 2.2 shall be deemed to be a representation that the Borrower’s
representations and warranties contained in Section 4.1 herein are true
and correct as of

 

3

 

the date of the advance as though made on and as of such date and that
no event has occurred and is continuing, or will result from such advance,
which constitutes an Event of Default or would constitute an Event of Default
but for the requirement that notice be given or time elapse or both.

 

Section 2.3.  Disbursement
Procedures for Advances.

 

(a)           Whenever the Borrower desires to borrow
under Subsection 2.2, which shall be no more often than four times each month,
the Borrower shall submit to the Bank a draw request in a form acceptable to
the Bank, duly executed on behalf of the Borrower, setting forth the
information requested therein.  Each
draw request shall be submitted at least ten (10) Business Days before the date
the advance is desired.

 

(b)           At the time of submission of each draw
request, the Borrower shall submit the following:

 

(i)            A written invoice or purchase agreement
from each equipment vendor for equipment to be purchased with the advance
proceeds.

 

(ii)           Such other supporting evidence as may be
requested by the Bank to substantiate all payments which are to be made out of
the correct draw request and/or to substantiate all payments then made for
prior draw requests.

 

(c)           If on the date an advance is desired, the
Borrower has performed all of its agreements and complied with all requirements
therefor to be performed or complied with hereunder including satisfaction of
all applicable conditions precedent contained herein, the Bank shall fund to
the equipment vendor(s) identified on the draw request the amount of the
requested advance, such sums to be paid in accordance with the requirements
contained herein.  Each advance
disbursed shall bear interest at the rate provided in the Term Note from the
date such advance is so disbursed.

 

Section 2.4.  Origination Fee.  The Borrower agrees to pay to the Bank an origination
fee (the “Origination Fee”) in the amount of Seven Thousand Five Hundred and
00/100 Dollars ($7,500.00).

 

Section 2.5.  The Term Note.  The Loan made by the Bank shall have a
maturity of August 27, 2010 (the “Maturity Date”), and shall be evidenced
by a note, together with all renewal and replacement notes (the “Term Note”).

 

Section 2.6.  Interest and
Payments.  The Borrower shall repay,
and shall pay interest on, the aggregate unpaid principal amount of all
advances under the Loan in accordance with the Term Note.  The payments shall be sufficient to pay the
Term Note in full on the Maturity Date. 
All payments of principal, interest and fees under this Agreement shall
be made when due to the Bank in immediately available funds.  All computations of interest shall

 

4

 

be made by the Bank on the basis of the actual number of days elapsed
in a year of 360 days.  Whenever any
such payment shall be due on a non-Business Day such payment shall be made on
the next succeeding Business Day, and such extension of time shall be included
in the computation of interest.  The
Bank is expressly authorized to charge any principal or interest payment, when
past due, to any account maintained by Borrower at the Bank.

 

Section 2.7.  Interest Rate.  The parties agree that the interest rate on
the Term Note from August 28, 2003 until August 28, 2006, will be
6.125%, and thereafter shall be adjusted every three years to the greater of
(a) 5.5% or (b) the then-current Prime Rate (as defined in the Term Note) plus
2.0%.  Interest on the Term Note shall
be compounded per annum and accrual shall commence on the unpaid advanced
principal amount.

 

Section 2.8.  Prepayment of
Term Loan.  The Borrower may, upon
notice to the Bank, prepay the Term Note, in whole or in part, with accrued
interest to the date of such prepayment on the amount prepaid, together with a
one percent (1%) prepayment fee on the amount of the prepayment; provided,
however, the Bank may, at its option, waive the prepayment fee.  All prepayments shall be applied first to
accrued interest and then to principal installments due under the Term Note in
the inverse order of their maturities.

 

Section 2.09.  Late Payment
Charge.  If any installment or
payment is paid more than ten (10) days after the due date thereof, the
Borrower agrees to pay a late payment charge of five percent (5%) of the
installment or payment to cover the expenses of collection.

 

ARTICLE III

 

CONDITIONS OF LENDING

 

Section 3.1.  Conditions Precedent
to Initial Advance on the Term Loan. 
The Bank shall have no obligation to make the initial advance hereunder
unless the Bank shall have received on or before the date of such advance the
following documents:

 

(a)           Borrower shall have expended cash equity at
least in the amount of $321,428.55 for the Project, inclusive of pre-opening
costs.

 

(b)           The Term Note properly
executed and delivered on behalf of the Borrower.

 

(c)           The Security Agreement properly executed and
delivered on behalf of the Borrower, granting to the Bank a first security
interest in all of the Borrower’s inventory, accounts, general intangibles,
equipment, furniture, fixtures, and all other personal property of Borrower as
security for the performance of the Borrower’s obligations under this Agreement
and the Term Note, together with any UCC-1 and UCC-2 Financing
Statements, or other documents deemed necessary or desirable by the Bank to
perfect the security interest granted by the Security Agreement.

 

5

 

(d)           An Assignment of Leases and Rents properly
executed and delivered on behalf of the Borrower.

 

(e)           The Landlord Waiver and Consent properly
executed and delivered on behalf of the Borrower and Landlord.

 

(f)            The Guaranty properly executed and
delivered on behalf of the Guarantor.

 

(g)           A Borrower’s Certificate properly executed
and delivered on behalf of the Borrower.

 

(h)           Certificates satisfactory in form and
substance to the Bank of all required insurance coverage for the Project listing
the Bank as loss payee.

 

(i)            All governmental permits and approvals
required to equip the Project (and prior to the final draw, all governmental
permits and approvals to operate the Leased Property as a restaurant).

 

(j)            Financial statements of the Borrower and
Guarantor which are, both in form and substance, acceptable to the Bank.

 

(k)           The Origination Fee and all loan expenses
(including without limitation attorneys fees for the Bank) shall have been paid
by Borrower.

 

(l)            Certified copies of the organizational
documents of the Borrower.

 

(m)          A certified copy of appropriate documents of
the Borrower approving the execution and delivery of the Loan Documents and
approving all other matters contemplated by this Agreement.

 

(n)           Such other requirements and documents as the
Bank shall reasonably require.

 

Section 3.2.  Conditions
Precedent to Each Advance.  Each
advance under the Term Note shall be subject to the further conditions
precedent, that on the date of such advance:

 

(a)           The representations and warranties contained
in Section 4.1 of this Agreement are correct on and as of the date of such
advance as though made on such date.

 

(b)           No event has occurred
and is continuing, or will result from such advance, which constitutes an Event
of Default or would constitute an Event of Default but for the requirement that
notice be given or time elapse or both.

 

(c)           As of the date
immediately prior to any advance, the total amount of the unadvanced proceeds
of the Loan shall be sufficient, in Bank’s opinion, to complete the
Project.  To the extent the unadvanced
Loan proceeds shall be insufficient, in Bank’s opinion, to complete the
Project, Borrower shall immediately deposit with Bank, an amount equal to such
deficiency as additional equity funds. 
Such additional equity funds shall be disbursed prior to the
disbursement of any further advance or advances

 

6

 

under this
Agreement.  In this regard, it shall be
the obligation of Borrower to inform the Bank of any increase or decrease in
the costs of the Project.

 

ARTICLE IV

 

REPRESENTATIONS AND WARRANTIES

 

Section 4.1.  Representations
and Warranties of the Borrower.  To
induce the Bank to make the Loan, the Borrower represents and warrants as
follows:

 

(a)           Existence of Borrower.  The Borrower is a corporation duly formed
and validly existing and in good standing under the laws of the State of
Minnesota, and it is in good standing in Minnesota and qualified to do business
in Iowa.

 

(b)           Authority to Execute.  The execution, delivery and performance by
the Loan Parties of their respective Loan Documents are within their corporate
or individual powers, as the case may be, have been duly authorized by all
necessary corporate or individual action, as the case may be, and do not and
will not conflict with any provision of law, their organizational documents, as
applicable, or any contractual restriction binding upon or affecting them or
any of their property, and need no further consent.

 

(c)           Binding Obligation.  This Agreement is, and the other Loan
Documents when delivered hereunder will be, legal, valid and binding
obligations of the Loan Parties enforceable against the Loan Parties in
accordance with their respective terms.

 

(d)           Governmental Approval.  No consent of, or filing with, any
governmental authority or court, including, without limitation, any bankruptcy
court is required on the part of any Loan Party in connection with the
execution, delivery or performance of any Loan Documents.

 

(e)           Financial Statements.  The financial statements of the Borrower and
Guarantor, copies of which have been furnished to the Bank, have been prepared
in conformity with generally accepted accounting principles consistently
applied and present fairly the financial condition of the Borrower and
Guarantor as of such date, and the results of its operations for the financial
period then ended, except for any necessary year-end adjustments in the case of
unaudited statements, and since such date, there has been no materially adverse
change in such financial condition.

 

(f)            Litigation.  No litigation or governmental proceeding is
pending or threatened against the Borrower or the Guarantor, or any of their
properties, which may have a materially adverse effect on the finan­cial
conditions or operations of such Persons. No bankruptcy proceeding is pending
or threatened against the Borrower or the Guarantor.

 

7

 

(g)           Title to Project.  Borrower has and will have good and
marketable title to all equipment purchased in connection with the Project, and
none of such equipment is subject to any Lien of any kind.  The equipment shall be new and purchased
directly from the manufacturer.

 

(h)           Taxes.  The Borrower and Guarantor have filed by applicable due dates all
federal and state income and excess profits tax returns which are required to
be filed, and have paid all taxes shown on such returns to be due and all other
tax assessments received by them to the extent that such assessments have
become due.

 

(i)            Defaults.  Neither the Borrower nor the Guarantor are in default in the
payment of principal or interest on any indebtedness for borrowed money nor in
default under any instrument or agreement under or subject to which any indebtedness
for borrowed money has been issued, and no event has occurred and is continuing
which, with or without the lapse of time or the giving of notice, or both,
constitutes or would constitute an event of default under any such instrument
or agreement or an Event of Default hereunder.

 

(j)            Franchises.  The Borrower has all permits and licenses
necessary for the Project and will have all necessary permits, licenses, and
franchises necessary for the operation of Borrower’s restaurant businesses on
the Leased Property.

 

(k)           Compliance by Borrower with Laws.  The Borrower has not, and to the knowledge
of Borrower after due inquiry, all owners of the Leased Property have not,
failed to comply with any regulation or ordinance of any applicable
jurisdiction in any respect, the violation of which might materially and
adversely affect the business, properties, operations or assets of Borrower.

 

ARTICLE V

 

COVENANTS OF THE BORROWER

 

Section 5.1.  Affirmative
Covenants.  So long as the Term Note
shall remain unpaid or outstanding hereunder, the Borrower will, unless the
Bank shall give its prior written consent:

 

(a)           Lease.  Pay and perform all terms and conditions contained in the Lease.

 

(b)           Financial Reporting.  Borrower shall furnish to the Bank as soon
as available and in any event within ninety (90) days after the end of each
fiscal year:  (a) an audited
balance sheet, (b) a statement of income, expenses and retained earnings
of the Borrower for the period commencing at the end of the previous fiscal
year and ending with the end of such month, 
and (c) a statement of cash flows. 
The Borrower’s annual Financial Report shall be in reasonable detail, in
form and substance satisfactory to the

 

8

 

Bank and reviewed by an independent certified public accountant in
accordance with generally accepted accounting principles, showing the results
of the operations of the Property for such fiscal year.  Within ninety (90) days after the end of the
fiscal year, Guarantor shall furnish to the Bank his personal financial
statements in form and substance acceptable to the Bank.  Borrower and Guarantor shall also furnish
such other information concerning the conditions or operations, financial or
otherwise, of the Borrower and Guarantor as may be requested by the Bank.

 

(c)           Visitation Rights.  At any reasonable time and from time to time
upon reasonable prior notice to Borrower, permit the Bank, or any agents,
representatives or participants thereof, to examine and make copies of and
abstracts from the records and books of account of, and visit the Leased
Property and all other properties of, the Borrower, and to discuss the affairs,
finances and accounts of the Borrower with any of its employees or agents;  and permit the Bank or any agents,
representatives or participants thereof, to conduct an inspection, at
Borrower’s expense, of all of the Leased Property.

 

(d)           Notification of Default.  Notify the Bank as promptly as practicable
(but in any event not later than five (5) Business Days) after Borrower obtains
knowledge of:  (i) the occurrence
of any event which constitutes an Event of Default or which would constitute an
Event of Default with the passage of time or the giving of notice or both; or
(ii) the commencement of any litigation or governmental proceedings of any
type which could materially adversely affect the financial condition or
business operations of the Borrower or the Guarantor.

 

(e)           Keeping of Financial Records and Books of
Account.  Maintain proper financial
records in accordance with generally accepted accounting principles
consistently applied which fully and correctly reflect all financial
transactions and all assets and liabilities of the Borrower.

 

(f)            Maintenance of Insurance.  Maintain such insurance with reputable
insurance carriers as is normally carried by companies engaged in operating and
owning restaurant properties, and name the Bank as loss payee on all policies
insuring the Property and provide the Bank with certificates of insurance
evidencing its status as a loss payee.

 

(g)           Maintenance of Property.  Maintain and preserve all of its assets,
necessary or useful in the proper conduct of its business, in good working
order and condition, ordinary wear and tear excepted.

 

(h)           Payment of Taxes.  Pay all taxes, assessments and governmental
charges of any kind payable by it as such taxes, assessments and charges become
due and before any penalty shall be imposed,

 

9

 

except as Borrower shall contest in good faith and by appropriate
proceedings providing such reserves as are required by generally accepted
accounting principles.

 

(i)            Preservation of Existence.  Preserve and maintain its corporate
existence, rights, franchises and privileges.

 

(j)            Compliance by Borrower with Laws.  Comply with any and all laws, regulations,
and ordinances of any applicable jurisdiction in any respect, the violation of
which might materially and adversely affect the business, property, operations
or assets of Borrower; hold Bank harmless from any and all liability which the
Bank may incur as a result of Borrower’s failure to comply with any such law,
regulation, or ordinance described above; and continue to hold all governmental
licenses and permits, all franchising and all other authorities necessary to
conduct its business and to use its properties in the manner in which they will
be used.

 

Section 5.2.  Negative
Covenants.  So long as the Term Note
shall remain unpaid or outstanding hereunder, the Borrower will not, unless the
Bank shall give its prior written consent:

 

(a)           Debt.  Create or suffer to exist any Debt except for (i) the Debt under
this Agreement; and (ii) indebtedness pursuant to that Loan Agreement, dated
July 19, 2001, between the Borrower and the Bank; (iii) ordinary trade debt
incurred in Borrower’s business that is not in default and that is unsecured;
(iv) other indebtedness not exceeding, in aggregate $150,000 in any twelve
month period; (v) the Lease; or (vi) indebtedness under existing real estate
leases for Borrower’s restaurants located or to be developed in Fargo, North
Dakota, Davenport, Iowa, Cedar Rapids, Iowa, Maple Grove, Minnesota, and
Wichita-area, Kansas, pursuant to the terms of the Development Agreement
between Borrower and Donald A. Dunham, Jr. (“Dunham”), dated October 22, 2002,
subsequently assigned by Dunham to Dunham Capital Management, L.L.C. (the
“Development Agreement”).

 

(b)           Liens.  Create or suffer to exist any Lien except the Lien of the Loan
Documents or other loans by the Bank to the Borrower, including the loan made
on July 19, 2001.

 

(c)           Merger.  Merge or consolidate with any other Person (except where the
Borrower is the successor to the merger); sell, transfer, convey, assign,
encumber or otherwise dispose of any legal, beneficial, or equitable ownership
of Borrower; or sell, transfer, convey, assign, encumber, lease or otherwise
dispose of any of the Project assets (whether now owned or hereafter acquired)
to any other Person.

 

10

 

(d)           Transactions with Affiliates.  Engage after the date hereof, in any
transaction (including without limitation loans or financial accommodations of
any kind) with any Affiliate; provided, such transactions shall be permitted if
they are on terms no less favorable to the Borrower than would be obtainable if
no such relationship existed; provided, however, that Borrower may engage in
(i) debt or equity financing transactions with (a) Brew Buddies, L.L.C., a
South Dakota limited liability company; or (b) Bluestem Capital Partners III
Limited Partnership, a South Dakota limited partnership (“Bluestem”); (ii)
consulting agreement (not to exceed $25,000) with Bluestem; and
(iii) development, construction and lease agreements pursuant to the
Development Agreement for the restaurants identified in Section 5.2(a).

 

(e)           Investments in Other Persons.  Make any loan or advance to any Person; or
purchase or otherwise acquire the capital stock, assets, or obligations of, or
any interest in, any other Person other than (i) readily marketable direct
obligations of the United States of America; (ii) certificates of time
deposits issued by commercial banks of recognized standing operating in the
United States of America; and (iii) trade and customer accounts receivable
arising in the ordinary course of business.

 

(f)            Distributions.  If any default or Event of Default has
occurred hereunder and is continuing, make any cash or property distributions
(other than distributions payable only in common stock or payments for
fractions thereof) to any of its shareholders or set aside any funds for such
purpose.

 

ARTICLE VI

 

DEFAULT

 

Section 6.1.  Events of
Default.  “Event of Default” in this
Agreement means any of the following events:

 

(a)           An Event of Default under the Lease;

 

(b)           Failure of the Borrower to pay the principal
or interest on the Term Note when due (whether at the stated maturity or at a
date fixed for any installment payment or any accelerated payment date or
otherwise);

 

(c)           Any representation or warranty made by, or
on behalf of, any Loan Party in, or pursuant to, any Loan Document shall prove
to have been incorrect in any material respect when made;

 

(d)           Default in performance
of other covenant or agreement of any Loan Party in, or pursuant to, any Loan
Document and continuance of such default or breach for a period of thirty (30)
days thereafter;

 

(e)           The Borrower or Guarantor shall generally
not pay its debts as such debts become due, or shall admit in writing its
inability to pay its debts generally, or shall make a general assignment for
the benefit of creditors; or any proceeding shall be instituted by Borrower or
Guarantor seeking to adjudicate it

 

11

 

a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, custodianship, protection, relief, or
composition of it or its debts under any law relating to bankruptcy, insolvency
or reorganization or relief of debtors, or seeking the entry of an order for
relief, or the appointment of a receiver, custodian, trustee, or other similar
official for it or for any substantial part of its property; or any such
proceeding shall be instituted against Borrower or Guarantor and shall remain
undismissed for a period of sixty (60) days after its commencement; or the
Borrower or Guarantor shall take any action to authorize any of the actions set
forth above in this subsection (e); or Bank in good faith deems itself
insecure;

 

(f)            The Borrower shall fail to pay any Debt
(other than the Debt evidenced by the Term Note) of the Borrower, or any
interest or premium thereon, when due (whether by scheduled maturity, required
prepayment, acceleration, demand or otherwise) and such failure shall continue
after the applicable grace period, if any, specified in the agreement or
instrument relating to such Debt; or any other default under any agreement or
instrument relating to any such Debt, or any other event, shall occur and shall
continue after the applicable grace period, if any, specified in such agreement
or instrument, if the effect of such default or event is to accelerate, or to
permit the acceleration of, the maturity of such Debt; or any such Debt shall
be declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment) prior to the stated maturity thereof;
provided, the Borrower may contest in good faith amounts payable in the
ordinary course of business to its suppliers and vendors if adequate reserves
are established to pay such amounts;

 

(g)           The entry against the Borrower or any Guarantor
of a final judgment, decree or order for the payment of money in excess of
$50,000.00 and the continuance of such judgment, decree or order unsatisfied
for a period of thirty (30) days without a stay of execution;

 

(h)           The Project is discontinued for thirty (30)
consecutive days or remains incomplete after November 1, 2003;

 

(i)            The Guarantor revokes or attempts to revoke
his Guaranty; or

 

(j)            A default or event of default occurs under
any of the other Loan Documents, or any documents issued in connection with a
loan now or hereafter made by the Bank to the Borrower.

 

Section 6.2.  Rights and
Remedies.  If any Event of Default
shall occur, the Bank may exercise any or all of the following rights and
remedies:

 

(a)           Refuse to make any further advances to the
Borrower under the Term Note.

 

12

 

(b)           Declare the Term Note, all interest thereon,
and all other obligations under, or pursuant to, any Loan Document to be
immediately due and payable, and upon such declaration such Term Note, interest
and other obligations shall immediately be due and payable, without
presentment, demand, protest or any notice of any kind, all of which are
expressly waived.

 

(c)           Exercise any right or remedy under any of
the Loan Documents, or any other right or remedy of a secured party under
applicable law.

 

(d)           Exercise any other right or remedy available
to the Bank at law or in equity.

 

Notwithstanding anything
to the contrary contained herein, the occurrence of an Event of Default under
Subsection 6.1(e) shall automatically result in the acceleration of all amounts
due hereunder and under the Term Note.

 

ARTICLE VII

 

MISCELLANEOUS

 

Section 7.1.  No Waiver;
Cumulative Remedies.  No failure or
delay on the part of the Bank in exercising any right or remedy under, or
pursuant to, any Loan Document shall operate as a waiver thereof, nor shall any
single or partial exercise of any such right, remedy or power preclude other or
further exercise thereof, or the exercise of any other right, remedy or
power.  The remedies in the Loan
Documents are cumulative and are not exclusive of any remedies provided by law.

 

Section 7.2.  Amendments and
Waivers.  No amendment or waiver of
any provision of any Loan Document shall be effective unless such amendment or
waiver is in writing and is signed by the Bank, and such amendment or waiver
shall be effective only in the specific instance and for the specific purpose
for which it was given.

 

Section 7.3.  Notices.  All notices and other communications provided
for hereunder shall be in writing (including facsimile communication) and
mailed, telecopied or personally delivered, if to the Borrower, at its address
stated in the preamble hereof, or to facsimile number (952) 542-3951,
Attention:  Steven J. Wagenheim; and if
to the Bank, at its address stated in the preamble hereof, or to facsimile
number (605) 945-3914, Attention:  Craig
Davis, Branch President; or, as to each party, at such other address or
facsimile number as shall be designated by such party in a written notice to
the other party.  All such notices and
communications shall, when mailed, be effective when deposited in the mail,
addressed as aforesaid or, when telecopied, be effective when receipt is received
for a telecopy sent to the facsimile number set forth above.

 

Section 7.4.  Costs and
Expenses.  The Borrower agrees to
pay on demand all reasonable out-of-pocket costs and expenses of the Bank in
connection with the preparation of the Loan Documents, including reasonable

 

13

 

attorneys’ fees and legal expenses as well as all reasonable
out-of-pocket costs and expenses of the Bank, including reasonable attorneys’
fees and expenses, in connection with the administration and enforcement of the
Loan Documents (whether suit is commenced or not).

 

Section 7.5.  Right of
Set-off.  Upon the occurrence and
during the continuance of any Event of Default the Bank is hereby authorized at
any time and from time to time, to the fullest extent permitted by law, to set
off and apply any and all deposits (general or special, time or demand,
provisional or final) at any time held and other indebtedness at any time owing
by the Bank to or for the credit or the account of the Borrower against any and
all of the obligations of the Borrower now or hereafter existing under any Loan
Documents, irrespective of whether or not the Bank shall have made any demand
under any Loan Documents.  The rights of
the Bank under this Section are in addition to other rights and remedies (including,
without limitation, other rights of set-off) which the Bank may have.

 

Section 7.6.  Governing Law.  All Loan Documents shall be governed by the
internal laws of the State of Minnesota. 
Any term used in this Agreement and not otherwise defined herein shall
have the definition, if any, given that term in the Uniform Commercial Code as
in effect in the State of Minnesota from time to time.  If any term in this Agreement shall be held
to be illegal or unenforceable, the remaining parts of this Agreement shall not
be affected, and this Agreement shall be construed and enforced as if this
Agreement did not contain the term held to be illegal or unenforceable.  THE BORROWER HEREBY CONSENTS TO THE
EXCLUSIVE JURISDICTION OF ANY STATE OR FEDERAL COURT SITUATED IN OR
ENCOMPASSING HENNEPIN COUNTY, MINNESOTA, AND WAIVES ANY OBJECTIONS BASED ON FORUM
NON CONVENIENS, WITH REGARD TO ANY ACTIONS, CLAIMS, DISPUTES OR PROCEEDINGS
RELATING TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, ANY RELATED DOCUMENT, OR
ANY TRANSACTIONS ARISING THEREFROM, OR ENFORCEMENT AND/OR INTERPRETATION OF ANY
OF THE FOREGOING.  Nothing herein shall
affect the Bank’s right to serve process in any manner permitted by law, or
limit the Bank’s right to bring proceedings against the Borrower in the
competent courts of any other jurisdiction or jurisdictions.

 

THE BORROWER AND THE BANK HEREBY JOINTLY AND
SEVERALLY WAIVE ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY ACTION OR PROCEEDING
RELATING TO THIS AGREEMENT, THE OTHER LOAN DOCUMENTS, OR ANY TRANSACTION
ARISING HEREFROM OR CONNECTED HERETO. 
THE BORROWER AND THE BANK EACH REPRESENTS TO THE OTHER THAT THIS WAIVER
IS KNOWINGLY, WILLINGLY AND VOLUNTARILY GIVEN.

 

14

 

Section 7.7.  Binding Effect;
Assignment.  All Loan Documents
shall be binding upon and inure to the benefit of the Loan Parties and the Bank
and their respective succes­sors and assigns. 
No Loan Party shall have the right to assign its rights or interest
under any such Loan Document without the prior written consent of the Bank.

 

15

 

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

 

	
   

  	
  BORROWER:

  
	
   

  	
   

  
	
   

  	
  GRANITE CITY FOOD & BREWERY, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /s/ Steven J. Wagenheim

  	
   

  
	
   

  	
   

  	
  Steven J. Wagenheim

  
	
   

  	
   

  	
  Its:  President

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  BANK:

  
	
   

  	
   

  
	
   

  	
  FIRST NATIONAL BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By 

  	
  /s/ Craig Davis

  	
   

  
	
   

  	
   

  	
  Craig Davis

  
	
   

  	
   

  	
  Its:  Branch President

  

 

16

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