Document:

Exhibit 10.19

PROMISSORY NOTE

 

	

  $100,000.00

  	

   

  	

  New Brighton, MN

  	

   

  
	

   

  	

   

  	

  May 1, 2002

  	

   

  

 

FOR VALUE

RECEIVED, the undersigned FOUNDERS FOOD & FIRKINS LTD., a Minnesota

corporation (the “Borrower”), hereby promises to pay to the order of NEW

BRIGHTON VENTURES, INC. (the “Lender”), at its office at 2397 Palmer Drive, New

Brighton, Minnesota, the principal sum of One Hundred Thousand and no/100

Dollars ($100,000.00), in lawful money of the United States of America, and to

pay interest (calculated on the basis of actual days elapsed and a three

hundred sixty-five (365) day year) on said principal sum, or the unpaid balance

thereof, at a rate equal to prime plus one half of one percent (Prime + 0.5%)

per annum.

 

Beginning in

December 2001 and each month thereafter until said principal has been fully

paid, the Borrower shall pay monthly installments of accrued interest only on

the outstanding principal balance.

 

The principal

balance of this loan is due and payable upon 30 days following demand for

payment.

 

 

	

   

  	

  FOUNDERS FOOD & FIRKINS LTD.

  
	

   

  	

   

  
	

   

  	

   

  
	

   

  	

  By:

  	

  /s/ Steven J. Wagenheim

  	

   

  
	

   

  	

   

  
	

   

  	

  Title:  President/Chief

  Executive OfficerExhibit 10.25

 

DEVELOPMENT AGREEMENT

 

BETWEEN

 

DONALD A. DUNHAM, JR.

 

AND

 

GRANITE CITY FOOD & BREWERY, LTD.

 

›

 

Date of Development Agreement

 

October 22, 2002

 

 

DEVELOPMENT
AGREEMENT

 

THIS DEVELOPMENT AGREEMENT (hereinafter referred to as
this “Agreement”), made, entered into and effective this 22 day of October,
2002, by and between GRANITE CITY FOOD & BREWERY, LTD., a Minnesota
corporation, hereinafter referred to as “Granite City”, and DONALD A. DUNHAM,
JR., an individual, hereinafter referred to as the “Developer”;

 

WITNESSETH:

 

WHEREAS, Granite City has developed a restaurant
operation which provides to the public casual dining restaurants featuring
on-premises breweries under the name “Granite City Food & BreweryTM”; and

 

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

 

WHEREAS, the Developer desires to construct and
develop Granite City Food & Brewery restaurants (hereinafter individually
referred to as the “Restaurants” or “Project”) at locations as determined by
Granite City and Developer; and

 

WHEREAS, Granite City is willing to provide the
Developer with building plans and specifications and experience, and “know-how”
about the Granite City Food & Brewery Restaurants that has been developed
by Granite City; and

 

WHEREAS, the Developer shall provide human resources
and expertise to 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 I.

DEVELOPMENT SERVICES

 

A.                                   Developer shall
perform certain services relating to the development of the Restaurants and shall
oversee the development and construction of each Restaurant, and shall perform
the services and carry out the 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.

 

2

 

B.                                     The Developer’s
services shall consist of the duties set forth in the following subparagraphs
of this Section I.B and as provided elsewhere in this Agreement.  The Developer shall perform the following:

 

1.                                       Work with
Granite City to establish mutually acceptable Project cost goals and to
establish a Guaranteed Maximum Cost for each Project.

 

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

 

a.                                       Prior to
negotiating a Land Agreement for a Restaurant site the 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.

 

b.                                      Developer shall
provide Granite City copies of the following documents prior to closing the
Land Agreement for such property for a Restaurant Project,

 

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

 

(ii)                                  Survey
meeting ALTA/ACSM Land Title Standards.

 

(iii)                               All
environmental audits, tests and reports.

 

(iv)                              All
soil test reports.

 

3.                                       Negotiate the
terms and conditions of a guaranteed maximum cost construction contract between
Developer and a general contractor (“Construction Contract”).  Prior to negotiating a Construction
Contract, the Developer shall consult with Granite City concerning the basic
terms and conditions of such contract. 
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 Completion Date will be the
date that the Restaurant Project is substantially complete other than for
completion of the “Tenants Work” as specified in the lease of the Restaurant
Project from Developer to Granite City. 
The Restaurant Project will be deemed substantially complete when the
only legal or functional impediment to Granite City conducting its restaurant
operations in the Restaurant is completion of the Tenants Work, and 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.

 

4.                                       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.

 

3

 

Developer,
through its Project Manager, will obtain at least three competitive bids for
each site.

 

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

 

6.                                       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 all
such contractors and 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 by such contractors and professionals.

 

7.                                       Coordinate 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.

 

8.                                       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.

 

9.                                       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.

 

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

 

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

 

12.                                 Arrange for
periodic formal inspections of the construction process and Project by the
architect, Granite City and its agents at such times and frequency as Granite
City may require, but not to exceed more than once a month.  Granite City and its agents may also
informally monitor the construction process from time to time provided Granite
City does not interfere with or delay the construction process.

 

13.                                 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.

 

14.                                 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.

 

4

 

15.                                 Coordinate
payments to contractors and suppliers and assist in making recommendations for
payment for dispute work.

 

16.                                 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.

 

17.                                 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.

 

18.                                 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.

 

19.                                 Provide timely
reporting of Project status to all parties. 
Developer acknowledges that it is critical to deliver each Restaurant
Project 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.

 

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, 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 ten (10) days 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.

 

20.                                 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.

 

5

 

SECTION II.

RESPONSIBILITIES OF GRANITE CITY

 

A.                                   Granite City’s
services shall consist of the duties set forth in the following subparagraphs
of this Section II.A 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
perform the following:

 

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

 

2.                                       Negotiate the
terms and conditions of an architectural agreement between Granite City, the
Developer and the architect 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
Guaranteed Maximum Cost.  Developer
shall be entitled to utilize the plans and specifications now and in the future
for the Restaurant Project to which Developer, together with Granite City,
shall be a co-owner for purposes of being the beneficiary of the
architect’s duties, covenants and warranties. 
Granite City shall own the plans and specifications for purposes of
constructing the Tenants 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. 
Granite City shall advise Developer on various final plan details, 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.

 

3.                                       Approve or
disapprove, in writing, the plans and specifications of each Restaurant as
provided by Developer.

 

4.                                       Approve or
disapprove, in writing, the overall construction costs of the Restaurant,
including the Land costs and Lease costs.

 

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

 

6.                                       Provide all
other functions reasonably necessary to assist the completion of the facilities
in a professional and timely manner which are customarily undertaken by a
tenant under a build-to-suit leasing arrangement.

 

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

 

6

 

SECTION III.

DEVELOPMENT SCHEDULE

 

A.                                   Recognizing
that time is of the essence, the Developer (D) and Granite City (GC)
acknowledge and agree that a material provision of this Agreement is that the
following development schedule must be adhered to during the term of this
Agreement.

 

1.             Schedule
for first three Restaurants:

 

	
  a.

  	
   

  	
  Identify cities
  or metropolitan areas for three Projects (GC)

  	
   

  	
  15 days from
  execution of Development Agreement

  
	
  b.

  	
   

  	
  First Site
  Selection (D and GC)

  	
   

  	
  45 days from the
  execution of Development Agreement

  
	
  c.

  	
   

  	
  Executed Land
  Agreement and GC/Dunham Lease Agreement for First Site (D)

  	
   

  	
  30 days from the
  date of the First Site Selection

  
	
  d.

  	
   

  	
  Identify Second Site Selection (D and GC)

  	
   

  	
  60 days from execution of Development Agreement

  
	
  e.

  	
   

  	
  Executed Land Agreement for Second Site and GC/Dunham Lease
  Agreement(GC/D)

  	
   

  	
  30 days from date of the Second Site Selection

  
	
  f.

  	
   

  	
  Identify Third Site Selection (D and GC)

  	
   

  	
  90 days from execution of the Development Agreement

  
	
  g.

  	
   

  	
  Executed Land Agreement and GC/Dunham Lease Agreement for Third Site
  (D)

  	
   

  	
  30 days from the date of the Third Site Selection

  
	
  h.

  	
   

  	
  Provide Model Restaurant Design (GC)

  	
   

  	
  15 days from the execution of Development Agreement

  
	
  i.

  	
   

  	
  Determine Preliminary Lease Payment

  	
   

  	
  15 days after execution of Land Agreement for First Site

  
	
  j.

  	
   

  	
  Provide Modified Building Plans and Specifications for Restaurant for
  Land Agreement and Construction Contract for First Site (GC)

  	
   

  	
  30 days from the execution of Land Agreement for First Site

  

 

7

 

	
  k.

  	
   

  	
  Provide Modified Building Plans and Specifications
  for Restaurant for Land Agreement and Construction Contract for Second Site
  (GC)

  	
   

  	
  30 days from the execution of Land Agreement for
  Second Site

  
	
  l.

  	
   

  	
  Provide Modified Building Plans and Specifications for Restaurant for
  Land Agreement and Construction Contract for Third Site (GC)

  	
   

  	
  30 days from the execution of Land Agreement for Third Site

  
	
  m.

  	
   

  	
  Provide Estimate of Costs Associated with each Restaurant (D)

  	
   

  	
  45 days from the delivery of Modified Plans and Specifications for
  that Restaurant

  
	
  n.

  	
   

  	
  Selection of General Contractor

  	
   

  	
  60 days from the developer’s receipt of modified plans and
  specifications

  
	
  o.

  	
   

  	
  Approval of Building Costs (GC & D)

  	
   

  	
  60 days from developer’s receipt of modified plans and specifications

  
	
  p.

  	
   

  	
  Determine Lease Payment

  	
   

  	
  60 days after execution of Land Agreement for that Site

  
	
  q.

  	
   

  	
  Commencement of Construction of each Restaurant (D)

  	
   

  	
  Within a reasonable amount of time and not to exceed 6 months from
  execution of the Land Agreement for that Restaurant

  
	
  r.

  	
   

  	
  Completion of Construction of each Restaurant (D)

  	
   

  	
  Six months from commencement of Construction of that Restaurant

  

 

The above construction schedule is for the first three
Restaurants.  The parties shall stagger
the schedule for the three Restaurants so that openings are approximately 90
days apart, if feasible.  

 

2.             The
Development Schedule for the subsequent Restaurants subject to this Agreement:

 

	
  a.

  	
   

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

  	
   

  	
  As initiated by GC

  
	
  b.

  	
   

  	
  Site Selection (GC & D)

  	
   

  	
  30 days after Market Identification

  
	
  c.

  	
   

  	
  Executed Land Agreement (D)

  	
   

  	
  60 days after Site Selection

  
	
  d.

  	
   

  	
  Modified Plans and Specifications (GC)

  	
   

  	
  90 days after Site Selection

  
	
  e.

  	
   

  	
  Estimate of Costs (D)

  	
   

  	
  30 days after delivery of Plans and Specifications

  
	
  f.

  	
   

  	
  Approval of Costs (GC)

  	
   

  	
  20 days after estimate of costs

  

 

8

 

	
  g.

  	
   

  	
  Commencement of Construction

  	
   

  	
  6 months after Land Agreement executed

  
	
  h.

  	
   

  	
  Completion of Construction

  	
   

  	
  6 months after commencement of construction

  

 

3.                                       Construction of a restaurant shall be
deemed to commence upon Developer pouring concrete and footings.

 

B.                                     Failure to
Comply with Development Schedule.  The Developer or Granite City’s failure to comply with the above
Development Schedule 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 IV.B.  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 but will terminate the contract with respect to the
obligation to construct or lease additional restaurants with Developer for
which construction has not yet commenced. 
Notwithstanding the above, if Developer has constructed three (3)
restaurants in accordance with the Development Schedule, the failure of
Developer to comply with the Development Schedule for one restaurant shall not
be grounds for termination of this Agreement. 
If the Developer fails to comply with the Development Schedule for two or
more restaurants, this Agreement shall be terminated by Granite City at its
option.

 

SECTION IV.

EVENTS OF DEFAULT

 

A.                                   Defined.  The term “Event of Default” shall mean any
failure by any party to observe or perform any 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.

 

B.                                     Remedies.

 

1.                                       Default by
Developer.  Whenever any Event of
Default occurs on behalf of Developer, Granite City may exercise the following
remedies after providing fifteen (15) days written notice to the defaulting
party of the Event of Default, but only if the Event of Default has not been cured
within said fifteen days Granite City may:

 

a.                                       Suspend its
performance under this Agreement and/or the lease; provided that upon Developer
curing such Event of Default, Granite City shall resume its performance under
this Agreement.

 

b.                                      Cancel, rescind
or terminate this Agreement and/or any lease to an uncompleted restaurant for
which this Agreement is terminated.

 

c.                                       Take whatever
other action permitted by law, including legal, equitable or administrative
action, which may appear necessary or desirable to enforce performance and
observance of any obligation, agreement, or covenant under this Agreement or to
obtain and collect a judgment for damages.

 

2.                                       Default by
Granite City.  In the event that Granite
City is in default of any of its obligations or covenants, set forth in this
Agreement, Developer shall have, as its sole

 

9

 

remedy,
the right to terminate this Agreement and Granite City shall promptly pay to
Developer provided Developer is not in material default of its obligations,
covenants, representations or warranties set forth in this Agreement a
liquidated damage fee of One Hundred Thousand Dollars ($100,000), representing
a reasonable estimation of the costs, time, and legal and other expenses expended
by Developer as a result of Granite City’s default.  Such amount is acknowledged by Granite City and Developer to be a
reasonable estimate of damages anticipated to be suffered by Developer as a
result of Granite City’s failure to perform hereunder and shall not be deemed a
penalty or excessive fee.  Developer
shall not be entitled to make any other claim for damages in addition to or in
lieu of the claim for liquidated damages.

 

C.                                     Termination.

 

1.                                       Upon
termination of the Agreement, the Developer will have no further rights or
obligation to construct Restaurants under the Granite City Food & Brewery
name.

 

2.                                       Upon
termination, Granite City will have the right to develop and construct its
Restaurants in any location and to contract with another party for future
development in any location.

 

3.                                       Upon
termination, 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 for a price equal to
the lesser of the Guaranteed Maximum Cost or the amount of allowable costs
incurred by Developer to date of exercise of Granite City’s purchase.  In the event this Agreement is terminated
because of the default of a party, the other party shall be entitled to claim
damages equal to its unreimbursed out of pocket costs, but will not be entitled
to claim lost profits, speculative or consequential damages, except as set out
in the liquidated damages clause.

 

4.                                       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.

 

D.                                    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.  If Granite City elects
mediation the mediation shall take place in Minnehaha County, State of South
Dakota.  If Developer elects 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 South

 

10

 

Dakota,
without regard to its conflict of law provisions, to govern the construction
and interpretation of this Agreement.

 

E.                                      No Remedy
Exclusive.  Except as
set forth herein no remedy herein conferred upon or reserved to Granite City is
intended to be exclusive of any other available remedy or remedies.  Each and every such remedy shall be
cumulative and shall be in addition to every other remedy given under this
Agreement or now or hereafter existing at last or in equity or by statute,
provided that in no event shall Granite City 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 IV.

 

F.                                      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 V.

SITE SELECTION

 

Developer will assume all cost, liability, expense and
responsibility for locating and obtaining sites for the Restaurants, 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 the Restaurants
at such sites.

 

A.                                   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.

 

B.                                     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.

 

C.                                     After the
location for a Restaurant has been reviewed and agreed upon by the Developer
and Granite City, the Developer shall purchase or lease the site with
Development Schedule deadline set forth in Section III(A).

 

D.                                    Granite City
shall provide all furniture, fixtures and equipment necessary for the operation
of the Restaurants.  With respect to
each Project, the parties shall enter into a written agreement identifying or
classifying items which constitute furniture, fixtures and equipment to be provided
by Granite City.

 

11

 

SECTION VI.

INSPECTION

 

Upon receipt thereof, Developer agrees to provide
Granite City copies of all proposed and executed contracts, subcontracts,
purchase orders, or other documentation 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 VII.

LEASE AGREEMENT

 

A.                                   For each
Restaurant site developed by the Developer, Granite City shall enter into a
lease agreement (the “Lease”) with Developer or an assignee of Developer
substantially in the form of Exhibit A to be finalized and attached prior to
October 30, 2002 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:

 

1.                                       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.

 

2.                                       Term of Lease.  Each lease term shall be for twenty (20)
years with five (5) five-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.

 

3.                                       Lease Payments.  The annual lease payment shall be determined
by multiplying the approved Project costs, identified in the Lease, which shall
include land costs, by the lease rate of 10.5% (“Lease Rate”).  As an illustration, if the Project costs are
$2,000,000, the annual lease payment will be $210,000.  If the Developer does not purchase the land,
but executes a land lease, the annual land lease cost shall be added to the
annual lease payment as determined above. 
The Lease Rate has been determined using the ten year treasury note
(“Index”) indexed at 5%.  The Lease Rate
shall not be adjusted until the Index either exceeds 6.5% or is equal or below
3.5%.  If the Index exceeds 6.5% at the
time that each Restaurant opens, the Lease Rate for that Restaurant shall
increase by the same amount that the Index exceeds 6.5%, at the option of the
Developer and primarily determined by mortgage rates.  For example, if the Index is 7%, the Developer may raise the
Lease Rate to 11%.  If the Index is 3.5%
at the time that each Restaurant opens, the Lease Rate for that Restaurant
shall decrease by the same amount that the Index is less than 3.5%.  For example, if the Index is 3.0%, the Lease
Rate shall be 10%.

 

4.                                       Project Costs.  Prior to the commencement of the
construction of each Restaurant, the Developer and Granite City shall agree as
to the amount of the Guaranteed Maximum Cost. 
The constructions costs will not change unless Granite City initiates a
change to the plans and specifications and both parties execute a change
order.  However, Granite

 

12

 

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 the Site prior to purchasing the Site. 
There will be no development fee, financing fee or other fee earned by
the Developer it being agreed that the rent fully compensates Developer, except
that a project management fee of three percent (3%) of the General Contractor
Cost and Tenant Improvements constructed by the General Contractor, payable to
Developer, shall be included in the Project Costs.  Project costs are more specifically defined in Exhibit B.  The General Contractor Cost and Tenant
Improvements shall not include other costs such as land purchase costs or “soft
costs” including but not limited to architect fees, consultant fees, finance
fees, governmental fees, attorney fees, accountant fees, engineer fees,
geotechnical costs, or environmental audit costs.

 

5.                                       Rent
Commencement Date.  Rent shall
commence for each site the earlier of the day Granite City commences to operate
as a public restaurant or the first day of the first full month following
twenty-one (21) days after the issuance of a certificate of
occupancy.

 

6.                                       Option.  The Lease shall contain an option for
Granite City to purchase the restaurant real estate for fair market value at
the end of the 20th Lease Year.

 

7.                                       Right of First
Refusal.  The Lease shall provide
Granite City the right of first refusal to purchase the restaurant real estate
during the lease term and any extension or renewal thereof.

 

SECTION VIII.

NUMBER OF SITES

 

A.                                   In
consideration of Developer entering into this Development Agreement, Developer
is given the right to develop and build up to twenty-two (22) restaurants prior
to December 31, 2012.  Granite City is
not bound to authorize Developer to develop twenty-two (22) restaurants in such
time period but Granite City shall not use any other developer as long as this
Agreement is in effect.  Developer shall
have the option to waive its right to develop any site for any reason.  Notwithstanding the above, Granite City may
use another developer to develop a site(s) under the following circumstances:

 

1.                                       The Agreement
is terminated pursuant to Section III or IV. B. because of a Developer Default.

 

2.                                       Developer
declines to develop a particular Project site.

 

3.                                       If the
Developer has developed at least 7 Restaurants, and if the controlling interest
in Granite City or substantially all of Granite City’s assets is sold to a
third party or Granite City is merged into another entity controlled by third
parties, provided any site in process at the time of sale or merger shall be
completed pursuant to this Agreement.

 

B.                                     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

 

13

 

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.

 

The terms of this Section VIII(B) shall be
incorporated in more detail in the Lease.

 

SECTION IX.

GENERAL PROVISIONS

 

A.                                   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 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:

  
	
  Donald A. Dunham
  Jr. Ltd.

  	
   

  	
  John F. Archer,
  Esq.

  
	
  230 S. Phillips
  Avenue, Suite 202

  	
   

  	
  Hagen, Wilka
  & Archer, P.C.

  
	
  Sioux Falls, SD
  57104

  	
   

  	
  100 S. Phillips
  Avenue, Suite 418

  
	
   

  	
   

  	
  Sioux Falls, SD
  57104

  
	
   

  	
   

  	
   

  
	
  If to Granite
  City Food & Brewery, Ltd.:

  	
   

  	
  With a Copy to:

  
	
  Steve Wagenheim

  	
   

  	
  Avron Gordon,
  Esq.

  
	
  5831 Cedar Lake
  Road

  	
   

  	
  Briggs and
  Morgan, P.A.

  
	
  St. Louis Park,
  MN 55416

  	
   

  	
  2400 IDS Center

  
	
   

  	
   

  	
  Minneapolis, MN
  55402

  

 

B.                                     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.

 

C.                                     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 the 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.

 

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

 

SECTION X.

BINDING AGREEMENT

 

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.

 

14

 

SECTION XI.

HEADINGS

 

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

 

SECTION XII.

TERMINOLOGY

 

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.

 

SECTION XIII.

BENEFIT OF AGREEMENT

 

The obligations and undertakings of the Developers set
forth in this Agreement are made for the benefit of the Partnership and its
partners and shall not inure to the benefit of any creditor of the Partnership
other than a Partner, notwithstanding any pledge or assignment by the
Partnership of this Agreement or any rights hereunder.

 

SECTION XIV.

COUNTERPART

 

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.

 

15

 

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

 

	
  DONALD A.
  DUNHAM, JR.

  	
  GRANITE CITY
  FOOD & BREWERY LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
  /s/ Donald A.
  Dunham, Jr.

  	
   

  	
  By /s/ Steven J.
  Wagenheim

  	
   

  
	
   

  	
  Its President

  	
   

  
				

 

16

 

EXHIBIT A

LEASE AGREEMENT

 

THIS LEASE AGREEMENT, made and entered into on this
           day of
                    ,
200   , by and between Donald A. Dunham, Jr., and/or his assigns
(hereinafter referred to as “Landlord”) and Granite City Food & Brewery,
Ltd., having its principal place of business in
                                    ,
(hereinafter collectively referred to as “Tenant”).

 

WHEREAS, Landlord and Tenant have entered into a
Development Agreement on
October        , 2002 (“Development
Agreement”); and

 

WHEREAS, pursuant to the Development Agreement, the
Landlord and Tenant now hereby agree to enter into this Lease Agreement dated
this            day of
                           ,
200       ; and

 

WHEREAS, any capitalized terms used herein and not otherwise
defined shall have the meaning and effect of such term as set forth in the
Development Agreement.

 

SECTION I.

LEASED PREMISES

 

A.                                   Description of
Premises.  Landlord
hereby leases and demises to Tenant and Tenant hereby accepts and leases from
Landlord, on the terms and conditions hereinafter set forth, that certain real
property and building, fixtures, and other related improvements to be
constructed in
                            County,
                      ,
on land which is legally described on Exhibit A-1 and depicted on Exhibit A-2:

 

and hereinafter in this Lease called the
“Premises.”  The Premises consist of an
area of approximately
                           
square feet with a building located thereon of approximately
                                
square feet (“Building”).

 

B.                                     Quiet Enjoyment.  Landlord covenants and agrees that so long
as Tenant is not in default under the terms of this Lease, Tenant shall have
quiet and peaceful possession of the Premises and shall enjoy all of the rights
granted herein without interference.

 

C.                                     Construction of
Building.  Landlord
shall erect on the real property a
                 
square foot Building including the Fixtures and Equipment set forth on Exhibit
B and excepting such work as Tenant is to finish as set forth on Exhibit C
(“Tenant’s Work”).  The Building shall
be built in accordance with plans and specifications prepared by
                                           
                                                     
dated                                      
sheets
                                                
(the “Plans and Specifications”) as agreed to by the parties hereto and in
accordance with the Development Agreement. 
Landlord’s completion of its portion of the construction of the Building
and all related improvements shall be on or before
                        ,
200     (“Completion Date”) and such construction shall be
done in a good and workmanlike manner and sufficient to receive a certificate
of occupancy, and shall be in compliance with all governmental laws,
ordinances, regulations, building codes and requirements.  Landlord shall complete all landscaping
prior to the time Tenant completes the Tenant’s Work except if the landscaping
work cannot be completed prior to winter and the landscape plan has been
approved by the City of
                     
(“City”) and the City has granted a Certificate of Occupancy, the Landlord
shall complete the landscaping work as soon as possible during the spring of
the following calendar year.  The
Completion Date shall not be changed except by written amendment executed by
both parties or by Unavoidable Delay as hereinafter defined.

 

17

 

Tenant shall furnish, construct and install the Tenant’s
Work at its own expense and in accordance with the Plans and Specifications as
soon as can reasonably be done after the Building has been completed by
Landlord.  However, any delay caused by
the Landlord shall extend the completion period of the Tenant.  All Tenant’s work shall be done in a good
and workmanlike manner and in accordance with all city building codes.  Landlord is under no obligation to make any
structural or other alterations, decoration, additions or improvements in or to
the Premises except as expressly set forth in the Plans and
Specifications.  Tenant shall have the
right to make changes from time to time in the Plans and Specifications by
submitting to Landlord revised plans and specifications (herein called the
“Revisions”).  Upon timely receipt of
any Revisions, Landlord shall submit the Revisions for performance to the
contractors performing the trade or trades involved in the Revisions, and if so
requested by Tenant, obtain proposed Bids from those contractors before
embarking on such performance.  Landlord
shall have the right to reject any Revisions which would materially delay the
Commencement Date of this Lease unless, in conjunction therewith, Tenant agrees
to pay rental for the Premises on the date the Rent Commencement Date would
have occurred but for the completion of the Revisions.

 

D.                                    Preparation of
Premises.  Tenant
shall take and accept the Premises upon completion of construction and receipt
from the City of a Certificate of Occupancy (COO).  The Premises shall be in tenantable condition so that the lights,
water, sewer, front and rear doors, HVAC, plumbing, and water heater are in
working or operating condition and the Tenant is able to operate its customary
restaurant business in the Premises. 
Taking of possession of the Premises by Tenant shall be conclusive
evidence that the Premises, was, on that date, in good, clean and tenantable
condition as represented by Landlord, subject to latent defects or concealed
conditions.  Notwithstanding the
previous sentence, taking of possession of the Premises by Tenant shall not act
to waive the obligation of Landlord to remedy any defects in construction of
the Premises nor to complete punch list items.

 

E.                                      Signs.  Tenant shall be allowed to install exterior
signage, containing Tenant’s name and logo on the exterior of the Premises as
well as a free standing exterior sign at the entrance to the Premises, such
signage not to exceed the Premises allowable signage per code or
ordinance.  All exterior signage shall
comply with local codes and ordinances and be approved by Landlord, which
approval shall not be unreasonably withheld or delayed.  It is understood that Tenant will pay for
the signage and that Landlord, if requested, will use its best effort to assist
Tenant in securing required approvals, provided Tenant will promptly reimburse
Landlord for any monies expended for this purpose.

 

SECTION II.

TERM

 

A.                                   Lease
Commencement.  The term
of this Lease shall commence on the earlier of the date Tenant commences to
operate a restaurant on the Premises or the first day of the first full month
following twenty-one (21) days after the issuance of a Certificate of Occupancy
for the Premises (the “Commencement Date”). 
The parties shall execute an amendment to the Lease setting forth the
exact “Commencement Date” within thirty (30) days of Tenant commencing public
restaurant operations in the Premises.

 

B.                                     Initial Term.  The initial term of this Lease (the “Initial
Term”) shall be twenty (20) years, commencing on the Commencement Date.  Hereinafter, “Term” shall mean the Initial
Term and any extension thereof.

 

18

 

C.                                     Extension Terms.

 

1.                                       Generally.  Landlord hereby grants Tenant five (5)
consecutive options to extend the Initial Term of the Lease (each an “Option to
Extend”), in accordance with the terms and conditions of this Section 2(c) and
otherwise upon the same terms and conditions contained in this Lease.  Each Option to Extend shall be an option to
extend the Term for a period of five (5) years, commencing immediately upon the
expiration of the prior Term.

 

2.                                       Exercise.  Tenant shall exercise each Option to Extend,
if at all, by written notice delivered to Landlord at least one hundred eighty
(180) days prior to the expiration of the prior  Term.

 

3.                                       Rent.  The Base Rent payable during the Initial
Term and extensions thereof shall be as set forth in Sections 3 below.

 

SECTION III.

RENT

 

A.                                   Base Rent.  Tenant covenants and agrees to pay to
Landlord, Base Rent equal to the sum of (i) the amount of any ground lease
payments pursuant to a ground lease of the Premises approved by Tenant and (ii)
[fill in rate per Development Agreement at time Lease is executed]
                
(         %) (“Lease Rate”) of the
Approved Construction Costs defined herein. 
The Base Rent amount shall be payable in equal monthly installments in
advance on or before the first day of each month beginning on the “Commencement
Date.”  If the “Commencement Date” is
not on the first of the month, the Base Rent for the first month shall be
prorated.

 

For the purposes of this Lease, the Approved
Construction Costs shall mean the lesser of the total of actual Project Costs
for cost categories set forth on Exhibit D or the Guaranteed Maximum Cost
agreed to by Landlord and Tenant as the maximum total of the cost categories
set forth on Exhibit D (for purposes of this Lease “Guaranteed Maximum
Cost” is inclusive of more costs than the Landlord’s Contractor’s Guaranteed
Maximum Cost as that term is used in the Landlord’s Construction
Contract).  The Guaranteed Maximum Cost
is
$                              .  The Guaranteed Maximum Cost shall be amended
from time to time as necessary to reflect any amendments made under the
Development Agreement and subsequent to the execution of this Lease.

 

B.                                     Additional Rent.  It
is the intent of Landlord and Tenant that the Base Rent set forth above shall
be on a triple net basis, as that term is used and understood in connection
with the leasing of real property. 
Accordingly, as additional rental hereunder, Tenant shall pay, directly
to the appropriate authorities, during the term of this Lease, subject to
proration to the date of commencement and termination of the term hereof, all
real estate taxes, installments of special assessments, gross receipts taxes
and taxes on rentals (other than income taxes) relating to the Premises; the
costs of heating, cooling, utilities, insurance (including but not limited to
liability insurance and fire and casualty insurance with rent interruption
endorsement, boiler and pressure vessel insurance, and owners protective
liability insurance), security, snow removal, landscaping, janitorial and
cleaning services; fees for professional services; charges under maintenance
and service contracts; all supplies purchased for use in the Premises;
maintenance and repair costs as hereinafter set forth; any equipment rental;
altering, maintaining and repairing the Premises.  Notwithstanding the above, Tenant shall not be obligated to pay
or reimburse Landlord for i) depreciation of the Premises or any personal
property within the Premises, ii) real estate leasing commissions,
iii) mortgage principal or interest, iv) capital expenditures,
v) accountant fees, vi) attorney fees, except as required under
Article 16, vii) environmental remediation costs, penalties, attorney fees
and all related costs except for costs related to a release of hazardous

 

19

 

substances
arising out of the act or omission of Tenant, viii) Landlord’s employee or
overhead costs, ix) costs resulting from defective construction of the
Premises, x) special assessments attributable to the initial construction
of the Premises, xi) costs of travel, entertainment or promotion,
xii) management fees, and xiii) costs allocated to Landlord pursuant
to other provisions of this Lease.

 

C.                                     Rental
Adjustment During Renewal Terms.  If Tenant exercises a renewal option to extend the term of this
Lease, the annual Base Rent during the renewal term shall be equal to the
annual Base Rent as in effect at the end of the initial term plus any increase
as determined in accordance with the provisions of this Section.  Annual Base Rent for the renewal terms shall
be based on the percentage of change in the Consumer Price Index for Urban Wage
Earners and Clerical Workers (All Items Category) (1982-1984 = 100), as
published from time to time by the Bureau of Labor Statistics of the United
States Department of Labor (“Consumer Price Index”), or if such Index is not
published, a similar index agreed upon by Landlord and Tenant.

 

The annual Base Rent for the first renewal term shall
be calculated by first determining the percentage change in the Consumer Price
Index between the date occurring sixty (60) days prior to the fifteenth year
anniversary, and the date occurring sixty (60) days prior to twentieth annual
anniversary date of the term.  The
result, or ten percent (10%), whichever is less, shall then be applied to the
annual Base Rent in effect immediately prior to the first renewal term.  The result of the calculation, when added to
the annual Base Rental in effect immediately prior to the twentieth annual
anniversary date, shall be the annual Base Rent for the first renewal term.

 

The annual Base Rent for the second renewal term shall
be calculated by first determining the percentage change in the Consumer Price
Index between the date occurring sixty (60) days prior to the twentieth annual
anniversary date of the term and the date occurring sixty (60) days prior to
the twenty-fifth annual anniversary date of the term.  The result, or ten percent (10%), whichever is less, shall then
be applied to the annual Base Rental in effect during the first renewal
term.  The result of the calculation,
when added to the annual Base Rent in effect during the first renewal term,
shall be the annual Base Rent for the second renewal term.

 

The annual Base Rent for the third renewal term shall
be calculated by first determining the percentage change in the Consumer Price
Index between the date occurring sixty (60) days prior to the twenty-fifth
annual anniversary date of the term and the date occurring sixty (60) days
prior to the thirtieth annual anniversary date of the term.  The result, or ten percent (10%), whichever
is less, shall then be applied to the annual Base Rental in effect during the
second renewal term.  The result of the
calculation, when added to the annual Base Rent in effect during the second
renewal term, shall be the annual Base Rent for the third renewal term.

 

The annual Base Rent for the fourth renewal term shall
be calculated by first determining the percentage change in the Consumer Price
Index between the date occurring sixty (60) days prior to the thirtieth annual
anniversary date of the term and the date occurring sixty (60) days prior to
the thirty-fifth annual anniversary date of the term.  The result, or ten percent (10%), whichever is less, shall then
be applied to the annual Base Rental in effect during the third renewal term.  The result of the calculation, when added to
the annual Base Rent in effect during the third renewal term, shall be the
annual Base Rent for the fourth renewal term.

 

The annual Base Rent for the fifth renewal term shall
be calculated by first determining the percentage change in the Consumer Price
Index between the date occurring sixty (60) days prior to the thirty-fifth
annual anniversary date of the term and the date occurring sixty (60) days
prior to the fortieth annual anniversary date of the term.  The result, or ten percent (10%), whichever
is less, shall then be applied to

 

20

 

the annual Base Rental in effect during the fourth
renewal term.  The result of the
calculation, when added to the annual Base Rent in effect during the fourth
renewal term, shall be the annual Base Rent for the fifth renewal term.

 

SECTION IV.

TAXES, ASSESSMENTS AND UTILITIES

 

A.                                   Taxes and
Assessments.  Tenant
covenants and agrees to pay and discharge, directly to the appropriate
Governmental authorities, as additional rental hereunder, at least ten (10)
days before delinquency thereof and before any penalties or interest shall
accrue thereof, all taxes of any kind, general or special, foreseen or
unforeseen, of any nature whatsoever, and installments thereof which may be
taxed, charged, levied, assessed or imposed from and after the commencement of
the term hereof i) upon or measured by Rent including, without limitation, any
gross revenue tax, excise tax or value added tax with respect to the receipt of
Rent, and ii) upon all or any portion of, or in relation to the Premises,
including the improvements at any time situated or erected thereof, and all
personal property and equipment at any time contained therein.  Notwithstanding any clause to the contrary,
Tenant shall not be obligated to pay or reimburse Landlord for any inheritance
tax, gift tax, transfer tax, franchise tax, income tax (based on net income),
profit tax or capital levy imposed on Landlord.

 

B.                                     Tenant’s Right
to Contest Validity.  Landlord
agrees that Tenant shall have the right, in Tenant’s or Landlord’s name, but at
Tenant’s sole cost and expense, to contest the validity of any tax or
assessment by appropriate proceedings, timely instituted, provided that (a)
Tenant gives Landlord written notice of Tenant’s intention to do so at least
twenty (20) days prior to the delinquency thereof and (b) Tenant diligently
prosecutes any such contest, at all times effectively stays or prevents any
official or judicial sale of the Premises, under execution or otherwise, pays any
final judgment enforcing any tax or assessment so contested, and promptly
procures and records satisfaction thereof. 
Landlord shall, if requested by Tenant, cooperate with Tenant in any
such proceedings; provided, however, that Landlord shall not be liable for any
expenses whatsoever in connection therewith, and Tenant shall protect and
indemnify Landlord against all loss, cost, expense, attorney’s fees or damages
resulting therefrom.

 

C.                                     Utilities.  Tenant shall promptly pay or cause to be
paid all charges for water, gas, sewer, electricity, light, heat, air
conditioning, power, telephone or other service of any kind whatsoever
submitted, rendered or supplied in connection with the Premises, and shall
contract for the same in Tenant’s own name. 
Landlord and Tenant shall each reasonably assist the other in transition
of payments for, and control of, services and utilities at the commencement and
termination of this Lease.

 

SECTION V.

USE OF PREMISES

 

A.                                   Restrictions on
Use.  The Premises are leased to
Tenant for the purpose of Tenant conducting its restaurant and dining
establishment pursuant to the Development Agreement or any other purpose
permitted by applicable law.  Such
operations may include sales of clothing and other products marked with
Tenant’s trademark, take-out food and beverage products and other items sold
now or in the future in Tenant’s restaurants. 
Tenant shall not do anything in or about the Premises other than
customary Restaurant operations which will in any way tend to increase insurance
rates for the Premises.  Tenant agrees
to pay as additional rent any increase in premiums for insurance against loss
by fire or extended coverage risks resulting from the business carried on in
the

 

 

21

 

Premises by Tenant.  Tenant
shall not suffer or permit any waste of the Premises during the term of this
Lease.

 

B.                                     Hazardous Waste.  Tenant shall not cause or permit any
Hazardous Substance to be used, stored, generated, or disposed of on, in or
about the Premises by Tenant, or any of its agents, employees, representatives,
contractors, suppliers, customers, subtenants, concessionaires, licensees, or
invitees unless Tenant shall have received Landlord’s prior written consent,
which Landlord may withhold or at any time revoke in its sole discretion.

 

1.                                       Notwithstanding
the foregoing, Tenant may store, use and dispose of customary amounts of
restaurant and cleaning products and other Hazardous Substances in the normal
course of general restaurant use, and Tenant covenants to comply with all
applicable laws, rules, regulations and ordinances governing same.

 

2.                                       Lessee shall
indemnify and defend Landlord, and hold Landlord harmless, from and against any
and all claims, damages, fines, judgments, penalties, costs, expenses,
liabilities, or losses relating to any violation by Tenant of any Environmental
Law (as hereinafter defined) or of this Paragraph 5(b) (including, without
limitation, a decrease in value of the Premises as evidenced by a sale of the
Premises, damages caused by loss or restriction of rentable or usable space as
evidenced by a lease or sale of the Premises, damages caused by adverse impact
on marketing of space, and any and all sums paid for settlement of claims,
attorneys’ fees, consultant fees, and expert fees) incurred by or asserted
against Landlord arising during or after the term of this Lease as a result
thereof, except to the extent such violation is the result of any act or
omission of Landlord, Landlord’s contractors or is a condition or release which
was created or occurred prior to Tenant’s occupancy of the Premises.  This indemnification includes, without
limitation, any and all costs incurred because of any investigation of the site
or any cleanup, removal, testing, or restoration mandated or conducted by or on
behalf of any federal, state, or local agency or political subdivision.  Without limitation of the foregoing, if
Tenant causes a release of any Hazardous Substance in the Premises that results
in any contamination, Tenant shall promptly, at its sole expense, take any and
all necessary or appropriate actions to return the Premises to the condition
existing prior to the release of any such Hazardous Substance.  Tenant shall first obtain Landlord’s written
approval for any such remedial action which shall not be unreasonably withheld.

 

3.                                       Landlord shall
indemnify and defend Tenant, and hold Tenant harmless, from and against any and
all claims, damages, fines, judgments, penalties, costs, expenses, liabilities,
or losses relating to any violation of any Environmental Law (as hereinafter
defined) or of this Paragraph 
(including, without limitation, a decrease in value of the Premises,
damages caused by loss or restriction of rentable or usable space, damages
caused by adverse impact on marketing of space, and any and all sums paid for
settlement of claims, attorneys’ fees, consultant fees, and expert fees)
incurred by or asserted against Tenant arising during or after the term of this
Lease as a result of any condition that existed on the Premises prior to date
of Tenant’s occupancy under this Lease, or as a result of any act or omission
of Landlord.  This indemnification
includes, without limitation, any and all costs incurred because of any investigation
of the site or any cleanup, removal, testing, or restoration mandated or
conducted by or on behalf of any federal, state, or local agency or political
subdivision.  Without limitation of the
foregoing, if Landlord causes or permits the presence of any Hazardous
Substance in the Premises that results in any contamination, Landlord shall
promptly, at its sole expense, take any and all necessary or appropriate
actions to return the Premises to the condition existing prior to the presence

 

22

 

of
any such Hazardous Substance.  Landlord
shall first obtain Tenant’s written approval for any such remedial action.

 

4.                                       “Hazardous
Substance” means any substance that is regulated by any local government, the
State of
                        ,
the United States government, or any agency, authority and/or instrumentality
thereof and includes any and all materials or substances that are defined as
“hazardous waste,” “extremely hazardous waste,” or a “hazardous substance”
pursuant to any Environmental Law. 
“Hazardous Substance” includes but is not restricted to petroleum and
petroleum byproducts, asbestos, explosives, polychlorinated biphenyls (“PCBs”)
and infectious waste.

 

5.                                       “Environmental
Laws” means all federal, state and local laws, including statutes, regulations,
and requirements, relating to the discharge of air pollutants, water pollutants
or process waste water or otherwise relating to the environment or Hazardous
Substances, including, but not limited to, the Federal Clean Water Act, the
Federal Resource Conservation and Recovery Act of 1976, the Federal
Comprehensive Environmental Responsibility Cleanup and Liability Act of 1980,
regulations of the Environmental Protection Agency, regulations of the Nuclear
Regulatory Agency, and regulations of any state department of natural resources
or state environmental protection agency, as amended or supplemented from time
to time, now or at any time hereafter in effect.

 

Landlord represents that, prior to the Commencement
Date, to the best of its knowledge, there has been no installation, use,
generation, storage or disposal of in or about the Premises any Hazardous
Substance.  The foregoing representation
shall be deemed remade by Landlord as of the Commencement Date except to the
extent Landlord gives written notice of an exception to the representation to
Tenant prior to the Commencement Date. 
Landlord shall indemnify, defend and hold Tenant harmless from and
against any claim, damage or expense arising out of such prior installation,
use, generation, storage, or disposal of any such substance of which Landlord
had knowledge.

 

C.                                     Parking Spaces.  Landlord shall provide a minimum of
            parking
spaces on the Premises adjacent to the Building as shown on the Plans and
Specifications.

 

SECTION VI.

MAINTENANCE, REPAIRS AND ALTERATIONS

 

A.                                   Maintenance and
Repairs.  The Premises and every part
thereof shall be, at the Commencement Date, in good order, condition and
repair.  Landlord at its cost shall be
responsible for the replacement of all of the structural elements and exterior
surfaces and exterior walls of the Premises including roof and roof membrane,
concrete slab, footings, plumbing exterior to the building, at Landlord’s sole
expense as and when necessary.  Tenant
shall replace and maintain the heating, ventilation and air conditioning and
other equipment and maintain, repair and replace interior walls, interior
ceiling, painting, floor coverings, plate glass and doors at Tenant’s sole
expense.  Landlord shall provide
landscaping in accordance with the Plans and Specifications or any landscaping
plan agreed to by the parties at Landlord’s expense.  Tenant shall, at its own cost and expense, maintain landscaping,
if any, on the Premises.  Tenant agrees
to keep and maintain the Premises and the fixtures and equipment therein in
first class, properly functioning, safe, orderly and sanitary condition, will
suffer no waste or injury thereto, and will at the expiration or other
termination of the Term of this Lease, surrender the same with all improvements
in the same order and condition in which they were on the Commencement Date, or
in such better condition as they may hereafter be put, ordinary wear and tear
and casualty damage to the extent covered by insurance excepted.  All alterations, decorations, additions or
improvements in or to

 

23

 

the
Premises made by Tenant shall become the property of Landlord upon expiration
of the term and shall remain upon and be surrendered with the Premises as a
part thereof without disturbance or injury, unless Landlord requires specific
items thereof to be removed by Tenant at Tenant’s sole expense by written
notice made at the time of installation or construction, in which event Tenant
shall do so prior to the expiration of the term at its expense, and shall
repair any damage caused thereby. 
Tenant shall have the right to remove, during the last 90 days of the
term of this Lease, all movable furniture, equipment, furnishings or trade
fixtures installed in the Premises, as defined by the parties in Exhibit E or
as installed and paid for by Tenant during the term of the Lease, at the direct
expense of Tenant, provided the same is completed with no damage to the
Premises.

 

B.                                     Alteration.  Subject to the prior written consent of
Landlord, which shall not be unreasonably withheld, Tenant shall have the right
to make such additions, alterations, changes or improvements to the Premises as
Tenant shall deem necessary or desirable; provided, however, that no such
addition, alteration, change or improvement shall be made which will weaken the
structural strength of, lessen the value of, interfere with or make inoperable,
any portion of the Premises or appurtenances thereto.  All additions, alterations, changes and improvements shall be
made in a workmanlike manner, in full compliance with all building laws and
ordinances applicable thereto, and when permitted to be made shall become a
part of the Premises and except for furniture, trade fixtures and equipment
shall be surrendered as a part of the Premises upon the termination of this
Lease.

 

C.                                     Non-Liability
of Landlord.  Landlord
shall not be obligated to maintain nor to make any repairs or replacements of
any kind, nature, or description whatsoever to the Premises, except as provided
specifically herein.

 

D.                                    Tenant
Self-Help.  If
Landlord shall default in the performance or observance of any agreement or
condition in this Lease contained on its part to be performed or observed, and
if Landlord shall not cure such default within thirty (30) days after notice
from Tenant specifying the default (or, if said default is not reasonably
capable of cure within thirty (30) days, shall not within said period commence
to cure such default and thereafter prosecute the curing of such default to completion
with due diligence), Tenant may at its option, without waiving any claim for
damages for breach of agreement, at any time thereafter cure such default for
the account of Landlord, and any amount paid or any contractual liability
incurred by Tenant in so doing shall be deemed paid or incurred for the account
of Landlord, and Landlord agrees to reimburse Tenant therefor or save Tenant
harmless therefrom; provided that Tenant may cure any such default as aforesaid
prior to the expiration of said waiting period, but after said notice to
Landlord if the curing of such default prior to the expiration of said waiting
period, is reasonably necessary to protect the Premises or Tenant’s interest
therein to prevent injury or damage to persons or property, or to enable Tenant
to conduct its business in the Premises. 
If Landlord shall fail to reimburse Tenant upon demand for any amount
paid for the account of Landlord hereunder or for any other sum payable to
Tenant pursuant to this Lease, said amount plus interest of 12% thereon, but in
no event greater than the maximum legal rate of interest, from the date of
demand upon Landlord for payment, may be deducted by Tenant from the next or
any succeeding payments of Base Rent or any additional rent or other sum due
hereunder.  Notwithstanding anything to
the contrary contained in this Lease, in the case of emergency, notices
required pursuant to this Article may be given orally, or in any other
reasonably due and sufficient manner having regard to the emergency and the
attending circumstances.  If any such
notice shall not be given in the manner described in Article 20 hereof, then,
as soon thereafter as may be practicable, such notice shall be followed-up by
notice given in the manner described in said Article.  The addresses provided in Article 20 for

 

24

 

notices
to a party may be changed by the party receiving such notice by written notice
to the other party.

 

E.                                      Utility
Services.  Landlord
shall arrange for the provision of electricity, water, sewer and any utility
service necessary for heat and air conditioning to the Premises.  In the event that Tenant is unable to
conduct its customary restaurant operations in the Premises because of lack of
utility service for a period of three (3) days, rent shall abate until such
time as Tenant can resume its customary restaurant operations, except to the
extent of available rent interruption insurance proceeds.  In the event such inability to conduct
customary restaurant operations continues for sixty (60) days, Tenant, at its
option, may terminate the Lease by written notice delivered to Landlord prior
to restoration of all utility service necessary to permit Tenant to conduct
customary restaurant operations.  After
delivery of such notice, neither party shall have further obligations to the
other party except for obligations which survive termination of the Lease.

 

SECTION VII.

LANDLORD’S ACCESS TO PREMISES

 

A.                                   Inspection of
Premises by Landlord.  Tenant
agrees to permit Landlord and the authorized representatives of Landlord to
enter the Premises at all reasonable times upon two (2) business day’s prior
notice to Tenant during usual business hours for the purposes of:  (a) inspecting same, (b) making such repairs
or reconstruction to the Premises permitted to be made by Landlord, and (c)
performing any work therein which may be necessary by reason of Tenant’s
default under the terms of this Lease, (d) decorating, remodeling, repairing,
altering, or otherwise preparing the Premises for reoccupancy at any time after
Tenant is legally ejected from the Premises for a continuous period of thirty
(30) days, provided that Tenant shall not be considered to have abandoned the
Premises so long as the Premises are kept in clean and orderly fashion and rent
is paid in accordance with the terms hereof, and (e) entering the Premises
without notice for emergency purposes. 
Landlord shall use reasonable efforts to give Tenant notice by telephone
or e-mail prior to entering the Premises for any emergency and in any event
shall give Tenant notice of such entry as soon as practical after any such
entry.  For said purposes, Landlord
shall have the right to possess pass keys to the Premises.  Nothing herein contained shall imply any
duty on the part of Landlord to do any such work which, under the provisions of
this Lease, Tenant is required to perform, and the performance thereof by
Landlord shall not constitute waiver of Tenant’s default in failing to perform
the same.  Landlord may, during the
performance of any work on the Premises, keep and store upon the parking area
of or within the Premises all necessary materials, tools and equipment.  Landlord shall not in any event be liable
for any reasonable inconvenience, annoyance, disturbance, loss of business or
other damage sustained by Tenant during the making of repairs or the
performance of any work on the Premises, or on account of bringing materials,
supplies, and equipment into or through the Premises during the course thereof
provided that Landlord shall make reasonable efforts to minimize interference
with Tenant’s restaurant operations.  In
the event Landlord makes any repairs or maintenance which Tenant has failed to
do or perform, the cost thereof shall constitute additional rent and shall be paid
to Landlord with the next installment of the monthly Base Rent due hereunder.

 

B.                                     Right to
Exhibit Premises.  Landlord
is hereby given the right after two (2) business day’s notice to Tenant during
usual business hours to enter the Premises and to exhibit the same for the
purpose of sale or mortgage, and during the last six (6) months of the term of
this Lease, or any extension thereof, to exhibit the same to any prospective
Tenant.

 

25

 

SECTION VIII.

MECHANIC’S LIENS

 

Neither party shall suffer or permit any mechanic’s
liens to be filed against the Premises or any part thereof by reason of work,
labor, services, or materials supplied or claimed to have been supplied to such
party or anyone holding the Premises or any part thereof through or under such
party.  If any such mechanic’s liens
shall at any time be filed against the Premises, the party who directed such
work to be performed shall cause the same to be discharged of record within
sixty (60) days after the date of filing the same or in the event such party
disputes the validity of such lien, such party may deposit 150% of the amount
claimed by the lien holder in escrow with a title insurance company and/or the
other party as security against mortgage foreclosure.  If such party shall fail to discharge such mechanic’s lien within
such period, then, in addition to any other right or remedy of the other party
hereto, may, but shall not be obligated to, discharge the same either by paying
the amount claimed to be due or by procuring the discharge of such lien by
deposit in court or by giving security or in such other manner as is or may be
prescribed by law.  Any amount paid by
such party for any of the aforesaid purposes, and all reasonable legal and other
expenses of such party, including reasonable attorneys’ fees, in or about
procuring the discharge of such lien, with all necessary disbursements in
connection therewith, with interest thereon at the rate of twelve percent (12%)
per annum from the date of payment shall be repaid by the other party on
demand.  Any such amount owed by Tenant
to Landlord shall become due and payable by Tenant as additional rent with the
next succeeding installment of monthly base rent which shall become due after
such demand  Any such amount owed by
Landlord to Tenant may be deducted from the next succeeding installment of rent
which shall become due after such demand. 
Nothing herein contained shall imply any consent or agreement on the
part of Landlord to subject Landlord’s estate to liability under any mechanic’s
lien law.

 

SECTION IX.

COMPLIANCE WITH LAWS

 

A.                                   Generally.  Tenant shall through the term, at Tenant’s
sole cost and expense, promptly comply with all laws and ordinances, and the
orders, rules, regulations and requirements of all Federal, State and municipal
governments and appropriate departments, commissions, boards and offices
thereof, foreseen or unforeseen, existing or hereafter constituted, ordinary as
well as extraordinary, which may be applicable to the Premises, or the use or
manner of use of the Premises; provided, however, that in any event any such
law, ordinance, order, rule or regulation requires structural repairs or
alterations to the Premises, such repairs or alterations shall be at the
expense of Landlord as provided in Article 6(a) herein.  Tenant will likewise observe and comply with
the requirements of all policies of public liability, fire and all other
policies of insurance at any time in force with respect to the building and
improvements on the Premises and the personal property thereof.

 

B.                                     License.  Tenant shall use its best efforts to obtain
all appropriate licenses required from all Federal, State, and municipal
governments, if any, needed to operate its business on the Premises and Tenant
shall be responsible to maintain such licenses, as long as the Lease is in
effect.

 

C.                                     Non-Compliance.  Landlord agrees that if at any time or times
any governmental authorities or insurance rating bureaus having jurisdiction
shall complain that the Premises or the Buildings were not constructed in
compliance with any law, ordinance or regulation of any governmental authority
or insurance rating bureau having jurisdiction and shall request compliance,
then Landlord shall, upon receipt of notice of such complaint, cause such
repairs, alterations or other work to be done so as to bring about the
compliance requested.  If by reason of
such failure of compliance or by reason of such repairs, alterations or other
work done by Landlord, Tenant shall be deprived of the use and enjoyment of the
whole or any part of the Premises, all base rent, additional rent and other
sums payable hereunder shall abate on a per diem basis in proportion to

 

26

 

said
deprivation.  If at any time during the
term of this Lease, any person claiming a prior right to Tenant or any
governmental authority shall cause an injunction to be entered against Tenant
restricting Tenants using or enjoying the Premises or any rights of Tenant
under this Lease, and if said injunction shall not be dismissed within sixty
(60) days after Tenant shall give Landlord notice thereof, then Tenant, without
waiving any other rights Tenant may have against Landlord on account thereof
(including, without limitation, the right to an abatement of all rent payable
hereunder so long as said injunction shall remain in effect), may terminate
this Lease by giving Landlord notice thereof.

 

SECTION X.

INDEMNIFICATION OF LANDLORD

 

Tenant agrees to indemnify and hold harmless Landlord
against and from any and all claims by or on behalf of any person, arising from
the conduct or management of, or from any work or thing whatsoever done, in and
on the Premises except work done through or at the behest of Landlord and
except for claims arising out of the negligent act or omission or intentional
act of Landlord and will further indemnify and save Landlord harmless against
any and from any and all claims arising during the term of this Lease from any
condition of any street, curb, or sidewalk adjoining the Premises, or of any
vaults, passageways or space therein or appurtenant thereto, or arising from
any breach or default on the part of Tenant in performance of any covenant or
agreement on the part of Tenant to be performed, pursuant to this Lease, or
arising from any act or negligence of Tenant or any other occupant of the
Premises, or any part thereof, or of its or their agents, contractors,
servants, employees or licensees, or arising from any accident, injury or
damage whatsoever caused to any person or property occurring during the term of
this Lease in or about the Premises, or upon or under the sidewalks and the
land adjacent thereto, and from and against all judgments, costs, expenses and
liabilities incurred in or about any such claim or action or proceeding brought
therein except as such claims or liabilities are the result of the negligence
of the Landlord, and in case any action or proceeding be brought against
Landlord by reason of any such claim, Tenant upon notice from Landlord
covenants to resist or defend such action or proceeding by counsel reasonably
satisfactory to Landlord.

 

Landlord agrees to indemnify and hold harmless Tenant
against and from any and all claims by or on behalf of any person arising from
the condition of the land on which the Premises is located prior to Tenant’s
occupancy of the Premises or from the construction of the Premises by Landlord
except for claims arising from the negligent act or omission or intentional act
of Tenant.

 

SECTION XI.

INSURANCE

 

A.                                   Fire and
Extended Coverage.  Tenant
shall, as additional rent, at its sole cost and expense, keep the Premises,
including all improvements, personal property, fixtures and equipment on, in or
appurtenant to the Premises at the commencement of the term and thereafter
erected thereon or therein, including all alterations, rebuildings,
replacements, changes, additions and improvements, fully insured for
replacement value which the parties agree is
$       00,000.00 at the inception of this
Lease, for the benefit of Landlord and Tenant as their respective interests may
appear, against loss or damage by fire and those perils included from time to
time in the standard form of extended coverage insurance endorsement.  All such insurance shall be in amounts at all
times sufficient to prevent Landlord or Tenant from becoming a co-insured under
the terms of the applicable policy. 
These insurance provisions shall in no way limit or modify any of the
obligations of Tenant under any provision of this Lease to restore the
Premises.  Such insurance shall
expressly provide that any losses thereunder shall be adjusted with Landlord
and Tenant pursuant to a standard clause, without contribution, if obtainable,
and Landlord and

 

27

 

Tenant,
as their respective interests may appear, but the proceeds of such insurance
shall be used for the repair, replacement or restoration of the Premises, as
provided by Article 12.

 

B.                                     Liability
Insurance.  Tenant
shall also, at its sole cost and expense, but for the benefit of Landlord and
Tenant, maintain comprehensive general liability insurance against claims for
personal injury, death or property damage occurring upon, in or about the
Premises, which insurance shall afford combined single occurrence limit
protection of not less than three million dollars ($3,000,000) with respect to
injury, or death to a single person, with respect to injuries or death from any
one accident, and with respect to property damage.

 

C.                                     Rent
Interruption.  Tenant
shall purchase a rent interruption insurance rider to the fire and extended
coverage policy which would provide Landlord up to six (6) months of rent in
the event of damage or destruction of the Premises.  Tenant shall use reasonable efforts to cause such policy to cover
all other occurrences to the Premises which would deprive Landlord of rent.

 

D.                                    General
Requirements.  All
policies of insurance maintained by Tenant in accordance with this Article 11
shall be subject to and governed by the following:

 

1.                                       All policies of
insurance shall provide that any loss shall be payable in the event that, and
notwithstanding, any act or omission of Tenant might otherwise result in a
forfeiture or reduction of said insurance and shall contain a waiver of any
right to subrogation.

 

2.                                       All policies of
insurance and the form thereof shall be standard policies of the insurer.  A certificate of insurance shall be
delivered to Landlord at the commencement of the term and renewal certificates
policies shall be delivered to Landlord not less than ten (10) days prior to
the expiration of any then current policy. 
Landlord shall be named as an additional insured.

 

3.                                       It is the
intention of the parties that Tenant shall take out, maintain in force and at
all times pay for and deliver to Landlord all of the policies of insurance
hereinabove referred to at such times and in such manner so that Landlord shall
at all times during the term be in possession of policies which are in full
force and effect.

 

4.                                       Each such
policy shall provide that it may not be canceled, non-renewed, or materially
modified as to the interest of Landlord, except upon thirty (30) days’ prior
written notice from the insurance company to Landlord.

 

5.                                       Tenant shall
not violate or permit any occupant of the Premises to violate any of the
conditions or provisions of any such policy.

 

6.                                       Tenant and
Landlord shall cooperate in connection with the collection of any insurance
monies that may be due in the event of loss, but at the sole expense of Tenant,
and Tenant shall execute and deliver to Landlord such proofs of loss and other
instruments as may be required for the purpose of obtaining the recovery of any
such insurance monies.

 

7.                                       The premiums of
all transferable insurance policies in force at the termination of the term
shall be apportioned as between Landlord and Tenant in such manner that
Landlord shall reimburse Tenant for that portion of the aggregate premiums
unearned on all such policies in force at the expiration of the term.

 

28

 

E.                                      Waiver of
Claims and Subrogation. 
Notwithstanding any other provisions in this Lease to the contrary,
Landlord and Tenant hereby release one another from any and all liability or
responsibility (to the other or anyone claiming through or under them by way of
subrogation or otherwise) for any loss or damage covered by property insurance
or coverable by a customary policy of the insurance required by Article 11(a)
or Article 11(b) (whichever is applicable), even if such loss or damage shall
have been caused by the fault or negligence of the other party, or anyone for
whom such party may be responsible.

 

29

 

SECTION XII.

DESTRUCTION

 

A.                                   Partial or
Total Destruction.  In the
event that the Premises shall be damaged during the initial term of this Lease
or at any time during an extended term of this Lease and Tenant is unable to
operate its customary restaurant business in the Premises, rent shall abate for
the time period Tenant is unable to operate its customary restaurant business
except to the extent of available rent interruption insurance proceeds.  If such damage renders fifty (50%) percent
of the usable space of the Building unusable, Landlord shall have the option of
terminating this Lease unless Tenant agrees to continue to pay the rent set
forth in the Lease, during the reconstruction period to the extent of available
rent interruption insurance, and after completion of restoration, the rent set
forth in this Lease and agrees to restore the Premises with the insurance
proceeds.  Regardless of whether such
damage is due to the fault, negligence, act or omission of Tenant, its
employees, agents or servants, licensees or invitees, Tenant shall also have
the option of terminating this Lease if there are insurance proceeds available
for the benefit of the Landlord.  Upon
termination by either party, Landlord shall retain the right to receive
payments under the rent interruption insurance as provided for in Article 11
herein for the time period provided by such insurance up to the balance of the
term of this Lease Agreement.  In the
event of a total or partial destruction of the Premises or any portion thereof
during the term of this Lease by any cause or risk including those covered by
any policy of insurance referred to in Article 11 above, Tenant shall give to
Landlord prompt notice thereof and Tenant, as long as it continues to pay rent,
during the reconstruction period to the extent of available rent interruption
insurance, and after completion of restoration, the rent set forth in this
Lease shall notwithstanding the foregoing, have the option, at its sole cost
and expense, whether or not insurance proceeds shall be sufficient for that
purpose, and regardless of the amount of any such destruction, to forthwith
repair, replace and rebuild the same at least to the extent of the value
thereof existing immediately prior to such occurrence, provided such repairs,
replacement or rebuilding can be done in accordance with then existing laws and
regulations.  All such repairs,
replacement or rebuilding shall be performed in a good and workmanlike manner
and in compliance with all then existing laws and regulations, and Landlord
shall in no event be called upon to repair, replace or rebuild the Premises or
any portion thereof.  If Tenant elects
not to rebuild the Premises, Tenant may terminate the Lease by written notice
to Landlord.

 

B.                                     Notice to
Landlord.  At least
ten (10) days before the commencement of such repairs, replacement or
rebuilding, Tenant shall notify Landlord of its intention to commence the same.

 

C.                                     Application of
Insurance Proceeds.  For the
purpose of payment toward the cost of such repairs, replacement or rebuilding
from time to time (but not more frequently than once in each month), Landlord
shall make available and pay all net sums received under insurance policies
covering such loss, as provided in Article 11 above either:  (a) to the parties whom Tenant may employ to
repair, replace, or rebuild same as such repairs, replacements, or rebuilding
shall progress, or (b) to Tenant if Tenant shall make or pay for such repairs,
replacements, or building.  In either
case, Landlord shall pay said insurance proceeds periodically as work and
materials are actually incorporated in the Premises.  If the net amount of such insurance proceeds shall be
insufficient for the purpose of effecting repairs, replacement or rebuilding of
all such damaged or destroyed improvements, Tenant shall pay the additional
sums required, and if the amount of such insurance proceeds shall be in excess
of the cost thereof, the excess shall be paid to and be retained by
Tenant.  If the Lease is terminated by
either Landlord or Tenant, the insurance proceeds shall be subject to the
rights of the holder of any mortgage to which this Lease is or shall be subject
and subordinate.

 

30

 

D.                                    Rent Adjustment.  If any amount of the insurance proceeds is
paid to Landlord or Landlord’s Lender and not used to restore the Premises, the
annual base rent shall be reduced by the amount of such payment multiplied by
10.5% (or substitute factor originally used pursuant to Article 3 to originally
set the rent), commencing with the first post restoration rent payment.

 

E.                                      Rights of
Landlord.  Upon
receiving notification from Tenant, if the work of repairing, replacing, or
rebuilding such damaged or destroyed building, improvements, furniture or
equipment or construction of a new building shall not be commenced within a
reasonable time from the date of any such loss, destruction or damage, or after
commencement thereof shall not be expeditiously proceeded with to completion
and Tenant has ceased paying rent under the terms of the Lease, Landlord shall
have the right to cancel and terminate this Lease by giving to Tenant not less
than thirty (30) days’ notice of intention to do so.

 

SECTION XIII.

CONDEMNATION

 

A.                                   Condemnation
Defined.  The term “condemnation”, as
used in this Lease, shall mean the exercise of the power of eminent domain by
any person, entity, body, agency or authority, or purchase in lieu of eminent
domain, and the date of condemnation shall mean the day on which the actual
physical taking of possession pursuant to the exercise of said power of eminent
domain, or purchase in lieu thereof, occurs or the date of settlement or
compromise of the claims of the parties hereto during the pendency of this
exercise of said power, whichever occurs first, and property is deemed
“condemned” on said date; or at Tenant’s option, the day which is the second
anniversary of the commencement of the eminent domain action.

 

B.                                     Landlord’s
Right to Collect Proceeds.  In
the event the Premises or any part thereof shall be taken in condemnation
proceedings, Landlord shall be entitled to collect the entire award made in any
such proceedings without deduction therefrom for any estate hereby vested in or
owned by Tenant subject to Tenant’s rights as hereinafter set forth except
Tenant may claim a separate award for moving expenses, loss of going concern,
and immovable fixtures.  Tenant agrees
to execute any and all further documents that may be required in order to
facilitate collection by Landlord of any and all such awards.  Tenant and any person or entity having an
interest in Tenant’s share of the award, in cooperation with Landlord, shall
have the right to participate in any condemnation proceedings or agreement as
aforesaid for the purpose of protecting Tenant’s interests hereunder.

 

C.                                     Total Taking.  If at any time during the term of the Lease
the whole or substantially all of the Premises shall be so taken or condemned,
this Lease shall terminate and expire on earlier of the date upon which
possession shall vest in the condemning authority or, if earlier, at Tenant’s
option, on the second anniversary of the commencement of the eminent domain
action, and the rent provided to be paid by Tenant shall be apportioned and
paid to such date.  For the purposes of
this Section, “substantially all of the Premises” shall be deemed to have been
taken if taking into consideration the amount of the net award available for
such purposes, the portion of the Premises not so taken cannot be so repaired
or rebuilt as to constitute a complete, rentable structure suitable for
continuing the use to which Tenant was putting the Premises prior to such
taking and capable of producing a proportionately fair and reasonable net
annual income after payment of all operating expenses thereof, the net rent, as
the same may be reduced as a result of such taking, additional rent and all other
charges payable hereunder, and after performance of all covenants, agreements,
terms and provisions herein and by laws provided to be performed and paid by
Tenant.

 

31

 

D.                                    Distribution of
Award.  In the event of a taking
which shall result in the termination of this Lease, the rights of Landlord and
Tenant in any award shall be as follows and in the following order of priority:

 

1.                                       There shall
first be paid to the holder of any mortgage on the Premises (regardless of
whether this Lease is or shall be subject and subordinate to said mortgage) the
unpaid balance of principal and interest due on such mortgage.

 

2.                                       Landlord shall
then retain that part of the award attributable to the land and improvements
(reduced by any payment to a mortgagee under (a) above), and consequential and
severance damages for the value of Landlord’s interest in the remaining term of
this Lease.

 

3.                                       Tenant shall be
entitled to receive the balance of the award, if any.

 

Notwithstanding the above, Tenant shall be entitled to
collect the entirety of any separate award for moving expenses, loss of going
concern or immovable fixtures.

 

E.                                      Partial Taking.  In the event of a partial taking which shall
not result in the termination of this Lease, Landlord shall promptly proceed to
repair, rebuild or restore the remainder of any building on the premises
affected thereby to a complete and self-contained architectural unit, for the
purposes and uses to which Tenant was putting the Premises before the
taking.  However, if the aforementioned
taking renders the Premises unsuitable for Tenant’s use, Tenant may terminate
this Lease as of the date when Tenant is required to yield possession.

 

F.                                      Rent Adjustment.  During the period of any restoration of the
Premises the rent shall be abated in proportion to the amount of the Premises
that Tenant is unable to use for the serving of customers.  If any amount of the condemnation proceeds
is paid to the holder of any mortgage on the Premises or to Landlord on account
of the taking of Land and/or improvements, and such payment is not applied to
reconstruction of the Premises, the annual rent shall be reduced by an amount
equal to the amount of such payment multiplied by 10.5% (or the substitute
factor originally used pursuant to Article 3 to originally set the rent)
commencing with the first post restoration rent payment.

 

SECTION XIV.

ASSIGNMENT AND SUBLETTING

 

A.                                   Prohibition
Against Assignment.  Subject to
14.b. below, Tenant shall not assign this Lease or sublet the whole of the
Premises either voluntarily or by operation of law without the prior written
consent of Landlord; and such consent shall not be unreasonably withheld based
on the financial credit worthiness and expertise in restaurant operations of the
proposed or potential transferee. 
Tenant shall not hypothecate or pledge this Lease except as security for
the financing of leasehold improvements. 
Any such assignment or subletting not provided for below, without
Landlord’s prior written consent shall be void and, at Landlord’s option, shall
terminate this Lease.  Any assignment or
transfer of this Lease shall not be effective unless the assignee or transferee
shall, at the time of such assignment or transfer, assume in writing all the
terms, covenants and conditions of this Lease thereafter to be performed by the
Tenant, and shall agree in writing to be bound thereby.  Tenant specifically understands and agrees
that any assignment or sublease shall in no way release (unless by written
agreement with Landlord) the Tenant from any of its obligations and covenants
under this Lease, nor should said assignment or sublease be

 

32

 

construed
or taken as a waiver of any of Landlord’s rights or remedies hereunder against
or as relating to Tenant.  In order for
Landlord to consider an assignment or sublease, Tenant shall provide the
following:

 

1.                                       Tenant shall
give Landlord a twenty (20) day prior written notice of its desire to assign or
sublet, which notice shall include reliable information, including but not
limited to, the name of the proposed assignee or subtenant, its financial
responsibility evidenced by financial statements and/or credit reports, a
description of its business activities and specific terms as to the assignment
or sublease agreement including rental, term and the date said assignment or
sublease is to take effect.  Tenant
shall comply with all reasonable requests of Landlord for additional
information.

 

2.                                       Provided
Landlord submits a preliminary approval of such assignment or sublet, such
consent shall be conditioned upon the delivery to the Landlord within thirty
(30) days after such preliminary approval of two executed copies of the
assignment which shall include an assumption by the assignee, from and after
the effective date of the assignment of the performance and observance of the
covenants and conditions of this Lease contained on Tenant’s part to be
performed and observed, or should a sublease be involved, two executed copies
of the sublease agreement which shall include an agreement on the part of the
subtenant to be obligated, from and after the effective date of the sublease,
to the performance and observance of the covenants and conditions of this Lease
contained on Tenant’s part to be performed and observed.

 

B.                                     Permitted
Assignments.

 

1.                                       The provisions
of this Articles shall not be deemed to prohibit (1) transfers of stock among
existing stockholders or among spouses, children or grandchildren of existing
stockholders or inter vivos or testamentary transfers or other transfers to
trusts limited liability companies, limited liability partnerships, family
limited partnerships, corporations or other entities established for the
benefit of such persons, (2) a public offering of the stock of Tenant, (3) the
transfer of outstanding stock which are traded on a recognized securities
exchange or (4) a transfer of all of Tenant’s stock to any one person or
entity.

 

2.                                       Tenant may
assign this lease or sublease the entire Premises to a parent, affiliate or
wholly owned subsidiary of Tenant or to any entity with which or into which
Tenant may consolidate or merge or to whom all or substantially all of the
assets of Tenant are sold or transferred.

 

C.                                     Landlord
Assignment.  Landlord
may assign his interest in this Net Lease Agreement without the consent of the
Tenant, provided Landlord provides Tenant with a copy of such assignment as a
precondition to the effectiveness of such assignment.

 

SECTION XV.

SECURITY INTEREST

 

Purchase Money Security
Interest.  Landlord’s leasehold interest is and shall
remain subject and subordinate to any lien securing bona fide purchase money
financing of any of the Tenant’s personal property in question in favor of a
party unaffiliated with Tenant. 
Landlord shall not have any lien for performance of any obligations of
Tenant upon any fixtures, machinery or equipment, or goods, wares or
merchandise or other personal property, and Landlord hereby expressly waives
the provisions of any law giving to it such a lien.

 

33

 

Landlord hereby waives
any lien which Landlord may have thereupon by operation of law for the
performance of any obligations of Tenant hereunder, and Landlord shall promptly
execute and deliver to Tenant any instrument so requested of it.

 

SECTION XVI.

EVENTS OF DEFAULT: REMEDIES

 

A.                                   Events of
Default.  Each of the following events
shall be an Event of Default hereunder by Tenant and a breach of this Lease:

 

1.                                       If Tenant shall
file a petition in bankruptcy or insolvency or for reorganization or
arrangement under the bankruptcy laws of the United States or any insolvency
act of any state or shall voluntarily take advantage of any such law or act by
answer or otherwise or shall be dissolved or shall make an assignment for the
benefit of creditors.

 

2.                                       If involuntary
proceedings under any such bankruptcy law or insolvency act shall be instituted
against Tenant or if a receiver or trustee shall be appointed for all or
substantially all of the property of Tenant, and such proceedings shall not be
dismissed or such receivership or trusteeship vacated within sixty (60) days
after institution or appointment.

 

3.                                       If Tenant shall
fail to pay Landlord any rent or additional rent as and when the same shall
become due and payable and shall not make such payment within five (5) days
after written notice thereof.

 

4.                                       If this Lease
or the estate of Tenant hereunder shall be transferred to any other person or
party, except in a manner permitted under Article 14 hereof.

 

5.                                       If Tenant shall
make an assignment for the benefit of creditors or shall apply for or consent
to the appointment of a receiver for itself or any of its property.

 

6.                                       If Tenant shall
fail to keep, observe or perform any of the other covenants and agreements
herein contained to be kept, observed and performed by Tenant, and such failure
shall continue for thirty (30) days after notice thereof in writing to Tenant
by Landlord, provided, however, should remedial activity on the part of Tenant
reasonably require a period in excess of the said period provided, Tenant shall
not be considered to have committed an event of Default provided it diligently
pursues said remedial activity for a reasonable period of time as may be
required as long as it diligently pursues such remedial activity.  In the event that Landlord reasonably
determines that the condition of the Premises poses a risk of imminent harm to
persons or property and cannot await the thirty (30) day remedial period and
Tenant has not commenced such remedial action, Landlord may enter the Premises
immediately upon written notice to Tenant for purposes of immediately
remediating such condition.  In such
event, Tenant shall reimburse Landlord its costs within ten (10) days of Landlord’s
written demand.

 

B.                                     Remedies.  Upon the occurrence and continuance of
Tenant’s Event of Default for failure to pay Rental when due, Landlord shall
give Tenant ten (10) days’ written notice that Tenant’s Event of Default has
occurred, specifying Tenant’s Event of Default and the action required
necessary to cure Tenant’s Event of Default. 
Upon the occurrence and continuance of Tenant’s Event of Default other
than the failure to pay Rent when due, Landlord shall give Tenant thirty (30)
days’ written notice of Tenant’s Event of Default, specifying Tenant’s Event of
Default and the action

 

34

 

required
to cure Tenant’s Event of Default.  If
Tenant fails to cure Tenant’s Event of Default within the time provided to
cure, Landlord may resort to any and all legal remedies or combination of legal
remedies which Landlord may desire to assert including but not limited to
Landlord bringing an action for ejectment of Tenant and obtain an order for the
sheriff to enter the Premises and removing all persons and chattels therefrom
and Landlord shall not be liable for damages or otherwise by reason of re-entry
or termination.  Notwithstanding such
termination, the liability of Tenant for the rent provided for hereinabove shall
not be extinguished for the balance of the term remaining after said
termination.

 

Should termination of Tenant’s estate occur as herein provided, or
should Landlord take possession pursuant to legal proceedings or pursuant to
any notice provided by law, it may either terminate this lease or it may from
time to time without terminating this Lease, make such alterations and repairs
as may be necessary in order to relet the premises, and relet said premises or
any part thereof for such term or terms (which may be for a term extending
beyond the term of this lease) and at such rental or rentals and upon such
other terms and conditions as reletting all rentals received by Landlord from
such reletting shall be applied, first, to the payment of any indebtedness
other than rent due hereunder from Tenant to Landlord; second, to the payment
of any costs and expenses of such reletting, including brokerage fees and
attorneys’ fees and of costs of such alterations and repairs; third, to the
payment of rent due and unpaid hereunder, and the residue, if any, shall be
held by Landlord and applied in payment of future rent as the same may become
due and payable hereunder.

 

If such rentals received from such reletting during any month be less
than that to be paid during that month by Tenant hereunder, Tenant shall pay
any such deficiency to Landlord.  Such
deficiency shall be calculated and paid monthly.  No such re-entry or taking possession of said premises by
Landlord shall be construed as an election on its part to terminate this lease
unless a written notice of such intention be given to Tenant or unless the
termination thereof be decreed by a court of competent jurisdiction.

 

Notwithstanding any such reletting without termination, Landlord may at
any time thereafter elect to terminate this lease for such previous
breach.  Should Landlord at any time
terminate this lease for any breach, in addition to any other remedies it may
have, it may recover from Tenant all damages it may incur by reason of such
breach, including the worth at the time of such termination of the excess, if
any, of the amount of rent and charges equivalent to rent reserved in this
lease for the remainder of the stated term over the then reasonable rental
value of the Premises for the remainder of the stated term, all of which
amounts shall be immediately due and payable from Tenant to Landlord.  In determining the rent which would be
payable by Tenant hereunder, subsequent to default, the rent for the unexpired
term shall be equal to the base monthly rent, for each remaining month plus
Tenant’s share of taxes, insurance, and maintenance from the commencement of
the term to the time of default.  The
“worth” of such sum shall be determined by determining the sum of the present
value of all such payments using a 10.5% interest factor.  Upon termination of the Lease, Tenant shall
surrender possession and vacate the Premises immediately, and deliver
possession thereof to Landlord.

 

C.                                     Cure of Default.  If Tenant defaults in the making of any
payment, or in the doing of any act herein required to be made or done by
Tenant, or does or suffers any act prohibited herein, beyond applicable cure
periods, then Landlord may, but shall not be required to, make such payment or
do such act, or correct any damage caused by such prohibited act and to enter
the Premises as appropriate in connection therewith, and the amount of the
expense thereof, if made or done so by Landlord, with interest thereon at the
Interest Rate (as hereinafter defined) from the date paid by Landlord, shall be
paid by Tenant to Landlord and shall constitute additional rent hereunder due
and payable with the next monthly installment of rent.

 

35

 

D.                                    Landlord’s
Default.  Should Landlord be in default
under the terms of this lease, Landlord shall have thirty (30) days in which to
cure the same after written notice to Landlord by Tenant, provided however
should remedial action on the part of Landlord reasonably require a period in
excess of said period, Landlord shall have a reasonable amount of time to cure
such default provided Landlord diligently pursues such cure.  If Tenant is not able to operate its
customary business during the time Landlord is pursuing such cure, the rent
shall be reduced pro rata based on the percentage of the customer seating area
Tenant is able to operate.  If the
default is not cured within the applicable time period, Tenant may terminate
the lease upon written notice to Tenant given prior to completion of any cure
of the default.

 

E.                                      Waiver of
Redemption.  Tenant
hereby expressly waives, to the full extent waivable, any and all rights or
redemption granted by or under any present or future laws in the event of
Tenant being evicted or dispossessed for any cause, or in the event of Landlord
obtaining possession of the Premises, by reason of the violation of Tenant of
any of the covenants or conditions of this lease, or otherwise.

 

F.                                      Remedies
Cumulative.  No remedy
herein or otherwise conferred upon or reserved to Landlord or Tenant shall be
considered to exclude or suspend any other remedy, but the same shall be
cumulative and shall be in addition to every other remedy given hereunder now
or hereafter existing at law or by statute and every power and remedy given by
this Lease to Landlord or Tenant may be exercised from time to time and as
often as occasion may arise or may be deemed expedient.  No delay or admission of Landlord or Tenant
to exercise any right or power arising from any event of default shall impair
any such right or power or shall be construed to be a waiver of any such event
of default or acquiescence therein. 
Notwithstanding the above Landlord shall not be entitled to double
recovery or inequitable accumulation of remedies.

 

G.                                     Miscellaneous.  If any installment of rent is not paid by
Tenant within five days after the same becomes due and payable:  (i) a late charge in the amount of $100.00
shall become immediately due and payable as compensation to Landlord for
administrative costs; and (ii) the unpaid balance due Landlord shall bear
interest at the Interest Rate from the date such installment became due and
payable to the date of payment thereof by Tenant, and such interest shall
constitute additional rent hereunder which shall be immediately due and
payable.  The “Interest Rate” as used
herein means 12%.

 

SECTION XVII.

SURRENDER OF PREMISES

 

Tenant shall, upon the expiration or earlier  termination of this Lease, peaceably vacate
and surrender the Premises to Landlord in good order, condition and repair,
reasonable wear and tear excepted. 
Tenant shall leave the Premises and appurtenances thereto free and clear
of rubbish and broom clean.

 

SECTION XVIII.

SUBORDINATION

 

A.                                   Definition of
Mortgage.  For the
purposes of this Article, the term “Mortgage” shall mean at any time, any
mortgage of record now or hereafter placed against the Premises, any increase,
amendment, extension, refinancing or recasting of a Mortgage and, in the case
of a sale or lease and leaseback by Landlord of all or any part of the
Premises, the lease creating the leaseback. 
For the purposes hereof, a Mortgage shall be deemed to continue in
effect after foreclosure thereof and during the period of redemption therefrom.

 

36

 

B.                                     Subordination
of Lease.  Landlord
shall provide Tenant a recordable subordination, non disturbance and attornment
agreement executed by every holder of a mortgage against the Premises prior to
commencement of construction of the Building and subsequently within thirty
(30) days of recording any mortgage. 
Such document shall provide that such holder shall not disturb Tenant’s
possession of the Premises under this Lease provided Tenant is not in default
of the Lease beyond applicable cure periods. 
Such document shall not contain any modifications to the substantive lease
terms.  As long as there is an executed
Subordination, Non-Disturbance and Attornment Agreement between the Landlord,
Tenant and any Mortgagee, this Lease is subject and subordinate to the lien of
any Mortgage which may now or hereafter encumber the Premises or any
development of which the Premises is a part. 
In confirmation of such subordination, Tenant shall, at Landlord’s
request from time to time, promptly execute any certificate or other document
requested by the holder of the Mortgage. 
Tenant agrees that in the event that any proceedings are brought for the
foreclosure of any Mortgage, Tenant shall immediately and automatically attorn
to the purchaser at such foreclosure sale, as Landlord under this Lease, and
Tenant waives the provisions of any statute or rule of law, nor or hereafter in
effect, which may give or purport to give Tenant any right to terminate or
otherwise adversely affect this Lease or the obligations of Tenant hereunder in
the event that any such foreclosure proceeding is prosecuted or completed.  Neither the holder of the Mortgage (whether
it acquires title by foreclosure or by deed in lieu thereof) nor any purchaser
at foreclosure sale shall be liable for any act or omission of Landlord or
bound by any prepayment by Tenant of more than one month’s installment of Base
Rent and additional rent or by any modification of this Lease made subsequent
to the granting of the Mortgage.

 

SECTION XIX.

CERTIFICATES BY TENANT AND LANDLORD

 

A.                                   Certificate by
Tenant.  Tenant shall, at any time and
from time to time, upon not less than twenty (20) days’ prior notice by
Landlord, execute and acknowledge to Landlord a statement in writing certifying
that this Lease is unmodified and in full force and effect (or if there shall
have been modifications that the Lease is in full force and effect as modified
and stating the modifications), and the dates to which the base rent and the
additional rent have been paid, and stating whether or not to the best
knowledge of the signer of such certificate, Landlord is in default in keeping,
observing or performing any term, covenant, agreement, provision, condition or
limitation contained in this Lease, and, if in default, specifying each such
default of which the signer may have knowledge, it being intended that any such
statement delivered pursuant to this Article 19(a) may be relied upon by
Landlord or any prospective purchaser of the fee or any mortgage thereto or any
assignee of any mortgage upon the fee of the Premises, but reliance on such
certificate may not extend to any default of Landlord as to which the signer
for Tenant shall have had no actual notice. 
Such certificate shall not contain any amendments to the substantive
terms of the Lease.

 

B.                                     Certificate by
Landlord.  Landlord
shall, at any time and from time to time, upon not less than twenty (20) days’
prior notice by Tenant execute and acknowledge to Tenant a statement in writing
certifying that this Lease is unmodified and in full force and effect (or if
there shall have been modifications that the Lease is in full force and effect
as modified and stating the modifications), and the dates to which the base
rent and additional rent have been paid, and stating whether or not, to the
best knowledge of the signer of such certificate, Tenant is in default in
keeping, observing or performing any term, covenant, agreement, provision,
condition, or limitation contained in this Lease, and if in default, specifying
each such default of which the signer may have knowledge, it being intended
that any such statement delivered pursuant to this Article 19(b) may be relied
upon by any prospective assignee of Tenant’s interest in this Lease,

 

37

 

any
prospective sublessee of the entire Premises or any mortgagee of this Lease or
of any sublease of the entire Premises, or any assignee of any mortgage upon
the leasehold estate created hereby or by any sublease, but reliance on such
certificate may not extend to any default of Tenant as to which the signer for
Landlord shall have had no actual knowledge.

SECTION XX.

NOTICE

 

All notices or demands which shall be required or
permitted by law or any provisions of this Lease shall be sent by United States
certified mail, postage prepaid, to the addresses set out below for Landlord and
Tenant, and such notices shall be properly given if directed to those addresses
until notices given in the manner described above to change such address.

 

	
  To Tenant:

  	
   

  	
  Granite City Food & Brewery, Ltd.

  
	
   

  	
   

  	
  c/o Steven Wagenheim

  
	
   

  	
   

  	
  5831 Cedar Lake Road

  
	
   

  	
   

  	
  St. Louis Park, MN 55416

  

 

	
  To Landlord:

  	
   

  	
  Donald A. Dunham, Jr.

  
	
   

  	
   

  	
  230 South Phillips Avenue, Suite 202

  
	
   

  	
   

  	
  Sioux Falls, SD 57104

  

 

SECTION XXI.

WAIVER

 

Failure of Landlord to insist upon the strict
performance of any or all of the terms or conditions herein shall not
constitute, nor be construed as, a waiver of Landlord’s right to thereafter
enforce any such terms or conditions, but the same shall continue in full force
and effect.

 

SECTION XXII.

HOLDING OVER

 

In the event Tenant shall continue to occupy the  Premises after the expiration of the term
hereof, such holding over shall not operate to extend or renew this Lease, but
shall be construed as a tenancy from month to month which may be terminated by
either party upon thirty (30) days’ prior written notice.  Such month-to-month tenancy by Tenant shall
be subject to all the terms and provisions of this Lease.

 

SECTION XXIII.

COVENANTS

 

A.                                   Covenant of
Faithful Performance.  It is
mutually agreed that this Lease is made upon and subject to the terms, covenants,
and conditions herein contained, and that Tenant covenants, as a material part
of the consideration for this Lease, to keep and perform each and all of said
terms, covenants and conditions to be kept and performed by it and that this
Lease is made upon the condition of such performance.

 

B.                                     Provisions
Deemed Covenants and Conditions.  The parties hereto agree that all the provisions hereof are to be
construed as covenants and conditions as though the words imparting such
covenants and conditions were used in each instance.

 

38

 

SECTION XXIV.

RIGHT OF FIRST REFUSAL

 

If at any time during the term of this Lease or any
renewal period thereof, Landlord receives a bona fide offer from a third party
for the sale to said third party of the Landlord’s interest in the Premises,
Landlord shall give Tenant the right to purchase the Premises at the same price
and on the same terms as contained in said bona fide offer.  Upon receipt of written notice (and a copy
of said offer) from Landlord that Landlord has received a bona fide offer it is
willing to accept, Tenant shall, within fifteen (15) days after receipt of said
notice, give written notice to Landlord as to whether Tenant has elected to
exercise its right to purchase the Premises, or said part interest, on the same
terms and conditions as contained in said bona fide offer.  In the event that Tenant exercises said
right to purchase the Premises, Tenant shall be required to close its
acquisition of the Premises within ninety (90) days, and upon the terms and
conditions as third party offeror would have been required to close its
acquisition of the Premises.  In the
event that Tenant does not exercise said right to purchase the Premises
Landlord shall require as a condition of sale that the third party offeror
agree that the Tenant’s interest in this Lease shall not be affected by said
transfer of ownership and the third party offeror shall assume all of the
Landlord’s obligations hereunder.

 

It is understood that, for purposes of this paragraph, a bona fide
offer shall refer to an offer where the earnest money deposited with Landlord
by said third party is equal to at least five percent (5%) of the purchase
price offered by said third party.

 

This right of first refusal is a continuing right and
if Tenant does not exercise its right of first refusal shall continue with
regard to further offers so long as this Lease is in effect.

 

SECTION XXV.

OPTION TO PURCHASE

 

So long as this Lease is in full force and effect and
Tenant is not in default hereunder, Tenant shall have the option to purchase,
at any time after the nineteenth anniversary of the Commencement Date and prior
to the twentieth anniversary of the Commencement Date, all right, title and
interest of Landlord in and to the Premises for the fair market value as
defined below and as determined below.

 

A.                                   Fair Market
Value.  “Fair Market Value” shall
mean the price a willing buyer would pay a willing seller for the Premises with
the buyer having no necessity to purchase the Premises and the seller having no
necessity to sell the Premises.

 

B.                                     Determination
of Fair Market Value.  Within
fifteen (15) days of the date Tenant gives notice to Landlord of Tenant’s
election to have the fair market value and the Premises determined, Tenant
shall give Landlord written notice of an appraiser and Landlord shall give
Tenant written notice of an appraiser. 
Within thirty (30) days after the Election Date the two appraisers shall
select a third appraiser.  All
appraisers shall be independent from the Landlord and Tenant and have no
conflict of interest, shall have MAI certification and at least ten (10) years
experience appraising real estate including appraising at least five (5)
restaurants.  Each appraiser shall
complete and deliver to Tenant and Landlord an appraisal of the Premises in
compliance with MAI standards within 120 days of the Election Date.

 

Any appraisal that is ten percent (10%) more or less
then the average of the appraisals shall not be used.  The average of the remaining appraisals shall be deemed the fair
market value of the Premises.  The
appraisers shall give each party copies of the appraisals and final written
notice of the fair market value.  The
decision shall be final and not subject to appeal in the absence of fraud or
other failure to follow the requirements set forth herein.  The parties shall each pay one-half the cost
of the appraisers.

 

39

 

Such option shall be exercised, if at all, by Tenant
giving written notice thereof to Landlord, said notice period to be within
thirty (30) days after having received a Final Written Notice of the fair
market value as described above. 
Landlord shall provide Tenant with a warranty deed conveying marketable
title to Tenant and with a current title insurance commitment to insure
marketable title to the Premises.  The
title insurance company may use the sales proceeds to pay such encumbrances and
costs as are necessary to insure marketable title in the name of Tenant subject
to Tenant’s mortgage financing. 
Subsequent closing of the sale and purchase must occur within ninety
(90) days from the date the option is exercised.

 

SECTION XXVI.

GENERAL PROVISIONS

 

A.                                   Captions.  The captions of the Articles of this Lease
are for convenience only and are not a part of this Lease, and do not in any
way limit or amplify the terms or provisions of this Lease.

 

B.                                     Successors and
Assigns.  Subject to the provisions
hereof, this Lease shall bind and inure to the benefit of the parties hereto and
their respective successors and assigns.

 

C.                                     Attorney’s Fees.  In the event either of the parties hereto
commences any action or proceeding against the other under or on account of
this Lease, then and in each such event, the successful party in such action or
proceeding shall be entitled to receive, and the parties hereto respectively
agree to pay, a reasonable attorneys’ fee on account of such action or
proceeding.

 

D.                                    Construction.  The language in all parts of this Lease
shall be in all cases construed according to its fair meaning and not strictly
for or against Landlord or Tenant.

 

If any term, covenant, condition or provision of this Lease is held by
a court of competent jurisdiction to be invalid, void or unreasonable, the
remainder of the provisions hereof shall remain in full force and effect and
shall in no way be affected, impaired or invalidated thereby.

 

The parties intend that the obligations herein of Tenant are the joint
and several obligations of the corporation and the Guarantors named in attached
Lease Guaranty.

 

E.                                      Unavoidable
Delay.  Whenever a date is herein
provided for either party to do or perform any act or thing, that date shall be
subject to Unavoidable Delay. 
Unavoidable Delay shall mean delays in the performance or obligations
under this Lease due to acts of God, acts of the public enemy, 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 “Unaviodable Delay” for a party unless the party gives written
notice to the other party of such occurrence within ten (10) days of its first
occurrence.  For each day of Unavoidable
Delay, one day shall be added to the date under this Lease for completion of
the affected task and any subsequent task the commencement of which is
dependent on completion of the affected task.

 

F.                                      Law Governing.  This Lease shall be governed by and
construed in accordance with the laws of the State of South Dakota.

 

40

 

G.                                     Landlord Rules
and Regulations.  Tenant and
its employees shall observe and comply with any reasonable rules and
regulations that Landlord or Landlord’s agents may from time to time adopt for
the Premises and that are applicable to Tenant provided Tenant has received
notice of such rules and regulations pursuant to the notice provisions of
Article 20 hereof, and provided such rules and regulations do not deprive
Tenant of any rights set forth in this Lease or materially and unreasonably
interfere with the benefits of the Lease.

 

H.                                    Initial Tenant
Covenant.  Tenant
covenants and warrants that it has full right and lawful authority to enter
into this Lease for the full term herein granted and for any and all extensions
herein provided.

 

I.                                         Entire
Agreement.  This
Lease, together with any written modifications or amendments hereto,
hereinafter entered into, shall constitute the entire agreement between the
parties relative to the subject matter hereof and shall supersede any prior
agreements or understandings, whether written or oral, which the parties may
have had relating to the subject matter hereof.  No subsequent alteration, amendment, change or addition to this
Lease shall be binding upon Landlord or Tenant unless reduced to writing and
signed by them.  Tenant shall not record
this Lease without Landlord’s written consent.

 

J.                                        Counterparts.  This Lease may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.

 

K.                                    Consent of
Landlord.  Wherever
in this Lease the consent of Landlord is required, it is agreed that such
consent will not be unreasonably withheld and will be promptly considered, and
in the event Landlord does not refuse to grant such consent in writing within
thirty (30) days after request by Tenant thereof, the same shall be deemed to
have been given.

 

L.                                      Tenant
Financial Statements.  On an
annual basis, Tenant hereby agrees to provide to Landlord a copy of its audited
financial statements.

 

M.                                 Brokerage
Commission.  Landlord
will pay the brokerage commission payable in connection with this Lease.

 

IN WITNESS WHEREOF, the parties hereto have executed
this Net Lease Agreement as of the day and year first above written.

 

	
  LANDLORD:  Donald A. Dunham,
  Jr.

  	
   

  	
  TENANT:  Granite City Food
  & Brewery, Ltd.

  
	
   

  	
   

  	
   

  
	
  By

  	
   

  	
   

  	
  By

  	
   

  	
   

  
	
  Donald A. Dunham, Jr.

  	
   

  	
  Its

  	
   

  	
   

  
						

 

41

 

EXHIBIT B

 

PROJECT COSTS

 

The following items are included in, but not limited to, “Project Costs”
identified in Section VII. A. 4. of the Development Agreement:

 

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

•                                          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

 

42

 

•                                          Windows

•                                          Roof, Gutters, Downspouts

•                                          Fire Extinguishers

•                                          Mini-Blinds

•                                          Bathroom Accessories

•                                          Cabinets

•                                          Shelving

•                                          Laminate/Marble Tops

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

 

LAND AND SOFT COSTS TO BE EXCLUDED:

 

The following
costs shall be excluded from the calculation of the Developer’s Fee under
Section VII. A. 4:

 

•                                          Land Cost (to include Land Lease Cost)

•                                          Title Insurance

•                                          Architect

•                                          Civil Engineer

•                                          Mechanical Engineer

•                                          Electrical Engineer

•                                          Project Management Fee

•                                          Legal Fees

•                                          Appraisal

•                                          Recording Fees

•                                          Financing Fees

•                                          Construction Interest

•                                          Real Estate Taxes

•                                          Drafting Fees

•                                          Builders Risk Insurance

•                                          Blueprints and Spec Books

•                                          Project Sign

•                                          Misc. Soft Costs

 

HARD
COSTS TO BE EXCLUDED:

 

The following
costs shall be excluded from the calculation of the Developer’s Fee under
Section VII. A. 4:

 

•                                          Tenant Work constructed and paid for by
Tenant

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

 

43

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