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LEASEHOLD 180-DAY REDEMPTION MORTGAGE AND SECURITY AGREEMENT AND FIXTURE FILING STATEMENT

Mortgage Agreement

LEASEHOLD 180-DAY REDEMPTION MORTGAGE AND SECURITY AGREEMENT AND FIXTURE FILING STATEMENT | Document Parties: GRANITE CITY FOOD & BREWERY LTD | Granite City Restaurant Operations, Inc | Harmony Equity Income Fund, LLC | Maslon Edelman Borman & Brand, LLP | Mortgagor, Granite City Food & Brewery, Ltd | Sioux Falls Investments, LLP You are currently viewing:
This Mortgage Agreement involves

GRANITE CITY FOOD & BREWERY LTD | Granite City Restaurant Operations, Inc | Harmony Equity Income Fund, LLC | Maslon Edelman Borman & Brand, LLP | Mortgagor, Granite City Food & Brewery, Ltd | Sioux Falls Investments, LLP

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Title: LEASEHOLD 180-DAY REDEMPTION MORTGAGE AND SECURITY AGREEMENT AND FIXTURE FILING STATEMENT
Governing Law: South Dakota     Date: 4/3/2009
Industry: Restaurants     Law Firm: Maslon Edelman     Sector: Services

LEASEHOLD 180-DAY REDEMPTION MORTGAGE AND SECURITY AGREEMENT AND FIXTURE FILING STATEMENT, Parties: granite city food & brewery ltd , granite city restaurant operations  inc , harmony equity income fund  llc , maslon edelman borman & brand  llp , mortgagor  granite city food & brewery  ltd , sioux falls investments  llp
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EXHIBIT 10.3

 

This document prepared by:

 

Joseph Alexander, Esq.

Maslon Edelman Borman & Brand, LLP

3300 Wells Fargo Center

90 South Seventh Street

Minneapolis, MN  55402

612.672.8369

 

LEASEHOLD 180-DAY REDEMPTION MORTGAGE AND SECURITY AGREEMENT AND FIXTURE FILING STATEMENT

 

This LEASEHOLD 180-DAY REDEMPTION MORTGAGE AND SECURITY AGREEMENT AND FIXTURE FILING STATEMENT, dated as of the 30 TH  day of March, 2009, is made by Granite City Restaurant Operations, Inc., a Minnesota corporation having an office at 5402 Parkdale Drive, Suite 101, Minneapolis, MN 55416 as mortgagor, assignor and debtor (in such capacities and together with any successors in such capacities, the “ Mortgagor ”), in favor of  Harmony Equity Income Fund, L.L.C., with an address of 201 S. Phillips Avenue, Suite 100, Sioux Falls, SD 57104 (referred to herein, together with any successors or assigns, as the “ Mortgagee ”).

 

W I T N E S S E T H:

 

A.            Pursuant to that certain Bridge Loan Agreement, dated as of the date hereof (as amended, amended and restated, supplemented or otherwise modified from time to time, the “ Loan Agreement ”), between the Mortgagor, Granite City Food & Brewery, Ltd. (the “ Co-Borrower ”) and Mortgagee, the Mortgagee has agreed to advance One Million Dollars ($1,000,000) to the Mortgagor and Co-Borrower.  Capitalized terms used but not otherwise defined herein shall have the meaning assigned to such terms in the Loan Agreement.

 

B.            The Mortgagor is the owner and holder of the tenant’s interest in certain real property and the buildings, improvements and fixtures constructed thereon, located in Minnehaha County, Sioux Falls, South Dakota, as more particularly described on Schedule A attached hereto and incorporated herein by this reference (the “ Real Property ”), pursuant to the terms of that certain lease, dated as of June 14, 2000 (as amended from time to time in accordance with the documents referenced in Schedule B and as further amended from time to time in accordance with the provisions of this Mortgage, the “ Lease ”), by and between  Doug Johnson, successor in interest to Sioux Falls Investments, L.L.P. as landlord (together with his successors and assigns, “ Lessor ”) and the Mortgagor.

 

C.            It is a condition to the obligations of the Mortgagee to make loans under the Loan Agreement that the Mortgagor execute and deliver this Mortgage.   This Mortgage is given by

 

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the Mortgagor in favor of the Mortgagee for its benefit to secure the payment and performance of all Secured Obligations (as hereinafter defined).

 

NOW, THEREFORE , the Mortgagor, in consideration of the foregoing and in order to secure payment and performance of the Secured Obligations and its other obligations arising under and pursuant to the Loan Agreement and this Mortgage, hereby gives, grants, bargains, sells, warrants, conveys, assigns, transfers, mortgages, hypothecates, deposits, pledges, sets over, and confirms unto the Mortgagee all its estate, right, title, and interest in, to, and under any and all of the following described property (referred to herein as the “ Mortgaged Estate ”), whether now owned or held or hereafter acquired:

 

(a)  its leasehold interest in the Real Property, created by the Lease, including all of the air space, easements, rights, privileges, royalties, and appurtenances thereunto belonging or in anywise appertaining, and all of the estate, right, title interest, claim, or demand whatsoever of the Mortgagor therein and in the streets, alleys, and ways adjacent thereto, either at law or in equity, in possession or expectancy, now or hereafter acquired (hereinafter referred to as the “ Premises ”);

 

(b)  all structures and buildings, and replacements thereof, now or hereafter constructed upon the Premises by the Mortgagor, to the extent the Mortgagor owns or otherwise has rights to the foregoing, including all equipment, apparatus, machinery, and fixtures of every kind and nature whatsoever forming part of said structures and/or buildings (hereinafter referred to as the “ Leasehold Improvements ”);

 

(c)  all furniture, trade fixtures, fittings, appliances, apparatus, equipment, machinery, and articles of personal property, and replacements thereof, to the extent the Mortgagor owns or otherwise has rights to the foregoing, now or at any time hereafter affixed to, attached to, placed upon, or used in any way in connection with the complete and comfortable use, enjoyment, occupancy or operation of the Premises (hereinafter referred to as the “ Fixtures ”);

 

(d)  all “general intangibles” (as such term is defined in the Uniform Commercial Code of the State of South Dakota, SDCL 57A-9) in any way relating to the Premises and/or the Leasehold Improvements and Fixtures and in which the Mortgagor has any interest, and all unearned premiums reasonably allocated to insuring the Mortgaged Estate, accrued, accruing, or to accrue under all insurance policies now or hereafter obtained by the Mortgagor insuring the Mortgaged Estate, as hereinafter defined, and all rights and interest of Mortgagor thereunder (hereinafter referred to as the “ Intangibles ”);

 

(e)  all substitutions, replacements and proceeds of any of the foregoing including, without limitation, proceeds of hazard and title insurance and condemnation awards, and all accessions, substitutions or replacements of any of the foregoing; and

 

(f)  all subleases and lettings of the Premises now or hereafter entered into by the Mortgagor and all right, title, and interest of the Mortgagor thereunder, and under the Lease and any cash or securities deposited thereunder to secure performance by the Mortgagor of its obligations thereunder, whether such cash or securities are to be held until the expiration of the

 

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terms of such Lease or applied to one or more of the installments of rent coming due immediately prior to the expiration of such terms, including, further, the right, upon the happening of an Event of Default, to receive and collect the rents thereunder.

 

TO HAVE AND TO HOLD all and singular, the Mortgaged Estate, together with all estate, right, title and interest of the Mortgagor and anyone claiming by, through or under the Mortgagor in and to the Mortgaged Estate and all rights and appurtenances relating thereto, whether now owned or hereafter owned, unto the Mortgagee, its successors and assigns, forever, subject to the terms and conditions of this Mortgage, the Loan Agreement and the other Loan Documents (as defined in the Loan Agreement) for the purpose of securing the payment and performance in full of all the Secured Obligations, with power of sale for the purposes of South Dakota Codified Laws, Chapter  21-49, as amended.

 

For purposes of this Mortgage, the term “ Secured Obligations ” shall mean all obligations (whether or not constituting future advances, obligatory or otherwise) of the Mortgagor from time to time arising under or in respect hereof, the Loan Agreement and the other Loan Documents (including, without limitation, the obligations to pay principal, interest and all other charges, fees, expenses, commissions, reimbursements, premiums, indemnities and other payments related to or in respect of the obligations contained in this Mortgage, the Loan Agreement), in each case whether (i) such obligations are direct or indirect, secured or unsecured, joint or several, absolute or contingent, due or to become due whether at stated maturity, by acceleration or otherwise, (ii) arising in the regular course of business or otherwise, (iii) for payment or performance and/or (iv) now existing or hereafter arising (including, without limitation, interest and other obligations arising or accruing after the commencement of any bankruptcy, insolvency, reorganization or similar proceeding with respect to the Mortgagor or which would have arisen or accrued and which would have been enforceable or allowable but for the commencement of such proceeding, even if such obligation or the claim therefor is not enforceable or allowable in such proceeding).

 

The maximum aggregate amount of all advances of principal under the Loan Agreement (which advances are subject to the conditions set forth therein) that may be outstanding hereunder at any time is One Million Dollars ($1,000,000), plus interest thereon, reasonable collection costs, sums advances for the payment of taxes, assessments, maintenance and repair charges, insurance premiums and other costs incurred to protect the security encumbered hereby or the lien hereof, expenses incurred by the Mortgagee by reason of any default by the Mortgagor under the terms hereof, together with all other sums secured hereby.

 

THE PARTIES AGREE THAT THE PROVISIONS OF THE ONE HUNDRED EIGHTY DAY REDEMPTION MORTGAGE ACT GOVERN THIS MORTGAGE.  THERE IS HEREBY GRANTED TO MORTGAGEE A POWER OF SALE FOR THE PURPOSES OF SDCL 21-49.

 

AND IT IS FURTHER COVENANTED AND AGREED AS FOLLOWS:

 

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ARTICLE I

 

COVENANTS, REPRESENTATIONS AND WARRANTIES OF THE MORTGAGOR

 

The Mortgagor covenants, agrees, represents and warrants as follows:

 

Section 1.01.    Leasehold Interest .

 

(a)  The Mortgagor represents and warrants that (i) it is the owner of a valid and subsisting interest as tenant under the Lease; (ii) the Lease is in full force and effect and has not been assigned, modified, amended, supplemented, or extended in any way, except as disclosed previously to the Mortgagee; (iii) the Lease represents the entire agreement between the parties as to the leasing described therein, and the Lease is not subject to any occurrence known to Mortgagor which constitutes a defense, offset or counterclaim as of the date of this Mortgage, (iv) there is no default which has occurred and is continuing under the Lease nor has any event occurred which with notice, the passage of time, or both would constitute a default under the Lease by either the Lessor or lessee thereunder; (v) all rental payments and other charges under the Lease which are due and owing as of the date of this Mortgage have been paid in full; (vi) the Lease is subject to no liens and encumbrances whatsoever, other than the interest of the Lessor thereunder and the interests set forth on Schedule B hereto; (vii) it leases and will lease the Fixtures free and clear of all liens and claims except the interest of DHW Leasing LLC and Great Western Bank; (viii) this Mortgage is and will remain a valid and enforceable lien on the Mortgaged Estate subject only to the exceptions referred to above; (ix) the Mortgagor has full power and lawful authority to mortgage the Mortgaged Estate in the manner and form herein done or intended hereafter to be done and this Mortgage constitutes the legal, valid and binding obligation of the Mortgagor, enforceable against it in accordance with its terms; and (x) Mortgagor is in actual possession of the Premises.

 

(b)  The Mortgagor will preserve the leasehold estate created in it by the Lease, and will forever warrant and defend the same to the Mortgagee and will forever warrant and defend the validity and priority of the lien hereof against the claims of all persons and parties whomsoever.

 

(c)  The Mortgagor will perform or cause to be performed all of the covenants and conditions required to be performed by it under the Lease, will do all things necessary to preserve unimpaired its rights thereunder, and will not enter into any agreement modifying or amending the Lease or releasing the Lessor thereunder from any obligations imposed upon it thereby. If the Mortgagor receives a notice or default under the Lease, it shall immediately cause a copy of such notice to be sent by registered United States mail to the Mortgagee.

 

(d)  The Mortgagor represents and warrants that the Real Property and the Premises consist of less than forty (40) acres.

 

Section 1.02.    Further Acts .  The Mortgagor will, at the sole cost of the Mortgagor, and without expense to the Mortgagee, do, execute, acknowledge and deliver all and every such further acts, deeds, conveyances, mortgages, assignments, notices of assignment, transfers, and assurances as the Mortgagee shall from time to time reasonably require, for the better assuring,

 

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conveying, assigning, transferring, and confirming unto the Mortgagee the property and rights hereby conveyed or assigned or intended now or hereafter so to be, or which the Mortgagor may be or may hereafter become bound to convey or assign to the Mortgagee, or for carrying out the intention or facilitating the performance of the terms of this Mortgage, or for filing, registering, or recording this Mortgage and, on demand, will execute and deliver, and hereby authorizes the Mortgagee to execute and file in the name of the Mortgagor to the extent it may lawfully do so, one or more financing statements, chattel mortgages, or comparable security instruments to evidence more effectively the lien hereof upon the Mortgaged Estate or any part thereof.

 

Section 1.03 .   Condition of Mortgaged Estate .  The Mortgagor represents and warrants that (a) the Premises and the present and contemplated use and occupancy thereof complies with all applicable zoning ordinances, building codes, land use laws, set back or other development and use requirements of any local or state governmental authority; (b) the Premises are served by all utilities necessary for the present and contemplated use thereof, and all utility services are provided by public utilities and the Premises have accepted or are equipped to accept such utility services and the Mortgagor has not received notice of termination of such utility service; and (c) there has been issued and there remains in full force and effect subject to no revocation, suspension, forfeiture or modification, each and every permit of any local, state or federal governmental authority or agency thereof necessary for the present and contemplated use, operation and occupancy of the Premises by the Mortgagor.

 

Section 1.04 .   Payment .  The Mortgagor will punctually pay the principal and interest and all other sums to become due in respect of the Loan Agreement or other Secured Obligations at the time and place and in the manner specified in the Loan Agreement or such other instrument with respect to the obligations secured hereby, and shall duly and punctually perform and observe all of the covenants, agreements and provisions contained herein and therein.

 

Section 1.05 .   Zoning.   The Mortgagor shall not initiate, join in or consent to any change in the zoning or other permitted use classification of the Premises without the prior written consent of the Mortgagee, which consent may not be unreasonably withheld.

 

Section 1.06 .   After-Acquired Property .  All right, title, and interest of the Mortgagor in and to all extensions, improvements, betterments, renewals, substitutes, and replacements of, and all additions and appurtenances to, the Mortgaged Estate hereafter acquired by, or released to, the Mortgagor, or constructed, assembled, or placed by the Mortgagor on the Premises or any part thereof, and all conversions of the security constituted thereby, immediately upon such acquisition, release, construction, assembling, placement, or conversion, as the case may be, and in each such case, without any further mortgage, conveyance, assignment, or other act by the Mortgagor, shall become subject to the lien of this Mortgage as fully and completely, and with the same effect, as though now owned by the Mortgagor and specifically described in the granting clause hereof, but at any and all times the Mortgagor will execute and deliver to the Mortgagee any and all such further assurances, mortgages, conveyances, or assignments thereof as the Mortgagee may reasonably require for the purpose of expressly and specifically subjecting the same to the lien of this Mortgage.

 

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Section 1.07.    Taxes and Related Matters .

 

(a)  The Mortgagor, from time to time when the same shall become due and payable, will pay and discharge or cause the Lessor under the Lease to pay and discharge, pursuant to the Lease, all taxes of every kind and nature, all general and special assessments, levies, permits, inspection and license fees, all water and sewer rents and charges, and all other public charges whether of a like or different nature, imposed upon or assessed against the Mortgaged Estate, or any part thereof, or upon the revenues, rents, issues, income, and profits of the Mortgaged Estate, or any part thereof, or arising in respect of the occupancy, use, or possession thereof. The Mortgagor will, upon the request of the Mortgagee, deliver or cause to be delivered to the Mortgagee receipts evidencing the payment of all such taxes, assessments, levies, fees, rents, and other public charges imposed upon or assessed against the Mortgaged Estate, or any part thereof, or the revenues, rents, issues, income, or profits thereof.

 

The Mortgagee may, at its option to be exercised by thirty (30) days written notice to the Mortgagor following an Event of Default by the Mortgagor, require the deposit by the Mortgagor, at the time of each payment of an installment of interest or principal under the Loan Agreement, of an additional amount sufficient to discharge the obligations under this subsection (a) when they become due. The determination of the amount so payable and of the fractional part thereof to be deposited with the Mortgagee, so that the aggregate of such deposit shall be sufficient for this purpose, shall be made by the Mortgagee in its sole discretion. Such amounts shall be held by the Mortgagee without interest and applied to the payment of the obligations in respect to which such amounts were deposited or, at the option of the Mortgagee, to the payment of said obligations in such order or priority as the Mortgagee shall determine, on or before the respective dates on which the same or any of them would become delinquent. If one month prior to the due date of any of the aforementioned obligations the amounts then on deposit therefor shall be insufficient for the payment of such obligation in full, the Mortgagor within ten (10) days after demand shall deposit the amount of the deficiency with the Mortgagee. Nothing herein contained shall be deemed to affect any right or remedy of the Mortgagee under any provisions of this Mortgage or of any statute or rule of law to pay any such amount and to add the amount so paid to the Secured Obligations.

 

(b)  The Mortgagor will pay, or cause the Lessor under the Lease to pay, pursuant to the Lease, from time to time when the same shall become due, all lawful claims and demands of mechanics, materialmen, laborers, and others, which claims and demands, if unpaid, might result in, or permit the creation of, a lien on the Mortgaged Estate or any part thereof, or on the revenues, rents, issues, income, and profits arising therefrom and in general will do or cause to be done everything necessary so that the lien shall be fully preserved, at the cost of the Mortgagor, without expense to the Mortgagee.

 

(c)  Nothing in this Section 1.07 shall require the payment or discharge of any obligation imposed upon the Mortgagor by this Section 1.07 so long as the Mortgagor shall in good faith and at its own expense contest the same or the validity thereof by appropriate legal proceedings which shall operate to prevent the collection thereof or other realization thereon and the sale or forfeiture of the Premises or any part thereof to satisfy the same or termination of the Lease; provided that during such contest the Mortgagor shall, at the option of the Mortgagee, provide security satisfactory to the Mortgagee, assuring the discharge of the Mortgagor’s

 

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obligation hereunder and of any additional charge, penalty, or expense arising from or incurred as a result of such contest.  Any such contest shall be prosecuted with due diligence and the Mortgagor shall promptly after final determination thereof pay the amount of any such lien or obligation so determined, together with all interest and penalties which may be payable in connection therewith.  Notwithstanding these provisions the Mortgagor shall (and if the Mortgagor shall fail so to do, the Mortgagee, may but shall not be required to) pay any such lien or obligation notwithstanding such contest if in the opinion of the Mortgagee, the Mortgaged Estate shall be in jeopardy or in danger of being forfeited or foreclosed.

 

Section 1.08.    Protection of Security .  The Mortgagor shall promptly notify the Mortgagee of and appear in and defend any suit, action or proceeding that affects the Mortgaged Estate, the Lease or the rights or interest of the Mortgagee hereunder or the rights or interest of the Mortgagor under the Lease and the Mortgagee may elect to appear in or defend any such action or proceeding.  The Mortgagor agrees to indemnify and reimburse the Mortgagee from any and all loss, damage, expense or cost arising out of or incurred in connection with any such suit, action or proceeding, including costs of evidence of title and reasonable attorney’s fees and such amounts together with interest thereon at the interest rate provided in the Loan Agreement shall become additional indebtedness secured hereby, as applicable, and shall become immediately due and payable.

 

Section 1.09 .   Insurance .

 

(a)  The Mortgagor shall keep the Leasehold Improvements and Fixtures insured against damage by fire and other hazards as required by the Lease, and each policy shall be endorsed to name the Mortgagee as an additional insured thereunder, as its interest may appear, with loss payable to the Mortgagee, without contribution or assessment, under a standard mortgagee clause.  Subject to any insurance requirements in the Lease, all insurance policies and endorsements required pursuant to this Section 1.09 shall be fully paid for and nonassessable and contain such provisions and expiration dates and be in such form and amounts and issued by such insurance companies satisfactory to the Mortgagee. Without limiting the foregoing, each policy shall specifically provide that (i) such policy may not be canceled except upon thirty (30) days prior written notice to the Mortgagee and that no act or thing done by the Mortgagor shall invalidate the policy as against the Mortgagee, (ii) such policy may not be amended, modified or altered without the prior written consent of the Mortgagee, and (iii) any and all insurance proceeds allocated to the Mortgagor pursuant to the Lease will be paid to the Mortgagee. In addition, the Mortgagee may require the Mortgagor to carry such other insurance on the Leasehold Improvements and Fixtures in such amounts as may from time to time be reasonably required by the Mortgagee, against insurable casualties. The Mortgagor will assign and deliver the policy or policies of all such insurance to the Mortgagee, which policy or policies shall have endorsed thereon the standard mortgagee clause in the name of the Mortgagee, so and in such manner and form that the Mortgagee and its successors and assigns shall at all times have and hold said policy or policies as collateral and further security for the payment of the Secured Obligations until the full payment of the Secured Obligations. In addition, from time to time, upon the occurrence of any change in the use, operation, or value of the Premises, or in the availability of insurance in the area in which the Premises are located, the Mortgagor shall, within five (5) days after demand by the Mortgagee, take out such additional amounts and/or such other kinds of insurance as the Mortgagee may reasonably require.

 

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(b)  If Mortgagor takes out separate insurance concurrent in form or contributing in the event of loss with that required to be maintained under this Section 1.09 , the Mortgagee shall be included thereon as a named insured with loss payable to the Mortgagee under a standard mortgage endorsement of the character above described. The Mortgagor shall immediately notify the Mortgagee whenever any such separate insurance is taken out and shall promptly deliver to the Mortgagee the policy or policies of such insurance.

 

(c)  If the Premises, or any part thereof, are located in an area which has been identified by the Secretary of Housing and Urban Development as a flood hazard area, the Mortgagor will keep, for as long as any Secured Obligations remains unpaid, the Leasehold Improvements covered by flood insurance in an amount at least equal to the full amount of the Loan Agreement or the maximum limit of coverage available for the Premises under the National Flood Insurance Act of 1968 and the Flood Disaster Protection Act of 1973, as the same may have been or may hereafter be amended or modified (and any successor act thereto), whichever is less.

 

(d)  The Mortgagor shall give the Mortgagee prompt notice of any loss covered by insurance and the Mortgagee shall have the right to join the Mortgagor in adjusting any loss in excess of One Hundred Thousand Dollars ($100,000).  The Mortgagee shall have the option in its sole discretion to apply any insurance proceeds it may receive pursuant hereto, or otherwise to the payment of the Secured Obligations or to allow all or a portion of such proceeds to be used for the restoration of the Premises. In the event any such insurance proceeds shall be used to reduce the Secured Obligations, the same shall be applied by the Mortgagee, after the deduction therefrom and repayment to the Mortgagee of any and all reasonable costs incurred by the Mortgagee in the recovery thereof, in any manner it shall designate, including but not limited to the application of such proceeds to the then unpaid installments of the principal balance due under the Loan Agreement in the inverse order of their maturity, such that the regular payments, if any, under the Loan Agreement shall not be reduced or altered in any manner.  Notwithstanding the foregoing, the Mortgagor may, upon timely notice to Mortgagee not later than sixty (60) days after the loss occurred, require that the insurance proceeds be utilized for restoration of the Premises if and only if there is no Event of Default existing, the Mortgagor can demonstrate to the Mortgagee’s satisfaction that the insurance proceeds together with other funds deposited with the Mortgagee are sufficient to restore the Premises and Mortgagor complies with such disbursement and construction terms as the Mortgagee deems reasonably necessary.  If at any time during the restoration of the Premises an Event of Default occurs, the Mortgagee may at its option


 
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