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