EXHIBIT 10.2
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (“
Agreement ”) is made as of March 30, 2009, by and
among GRANITE CITY FOOD & BREWERY, LTD . (“
Granite City ”), GRANITE CITY RESTAURANT
OPERATIONS, INC. (“ GCROI ”), each a
Minnesota corporation (each a “ Debtor ”, and
collectively referred to herein as, the “ Debtors
”) and HARMONY EQUITY INCOME FUND, L.L.C. , a South
Dakota limited liability company (herein, with its participants,
successors and assigns, called the “Secured
Party” ), as secured party.
All capitalized terms not otherwise
defined herein, shall have the meaning set forth in that certain
Bridge Loan Agreement of even date herewith by and among the Debtor
and the Secured Party (the “ Loan Agreement
”).
For good and valuable consideration,
Debtors hereby agree for the benefit of the Secured Party as
follows:
1.
Debtors hereby grant the Secured
Party a security interest (collectively referred to as the “
Security Interests” ) in all personal property of the
Debtors located at or utilized exclusively for the restaurant
located at 2620 South Louise Avenue, Sioux Falls, South Dakota
(such location being referred to herein as, the “ Leased
Premises ”), including but not limited to, the property
described below, as security for the payment and performance of
each and every debt, liability and obligation of every type and
description which either Debtor, may now or at any time hereafter
owe to the Secured Party (whether such debt, liability or
obligation now exists or is hereafter created or incurred, whether
it arises in a transaction involving the Secured Party alone or in
a transaction involving other creditors of Debtors, and whether it
is direct or indirect, due or to become due, absolute or
contingent, primary or secondary, liquidated or unliquidated, or
sole, joint, several or joint and several, and including
specifically, but not limited to, all indebtedness of Debtors
arising under any loan or credit agreement or guaranty between
Debtors and the Secured Party, whether now in effect or hereafter
entered into; all such debts, liabilities and obligations are
herein collectively referred to as the “ Obligations
”). The Security Interests shall attach to the personal
property of Debtors described herein and all products and proceeds
thereof, whether now owned or hereafter acquired, including the
following (collectively, the “ Collateral
”):
(a)
All inventory
(“ Inventory
”) of
Debtors located at the Leased Premises and/or used solely in
Debtors’ restaurant operations located thereon (the
“ Restaurant
”);
(b)
All equipment
(“ Equipment
”)
located on the Leased Premises or used in the Restaurant,
including but not limited to vehicles, furniture, fixtures,
office and record keeping equipment, audio visual equipment, any
goods described in any equipment schedule or list attached hereto
or hereafter furnished to the Secured Party by Debtor (but no such
schedule or list need be furnished in order the security interest
to be valid as to Debtors’ equipment), any spare and repair
parts or replacements for any of the foregoing and any software
imbedded therein;
(c)
All accounts
(“ Receivables
”) arising
from the operation of the Restaurant and contract rights
specifically relating to the Restaurant;
(d)
All general
intangibles of Debtors necessary for the operation of the
Restaurant;
(e)
An undivided
interest in the Debtors’ intellectual property used in
connection with the Restaurant, including but not limited to,
trademarks, trade secrets, goodwill, trade names, customer lists,
permits and franchises, and the right to use Debtors’ names
(the “ Granite City
Intellectual Property ”) subject to the
agreement of the parties as set forth in the IP Agreement of even
date herewith between Debtor and Secured Party (the “
IP Agreement ”);
(f)
All deposit
accounts related solely to the Restaurant;
(g)
The Lease between
Sioux Falls Douglas L. Johnson, as Landlord, and GCROI, as tenant,
dated June 14, 2000, as amended, for the Leased
Premises;
(h)
The Master
Equipment Finance Lease dated September 19, 2006 by and
between DHW Leasing, L.L.C. and Granite City together with any
schedules or addendums related to furniture fixtures and equipment
located at the Restaurant;
(i)
All supporting
obligations that support the payment or performance of any of the
foregoing; and
(j)
All additions and
accessions to, all proceeds, products, offspring and profits of,
and all rights and privileges incident to, any of the
foregoing;
provided that with respect to any assets
included within the definition of “Granite City Intellectual
Property,” the Secured Party’s security interest is
limited to the security interest in an undivided interest in such
assets granted pursuant to clause (e), above.
2.
Each Debtor represents, warrants and
agrees that:
(a)
Debtors have (or
will have at the time they acquire rights in Collateral hereafter
arising) and will maintain so long as the Security Interests may
remain outstanding, absolute title to each item of Collateral and
all proceeds thereof, free and clear of all interests, liens,
attachments, encumbrances and security interests except the
Security Interests as provided herein, liens existing on the date
hereof and listed on Schedule 6.1 to the Loan Agreement, or as the
Secured Party may otherwise agree in writing. Debtors will
defend the Collateral against all claims or demands of all persons
(other than the Secured Party) claiming the Collateral or any
interest therein. Debtors will not sell or otherwise dispose
of any material portion of the Collateral or any interest therein
except for the sale of Inventory in the normal course of
Debtors’ businesses, without the Secured Party’s prior
written consent.
(b)
Each Debtor does
business solely under its own name and the trade names (if any) set
forth below (or if none are listed, such Debtor warrants that it
does not have any
tradenames). The chief
executive office of each Debtor is located at the address set forth
below and all of such Debtor’s records relating to its
business or the Collateral are kept at that location or at the
Leased Premises. The addresses where the Collateral will be kept,
if different from the Leased Premises or the address appearing
below Debtor’s signature, are set forth in
Exhibit A
. No
Collateral will be kept at any other location without the prior
written consent of Secured Party, but the parties intend that the
Collateral, wherever located, is covered by this Agreement.
Debtors will not permit any tangible Collateral or any records
pertaining to Collateral to be located in any state or area in
which, in the event of such location, a financing statement
covering such Collateral would be required to be, but has not in
fact been, filed in order to perfect the Security Interests.
Neither Debtor will change its name or the location of its place of
business, without prior written notice to the Secured Party.
Debtors shall advise Secured Party in writing at least thirty (30)
days before any change of name, identity, form of organization,
state of organization, corporate structure, or chief executive
office.
(c)
None of the
Collateral is or will become a fixture on real estate, unless a
sufficient fixture filing is in effect with respect
thereto.
(d)
Each right to
payment and each instrument, document, chattel paper and other
agreement constituting or evidencing Collateral is (or, in the case
of all future Collateral, will be when arising or issued) the
valid, genuine and legally enforceable obligation, subject to no
defense, setoff or counterclaim, of the account debtor or other
obligor named therein or in Debtors’ records pertaining
thereto as being obligated to pay such obligation. Except in
the ordinary course of Debtors’ business, Debtors will not
agree to modify, amend, subordinate, cancel or terminate the
obligation of any such account debtor or other obligor, without the
Secured Party’s prior written consent.
(e)
Debtors will keep
all tangible Collateral in good repair, working order and
condition, normal depreciation excepted, and will, from time to
time, replace any worn, broken or defective parts.
(f)
Debtors will
promptly pay all taxes and other governmental charges levied or
assessed upon or against any Collateral or upon or against the
creation, perfection or continuance of the Security
Interests.
(g)
Debtors will keep
all Collateral free and clear of all security interests, liens and
encumbrances except the Security Interests provided herein and
except other security interests approved in writing by the Secured
Party.
(h)
Debtors will at
all reasonable times permit the Secured Party or its
representatives to examine or inspect any Collateral, or any
evidence of Collateral, wherever located, and Debtors will at any
time and from time to time send requests for verification of
accounts or notices of assignment to account debtors and other
obligors.
(i)
Each Debtor will
keep accurate and complete records pertaining to the Collateral and
pertaining to its respective business and financial condition,
prepared on the basis of generally accepted accounting principles
consistently applied; will submit to the Secured Party
such
weekly, monthly and other
periodic reports concerning the Collateral and its respective
business and financial condition as the Secured Party may from time
to time request; and will permit the Secured Party, or its
employees, accountants, attorneys or agents, to examine and copy
any or all of its records at any time during Debtor’s
business hours.
(j)
Debtors will
promptly notify the Secured Party of any loss of or material damage
to any Collateral or of any substantial adverse change, known to
Debtors, in any Collateral or the prospect of payment
thereof.
(k)
Upon request by
the Secured Party, whether such request is made before or after the
occurrence of an Event of Default, Debtors will promptly deliver to
the Secured Party in pledge all instruments, documents and chattel
papers constituting Collateral, duly endorsed or assigned by each
applicable Debtor.
(l)
Each Debtor will
at all times keep its business and all tangible Collateral insured
against risks of fire (including so-called extended coverage),
theft, collision (for Collateral consisting of motor vehicles) and
such other risks and in such amounts as the Secured Party may
reasonably request, with a Secured Party’s loss payee
endorsement to the Secured Party to the extent of its
interest.
(m)
Debtors will pay
or reimburse the Secured Party on demand for all costs of
col
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