EXHIBIT 10.4

 

PATENT AND TRADEMARK SECURITY AGREEMENT

 

This Patent and Trademark Security Agreement (the “Agreement”), dated as of
March 30, 2009, is made by and between GRANITE CITY FOOD AND BREWERY, LTD., a
Minnesota corporation having a business location at the address set forth below
next to its signature (the “Debtor”), and HARMONY EQUITY INCOME FUND, L.L.C., a
South Dakota limited liability company (“Agent”), for the benefit of the Lenders
a party to the Credit Agreement (defined below), and having a business location
at the address set forth below next to its signature.

 

Recitals

 

A.           Debtor and Agent are parties to that certain Bridge Loan Agreement
(as amended, supplemented or restated from time to time, the “Credit Agreement”)
dated the same date as this Agreement, setting forth the terms by which the
Lenders set forth therein may now or hereafter extend credit to or for the
account of Debtor.

 

B.           As a condition to extending credit to or for the account of Debtor,
Agent and Lenders have required the execution and delivery of this Agreement by
Debtor.

 

ACCORDINGLY, in consideration of the mutual covenants contained in the Loan
Documents and herein, the parties hereby agree as follows:

 

1.            Definitions. All terms defined in the Recitals hereto or in the
Credit Agreement that are not otherwise defined herein shall have the meanings
given to them in the Credit Agreement.  In addition, the following terms have
the meanings set forth below:

 

“Patents” means all of Debtor’s right, title and interest in and to patents or
applications for patents, fees or royalties with respect to each, and including
without limitation the right to sue for past infringement and damages therefor,
and licenses thereunder, all as presently existing or hereafter arising or
acquired, including without limitation the patents listed on Exhibit A.

 

“Security Interest” has the meaning given in Section 2.

 

“Trademarks” means all of Debtor’s right, title and interest in and to:
(i) trademarks, service marks, collective membership marks, registrations and
applications for registration for each, and the respective goodwill associated
with each, (ii) licenses, fees or royalties with respect to each, (iii) the
right to sue for past, present and future infringement, dilution and damages
therefor, and (iv) licenses thereunder, all as presently existing or hereafter
arising or acquired, including, without limitation, the marks listed on
Exhibit B.

 

2.            Security Interest. Debtor hereby irrevocably pledges and assigns
to, and grants Agent (for the benefit of Lenders)  a security interest (the
“Security Interest”) with power of sale to the extent permitted by law, in the
Patents and in the Trademarks to secure payment of the Obligations. As set forth
in the Credit Agreement, the Security Interest is coupled with a security

 

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interest in substantially all of the personal property of Debtor.  This
Agreement grants only the Security Interest herein described, is not intended to
and does not affect any present transfer of title of any trademark registration
or application and makes no assignment and grants no right to assign or perform
any other action with respect to any intent to use trademark application, unless
such action is permitted under 15 U.S.C. § 1060.

 

3.            Representations, Warranties and Agreements. Debtor represents,
warrants and agrees as follows:

 

(A)           EXISTENCE; AUTHORITY. DEBTOR IS A CORPORATION DULY ORGANIZED,
VALIDLY EXISTING AND IN GOOD STANDING UNDER THE LAWS OF ITS STATE OF
INCORPORATION, AND THIS AGREEMENT HAS BEEN DULY AND VALIDLY AUTHORIZED BY ALL
NECESSARY CORPORATE ACTION ON THE PART OF DEBTOR.

 

(B)           PATENTS. EXHIBIT A ACCURATELY LISTS ALL PATENTS OWNED OR
CONTROLLED BY DEBTOR AS OF THE DATE HEREOF, OR TO WHICH DEBTOR HAS A RIGHT AS OF
THE DATE HEREOF TO HAVE ASSIGNED TO IT, AND ACCURATELY REFLECTS THE EXISTENCE
AND STATUS OF APPLICATIONS AND LETTERS PATENT PERTAINING TO THE PATENTS AS OF
THE DATE HEREOF. IF AFTER THE DATE HEREOF, DEBTOR OWNS, CONTROLS OR HAS A RIGHT
TO HAVE ASSIGNED TO IT ANY PATENTS NOT LISTED ON EXHIBIT A, OR IF EXHIBIT A
CEASES TO ACCURATELY REFLECT THE EXISTENCE AND STATUS OF APPLICATIONS AND
LETTERS PATENT PERTAINING TO THE PATENTS, THEN DEBTOR SHALL WITHIN 60 DAYS
PROVIDE WRITTEN NOTICE TO AGENT WITH A REPLACEMENT EXHIBIT A, WHICH UPON
ACCEPTANCE BY AGENT SHALL BECOME PART OF THIS AGREEMENT.

 

(C)           TRADEMARKS. EXHIBIT B ACCURATELY LISTS ALL TRADEMARKS OWNED OR
CONTROLLED BY DEBTOR AS OF THE DATE HEREOF AND ACCURATELY REFLECTS THE EXISTENCE
AND STATUS OF TRADEMARKS AND ALL APPLICATIONS AND REGISTRATIONS PERTAINING
THERETO AS OF THE DATE HEREOF; PROVIDED, HOWEVER, THAT EXHIBIT B NEED NOT LIST
COMMON LAW MARKS (I.E., TRADEMARKS FOR WHICH THERE ARE NO APPLICATIONS OR
REGISTRATIONS) WHICH ARE NOT MATERIAL TO DEBTOR’S OR ANY AFFILIATE’S
BUSINESS(ES).  IF AFTER THE DATE HEREOF, DEBTOR OWNS OR CONTROLS ANY TRADEMARKS
NOT LISTED ON EXHIBIT B (OTHER THAN COMMON LAW MARKS WHICH ARE NOT MATERIAL TO
DEBTOR’S OR ANY AFFILIATE’S BUSINESS(ES)), OR IF EXHIBIT B CEASES TO ACCURATELY
REFLECT THE EXISTENCE AND STATUS OF APPLICATIONS AND REGISTRATIONS PERTAINING TO
THE TRADEMARKS, THEN DEBTOR SHALL PROMPTLY PROVIDE WRITTEN NOTICE TO AGENT WITH
A REPLACEMENT EXHIBIT B, WHICH UPON ACCEPTANCE BY AGENT SHALL BECOME PART OF
THIS AGREEMENT.

 

(D)           AFFILIATES. AS OF THE DATE HEREOF, NO AFFILIATE OWNS, CONTROLS, OR
HAS A RIGHT TO HAVE ASSIGNED TO IT ANY ITEMS THAT WOULD, IF SUCH ITEM WERE OWNED
BY DEBTOR, CONSTITUTE PATENTS OR TRADEMARKS. IF AFTER THE DATE HEREOF ANY
AFFILIATE OWNS, CONTROLS, OR HAS A RIGHT TO HAVE ASSIGNED TO IT ANY SUCH ITEMS,
THEN DEBTOR SHALL PROMPTLY EITHER: (I) CAUSE SUCH AFFILIATE TO ASSIGN ALL OF ITS
RIGHTS IN SUCH ITEM(S) TO DEBTOR; OR (II) NOTIFY AGENT OF SUCH ITEM(S) AND CAUSE
SUCH AFFILIATE TO EXECUTE AND DELIVER TO AGENT A PATENT AND TRADEMARK SECURITY
AGREEMENT SUBSTANTIALLY IN THE FORM OF THIS AGREEMENT.

 

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(E)           TITLE. DEBTOR HAS ABSOLUTE TITLE TO EACH PATENT AND EACH TRADEMARK
LISTED ON EXHIBITS A AND B, FREE AND CLEAR OF ALL LIENS EXCEPT PERMITTED LIENS. 
DEBTOR (I) WILL HAVE, AT THE TIME DEBTOR ACQUIRES ANY RIGHTS IN PATENTS OR
TRADEMARKS HEREAFTER ARISING, ABSOLUTE TITLE TO EACH SUCH PATENT OR TRADEMARK
FREE AND CLEAR OF ALL LIENS EXCEPT PERMITTED LIENS, AND (II) WILL KEEP ALL
PATENTS AND TRADEMARKS FREE AND CLEAR OF ALL LIENS EXCEPT PERMITTED LIENS.

 

(F)            NO SALE. EXCEPT AS PERMITTED IN THE CREDIT AGREEMENT, DEBTOR WILL
NOT ASSIGN, TRANSFER, ENCUMBER OR OTHERWISE DISPOSE OF THE PATENTS OR
TRADEMARKS, OR ANY INTEREST THEREIN, WITHOUT AGENT’S PRIOR WRITTEN CONSENT.

 

(G)           DEFENSE. DEBTOR WILL AT ITS OWN EXPENSE AND USING COMMERCIALLY
REASONABLE EFFORTS, PROTECT AND DEFEND THE PATENTS AND TRADEMARKS AGAINST ALL
CLAIMS OR DEMANDS OF ALL PERSONS OTHER THAN THOSE HOLDING PERMITTED LIENS.

 

(H)           MAINTENANCE. DEBTOR WILL AT ITS OWN EXPENSE MAINTAIN THE PATENTS
AND THE TRADEMARKS TO THE EXTENT REASONABLY ADVISABLE IN ITS BUSINESS INCLUDING,
BUT NOT LIMITED TO, FILING ALL APPLICATIONS TO OBTAIN LETTERS PATENT OR
TRADEMARK REGISTRATIONS AND ALL AFFIDAVITS, MAINTENANCE FEES, ANNUITIES, AND
RENEWALS POSSIBLE WITH RESPECT TO LETTERS PATENT, TRADEMARK REGISTRATIONS AND
APPLICATIONS THEREFOR.  DEBTOR COVENANTS THAT IT WILL NOT ABANDON NOR FAIL TO
PAY ANY MAINTENANCE FEE OR ANNUITY DUE AND PAYABLE ON ANY PATENT OR TRADEMARK,
NOR FAIL TO FILE ANY REQUIRED AFFIDAVIT OR RENEWAL IN SUPPORT THEREOF, WITHOUT
FIRST PROVIDING AGENT:  (I) SUFFICIENT WRITTEN NOTICE, OF AT LEAST 30 DAYS, TO
ALLOW AGENT TO TIMELY PAY ANY SUCH MAINTENANCE FEES OR ANNUITIES WHICH MAY
BECOME DUE ON ANY PATENTS OR TRADEMARKS, OR TO FILE ANY AFFIDAVIT OR RENEWAL
WITH RESPECT THERETO, AND (II) A SEPARATE WRITTEN POWER OF ATTORNEY OR OTHER
AUTHORIZATION TO PAY SUCH MAINTENANCE FEES OR ANNUITIES, OR TO FILE SUCH
AFFIDAVIT OR RENEWAL, SHOULD SUCH BE NECESSARY OR DESIRABLE.

 

(I)            AGENT’S RIGHT TO TAKE ACTION. IF DEBTOR FAILS TO PERFORM OR
OBSERVE ANY OF ITS COVENANTS OR AGREEMENTS SET FORTH IN THIS SECTION 3, AND IF
SUCH FAILURE CONTINUES FOR A PERIOD OF TEN (10) CALENDAR DAYS AFTER AGENT GIVES
DEBTOR WRITTEN NOTICE THEREOF (OR, IN THE CASE OF THE AGREEMENTS CONTAINED IN
SUBSECTION (H), IMMEDIATELY UPON THE OCCURRENCE OF SUCH FAILURE, WITHOUT NOTICE
OR LAPSE OF TIME), OR IF DEBTOR NOTIFIES AGENT THAT IT INTENDS TO ABANDON A
PATENT OR TRADEMARK, AGENT MAY (BUT NEED NOT) PERFORM OR OBSERVE SUCH COVENANT
OR AGREEMENT OR TAKE STEPS TO PREVENT SUCH INTENDED ABANDONMENT ON BEHALF AND IN
THE NAME, PLACE AND STEAD OF DEBTOR (OR, AT AGENT’S OPTION, IN AGENT’S OWN NAME)
AND MAY (BUT NEED NOT) TAKE ANY AND ALL OTHER ACTIONS WHICH AGENT MAY REASONABLY
DEEM NECESSARY TO CURE OR CORRECT SUCH FAILURE OR PREVENT SUCH INTENDED
ABANDONMENT.

 

(J)            COSTS AND EXPENSES. EXCEPT TO THE EXTENT THAT THE EFFECT OF SUCH
PAYMENT WOULD BE TO RENDER ANY LOAN OR FORBEARANCE OF MONEY USURIOUS OR
OTHERWISE ILLEGAL UNDER ANY APPLICABLE LAW, DEBTOR SHALL PAY AGENT ON DEMAND THE
AMOUNT OF ALL MONEYS EXPENDED AND ALL COSTS AND EXPENSES (INCLUDING REASONABLE
ATTORNEYS’ FEES AND DISBURSEMENTS) INCURRED BY AGENT IN CONNECTION WITH OR AS A
RESULT OF AGENT’S TAKING ACTION UNDER SUBSECTION (I) OR EXERCISING ITS RIGHTS
UNDER SECTION 6, TOGETHER WITH INTEREST THEREON FROM THE DATE EXPENDED OR
INCURRED BY AGENT AT THE DEFAULT RATE.

 

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(K)           POWER OF ATTORNEY. TO FACILITATE AGENT’S TAKING ACTION UNDER
SUBSECTION (I) AND EXERCISING ITS RIGHTS UNDER SECTION 6, DEBTOR HEREBY
IRREVOCABLY APPOINTS (WHICH APPOINTMENT IS COUPLED WITH AN INTEREST) AGENT, OR
ITS DELEGATE, AS THE ATTORNEY-IN-FACT OF DEBTOR WITH THE RIGHT (BUT NOT THE
DUTY) FROM TIME TO TIME TO CREATE, PREPARE, COMPLETE, EXECUTE, DELIVER, ENDORSE
OR FILE, IN THE NAME AND ON BEHALF OF DEBTOR, ANY AND ALL INSTRUMENTS,
DOCUMENTS, APPLICATIONS, FINANCING STATEMENTS, AND OTHER AGREEMENTS AND WRITINGS
REQUIRED TO BE OBTAINED, EXECUTED, DELIVERED OR ENDORSED BY DEBTOR UNDER THIS
SECTION 3, OR, NECESSARY FOR AGENT, AFTER AN EVENT OF DEFAULT, TO ENFORCE OR USE
THE PATENTS OR TRADEMARKS OR TO GRANT OR ISSUE ANY EXCLUSIVE OR NON-EXCLUSIVE
LICENSE UNDER THE PATENTS OR TRADEMARKS TO ANY THIRD PARTY, OR TO SELL, ASSIGN,
TRANSFER, PLEDGE, ENCUMBER OR OTHERWISE TRANSFER TITLE IN OR DISPOSE OF THE
PATENTS OR TRADEMARKS TO ANY THIRD PARTY. DEBTOR HEREBY RATIFIES ALL THAT SUCH
ATTORNEY SHALL LAWFULLY DO OR CAUSE TO BE DONE BY VIRTUE HEREOF. THE POWER OF
ATTORNEY GRANTED HEREIN SHALL TERMINATE UPON THE TERMINATION OF THE CREDIT
AGREEMENT AS PROVIDED THEREIN AND THE PAYMENT AND PERFORMANCE OF ALL
INDEBTEDNESS.

 

4.            Debtor’s Use of the Patents and Trademarks. Debtor shall be
permitted to control and manage the Patents and Trademarks, including the right
to exclude others from making, using or selling items covered by the Patents and
Trademarks and any licenses thereunder, in the same manner and with the same
effect as if this Agreement had not been entered into, so long as no Event of
Default occurs and remains uncured.

 

5.            Events of Default. As used herein, the term “Event of Default”
shall have the meaning assigned to such term in the Credit Agreement.

 

6.            Remedies. Upon the occurrence and during the continuance of an
Event of Default, Agent may, at its option, take any or all of the following
actions, subject in each case to the last two sentences of this Section 6:

 

(A)           AGENT MAY EXERCISE ANY OR ALL REMEDIES AVAILABLE UNDER THE CREDIT
AGREEMENT.

 

(B)           AGENT MAY EXERCISE ITS RIGHTS WITH RESPECT TO THE PATENTS AND
TRADEMARKS SET FORTH IN THAT CERTAIN IP AGREEMENT OF EVEN DATE HEREWITH BY AND
BETWEEN DEBTOR AND AGENT (THE “IP AGREEMENT”).

 

The rights of Agent as secured creditor with respect to the Patents and
Trademarks following the occurrence and during the continuance of an Event of
Default are limited in all respects to the rights of Agent under the terms of
the IP Agreement.  In the event of any conflict between this Agreement and the
IP Agreement, with respect to the Patents and Trademarks, the terms of the IP
Agreement shall govern.

 

7.            Miscellaneous. This Agreement can be waived, modified, amended,
terminated or discharged, and the Security Interest can be released, only
explicitly in a writing signed by Agent. A waiver signed by Agent shall be
effective only in the specific instance and for the specific purpose given. Mere
delay or failure to act shall not preclude the exercise or enforcement of any

 

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of Agent’s rights or remedies. All rights and remedies of Agent shall be
cumulative and may be exercised singularly or concurrently, at Agent’s option,
and the exercise or enforcement of any one such right or remedy shall neither be
a condition to nor bar the exercise or enforcement of any other. All notices to
be given to Debtor under this Agreement shall be given in the manner and with
the effect provided in the Credit Agreement. Agent shall not be obligated to
preserve any rights Debtor may have against prior parties, to realize on the
Patents and Trademarks at all or in any particular manner or order, or to apply
any cash proceeds of Patents and Trademarks in any particular order of
application. This Agreement shall be binding upon and inure to the benefit of
Debtor and Agent and their respective participants, successors and assigns and
shall take effect when signed by Debtor and delivered to Agent, and Debtor
waives notice of Agent’s acceptance hereof. Agent may execute this Agreement if
appropriate for the purpose of filing, but the failure of Agent to execute this
Agreement shall not affect or impair the validity or effectiveness of this
Agreement. A carbon, photographic or other reproduction of this Agreement or of
any financing statement signed by Debtor shall have the same force and effect as
the original for all purposes of a financing statement. This Agreement shall be
governed by the internal law of Minnesota without regard to conflicts of law
provisions. If any provision or application of this Agreement is held unlawful
or unenforceable in any respect, such illegality or unenforceability shall not
affect other provisions or applications which can be given effect and this
Agreement shall be construed as if the unlawful or unenforceable provision or
application had never been contained herein or prescribed hereby. All
representations and warranties contained in this Agreement shall survive the
execution, delivery and performance of this Agreement and the creation and
payment of the Indebtedness.

 

8.             THE PARTIES WAIVE ANY RIGHT TO TRIAL BY JURY IN ANY ACTION OR
PROCEEDING BASED ON OR PERTAINING TO THIS AGREEMENT.

 

[Signature Page Follows.]

 

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IN WITNESS WHEREOF, the parties have executed this Patent and Trademark Security
Agreement as of the date written above.

 

Address for Notice

 

GRANITE CITY FOOD & BREWERY, LTD.

5402 Parkdale Drive, Suite 101

 

 

 

Minneapolis, MN 55416

 

 

 

Attention:                          

 

By

/s/ James G. Gilbertson

 

 

 

Its CFO

 

 

 

 

 

 

 

 

Address for Notice.

 

HARMONY EQUITY INCOME FUND, L.L.C.

201 S. Phillips Ave., Suite 100

 

 

 

Sioux Falls, SD 57104

 

 

 

Attention: Gene McGowan

 

By

/s/ Eugene E. McGowan

 

 

 

Its Managing Member

 

STATE OF                         

)

 

)

COUNTY OF                    

)

 

 

The foregoing instrument was acknowledged before me this      day of March,
2009, by                                  , the                              of
Granite City Food & Brewery, a Minnesota corporation, on behalf of the
corporation.

 

 

 

 

 

Notary Public

 

STATE OF SOUTH DAKOTA)

                                               )

COUNTY OF MINNEHAHA  )

 

The foregoing instrument was acknowledged before me this 30th day of March,
2009, by Eugene E. McGowan, the Managing Member of Harmony Equity Income Fund,
L.L.C., a South Dakota limited liability company, on behalf of the company.

 

 

 

/s/ Jennifer Starnes

 

Notary Public

 

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EXHIBIT A

PATENTS

 

Description

 

Inventor

 

Assignee

 

Patent No.
Application

 

Filed

 

 

 

 

 

 

 

 

 

Method and Apparatus for Distributed Production of Beer

 

William E. Burdick

 

Granite City Food & Brewery Ltd.

 

7,214,402
10/411,002

 

4/9/2003

Method of Production of Beer for Distribution

 

William E. Burdick

 

Granite City Food & Brewery Ltd.

 

11/800,752

 

5/7/2007

Apparatus for Distributed Production of Beer

 

William E. Burdick

 

Granite City Food & Brewery Ltd.

 

11/800,753

 

5/7/2007

 

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EXHIBIT B

UNITED STATES ISSUED TRADEMARKS, SERVICE MARKS

AND COLLECTIVE MEMBERSHIP MARKS

 

Description

 

Owner/Applicant

 

Filing/Registration
Date

 

Jurisdiction

Brother Benedict’s Mai Bock

 

Granite City Food & Brewery Ltd.

 

12/17/1999

 

Minnesota

Brother Benedict’s Mai Bock and design

 

Granite City Food & Brewery Ltd.

 

12/17/1999

 

Minnesota

Duke of Wellington

 

Granite City Food & Brewery Ltd.

 

12/17/1999

 

Minnesota

Duke of Wellington and design

 

Granite City Food & Brewery Ltd.

 

12/17/1999

 

Minnesota

Fermentus Interruptus

 

Granite City Food & Brewery Ltd.

 

2/15/2005
10/21/2008

 

United States

GC

 

Granite City Food & Brewery Ltd.

 

6/7/2007
2/12/2008

 

United States

GC Granite City Food & Brewery & design

 

Granite City Food & Brewery Ltd.

 

1/28/2000
3/19/2002

 

United States

Granite City

 

Granite City Food & Brewery Ltd.

 

6/7/2007
2/19/2008

 

United States

Granite City Food & Brewery

 

Granite City Food & Brewery Ltd.

 

6/7/2007
2/19/2008

 

United States

Granite City Food & Brewery & design

 

Granite City Food & Brewery Ltd.

 

12/17/1999

 

Minnesota

Northern Light

 

Granite City Food & Brewery Ltd.

 

12/17/1999

 

Minnesota

Northern Light & design

 

Granite City Food & Brewery Ltd.

 

12/17/1999

 

Minnesota

Pride of Pilsen

 

Granite City Food & Brewery Ltd.

 

12/17/1999

 

Minnesota

Pride of Pilsen & design

 

Granite City Food & Brewery Ltd.

 

12/17/1999

 

Minnesota

Victory Lager

 

Granite City Food & Brewery Ltd.

 

12/17/1999

 

Minnesota

Victory Lager & design

 

Granite City Food & Brewery Ltd.

 

12/17/1999

 

Minnesota

 

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