Exhibit 10.1


 


LOAN AGREEMENT


 


Come now First Midwest Bank of 3310 W. 49th Street, Sioux Falls, South
Dakota, 57106, hereinafter referred to as “First Midwest”; Dunham Capital
Management, L.L.C. of 230 S. Phillips Avenue, Ste. 202, Sioux Falls, South
Dakota, 57104, hereinafter referred to as “DCM”; Granite City Food &
Brewery Ltd., 5402 Parkdale Drive, Suite 101, St. Louis Park, Minnesota,
55416, hereinafter referred to as “Granite City”; and Donald Dunham, Jr.
of 6216 Pinehurst Court South, Sioux Falls, SD, 57108, hereinafter referred to
as “Dunham”.


 


Witnesseth:


 


WHEREAS, DCM has executed Promissory Notes
#30003577 (Indianapolis) and #30003371 (South Bend) in favor of First Midwest;
and


 


WHEREAS, Dunham has executed Promissory Note
#30003372 in favor of First Midwest; and


 


WHEREAS, Dunham has personally guaranteed the
promissory notes of DCM and DCM has guaranteed the note of Dunham; and


 


WHEREAS, the promissory notes were secured by
certain assets of DCM and Dunham; and


 


WHEREAS, said Promissory Notes are in default
in the terms of repayment; and


 


WHEREAS, DCM is desirous of transferring to
Granite City the Indianapolis and South Bend assets which serve as the primary
security for its loans associated with the Granite City restaurant locations in
Indianapolis, Indiana, and South Bend, Indiana in exchange for
Granite City assuming $1,350,000.00 of DCM’s obligation to First Midwest; and


 

















 


WHEREAS, Granite City, is desirous of assuming
$1,350,000.00 of DCM’s debt owed to First Midwest in exchange for the transfer
of DCM’s interest in the collateral associated with the Indianapolis and South
Bend Granite City locations; and


 


WHEREAS, First Midwest has agreed with Granite
City to allow Granite City to assume $1,350,000.00 of DCM’s debt, subject to
the security interests previously pledged by DCM to First Midwest;


 


NOW, THEREFORE, the parties do hereby agree as
follows:


 


1.             Transfer to Granite City.  First Midwest does hereby consent to the
transfer of the property and other assets described on Exhibit A attached hereto
currently constituting a portion of the collateral currently pledged for the
loans identified hereinabove as the Indianapolis, Indiana, and South Bend, Indiana,
Granite City loans (collectively, the “Assets”) pursuant to a purchase
agreement to be entered into by and between DCM and Granite City.  Granite City, DCM and Dunham acknowledge and
agree that the assets will remain subject to the liens and security agreements
previously granted by DCM and Dunham in favor of First Midwest, including the
liens and security agreements granted under that certain (a) Commercial
Security Agreement dated July 29, 2008 (Loan No. 30003371) between
Dunham Capital Management, L.L.C. and First Midwest; (b) Commercial
Security Agreement dated February 1, 2009 between DCM and First Midwest
relating to collateral at Indianapolis location; (c) Assignment of Rents
dated February 1, 2009 between DCM and First Midwest; (d) Commercial
Pledge Agreement dated July 29, 2008 between DCM and the First Midwest; (e) Commercial
Pledge Agreement between DCM and First Midwest dated July 29, 2008
consisting of Assignment of Lease; (f) Commercial Security Agreement dated
July, 29, 2008 between 


 


2

















 


DCM and First Midwest, all of the foregoing
hereinafter referred to as the (collectively, the “Collateral”).  The acquisition by Granite City shall be
subject to and conditioned upon First Midwest maintaining its perfected and
first security interest in and to the Assets pledged as collateral for the
loans made to DCM for the Indianapolis and South Bend Granite City
locations.   Additional collateral
pledged by DCM which consists of assets located at other Granite City locations
shall remain security for the balance of the DCM obligations to First Midwest
as more fully set forth herein below.


 


2.             Indianapolis and South Bend
Promissory Notes.  The parties
hereto agree that, after application of the payment of interest which was paid
through June 30, 2010 and a $50,000.00 principal payment made on June 30,
2010, and the assumption of $1,350,000 of the total obligation by Granite City,
the outstanding balance due on the Indianapolis and South Bend Promissory Notes
in the amount of $428,887.00 shall remain owing and payable from DCM.  By execution of this Loan Agreement, DCM
hereby authorizes Frieberg, Nelson & Ask, L.L.P. to make payment to
First Midwest of all monies deposited into its trust account for purposes of
payment of interest and principal on the Indianapolis and South Bend Promissory
Notes identified hereinabove.


 


3.             Acknowledgement by DCM of
Debt and Obligation to Pay.  By execution of this Agreement, DCM
acknowledges its obligation to repay First Midwest for the remaining balance
owing on the Indianapolis and South Bend promissory notes in favor of First
Midwest as identified in Paragraph 2 above. 
DCM and First Midwest agree that the balance after the payments
identified above are applied to the Promissory Notes shall be in the amount of
$428,887.00.  Said balance shall be
deemed owing effective as of July 1, 2010 and interest shall accrue
interest from and after said date.


 


3

















 


4.             Payment from DCM.  DCM shall make monthly payments of principal
and interest in the amount of $2,831.21 beginning on the 1st day of August, 2010, and on the 1st day of each month thereafter until January 1,
2018, when the entire unpaid balance of principal and interest shall be due and
owing.  Payments shall be based upon a
20-year amortization.  Interest shall
accrue on the unpaid principal balance at the rate of five percent (5%) per
annum until July 1, 2015, at which time the interest rate shall be
adjusted to a rate equal to 200 basis points over the 5-year T-bill; provided,
however, the parties agree that the interest rate shall not exceed seven
percent (7%) per annum.  A new payment
schedule shall be prepared at that time to reflect any change in interest.


 


5.             Acknowledgement by Granite
City of Debt and Obligation to Pay.   By execution of this Agreement, Granite City
acknowledges its obligation to pay to First Midwest the sum of $1,350,000.00
pursuant to the terms of this Agreement (the “GC Payment Obligation”).  The parties agree that the execution of this
Agreement shall be sufficient evidence of the debt owed by Granite City to
First Midwest and that a separate promissory note evidencing said debt shall
not be necessary. The parties further agree that Granite City’s repayment
obligation shall be deemed effective July 1, 2010 and that interest shall
accrue on the unpaid principal balance from and after  July 1,
2010.  Payments made by Granite City in
respect of the GC Payment Obligation shall be credited to the remaining balance
due in respect of the obligations of DCM under Sections 3 and 4 above.


 


6.             Payments By Granite City.  Granite City shall make monthly payments of
principal and interest of $8,909.40 on its Payment Obligation beginning on the
1st day of August, 2010, and on the 1st day of each month thereafter until January 1,
2018, when the 


 


4

















 


entire unpaid balance of principal and interest in
respect of the GC Payment Obligation shall be due and owing.  Payments shall be based upon a 20-year
amortization.  Interest shall accrue on
the unpaid principal balance at the rate of five percent (5%) per annum until July 1,
2015, at which time the interest rate shall be adjusted to a rate equal to 200
basis points over the 5-year T-bill; provided, however, the parties agree that
the interest rate shall not exceed seven percent (7%) per annum.  Granite City may prepay the GC Payment
Obligation in whole or in part without premium or penalty upon written notice
to First Midwest and DCM.  All prepayments
shall be applied, first, to accrued interest and thereafter to principal in the
inverse order of maturity.  A new payment
schedule shall be prepared at that time to reflect any change in interest.


 


7.             Condition of Loan.  Granite City’s obligations under this
Agreement shall be subject to the following conditions:


 


(a)           Modification and Existing
Lease with DCM.  DCM and
Granite City shall enter into an Amendment to the existing leases for the
Indianapolis and South Bend locations which recalculate the rent consistent
with this Agreement and provide, among other things, for (i) direct
payment of rents under such leases to First Midwest; and (ii) upon
satisfaction of the payment obligations under such amended leases, the
respective ground leases for such properties shall be assigned to Granite City,
and DCM shall cease to have any interest in such leases or the Indianapolis or
South Bend locations;


 


(b)           SNDAs.  Granite City shall receive from the ground
lessors and any party having an interest in such properties customary
subordination and non-disturbance agreements;


 


5

















 


(c)           Amended Ground Leases.  The respective lessors of the Indianapolis
and South Bend locations shall consent to an amendment of the ground leases
which provide, among other things, for the assignment of the ground leases by
DCM to Granite City;


 


(d)           Agreement Between DCM and
Granite City.  DCM and
Granite City shall enter into the agreement substantially in the form of Exhibit B;


 


(e)           Consent From Granite City
Lender.  Harmony Equity Income Fund,
L.L.C. shall have consented to Granite City entering into this agreement;


 


(f)            Conveyance of Assets.  The assets shall have been conveyed by DCM to
Granite City under the terms and conditions of the Purchase Agreement, which
conveyance shall be free and clear of all liens and encumbrances (other than
the lien in favor of First Midwest and other liens and encumbrances acceptable
to Granite City in its sole discretion).


 


(g)           Litigation.  The non-occurrence prior to the date of
closing of any legal or other proceeding, which, in the judgment of Granite
City, may limit or impair the ability of any other party to this Agreement to
enter into and perform the obligations of such parties under this Agreement.


 


(h)           UCC Amendment.  Delivery of a consent satisfactory to Granite
City under which Granite City shall be authorized to file appropriate
amendments to all UCC financing statements covering the Assets evidencing the
transfer of the Assets to Granite City.


 


(i)            Bank Approval.  Evidence satisfactory to Granite City that
the transactions contemplated under this Agreement have been approved by First 


 


6

















 


Midwest’s loan committee and
board of directors and that the minutes reflecting such approval constitute
part of the official records continuously maintained by First Midwest.


 


DCM and Granite City agree to use their best
efforts to accomplish or satisfy the foregoing conditions on or before September 15,
2010.


 


8.             Security.  The parties agree that the security
previously pledged by DCM and Dunham shall remain security for the debts
assumed by Granite City and DCM pursuant to this Agreement.  The parties agree that change of ownership
contemplated under this Agreement as a part of the assumption of debt by Granite
City shall not, in any manner, compromise the security position of First
Midwest and that Granite City accepts said assets subject to any and all
security interests of First Midwest, subject, however, to the provisions of Section 9
below.


 


9.             Non-Disturbance.  Notwithstanding anything apparently to the
contrary contained herein, and notwithstanding any default or event of default
by DCM or Dunham in any obligation payable to First Midwest, so long as none of
the events set forth in Section 12 below shall have occurred, First
Midwest shall not exercise any of its rights or remedies as a secured creditor
with respect to the Assets, including the commencement of any proceedings to
foreclose on the Assets under the Uniform Commercial Code and shall not disturb
or impair Granite City’s use or possession of the Assets.


 


10.           Collateral Release.


 


(a)           First Midwest agrees that,
upon Granite City’s payment of its obligation to pay the $1,350,000.00 assumed
pursuant to this Agreement and 


 


7

















 


payment of the DCM
Indebtedness referenced in paragraphs 2 and 3 above, it shall release all liens
and security interests held by First Midwest in the Assets and shall execute
such release documents (including UCC amendments) as may be required by Granite
City to evidence the release contemplated under this Agreement.


 


(b)           First Midwest acknowledges
that DCM and Granite City contemplate that the DCM Indebtedness will be paid by
Granite City through direct payment of rents under the Indianapolis and South
Bend leases in accordance with the terms of a rent termination agreement.  First Midwest agrees to accept such payments
under the rent termination agreement and to apply all such payments against the
DCM Obligation.  First Midwest further
agrees that it will continue to accept such payments from Granite City
following any acceleration of the DCM Indebtedness by reason of any default by
DCM following the date of this Agreement, provided, however, that Granite City
may, at its option, prepay the DCM Indebtedness at any time following a default
by DCM occurring after the date of this Agreement and may offset such payment
against any amounts otherwise due under the Rent Modification Agreement.


 


(c)           First Midwest shall give
prompt notice to Granite City of any default by DCM occurring from and after
the date of this Agreement.


 


11.           Obligation to Insure
Collateral.  The parties
agree that Granite City and/or DCM shall each provide such insurance coverage
and proof of coverage as is currently required for the collateral pledged by
DCM for the Promissory Notes identified hereinabove.  Any insurance condemnation or other proceeds
paid to First Midwest by


 


8
















 


reason of any loss or damage or condemnation of any
of the Assets shall be applied to reduce the GC Payment Obligation set forth in
Section 5 above.


 


12.           Default and Remedies on
Default.  First Midwest’s
non-disturbance obligations under Section 9 above shall terminate upon the
occurrence of any of the following events, that is to say, if:


 


(a)           Granite City shall fail to
make any payment required under  Section 5
of this Agreement when due and such default shall continue for a period of ten (10) days
after written notice; or


 


(b)           Granite City shall fail to
comply with any other term, obligation or covenant contained in this Agreement
and such default shall continue for a period of thirty (30) days following
written notice thereof; or


 


(c)           Granite City should become
the subject of a proceeding under the United States Bankruptcy Code or under
any insolvency, receivership or other state or federal law affecting the rights
and obligations of creditors generally; or


 


(d)           Granite City should default
(beyond any period given to Granite City to cure such default under an
applicable lease for Indianapolis or South Bend locations) in the payment of
rent, additional rent or other charges or in the performance of its obligations
under such leases.


 


In the event that First Midwest becomes
entitled to exercise any rights or remedies as a secured creditor with respect
to the Assets, First Midwest shall provide Granite City with copies of all
notices provided to DCM or Dunham in connection with any such foreclosure
proceeding.


 


9

















 


13.           Release of Dunham Guaranty.  The parties agree that the personal guaranty
of Dunham shall no longer remain in force as to the $1,350,000.00 owed to First
Midwest by Granite City.  The personal guaranty
of Dunham for the balance of DCM’s debt and the corporate guaranty of DCM for
Dunham’s debt shall remain in full force and effect.


 


14.           Confession of Judgment.  Except as set forth in Section 9 above,
nothing contained in this agreement shall impair any right or remedy of First
Midwest against DCM or Dunham and DCM and Dunham agree that in the event of
default in the terms of repayment, DCM and Dunham, as appropriate, shall
confess judgment in favor of First Midwest for all sums due at the time of entry
of Judgment.  A Confession of Judgment
shall only be required in the event that First Midwest gives unto DCM and
Dunham, as appropriate, notice of default and fifteen (15) days to cure the
same.  In the event said default in
payment is not cured within said fifteen (15) days, DCM and Dunham, as
appropriate, will execute such documentation as necessary to allow First
Midwest to have judgment entered in its favor for the amount due upon the
defaulting party’s obligation.


 


15.           Non-Assumption.  Except as expressly provided herein, Granite
City has not assumed any obligation or liability of DCM or Dunham to First
Midwest or any other party.


 


16.           Adverse Interest.  In the event that any payment required to be
made by Granite City to First Midwest under this Agreement, including, without
limitation, the GC Payment Obligation, shall become the subject of a
garnishment, levy, execution or payment demand on behalf of any trustee,
receiver or creditor of DCM or Dunham, then, in such event, Granite City may
commence an appropriate interpleder action or deposit 


 


10

















 


any amount in dispute into escrow pending resolution
of any such adverse claim or demand. 
Granite City shall not be deemed in default under this Agreement by
reason of any such deposit or payment.


 


17.           Disclosure.  As a result of the assumption by Granite City
and in order to facilitate the same, DCM and Dunham do hereby authorize First
Midwest to disclose any and all loan documents, including but not limited to
promissory notes, security agreements, guaranties, UCC Financing Statements,
and collateral listings which are part of First Midwest’s loan files and which
would otherwise be subject to non-disclosure. 
By execution of this Agreement, the parties agree that disclosures can
be made as are deemed necessary by First Midwest to accomplish the objectives
of this Agreement and that the parties waive any claim  of wrongful disclosure or privacy violations
that may be alleged as a result of such disclosure.  The waiver shall only be applicable to the
parties to this Agreement, their attorneys, accountants or otherwise authorized
agents and shall not extend to others to whom disclosure by First Midwest would
otherwise be prohibited.


 


18.           Authority.  The parties hereto agree and acknowledge that
each has obtained the requisite corporate authority to enter into this Loan
Agreement and all other documents associated with the loan, including but not
limited to a promissory note, security agreement, UCC financing statements,
this Loan Agreement, and any other such documents as deemed necessary by First
Midwest to evidence the indebtedness of the parties as assumed in this
Agreement and perfect its security interest in the collateral being pledged for
said indebtedness, if any.


 


19.           Binding Effect.  The parties hereto agree that this Agreement
shall be binding upon the parties, their assigns, successors in interest, and
that the loan and all 


 


11

















 


agreements associated therewith shall be interpreted
and construed under the laws of the State of South Dakota.


 


20.           Notices: The parties agree that any
notices required to be provided under this Agreement shall be provided to the
following unless modification of said notice recipient is modified by written
notice to all parties:


 


Granite City Food and Brewery, Ltd.


5402 Parkdale Drive, Suite 101,


St. Louis Park, Minnesota, 55416


 


With a copy to:


 


Avron L. Gordon


Briggs and Morgan, P.A.


2200 IDS Center


80 South Eighth Street


Minneapolis, MN 55402


 


Dunham Capital Management, LLC


c/o Nancy Hughes


230 S. Phillips Avenue, Ste. 202


Sioux Falls, SD 57104


 


with copy to:


 


John Archer


Hagen, Wilka and Archer, LLP


PO Box 964


Sioux Falls, SD 57101


 


Donald Dunham, Jr.


6216 Pinehurst Court South


Sioux Falls, SD 57108


 


First Midwest Bank – Deerfield Branch


c/o Robert Laird, President


3310 W. 49th Street


Sioux Falls, SD 57106


 


12

















 


with copy to:


 


Thomas H. Frieberg


Frieberg, Nelson & Ask, LLP


PO Box 511


Beresford, SD 57004


 


21.           Counterparts.  The parties agree that this Agreement may be
executed in counterparts and that upon proper signature by all parties to this
Agreement, the Agreement shall be binding upon all parties.


 


Dated this 31st day of August, 2010.


 


 


	
   

  	
  FIRST MIDWEST BANK

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ Robert K. Laird

  
	
   

  	
  Its President

  



 


	
  State of South Dakota 

  	
  )

  
	
   

  	
  :ss

  
	
  County of Minnehaha 

  	
  )

  



 


On this the 3rd day of September, 2010, before
me, the undersigned officer, personally appeared Robert K. Laird, who acknowledged
himself to be the President of First Midwest Bank, a banking corporation, and
that he, as such President, being authorized so to do, executed the foregoing
instrument for the purposes therein contained, by signing the name of the
corporation by himself as President.


 


 


In witness whereof, I hereunto set my
hand and official seal.


 


 


	
   

  	
  /s/ Lori Bierwagen

  
	
   

  	
  Notary Public, South Dakota

  
	
   

  	
  My commission expires: 10-4-2014

  



 


 


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Dated this 31st day of August, 2010.


 


 


	
   

  	
  DUNHAM CAPITAL MANAGEMENT, L.L.C.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Donald A. Dunham, Jr.

  
	
   

  	
   

  	
  Its: Managing Member

  



 


 


	
  State of South Dakota 

  	
  )

  
	
   

  	
  :ss

  
	
  County of Minnahaha 

  	
  )

  



 


On this the 3rd day of September, 2010, before
me, the undersigned officer, personally appeared Donald A. Dunham, Jr.,
who acknowledged himself to be the Managing Member of Dunham Capital
Management, a limited liability company, and that he, as such Managing Member,
being authorized so to do, executed the foregoing instrument for the purposes
therein contained, by signing the name of the limited liability company by
himself as Managing Member.


 


 


In witness whereof, I hereunto set my
hand and official seal.


 


 


	
   

  	
  /s/ Nancy J. Hughes

  
	
   

  	
  Notary Public, South Dakota

  
	
   

  	
  My commission expires: 9/30/2015

  



 


 


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Dated this 31st day of August, 2010.


 


	
   

  	
  GRANITE CITY FOOD AND BREWERY, LTD.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: 

  	
  /s/ James Gilbertson

  
	
   

  	
   

  	
  Its: Chief Financial Officer

  



 


	
  State of Minnesota

  	
  )

  
	
   

  	
  :ss

  
	
  County of Hennepin)

  	
   

  



 


On this the 31st day of August, 2010, before me,
the undersigned officer, personally appeared James Gilbertson, who acknowledged
himself to be the Chief Financial Officer of Granite City Food and Brewery
Ltd., a corporation, and that he, as such Chief Financial Officer, being
authorized so to do, executed the foregoing instrument for the purposes therein
contained, by signing the name of the corporation by himself as Chief Financial
Officer.


 


 


In witness whereof, I hereunto set my
hand and official seal.


 


 


	
   

  	
  /s/ Teri Tenes Staggemeyer

  
	
   

  	
  Notary Public, Minnesota

  
	
   

  	
  My commission expires: 7/31/2015

  



 


 


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Dated this 31st day of August, 2010.


 


 


	
   

  	
  /s/ Donald A. Dunham, Jr.

  
	
   

  	
  Donald Dunham, Jr.

  



 


 


Subscribed and sworn to before me this 3rd day of September, 2010.


 


 


	
   

  	
  /s/ Nancy J. Hughes

  
	
   

  	
  Notary Public, South Dakota

  
	
   

  	
  My commission expires: 9/30/2015

  



 


 


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EXHIBIT A


 


Definition of Assets


 


Property
located at University Park Mall, 6501 Grape Road, in the City of South Bend, Indiana
and Property located at 150 West 96th Street, in the City of Indianapolis, Indiana.


 


Description of the Property


 


1.             The building, all related
improvements and any other personal property of every nature whatsoever now or
hereafter situated in or on or used or intended to be used in connection with
each of the South Bend Property and the Indianapolis Property legally described
above as of August 31, 2010;


 


2.             Any assignable permits and
licenses related to the South Bend Property and the Indianapolis Property;


 


3.             Any assignable warranties
and guarantees, given to, assigned to, or benefiting Seller, the South Bend
Property and the Indianapolis Property or any personal property situated on the
South Bend Property and the Indianapolis Property as of August 31, 2010;
and


 


4.             Any originals or copies of
any blueprints, plans, specifications and related information regarding the
South Bend Property and the Indianapolis Property (the foregoing referred to
collectively as the “Property”) that are in Seller’s possession or can be
obtained without cost to Seller.


 


A-1