**Exhibit 10.1**

 

**LOAN AGREEMENT**

 

Come now First Midwest Bank of 3310 W. 49th Street, Sioux Falls, SouthDakota, 57106, hereinafter referred to as “First Midwest”; Dunham CapitalManagement, L.L.C. of 230 S. Phillips Avenue, Ste. 202, Sioux Falls, SouthDakota, 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 toas “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 thepromissory notes of DCM and DCM has guaranteed the note of Dunham; and

 

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

 

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

 

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

 

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

 

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

 

NOW, THEREFORE, the parties do hereby agree asfollows:

 

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

 

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DCM and First Midwest, all of the foregoinghereinafter referred to as the (collectively, the “Collateral”).  The acquisition by Granite City shall besubject to and conditioned upon First Midwest maintaining its perfected andfirst security interest in and to the Assets pledged as collateral for theloans made to DCM for the Indianapolis and South Bend Granite Citylocations.   Additional collateralpledged by DCM which consists of assets located at other Granite City locationsshall remain security for the balance of the DCM obligations to First Midwestas more fully set forth herein below.

 

2.             Indianapolis and South BendPromissory Notes.  The partieshereto agree that, after application of the payment of interest which was paidthrough 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 Notesin the amount of $428,887.00 shall remain owing and payable from DCM.  By execution of this Loan Agreement, DCMhereby authorizes Frieberg, Nelson & Ask, L.L.P. to make payment toFirst Midwest of all monies deposited into its trust account for purposes ofpayment of interest and principal on the Indianapolis and South Bend PromissoryNotes identified hereinabove.

 

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

 

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4.             Payment from DCM.  DCM shall make monthly payments of principaland 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 andowing.  Payments shall be based upon a20-year amortization.  Interest shallaccrue on the unpaid principal balance at the rate of five percent (5%) perannum until July 1, 2015, at which time the interest rate shall beadjusted 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 sevenpercent (7%) per annum.  A new paymentschedule shall be prepared at that time to reflect any change in interest.

 

5.             Acknowledgement by GraniteCity of Debt and Obligation to Pay.   By execution of this Agreement, Granite Cityacknowledges its obligation to pay to First Midwest the sum of $1,350,000.00pursuant to the terms of this Agreement (the “GC Payment Obligation”).  The parties agree that the execution of thisAgreement shall be sufficient evidence of the debt owed by Granite City toFirst Midwest and that a separate promissory note evidencing said debt shallnot be necessary. The parties further agree that Granite City’s repaymentobligation shall be deemed effective July 1, 2010 and that interest shallaccrue on the unpaid principal balance from and after****July 1,2010.  Payments made by Granite City inrespect of the GC Payment Obligation shall be credited to the remaining balancedue in respect of the obligations of DCM under Sections 3 and 4 above.

 

6.             Payments By Granite City.  Granite City shall make monthly payments ofprincipal and interest of $8,909.40 on its Payment Obligation beginning on the1st day of August, 2010, and on the 1st day of each month thereafter until January 1,2018, when the 

 

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entire unpaid balance of principal and interest inrespect of the GC Payment Obligation shall be due and owing.  Payments shall be based upon a 20-yearamortization.  Interest shall accrue onthe 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 200basis points over the 5-year T-bill; provided, however, the parties agree thatthe interest rate shall not exceed seven percent (7%) per annum.  Granite City may prepay the GC PaymentObligation in whole or in part without premium or penalty upon written noticeto First Midwest and DCM.  All prepaymentsshall be applied, first, to accrued interest and thereafter to principal in theinverse order of maturity.  A new paymentschedule shall be prepared at that time to reflect any change in interest.

 

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

 

(a)           Modification and ExistingLease with DCM.  DCM andGranite City shall enter into an Amendment to the existing leases for theIndianapolis and South Bend locations which recalculate the rent consistentwith this Agreement and provide, among other things, for (i) directpayment of rents under such leases to First Midwest; and (ii) uponsatisfaction of the payment obligations under such amended leases, therespective 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 orSouth Bend locations;

 

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

 

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

 

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

 

(e)           Consent From Granite CityLender.  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 toGranite City under the terms and conditions of the Purchase Agreement, whichconveyance shall be free and clear of all liens and encumbrances (other thanthe lien in favor of First Midwest and other liens and encumbrances acceptableto Granite City in its sole discretion).

 

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

 

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

 

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

 

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

 

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

 

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

 

9.             Non-Disturbance.  Notwithstanding anything apparently to thecontrary contained herein, and notwithstanding any default or event of defaultby DCM or Dunham in any obligation payable to First Midwest, so long as none ofthe events set forth in Section 12 below shall have occurred, FirstMidwest shall not exercise any of its rights or remedies as a secured creditorwith respect to the Assets, including the commencement of any proceedings toforeclose on the Assets under the Uniform Commercial Code and shall not disturbor 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 assumedpursuant to this Agreement and 

 

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payment of the DCMIndebtedness referenced in paragraphs 2 and 3 above, it shall release all liensand security interests held by First Midwest in the Assets and shall executesuch release documents (including UCC amendments) as may be required by GraniteCity to evidence the release contemplated under this Agreement.

 

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

 

(c)           First Midwest shall giveprompt notice to Granite City of any default by DCM occurring from and afterthe date of this Agreement.

 

11.           Obligation to InsureCollateral.  The partiesagree that Granite City and/or DCM shall each provide such insurance coverageand proof of coverage as is currently required for the collateral pledged byDCM for the Promissory Notes identified hereinabove.  Any insurance condemnation or other proceedspaid to First Midwest by

 

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

 

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

 

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

 

(b)           Granite City shall fail tocomply with any other term, obligation or covenant contained in this Agreementand such default shall continue for a period of thirty (30) days followingwritten notice thereof; or

 

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

 

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

 

In the event that First Midwest becomesentitled to exercise any rights or remedies as a secured creditor with respectto the Assets, First Midwest shall provide Granite City with copies of allnotices provided to DCM or Dunham in connection with any such foreclosureproceeding.

 

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13.           Release of Dunham Guaranty.  The parties agree that the personal guarantyof Dunham shall no longer remain in force as to the $1,350,000.00 owed to FirstMidwest by Granite City.  The personal guarantyof Dunham for the balance of DCM’s debt and the corporate guaranty of DCM forDunham’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 FirstMidwest against DCM or Dunham and DCM and Dunham agree that in the event ofdefault in the terms of repayment, DCM and Dunham, as appropriate, shallconfess judgment in favor of First Midwest for all sums due at the time of entryof Judgment.  A Confession of Judgmentshall only be required in the event that First Midwest gives unto DCM andDunham, as appropriate, notice of default and fifteen (15) days to cure thesame.  In the event said default inpayment is not cured within said fifteen (15) days, DCM and Dunham, asappropriate, will execute such documentation as necessary to allow FirstMidwest to have judgment entered in its favor for the amount due upon thedefaulting party’s obligation.

 

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

 

16.           Adverse Interest.  In the event that any payment required to bemade by Granite City to First Midwest under this Agreement, including, withoutlimitation, the GC Payment Obligation, shall become the subject of agarnishment, levy, execution or payment demand on behalf of any trustee,receiver or creditor of DCM or Dunham, then, in such event, Granite City maycommence an appropriate interpleder action or deposit 

 

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

 

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

 

18.           Authority.  The parties hereto agree and acknowledge thateach has obtained the requisite corporate authority to enter into this LoanAgreement and all other documents associated with the loan, including but notlimited to a promissory note, security agreement, UCC financing statements,this Loan Agreement, and any other such documents as deemed necessary by FirstMidwest to evidence the indebtedness of the parties as assumed in thisAgreement and perfect its security interest in the collateral being pledged forsaid indebtedness, if any.

 

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

 

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

 

20.           Notices:The parties agree that anynotices required to be provided under this Agreement shall be provided to thefollowing unless modification of said notice recipient is modified by writtennotice 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

 

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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 beexecuted in counterparts and that upon proper signature by all parties to thisAgreement, 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, beforeme, the undersigned officer, personally appeared Robert K. Laird, who acknowledgedhimself to be the President of First Midwest Bank, a banking corporation, andthat he, as such President, being authorized so to do, executed the foregoinginstrument for the purposes therein contained, by signing the name of thecorporation by himself as President.

 

 

In witness whereof, I hereunto set myhand and official seal.

 

 
|   | /s/ Lori Bierwagen               |
|--------|----------------------------------|
|   | Notary Public, South Dakota      |
|   | My commission expires: 10-4-2014 |

 

 

*(THE REMAINDER OF THIS PAGE LEFTINTENTIONALLY BLANK)*

 

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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, beforeme, the undersigned officer, personally appeared Donald A. Dunham, Jr.,who acknowledged himself to be the Managing Member of Dunham CapitalManagement, a limited liability company, and that he, as such Managing Member,being authorized so to do, executed the foregoing instrument for the purposestherein contained, by signing the name of the limited liability company byhimself as Managing Member.

 

 

In witness whereof, I hereunto set myhand and official seal.

 

 
|   | /s/ Nancy J. Hughes              |
|--------|----------------------------------|
|   | Notary Public, South Dakota      |
|   | My commission expires: 9/30/2015 |

 

 

*(THE REMAINDER OF THIS PAGE LEFTINTENTIONALLY BLANK)*

 

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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 acknowledgedhimself to be the Chief Financial Officer of Granite City Food and BreweryLtd., a corporation, and that he, as such Chief Financial Officer, beingauthorized so to do, executed the foregoing instrument for the purposes thereincontained, by signing the name of the corporation by himself as Chief FinancialOfficer.

 

 

In witness whereof, I hereunto set myhand and official seal.

 

 
|   | /s/ Teri Tenes Staggemeyer       |
|--------|----------------------------------|
|   | Notary Public, Minnesota         |
|   | My commission expires: 7/31/2015 |

 

 

*(THE REMAINDER OF THIS PAGE LEFTINTENTIONALLY BLANK)*

 

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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 |

 

 

*(THE REMAINDER OF THIS PAGE LEFTINTENTIONALLY BLANK)*

 

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** **

**EXHIBIT A**

 

**Definition of Assets**

 

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

 

**Description of the Property**

 

1.             The building, all relatedimprovements and any other personal property of every nature whatsoever now orhereafter situated in or on or used or intended to be used in connection witheach of the South Bend Property and the Indianapolis Property legally describedabove as of August 31, 2010;

 

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

 

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

 

4.             Any originals or copies ofany blueprints, plans, specifications and related information regarding theSouth Bend Property and the Indianapolis Property (the foregoing referred tocollectively as the “Property”) that are in Seller’s possession or can beobtained without cost to Seller.

 

A-1

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