EXHIBIT 10.7
EDA SUBORDINATION AGREEMENT
THIS EDA SUBORDINATION AGREEMENT ("Agreement") made and entered into
this ______ day of ________________________, 2003, by and between the New Hope
Economic Development Authority, New Hope, Minnesota, a public body corporate and
politic of the State of Minnesota (the "Agency"), and The Business Bank, a
Minnesota corporation ("Mortgagee").
RECITALS
A. The Agency and New Hope, LLC, a Minnesota limited liability
company, have heretofore entered into a certain Contract for Private
Redevelopment dated November 12, 2002, (the "Contract") the interest of New
Hope, LLC thereunder having been assigned to and assumed by Navarre Corporation,
a Minnesota corporation ("Company") pursuant to an Assignment and Assumption of
Contract for Private Redevelopment dated September 15, 2003, relating to the
development of certain real property situated in the County of Hennepin, State
of Minnesota, pursuant to which the Agency has agreed to provide assistance in
the redevelopment of the Redevelopment Property (as defined below) the financing
of certain costs of the redevelopment project with tax increment revenues
derived from a tax increment financing district established with the
redevelopment project.
B. As defined in the Contract, the "Redevelopment Property" is
legally described in Exhibit A attached hereto, (said property is also referred
to as the "Premises").
C. In order to provide funds for the construction and
installation of certain improvements thereon (collectively the "Project"), the
Mortgagee has agreed to make a loan to the Company pursuant to that certain
Promissory Note dated October ____, 2003 in the amount of Four Million Five
Hundred Fifty Thousand and 00/100 Dollars ($4,550,000.00) and payable to the
order of the Mortgagee ("Note") and will loan the proceeds of said Note pursuant
to a Construction Loan Agreement dated October ____, 2003 (the "Loan
Agreement").
D. To secure its obligations under the Note, the Company is
executing and delivering to the Mortgagee a Mortgage and Security Agreement and
Fixture Financing Statement ("Mortgage"); with an Assignment of Rents and Leases
each dated October ____, 2003.
E. The Note, the Mortgage, the Loan Agreement and the Assignment
of Rents and Leases are hereinafter collectively referred to as the "Loan
Documents".
F. The Company's development of the Premises is subject to the
covenants, conditions, restrictions, and provisions of the Contract, certain
provisions of which are or may be in conflict with the provisions of the Loan
Documents and this Agreement is being entered into for the purpose of resolving
such conflicts.
NOW, THEREFORE, in consideration of the promises contained herein, the
parties agree as follows:
1. The Agency certifies that as of the date of this Agreement no default
exists under the terms of the Contract.
2. Subject to the provisions of Paragraphs 7 and 8 herein, the Agency
hereby subordinates in all respects to the Loan Documents, and the
interest of the Mortgagee, thereunder, and to the liens thereof, any
and all right, title or interest the Agency has, may have or may
hereafter acquire in the Premises, the Project or any insurance
proceeds or condemnation awards with respect thereto, and including
without limitation any rights of reversion, reentry or forfeiture of
the Premises available to the Agency, which are in all respects
subordinate to the Loan Documents and the liens created thereby
notwithstanding the order of recording, date of execution and delivery,
order of performance or any other priority requirements which may
otherwise exist.
3. The Agency acknowledges receipt of copies of the Loan Documents and
further acknowledges that this Subordination Agreement, the Loan
Documents and the loan evidenced thereby are each hereby authorized and
approved under the terms of the Contract.
4. The Agency hereby agrees that all rights of the Agency to approve or
disapprove changes to the Construction Plans for the Project or any
amendments thereto are set forth in the Contract.
5. If a default or Event of Default occurs under the Loan Documents, the
Mortgagee will give the Agency written notice thereof, and the Agency
shall have the right but not the obligation to cure said default or
Event of Default provided said cure is performed or effected by the
Agency within thirty (30) days following said notice. The Mortgagee
will accept any such performance or cure by the Agency. Nothing
contained in this paragraph shall be deemed to prevent the Mortgagee
from commencing foreclosure proceedings or pursuing any other remedy it
may have under the Loan Documents, or otherwise, prior to the
expiration of such period so long as a foreclosure sale is not held
during such period.
6. If, following the occurrence of any default or Event of Default under
the Loan Documents, and upon the failure on the part of the Agency to
exercise its rights described in Paragraph 5 above to cure said default
or Event of Default, the Mortgagee forecloses by action or
advertisement or accepts a Deed in Lieu of Foreclosure to the Premises
or the Project from the Company, the Agency agrees that upon recording
of such Sheriff's Certificate or Deed in Lieu of Foreclosure, all
right, title and interest of the Agency in or to the Premises and the
Project under the Contract or the Agency Deed, including, but not
limited to, the Agency's rights to reversion of title and reentry as
provided therein, shall
-2-
automatically terminate and be null and void and of no further force or
effect, and, at the Mortgagee's request, the Agency will deliver,
within ten (10) working days, to the Mortgagee a Quit Claim Deed
covering the Premises and the Project. This Paragraph 6 is subject to
the provisions of Paragraphs 7 and 8 herein.
7. In the event that, after receipt of a notice of default by the Company
under the Contract, the Mortgagee (or any successor in interest to the
Mortgagee) elects within a reasonable time to exercise any rights under
the Contract to cure or remedy any breach or default by the Company
under the Contract, with respect to construction of the Minimum
Improvements (as defined in the Contract), then such exercise of rights
or cure or remedy shall be in accordance with the terms of the
Contract. Nothing herein shall be construed to create any obligation of
the Mortgagee to perform under the contract or to cure or remedy any
default of the Company under the Contract.
8. In the event that the Mortgagee exercises its right under Paragraph 7
to cure or remedy defaults and is diligently proceeding to do so, the
Agency will not exercise its right to re-enter and take title to and
possession of the Premises; provided, however that in the event that
the Minimum Improvements or other improvements reasonably satisfactory
to the Agency are not completed within one year from the date the
Mortgagee acquires title to the Project and Premises, the Agency shall,
notwithstanding a foreclosure of the Mortgage, have the rights set
forth in the Contract and the Agency Deed to re-enter and take title to
and possession of the Premises pursuant to the Contract and the Agency
Deed, by paying to the Mortgagee the principal amount and accrued
interest on the Note as if they were outstanding plus costs and
expenses of the Loan Agreement and amounts due under Mortgage as if
they were outstanding. The provisions of this Paragraph 8 relating to
the right to re-enter shall become null and void and of no further
effect upon delivery by the Agency to the Company or the Mortgagee of
the Certificate of Completion (as defined in the Contract) or upon
filing by the Agency of a similar certificate if improvements other
than the Minimum Improvements are constructed. Nothing contained in
this Paragraph 8 shall be construed to release the Company from its
obligation to construct the Minimum Improvements as required by the
Contract.
9. The Agency agrees that under any circumstances wherein the Premises may
revest in the Agency such revesting shall be expressly subject and
subordinate to the provisions of the Loan Documents and the lien of
Mortgage.
10. The Agency represents to the Mortgagee as follows:
a. The making, delivery and performance of this Agreement have
been duly authorized by all necessary action and this
Agreement, when executed, shall be the legal, valid and
binding obligations of the Agency, enforceable in accordance
with its terms;
b. The Project is permitted by, and if completed in accordance
with the Construction Plans submitted to and approved by the
Agency under the Contract, will be consistent with the
Redevelopment Plan (as defined in the Contract) and will, to
the knowledge of the Agency, comply with all applicable zoning
ordinances;
-3-
c. To the knowledge of the Agency, the Redevelopment Plan (as
defined in the Contract) complies with all applicable
environmental laws and regulations; and
d. The making, delivery and performance of the Contract have been
duly authorized by the Agency and is the legal, valid and
binding obligation of the Agency.
11. Notwithstanding anything to the contrary contained herein, the terms
and provisions of the exceptions to subordination set forth in Section
10.10(c) of the Contract, and the rights of the Agency thereunder,
shall be and remain prior and superior to the Loan Documents and shall
survive a foreclosure of the Mortgage, and the Mortgagee, or any other
person or entity which acquires title to the Premises as a result of a
foreclosure sale or Deed in Lieu of Foreclosure shall take title to the
Premises subject to the terms and provisions thereof.
12. The Agency and the Mortgagee acknowledge that the Mortgagee is not a
party to the Contract, and that this Subordination Agreement contains
the entire agreement between the Agency and the Mortgagee with respect
to each other under the Contract, and that this Agreement may be
amended only in writing signed by both parties hereto.
13. The rights given to the Mortgagee under this Agreement are in addition
to the rights of the Mortgagee under the Loan Documents and the
documents related thereto. In the event of any inconsistency between
the terms of this Agreement and the terms of the Loan Documents or the
Contract, the terms of this Agreement shall control to the benefit of
each of the parties thereto and their respective successors and
assigns.
14. Any notices, certificates or other communications hereunder shall be
sufficiently given and shall be deemed given when mailed by certified
or registered mail, postage prepaid, when the proper addresses
indicated below. Unless otherwise designated by the respective parties,
all notices, certificates and communications to each of them shall be
sent to the addresses designated below:
Agency: The New Hope Development Authority
0000 Xxxxx Xxxxxx Xxxxx
Xxx Xxxx, Xxxxxxxxx 00000
Mortgagee: The Business Bank
Attention: Xxxxx Xxxxxxxxx
00000 Xxxxxxx Xxxxxxxxx, Xxxxx 000
Xxxxxxxxxx, Xxxxxxxxx 00000
15. This Agreement shall inure to the benefit of and shall be binding upon
the parties and their respective successors and assigns including any
subsequent holder of the Mortgage.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered as of the day and year first above written.
-4-
THE NEW HOPE ECONOMIC DEVELOPMENT AUTHORITY
By _____________________________
Its President
By _____________________________
Its Executive Director
THE BUSINESS BANK
By _____________________________
Its Senior Vice President
STATE OF MINNESOTA )
)ss.
COUNTY OF )
The foregoing instrument was acknowledged before me this ____ day of
October, 2003, by __________________________ and __________________________, the
President and the Executive Director of the New Hope Economic Development
Authority, a public body corporate and politic of the State of Minnesota, on
behalf of the body corporate and politic.
___________________________________
Notary Public
STATE OF MINNESOTA )
) ss.
COUNTY OF ___________ )
The foregoing instrument was acknowledged before me this ____ day of
October, 2003, by ___________________________, the Senior Vice President of The
Business Bank, a Minnesota corporation, on behalf of the corporation.
___________________________________
Notary Public
-5-
THIS DOCUMENT WAS DRAFTED BY:
BEST & XXXXXXXX LLP
000 Xxxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxxxxxx, XX 00000-0000
Phone: (000) 000-0000
-6-
EXHIBIT A
LEGAL DESCRIPTION
-7-
