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EXHIBIT 2
CONVERSION AGREEMENT
This Conversion Agreement dated this 20th day of March, 1997 is made
by and between ValueVision International, Inc., a Minnesota corporation (the
"Purchaser") and Navarre Corporation, a Minnesota corporation ("Navarre").
WHEREAS, Navarre has closed on the merger (the "Merger") pursuant to
that certain Agreement and Plan of Reorganization (the "Merger Agreement") by
and among Navarre, Net Radio Corporation, a Minnesota corporation and wholly
owned subsidiary of Navarre (the "Company"), and Net Radio Corporation, a
Nevada corporation ("NRC"), whereby NRC merged with and into the Company;
WHEREAS, Navarre, the Purchaser, the Company and NRC entered into that
certain Stock Purchase Agreement dated March 7, 1997 (the "Purchase Agreement")
pursuant to which the Purchaser agreed to purchase 1,765 shares (the "Shares")
of Common Stock, $.01 par value of the Company (the "Common Stock");
WHEREAS, to induce the Purchaser to enter into the Purchase Agreement
and purchase the Shares, Navarre has agreed to enter into this Agreement and
provide the Purchaser with certain rights to convert the Shares into either
cash or shares of Common Stock, $.01 par value of Navarre.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
1. Definitions. All capitalized terms not otherwise defined herein shall
have the meaning set forth in the Purchase Agreement.
2. Conversion Rights. Upon and at all times after the earlier occurrence
of (i) an Event of Default as set forth in Section 13.1 of the Purchase
Agreement or (ii) the fifth anniversary of the Closing Date hereof if the
Company has not then registered the Common Stock under the Securities Act, the
Purchaser shall have the right (all such rights collectively referred to as the
"Conversion Rights") at Purchaser's option to exchange the Common Stock that it
acquired pursuant to the Purchase Agreement for shares of the Common Stock,
$.01 par value of Navarre (the "Navarre Common Stock"), or at the option of
Navarre, for cash to be paid by Navarre to Purchaser equal in amount to the sum
of $3,000,000 plus the amount of any Option Consideration previously paid by
Purchaser pursuant to the Purchase Agreement (together, the "Conversion
Price"), provided, however, that the Conversion Price and the pro rata number
of shares of the Common Stock convertible hereunder shall be reduced by the
value of any Advertising Consideration not then used by the Company. In the
event that the Navarre Common Stock is no longer a publicly traded security on
the National Marketing Exchange (namely the NASDAQ National Market, New York
Stock Exchange or American Stock Exchange), Navarre shall pay the Conversion
Price to Purchaser in
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cash. In the event that the Conversion Price is to be paid by Navarre to
Purchaser in the form of Navarre Common Stock, the number of shares of Navarre
Common Stock to be delivered to Purchaser by Navarre shall be equal to the
Conversion Price divided by 1.01 of the then current market value of the
Navarre Common Stock (the "Conversion Ratio") which market value shall be the
average of the last sales prices of the Navarre Common Stock for the ten (10)
consecutive trading days immediately preceding the conversion exercise date.
In the event that any Advertising Consideration is used by the Company after
exercise of the Conversion Rights, Navarre agrees to pay to the Purchaser the
value of such Advertising Consideration in cash or in the form of Navarre
Common Stock at the market value previously determined in accordance with this
Agreement. The Purchaser shall exercise its Conversion Rights under this
Agreement by providing written notice of its intention in any form to Navarre
and the Company. The Purchaser agrees that the first time it excercises any of
its Conversion Rights hereunder, the Purchaser shall be required to exercise
such Conversion Rights as it relates to at least fifty percent (50%) of the
Common Stock that the Purchaser then has a right to convert into Navarre Common
Stock or cash hereunder. Thereafter, when the Purchaser exercises its
Conversion Rights hereunder, it my convert any portion of the remaining Common
Stock that it then holds. Navarre agrees to deliver a certificate representing
that Navarre Common Stock required by this Agreement or, in the alternative,
the cash payment required hereby within ten (10) days of the receipt of a
written notice from Purchaser of its intention to exercise Conversion Rights.
Navarre shall further deliver any additional cash or Navarre Common Stock
required in connection with this subsequent use of Advertising Consideration
within ten (10) days.
3. Stock Fully Paid; Reservation of Shares. Navarre covenants and agrees
that all the Navarre Common Stock that may be issued upon the exercise of the
Conversion Rights will, upon issuance in accordance with the terms of this
Agreement, be fully paid and nonassessable, and that the issuance thereof shall
not give rise to any preemptive rights on the part of any person. Navarre
further covenants and agrees that it will at all times have authorized and
reserved a sufficient number of shares of the Navarre Common Stock for the
purpose of issue upon the exercise of the Conversion Rights.
4. Adjustment of Number of Shares and Conversion Price. If at any time
commencing on the first day of the Measurement Period and prior to the closing
on the exercise of any or all of the Conversion Rights, Navarre shall (i)
declare a dividend or make a distribution of the Navarre Common Stock payable
in shares of Navarre's capital stock (whether shares of Navarre Common Stock or
of any other class of Navarre capital stock); (ii) subdivide, reclassify or
recapitalize outstanding Navarre Common Stock into a greater number of shares;
(iii) combine, reclassify or recapitalize the outstanding Navarre Common Stock
into a smaller number of shares; or (iv) issue any shares of its capital stock
by reclassification of the Navarre Common Stock (including any such
reclassification in connection with a consolidation or a merger in which
Navarre is the continuing corporation), excluding, however, any dividend,
distribution, reclassification or recapitalization that requires the payment of
more than nominal additional consideration by security holders, the Conversion
Ratio in effect at the time of the record date of such dividend, distribution,
subdivision, combination, reclassification or recapitalization shall be
adjusted so that upon exercise of the Conversion Rights, the Purchaser shall be
entitled to receive the aggregate number and kind of shares which, if the
Conversion Rights had been exercised in full immediately prior to such event,
the Purchaser would have owned upon such exercise and been entitled to receive
by virtue of such
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dividend, distribution, subdivision, combination, reclassification or
recapitalization, for the same aggregate consideration. Any adjustments made
by this Section 4 shall be made successively immediately after the record date,
in the case of a dividend or distribution, or the effective date, in the case
of a subdivision, combination, reclassification or recapitalization.
5. Registration of Stock.
5.1 Navarre Demand Registration. In the event that the
Purchaser shall have exercised its Conversion Rights pursuant to this Agreement
and is a holder of Navarre Common Stock, it shall have a one-time right to
demand a registration (a "Navarre Demand Registration"), of its shares of the
Navarre Common Stock pursuant to a registration statement filed with the
Securities and Exchange Commission (the "Commission"), pursuant to the
Securities Act of 1933, as amended (the "Securities Act"). Upon receipt by
Navarre of a request by the Purchaser for a Navarre Demand Registration,
Navarre shall prepare and file a registration statement under the Securities
Act covering the Purchaser's shares of the Navarre Common Stock which are the
subject of such request and shall use its best efforts to cause such
registration statement to become effective. The Purchaser agrees that it will
not sell more than 20% of its initial holdings of the Navarre Common Stock
pursuant to such registration during any three month period, provided, however,
if the Purchaser is unable to sell all of its shares of the Navarre Common
Stock pursuant to such registration because the registration statement is no
longer effective, Navarre agrees that the Purchaser shall continue to have a
right to demand registration of the remaining shares of Navarre Common Stock
that it owns pursuant hereto until all such shares are sold.
5.2 Navarre Piggy-Back Registration. In the event that
the Purchaser shall have exercised its Conversion Rights pursuant to this
Agreement and is a holder of Navarre Common Stock, it shall have a unlimited
right to piggy-back registrations (a "Navarre Piggy-Back Registration"), of its
shares of the Navarre Common Stock pursuant to a registration statement filed
with the Commission under to the Securities Act. Each time Navarre shall
determine to proceed with the actual preparation and filing of a registration
statement under the Securities Act in connection with the proposed offer and
sale for cash of any of its securities by it or any of its security holders
(other than a registration statement on a form that does not permit the
inclusion of shares by its security holders), Navarre will give written notice
of its determination to the Purchaser. Upon the written request of the
Purchaser given within 20 days after receipt of any such notice from Navarre,
Navarre will, except as herein provided, cause all such shares of the Navarre
Common Stock held by the Purchaser which have been so requested to be
registered, to be included in such registration statement, all to the extent
requisite to permit the sale or other disposition by the Purchaser to be so
registered; provided, however, that nothing herein shall prevent the Navarre
from, at any time, abandoning or delaying any such registration initiated by
it; provided further, however, that if Navarre determines not to proceed with a
registration after the registration statement has been filed with the
Commission and Navarre's decision not to proceed is primarily based upon the
anticipated public offering price of the securities to be sold by Navarre,
Navarre shall promptly complete the registration for the benefit of Purchaser
if the Purchaser wishes to proceed with a public offering of its securities if
the Purchaser agrees to bear all expenses incurred by Navarre as the result of
such registration after Navarre has decided not to proceed. If any
registration pursuant to this Section 5.2 shall be underwritten in whole or in
part, Navarre may require that the shares of Navarre Common Stock
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requested for inclusion pursuant to this Section 5.2 be included in the
underwriting on the same terms and conditions as the securities otherwise being
sold through the underwriters. In the event that the Navarre Common Stock
requested for inclusion pursuant to this Section 5.2 would constitute more than
25% of the total number of shares to be included in a proposed underwritten
public offering, and if in the good faith judgment of the managing underwriter
of such public offering the inclusion of all of such shares originally covered
by a request for registration would reduce the number of shares to be offered
by Navarre or interfere with the successful marketing of the shares of stock
offered by Navarre, the number of shares of the Navarre Common Stock otherwise
to be included in the underwritten public offering may be reduced pro rata (by
number of shares) among the holders of all other securities of Navarre being
included in such registration, provided, however, that after any such required
reduction the number of shares of the Navarre Common Stock to be included in
such offering pursuant to this Section 5.2 shall constitute at least 25% of the
total number of shares to be included in such offering.
5.3 Registration Procedures. If and whenever Navarre is
required by the provisions of Sections 5.1 or 5.2 to effect the registration of
securities under the Securities Act, Navarre will:
(a) prepare and file with the Commission a registration
statement with respect to such securities, and use its best efforts to
cause such registration statement to become and remain effective for
such period as may be reasonably necessary to effect the sale of such
securities;
(b) prepare and file with the Commission such amendments
to such registration statement and supplements to the prospectus
contained therein as may be necessary to keep such registration
statement effective for such period as may be reasonably necessary to
effect the sale of such securities;
(c) furnish to the Purchaser and to the underwriters of
the securities being registered such reasonable number of copies of
the registration statement, preliminary prospectus, final prospectus
and such other documents as the Purchaser and such underwriters may
reasonably request in order to facilitate the public offering of such
securities;
(d) use its best efforts to register or qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as the Purchaser may
reasonably request in writing within 20 days following the original
filing of such registration statement, except that Navarre shall not
for any purpose be required to execute a general consent to service of
process or to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified;
(e) notify the Purchaser promptly after it shall receive
notice thereof, of the time when such registration statement has
become effective or a supplement to any prospectus forming a part of
such registration statement has been filed;
(f) notify the Purchaser promptly of any request by the
Commission for the
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amending or supplementing of such registration statement or prospectus
or for additional information;
(g) prepare and file with the Commission, promptly upon
the request of the Purchaser, any amendments or supplements to such
registration statement or prospectus which, in the opinion of counsel
for the Purchaser (and concurred in by counsel for Navarre), is
required under the Securities Act or the rules and regulations
thereunder in connection with the distribution of the securities so
registered;
(h) prepare and promptly file with the Commission and
promptly notify the Purchaser of the filing of such amendment or
supplement to such registration statement or prospectus as may be
necessary to correct any statements or omissions if, at the time when
a prospectus relating to such securities is required to be delivered
under the Securities Act, any event shall have occurred as the result
of which any such prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in the
light of the circumstances in which they were made, not misleading;
(i) advise the Purchaser, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order
by the Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for that
purpose and promptly use its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal if such stop order should
be issued;
(j) not file any amendment or supplement to such
registration statement or prospectus to which the Purchaser shall have
reasonably objected on the grounds that such amendment or supplement
does not comply in all material respects with the requirements of the
Securities Act or the rules and regulations thereunder, after having
been furnished with a copy thereof at least five business days prior
to the filing thereof, unless in the opinion of counsel for Navarre
the filing of such amendment or supplement is reasonably necessary to
protect Navarre from any liabilities under any applicable federal or
state law and such filing will not violate applicable law; and
(k) at the request of the Purchaser, furnish: (i) an
opinion, dated as of the closing date, of the counsel representing
Navarre for the purposes of such registration, addressed to the
underwriters, if any, and to the Purchaser, covering such matters as
such underwriters and the Purchaser may reasonably request; and (ii)
letters dated as of the effective date of the registration statement
and as of the closing date, from the independent public accountants of
Navarre, addressed to the underwriters, if any, and to the Purchaser,
covering such matters as such underwriters and the Purchaser may
reasonably request.
5.4 Expenses. With respect to each registration requested
pursuant to Section 5.1 or 5.2 hereof (except as otherwise provided in Section
5.2 with respect to registrations initiated by Navarre but with respect to
which Navarre has determined not to proceed), Navarre shall bear all of the
fees, costs and expenses of such registrations, including without limitation,
filing and NASD fees,
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printing expenses, fees and disbursements of counsel and accountants for
Navarre, fees and disbursements of counsel for the underwriter or underwriters
of such securities (if Navarre and/or selling security holders are required to
bear such fees and disbursements), all internal Navarre expenses, all legal
fees and disbursements and other expenses of complying with state securities or
blue sky laws of any jurisdictions in which the securities to be offered are to
be registered or qualified, and the premiums and other costs of policies of
insurance against liability (if any) arising out of such public offering. Fees
and disbursements of counsel and accountants for the Purchaser, underwriting
discounts and commissions and transfer taxes relating to the shares included in
the offering by the Purchaser shall be borne by the Purchaser.
5.5 Indemnification. In the event that any securities
held by the Purchaser are included in a registration statement under Section
5.1 or 5.2:
(a) Navarre will indemnify and hold harmless the
Purchaser pursuant to the provisions of this Section 5, its directors
and officers, and any underwriter (as defined in the Securities Act)
for the Purchaser and each person, if any, who controls the Purchaser
or such underwriter within the meaning of the Securities Act, from and
against, and will reimburse the Purchaser and each such underwriter
and controlling person with respect to, any and all loss, damage,
liability, cost and expense to which the Purchaser or any such
underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
provided, however, that Navarre will not be liable in any such case to
the extent that any such loss, damage, liability, cost or expense
arises out of or is based upon an untrue statement or alleged untrue
statement or omission or alleged omission so made in conformity with
information furnished by the Purchaser, such underwriter or such
controlling person in writing specifically for use in the preparation
thereof.
(b) The Purchaser will indemnify and hold harmless
Navarre, its directors and officers, any controlling person and any
underwriter from and against, and will reimburse Navarre, its
directors and officers, any controlling person and any underwriter
with respect to, any and all loss, damage, liability, cost or expense
to which Navarre or any controlling person and/or any underwriter may
become subject under the Securities Act or otherwise, insofar as such
losses, damages, liabilities, costs or expenses are caused by any
untrue or alleged untrue statement of any material fact contained in
such registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or
alleged omission was so made in reliance upon and in strict conformity
with written information furnished by the Purchaser specifically for
use in the preparation thereof.
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(c) Promptly after receipt by an indemnified party
pursuant to the provisions of paragraph (a) or (b) of this Section 5.5
of notice of the commencement of any action involving the subject
matter of the foregoing indemnity provisions such indemnified party
will, if a claim thereof is to be made against the indemnifying party
pursuant to the provisions of said paragraph (a) or (b), promptly
notify the indemnifying party of the commencement thereof; but the
omission to so notify the indemnifying party will not relieve it from
any liability which it may have to any indemnified party otherwise
than hereunder. In case such action is brought against any indemnified
party and it notifies the indemnifying party of the commencement
thereof, the indemnifying party shall have the right to participate
in, and, to the extent that it may wish, jointly with any other
indemnifying party similarly notified, to assume the defense thereof,
with counsel satisfactory to such indemnified party, provided,
however, if the defendants in any action include both the indemnified
party and the indemnifying party and the indemnified party shall have
reasonably concluded that there may be legal defenses available to it
and/or other indemnified parties which are different from or
additional to those available to the indemnifying party, or if there
is a conflict of interest which would prevent counsel for the
indemnifying party from also representing the indemnified party, the
indemnified party or parties shall have the right to select separate
counsel to participate in the defense of such action on behalf of such
indemnified party or parties. After notice from the indemnifying
party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party will not be liable to such
indemnified party pursuant to the provisions of said paragraph (a) or
(b) for any legal or other expense subsequently incurred by such
indemnified party in connection with the defense thereof other than
reasonable costs of investigation, unless (i) the indemnified party
shall have employed counsel in accordance with the proviso of the
preceding sentence, (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to represent
the indemnified party within a reasonable time after the notice of the
commencement of the action, or (iii) the indemnifying party has
authorized the employment of counsel for the indemnified party at the
expense of the indemnifying party.
6. Limitations on the Conversion Rights. The Conversion Rights set forth
in this Agreement shall become immediately exercisable upon an Event of
Default, provided, however, that the Purchaser agrees not to exercise any
Conversion Rights based solely on an Event of Default as set forth in Section
13.1(a), (d), (f), (g) or (i) of the Purchase Agreement until the first
anniversary of the Closing Date.
7. Obligations of Navarre. Navarre's obligations under this Agreement
shall be enforceable whether or not violation of the Purchase Agreement by any
party have occurred or the Purchase Agreement is unenforceable for any reason,
including without limitation, applicable bankruptcy laws. Navarre also agrees
that the Purchaser may do or refrain from doing any of the following without
notice to, or the consent of Navarre, without limiting or discharging Navarre's
liability under this Agreement: (i) renew, amend, modify, extend or release any
existing obligation of the Company and/or Navarre under the Purchase Agreement;
and (ii) amend, supplement and waive compliance by the Company and/or Navarre
with any of the provisions of the Purchase Agreement.
8. Consents, Waivers and Amendments. Neither this Agreement nor any
provision hereof may
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be amended, changed, waived, discharged or terminated orally, but only by a
statement in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought. Delay in the exercise of
the Conversion Rights following an Event of Default shall not constitute a
waiver of the Conversion Rights. Failure of the Purchaser to pursue remedies
under the Purchase Agreement upon an Event of Default shall not constitute a
waiver of any rights hereunder.
9. Notices. All notices, requests, consents and other communications
required or permitted hereunder shall be in writing and shall be delivered, or
mailed first-class postage prepaid, registered or certified mail, addressed as
follows (or to another address or person as a party may specify on notice to
the other parties):
(a) if to the Purchaser:
ValueVision International, Inc
0000 Xxxxx Xxx Xxxx
Xxxx Xxxxxxx, Xxxxxxxxx 00000
Attn: Chief Executive Officer
(b) if to Navarre:
Navarre Corporation
0000 00xx Xxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: President
and such notices and other communications shall for all purposes of this
Agreement be treated as being effective or having been given if delivered
personally, or, if sent by mail, when received.
10. Representations and Warranties, etc. All representations and
warranties or the Purchaser and Navarre contained in the Purchase Agreement are
hereby incorporated by reference and shall survive the execution and delivery
of this Agreement, any investigation at any time made by the Purchaser or on
its behalf, and the sale and purchase of the Shares, the Additional Shares and
the Navarre Common Stock and payment therefor. All statements contained in any
certificate, instrument or other writing delivered by or on behalf of NRC, the
Company and/or Navarre pursuant this Agreement or the Purchase Agreement or in
connection with or contemplation of the transactions contemplated herein or
therein (other than legal opinions) shall constitute representations and
warranties by Navarre hereunder.
11. Parties in Interest. All the terms and provisions of this Agreement
shall be binding upon and inure to the benefit of and be enforceable by the
respective successors and assigns of the parties hereto, whether so expressed
or not.
12. Headings. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
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13. Choice of Law. It is the intention of the parties that the laws of
Minnesota, without regard to its conflict of laws provisions, shall govern the
validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties.
14. Counterparts. This Agreement may be executed concurrently in two or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the undersigned have executed this Agreement
effective as of the date first above written.
NAVARRE CORPORATION
By /s/ Xxxx Xxxxxxx
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Its President
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VALUEVISION INTERNATIONAL, INC.
By /s/ Xxxxx X. Xxxxxx
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Its Vice President, General Counsel
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