ESCROW AGREEMENT
THIS ESCROW AGREEMENT (this "Agreement") is made effective as of March 20, 1997,
by and among the named persons set forth on Schedule 1 attached hereto (the
"Shareholders"), NET RADIO CORPORATION, a Minnesota corporation and wholly owned
subsidiary of Navarre Corporation ("NRC"), NAVARRE CORPORATION, a Minnesota
corporation ("Navarre") and NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION, a
national banking association (the "Escrow Agent").
RECITALS:
X. Xxxxxxx, NRC, the Shareholders and Net Radio Corporation, a Nevada
corporation ("Net Radio") entered into that certain Agreement and Plan of
Reorganization, dated as of March 7, 1997, (the "Merger Agreement"), which
provides for the merger of Net Radio and NRC with NRC being the surviving
entity.
B. Pursuant to the Merger Agreement, Navarre has deposited 105,000 shares of
Navarre's stock, registered in the Escrow Agent's nominee name "EMSEG & CO"
representing the consideration given to the Shareholders under the terms of the
Merger Agreement with the Escrow Agent ("Escrow Account"), who has agreed to act
as escrow agent with respect to the Escrow Account pursuant to the terms of this
Agreement.
C. The parties desire to appoint the Escrow Agent (the "Escrow Agent") to act on
their behalf with respect to the matters contained in this Agreement.
AGREEMENTS:
IN CONSIDERATION for the mutual covenants set forth herein and for other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties agree as follows:
1. ESCROW ACCOUNT.
a. Appointment and Acceptance of the Escrow Agent. The Escrow Agent is
hereby appointed by the parties as escrow agent to act in accordance with
the instructions set forth herein. The Escrow Agent hereby accepts such
appointment.
b. Effective Date. This Agreement shall be effective as of March 20,
1997.
c. Term of Escrow. This Agreement shall terminate upon the earlier of
(i) the date all of the assets in the Escrow Account have been disbursed
as provided herein, (ii) the date on which Xxxxxx Xxxxxx, the appointed
representative of the Shareholders (the "Representative"), Navarre and
NRC agree to terminate this Agreement, or (iii) May 31, 1999 (unless
extended by mutual agreement of the Shareholders, Navarre and NRC).
d. Duty to Hold Escrow Account. Escrow Agent shall hold the Escrow
Account and any proceeds thereof and shall disburse all or part of such
funds only as instructed in accordance with Section 3.
2. NOTICE OF CLAIMS. Navarre and/or NRC (referred to hereinafter collectively or
individually, as applicable, as the "Indemnified Party") shall promptly deliver
written notice to the Escrow Agent of any claims by the Indemnified Party for
indemnification from the Company and the Shareholders under the terms of the
Merger Agreement. The Escrow Agent shall in turn notify the Representative of
any claims made or notices delivered by the Indemnified Party pursuant to this
Agreement and, if the Shareholders desire to contest any claim by the
Indemnified Party for indemnification hereunder, the Representative must notify
the Indemnified Party and Escrow Agent within 15 days of receipt of notice from
the Escrow Agent.
3. DISPOSITION OF ESCROW ACCOUNT. The Escrow Account, and any proceeds
thereof earned thereon, shall be dispersed in one or more installments as
follows:
a. Undisputed Claims. If the Shareholders do not contest the Indemnified
Party's claim(s) for indemnification, the Shareholders shall have 30 days
to pay the Indemnified Party the amount of the claim in cash. If full
payment is not made within such 30 day period, the Escrow Agent shall
immediately sell a sufficient amount of the stock contained in the Escrow
Account to pay such claim and shall disperse to the Indemnified Party the
lesser of (i) the balance of the Escrow Account and any proceeds thereof,
or (ii) the amount of such claim;
b. Disputed Claims. If the Shareholders contest any request by the
Indemnified Party for indemnification, upon a final award or judgment in
favor of the Indemnified Party issued by an arbitrator or by a court
holding the Shareholders liable to the Indemnified Party under the terms
and conditions of the Merger Agreement, the Escrow Agent shall
immediately sell a sufficient amount of the stock deposited in the Escrow
Account to pay such claim and shall disperse to the Indemnified Party an
amount equal to the lesser of (i) the balance of the Escrow Account and
any proceeds thereof, or (ii) the amount of such judgment plus
(a) interest thereon accrued at a rate of 18% per annum from the date of
the Indemnified Party's initial claim plus (b) the Indemnified Party's
costs and expenses in connection with such claim, including reasonable
attorneys' fees;
c. Written Agreement. As instructed in a writing signed by Navarre and
the Shareholders;
d. Expiration of Indemnification Period. At any time after the period
ending twenty-six (26) months after the date of this Agreement (the
"Indemnification Period"), the remaining balance of the Escrow Account,
and any interest earned thereon, shall be disbursed to the Shareholders
on a pro rata basis in accordance with the percentages set forth on
Schedule 1 attached hereto provided that if there are claims, (i) notice
of which was received by the Escrow Agent in accordance with Section 2
prior to the end of such period, and (ii) which have not been resolved as
described in Sections 3(a), 3(b), or 3(c), Escrow Agent shall retain
stock equal to 150% of the remaining disputed claims and shall
disburse the balance of the stock, if any, to the Shareholders. The
remaining stock shall be held by Escrow Agent until such times as the
remaining disputed claims are resolved by settlement or court order and
shall disburse said stock in accordance with any such settlement or court
order. If distribution of the shares to the Shareholders in accordance
with Schedule 1 would otherwise result in distribution of a fractional
share, the Escrow Agent shall round the fractional share to the nearest
whole share.
4. ESCROW FUND CLAIM AND DISBURSEMENT PROCEDURES.
a. Initiation of Indemnification Claim Procedure. In the event the
Indemnified Party proposes to make any claim, it shall deliver a
certificate signed by an officer of the Indemnified Party ("Officer's
Certificate") to the Escrow Agent within forty-five (45) days after the
Indemnified Party first becomes aware of any claim. The Officer's
Certificate shall specify in reasonable detail each individual item
included in the amount of such claim, the date such item was incurred,
paid or properly accrued and the nature of the misrepresentation, breach
of warranty, agreement or third-party claim to which each such item is
related.
b. Shareholder's Objection. The Shareholders, through their
Representative, shall have forty-five (45) days after receipt of any
Officer's Certificate in which to object in writing to the claim or
claims made by the Indemnified Party in the Officer's Certificate, which
written objection (the "Objection Notice") shall state, in reasonable
detail, the basis for the Shareholders' objection. In the event the
Escrow Agent does not receive the Objection Notice within such forty-five
(45) day period, the Escrow Agent shall make distributions to the
Indemnified Party in accordance with Section 3 of this Agreement.
However, no such distribution shall be made with respect to those matters
specified in the Objection Notice delivered within such forty-five (45)
day period. A duplicate copy of the Objection Notice shall be delivered
to the Indemnified Party at the same time it is delivered to the Escrow
Agent.
c. Negotiated Settlement of Claims. In the event that the Shareholders do
deliver an Objection Notice with respect to any claim or claims made in
any Officer's Certificate, the Shareholders, through their Representative
and the Indemnified Party shall, within the forty-five (45) day period
beginning as of the date of the receipt by the Indemnified Party of the
Objection Notice, attempt in good faith to agree upon the proper
resolutions of each of such claims. If the parties should so agree, a
memorandum setting forth such agreement (the "Memorandum of Agreement")
shall be prepared and signed by both the Indemnified Party and the
Representative and shall be furnished to the Escrow Agent. The Escrow
Agent shall be entitled to rely on any such Memorandum of Agreement to
make distributions from the Escrow Fund in accordance with the terms of
such Memorandum of Agreement and Section 3 of this Agreement.
d. Arbitration. If no agreement can be reached after good faith
negotiation within the forty-five (45) day period specified above or such
extended period as the Indemnified Party and the Shareholders, through
their Representative, shall mutually agree upon in writing, the matter
shall be submitted to binding arbitration at the request of any party in
accordance with the rules and procedures of the American Arbitration
Association
("AAA"). Unless otherwise agreed to by the Indemnified Party and the
Representative, any such arbitration shall be held in Minneapolis,
Minnesota before a single arbitrator mutually acceptable to both the
Indemnified Party and the Representative. In the event that the
Indemnified Party and the Representative are unable to agree on a single
arbitrator within thirty (30) days after initiation of the arbitration, a
panel of three (3) arbitrators shall be selected in accordance with the
procedures of the AAA. The decision of the arbitrator as to the validity
and amount of any claim shall be conclusive and binding upon the
Indemnified Party and the Shareholders. The Escrow Agent shall be
entitled to act in accordance with such decision and make distributions
out of the Escrow Fund in accordance therewith and with Section 3. Any
arbitrator's decision may be used as a basis for entry of judgment in any
jurisdiction. Each party shall pay its own costs and expenses incurred in
connection with such arbitration proceedings and each party shall pay
fifty percent (50%) of the fees of the arbitrator and the American
Arbitration Association; provided, however, that if either party is
successful in such arbitration proceeding in any amount equal to eighty
percent (80%) or more of the amount in dispute (i.e., the Indemnified
Party is successful if awarded eighty percent (80%) or more of its
claims, and the Shareholders are successful if the Indemnified Party is
awarded less than twenty percent (20%) of its claims), the other party
shall be responsible for paying all of the costs of the proceeding,
including the costs and expenses (including reasonable attorneys' fees
and travel expenses) of the prevailing party.
5. LIMITATIONS ON LIABILITY OF ESCROW AGENT.
a. The duties and obligations of Escrow Agent shall be determined solely
by the provisions of this Agreement and no implied duties or obligations
shall be read into this Agreement against Escrow Agent. Escrow Agent
shall be under no obligation to refer to the Merger Agreement or any
other documents between or among the parties related in any way to this
Agreement, except as specifically provided herein.
b. Escrow Agent shall not be liable to anyone for any damages, losses or
expenses for any act done or step taken or omitted by Escrow Agent in
good faith, provided, however, that Escrow Agent shall be liable for
damages, losses and expenses arising out of its willful default, gross
negligence or bad faith under this Agreement.
c. Escrow Agent shall be entitled to rely upon, and shall be protected in
acting in reasonable reliance upon, any writing furnished to Escrow Agent
by any party in accordance with the terms hereof, which the Escrow Agent
believes in good faith to be genuine and valid and to have been signed by
the proper party or parties.
d. Escrow Agent may obtain advice of its counsel with respect to any
questions relating to its duties or responsibilities hereunder and shall
not be liable for any action taken or omitted in good faith on such
advice of such counsel.
e. In the event a dispute arises between the parties to this Agreement
regarding the interpretation, operation or enforcement of the terms and
conditions of this Agreement, the Escrow Agent shall refuse to comply
with the claims or demands of any party until such disagreement is
finally resolved by mutual agreement of the parties or by a court
of competent jurisdiction (including expiration of all available appeal
remedies), and, in so doing, Escrow Agent shall not be or become liable
to any party. In addition, Escrow Agent may, but shall not be required,
to file an action of interpleader to resolve such disagreement. Navarre,
NRC and the Shareholders jointly and severally agree to indemnify Escrow
Agent against all legal fees, costs and other expenses incurred by Escrow
Agent in connection with or as a result of any dispute among or between
the parties hereto or the performance by Escrow Agent of its duties
hereunder. Navarre and the Shareholders shall each pay one-half of any
expenses incurred by Escrow Agent pursuant to this Section 5(e).
f. Any action claimed to be required to be taken by Escrow Agent
hereunder and not otherwise specifically set forth herein shall require
the agreement of Navarre, NRC, the Representative and Escrow Agent.
g. The Escrow Agent shall be entitled to a fee described on Schedule A
hereto, which amount, plus all reasonable expenses of the Escrow Agent,
shall be invoiced to and payable one-half by Navarre and one-half by the
Shareholders.
6. RESIGNATION OF ESCROW AGENT. If Escrow Agent desires to resign as Escrow
Agent, it shall provide thirty (30) days written notice (a "Resignation Notice")
of its intention to so resign to Navarre and to the Representative.
Notwithstanding the foregoing, if following the resignation of Escrow Agent
there would be no replacement escrow agent hereunder, Navarre shall appoint a
successor mutually acceptable to Navarre and the Representative or shall turn
over the Escrow Account to a court of competent jurisdiction in the State of
Minnesota.
7. AMENDMENTS. No modification or amendment to this Agreement, or waiver of
compliance with any provision or condition hereof shall be valid unless
reduced to writing and signed by all of the parties hereto.
8. EFFECT OF THIS ESCROW AGREEMENT. This Agreement sets forth the entire
understanding of the parties with respect to the subject matter hereof and
supersedes any and all prior agreements, arrangements and understandings
relating to the subject matter hereof. This Agreement shall be binding upon and
inure to the benefit of the parties and their respective successors and legal
representatives. The paragraph headings of this Agreement are for convenience of
reference only and do not form a part hereof and do not in any way modify,
interpret or construe the intentions of the parties. This Agreement shall be
governed by and construed in accordance with the laws of the State of Minnesota
without regard to is conflicts of laws principles, and the state and federal
courts of Minnesota shall have exclusive jurisdiction over any controversy or
claim arising out of or relating to this Agreement.
9. APPOINTMENT OF SHAREHOLDER REPRESENTATIVE. The Shareholders hereby
acknowledge and agree that Xxxxxx Xxxxxx has been named as the duly appointed
representative of the Shareholders; any action taken by the Representative in
accordance with the terms of this Agreement shall be taken on behalf of each
Shareholder as if such Shareholder were acting for his or her own benefit.
10. NOTICES. Any notice, report, demand, waiver, or protest required, permitted
or contemplated hereunder shall be in writing and shall be personally delivered
or mailed, postage prepaid, certified or registered mail, or delivered by a
nationally recognized express courier service, charges prepaid, to the following
addresses (or such other addresses as the parties may specify from time to
time):
To the Shareholders to their appointed Representative:
Xxxxxx Xxxxxx
0000 Xxxx Xxxxx Xxxxx
Xxxxxxxxxx, XX 00000
To Navarre and/or NRC:
Navarre Corporation
0000 00xx Xxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attention: President
with a copy to:
Winthrop & Weinstine, P.A.
0000 Xxxx Xxxxxxxx Xxxxx
00 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
To NRC:
Net Radio Corporation
Riverplace Exposition Hall
Suite 149
00 Xxxx Xxxxxx X.X.
Xxxxxxxxxxx, XX 00000
Attention: President
with a copy to:
Winthrop & Weinstine, P.A.
0000 Xxxx Xxxxxxxx Xxxxx
00 Xxxxx Xxxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx, Esq.
To Escrow Agent:
Norwest Bank Minnesota, National Association
Sixth and Marquette
Xxxxxxxxxxx, Xxxxxxxxx 00000-0000
Attention: Xxxx Xxxxxxxxx
Facsimile: (000) 000-0000
and shall be deemed to have been duly delivered and received (i) on the date of
personal delivery, or (ii) on the date of receipt if mailed by registered or
certified mail, postage prepaid and return receipt requested, or (iii) on the
date of a signed receipt, if sent by an overnight delivery service, but only if
sent in the same manner to all persons entitled to receive notice or a copy.
11. COUNTERPARTS. This Agreement may be executed in one or more counterparts,
and by the different parties hereto on separate counterparts, each of which
shall be deemed an original but all of which shall constitute one and the same
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
NAVARRE:
NAVARRE CORPORATION
By: /s/ (illegible)
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Its: President
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NRC:
NET RADIO CORPORATION, a Minnesota
corporation
By: /s/ (illegible)
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Its: President
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ESCROW AGENT:
NORWEST BANK MINNESOTA, NATIONAL ASSOCIATION
By: /s/ Xxxx Xxxxxxxxx
----------------------------
Its: Corporate Trust Officer
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By:
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Its:
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SHAREHOLDERS:
/s/ Xxxxxxxx X. Xxxxxxx /s/ Xxxxxx Xxxxxx
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Xxxxxxxx X. Xxxxxxx Xxxxxx Xxxxxx
-------------------------------- -------------------------------
Xxxxx Xxxxxx Xxxx Xxxxx
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Xxxxxxx Xxxxxxx Xxxxx Xxxxxxx
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Xxxxxxx Xxxxxxx Xxxxxxx Xxxx
-------------------------------- -------------------------------
Xxxx Xxxxxxxxx Xxxxxx Xxxxx
/s/ Xxxx Xxxxxx
-------------------------------- -------------------------------
Xxxx Xxxxxx Xxx Xxxx
/s/ Xxxxxxx Xxxxxxx /s/ Xxxxxx X. Xxxx
-------------------------------- -------------------------------
Xxxxxxx Xxxxxxx Xxxxxx Xxxx
/s/ Xxxxx Xxxxxx
-------------------------------- -------------------------------
Xxxxx Xxxxxx Xxxx Xxxxxx
/s/ Xxxxx Xxxxxx
-------------------------------- -------------------------------
Xxxxx Xxxxxx Xxxxxxx Xxxxxx
/s/ Xxxx Xxxxxx
-------------------------------- -------------------------------
Xxxx Xxxx Xxxx Xxxxxx
-------------------------------- -------------------------------
Xxxxxx Xxxxxx Xxxx Xxxxxxxxx
/s/ Xxxx Xxxxxx
-------------------------------- -------------------------------
Xxx Xxxxxx Xxxx Xxxxxx
/s/ Xxxx Xxxxx
-------------------------------- -------------------------------
Xxxxx Xxxxxxxx Xxxx Xxxxx
/s/ Xxx Xxxxx
-------------------------------- -------------------------------
Xxxx Xxxxxxxx Xxx Xxxxx
/s/ Xxx Xxxxxxxx
-------------------------------- -------------------------------
Xxxxx Medi-Xxxxx Xxx Xxxxxxxx
/s/ Xxxx Xxxxx
-------------------------------- -------------------------------
Xxxx Xxxxx Xxxxxx Xxxxxx
/s/ Xxxxx Xxxxxxx /s/ Xxxx Creswall
-------------------------------- -------------------------------
Xxxxx Xxxxxxx Xxxx Creswall
/s/ Xxxxxxx Hope /s/ Xxxxxxxx Xxxx
-------------------------------- -------------------------------
Xxxxxxx Hope Xxxxxxxx Xxxx
/s/ Xxx Xxxxxxx
-------------------------------- -------------------------------
Xxx Xxxxxxx Xxxx Xxxxxx
Internet Marketing Group, Ltd.
By:
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Its
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