AGREEMENT AND
PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of March
7, 1997, by and among NET RADIO CORPORATION, a Nevada corporation with its
principal place of business located at Riverplace Exposition Hall, Suite 149, 00
Xxxx Xxxxxx, Xxxxxxxxxxx, Xxxxxxxxx 00000 (the "Company"), NAVARRE CORPORATION,
a Minnesota corporation with its principal place of business located at 0000
00xx Xxxxxx Xxxxx, Xxx Xxxx, Xxxxxxxxx 00000 ("Navarre") and NET RADIO
CORPORATION, a Minnesota corporation with its principal place of business
located at 0000 00xx Xxxxxx Xxxxx, Xxx Xxxx, Xxxxxxxxx 00000, A WHOLLY OWNED
SUBSIDIARY OF NAVARRE CORPORATION ("NRC").
RECITALS
A. The Board of Directors of Navarre and the Company have each determined
that it is in the best interests of their respective stockholders that Navarre
and the Company enter into a business combination under which the Company will
merge with and into NRC (the "Merger"), in order to achieve certain synergies
and efficiencies resulting from the combination of the respective businesses,
and, in connection therewith, to make certain representations, warranties and
agreements in connection with the Merger.
B. The Company is engaged in the business of offering an array of
services and products to internet users, including 24-hour live programming
related to music and the music industry and a product known as "Net Companion"
(collectively, the "Business").
C. Pursuant to the terms of that certain Stock Purchase Agreement dated
as of May 1, 1996, by and among the Company, the Company's shareholders
(hereinafter referred to as the "Shareholders", whose names are set forth on
SCHEDULE 1. attached hereto) and Navarre, Navarre purchased what was then a
fifty percent (50%) interest in the Company through the purchase of fifty
percent (50%) of the issued and outstanding shares of capital stock of the
Company as of that date.
D. As of May 1, 1996, the Shareholders were the legal and beneficial
owners of all right, title and interest in and to the remaining fifty percent
(50%) of all of the issued and outstanding capital stock of the Company.
E. The parties to this Agreement intend that, subject to the terms and
conditions of this Agreement, the Company will merge with and into NRC, with NRC
to be the surviving corporation of the Merger, all pursuant to the terms and
conditions of this Agreement and an Agreement of Merger substantially in the
form of EXHIBIT A attached hereto (the "Agreement of Merger") and the applicable
provisions of the Nevada General Corporation Law ("Nevada Law") and the
Minnesota Business Corporation Act ("Minnesota Law"). Upon the effectiveness of
the Merger, all the outstanding capital stock of the Company shall be converted,
as provided in this Agreement and the Agreement of Merger, and the Shareholders
shall receive Navarre
common stock in exchange for their Company owned stock and the Company stock
owned by Navarre will be cancelled.
F. The Merger is intended to be treated as a reorganization pursuant to
the provisions of Section 368 (a) of the Internal Revenue Code of 1986, as
amended (the "Code").
G. For accounting purposes, it is intended that the Merger shall be
accounted for as a purchase of assets under United States generally accepted
accounting principles ("GAAP").
NOW, THEREFORE, in consideration of the premises, the mutual covenants
and agreements contained in this Agreement and other valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the Company, NRC and
Navarre, each intending to be legally bound, do hereby covenant and agree as
follows:
SECTION I.
THE MERGER
1.1 The Merger. Upon the terms and subject to the conditions set forth in
Sections VI and VII, and in accordance with Nevada Law and Minnesota Law, on the
Effective Date (as defined in Section 1.13) the Company shall be merged with and
into NRC. As a result of the Merger, the separate corporate existence of the
Company shall cease and NRC shall continue as the surviving corporation of the
Merger which shall continued to be a wholly owned subsidiary of Navarre (the
"Surviving Corporation").
1.2 Effective Date. Upon the terms and subject to the conditions of this
Agreement, as soon as practicable on the Effective Date the parties hereto shall
cause a certificate of merger (the "Certificate of Merger") to be filed with
both the Secretary of State of the State of Minnesota and the Secretary of State
of the State of Nevada, in such form as is required by, and executed in
accordance with the applicable provisions of, Minnesota Law and Nevada Law. The
Merger shall become effective upon the filing of the Certificate of Merger with
both the Secretary of State of the State of Minnesota and the Secretary of State
of the State of Nevada.
1.3. Effect of the Merger. On the Effective Date, the effect of the Merger shall
be as provided in the applicable provisions of Minnesota Law and Nevada Law.
Without limiting the generality of the foregoing, and subject thereto, on the
Effective Date all of the property, rights, privileges, powers and franchises of
the Company shall vest in the Surviving Corporation, and all debts, liabilities,
obligations, restrictions, disabilities and duties of the Company shall become
the debts, liabilities, obligations, restrictions, disabilities and duties of
the Surviving Corporation.
1.4. Articles of Incorporation and Bylaws. The Articles of Incorporation and the
Bylaws of NRC in effect immediately prior to the Effective Date, shall be the
Articles of Incorporation and Bylaws of the Surviving Corporation until
thereafter amended as provided by Minnesota Law and the Surviving Corporation's
Articles of Incorporation and its Bylaws.
1.5. Directors and Officers. The directors of NRC immediately prior to the
Effective Date shall be the initial directors of the Surviving Corporation after
the Merger, each to hold office in accordance with the Articles of Incorporation
and Bylaws of the Surviving Corporation, and the officers of NRC immediately
prior to the Effective Date shall be the initial officers of the Surviving
Corporation after the Merger, in each case until their respective successors are
duly elected or appointed and qualified.
1.6. Subsequent Actions. If, at any time after the Effective Date, the Surviving
Corporation shall consider or be advised that any deeds, bills of sale,
assignments, assurances or any other actions or things are necessary or
desirable to continue in, vest, perfect or confirm of record or otherwise in the
Surviving Corporation its right, title or interest in, to or under any of the
rights, properties, privileges, franchises or assets, acquired or to be acquired
by the Surviving Corporation as a result of, or in connection with, the Merger
or otherwise to carry out this Agreement, the officers and directors of the
Surviving Corporation shall be directed and authorized to execute and deliver,
in the name of and on behalf of the Company, all such deeds, bills of sale,
assignments and assurances and to take and do, in the name of and on behalf of
the Company, all such other actions and things as may be necessary or desirable
to vest, perfect or confirm any and all right, title and interest in, to or
under such rights, properties, privileges, franchises or assets in the Surviving
Corporation or otherwise to carry out this Agreement.
1.7. Effect on Capital Stock of the Company. As of the Effective Date, by virtue
of the Merger and without any action on the part of the holders thereof, the
shares of stock of the Company owned by Navarre and the Shareholders, and the
NRC shares of common stock shall be as set forth in Sections 1.8., 1.9., 1.10.,
1.11. and 1.12. All outstanding options to purchase the Company's common stock
shall be exercised prior to the Effective Date. Any options or warrants not
exercised prior to the Effective Date shall automatically and immediately be
extinguished and of no further force or effect, without any further action by
NRC, the Company or any other party.
1.8. Delivery of the Company Share Certificates and Cancellation of Treasury
Shares.
(a) CANCELLATION OF TREASURY SHARES. On the Effective Date, each share of
the Company common stock held in the treasury of the Company or owned by
Navarre immediately prior to the Effective Date shall be cancelled and
retired and no shares of common stock or other securities of Navarre or
the Surviving Corporation shall be issuable, and no payment or other
consideration shall be made, with respect thereto.
(b) EXCHANGE OF SHARES OTHER THAN TREASURY SHARES. Subject to the terms
and conditions of this Agreement, at or prior to the Effective Date, the
Company shall deposit, or cause to be deposited with Norwest Bank
Minnesota, National Association (hereinafter referred to as the "Escrow
Agent") certificates representing all of the Company common stock that is
issued and outstanding to persons other than Navarre for conversion into
Navarre Shares as set forth in Sections 1.11. and 1.12. The certificates
deposited with the Escrow Agent shall be free and clear of all pledges,
liens, encumbrances, equities, claims and obligations to other persons of
every kind and character (the "Encumbrances"), and all right, title and
interest therein and thereto (the
Merger described in this Agreement and the agreements contained in the
Exhibits attached hereto are collectively referred to herein as the
"Transaction").
1.9. Capital Stock of NRC. As of the Effective Date, each issued and outstanding
share of common stock, no par value per share, of NRC shall continue to be
issued and outstanding as shares of the Surviving Corporation common stock, and
the holder thereof shall retain its rights therein.
1.10. Certain Adjustments.
(a) If between the date hereof and the Effective Date, the outstanding
shares of Navarre common stock or of the Company common stock shall be
changed into a different number of shares by reason of any
reclassification, recapitalization, split-up, combination or exchange of
shares, or any dividend payable in stock or other security shall be
declared thereon with the record date within such period, the Conversion
Ratio set forth in the Agreement of Merger shall be adjusted accordingly
to provide to the holders of the Company common stock the same economic
effect as contemplated by this Agreement prior to such reclassification,
recapitalization, split-up, combination, exchange or dividend.
(b) No fractional share certificate of Navarre common stock will be
issued upon the surrender for exchange of certificates evidencing the
Company's stock, and an outstanding fractional share interest will not
entitle the holder thereof to vote, receive dividends or to any rights of
a stockholder of Navarre or of the Surviving Corporation with respect to
such fractional share interest. For purposes of valuating the amount of
cash, if any, to be paid to the holders of the Company stock with respect
to any fractional share interests, the Navarre shares shall be valued at
$3.00 per share, and at such time that the Shareholders have a right to
distribution under the terms of this Agreement, if a fractional share
results in the distribution, the Shareholder shall be paid in cash for
the fractional amount based on a $3.00 per share figure and the number of
Escrow Shares to be issued pursuant to Section 1.11.(a) shall be reduced
accordingly.
1.11. Conversion of Company Shares. The conversion of the Company Shares into
shares of common stock of Navarre to be issued to the Shareholders in
accordance with this Agreement and the Agreement of Merger shall be as
follows:
(a) 105,000 shares of common stock of Navarre (the "Escrow Shares") shall
be deposited with the Escrow Agent;
(b) up to an additional 1,175,000 shares of common stock of Navarre (the
"1997 Shares"); and
(c) up to an additional 1.6 million shares (but not more than 800,000
shares if all of the 1997 Shares have been issued/earned) of common stock
of Navarre (the "1998 Shares") (the Escrow Shares, 1997 Shares and 1998
Shares are collectively referred to hereinafter as the "Navarre Shares").
Navarre shall reserve and cause to be set aside for future distribution to
record holders of the Company stock such shares as are necessary to meet its
obligations pursuant to Sections 1.11.(b), 1.11.(c), 1.12.(b) and 1.12.(c)
hereof.
1.12. Conversion Rights of the Shareholders of the Company Shares into Navarre
Stock. The conversion ratio of the Company stock owned by the Shareholders into
Navarre common stock shall be as set forth in the Agreement of Merger, and the
rights of such Shareholder to his or her pro rata share of the Navarre Shares
shall be based on the percentage interest of the Company stock owned by such
Shareholder set forth on SCHEDULE 1. attached hereto. The rights of the
Shareholders to receive equity securities of Navarre pursuant to the Merger
shall be conditioned on the following:
(a) The Escrow Shares shall be placed in escrow on the Effective Date to
indemnify Navarre, in part, against those liabilities of the Company
described on SCHEDULE 1.12.(a) hereto. The Escrow Shares shall be
released within 30 days of execution of a certificate signed by the
Surviving Corporation and Navarre confirming full payment or final
settlement of those liabilities described on SCHEDULE 1.12.(a) hereto.
For those Shareholders that have nonrecourse notes outstanding with the
Company for the purchase of Company Shares, the Escrow Shares will not be
issued to such Shareholders until the notes have been paid in full. The
Escrow Shares shall be ultimately released to the Shareholders after
first releasing to Navarre such number of Escrow Shares having a Fair
Market Value (as defined in Section 1.12.(e) below) equal to the cost of
any post closing costs paid by the Surviving Corporation or Navarre in
connection with resolution of those liabilities of the Company described
on SCHEDULE 1.12.(a). and hereto, or such earlier date as may be
determined by Navarre in its sole discretion.
Any dividends or distributions payable with respect to the Escrow Shares
shall be paid to the Shareholders upon final release of the Escrow
Shares, to the extent not previously used to satisfy the obligations set
forth above. If the liabilities described on SCHEDULE 1.12.(a) are
resolved in a non-monetary settlement (without the use of cash proceeds,
using assets or potential assets of the Company) (e.g., forfeiture of the
Company's licensing or distribution rights to a specific country, whether
by licensing or franchising such rights to a third party or otherwise)
then the calculation of the liabilities incurred by Navarre for purposes
of determining the number of Escrow Shares to be released to the
Shareholders shall be calculated as follows: (i) if a country with a
census population of 50,000,000 or greater is the subject of the
settlement involving the granting of licensing, distribution or franchise
rights for such country then $100,000 worth of the Escrow Shares for each
such country shall first be released to Navarre before the remaining
Escrow Shares are distributed to the Shareholders; and/or (ii) if a
country with a census population of less than 50,000,000 is the subject
of the settlement involving the granting of distribution or franchise
rights for such country then $50,000 worth of the Escrow Shares for each
such country shall first be released to Navarre before the remaining
Escrow Shares are distributed to the Shareholders.
(b) If applicable, any 1997 Shares earned by the Shareholders shall be
issued to the Shareholders within 90 days after the end of the applicable
earn out period. The actual number of 1997 Shares issued shall be
determined as follows:
(i) Up to 600,000 Shares (the "1997 Pre-tax Shares") shall be
issued on the basis of the Surviving Corporation's actual net
profit before extraordinary items and income taxes ("Pre-tax
Income") for the twelve months ending twelve months from the
Effective Date (hereinafter such date is referred to as "Target
Date No. 1") in accordance with the following formula:
(1) If Pre-tax Income is a loss, then none of the 1997
Pre-tax Shares will be issued; or
(2) If Pre-tax Income is between $0 and $200,000, then
100,000 shares of the 1997 Pre-tax Shares will be issued;
or
(3) If Pre-tax Income is $200,000 or more, then the
remaining portion of the 500,000 unissued 1997 Pre-tax
Shares (rounded to the nearest whole number of shares)
available to be issued shall be the product of (i) 500,000
Shares and (ii) the quotient of Pre-tax Income (minus
$200,000) and $800,000.
(ii) Up to 200,000 1997 Shares (the "1997 Revenue Shares") shall
be issued on the basis of the Surviving Corporation's actual
revenue (excluding barter revenue and other similar
accommodations) for Target Date No. 1 in accordance with the
following formula:
One 1997 Revenue Share for each $5.00 of revenue earned by
the Surviving Corporation in excess of $4,000,000 for
Target Date No. 1; provided, however, no 1997 Revenue
Shares shall be issued if Pre-tax Income is less than $0.
(iii) To the extent the Surviving Corporation achieves "Net Sales"
of at least $1,750,000 for the 12 month period ending 12 months
from the Effective Date, up to 375,000 of the 1997 Shares (the
"1997 Net Sales Shares") eligible for distribution to the
Shareholders shall be distributed on a proportionate basis in an
amount equal to 1 share of common stock for each $3.33333 that Net
Sales exceed $1,750,000 for such 12 month period. For purposes of
this Agreement, "Net Sales" shall be calculated in accordance with
GAAP, with the exception that any Net Sales not collected within
60 days after any applicable earn out period shall not be included
in any earn out calculations for such period, and "barter income"
and any revenue which is all or in part offset by payments to an
entity from which revenue has been derived shall also be excluded
from such earn out calculations. The maximum number of 1997 Shares
subject to distribution under this Section shall be 375,000.
Example: If the Surviving Corporation's Net Sales are
$2,500,000 for such period, the 1997 Net Sales Shares
distributed would be 225,000.
(iv) Notwithstanding anything to the contrary contained herein,
the 1997 Shares (i.e. the sum of 1997 Revenue Shares, the 1997
Pre-tax Shares and the
1997 Net Sales Shares) to be issued shall in no event exceed
1,175,000 shares in the aggregate; and provided further, that if
the Fair Market Value price for Navarre's common stock at Target
Date No. 1 is greater than 125% of the Fair Market Value of
Navarre's stock on the Effective Date (the "Base Price"), then the
1997 Pre-Tax Shares and the 1997 Revenue Shares (but not including
the 1997 Net Sales Shares) to be issued shall be equal to the
quotient of: (a) the product of 125% of the Base Price and the
number of shares as otherwise calculated above and (b) the Fair
Market Value of Navarre's common stock at Target Date No. 1;
further, provided, that only 800,000 of 1997 Shares shall be
subject to the Fair Market Value of the Navarre common stock and
the remaining 375,000 1997 Shares shall not be subject to the Fair
Market Value of Navarre common stock.
(c) Subject to the provisions set forth herein, any 1998 Shares earned by
the Shareholders shall be issued to the Shareholders within 90 days after
the end of the applicable earn out period. The actual number of 1998
Shares issued shall be determined as follows:
(i) Up to 1.6 million Shares (but reduced by the aggregate number
of 1997 Pre- tax Shares, 1997 Revenue Shares and 1997 Net Sales
Shares earned by the Shareholders) based upon the Surviving
Corporation's actual, cumulative Pre- tax Income for the Target
Date No. 2 ("Cumulative Pre-tax Income") in accordance with the
following formula:
(1) If Cumulative Pre-tax Income is $1,000,000 or less
(including an operating loss), then no 1998 Shares will be
issued (other than 1997 Shares previously earned); or
(2) If Cumulative Pre-tax Income is greater than
$1,000,000, then the 1998 Shares to be issued (rounded up
to the nearest whole number of shares) shall be the
difference between (i) the product of (a) 1.6 million
shares and (b) the quotient of Pre-tax Income (minus
$1,000,000) and $5,000,000; and (ii) the 1997 Shares
actually issued/earned pursuant to Section 1.12.(b);
provided, however, the combined number of 1997 Shares and
1998 Shares to be issued shall in no event exceed 1.6
million shares, and provided further, that if the Fair
Market Value of Navarre's common stock at Target Date No. 2
is greater than 150% of the Base Price, then the 1998
Shares to be issued shall be equal to the quotient of:
(a) the product of 150% of the Base Price and the number of
shares as otherwise calculated above and (b) the Fair
Market Value of Navarre's common stock at Target Date
No. 2.
(d) For purposes of this Section 1.12., the Company's litigation costs
with respect to litigation pending on the date of this Agreement and
described on SCHEDULE 2.8. hereto and for which provision is made in
Section 1.12.(a) shall not be taken into account in computing the
"Pre-tax Income" calculations described herein. "Pre-tax Income" shall
otherwise be defined as follows:
Exclusions: "barter income," or any revenue which is all or in
part offset by payments to an entity from which
revenue has been derived; accounts receivable not
collected within 60 days after the end of any
applicable earn out period.
Allocated
Expenses: accounting expense allocation of $5,000 per month
for the first year and $10,000 per month during the
second year shall be charged against income.
(e) For purposes of this Agreement, "Fair Market Value" of a share of
Navarre's common stock as of a particular date (the "Determination Date")
shall mean: (i) if Navarre's common stock is traded on an exchange or the
NASDAQ national market or SmallCap Market, then the average last reported
sale prices, reported for the twenty (20) business days immediately
preceding the Determination Date, (ii) if Navarre's common stock is not
traded on an exchange or on NASDAQ but is traded on the over-the-counter
market, then the average closing bid and asked prices reported for the
twenty (20) business days immediately preceding the Determination Date,
and (iii) if Navarre's common stock is not actively traded, then the fair
market value of a share of common stock shall be the fair market value as
determined by Navarre's Board of Directors in good faith.
1.13. Closing. Subject to satisfaction or waiver of all conditions of closing
(the "Closing"), this Agreement shall be executed at the offices of Winthrop &
Weinstine, P.A., 3000 Xxxx Xxxxxxxx Plaza, 00 Xxxxx Xxxxx Xxxxxx, Xxxxxxxxxxx,
Xxxxxxxxx at 10:00 a.m. central time on March 7, 1997 (the "Closing Date"). As
soon as practicable thereafter, and in no event later than March 21, 1997, the
parties will obtain all necessary shareholder approvals and third party
consents, exchange shares and other consideration and otherwise complete the
Transaction (the date all such activities are completed is hereinafter referred
to as the "Effective Date").
1.14. Certain Payments and Distributions. SCHEDULE 1.14.(a) attached hereto
lists and describes all loans, receivables or other amounts due from the
Shareholders to the Company or from the Company to the Shareholders existing on
the Closing Date. The Company further acknowledges and agrees that, except as
set forth on SCHEDULE 1.14(b), on or before the Effective Date (i) all loans and
advances from the Company to the Shareholders, whether or not disclosed in any
Schedule hereto, shall be repaid to the Company in full and the Company shall
have delivered to Navarre appropriate instruments or writings to evidence the
receipt of such repayments; (ii) all guarantees by the Company of loans obtained
by any shareholder, officer or director of the Company from third parties shall
have been released; and (iii) other than this Agreement, the Employment
Agreements, the Non-Compete Agreements, and agreements described on SCHEDULE
1.14.(b) hereto, all contracts, leases and agreements between the Company and
the Shareholders shall be terminated without penalty to Navarre or to the
Surviving Corporation.
1.15. Deliveries by the Company. Within ten (10) days after the Closing but in
no event later than the Effective Date, the Company shall have received for
delivery to Navarre on the Effective Date the following:
(a) Certificates evidencing all of the issued and outstanding Company
shares issued to the Shareholders that are to be deposited with the
Escrow Agent;
(b) A certificate evidencing 1,042,907 shares of the Company, which
represents the shares purchased by Navarre as of May 1, 1996, which have
been held in escrow, which shall be deposited with the Escrow Agent to
effect the conversion.
(c) Executed counterparts of non-compete agreements executed by certain
Shareholders who are key employees of the Company (to be determined by
Navarre) in substantially the form set forth in EXHIBIT 1.15.(c) attached
hereto (the "Non-Compete Agreements");
(d) An executed counterpart of employment/confidentiality agreement for
Xxxx Xxxxxx and Xxxxxx Xxxxxx (collectively referred to hereinafter as
the "Employment Agreements") in substantially the form set forth on
EXHIBIT 1.15.(d) attached hereto;
(e) An executed counterpart of a voting agreement wherein all of the
Shareholders will appoint Xxxx X. Xxxxxxx and Xxxxxxx X. Xxxxxx as the
persons authorized to vote all shares of Navarre stock held by or to be
issued to the Shareholders in substantially the form set forth on EXHIBIT
1.15.(e) attached hereto (the "Voting Agreement");
(f) An executed counterpart of a shareholder rights agreement with
respect to the terms of the lock-up, registration rights and first
refusal rights of the Shareholders in substantially the form set forth on
EXHIBIT 1.15.(f) attached hereto (the "Shareholder Rights Agreement");
(g) Executed counterparts of release agreements signed by all current
employees of the Company evidencing that such employees are "at-will"
employees and that any and all employment agreements now in effect are
null and void as of the Effective Date and that any consulting, bonus,
severance or other provisions relating to compensation described in said
employment agreements are terminated and no longer of any force and
effect, at no cost to the Company, the Surviving Corporation or Navarre,
in substantially the form set forth in EXHIBIT 1.15.(g) attached hereto
(the "Agreement of Employees");
(h) An executed counterpart of a credit facility agreement in
substantially the form set forth on EXHIBIT 1.15.(h) attached hereto (the
"Credit Facility Agreement") which evidences Navarre's obligation to make
working capital loans to the Surviving Corporation based on specific
performance criteria;
(i) A fully executed agreement signed by the Shareholders and all of the
parties described on EXHIBIT 1.15.(i) hereto evidencing to Navarre's
satisfaction that all option holders, warrant holders and other persons
or entities with claims or rights to the Company's stock shall have
released and terminated all of such claims and rights (the "Option
Termination Agreement");
(j) An executed counterpart of a termination agreement in substantially
the form set forth on EXHIBIT 1.15.(j) attached hereto (the "Termination
Agreement") that will
evidence the termination of the following agreements each dated as of May
1, 1996: (1) the Option Agreement, (2) Shareholder Voting Control
Agreement, and (3) Preemptive Rights Agreement;
(k) Such resignations of officers and directors of the Company effective
as of the Effective Date as are requested by Navarre not less than ten
(10) days after the Closing Date;
(l) Executed counterparts of disclosure statements in substantially the
form set forth in EXHIBIT 1.15.(l) attached hereto ("Disclosure
Statement") signed by every Shareholder;
(m) An executed counterpart of the severance agreement for Xxxxxxxx X.
Xxxxxxx ("Xxxxxxxxx Agreement") in substantially the form set forth in
EXHIBIT 1.15.(m) attached hereto;
(n) Certificate of the Secretary of the Company certifying copies of the
Bylaws, stock ledger and minute book of the Company, evidencing no
changes since the Closing Date;
(o) Articles of Incorporation of the Company certified as of recent date
by the Secretary of State of the State of Nevada, evidencing no changes
since the Closing Date;
(p) Certificate of Good Standing of the Company certified as of recent
date by the Secretary of State of the State of Nevada and each state in
which the Company is qualified to do business;
(q) A copy, certified by an officer of the Company, of the duly adopted
Resolutions of the Company's Board of Directors and its Shareholders
approving this Agreement and the Transaction, the Agreement of Merger and
authorizing the execution of all of the documents contemplated in this
Agreement;
(r) An executed counterpart of the Agreement of Merger and Articles of
Merger which will be filed at the Office of the Secretary of State of the
State of Minnesota and office of the Secretary of State of the State of
Nevada;
(s) A bring-down certificate, which certificate shall (i) certify to both
Navarre and NRC, that the unaudited balance sheet of the Company as of
February 28, 1997, (a copy of which shall be attached to the bring-down
certificate) is complete, true and accurate in all respects, (ii) shall
identify any changes from the Company's January 31, 1997, financial
statements, (iii) shall identify any material changes outside of the
ordinary course of business from the date of this Agreement through the
Effective Date, and (iv) specifically identifying all revisions to any of
the Schedules attached to the Agreement from the date of this Agreement
through the Effective Date; and
(t) Such other documents as Navarre and NRC may require to evidence that
the conditions to the Effective Date set forth in Section VI and
elsewhere herein have been satisfied.
1.16. Satisfaction of Note. Immediately, the Company shall xxxx "paid in full"
and return that certain $500,000 promissory note dated as of May 1, 1996,
executed by Navarre in favor of the Company (the "Note") which has been paid in
full by Navarre as of the date of this Agreement.
1.17. Deliveries by Navarre. On the Effective Date, Navarre shall deliver, or
cause to be delivered, to the Company the following:
(a) The Escrow Shares which shall be held with the Escrow Agent pursuant
to the terms of an escrow agreement to be substantially in the form of
EXHIBIT 1.17.(a) attached hereto (the "Escrow Agreement");
(b) Executed counterparts of the Non-Compete Agreements;
(c) An executed counterpart of the Voting Agreement;
(d) An executed counterpart of the Shareholder Rights Agreement;
(e) An executed counterpart of the Termination Agreement;
(f) An executed counterpart of the Credit Facility Agreement;
(g) A copy, certified by an officer of Navarre, of the duly adopted
resolutions of Navarre's Board of Directors approving this Agreement, the
Agreement of Merger and the Transaction, and authorizing the execution of
this Agreement and the other documents contemplated in this Agreement;
and
(h) Stock certificates evidencing the 5,000 shares of common stock of
Navarre issued to Xxxxxxx Xxxxxxx, and 15,000 shares of common stock of
Navarre issued to Xxxxxx Xxxxxx as consideration for the release of their
respective security interests in the Company's assets, as further
described in Section 5.6. of this Agreement.
1.18. Deliveries by NRC. On the Effective Date, NRC shall deliver, or cause
to be delivered, to the Shareholders the following:
(a) Executed counterparts of the Non-Compete Agreements;
(b) An executed counterpart of the Credit Facility Agreement;
(c) A copy, certified by an officer of NRC, of the duly adopted
resolutions of NRC's Board of Directors approving this Agreement, the
Agreement of Merger and the Transaction, and authorizing the execution of
this Agreement and the other documents contemplated in this Agreement;
and
(d) An executed counterpart of the Agreement of Merger and Articles of
Merger which will be filed at the Office of the Secretary of State of the
State of Minnesota and Office of the Secretary of State of the State of
Nevada.
1.19. Inspection and Information by Navarre. Through the Effective Date, Navarre
may, through its representatives, accountants and attorneys, make such
investigation of the Company and of its financial and legal condition as it may
deem necessary or advisable, and the Company agrees to make available to such
persons, with the right, at Navarre's expense, to make copies thereof, all of
the Company's books, tax returns, records and other data of or relating to the
Company; provided, however, that such investigation shall be made only at
reasonable hours and so as not to interfere unreasonably with the Company's
operations through the Effective Date. Through the Effective Date, the Company
further agrees to furnish Navarre with such financial and operating data and
other information with respect to the Company as Navarre or its representatives,
accountants or attorneys shall from time to time reasonably request.
1.20. Inspection and Information by the Company. Through the Effective Date, the
Company may, through its representatives, accountants and attorneys, make such
investigation of Navarre and of its financial and legal condition as it may deem
necessary or advisable, and Navarre agrees to make available to such persons,
with the right, at the Company's expense, to make copies thereof, all of
Navarre's books, tax returns, records and other data of or relating to Navarre;
provided, however, that such investigation shall be made only at reasonable
hours and so as not to interfere unreasonably with Navarre's operations through
the Effective Date. Through the Effective Date, Navarre further agrees to
furnish the Company with such financial and operating data and other information
with respect to Navarre as the Company or its representatives, accountants or
attorneys shall from time to time reasonably request.
1.21. Further Assurances and Cooperation. Each party hereto agrees that he, she
or it will, at any time and from time to time after the Effective Date, upon
request of any other party hereto, take or cause to be taken such further action
and execute and deliver, or cause to be executed and delivered, all such further
documents as such party may reasonably require to effect the Merger and issuing
and delivering the Navarre Shares to the Shareholders.
1.22. Public Announcements. No party hereto shall issue any press release or
otherwise make any public announcements, statements or disclosures with respect
to the Transaction contemplated by this Agreement without the prior written
consent of Navarre and Navarre's counsel except as may be required by law or as
may be required under the circumstances to fully explain the Transaction
contemplated by this Agreement to those who have a need to understand such
Transaction and the Company's relationship with Navarre and NRC.
1.23. Expenses. Each party hereto shall pay its or his own expenses incident to
the negotiation, preparation and carrying out of this Agreement, including all
fees and expenses of its counsel and accountants for all activities of such
counsel and accountants undertaken pursuant to this Agreement, whether or not
the Transaction contemplated hereby are consummated. Navarre acknowledges that
the Company may incur legal and accounting costs to facilitate and assist the
Company in completing the Transaction that will be paid by Navarre.
SECTION II.
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents, warrants and covenants to NRC and Navarre and agrees
that:
2.1. Organization and Capitalization.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Nevada. The Company has full
power and authority (corporate and other), to own, lease or operate its
properties in the places where such business is now conducted and where
such properties are now owned, leased or operated, to carry on its
business as now being conducted, and to execute and deliver and carry out
the Transaction contemplated by this Agreement and the Agreement of
Merger, subject only to obtaining the approvals and consents identified
in SCHEDULE 2.17. The Company is duly qualified to do business in, and is
in good standing, and has all required and appropriate licenses under the
laws of the states or jurisdictions specified in SCHEDULE 2.1.(a) being
all the states and jurisdictions in which the failure to be so qualified
or in good standing would materially adversely affect the operations of
the Business of the Company. The Company is currently operating and
structured in accordance with its Articles of Incorporation and Bylaws.
The Company has delivered to Navarre complete and correct copies of its
Articles of Incorporation and Bylaws, as amended to the date of this
Agreement.
(b) On the Closing Date and on the Effective Date the authorized capital
stock of the Company consists of 10,000,000 shares of common capital
stock, $.01 par value per share. Except as set forth in SCHEDULE 2.1.(b),
there are no options, warrants, or other rights presently outstanding for
the purchase, acquisition or sale of any common stock or any other
securities of the Company, or any securities convertible into common
stock or other securities of the Company. As of the Effective Date, all
options, warrants, or other rights as set forth on SCHEDULE 2.1.(b) shall
have been terminated and of no further force and effect. All of the
Company shares, other than the shares owned by Navarre, (i) are owned
beneficially and held of record by the Shareholders, (ii) have been duly
authorized, and were duly and validly issued, are fully paid and
non-assessable, are not subject to preemptive rights, and were issued in
full compliance with all federal, state and local laws, rules and
regulations. There are no shareholder or other restrictive agreements
with respect to the ownership, transfer or repurchase of the capital
stock or the management of the Company or any voting trusts or other
agreements or understandings to which the Shareholders and/or the Company
is a party with respect to the voting of the capital stock of the
Company. There is no liability or indebtedness with respect to dividends
or other distributions declared or accumulated but unpaid with respect to
any equity securities of the Company.
(c) The Company has no subsidiaries and is not a party to any joint
venture nor a partner of any partnership. Except for as set forth in
SCHEDULE 2.1.(c), the Company does not own any capital stock or other
securities of, or any other direct or indirect interest in, any other
business entity.
2.2. Due Authorization; Effect of Transaction. No provisions of the Company's
Articles of Incorporation or Bylaws, or of any agreement, instrument or
understanding, or any judgment, decree, law, rule or regulation, to which
Company is a party or by which it is bound, has been or will be violated by the
execution and delivery by the Company of this Agreement, or the performance or
satisfaction of any agreement or condition therein or herein contained upon the
Company's part to be performed or satisfied, and all requisite corporate and
other authorizations for such execution, delivery, performance and satisfaction
have been duly obtained, other than the approvals referred to on SCHEDULE 2.17.
This Agreement will, upon execution and delivery, be a legal, valid and binding
obligation of the Company, enforceable against it in accordance with its terms,
except as may be limited by applicable securities laws, bankruptcy, insolvency
or other laws affecting creditors' rights generally and as may be limited by
equitable principles. No authorization or approval of, or filing with, any
governmental agency, authority or other body or any other third persons will be
required in connection with the execution and delivery of this Agreement or the
consummation of the Transaction contemplated hereby, except as described on
SCHEDULE 2.17.
2.3. Financial Statements, Etc. of the Company.
(a) The Company has delivered to Navarre (i) audited balance sheets of
the Company as of the close of its fiscal year for the year ending
December 31, 1995, together with the related statements of income for
fiscal year ending December 31, 1995 (collectively, the "1995 Year End
Financial Statements"), and (ii) an unaudited balance sheet of the
Company as of April 30, 1996, (the "April Financial Statements"), and
(iii) an unaudited balance sheet of the Company as of January 31, 1997
(the "January Statements"). The 1995 Year End Financial Statements, the
April Financial Statements and the January Statements, including in each
case the notes to the financial statements, if any, are hereinafter
sometimes collectively referred to as the "Financial Statements." All of
such Financial Statements shall include all pertinent back-up
information, invoices, asset lists, detailed descriptions of liabilities,
payables and obligations and other supporting reconciliation
documentation relating to the Financial Statements (including, in the
case of accruals and estimates, the basis for such information).
(b) Except as set forth in SCHEDULE 2.3.(b), all of the Financial
Statements are (i) in accordance with the books and records of the
Company, (ii) true, correct and complete in all material respects and
fairly present the financial condition and results of operation of the
Company as of the dates thereof and throughout the periods covered
thereby in accordance with GAAP. In the case of the January Statements,
they include normal accruals and reflect reserves believed by the
officers and directors of the Company to be adequate for all material
liabilities. The Company does not have as of the date hereof and will not
have as of the Closing Date or the Effective Date (i) any Undisclosed
Liabilities or (ii) any Loss Contingencies, as such term is used in the
Statement of Financial Accounting Standards No. 5 issued by the Financial
Accounting Standards Board in March 1975, which are not adequately
disclosed in the Unaudited Financial Statements, as required by said
Statement No. 5. For purposes of this Section 2.3., "Undisclosed
Liabilities" shall mean any material liability or obligation of the
Company, whether matured or unmatured, fixed, liquidated or contingent,
known or unknown, that is not fully reflected or reserved against in the
Unaudited Financial Statements or fully
covered by insurance or fully disclosed in any Schedule to this
Agreement, other than obligations and liabilities incurred in the
ordinary course of the Company's business. There has not been any change
between the date of the most recent Unaudited Financial Statements and
the date of this Agreement (whether in the ordinary course of business,
through a so-called Act of God or as a result of government activity or
otherwise, and whether or not covered by insurance) which has affected
materially and adversely the business or properties or condition,
financial or otherwise, or results of operation of the Company and, to
the best knowledge, information and belief of the management level
personnel of the Company, no fact or condition exists or is contemplated
or threatened, which might cause any such change.
(c) As of the date of the most recent Financial Statements, except as
otherwise disclosed in this Agreement and Schedules attached hereto, the
Company did not have any obligations or liabilities, past, present or
deferred, accrued or unaccrued, fixed, absolute, contingent or other,
except as disclosed in the Financial Statements, or the notes thereto,
and since such date the Company has not incurred any such obligations or
liabilities, other than obligations and liabilities incurred in the
ordinary course of the business. The Company has not guaranteed and is
not otherwise primarily or secondarily liable in respect of any
obligation or liability of any other person or entity with respect to the
Company, except for endorsements of negotiable instruments for deposit in
the ordinary coarse of business or as disclosed in the Financial
Statements, or the notes thereto, or in SCHEDULE 2.3.(c).
(d) The books and records of the Company have been maintained in all
material respects in accordance with generally accepted accounting
principles.
2.4. Material Contracts. SCHEDULE 2.4. contains a true, correct and complete
list of all the Company's Material Contracts, true, complete and correct copies
of which have been delivered to Navarre. "Material Contracts" for purposes of
this Agreement as it applies to the Company shall mean contracts of $1,000 or
greater. Each such contract is or will be, as the case may be, valid, binding
and enforceable in accordance with its terms and the Company has or will have,
as the case may be, performed in all material respects its obligations required
to be performed under any such contract and is not or will not be, as the case
may be, in breach or default or in arrears in any material respect or in any
other respect which would permit the other party to cancel such contract under
the terms thereof. Except as set forth on SCHEDULE 2.4., no claim, suit or
proceeding is pending or, to the best knowledge, information and belief of the
officers, directors and management level personnel of the Company, threatened
against the Company in connection with any such contract. No party is in default
or breach of any such contract, nor are payments pursuant thereto overdue,
except as described on SCHEDULE 2.4.
2.5. Employment Arrangements.
(a) The Company does not have any obligation, contingent or otherwise,
under any employment agreement, collective bargaining or other labor
agreement, any agreement containing severance or termination pay
arrangements, deferred compensation agreement, retainer or consulting
arrangements, pension or retirement plan, bonus or profit-sharing plan,
warrants, stock option or purchase plan or other employee contract or
non-terminable (whether with or without penalty) arrangement, group life,
health, medical or hospitalization insurance, plan or program or other
employee or fringe benefit plan, including vacation plans or programs and
sick leave plans or programs, including those relating to any employee of
the Company, other than those listed or described on SCHEDULE 2.5.(a),
true, correct and complete copies of which have been made available to
Navarre for review. The Company has performed in all material respects
all obligations required to be performed under all such agreements, plans
and arrangements and is not in any material respect in breach of or in
default or arrears under the terms thereof.
(b) For the past two years, the Company's employees have not been subject
to or involved in or, to the best knowledge, information and belief of
the officers, directors and management level personnel of the Company,
threatened with any union elections, petitions therefor or other
organizational activities, except as described on SCHEDULE 2.5.(b).
Employees of the Company are not parties to any collective bargaining
agreement, and there are no grievances, disputes or controversies with
any union or any other organization of such employees, or threats of
strikes, work stoppages or any pending demands for collective bargaining
by any union or organization, or, to the best knowledge, information and
belief of the officers, directors and management level personnel of the
Company, any active organizing or recruiting of such employees with
respect to becoming members of any union or other employee organization.
(c) SCHEDULE 2.5.(c) sets forth a true, correct and complete list of
(i) all employees of the Company as of January 31, 1997, together with
their respective salaries, and (ii) all independent contractors having
contracts with the Company as of January 31, 1997.
2.6. Compliance with ERISA. Each employee benefit plan subject to the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), which the Company
has established or maintained or to which the Company or any ERISA Affiliate (as
defined below) is or has been obligated to contribute, or in which employees
participate (a "Plan") is listed on SCHEDULE 2.6. and is in material compliance
with the applicable provisions of ERISA and the Code. Except as set forth in
SCHEDULE 2.6., the Company has not made or been obligated to make any
contributions to, nor has it participated in any, employee benefit plan which is
a multi-employer plan. For purposes of this Section 2.6., the terms "employee
benefit plan" and "multi-employer plan" shall have the respective meanings
assigned to such terms in Section 3 of ERISA and the term "ERISA Affiliate"
shall mean every corporation or trade or business, whether or not incorporated,
which is from time to time a member of a controlled group or a group under
common control with the Company within the meaning of Sections 414(b) and 414(c)
of the Code and 4001(b)(1) of ERISA.
2.7. Ordinary Course of Business, Amendment of Certain Agreements; Certain
Changes. The Company, from December 31, 1995, to the date hereof, and until
the Effective Date, except as set forth on SCHEDULE 2.7. or as required by the
terms of this Agreement, in all material respects:
(a) has operated, and will continue to operate, in the normal, usual and
customary manner in the ordinary and regular course of business;
(b) has not sold or otherwise disposed of, and will not sell or otherwise
dispose of or contract to sell or otherwise dispose of, any of its
business, properties or assets, including Intangible Property, other than
in the ordinary course of business;
(c) except in each case in the ordinary course of business, has not
discharged or satisfied and will not discharge or satisfy, and has not
incurred and will not incur, any obligations or liabilities (fixed,
contingent or other), other than the repayment of regularly scheduled
indebtedness;
(d) has not sold, assigned or transferred, and will not sell, assign or
transfer, any Intangible Property (as hereinafter defined);
(e) has not materially increased and will not increase the compensation
payable or to become payable to any of its officers, employees or other
agents, or increase the benefits under any employee benefit plan or
change any insurer providing any such benefit;
(f) has not changed and will not change any of the Material Contracts
listed on SCHEDULE 2.4. hereto;
(g) has not suffered, and will not suffer, any material damage or
destruction (whether or not covered by insurance), in any one instance
amounting to more than $10,000.00, that adversely affected, affects or
will affect the properties, assets, Business or operations of the
Company;
(h) has not entered into, and will not enter into, any other transactions
which individually or in the aggregate are material to the Company other
than in the ordinary course of business;
(i) will not make and has not made any change in its Articles of
Incorporation or Bylaws;
(j) will not make and has not made any change in its authorized capital
stock;
(k) except as otherwise provided herein, will not declare or make and has
not declared or made any dividend or other distribution or payment on or
in respect of its capital stock and will not directly or indirectly
redeem, purchase, or otherwise acquire any shares of its capital stock;
(l) has maintained and will maintain its properties and facilities in as
good working order and condition as at present, ordinary wear and tear
excepted;
(m) has used and will use its reasonable efforts to maintain and preserve
its business organization intact, retain its present employees and
maintain its relationships with independent contractors and others having
business relations with it;
(n) has not created, assumed or otherwise permitted and will not create,
assume or otherwise permit the imposition of any Encumbrance upon any
assets or properties (including the Intangible Property) whether now
owned or hereafter acquired; and
(o) has not amended or terminated and will not amend or terminate any
material agreement or license or other right of the Company.
2.8. Litigation. SCHEDULE 2.8. contains a summary description of all
litigation or legal or other actions, suits, proceedings or investigations
pending, or, to the best knowledge, information and belief of the officers,
directors and management level personnel of the Company, threatened against
the Company or relating to its operations.
2.9. Compliance With Laws. To the best knowledge, information and belief of the
officers, directors and management level personnel of the Company, and so far as
the officers, directors and management level personnel of the Company should
have known through the exercise of reasonable diligence (including seeking the
advice of legal counsel), at all times since the date of incorporation the
Company has maintained and operated and, through the Effective Date, the Company
will maintain and operate, its business, properties and assets in all material
respects in accordance with all applicable federal, state, municipal and other
laws and administrative rules and regulations, including, without limitation,
the rules and regulations of the Interstate Commerce Commission, the Federal
Communications Commission and a similar state authority or agency (collectively,
a "Licensing Agency") and in compliance with all requirements of insurance
carriers. The Company has maintained and operated in all material respects its
business, properties and assets in accordance with, has obtained all approvals,
licenses, certificates, permits, exceptions, franchises, variances, waivers,
consents and other authorizations materially required for the conduct of its
Business (collectively, the "Licenses"). The Company holds all Licenses required
from any Licensing Agency. A list of all the Licenses is set forth on SCHEDULE
2.9. attached hereto. The Company is not in default with respect to any
judgment, order, writ, injunction, decree, demand or assessment issued by any
court or any federal, state, municipal or other governmental agency, board,
commission, bureau, instrumentality or department, relating to its Business,
properties and assets. The Company is not charged and, to the best knowledge,
information and belief of the officers, directors and management level personnel
of the Company, is not under investigation with respect to, any violation of any
federal, state, municipal or other law or administrative rule or regulation.
2.10. Adverse Restrictions. The execution and delivery of this Agreement and the
consummation of the Transaction contemplated hereunder and thereunder are not
events which of themselves or with the giving of notice or the passage of time
or both, could constitute, on the Company a violation of or conflict with or
result in any breach of, or default under the terms, conditions or provisions
of, any judgment, law or regulation, or the Company's Articles of Incorporation
or Bylaws, or result in the creation of any Encumbrance of any nature whatsoever
on the properties, facilities and assets of the Company.
2.11. Broker or Finder. No person or entity assisted in or brought about the
negotiation of this Agreement in the capacity of broker or agent or finder on
behalf of the Company. The Company does not have any liability to any broker,
finder or agent or has agreed to pay any brokerage fees, commissions or finders
fees with respect to this Agreement or the Transaction.
2.12. Title and Condition of Assets.
(a) The assets and properties utilized in and material to conduct of the
Business, whether owned or leased, are in the aggregate in good operating
condition and repair (reasonable wear and tear excepted) and are suitable
for the purposes for which they are presently being used. The Company has
valid title to all of the assets reflected on its audited balance sheet
dated December 31, 1995, and its interim financial statement dated
January 31, 1997, free and clear of all Encumbrances of any kind or
nature other than Encumbrances disclosed on SCHEDULE 2.12.(a) hereto,
except for:
(i) Assets that were disposed in the ordinary course of business
(consistent with past practices); provided, that any sale or
disposal of assets shall not have materially changed the total net
asset value on said December 31, 1995 balance sheet;
(ii) Assets being leased under capitalized leases; and
(iii) Minor imperfections not materially distracting from the
value or not materially restricting the use of the property in
question.
(b) SCHEDULE 2.12.(b) contains a list of all leases for machinery,
equipment or other items of personal property (except miscellaneous
leases of office machinery having an aggregate value if capitalized of
less than $500.00) used or employed by the Company, and, with respect to
any personal property subject to a security interest or similar
agreement, details thereof, together with copies of such instruments have
been made available to Navarre. Each of the leases disclosed in SCHEDULE
2.12.(b) is in full force and effect and there are not existing defaults
or events of default, real or claimed, or events which with notice or
lapse of time or both would constitute defaults, the consequence of
which, severally or in the aggregate, would have a material adverse
effect on the business or financial condition of the Company. The
continuation, validity and effectiveness of those leases will in no way
be affected by the Transaction contemplated by this Agreement.
(c) The Company does not own any real estate. SCHEDULE 2.12.(c) sets
forth an identification of all real estate leased or subleased by the
Company and a list of all agreements, leases, subleases, options and
commitments with respect to the real estate to which the Company is a
party or by which the Company or any property of the Company is bound,
including the legal description of each parcel leased by the Company and
the lease term and rent obligations of the Company under such lease.
Except as otherwise disclosed on SCHEDULE 2.12.(c), other than the lease
listed and described on SCHEDULE 2.12.(c), there are no leases of real
property under which the Company is bound. Such lease is in full force
and effect and there are no existing defaults or events of default,
actual or asserted, or events which with the giving of notice or the
lapse of time or both would constitute a default or event of default, the
consequence of which, severally or in the aggregate, would have a
material adverse effect on the business or financial condition of the
Company.
2.13. Intangible Property.
(a) All registered and unregistered trademarks and service marks, trade
names, fictional business names, patents, copyrights, registrations or
applications with respect thereto (state and federal), or licenses or
rights under the same owned, used or useful, or intended to be acquired
or used, in connection with the Business, including, without limitation,
the names "Net Radio Corporation," "Net Companion," "Net Radio," "Net
Radio Network," "Xxx.Xxxxx" and related logos and the other are described
on SCHEDULE 2.13.(a), together with all other Intangible Property (as
that term is hereinafter defined). Except as set forth in SCHEDULE
2.13.(b), the Company is the sole and exclusive owner of all right, title
and interest in and to the Intangible Property. The Intangible Property
represents all of the intangible assets or rights to the same used by the
Company in the Business as conducted on the Closing Date and the
Effective Date. The Intangible Property is all the intangible assets that
are necessary for the operation of the Business as its it is currently
conducted. For purposes of this Agreement, "Intangible Property" shall
mean all patents, patent applications, inventions and discoveries that
may be patentable, registered and unregistered trademarks, registered and
unregistered service marks, the corporate name "Net Radio Corporation,"
trade names,fictitious business names, logos, symbols, copyrights in both
published and unpublished works,rights in mask works and licenses,
registrations and applications with respect thereto, and customer lists,
manifests, service schedules and all customer records, inventions,
processes, technical information and data, plans, drawings, blueprints,
know-how, trade secrets, proprietary information, confidential
information, software, all of the good will of the Company, and any other
intangible asset associated with, owned or used in connection with the
Business.
(b) Except as set forth in SCHEDULE 2.13.(b), (i) the Intangible Property
is free and clear of all Encumbrances to other persons or entities of
whatever kind and character; (ii) there are no claims or demands of any
other person, firm or corporation pertaining to the Intangible Property;
(iii) no proceedings have been instituted, are pending, or threatened
which challenge the Company's rights in respect thereto; (iv) the
Intangible Property does not infringe upon or otherwise violate the
rights of others nor is it being infringed on by others; (v) no
Intangible Property has been challenged or threatened in any way;
(vi) the Intangible Property is not subject to any outstanding order,
decree, judgment or stipulation; (vii) all products, materials and images
containing a trademark or service xxxx xxxx the proper trademark notice
where permitted by law; (viii) all works in which copyright protection is
claimed have been registered and are currently in compliance with formal
legal requirements, are valid and enforceable, and have been marked with
the proper copyright notice and (viii) no licenses, sublicenses or
agreements pertaining to the Intangible Property are in effect. There are
no outstanding and, to the best of the Company's knowledge and to the
best knowledge of its officers and directors, no threatened disputes or
disagreements respect to any license, sublicense or agreement pertaining
to the Intangible Property. With respect to trademark and/or service xxxx
applications which are pending as of the date of this Agreement, to the
best of the Company's knowledge, there are no potentially interfering
trademarks or service marks or applications therefor. The Intangible
Property represents all of the intangible assets or rights to the same
used by the Company in the Business as conducted on the Closing
Date and as conducted on the Effective Date. The Company has taken
reasonable and practicable steps to maintain the secrecy and
confidentiality of, and its proprietary rights in, the customer list of
the Company.
(c) Except as set forth in SCHEDULE 2.13.(c), all current officers of the
Company have executed written contracts with the Company that assign to
the Company all rights to any inventions, improvements, discoveries, or
information relating to the Business of the Company; prior to the
Effective Date the Company shall obtain written contracts from those
officers listed on SCHEDULE 2.13.(c) assigning such rights and interests.
No employee of the Company has entered into any contract that restricts
or limits in any way the scope or type of work in which the employee may
be engaged or requires the employee to transfer, assign or disclose
information concerning his work to anyone other than the Company.
(d) The Company has taken all reasonable precautions to protect the
secrecy, confidentiality, and value of its trade secrets and has good
title and an absolute right to use the trade secrets. The trade secrets
are not part of the public knowledge or literature, and, to the best of
the Company's knowledge, have not been used, divulged, or appropriated
either for the benefit of any person or to the detriment of the Company.
No trade secret is subject to any adverse claim or has been challenged or
threatened in any way.
2.14. Rights to Use Works. Except as set forth in SCHEDULE 2.14., the Company
has received authorizations, licenses, and permissions which are required by law
or industry practice, to use, perform or otherwise transmit in the course of its
business all works, compositions or other information which it does not own or
otherwise have the right to use. All such authorizations, licenses and
permissions allow Company to use, perform or otherwise transmit such works,
compositions and information in all countries and principalities in which the
Company's Website may be accessed.
2.15. Competition. To the best of the Company's knowledge, there is currently
no business or operation existing in the United States which directly competes
with the business.
2.16. Accounts Receivable. The accounts receivable shown on the Company's
Financial Statements or arising after the date thereof and prior to the Closing
Date or after the Closing Date and arising prior to the Effective Date have been
created only in the ordinary course of business and, in all material respects,
represent bona fide transactions completed in accordance with the terms and
provisions contained in any documents related thereto. There are no set-offs,
pending returns, counterclaims or disputes asserted or conditions precedent to
payment therefor with respect to any such accounts receivable and no discount,
credit against or allowance from any such accounts receivable has been made or
agreed to (except for set-offs, counterclaims, disputes, conditions, discounts
or allowances that singly or in the aggregate would not reduce the value of the
Company's accounts receivable by more than $10,000.00).
2.17. Consents. Except as set forth on SCHEDULE 2.17., no consents from any
third parties, including any governmental or other regulatory agencies or
customers, are required to carry out the Transaction contemplated by this
Agreement. The Company shall obtain, prior to the
Effective Date, all consents of third parties, including, but not limited to,
governmental or other regulatory agencies, which are required to prevent a
violation or default under any authorization, agreement, instrument or
understanding of the Company, as a result of the execution, delivery or
performance of this Agreement. A list of all consents of third parties required
to carry out such Transaction is set forth on SCHEDULE 2.17.
2.18. Tax Matters.
(a) SCHEDULE 2.18.(a) lists the fiscal year(s) and period(s) through
which the Company has filed Tax returns, stating whether or not they have
been examined by the Internal Revenue Service or any state agency with
respect to any such period, giving, in each instance, any deficiencies
proposed as a result of all such examinations, stating whether such
deficiencies have been paid or settled, and listing any powers of
attorney given by the Company empowering the person, firm or corporation
named therein to act on behalf of the Company in connection with Tax or
other matters. Since January 31, 1996, no material Tax liability has been
assessed, or proposed to be assessed, incurred or accrued other than in
the ordinary course of business. No Tax returns of the Company have been
examined by the Internal Revenue Service or the appropriate state
agencies for any fiscal year or period ended prior to the Closing Date,
and the Company is not presently under, not has it received notice of,
any contemplated investigation or audit by the Internal Revenue Service
or any state agency concerning any fiscal year or period ended prior to
the Closing Date or the Effective Date.
(b) The Company has provided to Navarre a true and complete copy of the
Company's state and federal income tax returns for the year 1995.
(c) Except as set forth in SCHEDULE 2.18.(e), As of the Closing Date and
as of the Effective Date, the Company has timely filed all Tax returns
required to be filed on or prior to the Closing Date and Effective Date,
taking into account any extensions of the filing deadlines which have
been validly granted to the Company. All such Tax returns are and will be
true and correct in all material respects. No material issues have been
raised (and are currently pending) by the Internal Revenue Service or any
other taxing authority in connection with any of the Tax returns referred
to in the preceding sentence, and no waivers of statutes of limitations
have been given or requested by or of the Company. Any deficiencies
asserted or assessments (including interest and penalties) made as a
result of any examination by the Internal Revenue Service or by
appropriate state or departmental authorities of the Tax returns of or
with respect to the Company have been fully paid or are adequately
provided for in the Unaudited Financial Statements and no material
proposed (but unassessed) additional Taxes have been asserted or assessed
and no Tax liens have been filed.
(d) The Company has paid, collected or withheld all federal, foreign,
state, county and local income, franchise, property, sales, use, payroll
(including, without limitation, social security) and all other Taxes
(including penalties and interest in respect thereof, if any) that have
become or are due or collectible with respect to any period or
transaction ended on or prior to the Closing Date and the Effective Date
whether shown
on the Company's Tax returns or not and whether or not assessed prior to
the Closing Date or the Effective Date.
(e) Except as set forth on SCHEDULE 2.18.(e), the Company has accrued on
its Financial Statements all unpaid Taxes which are required under
generally accepted accounting principles to be so accrued on its
Financial Statements and which are due or may become due with respect to
any periods ended on or prior to the Closing Date, and prior to the
Effective Date whether or not such unpaid Taxes are shown on a return for
such period and whether or not a return has been filed for such period.
(f) Neither the Company, nor any predecessor thereto has at any time
consented under Section 341(f)(1) of the Code to have the provisions of
Section 341(f)(2) of the Code apply to any sale of its stock or is a
"personal holding company" within the meaning of Section 542 of the Code.
(g) Except as set forth on SCHEDULE 2.18.(g), all Taxes required to be
withheld on or prior to the Closing Date or the Effective Date from all
Company employees, owner/operators and other personnel engaged by the
Company in whatever capacity (including, without limitation, persons
designated as independent contractors) for income taxes, unemployment
taxes, social security and other taxes, contributions and assessments,
have been properly withheld and, if required on or prior to the Closing
Date or the Effective Date, have been deposited with, or as directed by,
the appropriate governmental agency.
2.19. Environmental Protection.
(a) Except as provided in SCHEDULE 2.19.(a), the Company has obtained all
authorizations required by law or contract (including, without
limitation, all environmental permits) and made all required governmental
filings relating to the ownership of its property, facilities and assets
and the operation thereof under all requirements of law relating to
pollution or protection of the environment where the failure to so obtain
such authorizations or make such required governmental filings would have
a material adverse effect on the Company. The Company is and at all times
since its organization has been in material compliance with the terms and
conditions of all such authorizations and environmental requirements.
SCHEDULE 2.19.(a) contains a complete and correct list of all waste
products generated by the Company in connection with its business which
would be considered to be hazardous wastes or substances under applicable
law and all persons or entities to whom such waste products are
transferred. To the best knowledge, information and belief of the
officers, directors and management level personnel of the Company, the
Company is not a "potentially responsible party" under the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, or any similar state law.
(b) In all matters relating to the Company's properties, facilities and
assets, there has not been, and on or prior to the Effective Date, there
shall not be, any past or present activities, practices, incidents,
actions or plans of the Company or any of its predecessors, which
individually or in the aggregate (i) constitute a material breach of
any environmental laws, (ii) may materially interfere with or prevent
continued compliance with all environmental laws, or (iii) may give rise
to any material common law, statutory or other legal liability, or
otherwise form the basis of any material claim, clean-up cost, fine,
penalty or assessment based on or related to the transportation,
transmission, gathering, processing, distribution, use, treatment,
storage, disposal or handling, or the emission, discharge, release or
threatened release into the environment, of any pollutant, contaminant.
hazardous or toxic material, substance or waste.
(c) The Company has not entered into or received any consent decree,
compliance order, or administrative order relating to environmental
protection.
(d) The Company has neither entered into or received nor is the Company
in default under any judgment, order, writ, injunction or decree of any
federal, state, or municipal court or other governmental authority
relating to environmental protection.
(e) The Company has all permits, licenses, approvals, consents and
authorizations relating to environmental protection which are required
under federal, state or local laws, rules and regulations which, if not
obtained by the Company, would have a material adverse effect on the
Company, all of which are set forth on SCHEDULE 2.19.(a), and is in
material compliance with all such permits, licenses, approvals, consents
and authorizations, including, without limitation, any information
provided in the applications therefor.
(f) There are no material actions, suits, claims, arbitration
proceedings, or complaints pending or, to the best knowledge, information
and belief of the officers, directors and management level personnel of
the Company, threatened or under consideration by any governmental
authority, municipality, community, citizen or other entity against the
Company relating to environmental protection, nor does the Company have
reason to believe that any such actions, suits, claims or complaints will
be brought against it with respect to any past or present activities,
practices, incidents, actions or plans of the Company.
(g) No lien has arisen on the Company's properties or facilities under
federal, state or local laws, rules or regulations as they relate to
environmental protection.
(h) The Company has no above-ground or underground storage and fuel tanks
on the property leased, operated or occupied by the Company.
2.20. Insurance. The insurance policies listed and described briefly on SCHEDULE
2.20. constitute all of the policies in force and effect and owned or held by
the Company. Except as set forth in SCHEDULE 2.20., the Company is not in
default under any such policy. SCHEDULE 2.20. lists all claims made under such
policies since their existence and states the carriers, and expiration dates
(and with respect to those policies owned or held by the Company) the policy
numbers, premiums and coverage. The list of all claims made under the policies
set forth above has been procured from the Company's insurance carriers and is
true and accurate to the best knowledge, information and belief of the officers,
directors and management level personnel of the Company. All policies listed on
SCHEDULE 2.20. are outstanding and fully in
force, and all liability under the claims listed on SCHEDULE 2.20. is fully
covered and insured against under such policies subject to applicable
deductibles. There are no outstanding claims under any such policy as to which
the insurer has disclaimed liability. The Company has not been refused insurance
by any insurance carrier to which it has applied for insurance.
2.21. Banks. SCHEDULE 2.21. lists all banks or other financial institutions
with which the Company has an account, line of credit or safe deposit box and
the account numbers thereof and names of persons authorized to act in
connection therewith.
2.22. Undisclosed Material Liabilities. Except as disclosed in SCHEDULE
2.22., the Company does not have any liabilities of any kind that would be
material to the financial condition of the Company, taken as a whole, other
than:
(a) Liabilities disclosed or provided for in the audited balance sheet of
the Company dated as of December 31, 1995;
(b) Liabilities incurred since December 31, 1995, in the ordinary course
of business consistent with past practice that in the aggregate are not
material to the Company, taken as a whole; and
(c) Liabilities not required under generally accepted accounting
principles to be shown on the balance sheet of the Company for reasons
other than the contingent nature thereof or the difficulty of determining
the amount thereof.
2.23. Disclosure. Neither the Financial Statements, nor this Agreement
(including the Schedules and Exhibits attached hereto as they relate to the
Company or its Shareholders) nor any certificate or other information or
document furnished or to be furnished by the Shareholders or the Company to NRC
and Navarre contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact required to be stated herein or
therein or necessary to make the statements herein or therein not misleading. To
the best knowledge, information and belief of the officers, directors and
management level personnel of the Company, there is no event, fact or condition
that materially and adversely affects, or that reasonably could be expected to
materially and adversely affect, the Company that has not been set forth in this
Agreement or in the Schedules to this Agreement. True copies of all indentures,
notes, leases, agreements, plans, contracts and other instruments listed on or
referred to, or otherwise related to any item referred to, in the Schedules
delivered or furnished to NRC and Navarre pursuant to this Agreement have been
delivered to or have been made available for inspection by NRC and Navarre and
NRC and Navarre's attorneys and accountants.
2.24. Continuing Representations. THE REPRESENTATIONS AND WARRANTIES OF THE
COMPANY CONTAINED IN SECTION II. OF THIS AGREEMENT SHALL BE REPEATED AND
REAFFIRMED AS TRUE AND CORRECT ON AND AS OF THE EFFECTIVE DATE WITH THE SAME
FORCE AND EFFECT AS IF MADE ON AND AS OF THAT DATE.
SECTION III.
REPRESENTATIONS AND WARRANTIES OF NAVARRE
Navarre represents, warrants, covenants and agrees to and with the Company that:
3.1. Organization and Corporate Power. Navarre is a corporation duly organized
and validly existing and in good standing under the laws of the State of
Minnesota and has full power and authority (corporate and other), to own, lease
or operate its properties in places where such business is now operated, to
carry on its business as now being conducted, and to execute and deliver this
Agreement to carry out the Transaction contemplated by this Agreement, and to
execute the documents referenced herein.
3.2. Due Authorization; Effect of Transaction. Except as otherwise provided in
SCHEDULE 3.2., no provision of Navarre's Articles of Incorporation or Bylaws, or
of any agreement, instrument or understanding, or any judgment, decree, law,
rule or regulation, to which Navarre is a party or by which it is bound, has
been or will be violated by the execution by Navarre of this Agreement or the
performance or satisfaction of any agreement or condition therein or herein
contained upon its part to be performed or satisfied, and all requisite
corporate and other authorizations for such execution, delivery, performance and
satisfaction have been duly obtained. This Agreement will, upon execution and
delivery, be a legal, valid and binding obligation of Navarre, enforceable in
accordance with its terms, except as may be limited by bankruptcy, insolvency,
or other laws affecting creditors' rights generally.
3.3. Articles of Incorporation and Bylaws. Navarre has heretofore furnished, or
otherwise made available, to the Company a complete and correct copy of its
Articles of Incorporation and the Bylaws, each as amended to the date hereof.
Such Articles of Incorporation and Bylaws are in full force and effect. Navarre
is not in violation of any of the provisions of its Articles of Incorporation
or, in any material respect, its Bylaws.
3.4. Capitalization.
(a) The authorized capital stock of Navarre consists of 25,000,000 shares
of no par value capital stock, of which 5,000,000 are shares of preferred
stock, none of which are outstanding and none of which are reserved for
issuance, and 20,000,000 of which are designated shares of common stock,
of which, as of March 3, 1997, 6,777,248 shares were issued and
outstanding, and 1,260,220 shares were issuable upon the exercise of
options outstanding under the Navarre option plans listed on SCHEDULE
3.4. hereto. Except as set forth on SCHEDULE 3.4., (i) since March 3,
1997, no shares of Navarre Common Stock have been issued, except upon the
exercise of options described in the immediately preceding sentence, and
(ii) there are no outstanding "Navarre Equity Rights." For purposes of
this Agreement, "Navarre Equity Rights" shall mean subscriptions,
options, warrants, calls, commitments, agreements, conversion rights or
other rights of any character (contingent or otherwise) to purchase or
otherwise acquire from Navarre at any time, or upon the happening of any
stated event, any shares of the capital stock of Navarre. SCHEDULE 3.4.
hereto sets forth a complete and accurate list of certain information
with respect to all outstanding Navarre Equity Rights as of
March 3, 1997. Since March 3, 1997, no Navarre Equity Rights have been
issued except as set forth on SCHEDULE 3.4.
(b) Except as set forth on SCHEDULE 3.4., there are no outstanding
obligations of Navarre to repurchase, redeem or otherwise acquire any
shares of capital stock of Navarre.
(c) All of the issued and outstanding shares of Navarre Common Stock are
validly issued, fully paid and nonassessable.
3.5. Required Filings and Consents. Except as listed on SCHEDULE 3.5. and except
for applicable requirements, if any, of foreign regulatory laws and commissions,
filing and recordation of appropriate merger or other documents as required by
Minnesota and Nevada Law, Navarre is not required to submit any notice, report
or other filing with any governmental authority, domestic or foreign, in
connection with the execution, delivery or performance of this Agreement. Except
as set forth in the immediately preceding sentence, no waiver, consent, approval
or authorization of any governmental or regulatory authority, domestic or
foreign, is required to be obtained by Navarre in connection with its execution,
delivery or performance of this Agreement or the Transaction contemplated
hereby.
3.6. SEC Filings; Financial Statements.
(a) Navarre has filed all forms, reports and documents required to be
filed with the Securities and Exchange Commission ("SEC") since January
1, 1994, and has heretofore delivered or made available to the Company,
in the form filed with the SEC, together with any amendments thereto, its
(i) Annual Reports on Form 10-K for the fiscal year ended Xxxxx 00, 0000,
(xx) the Company's proxy statement relating to Navarre's annual meetings
of shareholders held on September 5, 1996, (iii) Quarterly Reports on
Form 10-Q for the fiscal quarters ended June 30, 1996, September 30,
1996, and December 31, 1996, and (iv) all other reports or registration
statements filed by Navarre with the SEC since March 31, 1996
(collectively, the "Navarre SEC Reports"). The Navarre SEC Reports
(i) were prepared substantially in accordance with the requirements of
the Securities Exchange Act of 1934, as the same may be amended from time
to time ("Exchange Act"), as the case may be, and the rules and
regulations promulgated under each of such respective acts, and (ii) did
not at the time they were filed contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary in order to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(b) The financial statements, including all related notes and schedules,
contained in the Navarre SEC Reports (or incorporated by reference
therein) fairly present the consolidated financial position of Navarre
and its subsidiaries as at the date thereof and the consolidated results
of operations and cash flows of Navarre and its subsidiary for the
periods indicated in accordance with GAAP applied on a consistent basis
throughout the periods involved (except for changes in accounting
principles disclosed in the notes thereto) and subject in the case of
interim financial statements to normal year-end adjustments.
3.7. Absence of Certain Changes or Events. Except as disclosed in the Navarre
SEC Reports filed prior to the date hereof or disclosed in Navarre's Prospectus
dated December 10, 1996 and/or on SCHEDULE 3.7., since March 31, 1996, Navarre
has not incurred any material liability, except in the ordinary course of its
business consistent with its past practices, and there has not been any change,
or any event involving a prospective change, in the business, financial
condition or results of operations of Navarre which has had, or is reasonably
likely to have, a Material Adverse Effect on Navarre, and Navarre has conducted
its business in the ordinary course consistent with its past practices.
"Material Adverse Effect," as it applies to Navarre, for purposes of this
Agreement shall mean $1,000,000 or greater.
3.8. Litigation. Except as disclosed on SCHEDULE 3.8. hereto, (a) there are no
claims, actions, suits, proceedings or investigations pending or, to Navarre's
knowledge, threatened against Navarre or any properties or rights of Navarre
before any court, administrative, governmental, arbitral, mediation or
regulatory authority or body, domestic or foreign, as to which there is more
than a remote possibility of an adverse judgment or determination against
Navarre or any properties or rights of Navarre in excess of $200,000 (net of
insurance and net of accruals reflected in the financial statements incorporated
by reference in Navarre SEC Reports), and (b) cases in which Navarre is not a
named defendant, but as to which Navarre may be liable for an allocable share of
any judgment rendered. With respect to tax matters, litigation shall not be
deemed threatened unless a tax authority has delivered a written notice of
deficiency to Navarre.
3.9. No Violation of Law. The business of Navarre is not being conducted in
violation of any statute, law, ordinance, regulation, judgment, order or decree
of any domestic or foreign governmental or judicial entity (including any stock
exchange or other self-regulatory body) ("Legal Requirements"), or in violation
of any permits, franchises, licenses, authorizations or consents that are
granted by any domestic or foreign government or judicial entity (including any
stock exchange or other self-regulatory body) ("Permits"), except for possible
violations none of which, individually or in the aggregate, may reasonably be
expected to have a Material Adverse Effect on Navarre. Except as disclosed in
Navarre SEC Reports and as set forth on SCHEDULE 3.9. hereto, to the best of
Navarre's knowledge, no investigation or review by any domestic or foreign
governmental or regulatory entity (including any stock exchange or other
self-regulatory body) with respect to Navarre in relation to any alleged
violation of law or regulation is pending or, to Navarre's knowledge,
threatened, nor has any governmental or regulatory entity (including any stock
exchange or other self-regulatory body) indicated an intention to conduct the
same, except for such investigations which, if they resulted in adverse
findings, would not reasonably be expected to have, individually or in the
aggregate, a Material Adverse Effect on Navarre. Except as set forth on SCHEDULE
3.9. hereto, Navarre is not subject to any cease and desist or other order,
judgment, injunction or decree issued by, or is a party to any written
agreement, consent agreement or memorandum of understanding with, or is a party
to any commitment letter or similar undertaking to, or is subject to any order
or directive by, or has adopted any board resolutions at the request of, any
court, governmental entity or regulatory agency that materially restricts the
conduct of its business or which may reasonably be expected to have a Material
Adverse Effect on Navarre, nor has Navarre been advised that any court,
governmental entity or regulatory agency is considering issuing or requesting
any of the foregoing. None of the representations and warranties made in this
Section 3.9. are being made with respect to Environmental Laws.
3.10. Navarre Proxy Statement. None of the information supplied or to be
supplied by or on behalf of Navarre for inclusion or incorporation by reference
in its proxy statement, in definitive form, relating to the meeting of Navarre
shareholders to be held in connection with the Merger, if required, or in the
related proxy and notice of meeting, or soliciting material used in connection
therewith (referred to herein collectively as the "Proxy Statement") will, at
the dates mailed to shareholders of Navarre and at the times of the Navarre
shareholders' meeting, contain any untrue statement of a material fact or omit
to state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which they
are made, not misleading. The Proxy Statement (except for information relating
solely to Company) will comply as to form in all material respects with the
applicable provisions of the 1933 Act and the Exchange Act and the rules and
regulations promulgated thereunder.
3.11. Employee Matters; ERISA. Except as previously disclosed in writing by
Navarre's outside counsel to the Company's outside counsel with specific
reference to this Section 3.11.:
(a) Set forth on SCHEDULE 3.11. hereto is a true and complete list of all
employee benefit plans covering present and former employees or directors
of Navarre or its beneficiaries, or providing benefits to such persons in
respect of services provided to any such entity, including, but not
limited to, any employee benefit plans within the meaning of Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), any deferred compensation bonuses, stock options, restricted
stock plans, incentive compensation, severance or change in control
agreements and any other material benefit arrangements or payroll
practices (collectively, the "Navarre Benefit Plans").
(b) All contributions and other payments required to be made by Navarre
to or under any Navarre Benefit Plan (or to any person pursuant to the
terms thereof) have been made or the amount of such payment or
contribution obligation has been reflected in the Navarre Financial
Statements.
(c) Each of the Navarre Benefit Plans intended to be "qualified" within
the meaning of Section 401(a) of the Code has been determined by the
Internal Revenue Service (the "IRS") to be so qualified, and, to
Navarre's knowledge, no circumstances exist that could reasonably be
expected by Navarre to result in the revocation of any such
determination. Navarre is in compliance in all material respects with,
and each of the Navarre Benefit Plans is and has been operated in all
material respects in compliance with, all applicable Legal Requirements
governing such plan, including, without limitation, ERISA and the Code.
Each Navarre Benefit Plan intended to provide for the deferral of income
or the reduction of salary or other compensation, or to afford other
income tax benefits, complies in all material respects with the
requirements of the applicable provisions of the Code and other Legal
Requirements to the extent required to provide such income tax benefits.
(d) With respect to the Navarre Benefit Plans, individually and in the
aggregate, no event has occurred and, to Navarre's knowledge, there does
not now exist any condition or set of circumstances, that could subject
Navarre to any material liability arising under the Code, ERISA or any
other applicable Legal Requirements (including, without
limitation, any liability to any such plan or the Pension Benefit
Guaranty Corporation (the "PBGC")), or under any indemnity agreement to
which Navarre is a party, excluding liability for benefit claims and
funding obligations payable in the ordinary course.
(e) Except as set forth on SCHEDULE 3.11. hereto, none of the Navarre
Benefit Plans that are "welfare plans" within the meaning of Section 3(1)
of ERISA provides for any retiree benefits other than continuation
coverage required to be provided under Section 4980B of the Code or Part
6 of Title I of ERISA.
(f) Navarre has made available to Company a true and correct copy of each
current or last, in the case where there is no current, expired
collective bargaining agreement to which Navarre is a party or under
which Navarre has obligations and, with respect to each Navarre Benefit
Plan, where applicable, (i) such plan (but only to the extent such plan
is intended to be covered by Section 401 of the Code) and summary plan
description, (ii) the most recent annual report filed with the IRS,
(iii) each related trust agreement (including all material amendments to
each such trust agreement), (iv) the most recent determination of the IRS
with respect to the qualified status of such Navarre Benefit Plan, and
(v) the most recent actuarial report or valuation.
(g) Except as set forth on SCHEDULe 3.11. hereto, (i) the consummation or
announcement of the Transaction contemplated by this Agreement will not
(either alone or upon the occurrence of any additional or further acts or
events) result in any (A) payment (whether of severance pay or otherwise)
becoming due from Navarre to any officer, employee, former employee or
director thereof or to the trustee under any "rabbi trust" or similar
arrangement, or (B) benefit under any Navarre Benefit Plan being
established or becoming accelerated, vested or payable and (ii) Navarre
is not a party to (A) any management, employment, deferred compensation,
severance (including any payment, right or benefit resulting from a
change in control), bonus or other contract for personal services with
any current or former officer, director or employee (whether or not
characterized as a plan for purposes of ERISA), (B) any consulting
contract with any person who prior to entering into such contract was a
director or officer of Navarre, or (C) any plan, agreement, arrangement
or understanding similar to any of the items described in clause (ii)(A)
or (B) of this sentence.
(h) The consummation or announcement of the Transaction contemplated by
this Agreement will not (either alone or upon the occurrence of any
additional or further acts or events) result in the disqualification of
any of the Navarre Benefit Plans intended to be qualified under, result
in a prohibited transaction or breach of fiduciary duty under, or
otherwise violate, ERISA or the Code.
(i) Neither Navarre nor any of their directors, officers, employees or
agents, nor any "party in interest" or "disqualified person", as such
terms are defined in Section 3 of ERISA and Section 4975 of the Code has,
with respect to any Navarre Benefit Plan, engaged in or been a party to
any "prohibited transaction", as such term is defined in Section 4975 of
the Code or Section 406 of ERISA which is not otherwise exempt, which
could result in the imposition of either a penalty assessed pursuant to
Section 502(i) of ERISA or a tax imposed by Section 4975 of the Code or
which could constitute a breach
of fiduciary duty, in each case applicable to Navarre or any Navarre
Benefit Plan and which would result in a Material Adverse Effect on
Navarre.
3.12. Approval.
(a) The Board of Directors of Navarre has unanimously determined that
the Transaction contemplated by this Agreement is in the best
interests of Navarre and its stockholders and has resolved to
recommend to such stockholders that they vote in favor thereof.
(b) Navarre has no rights agreements which would affect any of the
above described transactions and no vote or approval under any
such agreement is required thereunder, and no holder of rights
issued thereunder shall be entitled to exercise such rights under,
or be entitled to any rights or benefits pursuant to, solely by
reason of the approval, execution and delivery of this Agreement
or the consummation of the Transaction contemplated hereby.
3.13. Opinion of Financial Advisor. Navarre has determined that it does not need
the benefit of any opinion from an independent financial advisor to engage in
the Transaction contemplated hereby and has determined that the conversion ratio
set forth in the Agreement of Merger is fair from a financial point of view to
the holders of Navarre common stock.
3.14. Tax Matters. Except as set forth on SCHEDULE 3.14. hereto, all material
federal, state, local and foreign tax returns and tax reports required to be
filed by Navarre on or prior to the Effective Date or with respect to taxable
periods ending on or prior to the Effective Date have been or will be filed with
the appropriate governmental authorities on or prior to the Effective Date or by
the due date thereof including extensions.
3.15. Intellectual Property. To the best of Navarre's knowledge, Navarre does
not utilize or has utilized any patent, trademark, trade name, service xxxx,
copyright, software, trade secret or how, except for those which are owned,
possessed or lawfully used by Navarre in its operations, and, to the knowledge
of Navarre, Navarre does not infringe upon or unlawfully or wrongfully uses any
patent, trademark, trade name, service xxxx, copyright or trade secret owned or
validly claimed by another.
3.16. Insurance. Except as set forth on SCHEDULE 3.16. hereto, Navarre is, and
has been continuously since January 1, 1992, insured with financially
responsible insurers in such amounts and against such risks and losses as are
customary for companies conducting the business as conducted by Navarre during
such time period. Except as set forth on such SCHEDULE 3.16., since January 1,
1996, Navarre has not received notice of cancellation or termination with
respect to any material insurance policy of Navarre. The insurance policies of
Navarre are valid and enforceable policies.
3.17. Certain Contracts. All contracts described in Item 601(b)(10) of
Regulation S-K to which Navarre is a party or may be bound ("Navarre Contracts")
have been filed as exhibits to, or incorporated by reference in, Navarre's
Annual Report on Form 10-K for the year ended March 31, 1996. All Navarre
Contracts are valid and in full force and effect on the date hereof
except to the extent they have previously expired in accordance with their
terms, and Navarre has not violated any provision of, or committed or failed to
perform any act which with or without notice, lapse of time or both would
constitute a default under the provisions of, any Navarre Contract, except for
defaults which, individually and in the aggregate, would not reasonably be
expected to result in a Material Adverse Effect on Navarre. True and complete
copies of all Navarre Contracts have been made available to the Company for
inspection.
3.18. Broker or Finder. No person or persons assisted in or brought about the
negotiation of this Agreement in the capacity of broker or agent or finder on
behalf of Navarre. Navarre has no liability to any broker, finder or agent and
has not agreed to pay any brokerage fees, commissions or finders fees with
respect to this Agreement or the Transaction.
3.19. Escrow Shares; 1997 Shares and 1998 Shares. Upon issuance to the
Shareholders pursuant to Section 1.11 and 1.12 of this Agreement, the Escrow
Shares, 1997 Shares and 1998 Shares shall have been duly authorized, duly and
validly issued and fully paid and nonassessable, and will not be subject to
preemptive rights of any shareholder of Navarre. The Escrow Shares, 1997 Shares
and 1998 Shares to be issued pursuant to this Agreement will not be registered
under the Securities Act of 1933 or any state securities law and may not be
resold without (i) registration under the Securities Act of 1933; or (ii) an
opinion of counsel acceptable to counsel for Navarre that such registration is
not necessary. The Navarre Shares may be sold by the Shareholders only in
compliance with Rule 144 or pursuant to registration under the Securities Act of
1933 and applicable state securities law.
3.20. Credit Facility Agreement. For the period ending September 30, 1998,
Navarre will, subject to achievement of satisfactory performance milestones by
the Surviving Corporation as identified in the Credit Facility Agreement, and
subject to all of the conditions set forth in the Credit Facility Agreement,
make available to the Surviving Corporation working capital in the amounts set
forth in the Credit Facility Agreement.
3.21. Continuing Representations. THE REPRESENTATIONS AND WARRANTIES OF
NAVARRE CONTAINED IN SECTION III. OF THIS AGREEMENT SHALL BE REPEATED AND
REAFFIRMED AS TRUE AND CORRECT ON AND AS OF THE EFFECTIVE DATE WITH THE SAME
FORCE AND EFFECT AS IF MADE ON AND AS OF THAT DATE.
SECTION IV.
REPRESENTATIONS AND WARRANTIES OF NRC
NRC represents, warrants, covenants and agrees to and with the Company that:
4.1. Organization and Corporate Power. NRC is a corporation duly organized and
validly existing and in good standing under the laws of the State of Minnesota
and has full power and authority (corporate and other), to own, lease or operate
its properties in places where such business is now operated, to carry on its
business as now being conducted, and to execute and deliver this Agreement to
carry out the Transaction contemplated by this Agreement, and to execute the
documents referenced herein.
4.2. Due Authorization; Effect of Transaction. No provision of NRC's Articles of
Incorporation or Bylaws, or of any agreement, instrument or understanding, or
any judgment, decree, law, rule or regulation, to which NRC is a party or by
which it is bound, has been or will be violated by the execution by NRC of this
Agreement or the performance or satisfaction of any agreement or condition
therein or herein contained upon its part to be performed or satisfied, and all
requisite corporate and other authorizations for such execution, delivery,
performance and satisfaction have been duly obtained. This Agreement will, upon
execution and delivery, be a legal, valid and binding obligation of NRC,
enforceable in accordance with its terms, except as may be limited by
bankruptcy, insolvency, or other laws affecting creditors' rights generally.
4.3. Broker or Finder. No person or persons assisted in or brought about the
negotiation of this Agreement in the capacity of broker or agent or finder on
behalf of NRC. NRC has no liability to any broker, finder or agent and has not
agreed to pay any brokerage fees, commissions or finders fees with respect to
this Agreement or the Transaction.
SECTION V.
ADDITIONAL AGREEMENTS
5.1. Transition Planning. Xxxx Xxxxxxx and Xxxxxx Xxxxxx, as Presidents of
Navarre and the Company, respectively, jointly shall be responsible for
coordinating all aspects of transition planning and implementation relating to
the Transaction contemplated hereby. If either such person ceases to be
President of his respective company for any reason, such person's successor as
President shall assume his predecessor's responsibilities under this Section
5.1. During the period between the date hereof and the Effective Date, Messrs.
Xxxxxxx and Xxxxxx jointly shall (i) examine various alternatives regarding the
manner in which to best organize and manage the businesses of the Surviving
Corporation after the Effective Date, and (ii) coordinate policies and
strategies with respect to regulatory authorities and bodies, in all cases
subject to applicable law.
5.2. Control of Operations. Nothing contained in this Agreement shall give the
Company, directly or indirectly, the right to control or direct Navarre's or
NRC's operations prior to the Effective Date. Nothing contained in this
Agreement shall give Navarre, directly or indirectly, the right to control or
direct the Company's operations prior to the Effective Date. Prior to the
Effective Date, each of the Company, NRC and Navarre shall exercise, consistent
with the terms and conditions of this Agreement, complete control and
supervision over its respective operations.
5.3. Management Agreement. Navarre shall determine the members of the Board of
Directors of the Surviving Corporation after the Closing. Such directors will,
in turn, be responsible for recruiting, selecting and training the officers of
the Surviving Corporation. Further, the Company has informed its Shareholders
that Navarre intends to interview and select a new Chief Operating Officer and a
Chief Financial Officer for the Surviving Corporation.
5.4. Shareholder Approval. The Company and Navarre each acknowledge that Rule
4460(i) of the NASDAQ and Stock Market Manual requires shareholder approval
where the potential issuance of shares in a transaction will result in the
issuance of shares in excess of twenty
percent (20%) of the issuer's outstanding securities prior to the transaction.
As a result of the fact that the Transaction contemplated herein will
potentially result in an issuance of common stock of Navarre in the amount of
more than twenty percent (20%), consummation of the Transaction contemplated
herein would ordinarily be subject to approval of the shareholders of Navarre,
and Navarre shall be required to call a special meeting with respect to the
proposed Transaction prior to the Effective Date. The Company has received
correspondence from NASDAQ under which NASDAQ has granted the Company an
exemption from Rule 4460(i), provided that the Shareholders of Navarre do not
challenge the transaction prior to the Effective Date.
5.5. Releases. Within ten (10) days of the Closing Date, the Company shall take
all necessary action to (i) terminate all outstanding warrants and options that
are in favor of the Shareholders and any third parties; (ii) release any
Encumbrances on the assets of the Company, including the Intangible Property,
that are in favor of any of Shareholders; and (iii) obtain the Agreement of
Employees from all its employees.
5.6. Repayment of Loan Obligations. Within 48 hours of Effective Date, Navarre
shall cause to be paid to the parties set forth and listed below twenty-five
percent (25%) of the outstanding balance of the Loans with the remainder of the
Loans to each be paid in eighteen (18) equal monthly installments of principal
plus interest at the rate provided therein. As additional consideration for the
release of the security interests securing the Loans, Navarre shall issue 5,000
shares of its common stock to Xxxxxxx Xxxxxxx and 15,000 shares of its common
stock to Xxxxxx Xxxxxx, which shares shall be issued as of the Effective Date.
In exchange, all security interests in the Company's assets provided to said
parties to secure the Loans shall be terminated contemporaneously with the
initial 25% payment. The Loans are as follows:
(a) that certain Promissory Note dated December 4, 1995, executed by
the Company in favor of Xxxxxxx Xxxxxxx in the original principal
amount of $22,500, together with interest accruing at 10% per
annum;
(b) that certain Promissory Note dated December 29, 1995, executed by
the Company in favor of Xxxxxx Xxxxxx in the original principal
amount of $22,500, together with interest accruing at 10% per
annum; and
(c) that certain Promissory Note dated November 13, 1995, executed by
the Company in favor of Xxxxxx Xxxxxx in the original principal
amount of $45,000, together with interest accruing at 10% per
annum (the loans set forth in (a), (b) and (c) of this Section
5.6. are collectively referenced as the "Loans").
5.7. Agreements Null and Void. Except as described on SCHEDULE 5.7. hereto, the
Company and Navarre each agree that the Option Agreement, Shareholder Voting
Control Agreement and Preemptive Agreement, each dated as of May 1, 1996, shall
be null and void and of no further force or effect as of the Effective Date,
which shall be evidenced by the Termination Agreement. Further, the Stock
Purchase Agreement dated as of May 1, 1996 shall be null and void and of no
further force and effect, except as described on SCHEDULE 5.7., and except with
respect to Section VIII., Survival Of Representations and Warranties, which
shall continue to survive the termination of the Stock Purchase Agreement for
the period set forth therein.
5.8. Consummation of the Merger.
(a) At the earliest reasonably practicable time following the execution
and delivery of this Agreement, each of Navarre and the Company, if
required, shall promptly take all action necessary in accordance with
Minnesota and Nevada Law and their Articles of Incorporation and Bylaws
to obtain the necessary approval of the Transaction, including the
issuance of Navarre common stock pursuant to the Merger Agreement, which
proposal shall be approved if it receives the affirmative vote of a
majority of the votes entitled to be cast by all holders of Navarre
Common Stock, or if the NASDAQ exemption as described in Section 5.4. of
this Agreement is not withdrawn. The Company, however, shall have
received the vote or consent of all of its shareholders to the Merger
Agreement; provided, however, Navarre, at its sole discretion, may waive
the requirement of a unanimous vote to provide for a less than unanimous
vote so long as it complies with Nevada Law. Each of Navarre and the
Company shall use all commercially reasonable efforts to solicit from its
respective stockholders proxies to be voted at their Stockholders Meeting
in favor of this Agreement, if applicable, pursuant to the Proxy
Statement and disclosure documents and, subject to the fiduciary duties
of its Board of Directors, each of Navarre and the Company shall include
in the Proxy Statement and disclosure and request for proxies the
recommendation of its Board of Directors in favor of this Agreement and
the Merger. Each of the parties shall take all other action necessary or,
in the opinion of the other parties, advisable to promptly and
expeditiously secure any vote or consent of stockholders required by
Minnesota and Nevada Law, the applicable requirements of any securities
exchange, and such party's Articles of Incorporation and Bylaws to effect
the Merger.
(b) Upon the terms and subject to the conditions hereof and as soon as
practicable after the conditions set forth in Articles VI and VII hereof
have been fulfilled or waived, each of the parties shall execute in the
manner required by Minnesota and Nevada Law and deliver to and file with
the Secretaries of State of the States of Minnesota and Nevada such
instruments and agreements as may be required by Minnesota and Nevada Law
and the parties shall take all such other and further actions as may be
required by law to make the Merger effective.
5.9. Additional Agreements. Each of the parties will comply in all material
respects with all applicable laws and with all applicable rules and regulations
of any governmental authority in connection with its execution, delivery and
performance of this Agreement and the Transaction contemplated hereby. Navarre,
NRC and the Company each agree to use all commercially reasonable efforts to
obtain in a timely manner all necessary waivers, consents and approvals and to
effect all necessary registrations and filings, and to use all commercially
reasonable efforts to take, or cause to be taken, all other actions and to do,
or cause to be done, all other things necessary, proper or advisable to
consummate and make effective as promptly as practicable the Transaction
contemplated by this Agreement.
5.10. Notification of Certain Matters. Each of Navarre and Company shall give
prompt notice to the other of the following:
(a) the occurrence or nonoccurrence of any event whose occurrence or
nonoccurrence would be likely to cause either (i) any representation or
warranty contained in this Agreement to be untrue or inaccurate in any
material respect at any time from the date hereof to the Effective Date,
or (ii) directly or indirectly, any Material Adverse Effect on such
party;
(b) any material failure of such party, or any officer, director,
employee or agent of any thereof, to comply with or satisfy any covenant,
condition or agreement to be complied with or satisfied by it hereunder;
and
(c) any facts relating to such party which would make it necessary or
advisable to amend the Proxy Statement or the disclosure documents in
order to make the statements therein not misleading or to comply with
applicable law; provided, however, that the delivery of any notice
pursuant to this Section 5.10. shall not limit or otherwise affect the
remedies available hereunder to the party receiving such notice.
5.11. Purchase of Assets. Navarre and the Company will each use its best efforts
to cause the Transaction contemplated by this Agreement to be accounted for as a
pooling of interests in accordance with GAAP, and such accounting treatment to
be accepted by Company's independent certified public accountants, by the SEC,
respectively, and each of the parties agrees that it will take no action that
would cause such accounting treatment not to be obtained. However, the parties
recognize and agree that the Transaction set forth in this Agreement under the
facts and circumstances which now exist make it highly unlikely that the
Transaction will be treated as a pooling of interests and will be treated for
accounting purposes as a purchase of assets.
5.12. Tax-Free Reorganization. Each of the parties will use its best efforts
to cause the Merger to qualify as a tax-free reorganization under Section 368
of the Code.
SECTION VI.
CONDITIONS PRECEDENT TO NAVARRE'S AND TO NRC'S OBLIGATIONS
Navarre's and NRC's obligations to the Company to complete the Transaction
contemplated by this Agreement and the Agreement of Merger is subject to
compliance by the Company and its Shareholders with their agreements herein
contained and to the satisfaction on the Effective Date of the following further
conditions, any of which may be waived by Navarre and NRC:
6.1. Opinion of the Shareholders's Counsel. The Company shall have furnished
Navarre, NRC, and Navarre's lender with a favorable opinion, dated the Effective
Date, of Xxxxxxx, Xxxxxxx & Xxxx, A Professional Association, counsel for the
Company, in form and substance satisfactory to Winthrop & Weinstine, P.A.,
counsel for Navarre and NRC.
6.2. Deliveries of the Company. The Company shall have complied in all
respects with its obligations under Section 1.15. hereof.
6.3. Representations and Covenants, Etc. The representations, warranties,
covenants and agreements of the Company contained in this Agreement or otherwise
made in writing pursuant hereto, shall be true and correct in all material
respects at and as of the Effective Date with the same force and effect as
though made on and as of such date; each and all of the agreements and
conditions to be performed or satisfied by the Company hereunder at or prior to
the Effective Date shall have been duly performed or satisfied in all material
respects; and the Company shall have furnished Navarre and NRC with such
certificates and other documents evidencing the accuracy of such representations
and warranties and the performance of such agreements or conditions as Navarre
shall have reasonably requested. Navarre shall, on the basis of its
investigation and inspection and that of its representatives, accountants and
attorneys, have been satisfied in all reasonable respects as to the accuracy in
all material respects of such representations and warranties and the performance
and satisfaction of such agreements and conditions.
6.4. Absence of Litigation. No action or proceeding shall have been instituted
or threatened prior to or at the Effective Date before any court or governmental
body or authority pertaining to the Transaction contemplated hereby, the results
of which could prevent or make illegal the consummation of such Transaction or
which, in the judgment of Navarre, could be materially adverse to the Company,
its properties, facilities or assets.
6.5. Satisfaction of Counsel. The validity of the Transaction herein mentioned,
as well as the form and substance of all opinions, certificates and other
documents hereunder, shall be satisfactory in all reasonable respects to
Winthrop & Weinstine, P.A., counsel for Navarre and NRC.
6.6. Uniform Commercial Code Searches. Navarre shall have received Uniform
Commercial Code, tax and judgment lien records searches (conducted through a
date reasonably proximate in time to the Closing Date and the Effective Date) of
filings in such records in all jurisdictions where the Company has any material
personal property or fixtures, which shall be in form, scope and substance
satisfactory to Buyer and its counsel and which shall not disclose any
Encumbrances not disclosed in a Schedule.
6.7. Third Party Consents. Navarre and NRC shall have received all required
consents and approvals from their lenders and any other third party or other
governmental authorities required to consent to or approve the Transaction
described in this Agreement.
6.8. Navarre Shareholder Approval. Navarre shall have received Shareholder
approval for the Transaction as required by applicable laws, rules and
regulations.
6.9. NRC Shareholder Approval. NRC shall have received Shareholder approval
for the Transaction as required by applicable laws, rules and regulations.
SECTION VII.
CONDITIONS PRECEDENT TO THE COMPANY'S OBLIGATIONS
The obligation of the Company to consummate the Transaction contemplated
hereunder is subject to compliance by Navarre and NRC with their agreements
herein contained, and to the
satisfaction on the Effective Date of the following further conditions, any of
which may be waived by the Shareholders and the Company:
7.1. Opinion of Navarre's and NRC's Counsel. Navarre and NRC shall have
furnished the Company with a favorable opinion, dated the Closing Date, of
Winthrop & Weinstine, P.A., counsel for Navarre and NRC, in form and substance
satisfactory to Xxxxxxx, Xxxxxxx & Xxxx, A Professional Association, counsel to
the Company. Navarre and NRC shall have furnished the Shareholders with a
favorable opinion dated the Effective Date on such matters satisfactory to the
Shareholders.
7.2. Deliveries by Navarre. Navarre shall have complied in all respects with
its obligations under Section 1.17. hereof.
7.3. Deliveries by NRC. NRC shall have complied in all respects with its
obligations under Section 1.18. hereof.
7.4. Representations and Covenants, Etc. The representations, warranties,
covenants and agreements of Navarre and NRC contained in this Agreement or
otherwise made in writing by their or on their behalf pursuant hereto or
otherwise made in connection with the Transaction contemplated hereby shall be
true and correct in all material respects at and as of the Effective Date with
the same force and effect as though made on and as of such date; each and all
the agreements and conditions to be performed or satisfied by Navarre and NRC
hereunder at or prior to the Effective Date shall have been duly performed or
satisfied in all material respects; and Navarre and NRC shall have furnished the
Company with such certificates or other documents evidencing the accuracy of
such representations and warranties and the performance of such agreements or
conditions as the Company shall have requested. The Company shall, on the basis
of its investigation and inspection, and that of its representatives,
accountants and attorneys, have been satisfied in all reasonable respects as to
the accuracy in all material respects of such representations and warranties and
the performance and satisfaction of such agreements and conditions.
7.5. Absence of Litigation. No action or proceeding shall have been instituted
or threatened prior to or at the Effective Date before any court or governmental
body or authority pertaining to the Transaction contemplated hereby, the results
of which could prevent or make illegal the consummation of such Transaction or
which, in the judgment of the Company, could be materially adverse to Navarre,
its properties, facilities or assets.
7.6. Satisfaction of Counsel. The validity of the Transaction herein mentioned,
as well as the form and substance of all opinions, certificates and other
documents hereunder, shall be satisfactory in all reasonable respects to
Xxxxxxx, Xxxxxxx & Xxxx, A Professional Association, counsel to the Company.
SECTION VIII.
ENTIRE AGREEMENT; SURVIVAL OF REPRESENTATIONS AND WARRANTIES
The Company, Navarre and NRC agree that, except as set forth in Section 5.7.,
this Agreement, including the Schedules and Exhibits hereto, and the Agreement
of Merger constitutes the entire agreement among the parties with respect to the
subject matter hereof and supersedes all prior understandings and agreements
with respect thereto. The representations, warranties, covenants and agreements
provided for in this Agreement shall survive the Effective Date for a period of
twenty-seven (27) months after which time they shall lapse and be of no further
force and effect, except for the representations and warranties set forth in
Sections 2.18. and 3.1., each of which shall survive for the applicable
limitations periods, and they shall be unaffected by any investigation made by
or on behalf of any party hereto.
SECTION IX.
INDEMNIFICATION AND OTHER REMEDIES
9.1. Specific Performance; Other Remedies. The parties recognize that various of
the rights of the parties under this Agreement are unique and, accordingly, the
parties shall, in addition to such other remedies as may be available to any of
them at law or in equity, have the right to enforce their rights hereunder by
actions for injunctive relief and specific performance to the extent permitted
by law. In addition, Navarre and the Surviving Corporation shall have the right
to set off their damages, costs and expenses against the Escrow Shares or any
payment or payments coming due in the form of the 1997 Shares and 1998 Shares
pursuant to this Agreement. The parties hereto agree that in any legal action
commenced to enforce the terms of this Agreement, the prevailing party shall be
entitled to recover from the other party all reasonable fees and expenses
(including reasonable legal fees) and including, but not limited to, all
reasonable fees and expenses incident to any action or participation in, or in
connection with, any case or proceeding commenced under federal or state
bankruptcy or insolvency laws or any regulatory proceeding.
9.2. Confidentiality.
(a) Whether or not the Transaction contemplated hereby are consummated,
each of the parties hereto agrees to keep confidential and cause their
attorneys and accountants to keep confidential any and all information
and data with respect to the other party which it has received as a
result of any investigation made in connection with this Agreement and
which is not otherwise available to the parties; provided, however, that
notwithstanding the foregoing, each of the parties hereto shall be free
to disclose any such information or data (a) to the extent required by
applicable law and (b) during the course of or in connection with any
litigation, arbitration or other proceeding based upon or in connection
with the subject matter of this Agreement, and the Agreement of Merger
including, without limitation, the failure of the Transaction
contemplated hereby to be consummated. In the event that the Transaction
contemplated hereby are not consummated, Navarre and NRC each agree that
it shall keep confidential any and all information and data with respect
to the Company or the Shareholders which is not
otherwise available to the public and shall not directly or indirectly
use any such secret or confidential information for its benefit and shall
return to the Company all of the above-referenced information and data
with respect to the Company and the Shareholders, including all books,
records, Tax returns and other data relating to the Shareholders, the
Company and the ownership and operation of the Company. The duty of
confidentiality set forth herein shall not apply to information that:
(i) is, at the time of disclosure, in the public domain;
(ii) after disclosure, enters the public domain, except where such
entry is a direct result of a breach of this Agreement;
(iii) subsequent to disclosure, is obtained from a third party in
possession of such information and not under a contractual or
fiduciary obligation to the party originally disclosing such
information to keep such information in confidence or did not,
directly or indirectly, obtain such information from a party under
a contractual or fiduciary obligation to the party originally
disclosing such information to keep such information in
confidence;
(iv) is filed with any governmental or any regulatory authority
and available to the public; or
(v) is disclosed pursuant to any judicial or governmental
requirement or order.
(b) Without intending to limit the remedies available to a party due to
any breach or threatened breach of Section 9.2.(a), each of the other
parties agrees that damages at law would be an insufficient remedy in the
event of any breach or threatened breach by the other parties of Section
9.2.(a) and that such party shall be entitled to injunctive relief or
other equitable remedies in the event of any such breach or threatened
breach.
SECTION X.
GENERAL PROVISIONS
10.1. Effect of Waiver. Any waiver of any term or condition of this Agreement,
or of the breach of any covenant, representation or warranty contained herein,
in any one instance, shall not operate as or be deemed to be or construed as a
further or continuing waiver of any other breach of such term, condition,
covenant, representation or warranty or any other term, condition, covenant,
representation or warranty, nor shall any failure at any time or times to
enforce or require performance of any provision hereof operate as a waiver of or
affect in any manner such party's right at a later time to enforce or require
performance of such provision or of any other provision hereof.
10.2. Modification of Agreement. This Agreement may not be amended, nor shall
any waiver, change, modification, consent or discharge be effected, except by an
instrument in writing executed by or on behalf of the party against whom
enforcement of any amendment, waiver, change, modification, consent or discharge
is sought.
10.3. Assignment; Parties in Interest. This Agreement shall not be assignable by
any party without the prior written consent of the other; provided, however,
that in the event that after the Effective Date Navarre or the Surviving
Corporation shall be merged with, or consolidated into, any other corporation,
or in the event that after the Effective Date Navarre or the Surviving
Corporation shall sell and transfer substantially all of its assets to another
corporation, the terms of this Agreement, shall inure to the benefit of the
corporation resulting from such merger or consolidation, or to which Navarre's
or the Surviving Corporation's assets shall be sold and transferred. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and permitted assigns. This Agreement is
not intended and shall not be construed to create any rights in or to be
enforceable in any part by persons other than the parties hereto (or a successor
to Navarre or the Surviving Corporation or assignees of the Shareholders as
provided in this Section).
10.4. Severability. If any provision of this Agreement shall be held or deemed
to be, or shall in fact be, invalid, inoperative or unenforceable as applied to
any particular case in any jurisdiction or jurisdictions, or in all
jurisdictions or in all cases, because of the conflict of any provision with any
constitution or statute or rule of public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision or provisions
in question invalid, inoperative or unenforceable in any other jurisdiction or
in any other case or circumstance or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
returned and construed in any such jurisdiction or case as if such invalid,
inoperative or unenforceable provision had never been contained herein and such
provision reformed so that it would be valid, operative and enforceable to the
maximum extent permitted in such jurisdiction or in such case.
10.5. Construction. This Agreement has been negotiated by Navarre, NRC and the
Company and their respective legal counsel, and legal or equitable principles
that may require the construction of this Agreement or any provision hereof
against the party drafting this Agreement shall not apply in any construction or
interpretation of this Agreement.
10.6. Counterparts. This Agreement may be executed 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, and in pleading or proving any provision
of this Agreement it shall not be necessary to produce more than one such
counterpart.
10.7. Notices. All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been duly given if delivered or
mailed, postage prepaid, certified or registered mail, return receipt requested:
(a) If to Navarre or to NRC to: with a copy to:
Navarre Corporation Winthrop & Weinstine, P.A.
0000 00xx Xxxxxx Xxxxx 0000 Xxxx Xxxxxxxx Xxxxx
Xxx Xxxx, XX 00000 00 Xxxxx Xxxxx Xxxxxx
Attention: President Xxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxxxxx
(b) If to the Company to: with a copy to:
Net Radio Corporation Xxxxxxx, Xxxxxxx & Xxxx,
Riverplace Exposition Hall A Professional Association
Xxxxx 000 000 Xxxxx Xxxxxxx Xxxxxx
00 Xxxx Xxxxxx X.X. Xxxxx 0000
Xxxxxxxxxxx, XX 00000 Xxxxxxxxxxx, XX 00000
Attn: President Attn: Xxxxxxx X. Xxxxxxx
or to such other person(s) and address(es) as either party shall have
specified in writing to the other.
10.8. Governing Law. This Agreement shall be governed by and construed and
enforced in accordance with the law (other than the law governing conflict of
law questions) of the State of Minnesota.
10.9. Captions and Headings. Captions and section headings used herein are for
convenience only and are not a part of this Agreement and shall not be used in
construing it.
10.10. Legal Representation. EACH OF THE PARTIES TO THIS AGREEMENT REPRESENTS
AND WARRANTS THAT IT HAS READ AND UNDERSTOOD ALL THE TERMS OF THE AGREEMENT;
THAT IT HAS HAD AN OPPORTUNITY TO OR HAS CONSULTED WITH COUNSEL OF ITS CHOICE
PRIOR TO ITS EXECUTION; THAT IT POSSESSES FULL LEGAL AUTHORITY AND CAPACITY TO
EXECUTE THIS AGREEMENT; AND THAT IT HAS FREELY EXECUTED THIS AGREEMENT WITHOUT
COERCION, DURESS, OR RELIANCE UPON ANY PROMISE NOT EXPRESSLY STATED IN THIS
AGREEMENT.
IN WITNESS WHEREOF, the Shareholders, the Company, Navarre and NRC have caused
this Agreement to be executed as of the date first above written.
NET RADIO CORPORATION, NAVARRE CORPORATION,
a Nevada corporation a Minnesota corporation
By: /s/ Xxxxxx Xxxxxx By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------- --------------------------------
Xxxxxx Xxxxxx Xxxxxxx X. Xxxxxx
Its Chief Executive Officer Its Executive Vice President
and Chief Financial Officer
NET RADIO CORPORATION,
a Minnesota corporation
By: /s/ Xxxxxxx X. Xxxxxx
---------------------------------
Xxxxxxx X. Xxxxxx
Its Chief Financial Officer
