1
EXHIBIT 1
STOCK PURCHASE AGREEMENT
This STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of March 7,
1997, by and among ValueVision International, Inc., a Minnesota corporation
(the "Purchaser"), Net Radio Corporation, a Minnesota corporation (the
"Company"), Navarre, Corporation, a Minnesota corporation and sole shareholder
of the Company ("Navarre"), and Net Radio Corporation, a Nevada corporation
("NRC").
WHEREAS, concurrent herewith, the Company, Navarre and NRC are
entering into that certain Agreement and Plan of Reorganization (the "Merger
Agreement"), whereby NRC will merge (the "Merger"), with and into the Company,
with the Company to be the surviving corporation of the Merger;
WHEREAS, following completion of the Merger, Navarre and the Company
desire to sell shares of the Company's Common Stock, no par value (the "Common
Stock"), to the Purchaser and the Purchaser desires to purchase shares of the
Common Stock from the Company;
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the parties hereto agree as
follows:
1. Sale and Purchase of Common Stock. Subject to the terms and
conditions hereof, the Company agrees to sell to the Purchaser, and the
Purchaser agrees to purchase from the Company, 1,765 shares (the "Shares") of
the Common Stock for an aggregate purchase price (the "Purchase Price") of
Three Million and 00/100 dollars ($3,000,000.00).
2. Purchase Price. The Purchase Price shall be paid by the
Purchaser to the Company in the form of One Million and 00/100 dollars
($1,000,000.00) in cash (the "Cash Consideration") at the Closing (as
hereinafter defined) and Two Million and 00/100 dollars ($2,000,000.00) in
advertising time as set forth in Section 4 hereof (the "Advertising
Consideration").
3. Closing. The closing of the sale to, and purchase by, the
Purchaser of the Shares (the "Closing") shall occur following completion of the
Merger, at the offices of Winthrop & Weinstine, a Professional Association,
Minneapolis, Minnesota, which the parties hereto currently anticipate will be
March 18, 1997 or on such other day or at such other time or place as the
Purchaser, the Company and Navarre shall agree upon, provided, however, that
such date shall not be later than March 31, 1997 (the "Closing Date"). At the
Closing, the Company will deliver to the Purchaser certificates representing
the Shares being purchased by the Purchaser, registered in its name, against
delivery to the Company of the Purchaser's check in the amount of the Cash
Consideration.
-1-
2
4. Cable Television Advertising Time. Following the Closing, the
Purchaser shall provide the Company with cable television advertising time (the
"Advertising Time") having an aggregate value of Two Million and 00/100 dollars
($2,000,000.00), which the Purchaser is currently purchasing pursuant to
various of its cable agreements. The value of the Advertising Time will be
equal to the amount paid by the Purchaser pursuant to its cable agreements for
such time. The allocation of the Advertising Time shall be done in mutually
agreed upon markets, subject to availability from the Purchaser's cable
affiliates, at the then current market rate for such market, over a period to
be determined by the Purchaser, subject to availability from the Purchaser's
cable affiliates, but in no event more than sixty (60) months.
5. Additional Shares. If the Purchaser has not excercised any of
the Conversion Rights (as defined in the Conversion Agreement (as defined
herein)) pursuant to the Conversion Agreement, but in no event after the fifth
anniversary of the Closing date, once the Company achieves net revenues
(excluding revenues from product sales) equal to or greater than $3,000,000 in
any rolling, consecutive four quarter period, (i) the Company shall have a one
time option for one hundred eighty (180) days from the last day of such four
quarter period (the "Option Period"), to require the Purchaser to make an
additional investment of $500,000 in cash (the "Option Consideration"), to
purchase the number of shares of the Common Stock (the "Additional Shares"),
such that the Additional Shares shall equal 4.95% of the Common Stock issued
and outstanding after issuance of the Additional Shares, and (ii) the Purchaser
shall have a one time option during the Option Period to purchase the
Additional Shares for the Option Consideration. In the event that either the
Company or the Purchaser exercises its option pursuant to this Section 5, the
other parties option hereunder shall terminate.
6. Representations and Warranties by the Company, Navarre and
NRC. The Company, Navarre and NRC, jointly and severally, represent and
warrant to the Purchaser that:
6.1 Organization, Standing, etc. Each of the Company and
Navarre is a corporation duly organized, validly existing and in good standing
under the laws of the State of Minnesota, NRC is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada,
and each of the Company, Navarre and NRC has the requisite corporate power and
authority to own its properties and to carry on its business in all material
respects as it is now being conducted. The Company has the requisite corporate
power and authority to issue the Shares and the Additional Shares, and to
otherwise perform its obligations under this Agreement, the Merger Agreement
and all other agreements and documents related thereto. Navarre has the
requisite corporate power and authority to issue the Navarre Common Stock (as
hereinafter defined), and to otherwise perform its obligations under this
Agreement, the Merger Agreement and all other agreements and documents related
thereto. NRC has the corporate power and authority to perform its obligations
under this Agreement and the Merger Agreement. The copies of the Articles of
Incorporation and Bylaws of the Company attached hereto as SCHEDULE 6.1 are
true and correct copies of the duly and legally adopted Articles of
Incorporation and Bylaws of the Company in effect as of the date of this
Agreement. Except as set forth on SCHEDULE 6.1.1, neither NRC nor the
-2-
3
Company have any direct or indirect equity interest in any other firm,
corporation, partnership, joint venture association or other business
organization.
6.2 Qualification. Except as set forth on SCHEDULE 6.2,
each of the Company, Navarre and NRC is duly qualified or licensed as a foreign
corporation in good standing in each jurisdiction wherein the nature of its
activities or of its properties owned or leased makes such qualification or
licensing necessary and failure to be so qualified or licensed would have a
material adverse impact on its business.
6.3 Financial Statements. Attached to this Agreement as
SCHEDULE 6.3 are (a) a balance sheet at December 31, 1995, together with the
related statements of operations, stockholders' equity and accumulated deficit,
and cash flow for the fiscal year then ended, and the report thereon of Larson,
Allen, Weishair & Co., LLP, independent public accountants, and (b) an
unaudited balance sheet at January 31, 1997, and unaudited profit and loss
statements for each of the thirteen (13) months commencing December 31, 1995
and ending in January 1997, prepared by NRC. Such financial statements (i) are
in accordance with the books and records of NRC, (ii) present fairly the
financial condition of NRC at the balance sheet dates and the results of its
operations for the periods therein specified, and (iii) except as set forth on
SCHEDULE 6.3, have been prepared in accordance with generally accepted
accounting principles applied on a basis consistent with prior accounting
periods. Specifically, but not by way of limitation, the balance sheets or
notes thereto, and except as set forth on SCHEDULE 6.3, disclose all of the
debts, liabilities and obligations of any nature (whether absolute, accrued or
contingent and whether due or to become due) of the NRC at December 31, 1995
and January 31, 1997, which, individually or in the aggregate, are material and
which in accordance with generally accepted accounting principles would be
required to be disclosed in such balance sheets, and the omission of which
would, in the aggregate, have a material adverse impact on NRC. For purposes of
this Agreement, material shall mean $1,000 for any individual item and $5,000
in the aggregate for all such items. The balance sheets include appropriate
reserves for all taxes and other liabilities accrued at such date but not yet
payable. Prior to the Merger, the Company has had no operations and incurred
no liabilities except pursuant to this Agreement and the Merger Agreement.
6.4 Tax Returns and Audits. All required federal, state
and local tax returns or appropriate extension requests of NRC have been filed,
and all federal, state and local taxes required to be paid with respect to such
returns have been paid or due provision for the payment thereof has been made.
NRC is not delinquent in the payment of any such tax or in the payment of any
assessment or governmental charge. NRC has not received notice of any tax
deficiency proposed or assessed against it, and has not executed any waiver of
any statute of limitations on the assessment or collection of any tax. None of
NRC's tax returns has been audited by governmental authorities in a manner to
bring such audits to NRC's attention. NRC and the Company do not have any tax
liabilities except those reflected in SCHEDULE 6.3 and those incurred in the
ordinary course of business since January 31, 1997.
6.5 Changes, Dividends, etc. Except as set forth on
SCHEDULE 6.5 and except for the transactions contemplated by this Agreement and
the Merger Agreement, since January 31, 1997,
-3-
4
neither NRC or the Company has: (a) incurred any debts, obligations or
liabilities, absolute, accrued or contingent and whether due or to become due,
except current liabilities incurred in the ordinary course of business, which
(individually or in the aggregate) will not materially and adversely affect the
business, properties or prospects of NRC or the Company; (b) paid any
obligation or liability other than, or discharged or satisfied any liens or
encumbrances other than those securing, current liabilities, in each case in
the ordinary course of business; (c) declared or made any payment or
distribution to its stockholders as such, or purchased or redeemed any of its
shares of capital stock or other securities, or obligated itself to do so; (d)
mortgaged, pledged or subjected to lien, charge, security interest or other
encumbrance any of its assets, tangible or intangible, except in the ordinary
course of business; (e) sold, transferred or leased any of its assets except in
the ordinary course of business; (f) cancelled or compromised any debt or
claim, or waived or released any right of material value; (g) suffered any
physical damage, destruction or loss (whether or not covered by insurance)
materially and adversely affecting the properties, business or prospects of NRC
or the Company; (h) entered into any transaction other than in the ordinary
course of business; (i) encountered any labor difficulties or labor union
organizing activities; (j) issued or sold any shares of capital stock or other
securities or granted any options, warrants or other purchase rights with
respect thereto other than as contemplated by this Agreement or the Merger
Agreement; (k) made any acquisition or disposition of any material assets or
become involved in any other material transaction, other than for fair value in
the ordinary course of business; (l) increased the compensation payable, or to
become payable, to any of its officers, directors or employees, or made any
bonus payment or similar arrangement with any officers, directors or employees
or increased the scope or nature of any fringe benefits provided for its
officers, directors or employees; or (m) agreed to do any of the foregoing
other than pursuant hereto. There has been no material adverse change in the
financial condition, operations, results of operations or business of NRC or
the Company since January 31, 1997.
6.6 Title to Properties and Encumbrances. NRC and the
Company each has good and marketable title to all its owned properties and
assets, including without limitation the properties and assets reflected in
SCHEDULE 6.3 and the properties and assets used in the conduct of its business,
except for property disposed of in the ordinary course of business since
January 31, 1997, which properties and assets are not subject to any mortgage,
pledge, lease, lien, charge, security interest, encumbrance or restriction,
except (a) those which are shown and described in SCHEDULE 6.3 or the notes
thereto or which are set forth on SCHEDULE 6.6, and (b) Permitted Liens (as
hereinafter defined). The plant, offices and equipment owned and leased by NRC
and the Company have been kept in good condition and repair in the ordinary
course of business, and, except as disclosed on SCHEDULE 6.3, NRC and the
Company has not been threatened with any action or proceeding under any
building or zoning ordinance, law or regulation.
6.7 Litigation; Governmental Proceedings. Except as set
forth on SCHEDULE 6.7, there are no legal actions, suits, arbitrations or other
legal, administrative or governmental proceedings or investigations pending or,
to the knowledge of NRC, the Company or Navarre, threatened against NRC or the
Company, its properties, assets or business, and neither NRC, the Company nor
Navarre is aware of any facts which are likely to result in or form the basis
for any such action, suit or other proceeding. Neither NRC or the Company is
in default with respect to any
-4-
5
judgment, order or decree of any court or any governmental agency or
instrumentality. Neither NRC or the Company has been threatened with any
action or proceeding under any business or zoning ordinance, law or regulation.
6.8 Compliance with Applicable Laws and Other
Instruments. Except as disclosed on SCHEDULE 6.8, the business and operations
of NRC and the Company have been and are being conducted in accordance with all
applicable laws, rules and regulations of all governmental authorities.
Neither the execution nor delivery of, nor the performance of or compliance
with this Agreement or the Merger Agreement nor the consummation of the
transactions contemplated hereby or thereby will conflict with, or, with or
without the giving of notice or passage of time, result in any breach of, or
constitute a default under, or result in the imposition of any lien or
encumbrance upon any asset or property of NRC or the Company pursuant to any
applicable law, administrative regulation or judgment, order or decree of any
court or governmental body, any agreement or other instrument to which NRC or
the Company is a party or by which it or any of its properties, assets or
rights is bound or affected, and will not violate the Articles of Incorporation
or Bylaws of NRC or the Company. Neither NRC nor the Company is in violation
of its Articles of Incorporation or its Bylaws nor in violation of, or, except
as set forth on SCHEDULE 6.14, in default under, any lien, indenture, mortgage,
lease, agreement, instrument, commitment or arrangement in any material
respect.
6.9 The Shares and the Additional Shares. The Shares,
when issued and paid for pursuant to the terms of this Agreement, will be duly
authorized, validly issued and outstanding, fully paid, nonassessable and free
and clear of all pledges, liens, encumbrances and restrictions, and the
Additional Shares have been reserved for issuance based upon the number of
shares of the Common Stock currently issued and outstanding (including the
Shares), and when issued pursuant to Section 5 hereof will be duly authorized,
validly issued and outstanding, fully paid, nonassessable and free and clear of
all pledges, liens, encumbrances and restrictions. The certificates
representing the Shares to be delivered by the Company hereunder, and the
certificates representing the Additional Shares to be delivered pursuant to
Section 5 hereof, will be genuine, and neither the Company nor Navarre has any
knowledge of any fact which would impair the validity thereof.
6.10 Securities Laws. Based in part upon the
representations and warranties contained in Section 7 of this Agreement, no
consent, authorization, approval, permit or order of or filing with any
governmental or regulatory authority is required under current laws and
regulations in connection with the execution and delivery of this Agreement or
the Merger Agreement, or the offer, issuance, sale or delivery of the Shares,
the offer, issuance, sale or delivery of the Additional Shares or the offer,
issuance, sale or delivery of the Navarre Common Stock, other than the
qualification thereof, if required, under applicable state securities laws,
which qualification has been or will be effected as a condition of these sales.
The Company has not, directly or through an agent, offered the Shares or the
Additional Shares or any similar securities for sale to, or solicited any
offers to acquire such securities from, persons other than the Purchaser.
Under the circumstances contemplated hereby, the offer, issuance, sale and
delivery of the Shares, the offer, issuance, sale and delivery of the
Additional Shares and the offer, issuance, sale and delivery of the Navarre
Common
-5-
6
Stock will not under current laws and regulations require compliance with the
prospectus delivery or registration requirements of the Securities Act.
6.11 Patents and Other Intangible Rights. Except as set
forth on SCHEDULE 6.11, each of NRC and the Company (a) owns or has the
exclusive right to use, free and clear of all material liens, claims and
restrictions, all patents, trademarks, service marks, trade names, copyrights,
licenses and rights with respect to the foregoing, used in the conduct of its
business as now conducted, (b) is not obligated or under any liability
whatsoever to make any payments of a material nature by way of royalties, fees
or otherwise to any owner of, licensor of, or other claimant to, any patent,
trademark, trade name, copyright or other intangible asset, with respect to the
use thereof or in connection with the conduct of its business or otherwise, (c)
owns or has the unrestricted right to use all trade secrets, including
know-how, inventions, designs, processes, computer programs and technical data
necessary to the development, operation and sale of all products and services
sold or proposed to be sold by it, free and clear of any rights, liens or
claims of others, and (d) is not using any confidential information or trade
secrets of others. Neither NRC nor the Company is, nor has either received
notice with respect to, infringing upon or otherwise acting adversely to any
known right or claimed right of any person under or with respect to any
patents, trademarks, service marks, trade names, copyrights, licenses or rights
with respect to the foregoing.
6.12 Capital Stock. The authorized capital stock of the
Company consists of 1,000,000 shares of the Common Stock, of which 10,000
shares are issued and outstanding. All of the outstanding shares of capital
stock of the Company were duly authorized and validly issued and are fully paid
and nonassessable. Following completion of the Merger and of the sale and
issuance of the Shares, the Purchaser will own fifteen percent (15%) of the
issued and outstanding shares of the Common Stock. There are not now and
following completion of the Merger there will not be any outstanding
subscriptions, options, warrants, calls, contracts, demands, commitments,
Convertible Securities (as hereinafter defined) or other agreements or
arrangements of any character or nature whatever, except as contemplated by
this Agreement, under which the Company is or may be obligated to issue capital
stock or other securities of any kind representing an ownership interest or
contingent ownership interest in the Company. Neither the offer nor the
issuance or sale of the Shares or the Additional Shares constitutes an event,
under any anti-dilution provisions of any securities issued or issuable by the
Company or any agreements with respect to the issuance of securities by the
Company, which will either increase the number of shares issuable pursuant to
such provisions or decrease the consideration per share to be received by the
Company pursuant to such provisions. Except as contemplated by this Agreement,
no holder of any security of the Company is entitled to any preemptive or
similar rights to purchase securities from the Company, provided, however, that
nothing in this Section 6.12 shall affect, alter or diminish any right granted
to the Purchaser in this Agreement. All outstanding securities of the Company
have been issued in full compliance with an exemption or exemptions from the
registration and prospectus delivery requirements of the Securities Act and
from the registration and qualification requirements of all applicable state
securities laws.
-6-
7
6.13 Outstanding Debt. Neither NRC nor the Company has
any Indebtedness for Borrowed Money (as hereinafter defined) except as
otherwise set forth in SCHEDULE 6.3 or the notes thereto. Neither NRC nor the
Company is in default in the payment of the principal of or interest or premium
on any such Indebtedness for Borrowed Money, and no event has occurred or is
continuing under the provisions of any instrument, document or agreement
evidencing or relating to any such Indebtedness for Borrowed Money which with
the lapse of time or the giving of notice, or both, would constitute an event
of default thereunder.
6.14 Schedule of Assets and Contracts. Attached hereto as
SCHEDULE 6.14 is a schedule of material contracts containing:
(a) a listing of all real properties owned by NRC or the Company;
(b) a listing of each indenture, lease, sublease, license or other
instrument under which either NRC or the Company claims or holds a leasehold
interest in real property;
(c) a listing of all written and oral contracts, agreements,
subcontracts, purchase orders, commitments and arrangements involving payments
remaining to or from NRC or the Company in excess of $5,000 and other
agreements material to NRC's or the Company's business to which either NRC or
the Company is a party or by which it is bound, under which full performance
(including payment) has not been rendered by any party thereto;
(d) a listing of all collective bargaining agreements, employment
agreements, consulting agreements, noncompetition agreements, nondisclosure
agreements, executive compensation plans, profit sharing plans, bonus plans,
deferred compensation agreements, employee pension retirement plans and
employee benefit stock option or stock purchase plans and other employee
benefit plans, entered into or adopted by either NRC or the Company;
(e) a listing of all deeds of trust, mortgages, security
agreements, pledge agreements and other agreements or arrangements whereby any
of the assets or properties of NRC or the Company are subject to any lien,
encumbrance, security interest or charge;
(f) a listing of all leases of personal property involving payment
remaining to or from NRC or the Company in excess of $5,000;
(g) Annex J: a listing of all insurance policies in force and
referred to in Section 6.20 hereof;
(h) Annex K: a listing of all patents (including applications
therefor), royalty and license agreements, trademarks, trade names, service
marks and copyrights relating to Company products.
Prior to the Closing Date, NRC and the Company shall provide the
Purchaser with a true and complete copy of each document referred to above the
Purchaser or its counsel requests to examine.
-7-
8
Except as set forth on SCHEDULE 6.14, each of NRC and the Company has
substantially performed all obligations required to be performed by it to date
and is not in default in any material respect under any of the contracts,
agreements, leases, documents, commitments or other arrangements to which it is
a party or by which it is otherwise bound. All instruments referred to above
are in effect and enforceable according to their respective terms, and there is
not under any of such instruments any existing material default or event of
default or event which, with notice or lapse of time or both, would constitute
an event of default thereunder. All parties having material contractual
arrangements with NRC or the Company are in substantial compliance therewith
and none are in material default in any respect thereunder. All plans or
arrangements listed pursuant to clause (d) above are fully funded to the extent
that such funding is required by generally accepted accounting principles.
6.15 Employees and Independent Contractors. SCHEDULE 6.15
sets forth the name and annual compensation of each employee of NRC or the
Company and the name of each independent contract for NRC or the Company.
6.16 Stockholders of NRC. The name of each stockholder of
NRC and the number of shares owned by such stockholder of NRC Common Stock are
set forth on SCHEDULE 6.16.
6.17 Corporate Acts and Proceedings. This Agreement and
the Merger Agreement have been duly authorized by all necessary corporate
action (including board of director and shareholder approval as required by
applicable law) on behalf of the Company, Navarre and NRC, and have been duly
executed and delivered by authorized officers of the Company, Navarre and NRC,
and each is a valid and binding agreement upon the part of the Company, Navarre
and NRC that is enforceable against the Company, Navarre and NRC in accordance
with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization or other similar laws
affecting the enforcement of creditors' rights generally and to judicial
limitations on the enforcement of the remedy of specific performance and other
equitable remedies. All corporate action necessary to the authorization,
creation, issuance and delivery of the Shares and the Additional Shares has
been taken on the part of the Company, or will be taken by the Company on or
prior to the Closing Date.
6.18 Accounts Receivable. To the extent that they exceed
the reserves for doubtful accounts set forth in SCHEDULE 6.3, the accounts
receivable of the Company which are reflected in SCHEDULE 6.3 and all of its
accounts receivable which have arisen since January 31, 1997 (except such
accounts receivable as have been collected since January 31, 1997) are valid
and enforceable claims, and the goods and services sold and delivered which
gave rise to such accounts were sold and delivered in conformity with the
applicable purchase orders, agreements and specifications. Such accounts
receivable are subject to no valid defense or offsets except routine customer
complaints or warranty demands of an immaterial nature. The reserve for
doubtful accounts that is included in SCHEDULE 6.3 is adequate.
-8-
9
6.19 Inventories. The inventories of the Company which
are reflected in SCHEDULE 6.3 and all inventory items which have been acquired
since January 31, 1997, consist of raw materials, supplies, work-in-process and
finished goods of such quality and in such quantities as are currently useable
or saleable in the ordinary course of its business.
6.20 Purchase Commitments and Outstanding Bids. No
purchase commitment of the Company is in excess of normal, ordinary and usual
requirements of its business, or was made at any price in excess of the then
current market price, or contains terms and conditions more onerous than those
usual and customary in the industry. There is no outstanding material bid,
sales proposal, contract or unfilled order of the Company which (a) will, or
could if accepted, require the Company to supply goods or services at a cost to
the Company in excess of the revenues to be received therefrom, or (b) quotes
prices which do not include a xxxx-up over reasonably estimated costs
consistent with past xxxx-ups on similar business or market conditions current
at the time.
6.21 Insurance Coverage. There are in full force policies
of insurance issued by insurers of recognized responsibility insuring NRC and
the Company, their properties and business against such losses and risks, and
in such amounts, as in NRC's and the Company's best judgment, after advice from
its insurance broker, are acceptable for the nature and extent of their
business and their resources.
6.22 No Brokers or Finders. No person, firm or
corporation has or will have, as a result of any act or omission of NRC or the
Company, any right, interest or valid claim against or upon NRC, the Company or
the Purchaser for any commission, fee or other compensation as a finder or
broker, or in any similar capacity, in connection with the transactions
contemplated by this Agreement. NRC, the Company and Navarre will indemnify
and hold the Purchaser harmless against any and all liability with respect to
any such commission, fee or other compensation which may be payable or
determined to be payable in connection with the transactions contemplated by
this Agreement.
6.23 Conflicts of Interest. Except as disclosed on
SCHEDULE 6.23, no officer, director or stockholder of NRC, the Company, Navarre
or any affiliate (as such term is defined in Rule 405 under the Securities Act
of 1933, as amended (the "Securities Act)) of any such person has any direct or
indirect interest (a) in any entity which does business with NRC or the
Company, or (b) in any property, asset or right which is used by NRC or the
Company in the conduct of its business, or (c) in any contractual relationship
with NRC or the Company other than as an employee. For the purpose of this
Section 6.23, there shall be disregarded any interest which arises solely from
the ownership of less than a 1% equity interest in a corporation whose stock is
regularly traded on any national securities exchange or in the over-the-counter
market.
6.24 Licenses. Each of NRC and the Company possesses from
the appropriate agency, commission, board and government body and authority,
whether state, local or federal, all licenses, permits, authorizations,
approvals, franchises and rights which (a) are necessary for it to engage in
the business currently conducted by it, and (b) if not possessed by NRC or the
Company
-9-
10
would have an adverse impact on the business or NRC or the Company. Neither
NRC, the Company nor Navarre has any knowledge that would lead it to believe
that NRC or the Company will not be able to obtain all licenses, permits,
authorizations, approvals, franchises and rights that may be required for any
business NRC or the Company proposes to conduct.
6.25 Registration Rights. Other than under this
Agreement, neither NRC nor the Company has agreed to register any of its
authorized or outstanding securities under the Securities Act.
6.26 Retirement Plans. Neither NRC nor the Company have
any retirement plans in which any employees of the Company participates that is
subject to any provisions of the Employee Retirement Income Security Act of
1974 and of the regulations adopted pursuant thereto ("ERISA").
6.27 Environmental and Safety Laws. Neither NRC nor the
Company is in violation of any applicable statute, law or regulation relating
to the environment or occupational health and safety, and no material
expenditures are or will be required in order to comply with any such existing
statute, law or regulation.
The operations of the Company do not involve any asbestos,
ureaformaldehyde foamed-in-place insulation, polyclorinated biphenyls ("PCBs")
or any other hazardous substances or materials including, but not limited to,
hazardous substances or materials under the Comprehensive Environmental
Response, Compensation and Liability Act, as amended by the Superfund
Amendments and Reauthorization Act, the Resource Conservation and Recovery Act,
the Minnesota Environmental Response and Liability Act, or any other federal,
state or local statute, regulation, code or ordinance.
6.28 Employees. To the best knowledge of NRC, the Company
and Navarre, no officer of NRC or the Company or employee of NRC or the Company
whose annual compensation is in excess of $30,000 has any plans to terminate
his or her employment with NRC or the Company. Except as set forth on SCHEDULE
2.28, each of NRC and the Company has complied in all material respects with
all laws relating to the employment of labor, including provisions relating to
wages, hours, equal opportunity, collective bargaining and payment of Social
Security and other taxes, and neither NRC or the Company has encountered any
material labor difficulties. Neither NRC nor the Company have any worker's
compensation liabilities, except those reflected on SCHEDULE 6.3 and SCHEDULE
2.28.
6.29 Absence of Restrictive Agreements. To the best
knowledge of NRC, the Company and Navarre, no employee of NRC or the Company is
subject to any secrecy or non-competition agreement or any agreement or
restriction of any kind that would impede in any way the ability of such
employee to carry out fully all activities of such employee in furtherance of
the business of NRC or the Company. To the best knowledge or NRC, the Company
and Navarre, no employer or former employer of any employee of NRC or the
Company has any claim of any kind whatsoever in respect of any of the rights
described in Section 6.11 of this Agreement.
-10-
11
6.30 Disclosure. None of NRC, the Company nor Navarre has
knowingly withheld from the Purchaser any material facts relating to the
assets, business, operations, financial condition or prospects of NRC or the
Company. No representation or warranty in this Agreement or in any
certificate, schedule, statement or other document furnished or to be furnished
to the Purchaser pursuant hereto or in connection with the transactions
contemplated hereby contains or will contain any untrue statement of a material
fact or omits or will omit to state any material fact required to be stated
herein or therein or necessary to make the statements herein or therein not
misleading.
7. Representations and Warranties of the Purchaser. The
Purchaser hereby represents and warrants that:
7.1 Investment Intent. The Shares being acquired by the
Purchaser hereunder are being purchased, and the Additional Shares to be
acquired by the Purchaser pursuant to Section 5 hereof and the Navarre Common
Stock to be acquired by the Purchaser pursuant to Section 11 hereof, will be
acquired, for the Purchaser's own account and not with the view to, or for
resale in connection with, any distribution or public offering thereof within
the meaning of the Securities Act. The Purchaser understands that the Shares,
the Additional Shares and the Navarre Common Stock have not been registered
under the Securities Act or any applicable state laws by reason of their
issuance or contemplated issuance in a transaction exempt from the registration
and prospectus delivery requirements of the Securities Act and such laws, and
that the reliance of the Company and others upon this exemption is predicated
in part upon this representation and warranty. The Purchaser further
understands that the Shares, the Additional Shares and the Navarre Common Stock
may not be transferred or resold without (a) registration under the Securities
Act and any applicable state securities laws, or (b) an exemption from the
requirements of the Securities Act and applicable state securities laws.
7.2 Location of Principal Office and Qualification as an
Accredited Investor. The state in which the Purchaser's principal office is
located is Minnesota. The Purchaser qualifies as an accredited investor within
the meaning of Rule 501 under the Securities Act. The Purchaser has such
knowledge and experience in financial and business matters that the Purchaser
is capable of evaluating the merits and risks of the investment to be made
hereunder by the Purchaser. To the best of its knowledge, the Purchaser has
had access to all of the Company's material books and records and access to the
Company's executive officers has been provided to the Purchaser or to the
Purchaser's qualified agents.
7.3 Acts and Proceedings. This Agreement has been duly
authorized by all necessary action on the part of the Purchaser, has been duly
executed and delivered by the Purchaser, and is a valid and binding agreement
upon the part of the Purchaser.
7.4 No Brokers or Finders. No person, firm or
corporation has or will have, as a result of any act or omission by the
Purchaser, any right, interest or valid claim against the Company for any
commission, fee or other compensation as a finder or broker, or in any similar
capacity, in connection with the transactions contemplated by this Agreement.
The Purchaser will indemnify
-11-
12
and hold the Company and Navarre harmless against any and all liability with
respect to any such commission, fee or other compensation which may be payable
or determined to be payable as a result of the actions of the Purchaser in
connection with the transactions contemplated by this Agreement.
8. Conditions of the Purchaser's Obligation. The obligation to
purchase and pay for the Shares which the Purchaser has agreed to purchase on
the Closing Date is subject to the fulfillment prior to or on the Closing Date
of the following conditions. In the event that any such condition is not
satisfied to the satisfaction of the Purchaser, then the Purchaser shall not be
obligated to proceed with the purchase of the Shares or the Additional Shares.
The Purchaser, in its sole discretion, may waive any of the conditions to this
Agreement.
8.1 No Errors, etc. The representations and warranties
of NRC, the Company and Navarre under this Agreement shall be true in all
material respects as of the Closing Date with the same effect as though made on
and as of the Closing Date.
8.2 Compliance with Agreement. The Company and Navarre
shall have performed and complied with all agreements or conditions required by
this Agreement and the Merger Agreement to be performed and complied with by it
prior to or as of the Closing Date.
8.3 Consummation of the Merger. The Merger shall have
closed and the Articles of Merger shall have been filed with and accepted by
the Minnesota Secretary of State and the Nevada Secretary of State.
8.4 Certificate of Officers. NRC, the Company and
Navarre shall each have delivered to the Purchaser a certificate, dated the
Closing Date, executed by the President and the senior financial officer of
NRC, the Company and Navarre, respectively, and certifying to the satisfaction
of the conditions specified in Sections 8.1, 8.2, 8.3 and 8.7 hereof.
8.5 Opinion of Counsel to the Company and Navarre. The
Company and Navarre shall have delivered to the Purchaser an opinion of
Winthrop and Weinstine, a Professional Association and/or Xxxxxxxxx and Xxxxxx,
counsel for the Company and Navarre, dated the Closing Date, to the effect
that:
(a) Each of the Company and Navarre is a duly and validly
organized and existing corporation in good standing under the laws of
the State of Minnesota; has the corporate power and authority to enter
into this Agreement and the Merger Agreement, to issue and sell the
Shares, the Additional Shares and the Navarre Common Stock as
contemplated by this Agreement, and to carry out the provisions of
this Agreement and the Merger Agreement; has the corporate power and
authority to own and hold its properties owned and leased and to carry
on the business in which it is engaged; and has not failed to qualify
to do business as a foreign corporation in good standing in any state
or jurisdiction wherein the nature of its activities or of its
properties owned or leased makes such qualification necessary and
failure to be so qualified would have a material adverse effect upon
the Company and or Navarre.
-12-
13
(b) Each of this Agreement and the Merger Agreement has
been duly authorized, executed and delivered by the Company and
Navarre, and is a legal, valid and binding agreement of the Company
and Navarre enforceable in accordance with its terms, except as the
enforceability thereof may be limited by bankruptcy, insolvency,
moratorium, reorganization or similar laws affecting the enforcement
of creditors' rights generally, and except for judicial limitations on
the enforcement of the remedy of specific performance and other
equitable remedies.
(c) The Shares have been duly authorized, issued and
delivered by the Company and are fully paid and nonassessable, and the
certificates therefor are in valid and sufficient form, and the Shares
are entitled to the benefits of this Agreement applicable thereto.
(d) The Additional Shares have been duly authorized and
reserved for issuance pursuant to Section 5 hereof, based upon the
number of shares of the Common Stock currently issued and outstanding
(including the Shares), and when issued pursuant to Section 5 hereof,
the Additional Shares will be duly authorized and issued and will be
fully paid and nonassessable.
(e) Shares of the Navarre Common Stock have been duly
authorized and reserved for issuance pursuant to Section 11 hereof,
based upon the current market price of the Navarre Common Stock, and
when issued pursuant to Section 11 hereof, the Navarre Common Stock
will be duly authorized and issued and will be fully paid and
nonassessable.
(f) All corporate proceedings required by law or by the
provisions of this Agreement and the Merger Agreement to be taken by
the Board of Directors and the shareholders of the Company and Navarre
(as applicable) on or prior to the Closing Date in connection with the
execution and delivery of this Agreement, the Merger Agreement, the
offer, issuance and sale of the Shares, the Additional Shares and the
Navarre Common Stock, and in connection with the consummation of the
transactions contemplated by this Agreement and the Merger Agreement,
have been duly and validly taken. Articles of Merger regarding the
Merger have been filed with and accepted by the Minnesota Secretary of
State and the Nevada Secretary of State.
(g) The Company is authorized by its Articles of
Incorporation to issue 1,000,000 shares of the Common Stock. Prior to
issuance of the Shares, there are 10,000 shares of the Common Stock
duly issued and outstanding, all of which are fully paid and
nonassessable. The issuance and sale of such outstanding common
shares were exempt from registration under the Securities Act and such
shares were issued in conformity with the permit or qualification
requirements of all applicable state securities laws. Except for such
shares of the Common Stock, the Company has no other authorized or
outstanding series or class of capital stock, and, to the knowledge of
such counsel, there are no outstanding securities convertible into the
Common Stock or outstanding options, warrants or other rights to
acquire securities of the Company, other than options and warrants
disclosed in Schedule 6.12 to this
-13-
14
Agreement. To the knowledge of such counsel, there are no agreements
or understandings on the part of the Company with respect to the
registration of any securities of the Company under the Securities
Act, other than those granted under this Agreement, and there are no
obligations on the part of the Company to purchase or redeem any
outstanding shares of capital stock of the Company.
(h) Except as otherwise provided in this Agreement, no
security holder of the Company is entitled to preemptive or similar
rights to subscribe for or to purchase any shares of capital stock of
the Company, nor will any security holder of the Company be entitled
to any such rights as a result of the execution or delivery of this
Agreement or the issuance of the Shares or the Additional Shares.
(i) Assuming the accuracy of the representations of the
Purchaser set forth in Section 7 hereof, each of the Company and
Navarre has obtained the approval or consent of all governmental
agencies or bodies required to be obtained by it for the legal and
valid execution and delivery of this Agreement and the Merger
Agreement, and the legal and valid offer, issuance and sale of the
Shares, the Additional Shares and the Navarre Common Stock to the
Purchaser, and for the performance of the obligations of the Company
and Navarre under any provisions of this Agreement and the Merger
Agreement. Neither the Company nor Navarre is in violation of any
term, provision or condition of its Articles of Incorporation or
Bylaws, or, to the best of such counsel's knowledge, and except as
disclosed in Schedule 6.14 to this Agreement, in violation of any
agreement or other instrument known to such counsel to which the
Company or Navarre is a party or by which either is bound or to which
any of their properties, assets or business is subject or any
judgment, decree or order known to such counsel or to the best of such
counsel's knowledge any statute, rule or regulation; and the
execution, delivery and performance of this Agreement, the Merger
Agreement, the offer, issuance and sale of the Shares, the Additional
Shares and the Navarre Common Stock and the consummation of the
transactions contemplated by this Agreement and the Merger Agreement,
will not result in any breach or violation of the terms or provisions
of, or constitute a default under, the Articles of Incorporation or
the Bylaws of the Company or Navarre or, to the best of such counsel's
knowledge, in violation of any agreement or other instrument to which
the Company or Navarre is a party or by which it is bound or to which
any of its properties, assets or business is subject or any judgment,
decree, order, statute, rule or regulation known to such counsel to
apply to the Company or Navarre.
(j) Assuming the accuracy of the representations of the
Purchaser set forth in Section 7 hereof, the offer, sale, issuance and
delivery of the Shares, the Additional Shares and the Navarre Common
Stock to the Purchaser, under the circumstances contemplated by this
Agreement are exempt from the registration and prospectus delivery
requirements of the Securities Act, and all registrations,
qualifications, permits and approvals required under applicable state
securities laws for the lawful offer, sale, issuance and delivery of
the Shares, the Additional Shares and the Navarre Common Stock have
been obtained.
-14-
15
(k) Except as disclosed on Schedule 6.7 to this
Agreement, such counsel has no knowledge of any litigation, proceeding
or governmental investigation pending or threatened against the
Company or Navarre, their key management employees, properties or
business which, if determined adversely to the Company or Navarre,
would have a material adverse effect upon the financial condition,
operations, results of operations or business of the Company or
Navarre.
8.6 Opinion of Counsel to NRC. NRC shall have delivered
to the Purchaser an opinion of Xxxxxxx, Xxxxxxx & Xxxx, counsel for NRC, dated
the Closing Date, to the effect that:
(a) NRC is a duly and validly organized and existing
corporation in good standing under the laws of the State of Nevada;
has the corporate power and authority to enter into this Agreement and
the Merger Agreement, and to carry out the provisions of this
Agreement and the Merger Agreement; has the corporate power and
authority to own and hold its properties owned and leased and to carry
on the business in which it is engaged; and, except as set forth on
Schedule 6.2 to this Agreement, has not failed to qualify to do
business as a foreign corporation in good standing in any state or
jurisdiction wherein the nature of its activities or of its properties
owned or leased makes such qualification necessary and failure to be
so qualified would have a material adverse effect upon NRC.
(b) Each of this Agreement and the Merger Agreement has
been duly authorized, executed and delivered by NRC, and is a legal,
valid and binding agreement of NRC, enforceable in accordance with its
terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency, moratorium, reorganization or similar laws
affecting the enforcement of creditors' rights generally, and except
for judicial limitations on the enforcement of the remedy of specific
performance and other equitable remedies.
(c) All corporate proceedings required by law or by the
provisions of this Agreement and the Merger Agreement to be taken by
the Board of Directors and the shareholders of NRC on or prior to the
Closing Date in connection with the execution and delivery of this
Agreement and the Merger Agreement, and in connection with the
consummation of the transactions contemplated by this Agreement and
the Merger Agreement, have been duly and validly taken. Articles of
Merger regarding the Merger have been filed with and accepted by the
Minnesota Secretary of State and the Nevada Secretary of State.
(d) NRC is authorized by its Articles of Incorporation to
issue 10,000,000 shares of common stock, $.01 par value per share (the
"NRC Common Stock"). Immediately prior to the Merger, there were
5,275,834 shares of the NRC Common Stock duly issued and outstanding
(including 2,085,815 shares owned by Navarre), and except for
1,136,381 shares issued by NRC effective in December 1996 pursuant to
non-recourse notes (the "December Shares") as to which such counsel
need not express an opinion, all of which were fully paid and
nonassessable. Except for the December Shares, as to which such
counsel need not
-15-
16
express an opinion, the issuance and sale of such outstanding NRC
Common Stock were exempt from registration under the Securities Act
and such shares were issued in conformity with the permit or
qualification requirements of all applicable state securities laws.
Except for such shares of the NRC Common Stock, NRC has no other
authorized or outstanding series or class of capital stock, and, to
the knowledge of such counsel, there are no outstanding securities
convertible into the NRC Common Stock or outstanding options, warrants
or other rights to acquire securities of NRC, other than options and
warrants disclosed in Schedule 6.14 to this Agreement. To the
knowledge of such counsel, there are no agreements or understandings
on the part of NRC with respect to the registration of any securities
of NRC under the Securities Act, and there are no obligations on the
part of the Company to purchase or redeem any outstanding shares of
capital stock of the Company, other than as set forth in the
Amendment.
(e) No security holder of NRC is entitled to preemptive
or similar rights to subscribe for or to purchase any shares of
capital stock of NRC, nor will any security holder of NRC be entitled
to any such rights as a result of the execution or delivery of this
Agreement or the Merger Agreement.
(f) NRC has obtained the approval or consent of all
governmental agencies or bodies required to be obtained by it for the
legal and valid execution and delivery of this Agreement and the
Merger, and for the performance of the obligations of NRC under any
provisions of this Agreement and the Merger Agreement. NRC is not in
violation of any term, provision or condition of its Articles of
Incorporation or Bylaws, or, to the best of such counsel's knowledge,
and except as disclosed in the Schedule 6.14 to this Agreement, in
violation of any agreement or other instrument known to such counsel
to which NRC is a party or by which it is bound or to which any of its
properties, assets or business is subject or any judgment, decree or
order known to such counsel or to the best of such counsel's
knowledge, except for the offer and sale of the December Shares and
unpaid employee withholding and social security payments as to which
such counsel need not express an opinion, any statute, rule or
regulation; and the execution, delivery and performance of this
Agreement, the Merger Agreement, and the consummation of the
transactions contemplated by this Agreement and the Merger Agreement,
will not result in any breach or violation of the terms or provisions
of, or constitute a default under, the Articles of Incorporation or
the Bylaws of NRC, to the best of such counsel's knowledge, in
violation of any agreement or other instrument to which NRC is a party
or by which it is bound or to which any of its properties, assets or
business is subject or any judgment, decree, order, statute, rule or
regulation known to such counsel to apply to NRC.
(g) Except as set forth in Schedule 6.7 to this
Agreement, such counsel has no knowledge of any litigation, proceeding
or governmental investigation pending or threatened against NRC, its
key management employees, properties or business which, if determined
adversely to NRC, would have a material adverse effect upon the
financial condition, operations, results of operations or business of
NRC.
-16-
17
8.7 No Event of Default. There shall exist at the time
of Closing no condition or event which would constitute an Event of Default (as
hereinafter defined) or which, after notice or lapse of time or both, would
constitute an Event of Default.
8.8 Qualification Under State Securities Laws All
registrations, qualifications, permits and approvals required under applicable
state securities laws for the lawful execution and delivery of this Agreement
and the offer, sale, issuance and delivery of the Shares, the Additional Shares
and the Navarre Common Stock shall have been obtained.
8.9 Employee Agreements. Each employee of the Company
who has managerial duties or whose duties involve research and development
shall have executed and delivered to the Company an agreement, in form and
substance satisfactory to the Purchaser and complying with applicable law,
assigning irrevocably to the Company any present or future invention,
discovery, improvement, formula, proprietary right or data, trade secret, shop
right, idea or know-how, whether patented or not, discovered, developed or
otherwise acquired by such employee during the term of such employee's
employment with the Company, and agreeing not to divulge to others information
that is proprietary to the Company.
8.10 Xxxxxxxx Xxxxxxx Agreement. The Company, NRC and
Xxxxxxxx Xxxxxxx shall have entered into a Severance and Release Agreement in
form and substance satisfactory to the Purchaser.
8.11 Xxxxxxx, Xxxxxxx & Xxxx Agreement. The law firm of
Xxxxxxx, Xxxxxxx & Xxxx shall have entered into a Settlement Agreement in form
and substance satisfactory to the Purchaser.
8.12 Conversion Agreement. Navarre and the Purchaser
shall have entered into a Conversion Agreement substantially in the form of
Exhibit A (the "Conversion Agreement").
8.13 Bring-Down Certificate. NRC shall deliver to the
Purchaser an unaudited balance sheet of NRC as of February 28, 1997, which
shall be certified by an officer of NRC and identify any material changes
outside of the ordinary course of business since the date of this Agreement
through the Closing Date and any revisions to the schedules attached hereto.
8.14 Proceedings and Documents. All corporate and other
proceedings and actions taken in connection with the transactions contemplated
by this Agreement and the Merger Agreement and all certificates, opinions,
agreements, instruments and documents mentioned herein or therein or incident
to any such transaction shall be satisfactory in form and substance to the
Purchaser and its counsel.
9. Affirmative Covenants of the Company and Navarre. The Company
and Navarre covenant and agree that:
-17-
18
9.1 Corporate Existence. The Company and Navarre will
maintain and cause each Subsidiary (which, for purposes of the following
covenants, shall mean any corporation, association or other business entity
more than a majority (by number of votes) of the voting stock of which is at
the time owned or controlled, directly or indirectly, by the Company, Navarre
or by one or more of their Subsidiaries or both) to maintain its corporate
existence in good standing and comply with all applicable laws and regulations
of the United States or of any state or states thereof or of any political
subdivision thereof and of any governmental authority where failure to so
comply would have a material adverse impact on the Company, Navarre or their
business or operations.
9.2 Books of Account and Reserves. The Company will, and
will cause each of its Subsidiaries to, keep books of record and account in
which full, true and correct entries are made of all of its and their
respective dealings, business and affairs, in accordance with generally
accepted accounting principles. The Company will employ independent public
accountants selected by the Board of Directors of the Company who are
"independent" within the meaning of the accounting regulations of the
Commission and have annual audits made by such independent public accountants
in the course of which such accountants shall make such examinations, in
accordance with generally accepted auditing standards, as will enable them to
give such reports or opinions with respect to the financial statements of the
Company and its Subsidiaries as will satisfy the requirements of the Commission
in effect at such time with respect to certificates and opinions of
accountants.
9.3 Furnishing of Financial Statements and Information.
The Company will deliver to the Purchaser:
(a) as soon as practicable, but in any event within 30
days after the close of each month, unaudited consolidated balance
sheets of the Company and its Subsidiaries as of the end of such
month, together with the related consolidated statements of operations
and cash flow for such month, setting forth the budgeted figures for
such month prepared and submitted in connection with the Company's
annual plan as required under Section 9.5 hereof and in comparative
form figures for the corresponding month of the previous fiscal year,
all in reasonable detail and certified by an authorized accounting
officer of the Company, subject to year-end adjustments;
(b) as soon as practicable, but in any event within 90
days after the end of each fiscal year, a consolidated balance sheet
of the Company and its Subsidiaries, as of the end of such fiscal
year, together with the related consolidated statements of operations,
stockholders' equity and cash flow for such fiscal year, setting forth
in comparative form figures for the previous fiscal year, all in
reasonable detail and duly certified by the Company's independent
public accountants, which accountants shall have given the Company an
opinion, unqualified as to the scope of the audit, regarding such
statements;
(c) within 90 days after the end of each fiscal year,
written notice of the current number of Additional Shares issuable
pursuant to Section 5 hereof, including a brief statement indicating
any adjustments reasonably anticipated;
-18-
19
(d) concurrently with the delivery in each year of the
financial statements referred to in paragraph (b) of this Section 9.3,
a statement and report signed by the independent public accountants
who certified such financial statements to the effect that they have
read this Agreement and that in the course of the audit upon which
their certificate was based they became aware of no condition or event
which constituted an Event of Default or which, after notice or lapse
of time or both, would constitute an Event of Default or if such
accountants did become aware of. any such condition or event,
specifying the nature and period of existence thereof;
(e) promptly after the submission thereof to the Company,
copies of all reports and recommendations submitted by independent
public accountants in connection with any annual or interim audit of
the accounts of the Company or any of its Subsidiaries made by such
accountants;
(f) promptly upon transmission thereof, copies of all
reports, proxy statements, registration statements and notifications
filed by it with the Commission pursuant to any act administered by
the Commission or furnished to shareholders of the Company or to any
national securities exchange;
(g) with reasonable promptness, such other financial data
relating to the business, affairs and financial condition of the
Company and any Subsidiaries as is available to the Company and as
from time to time the Purchaser may reasonably request;
(h) promptly following the issuance of any additional
shares of the Common Stock or any options, warrants or other rights
to purchase securities of the Company, the Company shall give written
notice of the amount of securities so issued and the total
consideration received therefor;
(i) at least 20 days prior to the earlier of (i) the
execution of any agreement relating to any merger or consolidation of
the Company or any of its Subsidiaries with another corporation, or a
plan of exchange involving the outstanding capital stock of the
Company or any of its Subsidiaries, or the sale, transfer or other
disposition of all or substantially all of the property, assets or
business of the Company or any of its Subsidiaries to another
corporation, or (ii) the holding of any meeting of the shareholders of
the Company for the purpose of approving such action, written notice
of the terms and conditions of such proposed merger, consolidation,
plan of exchange, sale, transfer or other disposition; and
(j) within 15 days after the Company learns in writing of
the commencement or threatened commencement of any material suit,
legal or equitable, or of any material administrative, arbitration or
other proceeding against the Company, any of its Subsidiaries or their
respective businesses, assets or properties, written notice of the
nature and extent of such suit or proceeding.
-19-
20
9.4 Inspection. The Company will permit the Purchaser and any of
its officers or employees, or any outside representatives designated by the
Purchaser and reasonably satisfactory to the Company, to visit and inspect at
the Purchaser's expense any of the properties of the Company or its
Subsidiaries, including their books and records (and to make photocopies
thereof or make extracts therefrom), and to discuss their affairs, finances,
and accounts with their officers, lawyers and accountants, except with respect
to trade secrets and similar confidential information, all to such reasonable
extent and at such reasonable times and intervals as the Purchaser may
reasonably request. Except as otherwise required by laws or regulations
applicable to the Purchaser, the Purchaser shall maintain, and shall require
their representatives to maintain, all information obtained pursuant to Section
9.3. this Section 9.4 and Section 9.5 on a confidential basis.
9.5 Preparation and Approval of Budgets. At least one month prior
to the beginning of each fiscal year of the Company, the Company shall prepare
and submit to its Board of Directors, for its review and approval, an annual
plan for such year, which shall include monthly capital and operating expense
budgets, cash flow statements and profit and loss projections itemized in such
detail as the Board of Directors may reasonably request. Each annual plan
shall be modified as often as is necessary in the judgment of the Board of
Directors to reflect changes required as a result of operating results and
other events that occur, or may be reasonably expected to occur, during the
year covered by the annual plan, and copies of each such modification shall be
submitted to the Board of Directors. The Company will, simultaneously with the
submission thereof to the Board of Directors, deliver a copy of each such
annual plan and modification thereof to the Purchaser.
9.6 Payment of Taxes and Maintenance of Properties. The Company
will, and will cause each Subsidiary to:
(a) pay and discharge promptly, or cause to be paid and
discharged promptly when due and payable, all taxes, assessments and
governmental charges or levies imposed upon it or upon its income or
upon any of its properties, as well as all material claims of any kind
(including claims for labor, material and supplies) which, if unpaid,
might by law become a lien or charge upon its property; provided,
however, that neither the Company nor any Subsidiary shall be required
to pay any such tax, assessment, charge, levy or claim if the amount,
applicability or validity thereof shall currently be contested in good
faith by appropriate proceedings and if the Company or such Subsidiary
as the case may be shall have set aside on its books reserves
(segregated to the extent required by generally accepted accounting
principles) deemed adequate by it with respect thereto; and
(b) maintain and keep, or cause to be maintained and
kept, its properties in good repair, working order and condition, and
from time to time make, or cause to be made, all repairs and renewals
and replacements which in the opinion of the Company are necessary and
proper so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; the Company will
maintain or cause to be maintained back-up copies of all valuable
papers and software.
-20-
21
9.7 Insurance. The Company will, and will cause each Subsidiary
to, obtain and maintain in force such property damage, public liability,
business interruption, worker's compensation, indemnity bonds and other types
of insurance as the Company's executive officers, after consultation with an
accredited insurance broker, shall determine to be necessary or appropriate to
protect the Company from the insurable hazards or risks associated with the
conduct of the Company's business. The Company's executive officers shall
periodically report to the Board of Directors on the status of such insurance
coverage.
All insurance shall be maintained in at least such amounts and to such
extent as shall be determined to be reasonable by the Board of Directors; and
all such insurance shall be effected and maintained in force under a policy or
policies issued by insurers of recognized responsibility, except that the
Company or any Subsidiary may effect worker's compensation or similar insurance
in respect of operations in any state or other jurisdiction either through an
insurance fund operated by such state or other jurisdiction or by causing to be
maintained a system or systems of self- insurance which is in accord with
applicable laws.
9.8 Payment of Indebtedness and Discharge of Obligations. The
Company will, and will cause each Subsidiary to, pay or cause to be paid the
principal of and interest and premium, if any, on all Indebtedness for Borrowed
Money heretofore or hereafter incurred or assumed by it when and as the same
shall become due and payable, unless such Indebtedness for Borrowed Money is
renewed or extended. The Company will, and will cause each Subsidiary to,
faithfully observe, perform and discharge all of the material covenants,
conditions and obligations which are imposed on it by any and all indentures
and other agreements securing or evidencing such Indebtedness for Borrowed
Money or pursuant to which such Indebtedness for Borrowed Money is issued, and
will not permit the continuance of any act or omission which is or under the
provisions thereof may be declared to be a material default thereunder, unless
such default is waived pursuant to the provisions thereof. Neither the Company
nor any Subsidiary shall be required to make any payment or to take any other
action by reason of this Section 9.8 at any time while it shall be currently
contesting in good faith by appropriate proceedings its obligations to make
such payment or to take such action provided that the Company or such
Subsidiary, as the case may be, shall have set aside on its books reserves
(segregated to the extent required by generally accepted accounting principles)
deemed adequate by it with respect thereto.
9.9 Directors' and Stockholders' Meetings. The Purchaser, so long
as it holds any shares of the Common Stock, shall have the right to elect the
number of directors of the Company equal to the total number of directors of
the Company multiplied by the percentage of the Purchaser's ownership of the
issued and outstanding shares of the Common Stock, rounded up to the nearest
whole number, and in no event less than one director.
The Company shall reimburse the Purchaser for the reasonable
out-of-pocket expenses incurred by it or the directors elected by it in
connection with the attending of meetings by its director designees or carrying
out any other duties by such director designees that may be specified by the
Board of Directors; shall pay such director designees the same directors' fees
paid to the other non-
-21-
22
employee directors of the Company; and shall maintain as part of its Articles
of Incorporation or Bylaws a provision for the indemnification of its directors
to the full extent permitted by law.
The Company agrees, as a general practice, to hold a meeting of its
Board of Directors at least once every two months, and during each year to hold
its annual meeting of shareholders on or approximately on the date provided in
its Bylaws.
9.10 Replacement of Certificates Representing the Shares or the
Additional Shares. Upon receipt of evidence reasonably satisfactory to the
Company of the loss, theft, destruction or mutilation of any certificates
representing the Shares or the Additional Shares and, in the case of any such
loss, theft or destruction, upon delivery of a bond of indemnity satisfactory
to the Company, or, in the case of any such mutilation, upon surrender and
cancellation of the certificates representing the Shares or the Additional
Shares, as the case may be, the Company will issue new certificates
representing the Shares or the Additional Shares, as the case may be, of like
tenor, in lieu of such lost, stolen, destroyed or mutilated certificates
representing the Shares or the Additional Shares, as the case may be.
9.11 Application of Proceeds. Unless otherwise approved by the
Purchaser, the net proceeds received by the Company from the sale of the Shares
shall be used substantially for working capital purposes. Pending use of the
proceeds in the business, up to $1,000,000 may be loaned to Navarre on a
secured demand note basis, subordinate only to Navarre's senior lender.
Navarre agrees to pay such note on an as-needed basis, as determined solely by
the board of directors of the Company.
9.12 Retirement Plans. The Company will cause each retirement plan
of the Company or any of its Subsidiaries in which any employees of the Company
or of any of its Subsidiaries participate that is subject to the provisions of
ERISA and the documents and instruments governing each such plan to be
conformed to when necessary, and to be administered in a manner consistent
with, those provisions of ERISA which may, from time to time, become effective
and operative with respect to such plans; if requested by the Purchasers in
writing from time to time, furnish to the Purchasers a copy of any annual
report with respect to each such plan that the Company files with the Secretary
of Labor pursuant to ERISA; and at such time as such insurance shall be
available at rates deemed commercially reasonable by the Company, maintain
insurance against the contingent liability against the net worth of the Company
imposed in respect of each such plan by the provisions of ERISA.
9.13 Filing of Reports. The Company will, from and after such time
as it has securities registered pursuant to Section 12 of the Securities
Exchange Act of 1934, as amended, or has securities registered pursuant to the
Securities Act, make timely filing of such reports as are required to be filed
by it with the Commission so that Rule 144 under the Securities Act or any
successor provision thereto will be available to the security holders of the
Company who are otherwise able to take advantage of the provisions of such
Rule.
-22-
23
9.14 Patents and Other Intangible Rights. The Company will apply
for, or obtain assignments of, or licenses to use, all patents, trademarks,
trademark rights, trade names, trade name rights and copyrights which in the
opinion of a prudent and experienced businessperson operating in the industry
in which the Company is operating are desirable or necessary for the conduct
and protection of the business of the Company.
9.15 Rights to Purchase Additional Securities. If the Company
should decide to issue and sell additional shares of any capital stock of the
Company or any warrants, securities convertible into capital stock of the
Company or other rights to subscribe for or to purchase any capital stock of
the Company, other than (a) shares of the Common Stock awarded or issued upon
the exercise of options granted pursuant to employee benefit plans adopted by
the Company, provided that the aggregate number of shares thus awarded and
issued and issuable pursuant to the exercise of all such options shall not be
in excess of five percent (5%) of the issued and outstanding shares of the
Common Stock (appropriately adjusted to reflect stock splits, stock dividends,
reorganizations, consolidations and similar changes effected after the Closing
Date), and (b) the Additional Shares, (all such capital stock, warrants,
securities convertible into capital stock and other rights, other than
securities referred to in (a) and (b) above, being hereinafter sometimes
collectively referred to as "Additional Securities"), the Company shall first
offer to sell to the Purchaser, upon the same terms and conditions as the
Company is proposing to issue and sell such Additional Securities to others,
the Purchaser's pro rata share (as defined below) of such Additional
Securities. Such offer shall be made by written notice given to the Purchaser
and specifying therein the amount of the Additional Securities being offered,
the purchase price and other terms of such offer. The Purchaser shall have a
period of 30 days from and after the date of receipt by it of such notice
within which to accept such offer. If the Purchaser elects to accept such
offer in whole or in part, the Purchaser shall so accept by written notice to
the Company given within such 30-day period. If a Purchaser fails to accept
such offer in whole or in part within such 30-day period, any of such
Additional Securities not purchased by the Purchaser pursuant to such offer may
be offered for sale to others by the Company for a period of 60 days from the
last day of such 30-day period, but only on the same terms and conditions as
set forth in the initial offer to the Purchaser, free and clear of the
restrictions imposed by this Section 9.15.
For purposes of the previous paragraph, the Purchaser's "pro rata
share" is the number of shares of Additional Securities (rounded to the nearest
whole share) as is equal to the product of (a)(i) the number of shares of
Common Stock issued, or issuable upon the exercise or conversion of rights,
options or Convertible Securities (as hereinafter defined) without the payment
of any additional cash consideration or with the payment of a nominal cash
consideration, as the case may be (collectively, "Fully Paid securities"), to
the Purchaser immediately prior to the issuance of the Additional Securities
being offered divided by (ii) the total number of Fully Paid Securities issued
or issuable by the Company immediately prior to the issuance of the Additional
Securities, multiplied by (b)(i) the entire offering of Additional Securities.
9.16 Exclusive Placement. (i) As soon as practicable, but in no
event later than 60 days after the Closing or after the date a programing
medium is available, and for so long as the Purchaser is a shareholder of the
Company the Company shall provide the Purchaser, at the Company's actual
-23-
24
direct cost without any profit or allocation of overhead, with at least one
placement on the most favorable level of service (e.g., the opportunity to
maintain a position to receive the most number of "hits" or "views") offered by
the Company on any of its programing mediums, including "Net TV" which is
currently being developed, and (ii) for so long as the Purchaser is a
shareholder of the Company, the Company shall not provide program distribution
for the sale or distribution of merchandise on behalf of any electronically
distributed shopping service other than the Purchaser, including but not
limited to, QVC, Home Shopping Network, Shop-At-Home and CUC Shoppers
Advantage.
9.17 Right of First Refusal. The Purchaser shall have a right, but
not an obligation, to sell and distribute any merchandise (other than music
items of the nature sold by the Company or Navarre as of the date hereof) to be
offered by the Company on any of its programing mediums, so long as the
Purchaser can offer the Company similar terms as any other vendor.
9.18 Public Announcements. Any and all public announcements of any
kind regarding the transactions contemplated by this Agreement or which
reference either the Purchaser or Navarre, whether made before or after the
Closing, shall require the prior written approval of the Purchaser and Navarre,
which approval shall not be unreasonably withheld, and each of the parties
hereto hereby acknowledge that the Purchaser and Navarre are public companies
that must comply with the requirements of the Securities Act, the Securities
Exchange Act of 1934, as amended, and the rules and regulations of the Nasdaq
National Market.
10. Negative Covenants. The Company will be limited and
restricted as follows:
10.1 Consolidation. Merger. Acquisition. etc. Without the
prior approval of the Purchaser, (a) the Company will not, nor will it permit
any Subsidiary to, sell, lease, license or otherwise dispose of all or
substantially all of its assets or any asset or assets which have a material
effect upon the business or financial condition of the Company, and (b) the
Company will not, nor will it permit any Subsidiary to, consolidate with or
merge into any other corporation or entity, or permit any other corporation or
entity to consolidate or merge into the Company or any Subsidiary, or enter
into a plan of exchange with any other corporation or entity, or otherwise
acquire any other corporation or entity; provided that the foregoing shall not
apply to any transaction between the Company and a wholly-owned Subsidiary.
10.2 Future Registration Rights. Except for any
registration expressly permitted by Section 12 of this Agreement, the Company
will not, without the prior approval of the Purchaser, agree with the holders
of any securities issued or to be issued by the Company to register such
securities under the Securities Act nor will it grant any incidental
registration rights.
10.3 Other Restrictions. The Company will not without
the prior written consent of the Purchaser:
-24-
25
(a) guarantee, endorse or otherwise be or become
contingently liable, or permit any Subsidiary to guarantee, endorse or
otherwise become contingently liable, in connection with the
obligations, securities or dividends of any person, firm, association
or corporation, other than the Company or any of its Subsidiaries,
except that the Company and any Subsidiary may endorse negotiable
instruments for collection in the ordinary course of business;
(b) make or permit any Subsidiary to make loans or
advances to any person (including without limitation to any officer,
director or stockholder of the Company or any Subsidiary), firm,
association or corporation, except loans and advances to the Company
and its wholly-owned Subsidiaries, advances to suppliers and employees
made in the ordinary course of business, and except as provided in
Section 9.12 hereof;
(c) purchase or invest, or permit any Subsidiary to
purchase or invest, in the stock or obligations of any other person,
firm or corporation, other than a wholly-owned Subsidiary;
(d) pay, or permit any Subsidiary to pay, compensation,
whether by way of salaries, bonuses, participations in pension or
profit sharing plans, fees under management contracts or for
professional services or fringe benefits to any officer in excess of
amounts fixed by the Board of Directors of the Company prior to any
payment to such officer; or
(e) make any material change in the nature of its
business as carried on at the date of this Agreement.
11. Conversion Rights. The Purchaser shall have those rights to
exchange all or any portion of the shares of the Common Stock that it then
holds (the "Conversion Shares"), into shares of the Common Stock, $.01 par
value, of Navarre (the "Navarre Common Stock") or cash as set forth in the
Conversion Agreement.
12. Registration of Stock.
12.1 Required Registration. In the event that the Company
has not commenced an initial public offering of the Common Stock pursuant to a
Registration Statement filed under the Securities Act of 1933, as amended (the
"Securities Act"), having an aggregate value of at least $10 million (a
"Registration") by the third anniversary of the Closing Date hereof, the
Purchaser and Navarre shall each have the right to demand that the Company
offer for sale pursuant to a Registration, shares of the Common Stock, provided
that the aggregate market value of the outstanding Common Stock following such
offering (excluding the value of the shares sold by the Company in such
offering) shall be at least $40 million. The Company shall include in such
Registration up to 20% of the shares of the Common Stock then owned by each of
the Purchaser and
-25-
26
Navarre, unless, in the good faith judgment of the managing underwriter of such
Registration, the inclusion of such securities would interfere with the
successful marketing of the offering.
12.2 Registration Procedures. If and whenever the Company
is required by the provisions of Sections 12.1 to effect the registration of
securities under the Securities Act, the Company will:
(a) prepare and file with the Commission a registration
statement with respect to such securities, and use its best efforts to
cause such registration statement to become and remain effective for
such period as may be reasonably necessary to effect the sale of such
securities;
(b) prepare and file with the Commission such amendments
to such registration statement and supplements to the prospectus
contained therein as may be necessary to keep such registration
statement effective for such period as may be reasonably necessary to
effect the sale of such securities;
(c) furnish to the Purchaser and to the underwriters of
the securities being registered such reasonable number of copies of
the registration statement, preliminary prospectus, final prospectus
and such other documents as the Purchaser and such underwriters may
reasonably request in order to facilitate the public offering of such
securities;
(d) use its best efforts to register or qualify the
securities covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as the Purchaser may
reasonably request in writing within 20 days following the original
filing of such registration statement, except that the Company shall
not for any purpose be required to execute a general consent to
service of process or to qualify to do business as a foreign
corporation in any jurisdiction wherein it is not so qualified;
(e) notify the Purchaser promptly after it shall receive
notice thereof, of the time when such registration statement has
become effective or a supplement to any prospectus forming a part of
such registration statement has been filed;
(f) notify the Purchaser promptly of any request by the
Commission for the amending or supplementing of such registration
statement or prospectus or for additional information;
(g) prepare and file with the Commission, promptly upon
the request of the Purchaser, any amendments or supplements to such
registration statement or prospectus which, in the opinion of counsel
for the Purchaser (and concurred in by counsel for the Company), is
required under the Securities Act or the rules and regulations
thereunder in connection with the distribution of the securities so
registered;
-26-
27
(h) prepare and promptly file with the Commission and
promptly notify the Purchaser of the filing of such amendment or
supplement to such registration statement or prospectus as may be
necessary to correct any statements or omissions if, at the time when
a prospectus relating to such securities is required to be delivered
under the Securities Act, any event shall have occurred as the result
of which any such prospectus or any other prospectus as then in effect
would include an untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in the
light of the circumstances in which they were made, not misleading;
(i) advise the Purchaser, promptly after it shall receive
notice or obtain knowledge thereof, of the issuance of any stop order
by the Commission suspending the effectiveness of such registration
statement or the initiation or threatening of any proceeding for that
purpose and promptly use its best efforts to prevent the issuance of
any stop order or to obtain its withdrawal if such stop order should
be issued;
(j) not file any amendment or supplement to such
registration statement or prospectus to which the Purchaser shall have
reasonably objected on the grounds that such amendment or supplement
does not comply in all material respects with the requirements of the
Securities Act or the rules and regulations thereunder, after having
been furnished with a copy thereof at least five business days prior
to the filing thereof, unless in the opinion of counsel for the
Company the filing of such amendment or supplement is reasonably
necessary to protect the Company from any liabilities under any
applicable federal or state law and such filing will not violate
applicable law; and
(k) at the request of the Purchaser, furnish: (i) an
opinion, dated as of the closing date, of the counsel representing the
Company for the purposes of such registration, addressed to the
underwriters, if any, and to the Purchaser, covering such matters as
such underwriters and the Purchaser may reasonably request; and (ii)
letters dated as of the effective date of the registration statement
and as of the closing date, from the independent public accountants of
the Company, addressed to the underwriters, if any, and to the
Purchaser, covering such matters as such underwriters and the
Purchaser may reasonably request.
12.3 Expenses. With respect to each registration requested
pursuant to Section 12.1 hereof, the Company shall bear all of the fees, costs
and expenses of such registrations, including without limitation, filing and
NASD fees, printing expenses, fees and disbursements of counsel and accountants
for the Company, fees and disbursements of counsel for the underwriter or
underwriters of such securities (if the Company and/or selling security holders
are required to bear such fees and disbursements), all internal Company
expenses, all legal fees and disbursements and other expenses of complying with
state securities or blue sky laws of any jurisdictions in which the securities
to be offered are to be registered or qualified, and the premiums and other
costs of policies of insurance against liability (if any) arising out of such
public offering. Fees and disbursements of counsel and
-27-
28
accountants for the Purchaser, underwriting discounts and commissions and
transfer taxes relating to the shares included in the offering by the Purchaser
shall be borne by the Purchaser.
12.4 Indemnification. In the event that any securities
held by the Purchaser are included in a registration statement under Section
12.1:
(a) The Company will indemnify and hold harmless the
Purchaser pursuant to the provisions of this Section 12, its directors
and officers, and any underwriter (as defined in the Securities Act)
for the Purchaser and each person, if any, who controls the Purchaser
or such underwriter within the meaning of the Securities Act, from and
against, and will reimburse the Purchaser and each such underwriter
and controlling person with respect to, any and all loss, damage,
liability, cost and expense to which the Purchaser or any such
underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, damages,
liabilities, costs or expenses are caused by any untrue statement or
alleged untrue statement of any material fact contained in such
registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not misleading;
provided, however, that the Company will not be liable in any such
case to the extent that any such loss, damage, liability, cost or
expense arises out of or is based upon an untrue statement or alleged
untrue statement or omission or alleged omission so made in conformity
with information furnished by the Purchaser, such underwriter or such
controlling person in writing specifically for use in the preparation
thereof.
(b) The Purchaser will indemnify and hold harmless the
Company, its directors and officers, any controlling person and any
underwriter from and against, and will reimburse the Company, its
directors and officers, any controlling person and any underwriter
with respect to, any and all loss, damage, liability, cost or expense
to which the Company or any controlling person and/or any underwriter
may become subject under the Securities Act or otherwise, insofar as
such losses, damages, liabilities, costs or expenses are caused by any
untrue or alleged untrue statement of any material fact contained in
such registration statement, any prospectus contained therein or any
amendment or supplement thereto, or arise out of or are based upon the
omission or the alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements
therein, in light of the circumstances in which they were made, not
misleading, in each case to the extent, but only to the extent, that
such untrue statement or alleged untrue statement or omission or
alleged omission was so made in reliance upon and in strict conformity
with written information furnished by the Purchaser specifically for
use in the preparation thereof.
(c) Promptly after receipt by an indemnified party
pursuant to the provisions of paragraph (a) or (b) of this Section
12.4 of notice of the commencement of any action involving the subject
matter of the foregoing indemnity provisions such indemnified party
will, if a claim thereof is to be made against the indemnifying party
pursuant to the provisions of
-28-
29
said paragraph (a) or (b), promptly notify the indemnifying party of
the commencement thereof; but the omission to so notify the
indemnifying party will not relieve it from any liability which it may
have to any indemnified party otherwise than hereunder. In case such
action is brought against any indemnified party and it notifies the
indemnifying party of the commencement thereof, the indemnifying party
shall have the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly notified, to
assume the defense thereof, with counsel satisfactory to such
indemnified party, provided, however, if the defendants in any action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be
legal defenses available to it and/or other indemnified parties which
are different from or additional to those available to the
indemnifying party, or if there is a conflict of interest which would
prevent counsel for the indemnifying party from also representing the
indemnified party, the indemnified party or parties shall have the
right to select separate counsel to participate in the defense of such
action on behalf of such indemnified party or parties. After notice
from the indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party will not be
liable to such indemnified party pursuant to the provisions of said
paragraph (a) or (b) for any legal or other expense subsequently
incurred by such indemnified party in connection with the defense
thereof other than reasonable costs of investigation, unless (i) the
indemnified party shall have employed counsel in accordance with the
proviso of the preceding sentence, (ii) the indemnifying party shall
not have employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after the
notice of the commencement of the action, or (iii) the indemnifying
party has authorized the employment of counsel for the indemnified
party at the expense of the indemnifying party.
13. Default.
13.1 Events of Default. Each of the following events
shall be an event of default (an "Event of Default") for purposes of this
Agreement:
(a) if the Company or any Subsidiary becomes insolvent,
or admits in writing its inability to pay its debts as they mature,
and does not obtain additional financing within 90 days thereof to no
longer be insolvent or to pay its debts as they mature; or
(b) if the Company or any Subsidiary makes an assignment
for the benefit of creditors, or ceases doing business as a going
concern, or the Company or any Subsidiary applies for or consents to
the appointment of a trustee or receiver for the Company or any
Subsidiary, or for the major part of the property of either; or
(c) if a trustee or receiver is appointed for the Company
or any Subsidiary or for the major part of the property of either and
the order of such appointment is not discharged, vacated or stayed
within 90 days after such appointment; or
-29-
30
(d) if any judgment, writ or warrant of attachment or of
any similar process in an amount in excess of $25,000 shall be entered
or filed against the Company or any Subsidiary or against any of the
property or assets of either and remains unpaid, unvacated, unbonded
or unstayed for a period of 90 days, provided, however, that this
section 13.1(c) shall not apply to the items disclosed on SCHEDULE 6.7
hereto; or
(e) if an order for relief shall be entered in any
Federal bankruptcy proceeding in which the Company or any Subsidiary
is the debtor; or if bankruptcy, reorganization, arrangement,
insolvency, or liquidation proceedings, or other proceedings for
relief under any bankruptcy or similar law or laws for the relief of
debtors, are instituted by or against the Company or any Subsidiary
and, if instituted against the Company or any Subsidiary, are
consented to or, if contested by the Company or the Subsidiary, are
not dismissed by the adverse parties or by an order, decree or
judgment within 90 days after such institution; or
(f) if the Company or any Subsidiary shall default in any
material respect in the due and punctual performance of any covenant
or agreement in any note, bond, indenture, loan agreement, note
agreement, mortgage, security agreement or other instrument evidencing
or related to Indebtedness for Borrowed Money, and such default shall
continue for more than the period of notice and/or grace, if any,
therein specified and shall not have been waived; or
(g) (i) if any representation or warranty made by or on
behalf of the Company, Navarre or NRC in this Agreement or in any
certificate, report or other instrument delivered under or pursuant to
any term hereof or thereof shall prove to have been untrue or
incorrect as of the date of this Agreement or as of the Closing Date,
or (ii) if any report, certificate, financial statement or financial
schedule or other instrument prepared or purported to be prepared by
the Company, Navarre or NRC or any officer of the Company, Navarre or
NRC furnished or delivered under or pursuant to this Agreement after
the Closing Date shall prove to be untrue or incorrect as of the date
it was made, furnished or delivered, and either (i) or (ii) has a
material adverse effect on the Company or Navarre; or
(h) if default shall be made in the due and punctual
performance or observation of any term condition or covenant contained
in Sections 10.1, 10.2 and 10.3 of this Agreement; or
(i) if default shall be made in the due and punctual
performance or observance of any term, condition or covenant contained
in this Agreement other than those set forth in Section 12.4(h), and
such default shall have continued for a period of 90 days.
13.2 Remedy Upon Events of Default. Upon the occurrence
of an Event of Default as herein defined, unless such Event of Default shall
have been waived by the Purchaser in a writing signed by an executive officer
of the Purchaser, the Purchaser shall be entitled the Conversion Rights as set
forth in the Conversion Agreement.
-30-
31
13.3 Notice of Defaults. When, to its knowledge, any
Event of Default has occurred or exists, the Company agrees to give written
notice within three business days of such Event of Default to the Purchaser.
13.4 Suits for Enforcement. In case any one or more
Events of Default shall have occurred and be continuing, unless such Events of
Default shall have been waived in the manner provided in Section 13.2 hereof,
the Purchaser may proceed to protect and enforce its rights under this Section
13 by suit in equity or action at law. It is agreed that in the event of such
action the Purchaser shall be entitled to receive all reasonable fees, costs
and expenses incurred, including without limitation, such reasonable fees and
expenses of attorneys (whether or not litigation is commenced) and reasonable
fees, costs and expenses of appeals.
13.5 Remedies Cumulative. No right, power or remedy
conferred upon the Purchaser shall be exclusive, and each such right, power or
remedy shall be cumulative and in addition to every other right, power or
remedy, whether conferred hereby or by any such security or now or hereafter
available at law or in equity or by statute or otherwise.
13.6 Remedies not Waived. No course of dealing between
the Company and/or Navarre and the Purchaser, and no delay in exercising any
right, power or remedy conferred hereby or by any such security or now or
hereafter existing at law or in equity or by statute or otherwise, shall
operate as a waiver of or otherwise prejudice any such right, power or remedy;
provided, however, that this Section shall not be construed or applied so as to
negate the provisions and intent of any statute which is otherwise applicable.
14. Definitions. Unless the context otherwise requires, the
terms defined in this Section 14 shall have the meanings herein specified for
all purposes of this Agreement, applicable to both the singular and plural
forms of any of the terms herein defined. All accounting terms defined below
shall, except as otherwise expressly provided, be determined by reference to
the Company's books of account and in conformity with generally accepted
accounting principles as applied to such books of account in the opinion of the
independent public accountants selected by the Board of Directors of the
Company as required under the provisions of Section 9.3 hereof.
14.1 "Convertible Securities" shall mean evidences of
indebtedness, shares of stock or other securities which are at any time
directly or indirectly convertible into or exchangeable for shares of the
Common Stock.
14.2 "Indebtedness for Borrowed Money" shall include only
indebtedness of the Company and its Subsidiaries incurred as the result of a
direct borrowing of money and shall not include any other indebtedness
including, but not limited to, indebtedness incurred with respect to trade
accounts.
14.3 "Permitted Liens" shall mean (a) liens for taxes and
assessments or governmental charges or levies not at the time due or in respect
of which the validity thereof shall
-31-
32
currently be contested in good faith by appropriate proceedings; and (b) liens
in respect of pledges or deposits under worker's compensation laws or similar
legislation, carriers', warehousemen's, mechanics', laborers' and
materialmen's, landlord's and statutory and similar liens, if the obligations
secured by such liens are not then delinquent or are being contested in good
faith, and liens and encumbrances incidental to the conduct of the business of
the Company or any Subsidiary which were not incurred in connection with the
borrowing of money or the obtaining of advances or credits and which do not in
the aggregate materially detract from the value of its property or materially
impair the use thereof in the operation of its business.
15. TERMINATION OF AGREEMENT. This Agreement may be
terminated at any time prior to the Closing Date:
(a) Mutual Consent. By mutual consent of the parties
hereto.
(b) Breach of Agreement. By any of the parties hereto
giving written notice to any of the other parties if any of the parties hereto
are in breach in any material respect of any representation, warranty or
covenant contained in this Agreement.
(d) Results of Due Diligence. By the Purchaser giving
written notice to any of the Selling Parties on or before the Closing Date, if
the Purchaser is not satisfied (in its sole discretion) with the results of its
continuing business, legal, and accounting due diligence regarding the Company
and NRC.
(e) Delayed Closing. By any party hereto giving written
notice to the other parties hereto, if the transactions contemplated by this
Agreement shall not have been consummated by March 31, 1997, unless such
failure shall be due to the failure of the party seeking to terminate this
Agreement to perform or observe the covenants, agreements and conditions hereof
to be performed or observed by such party at or before the Closing Date.
(f) Government Action. By any party hereto if any court
of competent jurisdiction in the United States or other United States
governmental body shall have issued an order, decree or ruling or taken any
other action restraining, enjoining or otherwise prohibiting the consummation
of the transactions contemplated by this Agreement and such order, decree,
ruling or other action shall have become final and non-appealable.
16. Consents, Waivers and Amendments. Neither this Agreement nor any
provision hereof may be amended, changed, waived, discharged or terminated
orally, but only by a statement in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought.
17. Payment of Fees and Expenses of Purchasers. Each party hereto
shall pay all costs and expenses incurred by it in preparing this Agreement
(and all other agreements, certificates, instruments and documents executed in
connection herewith), in performing its obligations under this Agreement, and
in otherwise consummating the transactions contemplated by this Agreement,
including without limitation, its attorneys' fees and accountants' fees. The
Company shall pay (a) all fees and expenses incurred by the Purchaser with
respect to any amendments or waivers requested
-32-
33
by the Company (whether or not the same become effective) under or in respect
of this Agreement or the agreements contemplated hereby, and (b) all fees and
expenses incurred by the Purchaser with respect to the enforcement of the
rights granted under this Agreement or the agreements contemplated hereby.
18. Notices. All notices, requests, consents and other
communications required or permitted hereunder shall be in writing and shall be
delivered, or mailed first-class postage prepaid, registered or certified mail,
addressed as follows (or to another address or person as a party may specify on
notice to the other parties):
(a) if to the Purchaser:
ValueVision International, Inc
0000 Xxxxx Xxx Xxxx
Xxxx Xxxxxxx, Xxxxxxxxx 00000
Attn: Chief Executive Officer
(b) if to the Company or Navarre:
Navarre Corporation
0000 00xx Xxxxxx Xxxxx
Xxx Xxxx, XX 00000
Attn: President
(d) if to NRC:
Net Radio Corporation
Riverplace Exposition Hall, Suite 149
00 Xxxx Xxxxxx X.X.
Xxxxxxxxxxx, XX 00000
Attn: President
and such notices and other communications shall for all purposes of this
Agreement be treated as being effective or having been given if delivered
personally, or, if sent by mail, when received.
19. Survival of Representations and Warranties, etc. All
representations and warranties contained herein shall survive the execution and
delivery of this Agreement, any investigation at any time made by the
Purchaser or on its behalf, and the sale and purchase of the Shares, the
Additional Shares and the Navarre Common Stock and payment therefor. All
statements contained in any certificate, instrument or other writing delivered
by or on behalf of NRC, the Company and/or Navarre pursuant hereto or in
connection with or contemplation of the transactions herein
-33-
34
contemplated (other than legal opinions) shall constitute representations and
warranties by NRC, the Company and/or Navarre hereunder.
20. Parties in Interest. All the terms and provisions of this
Agreement shall be binding upon and inure to the benefit of and be enforceable
by the respective successors and assigns of the parties hereto, whether so
expressed or not.
21. Headings. The headings of the Sections and paragraphs of this
Agreement have been inserted for convenience of reference only and do not
constitute a part of this Agreement.
22. Choice of Law. It is the intention of the parties that the laws
of Minnesota, without regard to its conflict of laws provisions, shall govern
the validity of this Agreement, the construction of its terms and the
interpretation of the rights and duties of the parties.
23. Counterparts. This Agreement may be executed concurrently in two
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
-34-
35
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed and delivered in Minneapolis, Minnesota on the date and year first
above written.
VALUEVISION INTERNATIONAL, INC.
a Minnesota corporation
By Xxxxxxxx Xxxxxxx
-------------------------------------
Its President
----------------------------------
NET RADIO CORPORATION,
a Minnesota corporation
By /s/ Xxxxxxx Xxxxxx
-------------------------------------
Its Chief Finanial Officer
--------------------------------
NAVARRE CORPORATION,
a Minnesota corporation
By /s/ Xxxxxxx Xxxxxx
-------------------------------------
Its Chief Finanial Officer
---------------------------------
NET RADIO CORPORATION,
a Nevada corporation
By /s/ Xxxxxx Xxxxxx
-------------------------------------
Its Chief Executive Officer
---------------------------------
-35-
