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