NAVARRE CORPORATION
SHAREHOLDER RIGHTS AGREEMENT
TABLE OF CONTENTS
Page
SECTION 1 RESTRICTIONS ON TRANSFERABILITY OF SECURITIES; REGISTRATION RIGHTS . . . . 2
1.1 Certain Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
1.2 Requested Registration . . . . . . . . . . . . . . . . . . . . . . . . . . 4
1.3 Company Registration . . . . . . . . . . . . . . . . . . . . . . . . . . . 6
1.4 Expenses of Registration . . . . . . . . . . . . . . . . . . . . . . . . . 7
1.5 Registration Procedures . . . . . . . . . . . . . . . . . . . . . . . . . 8
1.6 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
1.7 Information by Holder . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.8 Rule 144 Reporting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.9 Limitation on Resales . . . . . . . . . . . . . . . . . . . . . . . . . . 11
1.10 Non-Transfer or Assignment of Registration Rights . . . . . . . . . . . . 12
1.11 "Market Stand-Off" Agreement . . . . . . . . . . . . . . . . . . . . . . . 12
1.12 Allocation of Registration Opportunities . . . . . . . . . . . . . . . . . 12
1.13 Delay of Registration . . . . . . . . . . . . . . . . . . . . . . . . . . 13
1.14 Termination of Registration Rights . . . . . . . . . . . . . . . . . . . . 13
1.15 Registration of Previously Issued Shares . . . . . . . . . . . . . . . . . 13
SECTION 2 FURTHER AGREEMENTS OF THE CERTAIN SHAREHOLDERS . . . . . . . . . . . . . . 13
2.1 Limitations on Transfer . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.2 Right of First Refusal . . . . . . . . . . . . . . . . . . . . . . . . . . 13
SECTION 3 MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.2 Successors and Assigns . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.3 Entire Agreement; Amendment; Waiver . . . . . . . . . . . . . . . . . . . 14
3.4 Notices, etc . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.5 Delays or Omissions . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.6 Rights; Separability . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.7 Titles and Subtitles . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
NAVARRE CORPORATION
SHAREHOLDER RIGHTS AGREEMENT
This Shareholder Rights Agreement (the "Agreement") is made and entered
into as of the ____ day of ______________, 199___, by and among Navarre
Corporation, a Minnesota corporation (the "Company"), and the persons identified
on Exhibit A attached hereto (the "Shareholders").
RECITALS
WHEREAS, each of the Shareholders were shareholders of Net Radio
Corporation, a Nevada corporation ("Net Radio"); and
WHEREAS, Net Radio, the Company and Net Radio Corporation, a Minnesota
corporation and wholly-owned subsidiary of the Company ("NRC") have entered into
an Agreement and Plan of Reorganization under which Net Radio will merge with
and into NRC ("Agreement"); and
WHEREAS, the Agreement and transactions contemplated by the Agreement
have been structured to comply with Section 368(a) of the Internal Revenue Code
(the "Code"); and
WHEREAS, in connection with the execution of the Agreement, the
Shareholders and the Company wish to establish certain rights and obligations
with respect to resale of the shares to be issued by the Company in connection
with the Agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants
set forth herein, the Company and the Shareholders hereby agree as follows:
SECTION 1
RESTRICTIONS ON TRANSFERABILITY OF SECURITIES;
REGISTRATION RIGHTS
1.1 CERTAIN DEFINITIONS. As used in this Agreement, the following terms
shall have the meanings set forth below:
(a) "Closing" shall mean the date of the closing of the
transactions under the Agreement.
(b) "Commission" shall mean the Securities and Exchange Commission
or any other federal agency at the time administering the Securities Act.
(c) "Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any similar successor federal statute and the rules and
regulations thereunder, all as the same shall be in effect from time to time.
(d) "Holder" shall mean any shareholder who holds Registrable
Securities. A Holder of Shares shall be deemed a Holder of the Registrable
Securities.
(e) "Investors" shall mean persons who are acquiring Shares
pursuant to the Agreement.
(f) "Other Shareholders" shall mean persons other than Holders who,
by virtue of agreements with the Company, are entitled to include their
securities in certain registrations hereunder.
(g) "Registrable Securities" shall mean (i) the Shares and (ii) any
Common Stock issued as a dividend or other distribution with respect to or in
exchange for or in replacement of the shares referenced in (i) above, provided,
however, that Registrable Securities shall not include any shares of Common
Stock which have previously been registered.
(h) The terms "register," "registered" and "registration" shall
refer to a registration effected by preparing and filing a registration
statement in compliance with the Securities Act and applicable rules and
regulations thereunder, and the declaration or ordering of the effectiveness of
such registration statement.
(i) "Registration Expenses" shall mean all expenses incurred in
effecting any registration pursuant to this Agreement, including, without
limitation, all registration, qualification, and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel and accountants for the Company,
blue sky fees and expenses and related Company legal fees and disbursements, and
expenses of any regular or special audits incident to or required by any such
registration, but shall not include Selling Expenses (but excluding the
compensation of regular employees of the Company, which shall be paid in any
event by the Company).
(j) "Restricted Securities" shall mean restricted securities as
defined in Rule 144.
(k) "Rule 144" shall mean Rule 144 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(l) "Rule 145" shall mean Rule 145 as promulgated by the Commission
under the Securities Act, as such Rule may be amended from time to time, or any
similar successor rule that may be promulgated by the Commission.
(m) "Securities Act" shall mean the Securities Act of 1933, as
amended, or any similar successor federal statute and the rules and regulations
thereunder, all as the same shall be in effect from time to time.
(n) "Selling Expenses" shall mean all underwriting discounts and
selling commissions applicable to the sale of Registrable Securities.
(o) "Shares" shall mean the Company's Common Stock issuable to the
Shareholders pursuant to the Agreement.
1.2 REQUESTED REGISTRATION.
(a) REQUEST FOR REGISTRATION. If the Company shall receive any time
after January 1, 2001 from Holders holding Registrable Securities who hold in
the aggregate 1,100,000 shares of the Company's Common Stock (the "Initiating
Holders"), a written request that the Company effect any registration of
Registrable Securities, the Company will:
(i) promptly give written notice of the proposed registration
to all Holders of Registrable Securities; and
(ii) as soon as practicable, use its best efforts to effect
such registration (including, without limitation, filing post-effective
amendments, appropriate qualifications under applicable blue sky or
other state securities laws, and appropriate compliance with the
Securities Act) and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as
are specified in such request, together with all or such portion of the
Registrable Securities of any Holder or Holders joining in such request
as are specified in a written request received by the Company within
twenty (20) days after such written notice from the Company is
effective.
The Company shall not be obligated to effect, or to take any action
to effect, any such registration pursuant to this Section 1.2:
(A) In any particular jurisdiction in which the Company would
be required to execute a general consent to service of process in
effecting such registration, qualification or compliance, unless the
Company is already subject to service in such jurisdiction and except
as may be required by the Securities Act;
(B) After the Company has initiated one such registration
pursuant to this Section 1.2(a) (counting for these purposes only
registrations which have been
declared or ordered effective and pursuant to which securities have
been sold and registrations which have been withdrawn by the Holders as
to which the Holders have not elected to bear the Registration Expenses
pursuant to Section 1.4 hereof;
(C) During the period starting with the date sixty (60) days
prior to the Company's good faith estimate of the date of filing of,
and ending on a date one hundred eighty (180) days after the effective
date of, a Company-initiated registration; provided that the Company is
actively employing in good faith all reasonable efforts to cause such
registration statement to become effective; or
(b) Subject to the foregoing clauses (A) through (C), the Company
shall file a registration statement covering the Registrable Securities so
requested to be registered as soon as practicable after receipt of the request
or requests of the Initiating Holders; provided, however, that if (i) in the
good faith judgment of the Board of Directors of the Company, such registration
would be seriously detrimental to the Company and the Board of Directors of the
Company concludes, as a result, that it is essential to defer the filing of such
registration statement at such time, and (ii) the Company shall furnish to such
Holders a certificate signed by the President of the Company stating that in the
good faith judgment of the Board of Directors of the Company, it would be
seriously detrimental to the Company for such registration statement to be filed
in the near future and that it is, therefore, essential to defer the filing of
such registration statement, then the Company shall have the right to defer such
filing for the period during which such disclosure would be seriously
detrimental, provided that (except as provided in clause (C) above) that the
Company may not defer the filing for a period of more than one hundred eighty
(180) days after receipt of the request of the Initiating Holders, and, provided
further, that the Company shall not defer its obligation in this manner more
than once.
The registration statement filed pursuant to the request of the
Initiating Holders may include other securities of the Company with respect to
which registration rights have been granted and securities of the Company being
sold for the account of the Company only with the consent of the majority of the
Holders.
(c) UNDERWRITING. The right of any Holder to registration pursuant
to Section 1.2 shall be conditioned upon such Holder's participation in the
underwriting, if any, arranged by the Initiating Holders. A Holder may elect to
include in such underwriting all or a part of the Registrable Securities he
holds.
(d) PROCEDURES. If the Company shall request inclusion in any
registration pursuant to Section 1.2 of securities being sold for its own
account, or if other persons shall request inclusion in any registration
pursuant to Section 1.2, the Initiating Holders shall, on behalf of all Holders,
offer to include such securities in the underwriting, if any, and may condition
such offer on their acceptance of the further applicable provisions of this
Section 1 (including Section 1.11). The Company shall (together with all Holders
and other persons proposing to distribute their securities through such
underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected for
such underwriting by the Company, which underwriters are reasonably acceptable
to the majority in interest of the Initiating Holders. Notwithstanding any other
provision of this Section 1.2, if the representative of the underwriters advises
the Holders in writing that marketing factors require a limitation on the number
of shares to be underwritten, the number of shares to be included in the
underwriting or registration shall be allocated as set forth in Section 1.12
hereof. If a person who has requested inclusion in such registration as provided
above does not agree to the terms of any such underwriting, such person shall be
excluded therefrom by written notice from the Company, the underwriter or the
Initiating Holders. The securities so excluded shall also be withdrawn from
registration. If shares are so withdrawn from the registration and if the number
of shares to be included in such registration was previously reduced as a result
of marketing factors pursuant to this Section 1.2(d), then the Company shall
offer to all holders who have retained rights to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among such Holders requesting additional inclusion in accordance
with Section 1.12.
(e) LIMITATION. The Company shall not be obligated to include in
any registration statement pursuant to this Section 1.2 shares in an amount
greater than five percent of the Company's outstanding Common Stock prior to the
filing of the Registration Statement. To the extent that the number of shares
with respect to which inclusion is requested exceeds five percent of the Common
Stock of Navarre outstanding, the Company may require Holders to withdraw shares
from the registration statement on a pro rata basis based on the ratio set forth
in Section 1.12.
1.3 COMPANY REGISTRATION.
(a) If the Company at any time after two (2) years from the date of
Closing and prior to seven (7) years from the date of Closing, shall determine
to register any of its securities either for its own account or the account of a
security holder or holders exercising their respective demand registration
rights (other than pursuant to Section 1.2), and other than a registration
relating solely to employee benefit plans, or a registration relating solely to
a Rule 145 transaction, or a registration on any registration form that does not
permit secondary sales, the Company will:
(i) promptly give to each Holder written notice thereof; and
(ii) use its best efforts to include in such registration (and
any related qualification under blue sky laws or other compliance),
except as set forth in Section 1.3(b) below, and in any underwriting
involved therein, all the Registrable Securities specified in a written
request or requests, made by any Holder within twenty (20) days after
the written notice from the Company described in clause (i) above is
given. Such written request may specify all or a part of a Holder's
Registrable Securities.
(b) UNDERWRITING. If the registration of which the Company gives
notice is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as a part of the written notice given
pursuant to Section 1.3(a)(i). In such event, the right of any Holder to
registration pursuant to this Section 1.3 shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
(together with the Company and the other holders of securities of the Company
with registration rights to participate therein distributing their securities
through such underwriting) enter into an underwriting agreement in customary
form with the representative of the underwriter or underwriters selected by the
Company.
Notwithstanding any other provision of this Section 1.3, if the
representative of the underwriters advises the Company in writing that marketing
factors require a limitation on the number of shares to be underwritten, the
Company may limit, to the extent so advised by the underwriters, the amount of
securities (including Registrable Securities) to be included in the registration
by the Company's shareholders (including the Holders), or may exclude, to the
extent so advised by the underwriters, such securities entirely from such
registration. The Company shall so advise all holders of securities requesting
registration, and the number of shares of securities that are entitled to be
included in the registration and underwriting shall be allocated first to the
Company for securities being sold for its own account and thereafter as set
forth in Section 1.12. If any person does not agree to the terms of any such
underwriting, he shall be excluded therefrom by written notice from the Company
or the underwriter. Any Registrable Securities or other securities excluded or
withdrawn from such underwriting shall be withdrawn from such registration.
If shares are so withdrawn from the registration or if the number
of shares of Registrable Securities to be included in such registration was
previously reduced as a result of marketing factors, the Company shall then
offer to all persons who have retained the right to include securities in the
registration the right to include additional securities in the registration in
an aggregate amount equal to the number of shares so withdrawn, with such shares
to be allocated among the persons requesting additional inclusion in accordance
with Section 1.12 hereof.
(c) After the Company has given three (3) notices pursuant to this
Section 1.3, no Holder shall have any right to have shares included in any
registration statement filed by the Company, except to the extent that such
Holder's shares have been excluded from registration in an amount more than
twenty-five percent (25%) of the aggregate shares requested to be included by
such Holder.
1.4 EXPENSES OF REGISTRATION. All Registration Expenses incurred in
connection with any registration, qualification or compliance pursuant to the
registrations pursuant to Section 1.2 hereof or, any registration, qualification
or compliance, arising out of a registration pursuant to Section 1.3, shall be
borne by the Company and the Selling Shareholders on a pro rata basis. If the
Holders bear the Registration Expenses for any registration proceeding begun
pursuant to
Section 1.2 and subsequently withdrawn by the Holders registering shares
therein, such registration proceeding shall not be counted as a requested
registration pursuant to Section 1.2. If such withdrawal is based upon material
adverse information relating to the Company that is different from the
information actually known to the Holders requesting registration at the time of
their request for registration under Section 1.2, such registration shall not be
treated as a requested registration for purposes of Section 1.2, even though the
Holders do not bear the Registration Expenses for such registration. All Selling
Expenses relating to securities so registered shall be borne by the holders of
such securities pro rata on the basis of the number of shares of securities so
registered on their behalf.
1.5 REGISTRATION PROCEDURES. In the case of each registration effected
by the Company pursuant to Section 1, the Company will keep each Holder advised
in writing as to the initiation of each registration and as to the completion
thereof. As set forth in Section 1.4, the Company will use its best efforts to:
(a) Keep such registration effective for a period of one hundred
twenty (120) days or until the Holder or Holders have completed the distribution
described in the registration statement relating thereto, whichever first
occurs; provided, however, that (i) such 120-day period shall be extended for a
period of time equal to the period the Holder refrains from selling any
securities included in such registration at the request of an underwriter of
Common Stock (or other securities) of the Company.
(b) Prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in connection
with such registration statement as may be necessary to comply with the
provisions of the Securities Act with respect to the disposition of all
securities covered by such registration statement;
(c) Furnish such number of prospectuses and other documents
incident thereto, including any amendment of or supplement to the prospectus, as
a Holder from time to time may reasonably request;
(d) Notify each seller of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading or incomplete in the light of the
circumstances then existing, and at the request of any such seller, prepare and
furnish to such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such shares, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading or
incomplete in the light of the circumstances then existing;
(e) Cause all such Registrable Securities registered pursuant
hereunder to be listed on each securities exchange or trading system on which
similar securities issued by the Company are then listed.
1.6 INDEMNIFICATION.
(a) The Company will indemnify each Holder, each of its officers,
directors and partners and each person controlling such Holder within the
meaning of Section 15 of the Securities Act, with respect to which registration,
qualification, or compliance has been effected pursuant to this Section 1, and
each underwriter, if any, and each person who controls within the meaning of
Section 15 of the Securities Act any underwriter, against all expenses, claims,
losses, damages, and liabilities (or actions, proceedings, or settlements in
respect thereof) arising out of or based on any untrue statement (or alleged
untrue statement) of a material fact contained in any prospectus, offering
circular, or other document (including any related registration statement,
notification, or the like) incident to any such registration, qualification, or
compliance, or based on any omission (or alleged omission) to state therein a
material fact required to be stated therein or necessary to make the statements
therein not misleading, or any violation by the Company of the Securities Act or
any rule or regulation thereunder applicable to the Company and relating to
action or inaction required of the Company in connection with any such
registration, qualification, or compliance, and will reimburse each such Holder,
each of its officers, directors, partners and each person controlling such
Holder, each such underwriter, and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating and defending or settling any such claim, loss,
damage, liability, or action, provided that the Company will not be liable in
any such case to the extent that any such claim, loss, damage, liability, or
expense arises out of or is based on any untrue statement or omission based upon
written information furnished to the Company by such Holder or underwriter and
stated to be specifically for use therein. It is agreed that the indemnity
agreement contained in this Section 1.6(a) shall not apply to amounts paid in
settlement of any such loss, claim, damage, liability, or action if such
settlement is effected without the consent of the Company (which consent has not
been unreasonably withheld).
(b) Each Holder severally, but not jointly, will, if Registrable
Securities held by him are included in the securities as to which such
registration, qualification, or compliance is being effected, indemnify the
Company, each of its directors, officers, partners and each underwriter, if any,
of the Company's securities covered by such a registration statement, each
person who controls the Company or such underwriter within the meaning of
Section 15 of the Securities Act, each other such Holder and Other Shareholder,
and each of their officers, directors, and partners, and each person controlling
such other Holder or Other Shareholder, against all claims, losses, damages and
liabilities (or actions in respect thereof) arising out of or based on any
untrue statement (or alleged untrue statement) of a material fact contained in
any such registration statement, prospectus, offering circular, or other
document, or any omission (or alleged omission) to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading, and will reimburse the Company and such other Holders,
Other Shareholders, directors, officers, partners, persons, underwriters, or
control persons for any legal or any other expenses reasonably incurred in
connection with investigating or defending any such claim, loss, damage,
liability, or action, in each case to the extent, but only to the extent, such
untrue statement (or alleged untrue statement) or omission (or alleged omission)
is made in such registration statement, prospectus, offering circular, or other
document in reliance upon and in conformity with written information furnished
to the Company by such Holder and stated to be specifically for use therein;
provided, however, that the obligations of such Holder hereunder shall not apply
to amounts paid in settlement of any such claims, losses, damages, or
liabilities (or actions in respect thereof) if such settlement is effected
without the consent of such Holder (which consent shall not be unreasonably
withheld); and provided further that in no event shall any indemnity under this
Section 1.6(b) exceed the lesser of (A) the net proceeds from the offering
received by such Holder and (B) that proportion of aggregate losses, claims,
damages, liabilities or expenses indemnified against by such Holder as
determined by the proportion of the shares sold by such Holder compared to the
total number of Shares sold.
(c) Each party entitled to indemnification under this Section 1.6
(the "Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying Party
who shall conduct the defense of such claim or any litigation resulting
therefrom, shall be approved by the Indemnified Party (whose approval shall not
unreasonably be withheld), and the Indemnified Party may participate in such
defense at such party's expense; provided, however, that an Indemnified Party
(together with all other indemnified parties which may be represented without
conflict by one counsel) shall have the right to retain one separate counsel
with the fees and expenses to be paid by the Indemnifying Party, if
representation of such Indemnified Party would be inappropriate due to actual or
potential differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding; and provided further that the
failure of any Indemnified Party to give notice as provided herein shall not
relieve the Indemnifying Party of its obligations under this Section 1, to the
extent such failure is not prejudicial. No Indemnifying Party, in the defense of
any such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement that does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
(d) If the indemnification provided for in this Section 1.6 is held
by a court of competent jurisdiction to be unavailable to an Indemnified Party
with respect to any loss, liability, claim, damage, or expense referred to
therein, then the Indemnifying Party, in lieu of indemnifying such Indemnified
Party hereunder, shall contribute to the amount paid or payable by such
Indemnified Party as a result of such loss, liability, claim, damage, or expense
in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party on the one hand and of the Indemnified Party on the other in connection
with the statements or omissions that resulted in such loss, liability, claim,
damage, or expense as well as any other relevant equitable considerations. The
relative fault of the Indemnifying Party and of the Indemnified Party shall be
determined by reference to, among other things, whether the untrue or alleged
untrue statement of a material fact or the omission to state a material fact
relates to information supplied by the Indemnifying Party or by the Indemnified
Party and the parties' relative intent, knowledge, access to information, and
opportunity to correct or prevent such statement or omission.
(e) Notwithstanding the foregoing, to the extent that the
provisions on indemnification and contribution contained in the underwriting
agreement entered into in connection with the underwritten public offering are
in conflict with the foregoing provisions, the provisions in the underwriting
agreement shall control.
1.7 INFORMATION BY HOLDER. Each Holder of Registrable Securities shall
furnish to the Company such information regarding such Holder and the
distribution proposed by such Holder as the Company may reasonably request in
writing and as shall be reasonably required in connection with any registration,
qualification, or compliance referred to in this Section 1.
1.8 RULE 144 REPORTING. With a view to making available the benefits of
certain rules and regulations of the Commission that may permit the sale of the
Restricted Securities to the public without registration, the Company agrees to
use its best efforts to:
(a) Make and keep public information regarding the Company
available as those terms are understood and defined in Rule 144 under the
Securities Act;
(b) File with the Commission in a timely manner all reports and
other documents required of the Company under the Securities Act and the
Exchange Act;
(c) So long as a Holder owns any Restricted Securities, furnish to
the Holder forthwith upon written request a written statement by the Company as
to its compliance with the reporting requirements of Rule 144, and of the
Securities Act and the Exchange Act, a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents so filed
as a Holder may reasonably request in availing itself of any rule or regulation
of the Commission allowing a Holder to sell any such securities without
registration.
1.9 LIMITATION ON RESALES. As consideration for the Company's agreement
to grant the Holders the registration rights set forth in this Agreement and its
agreement to use its best efforts to enable Holders to sell under Rule 144, the
Holders agree that they will see all their shares only in compliance with Rule
144 (or any successor Rule that may be adopted by the Commission) or pursuant to
registration under the Securities Act as provided in this Agreement. Each Holder
further agrees and acknowledges that the Agreement and transactions contemplated
by the Agreement are designed to ensure that the transaction qualifies as a
tax-free transaction
under Section 368(a) of the Code. Therefore, notwithstanding any other rights in
this agreement, each Holder agrees that it will not directly or indirectly sell,
offer, pledge, contract or enter into any option to dispose of any of the Shares
for a period of two years from the date of Closing, without the consent of the
Company or an opinion of legal counsel or tax counsel to the Company that such
sale, pledge, contract or option will not destroy the tax-free nature of the
transaction for shareholders of Net Radio.
1.10 NON-TRANSFER OR ASSIGNMENT OF REGISTRATION RIGHTS. The rights to
cause the Company to register securities granted to a Holder by the Company
under this Section 1 may not be transferred or assigned to a transferee or
assignee of any Shares.
1.11 "MARKET STAND-OFF" AGREEMENT. If requested by the Company and an
underwriter of Common Stock (or other securities) of the Company, a Shareholder
shall not sell or otherwise transfer or dispose of any Common Stock (or other
securities) of the Company held by such Stockholder (other than those included
in the registration) during the one hundred eighty (180) day period following
the effective date of a registration statement of the Company filed under the
Securities Act. The obligations described in this Section 1.11 shall not apply
to a registration relating solely to employee benefit plans on Form S-8 or a
similar form that may be promulgated in the future, or a registration relating
solely to a Commission Rule 145 transaction on Form S-4 or similar forms that
may be promulgated in the future. The Company may impose stop-transfer
instructions with respect to the Shares subject to the foregoing restriction
until the end of said one hundred eighty (180) day period.
1.12 ALLOCATION OF REGISTRATION OPPORTUNITIES.
(a) ALLOCATION. In any circumstance in which all of the Registrable
Securities and other shares of Common Stock of the Company with registration
rights (the "Other Shares") requested to be included in a registration on behalf
of the Holders or other selling shareholders cannot be so included as a result
of limitations of the aggregate number of shares of Registrable Securities and
Other Shares that may be so included, the number of shares of Registrable
Securities and Other Shares that may be so included shall be allocated among the
Holders and other selling shareholders requesting inclusion of shares on the
basis of the ratio set forth in this Section 1.12. If any Holder or other
selling Shareholder does not request inclusion of the maximum number of shares
of Registrable Securities and Other Shares allocated to him pursuant to the
above-described procedure, the remaining portion of his allocation shall be
reallocated among those requesting Holders and other selling shareholders whose
allocations did not satisfy their requests pro rata on the basis of the number
of shares of Registrable Securities and Other Shares which would be held by such
Holders and other selling shareholders, and this procedure shall be repeated
until all of the shares of Registrable Securities and Other Shares which may be
included in the registration on behalf of the Holders and other selling
shareholders have been so allocated. The Company shall not limit the number of
Registrable Securities to be included in a registration pursuant to this
Agreement in order to include shares held by shareholders with no
registration rights or any other shares of stock issued to employees, officers,
directors, or consultants pursuant to any equity compensatory plan.
(b) RATIO. In the event that there is any allocation of shares as
specified in this Agreement, each Holder of Registrable Securities who has
requested registration will be able to include at its option in such
registration up to the percentage of such Holder's amount of Registrable
Securities compared with the total Registrable Securities owned by all Holders.
1.13 DELAY OF REGISTRATION. No Holder shall have any right to take any
action to restrain, enjoin, or otherwise delay any registration as the result of
any controversy that might arise with respect to the interpretation or
implementation of this Section 1.
1.14 TERMINATION OF REGISTRATION RIGHTS. The right of any Holder to
inclusion in any registration pursuant to this Section shall terminate on the
date all shares of Registrable Securities held by such Holder may immediately be
sold by such Holder under Rule 144 during any 90-day period.
1.15 REGISTRATION OF PREVIOUSLY ISSUED SHARES. The Company and the
Shareholders agreed that the 170,000 shares previously issued to the
Shareholders of Net Radio are not covered by this Agreement.
SECTION 2
FURTHER AGREEMENTS OF THE CERTAIN SHAREHOLDERS
In addition, each Shareholder that directly or indirectly through one
or more of such Shareholder's affiliates owns more than 100,000 Shares or is
entitled to receive more than 100,000 shares pursuant to the Agreement, hereby
agrees as follows:
2.1 LIMITATIONS ON TRANSFER. Such Shareholder will not sell, transfer
or dispose of any Shares except for transfers without consideration to
affiliates of such Shareholder until after January 1, 2001. This restriction
does not apply to any Shares in excess of 210,000 Shares issued to any
Shareholder pursuant to the Agreement.
2.2 RIGHT OF FIRST REFUSAL. In the event such Shareholder wishes to
sell, in any 90-day period, a number of shares equal to the lesser of (i) five
percent of such shareholder's total ownership of the Company's Common Stock or
(ii) 25,000 shares of the Company's Common Stock, the Shareholder shall, prior
to such sale, provide the Company with written notice of such intent to sell.
Upon delivery of such notice, the Company shall have the right to buy all or any
portion of the Shares with respect to which notice was given at a price equal to
the closing bid price of the Company's common stock on the day prior to the day
on which notice is received by the Company, or at such lower price as the
Company and the Shareholder might agree. The Company shall have a period of 30
days from its receipt of the notice to exercise its right to purchase the
shares. If the Company elects not to exercise its right to purchase the shares,
then
the Shareholder will be free to sell such shares for a ninety (90) day period,
such ninety (90) day period to begin on the earlier of (i) the date the Company
provides the shareholder with notice that it does not intend to exercise its
right or (ii) thirty (30) days after the Company's receipt of notice of the
Shareholder's intent to sell. Any Shares not sold in the 90-day period shall
become subject to this right of first refusal.
SECTION 3
MISCELLANEOUS
3.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of Minnesota, as if entered into by and between Minnesota
residents exclusively for performance entirely within Minnesota.
3.2 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto, whether expressed or not, and, in particular, shall inure to the
benefit of and be enforceable by the holder or holders at the time of Common
Stock issuable upon conversion thereof.
3.3 ENTIRE AGREEMENT; AMENDMENT; WAIVER. The Agreement (including the
Exhibits hereto) constitutes the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof. Neither this
Agreement nor any term hereof may be amended, waived, discharged or terminated,
except (i) by a written instrument signed by the Company and the holders of at
least fifty percent (50%) of the Registrable Securities and any such amendment,
waiver, discharge or termination shall be binding on all the Holders.
3.4 NOTICES, ETC. All notices and other communications required or
permitted hereunder shall be in writing and shall be mailed by United States
first-class mail, postage prepaid, or delivered personally addressed by hand or
special courier (a) if to a Holder, as indicated on the list of Holders attached
hereto as Exhibit A, or at such other address as such Holder or permitted
assignee shall have furnished to the Company in writing, or (b) if to the
Company, at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or at such other
address as the Company shall have furnished to each holder in writing. All such
notices and other written communications shall be effective (i) if mailed, two
(2) business days after mailing and (ii) if delivered, upon delivery.
3.5 DELAYS OR OMISSIONS. No delay or omission to exercise any rights,
power or remedy accruing to any Holder, upon any breach or default of the
Company under this Agreement shall impair any such right, power or remedy of
such Holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach or default
there occurring; nor shall any waiver of any single breach or default be deemed
a
waiver of any other breach or default theretofore or thereafter occurring. Any
waiver, permit, consent or approval of any kind or character on the part of any
Holder of any breach or default under the Agreement or any waiver on the part of
any Holder of any provisions or conditions of this Agreement must be made in
writing and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under this Agreement or by law or otherwise
afforded to any Holder, shall be cumulative and not alternative.
3.6 RIGHTS, SEPARABILITY. Unless otherwise expressly provided herein, a
Holder's rights hereunder are several rights, not rights jointly held with any
of the other Holders. In case any provision of the Agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions shall not in any way be affected or impaired thereby.
3.7 TITLES AND SUBTITLES. The titles of the paragraphs and
subparagraphs of this Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
3.8 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Shareholder
Rights Agreement effective as of the day and year first above written.
"COMPANY"
Navarre Corporation
a Minnesota corporation
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By: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Its: President and Chief Executive Officer
SHAREHOLDERS
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EXHIBIT A
List of Holders, Names and Addresses
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EXHIBIT B
Maximum Number of Shares
That May be Received by Shareholder
Name Maximum Number of Shares
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