Exhibit 10.4
NAVARRE CORPORATION 2004 STOCK PLAN
TSR STOCK UNIT AGREEMENT
You have been granted an Award of performance based Stock Units, subject to the
terms and conditions of the 2004 Stock Plan, as amended, and the Total
Shareholder Return Stock Unit Agreement set forth below, as follows:

             
Name of Participant:
                     
Grant Date:
                      Target Number of Award Shares:       shares of Common
Stock
 
            Maximum Number of Award Shares:       shares of Common Stock
 
           
Settlement Date:
  June 1, 2009*         Measurement Period:   April 1, 2006 — March 31, 2009    

     
Performance Criteria:
   
 
  The Company’s total shareholder return (“TSR”) relative to the TSR of the
companies that make up the Standard & Poor’s Small Cap 600 Index (the “Small Cap
Index”) for the Measurement Period. TSR is defined as the compound annual growth
rate that shareholders receive on their investment, including both dividends
(assumed reinvested) and stock price appreciation as more specifically set forth
in Section 3 below.

 

*   Subject to earlier expiration as provided below.

Total Shareholder Return Stock Unit Agreement
1 GRANT OF STOCK UNIT AWARD.
     Navarre Corporation, a Minnesota corporation (together with all successors
thereto, the “Company”), hereby grants to the Participant named above, who is an
employee and key leader of the Company or a Related Company, an award of
performance Stock Units (the “Stock Units”) subject to the terms and conditions
set forth in this TSR Stock Unit Agreement (the “Agreement”) and in the Navarre
Corporation 2004 Stock Plan, as amended from time to time (the “Plan”). The
Stock Units represent the contingent right to receive on the Settlement Date
specified above, subject to earlier termination as is specified herein, from
zero to the maximum number of shares (the “Award Shares”) indicated above of the
Company’s common stock, no par value (the “Common Stock”) depending on the
extent of achievement of the Performance Criteria as described in Section 3
below. This Stock Unit award is intended to qualify as “performance-based
compensation” within the meaning of Section 162(m) of the Internal Revenue Code
of 1986 (the “Code”). All capitalized terms used herein and not otherwise
defined shall have the respective meanings set forth in the Plan.
2. ACCEPTANCE.
     Your execution of this Agreement will indicate your acceptance of and your
willingness to be bound by its terms. No Award Shares will be issued unless you
have executed and returned this Agreement to the Company.

 

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3. VESTING OF STOCK UNITS.
3.1 Vesting Schedule. If the Company’s TSR is equal to 50% of the Small Cap
Index TSR, then the Target Number of Award Shares indicated above will vest. If
the Company’s TSR is equal to or greater than 75% of the Small Cap Index TSR,
then the Maximum Number of Award Shares indicated above will vest. If the
Company’s TSR performance falls below 25% of the Small Cap Index TSR, then no
Award Shares will vest. The complete Vesting Schedule is attached hereto as
Exhibit A. Vested Award Shares, in whole numbers, will be issued on the
Settlement Date and Stock Units for partial shares or for which Award Shares do
not vest shall be immediately cancelled. TSR will be calculated as [ending stock
price plus paid dividends minus beginning stock price] divided by beginning
stock price. The beginning and ending stock prices will be the average of the
daily closing prices for the Company’s Common Stock, and for each of the six
hundred stocks then currently in the Small Cap Index, for the thirty
(30) trading days immediately preceding the beginning date and ending date of
the Measurement Period, as applicable. The calculation is made for each year of
the Measurement Period, and the yearly returns will be annualized for the total
Measurement Period.
3.2 Termination of Employment or Service. In the event that your employment or
service with the Company or a Related Company terminates voluntarily or
involuntarily for any reason prior to the Settlement Date indicated above
(except for termination as a result of a Change in Control Transaction in which
case Section 3.3 below shall apply), this award of Stock Units shall expire and
be deemed forfeited and no Award Shares shall be issued or due to you.
3.3 Change of Control Transaction. For purposes of this Section 3.3, the term
“Change of Control Transaction” shall have the meaning set forth in Section 2 of
the Plan. Upon the occurrence of a Change of Control Transaction, the Vesting
Schedule shall no longer apply and the Company shall issue Award Shares at the
target level indicated above, pro-rated for the portion of the Measurement
Period that transpired prior to the Change of Control Transaction. The Committee
in its discretion may make further adjustments or modifications to the Award
Shares pursuant to Section 15.4 of the Plan.
4. ISSUANCE OF SHARES.
4.1 Issuance of Shares. Certificates evidencing ownership of the Award Shares
granted and earned hereunder will be issued on the Settlement Date. If permitted
by law and the rules of the applicable stock exchange, the issuance of shares
may be effected on a noncertificated basis. The Company, however, shall not be
required to issue or deliver a certificate for any shares until it has complied
with all requirements of the Securities Act of 1933, as amended, the Securities
Exchange Act of 1934, as amended, any stock exchange on which the Company’s
Common Stock may then be listed and all applicable state laws in connection with
the issuance or sale of such shares or the listing of such shares on said
exchange. The Company may cause each certificate evidencing the purchased Common
Stock to be endorsed with one or more legends setting forth the restrictions on
transfer of such Common Stock. Until the issuance of the Award Shares pursuant
to this Agreement and the Plan, you shall have none of the rights of a
shareholder with respect to the Award Shares.
4.2 Withholding Taxes. You acknowledge that the value of the Award Shares issued
on the Settlement Date will constitute compensation for which you will have an
ordinary income tax obligation, and you should consult a tax adviser concerning
the same. The Company makes no representations with respect to tax consequences.
Prior to the delivery of the Award Shares, the Company is entitled to:
(i) withhold and deduct from your future wages (or from other amounts which the
Company may owe you), or make other arrangements for the collection of, all
legally required amounts necessary to satisfy any federal, state or local
withholding and employment-related tax requirements attributable to such
compensation; or (ii) require you to remit the amount of such withholding to the
Company in cash. In the event that the Company is unable to withhold such
amounts, for whatever reason, you hereby agree to pay

 

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to the Company an amount equal to the amount the Company would otherwise be
required to withhold under federal, state or local law.
5. TRANSFERABILITY OF STOCK UNITS.
     You may not sell, assign, pledge (as loan collateral or otherwise),
encumber (by operation of law or otherwise), or transfer this Agreement or the
Stock Units in any manner, including, without limitation, by will or the
applicable laws of descent or distribution. Any attempt to transfer or encumber
this Agreement, the Stock Units or the Award Shares shall be null and void and
shall void this Agreement.
6. THIS AGREEMENT SUBJECT TO PLAN.
     This Agreement, the Stock Units granted hereunder and the Award Shares
issued pursuant to the Stock Units have been granted, or will be issued, as the
case may be, under, and are subject to the terms of, the Plan. The terms of the
Plan are incorporated by reference herein in their entirety, and, by execution
hereof, you acknowledge having reviewed a copy of the Plan. The provisions of
this Agreement shall be interpreted so as to be consistent with the Plan, and
any ambiguities herein shall be interpreted by reference to the Plan. In the
event that any provision hereof is inconsistent with the terms of the Plan, the
terms of the Plan shall prevail. You acknowledge and agree that in the event of
any question or controversy relating to the terms of the Plan or this Agreement,
including determination of the achievement of the Performance Criteria, the
decision of the Committee administering the Plan shall be conclusive and final.
A copy of the Plan has been filed with the Securities and Exchange Commission as
an Exhibit to S-8 Registration Statement dated February 20, 2006, and is
available from the Company, attention Human Resources.
7. NO GUARANTEE OF CONTINUED EMPLOYMENT.
     You acknowledge and agree that the vesting of Award Shares pursuant to the
Vesting Schedule is contingent upon continuing your employment at the will of
the Company or a Related Company. You further acknowledge and agree that this
award of Stock Units and this Agreement do not constitute an express or implied
promise of continued employment for any period and shall not interfere with your
right or the Company’s (or a Related Company’s) right to terminate your
employment or service at any time with or without cause.
8. MISCELLANEOUS.
8.1 Binding Effect. This Agreement shall be binding upon the heirs, executors,
administrators and successors of the parties hereto.
8.2 Governing Law. This Agreement and all rights and obligations hereunder shall
be construed in accordance with the Plan and governed by the laws of the State
of Minnesota, without regard to its choice of laws provisions. The parties agree
that any action relating to this Agreement may be brought in the state or
federal courts located in Hennepin County, Minnesota and the parties hereby
consent to the jurisdiction of such courts.
8.3 Entire Agreement. This Agreement and the Plan set forth the entire agreement
and understanding of the parties hereto with respect to this grant of Stock
Units and the administration of the Plan and supersede all prior agreements,
arrangements, plans and understandings relating to this grant of Stock Units and
the administration of the Plan.

 

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8.4 Amendment and Waiver. This Agreement may be amended, waived, modified or
canceled by the Committee at any time, provided that all such amendments,
waivers, modifications or cancellations shall comply with and not be prohibited
by the provisions of the Plan, and any amendment, waiver, modification or
cancellation that the Committee determines in good faith has a material adverse
affect on your rights under this Agreement shall be with your consent in a
written instrument executed by you and the Company.
Agreed and accepted as of the Grant Date:

                  NAVARRE CORPORATION       PARTICIPANT    
 
               
By
               
 
               
 
         
 
   
Its