Document:

exv10w2

 

STOCK PURCHASE AGREEMENT

     THIS STOCK PURCHASE AGREEMENT (this “Agreement”) is made and entered into as of the
14th day of March, 2005 (the “Effective Date”), by and among Navarre Corporation, a
Minnesota corporation (“Purchaser”) and Michael A. Bell (“Seller”).

W I T N E S S E T H:

     WHEREAS, Seller is the owner of 20,000 shares of the issued and outstanding common stock of
Encore Software, Inc., a Minnesota corporation (the “Company”), which shares currently represent
20% of the outstanding common stock of the Company (the “Shares”);

     WHEREAS, Purchaser has proposed to purchase the Shares on the terms and conditions contained
herein; and

     WHEREAS, Purchaser and Seller desire to consummate the purchase and sale of the Shares on the
terms set forth below.

     NOW, THEREFORE, in consideration of the foregoing premises and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:

1.      Termination of Buy and Sell Agreement.   Buyer hereby acknowledges and agrees that the
Stock Buy and Sell Agreement entered into effective as of August 2002 by and between Buyer and
Encore Software, Inc f/k/a Encore Acquisition Corporation (the “Buy and Sell Agreement”) is
terminated and of no further force or effect, and that this Agreement is being entered into in lieu
of giving any effect to the provisions of the Buy and Sell Agreement in connection with Seller’s
sale of the Shares.

2.      Purchase and Sale of Stock.   Effective as of the Effective Date (as defined below),
Purchaser shall purchase and acquire from Seller and Seller shall sell, transfer, assign and
deliver to Purchaser, the Shares on the terms and conditions set forth herein.

3.      Purchase Price.   The purchase price of the Shares (the “Purchase Price”) shall be the
sum of:

	   	(a)      One Million and No/100 Dollars ($1,000,000.00) in cash (the “Cash Consideration”); and
	 
	   	(b)      Up to six hundred thousand (600,000) shares of unregistered common stock of Purchaser
(the “Stock Consideration”).

4.      Manner of Payment.   The Purchase Price shall be payable to Seller as follows:

	   	(a)      The Cash Consideration shall be paid by Purchaser to Seller on April 15, 2005, by wire
transfer to an account designated by Seller;

 

 

	   	(b)      300,000 shares of the Stock Consideration (the “Closing Stock Consideration”) shall be
issued to Seller on the Effective Date; and
	 
	   	(c)      Up to 300,000 shares of the Stock Consideration (the “Contingent Stock Consideration”)
shall be issued to Seller upon achievement of the milestones set forth in Section 4 of this
Agreement.

5.      Payment of Contingent Stock Consideration.   Seller’s receipt of the Contingent Stock
Consideration is contingent on the Company achieving certain targets for Operating Income (as such
term is defined below) (each, an “Operating Income Target”).

	   	(a)      Seller shall receive 150,000 shares of the Contingent Stock Consideration if the
Company’s Operating Income for the fiscal year ended March 31, 2006 is greater than
$9,000,000 (the “2006 Target”); and
	 
	   	(b)      Seller shall receive 150,000 shares of the Contingent Stock Consideration if the
Company’s Operating Income for the fiscal year ended March 31, 2007 is greater than
$4,000,000 (the “2007 Target”).
	 
	   	(c)      Notwithstanding the foregoing, if the 2006 Target is not achieved, but the Company’s
cumulative Operating Income for the fiscal years ended March 31, 2006 and 2007 is greater
than $13,000,000, Seller shall receive the full amount of the Contingent Stock
Consideration.

“Operating Income” shall mean the EBIT of the Company, calculated consistently with the current
business practices of the Company and Purchaser, including expenses allocated to the Company by
Purchaser that are determined in a manner consistent with existing practices, but without reduction
for any expenses otherwise allocated to the Company by Purchaser in connection with any
extraordinary costs or one-time charges not arising out of the business of the Company, determined
on a standalone basis by Purchaser’s accountants (the “Accountants”).

The calculations for determining any Contingent Stock Consideration which may be due shall be
completed only after Purchaser’s accountants have reported to Purchaser’s Board of Directors for
the relevant fiscal year. In connection with the calculation for determining whether any
Contingent Stock Consideration is due to Seller, Purchaser shall provide such back-up information
and calculations as Seller may reasonable request and Seller shall have an opportunity to meet with
the Accountants in order to discuss such calculations, provided, however, that the Accountants
determination of Company’s EBIT for any fiscal year shall be binding on Purchaser and Seller. If
Purchaser determines that Seller is entitled to receive Contingent Stock Consideration, which
determination shall be made no later than the date on which the Accountants have reported the EBIT
of Company to Purchaser’s Board of Directors for the relevant fiscal year of Company, Purchaser
shall have fifteen (15) days to issue the required number of shares of Contingent Stock
Consideration to Seller; provided, further that in no event shall Purchaser issue Contingent Stock
Consideration to Seller any later than one hundred and twenty (120) days after the end of relevant
fiscal year.

 

 

6.      Changes in Capital Structure of Purchaser.   If, from time to time during the term of
this Agreement there is a change in the outstanding shares of Purchaser’s common stock by reason of
a recapitalization, stock split, reverse stock split, combination of shares, stock dividend or
similar transaction, Purchaser agrees that the Stock Consideration provided hereunder, but that has
not yet been issued to Seller, shall be proportionately adjusted, in an equitable manner.
Purchaser acknowledges and agrees that, except as to the restrictions set forth in Section 7 of
this Agreement, Seller’s rights in and to the Stock Consideration that has been issued to him shall
be the same as the rights of any other holder of common stock of Purchaser.

7.      Restricted Nature of Stock Consideration.

	   	(a)      During the period beginning on the date of receipt of the Stock Consideration and ending
on the third anniversary of such receipt, Seller shall not sell, assign, exchange, transfer,
distribute or otherwise dispose of (in each case, “transfer”) any shares of Stock
Consideration received by Seller hereunder except as otherwise permitted by Purchaser or
pursuant to the Registration Rights Agreement (as defined in Section 9(b) hereof).
Notwithstanding the foregoing, during the period beginning on the Effective Date and ending
on the first anniversary of the Effective Date, Seller may transfer, in the aggregate, up to
100,000 shares of Stock Consideration. During the period beginning on the first anniversary
of the Effective Date and ending on the second anniversary of the Effective Date, Seller may
transfer, in the aggregate, up to 100,000 shares of Stock Consideration. During the period
beginning on the second anniversary of the Effective Date and ending on the third
anniversary of the Effective Date, Seller may transfer, in the aggregate, up to 100,000
shares of Stock Consideration.
	 
	   	(b)      Seller will execute an investment letter in such form reasonably required by Purchaser
upon his receipt of Stock Consideration. Following the restriction periods described in
this Section 5, Seller may transfer his shares of Stock Consideration so long as such
transfer is in accordance with any applicable federal or state securities or “blue sky”
laws, rules or regulations (collectively, “Securities Laws”) and/or the Registration Rights
Agreement. The certificates evidencing the Stock Consideration delivered to Seller pursuant
to this Agreement shall bear a legend substantially in the form set forth below:

	 	 	 	 	 
	 

	 	THE SHARES REPRESENTED BY THIS CERTIFICATE MAY NOT BE SOLD, ASSIGNED (OTHER
THAN IN CONNECTION WITH A PLEDGE), EXCHANGED, TRANSFERRED, DISTRIBUTED,
CHANGED OR OTHERWISE DISPOSED OF, AND THE ISSUER SHALL NOT BE REQUIRED TO
GIVE EFFECT TO ANY ATTEMPTED SALE, ASSIGNMENT (OTHER THAN IN CONNECTION WITH
A PLEDGE), EXCHANGE, TRANSFER, DISTRIBUTION, OR OTHER DISPOSITION OTHER THAN
IN ACCORDANCE WITH SECTION 5 OF THAT CERTAIN STOCK PURCHASE AGREEMENT DATED
AS OF MARCH 14, 2005 BY AND BETWEEN NAVARRE CORPORATION AND MICHAEL A. BELL.
	 	 
	 
	 	 	 	 

 

 

	 	 	 	 	 
	

	 	THE SHARES OF COMMON STOCK REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN

REGISTERED UNDER THE SECURITIES LAWS OF ANY STATE OR OTHER JURISDICTION (COLLECTIVELY, THE
“SECURITIES LAWS”) AND MAY NOT BE SOLD, DISPOSED OF OR OTHERWISE TRANSFERRED
IN THE ABSENCE OF SUCH REGISTRATION, EXCEPT IN ACCORDANCE WITH AN AVAILABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF ANY APPLICABLE SECURITIES
LAWS PROVIDED THAT NAVARRE CORPORATION SHALL HAVE RECEIVED AN OPINION OF
COUNSEL ACCEPTABLE TO THEM CONFIRMING THAT THE REQUIREMENTS OF SUCH
EXEMPTION HAVE BEEN SATISFIED.	 	 

	   	(c)      Seller shall not transfer any shares of the Stock Consideration at any time if such
transfer would constitute a violation of any Securities Laws, or a breach of the conditions
to any exemption from registration of the Stock Consideration under any such Securities Law
on which Seller is relying at the time of his sale, or a breach of any undertaking or
agreement of Seller entered into with Stock Consideration pursuant to such Securities Laws
or in connection with obtaining an exemption thereunder.
	 
	   	(d)      For the purposes of this Agreement (and the restrictions set forth in this Section 7),
the term “Stock Consideration shall mean and include (i) the shares of common stock
Purchaser issued, granted, conveyed and delivered to Seller pursuant to Section 3 and (ii)
any and all additional share of capital stock of Purchaser issued or delivered by Purchaser
with respect to shares of Stock Consideration described in subsection (i) above, including,
without limitation, any shares issued or delivered to Seller pursuant to Section 6.

8.      Delivery of Stock Certificate.   The transfer and sale of the Shares contemplated by this
Agreement shall be effectuated by Seller delivering to Purchaser the certificate(s) representing
the Shares purchased by Purchaser, which certificate(s) shall be duly endorsed in blank or
accompanied by appropriate stock transfer powers duly executed in blank, together with any other
documents necessary to transfer the Shares to Purchaser.

9.      Representations and Warranties of Seller.   As a material inducement to Purchaser to
enter into this Agreement and with the understanding that Purchaser will be relying thereon, Seller
represents and warrants that:

	   	(a)      Good Title.   Seller has good title to, the right to possession of and the right
to sell the Shares free and clear of any pledges, liens, charges, encumbrances, proxies,
options, rights to purchase or other restrictions or potentially adverse claims of any kind
or nature (collectively, “Adverse Claims”), and, Concurrent with the execution of this
Agreement, Seller will transfer the Shares to Purchaser free and clear of any Adverse
Claims. In connection therewith, Seller hereby covenants to defend transfer of the Shares to
Purchaser against any and all persons who claim title to or interest in the Shares.
	 
	   	(b)      Authority.   Seller has the full power and authority to execute, deliver and
perform this Agreement. This Agreement has been duly executed by Seller and constitutes the
legal, valid and binding obligation of Seller enforceable in accordance with its terms.

 

 

	   	(c)      No Claims.   As of the date of this Agreement, Seller has no claims against
Purchaser, and no cause of action or other demands related to or arising out of any action
or omission prior to the date of this Agreement shall be pursued by Seller against
Purchaser.
	 
	   	(d)      No Pending Lawsuits.   As of the date of this Agreement, there are no lawsuits,
investigations, claims or proceedings pending or threatened against Seller which have had or
may have any effect on Seller’s rights and title to the Shares or the ability of Seller to
transfer the Shares in the manner contemplated by this Agreement.

Seller does hereby agree to, and shall immediately upon demand, indemnify and hold harmless the
Purchaser from, against and in respect of any and all losses, damages, liabilities, penalties,
interest, costs, expenses or other deficiencies, including, without limitation, attorneys’ fees and
costs, suffered or incurred by Purchaser by reason of, or arising out of any misrepresentation,
breach of representation or warranty or non-fulfillment of any agreement, covenant or
representation on the part of Seller under this Agreement. The right to indemnification, payment
of damages or other remedy based on the foregoing will not be affected by any investigation
conducted with respect to, or any knowledge acquired (or capable of being acquired) after the
execution and delivery of this Agreement or the Effective Date, with respect to the accuracy or
inaccuracy of, or compliance with, any representation, warranty, covenant or obligation of Seller.

10.      Representations and Warranties of Purchaser.   As a material inducement to Seller to
enter into this Agreement and with the understanding that Seller will be relying thereon, Purchaser
represents and warrants that:

	   	(a)      Organization.   Purchaser is a corporation duly organized, validly existing and
in good standing under the laws of the State of Minnesota.
	 
	   	(b)      Authority.   Purchaser has full power and authority to enter into, execute and
deliver this Agreement and to consummate the transactions contemplated hereby and any
instruments or agreements required herein. This Agreement has been duly and validly
executed and delivered by Purchaser and constitutes a valid and binding obligation of
Purchaser according to its terms. The execution of this Agreement by Purchaser has been
duly authorized by the Board of Directors of Purchaser.
	 
	   	(c)      No Violation.   Neither the execution and delivery by Purchaser of this
Agreement, the consummation of the transactions contemplated hereby, nor compliance by
Purchaser with any of the provisions hereof will:

	 	i.       	Violate or conflict with any provision of the Articles of
Incorporation or Bylaws of Purchaser;
	 
	 	ii.       	Violate or constitute a default under or give rise to any right
of termination, cancellation or acceleration under the terms, conditions or
provisions of any agreement or instrument to which Purchaser is a party or by
which Purchaser or any of its properties or assets is bound except as has been
duly and validly waived, consented to, or approved of by the other parties to
such agreement or instrument; or

 

 

	 	iii.       	Violate any statute or law or any judgment, order, decree,
regulation or rule of any court or governmental authority applicable to
Purchaser.

	   	(d)      Purchaser Stock.   The shares of Stock Consideration to be issued to Seller
pursuant to this Agreement are duly authorized and, when issued in accordance with the terms
of this Agreement, will be validly issued, fully paid and nonassessable and free and clear
of all encumbrances, except for any encumbrances created by Seller and encumbrances
resulting from restrictions on transferability imposed by Securities Laws. Upon delivery to
Seller of the certificates evidencing the Stock Consideration, Seller shall acquire valid
title to the Stock Consideration.

Purchaser does hereby agree to, and shall immediately upon demand, indemnify and hold harmless the
Seller from, against and in respect of any and all losses, damages, liabilities, penalties,
interest, costs, expenses or other deficiencies, including, without limitation, attorneys’ fees and
costs, suffered or incurred by Seller by reason of, or arising out of any misrepresentation, breach
of representation or warranty or non-fulfillment of any agreement, covenant or representation on
the part of Purchaser under this Agreement. The right to indemnification, payment of damages or
other remedy based on the foregoing will not be affected by any investigation conducted with
respect to, or any knowledge acquired (or capable of being acquired) after the execution and
delivery of this Agreement or the Effective Date, with respect to the accuracy or inaccuracy of, or
compliance with, any representation, warranty, covenant or obligation of Purchaser.

11.      Additional Covenants of the Parties.   In consideration of the transactions described
herein, the parties hereto agree to the following:

	   	(a)      Registration Rights Agreement.   Seller and Purchaser shall execute a registration
rights agreement substantially in the form attached hereto as Exhibit A (the
“Registration Rights Agreement”).
	 
	   	(b)      Expenses.   Each party shall pay its own expenses incurred in connection with the
transactions contemplated by this Agreement. Notwithstanding the foregoing, Purchaser shall
reimburse Seller in an aggregate amount not to exceed $5,000 for Seller’s out-of-pocket
expenses incurred for legal and other professional advice in connection with the transaction
contemplated by this Agreement. Purchaser shall make such reimbursement within fifteen (15)
days after Seller’s submission of reasonable supporting documentation for such expenses.

12.      Documents to Be Delivered by Purchaser.   Purchaser shall deliver or cause to be
delivered to Seller the following:

	   	(a)      A duly executed Registration Rights Agreement in the form attached
hereto as Exhibit A; and
	 
	   	(b)      The Closing Stock Consideration.

13.      Documents to Be Delivered by Seller.   Seller shall deliver or cause to be delivered to
Purchaser the following:

 

 

	   	(a)      A duly Registration Rights Agreement in the form attached hereto as Exhibit A;
and
	 
	   	(b)      Stock certificate(s) representing all of the Shares, which certificate(s) shall be duly
endorsed in blank or accompanied by appropriate stock transfer powers duly executed in
blank, together with any other documents necessary to transfer the Shares to Purchaser.

14.      Survival of Representations and Warranties.   The statements, representations,
warranties, covenants, agreements and indemnities of the parties hereto as contained in this
Agreement and in any certificate, instrument or document delivered by or on behalf of any of the
parties hereto pursuant to this Agreement and the transactions contemplated hereby shall survive
the closing and shall not terminate.

15.      Mutual Cooperation.   Purchaser and Seller agree to work together and cooperate to the
extent reasonably necessary so as to facilitate closing on the transactions contemplated by this
Agreement. Further, subsequent to closing, Purchaser and Seller, at the request of the other,
shall each execute, deliver and acknowledge all such further instruments and documents and do and
perform all such other acts and deeds as may be reasonably required to consummate the transactions
contemplated by this Agreement and to carry out the purpose and intent of this Agreement

16.      Notices.   All notices, requests, demands, claims, and other communications hereunder
shall be in writing. Any notice, request, demand, claim or other communication hereunder shall be
delivered personally to the recipient, delivered by United States Post Office mail or nationally
recognized overnight courier, telecopied to the intended recipient at the facsimile number set
forth below, or sent to the recipient by reputable express courier service and addressed to the
intended recipient as set forth on the signature page hereto or to such other address as the party
to whom notice is to be given may have furnished to the other party in writing in accordance
herewith. Any such communication shall be deemed to have been duly given and received when
delivered.

     If to Purchaser, to:

Navarre Corporation

7400 49th Avenue North

New Hope, MN 55428

Attn: Ryan Urness, General Counsel

Fax: (763)504-1107

     With a copy to:

Winthrop & Weinstine, P.A.

Suite 3500

225 South Sixth Street

Minneapolis, Minnesota 55402

Attn: Scott J. Dongoske, Esq.

Fax: (612) 604-6800

 

 

     If to Seller:

Michael A. Bell

1028 9th Street

Manhatten Beach, CA 90266

Fax: (310) 318-9071

     With a copy to:

Robin C. Gilden

Reish Luftman Reicher & Cohen

11755 Wilshire Blvd., 10th Floor

Los Angeles, CA 90025

Fax: (310) 388-4627

17.      Specific Performance.   Seller agrees that breach of this Agreement by Seller will
cause Purchaser irreparable harm for which there is no adequate remedy of law and, without limiting
whatever other rights and remedies Purchaser may have under this Agreement, Purchaser is entitled
to the remedy of specific performance to enforce this Agreement and Seller consents to the issuance
of an order by a court of competent jurisdiction requiring the specific performance of this
Agreement by Seller.

18.      Entire Agreement.   This Agreement expresses the whole agreement between the parties
with respect to the transactions contemplated hereby, there being no representations, warranties or
other agreements (oral or written) not expressly set forth or provided for herein.

19.      Counterparts; Facsimile Signatures.   This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which together shall constitute
one and the same instrument. This Agreement may be executed by facsimile signatures which, for all
purposes, shall be accepted as original signatures by the parties.

20.      Changes.   Any and all agreements by the parties hereto to amend, change, extend, revise
or discharge this Agreement, in whole or in part, shall be binding upon the parties to such
agreement, even though such agreements may lack legal consideration, provided such agreements are
in writing and executed by the party against whom enforcement is sought.

21.      Governing Law; Jurisdiction.   This Agreement shall be deemed to be a contract made
under the laws of the State of Minnesota. The laws of the State of Minnesota shall govern the
validity, construction and performance of this Agreement, regardless of the laws that might
otherwise govern under applicable principles of conflicts of law. Any legal proceeding related to
this agreement shall be brought in an appropriate court in Hennepin County, Minnesota. If any
action at law or in equity is brought by either party to enforce or interpret the terms of this
Agreement, the prevailing party shall be entitled to recover from the unsuccessful party attorneys’
fees, costs and expenses (including, without limitation, expert witness fees) in addition to any
other relief to which it may be entitled

 

 

22.      Construction.   Wherever possible, each provision of this Agreement and each related
document shall be interpreted in such manner as to be effective and valid under applicable law, but
if any provision of this Agreement or any related document shall be prohibited by or invalid under
applicable law, such provision shall be ineffective only to the extent of such prohibition or
invalidity without invalidating the remainder of such provision or the remaining provisions of this
Agreement or such related documents.

23.      Waiver.   No failure on the part of either party to exercise, and no delay in
exercising, any right or remedy hereunder shall operate as a waiver thereof; nor shall any single
or partial exercise of any right or remedy hereunder preclude any other or further exercise thereof
or the exercise of any other right or remedy granted hereby or by any related document or by law.

24.      Severability.   In the event any part of this Agreement is found to be void, the
remaining provisions of this Agreement shall nevertheless be binding with the same effect as though
the void parts were deleted.

25.      Titles and Sub-Titles.   The titles of the paragraphs and subparagraphs are placed
herein for convenient reference only and shall not to any extent have the effect of modifying,
amending or changing the expressed terms and provisions of this Agreement.

26.      Successor and Assigns.   This Agreement shall be binding upon and inure to the benefit
of the parties hereto and their respective heirs, personal representatives, successors and
permitted assigns.

27.      Preparation of Agreement.   Winthrop & Weinstine, P.A. has drafted this Agreement at the
request of Purchaser. By signing this Agreement, Seller acknowledges that he has been advised that
Winthrop & Weinstine, P.A. is not representing him individually in this transaction. Seller
further acknowledges that he has been encouraged to seek separate counsel, and that Seller has in
fact received or has had the opportunity to receive separate counsel.

(The remainder of this page has been intentionally left blank.)

 

 

[Signature Page to Stock Purchase Agreement]

IN WITNESS WHEREOF, the parties hereto have executed this Stock Purchase Agreement as of the date
and year first above written.

	 	 	 	 	 
	 	PURCHASER:

NAVARRE CORPORATION

 	 
	 	By:  	
 /s/ JAMES G. GILBERTSON	 
	 	 	James G. Gilbertson 	 
	 	 	Chief Financial Officer 	 
	 

	 	 	 	 	 
	 	SELLER:

 	 
	 	
 /s/ MICHAEL A. BELL	 
	 	Michael A. Bell

 	 

	 
	As to the effectiveness of the termination

of the Buy and Sell Agreement set forth in

Section 1 of this Agreement:

	 	 	 	 
	ENCORE SOFTWARE, INC.

 	 
	By:  	 	 /s/ JAMES G. GILBERTSON	 
	 	 	James G. Gilbertson 	 
	 	 	Chief Administrative Officer 	 

 

 

EXHIBIT A

Registration Rights Agreement

(Attached)exv10w3

 

REGISTRATION RIGHTS AGREEMENT

This Registration Rights Agreement (this “Agreement”) is made as of March 14th,
2005, by and among Navarre Corporation, a Minnesota corporation (the “Company”), and
Michael A. Bell (the “Seller”).

RECITALS

          A.      The Company and the Seller have entered into a Stock Purchase Agreement of even date
herewith (the “Purchase Agreement”), pursuant to which the Company is acquiring all of the
Seller’s shares of Encore Software, Inc., a Minnesota corporation (the “Shares”).

          B.      The execution of this Agreement at Closing is required by the Purchase Agreement.

          C.      Capitalized terms used in this Agreement but not otherwise defined shall have the meanings
given in the Purchase Agreement.

          D.      A portion of the consideration paid for the Shares consists of up to 600,000 shares of the
Company’s Common Stock, no par value (the “Common Stock”). This Registration Rights Agreement will
provide the Seller with certain rights with respect to the registration of the Common Stock
received by Seller.

AGREEMENT

     In consideration of the mutual promises and covenants in this Agreement, the Company and the
Seller agrees as follows:

1.      Definitions. For purposes of this Agreement:

          a.      “Act” means the Securities Act of 1933, as amended.

          b.      “Effective Date” means the date of Closing of the transactions contemplated
by the Purchase Agreement.

          c.      “Holder” means any person owning or having the right to acquire Registrable
Securities or any successor or assignee thereof.

          d.      “1934 Act” means the Securities Exchange Act of 1934, as amended.

          e.      “register,” “registered” and “registration” refer to a
registration effected by preparing and filing a registration statement or similar document
in compliance with the Act, and the declaration or ordering of effectiveness of such
registration statement or document.

          f.      “Registrable Securities” means the shares of Common Stock received by the
Seller in accordance with the terms of the Purchase Agreement. In addition, Common Stock or
other securities shall only be treated as Registrable Securities if and so long as

 

	   	they have not been (A) sold to or through a broker or dealer or underwriter in a public
distribution or a public securities transaction, including sales made pursuant to Rule 144
promulgated under the Act or (B) sold in a transaction exempt from the registration and
prospectus delivery requirements of the Act under Section 4(1) thereof so that all transfer
restrictions, and restrictive legends with respect thereto, if any, are removed upon the
consummation of such sale. The number of Registrable Securities outstanding shall be the
sum of the shares of Common Stock outstanding that are Registrable Securities.

	 
	   	g.     “SEC” shall mean the Securities and Exchange Commission.
	 
	2.	Registration Rights.
	 
	   	a.      Required Registration. If the Holder makes a written request that the Company
file a registration statement for 100% of the Registrable Securities, then the Company will
use its best efforts to effect a registration statement under the Securities Act covering
all Registrable Securities which the Holder requested to be registered. The Company shall
be obligated to prepare, file and cause to become effective only one (1) registration
statement pursuant to this Section 2.a., and to pay the expenses associated with such
registration statement, and shall not be obligated to effect a registration during the
period starting within 60 days prior to the filing date of a registration statement of the
Company, and ending 180 days after the effective date of a Company registration.
Furthermore, the Company shall only be obligated to effect a registration under this Section
2.a. if the Holder’s proposed disposal of Registrable Securities may be immediately
registered on Form S-3 pursuant to a Form S-3 registration.
	 
	   	In the event that a registration has been requested pursuant to this Section, but the Holder
determines for any reason not to proceed with a registration at any time before the
registration statement has been declared effective by the Commission, and Holder requests
the Company to withdraw such registration statement, if theretofore filed with the
Commission, with respect to the Registrable Securities covered thereby, and (b) the Holder
agrees to bear his own expenses incurred in connection therewith and to reimburse the
Company for the expenses incurred by it attributable to the registration of such Registrable
Securities, then the Holder shall not be deemed to have exercised his right to require the
Company to register Registrable Securities pursuant to this Section 2.a.
	 
	   	b.      Incidental Registration. Each time the Company shall determine to proceed with
the actual preparation and filing of a registration statement under the Securities Act of
1933 (the “Securities Act”) in connection with the proposed offer and sale for money of any
of its securities by it or any of its security holders (other than a registration statement
on Form S-4, Form S-8, or any form that does not permit the inclusion of shares by its
security holders), the Company will give written notice of its determination to the Holder.
Upon a written request given within 30 days after receipt of any such notice from the
Company, the Company will, except as herein provided, use its best efforts to cause all such
Registrable Securities that the Holder has so requested registration thereof, to be included
in such registration statement, all to the extent requisite to permit the sale or other
disposition by the prospective seller or sellers of the Registrable Securities to be so
registered; provided, however, that (a) nothing herein shall prevent the Company from, at

 

	   	any time, abandoning or delaying any such registration initiated by it, and (b) if the
Company determines not to proceed with a registration after the registration statement has
been filed with Securities and Exchange Commission (the “Commission”) and the Company’s
decision not to proceed is primarily based upon the anticipated public offering price of the
securities to be sold by the Company, the Company shall promptly complete the registration
for the benefit of those selling security holders who wish to proceed with a public offering
of their securities and who bear all expenses incurred by the Company as the result of such
registration after the Company has decided not to proceed. If any registration pursuant to
this Section 2.c. shall be underwritten in whole or in part, the Company may require that
the Registrable Securities requested for inclusion pursuant to this section be included in
the underwriting on the same terms and conditions as the securities otherwise being sold
through the underwriters. In the event that in the good faith judgment of the managing
underwriter of such public offering the inclusion of the Registrable Securities originally
covered by a request for registration would reduce the number of shares to be offered by the
Company or interfere with the successful marketing of the shares of stock offered by the
Company, the number of shares of Registrable Securities otherwise to be included in the
underwritten public offering shall be reduced to such amount as is deemed appropriate in the
good faith judgment of the managing underwriter.

	   	c.      Holdback Agreements.

	   	i.      Holder agrees not to effect any public sale or distribution of equity securities
of the Company, or any securities convertible into or exchangeable or exercisable
for such securities, during the seven days prior to and the 90-day period beginning
on the effective date of any underwritten Incidental Registration (except as part of
such underwritten registration), unless the underwriters managing the registered
public offering otherwise agree in writing.
	 
	   	ii.      the Company agrees (i) not to effect any public sale or distribution of its
equity securities, or any securities convertible into or exchangeable or exercisable
for such securities, during the seven days prior to and during the 90-day period
beginning on the effective date of any underwritten Incidental Registration (except
as part of such underwritten registration or pursuant to registrations on Form S-8
or any successor form), unless the underwriters managing the registered public
offering otherwise agree, and (ii) to use all reasonable efforts to cause each
holder of at least 5% (on a fully-diluted basis) of its equity securities (other
than equity securities acquired in a public trading market), or any securities
convertible into or exchangeable or exercisable for such securities, purchased from
the Company at any time after the date of this Agreement (other than in a registered
public offering) to agree not to effect any public sale or distribution of any such
securities during such period (except as part of such underwritten registration, if
otherwise permitted), unless the underwriters managing the registered public
offering otherwise agree.

 

	   	d.      Registration Procedures. If and whenever the Company is required by the
provisions of Sections 2.a. or 2.b. to effect the registration of any Registrable Securities
under the Securities Act, the Company will:

	   	i.      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, not to exceed sixty (60) days;
	 
	   	ii.      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, not to exceed sixty (60) days;
	 
	   	iii.      furnish to the Holder 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 Holder and
underwriters may reasonably request in order to facilitate the public offering of
such securities;
	 
	   	iv.      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 Holder may reasonably request, 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;
	 
	   	v.      notify the Holder, 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;
	 
	   	vi.      notify Holder promptly of any request by the Commission for the amending or
supplementing of such registration statement or prospectus or for additional
information;
	 
	   	vii.      prepare and file with the Commission, promptly upon the request of any such
holders, any amendments or supplements to such registration statement or prospectus
which, in the opinion of counsel for Holder (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 Registrable Securities by such
holder;
	 
	   	viii.      prepare and promptly file with the Commission and promptly notify Holder 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; and

	   	ix.      advise Holder, 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;

	   	e.      Expenses. With respect to any registration requested pursuant to Section 2.a.
(except as otherwise provided in Section 2.a. with respect to registrations voluntarily
terminated at the request of the requesting security holders) and with respect to each
inclusion of shares of Registrable Securities in a registration statement pursuant to
Section 2.c. (except as otherwise provided in Section 2.i. with respect to registrations
terminated by the Company), the Company shall bear the following fees, costs and expenses:
all registration, 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), reasonable fees and disbursements of one counsel for
the selling security holders, all internal the Company expenses, the premiums and other
costs of policies of insurance for the Company against liability arising out of the public
offering, and 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.
	 
	   	f.      Indemnification. In the event that any Registrable Securities are included in a
registration statement under Sections 2.a. or 2.b.:

	   	i.      The Company will indemnify and hold harmless each holder (together with all
officers, directors, agents and affiliates of the holder) of Registrable Securities
which are included in a registration statement pursuant to the provisions of this
Section 2 and any underwriter (as defined in the Securities Act) for such holder and
each person, if any, who controls such holder (or any affiliates of the holder) or
such underwriter within the meaning of the Securities Act, from and against any and
all loss, damage, liability, cost and expense to which such holder 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 written information furnished by such holder, such underwriter or
such controlling person.

	   	ii.      Each holder of Registrable Securities which are included in a registration
pursuant to the provisions of this Section 2 will indemnify and hold harmless the
Company, any controlling person and any underwriter from and against 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
such holder.
	 
	   	iii.      Promptly after receipt by an indemnified party pursuant to the provisions of
paragraph (i) or (ii) of this section 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 (i) or (ii), 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 unless the indemnifying party is materially
prejudiced. 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 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 (i) or (ii) 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.

	   	g.      NonTransferability of Registration Rights. The registration rights granted to
the holders of Registrable Securities pursuant to this Section 2 shall not be transferable.
	 
	   	h.      Termination of Registration Rights. The registration rights granted pursuant to
this Section 2 shall terminate with respect to any holder of Registrable Securities upon the
earlier of (i) three (3) years from the date of this Agreement or (ii) at the time such
holder is able to sell all Registrable Securities held by it in a single open market
transaction under Rule 144 promulgated under the Securities Act or any successor provision.

	   	3.      Miscellaneous.

	   	a.      Specific Performance. The Company agrees that breach of this Agreement by the
Company will cause Seller irreparable harm for which there is no adequate remedy of law and,
without limiting whatever other rights and remedies Seller may have under this Agreement,
Seller is entitled to the remedy of specific performance to enforce this Agreement and the
Company consents to the issuance of an order by a court of competent jurisdiction requiring
the specific performance of this Agreement by the Company.
	 
	   	b.      Successors and Assigns. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon the
respective successors and assigns of the parties. The Company may not assign its rights or
delegate its duties under this Agreement to any other person or entity without the prior
written consent of the Holder provided, however, that no consent shall be required in
connection with sale, merger or other change of control transaction of the Company. Holder
shall not assign his rights or delegate his duties under this Agreement. Nothing in this
Agreement, express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies, obligations, or
liabilities under or by reason of this Agreement, except as expressly provided in this
Agreement.
	 
	   	c.      Governing Law. This Agreement shall be governed by and construed under the laws
of the State of Minnesota as applied to agreements among Minnesota residents entered into
and to be performed entirely within Minnesota.
	 
	   	d.      Counterparts. This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute one and the
same instrument.
	 
	   	e.      Titles and Subtitles. The titles and subtitles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting this
Agreement.

 

	   	f.      Notices. All notices, requests, demands, claims, and other communications
hereunder shall be in writing. Any notice, request, demand, claim or other communication
hereunder shall be delivered personally to the recipient, delivered by United States Post
Office mail or nationally recognized overnight courier, telecopied to the intended recipient
at the facsimile number set forth on the signature page hereto, or sent to the recipient by
reputable express courier service and addressed to the intended recipient as set forth on
the signature page hereto or to such other address as the party to whom notice is to be
given may have furnished to the other party in writing in accordance herewith. Any such
communication shall be deemed to have been duly given and received when delivered.
	 
	   	g.      Expenses. If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’
fees, costs and necessary disbursements in addition to any other relief to which such party
may be entitled.
	 
	   	h.      Entire Agreement; Amendments and Waivers. This Agreement (including the exhibits
hereto) constitutes the full and entire understanding and agreement among the parties with
regard to the subjects hereof and thereof. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or in a
particular instance and either retroactively or prospectively), only with the written
consent of all parties to this Agreement affected thereby. Any amendment or waiver effected
in accordance with this paragraph shall be binding upon Holder.
	 
	   	i.      Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this Agreement and
the balance of the Agreement shall be interpreted as if such provision were so excluded and
shall be enforceable in accordance with its terms.
	 
	   	j.      Counterparts; Facsimile Signatures. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of which together
shall constitute one and the same instrument. This Agreement may be executed by facsimile
signatures which, for all purposes, shall be accepted as original signatures by the parties.

[SIGNATURE PAGE FOLLOWS]

 

[Signature Page to Registration Rights Agreement]

     The parties have executed this Registration Rights Agreement as of the date first above
written.

	 	 	 	 	 
	Addresses for Notice:	 	COMPANY:
	 
	 	 	 	 
	Navarre Corporation

7400 49th Avenue North

New Hope, Minnesota 55428	 	Navarre Corporation
	Attention: Eric Paulson, President	 	By: 	 	 /s/ JAMES G. GILBERTSON
	Ryan Urness, General Counsel	 	 	 	

	Fax No.: (763) 504-1107	 	 	 	James G. Gilbertson

Chief Financial Officer
	 
	 	 	 	 
	with a copy (which shall not

constitute notice) to:
	 	 	 	 
	 
	 	 	 	 
	Philip T. Colton

Winthrop & Weinstine P.A.

225 South Sixth Street, Suite 3600

Minneapolis, Minnesota 55402
	 	 	 	 
	 
	 	 	 	 
	Michael A. Bell

1028 9th Street

Manhatten Beach, CA 90266

Fax: (310) 318-9071
	 	SELLER:
	 
	 	/s/ MICHAEL A. BELL
	with a copy (which shall not constitute notice) to:	 	

Michael A. Bell
	 
	 	 	 	 
	Robin C. Gilden

Reish Luftman Reicher & Cohen

11755 Wilshire Blvd., 10th Floor

Los Angeles, CA 90025

Fax: (310) 388-4627

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