SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: MAY 1, 1998
NAVARRE CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 0-22982 41-1704319
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of Incorporation)
7400 49TH AVENUE NORTH, NEW HOPE, MN 55428
(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 535-8333
<PAGE>
Items 1, 2 3, 4, 6 and 8 are not applicable and therefore omitted.
Item 5. Other Events.
ISSUANCE OF CLASS A CONVERTIBLE PREFERRED STOCK
On May 1, 1998, the Company issued 1,523,810 shares of Class A
Convertible Preferred Stock in a private placement to a group of investors for
aggregate consideration of $20.0 million. The Class A Convertible Preferred
Stock was issued at a price of $13.125 per share and is convertible into five
shares of Navarre common stock at any time after June 30, 1998. In additional,
for each share of Class A Convertible Preferred Stock acquired, each investor
received a five-year warrant to purchase five shares of Navarre common stock at
a price $3.50 per share. The Class A Convertible Preferred Stock has a
cumulative quarterly dividend of ten percent (10%) payable beginning June 30,
1998. The Company has the right to call the Class A Convertible Preferred Stock
at any time after June 30, 1998 if the price of the Company's Common Stock is at
least 200% of the effective conversion price for ten consecutive trading days,
subject to certain other conditions. The Company cannot call more one-third of
the original aggregate Class A Convertible Preferred Stock in any six-month
period. The Company also has the right to call the warrant in certain
circumstances.
COMPLIANCE WITH NASDASQ STOCK MARKET RULES
Under the rules of the Nasdaq Stock Market, the Company must
maintain net tangible assets (assets, excluding goodwill, less liabilities) of
at least $4,000,000. On December 31, 1997 the Company had shareholders' equity
of $5.2 million, but because of it had goodwill from acquisitions of
approximately $1,254,000, the Company had net tangible assets of $3,963,000,
which was $37,000 less than the $4.0 million required by the Nasdaq Stock
Market. On March 31, 1998, on an unaudited basis, the Company had shareholders'
equity of $4,328,559 angible assets of $3,154.693.
After giving effect to the sale of 1,523,811 Shares of the
Company's Class A Preferred Convertible Stock on May 1, 1998 the Company's pro
forma shareholders equity at March 31, 1998 (unaudited) was $23,330,146 and its
net tangible assets of were $22,156,280. As a result of the offering, the
Company is in compliance with the Nasdaq net tangible asset requirement.
Item 7. Financial Statements and Exhibits
Exhibit 1. Unaudited Pro forma Balance Sheet at March 31, 1998.
Exhibit 2. Certificate of Rights and Preferences of Class A
Convertible Preferred Stock
Exhibit 3. Registration Rights of Class A Preferred Stock.
Exhibit 4. Form of Warrant.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
NAVARRE CORPORATION
By /s/ Charles. Cheney
------------------------------------------------
Charles E. Cheney
Executive Vice President, Chief
Financial Officer and Secretary
May 14, 1998
Exhibit 1
NAVARRE CORPORATION
CONSOLIDATED UNAUDITED PRO FORMA BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE AMOUNTS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
MARCH 31, 1998 ADJUSTMENTS MARCH 31, 1998
-----------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C> <C>
ASSETS
Current assets:
Cash $ 23 $ 23
Accounts receivable, less allowance for
doubtful accounts, and sales returns of $2,412 52,556 52,556
Inventories 23,188 23,188
Note receivable, officer 234 234
Prepaid expenses and other current assets 961 961
Refundable Income Taxes 2,265 2,265
-----------------------------------------
Total current assets 79,227 79,227
Property and equipment, net of
accumulated depreciation of $3,647 2,957 2,957
Other assets:
Goodwill 1,174 1,174
Other assets 331 331
-----------------------------------------
Total assets 83,689 83,689
=========================================
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Note payable to bank 32,445 (19,002) 13,443
Current maturities of long-term debt 162 162
Accounts payable 45,554 45,554
Accrued expenses 1,129 1,129
-----------------------------------------
Total current liabilities 79,290 (19,002) 60,288
Minority interest in subsidiaries (110) (110)
Long-term debt, less current maturities 181 181
Shareholders' equity:
Convertible Preferred stock, no par value: Authorized
shares - 5,000,000, Issued and
outstanding shares - None --
outstanding shares - 1,523,810 19,002 19,002
Common stock, no par value: Authorized
shares - 20,000,000, Issued and
outstanding shares - 7,009,170 8,113 8,113
Retained (deficit) (3,558) (3,558)
Unearned compensation (227) (227)
-----------------------------------------
Total shareholders' equity 4,328 19,002 23,330
-----------------------------------------
Total liabilities and shareholders' equity 83,689 -- 83,689
=========================================
</TABLE>
(1) This Consolidated Unaudited Pro Forma Balance Sheet at March 31, 1998 has
been adjusted to reflect the issuance by the Company of 1,523,810 shares of
Class A Convertible Preferred Stock ("Preferred Stock") on, May 1, 1998 in a
private placement to a group of investors for aggregate consideration of $20.0
million and the application of the net proceeds to reduce the borrowings under
the Company's working capital credit facility. Apart from these adjustments,
this Consolidated Unaudited Pro Forma Balance Sheet does not reflect any other
changes occurring subsequent to March 31, 1998,
Exhibit 2
CERTIFICATE
OF
RIGHTS AND PREFERENCES
OF
CLASS A CONVERTIBLE PREFERRED STOCK
OF
NAVARRE CORPORATION
The undersigned, being the President and Secretary, respectively, of
Navarre Corporation, a Minnesota corporation (the "Corporation"), hereby
certifies that (a) the following resolution was duly adopted on April 24, 1998,
by the Board of Directors of the Corporation, acting pursuant to the provisions
of Section 302A.401, subdivision 3 of the Minnesota Business Corporation Act for
the purposes of establishing a separate series of the Corporation's authorized
preferred stock and fixing the relative rights and preferences of such series of
preferred stock, and (b) such resolution has not been subsequently modified or
rescinded:
RESOLVED, that 1,600,000 shares of this Corporation's authorized
preferred stock no par value shall be designated as "Class A Convertible
Preferred Stock" and the rights, preferences, privileges and restrictions
granted to or imposed upon the Class A Convertible Preferred Stock are as
follows:
1. DIVIDENDS.
(a) The holders of the Class A Convertible Preferred Stock shall be
entitled to receive cumulative dividends of 10% per annum payable quarterly,
beginning on June 30, 1998. At the option of the preferred stockholder, the
dividend can be paid in cash or accrued and converted into Common Stock at a
conversion price equal to the average closing bid price of the Common Stock on
the last three (3) trading days of the quarter in which such dividend was
accrued (the "Accrued Dividend Conversion Price"). In the event that a holder
elects to convert a quarterly dividend payment into shares of Common Stock, the
holder shall notify the Company of such election within five (5) business days
after the end of the quarter in which such dividend was due. The Company shall
pay cash dividends within ten days of the end of each quarter, or if the
preferred shareholder has so elected, issue Common Stock in the amount of
accrued cash dividends on the same date the preferred shareholder elects to
convert the Class A Convertible Preferred Stock in accordance with Section 4.
(b) In the event that a holder of the Class A Convertible Preferred
Stock elects to exercise conversion rights in accordance with Section 4, the
Company shall pay the holder the amount of cash dividends as determined on a per
diem basis for the number of days of the quarter that have elapsed before the
date the holder elects to exercise conversion rights.
(c) In the event the Corporation shall declare a distribution (other
than any distribution
<PAGE>
described in Section 2) payable in securities of other persons, evidences of
indebtedness issued by the Corporation or other persons, assets (excluding cash
dividends) or options or rights to purchase any such securities or evidences of
indebtedness, then, in each such case the holders of the Class A Convertible
Preferred Stock shall be entitled to a proportionate share of any such
distribution as though the holders of the Class A Convertible Preferred Stock
were the holders of the number of shares of Common Stock of the Corporation into
which their respective shares of Class A Convertible Preferred Stock are
convertible as of the record date fixed for the determination of the holders of
Common Stock of the Corporation entitled to receive such distribution.
2. LIQUIDATION PREFERENCE.
(a) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, the holders of the Class A
Convertible Preferred Stock shall be entitled to receive, prior and in
preference to any distribution of any of the assets or surplus funds of the
Corporation to the holders of the Common Stock by reason of their ownership
thereof, the amount of $13.125 per share (as adjusted for any stock dividends,
combinations or splits with respect to such shares), plus all declared but
unpaid dividends on such share for each share of Class A Convertible Preferred
Stock then held by them. If upon the occurrence of such event, the assets and
funds thus distributed among the holders of the Class A Convertible Preferred
Stock shall be insufficient to permit the payment to such holders of the full
aforesaid preferential amount, then the entire assets and funds of the
Corporation legally available for distribution shall be distributed ratably
among the holders of the Class A Convertible Preferred Stock in proportion to
the preferential amount each such holder is otherwise entitled to receive.
(b) In the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, and subject to the payment in
full of the liquidation preferences with respect to the Class A Convertible
Preferred Stock as provided in subparagraph (a) of this Section 2 and the
Corporation's Articles of Incorporation, the holders of the Common Stock shall
be entitled to receive an amount per share equal to their paid-in capital for
such shares divided by the number of shares of Common Stock outstanding; and
thereafter the holders of Common Stock shall be entitled to receive the entire
remaining assets and funds of the Corporation legally available for
distribution, such assets and funds to be distributed among such holders in
proportion to the shares then held by them on an as-if and fully converted basis
provided, however, that the holders of the Class A Convertible Preferred Stock
shall not have the right to participate in any such distribution under this
subparagraph (b) of this Section 2 unless they first waive, in writing, the
right to receive the amounts that would be due them as their liquidation
preference under this subparagraph (a) of this Section 2.
(c) For purposes of this Section 2, (i) any acquisition of the
Corporation by means of merger or other form of corporate reorganization in
which outstanding shares of the Corporation are exchanged for securities or
other consideration issued, or caused to be issued, by the acquiring corporation
or its subsidiary (other than a mere reincorporation transaction) in which the
shareholders of the Corporation immediately prior to the transaction described
above hold less
<PAGE>
than fifty percent (50%) of the combined entity, or (ii) a sale of all or
substantially all of the assets of the Corporation, shall be treated as a
liquidation, dissolution or winding up of the Corporation and shall entitle the
holders of Class A Convertible Preferred Stock and Common Stock to receive at
the closing in cash, securities or other property (valued as provided in Section
2(d) below) the amounts and in the order of priority as specified in Sections
2(a) and 2(b) above.
(d) Whenever the distribution provided for in this Section 2 shall be
payable in securities or property other than cash, the value of such
distribution shall be the fair market value of such securities or other property
as determined in good faith by the Board of Directors.
3. VOTING RIGHTS.
In addition to the rights provided herein, each holder of shares of the
Class A Convertible Preferred Stock shall be entitled to the number of votes
equal to the number of shares of Common Stock into which such shares of Class A
Convertible Preferred Stock could be converted and shall have voting rights and
powers equal to the voting rights and powers of the Common Stock and shall be
entitled to notice of any shareholders' meeting in accordance with the Bylaws of
the Corporation. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating all
shares into which shares of Class A Convertible Preferred Stock held by each
holder could be converted) shall be rounded to the nearest whole number (with
one-half being rounded upward).
4. CONVERSION.
The holders of the Class A Convertible Preferred Stock shall have
conversion rights as follows (the "Conversion Rights"):
(a) RIGHT TO CONVERT. Each share of Class A Convertible Preferred Stock
shall be convertible, at the option of the holder thereof, at any time after
June 30, 1998, at the office of the Corporation or any transfer agent for such
stock, into such number of fully paid and nonassessable shares of Common Stock
as are determined by dividing $13.125 by $2.625 (the "Conversion Price");
however, cash dividends that the holder has elected to take in the form of
Common Stock pursuant to Section 1(a) shall be converted into Common Stock at
the respective Accrued Dividend Conversion Price in accordance with Section
1(a). The Class A Conversion Price is herein sometimes referred to as the
"Conversion Price."
(b) MECHANICS OF CONVERSION. Before any holder of Class A Convertible
Preferred Stock shall be entitled to convert the same into shares of Common
Stock, such holder shall surrender the certificate or certificates therefor,
duly endorsed, at the office of the Corporation or of any transfer agent for
such stock, and shall give written notice to the Corporation at such office that
he elects to convert the same and shall state therein the name or names in which
he wishes the certificate or certificates for shares of Common Stock to be
issued. The Corporation shall, as soon as practicable thereafter, issue and
deliver at such office to such holder of Class A Convertible Preferred Stock, a
certificate or certificates for the number of shares of Common
<PAGE>
Stock to which he shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on the date
of surrender of the shares of Class A Convertible Preferred Stock to be
converted, and the person or persons entitled to receive the shares of Common
Stock issuable upon such conversion shall be treated for all purposes as the
record holder or holders of such shares of Common Stock on such date.
(c) ADJUSTMENTS TO CONVERSION PRICES FOR STOCK DIVIDENDS AND FOR
COMBINATIONS OR SUBDIVISIONS OF COMMON STOCK. In the event that this Corporation
at any time or from time to time after the original issuance date of the Class A
Preferred Stock shall declare or pay, without consideration, any dividend on the
Common Stock payable in Common Stock or in any right to acquire Common Stock for
no consideration, or shall effect a subdivision of the outstanding shares of
Common Stock into a greater number of shares of Common Stock (by stock split,
reclassification or otherwise than by payment of a dividend in Common Stock or
in any right to acquire Common Stock), or in the event the outstanding shares of
Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, then the Conversion
Price for the Class A Convertible Preferred Stock in effect immediately prior to
such event shall, concurrently with the effectiveness of such event, be
proportionately decreased or increased, as appropriate. In the event that this
Corporation shall declare or pay, without consideration, any dividend on the
Common Stock payable in any right to acquire Common Stock for no consideration,
then the Corporation shall be deemed to have made a dividend payable in Common
Stock in an amount of shares equal to the maximum number of shares issuable upon
exercise of such rights to acquire Common Stock.
(d) ADJUSTMENTS FOR RECLASSIFICATION AND REORGANIZATION. If the Common
Stock issuable upon conversion of the Class A Convertible Preferred Stock shall
be changed into the same or a different number of shares of any other class or
classes of stock or other securities or assets, whether by capital
reorganization, reclassification, consolidation or merger of the Corporation
with another corporation, or the sale of all or substantially all its assets to
another corporation, or otherwise (other than a subdivision or combination of
shares provided for in Section 4(c) above), then, as a condition of such
reorganization, reclassification, consolidation, merger or sale, lawful and
adequate provision shall be made whereby the holders of Class A Convertible
Preferred Stock shall thereafter have the right to receive upon the basis and
upon the terms and conditions specified herein and in lieu of the shares of
Common Stock of the Corporation immediately theretofore receivable upon the
conversion of Class A Convertible Preferred Stock, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding shares of Common Stock equal to the number of shares
of such Common Stock immediately theretofore receivable upon the conversion of
Class A Convertible Preferred Stock had such reorganization, reclassification,
consolidation, merger or sale not taken place, plus all dividends unpaid and
accumulated or accrued thereon to the date of such reorganization,
reclassification, consolidation, merger or sale, and in any such case
appropriate provision shall be made with respect to the rights and interests of
the holders of Class A Convertible Preferred Stock to the end that the
provisions hereof (including without limitation provisions for adjustment of the
Conversion Price and of the number of shares receivable upon the conversion of
Class A Convertible Preferred Stock) shall thereafter be
<PAGE>
applicable, as nearly as may be in relation to any shares of stock, securities
or assets thereafter receivable upon the conversion of Class A Convertible
Preferred Stock. The Corporation shall not effect any such consolidation, merger
or sale, unless prior to the consummation thereof the successor corporation (if
other than the Corporation) resulting from such consolidation or merger or the
corporation purchasing such assets shall assume by written instrument executed
and mailed to the holders of Class A Convertible Preferred Stock, at the last
addresses of such holders appearing on the books of the Corporation, the
obligation to deliver to such holder such shares of stock, securities or assets
as, in accordance with the foregoing provisions, such holder may be entitled to
receive.
(e) CERTIFICATES AS TO ADJUSTMENTS. Upon the occurrence of each
adjustment or readjustment of any Conversion Price pursuant to this Section 4,
the Corporation at its expense shall promptly compute such adjustment or
readjustment in accordance with the terms hereof and prepare and furnish to each
holder of Class A Convertible Preferred Stock a certificate executed by the
Corporation's President or Chief Financial Officer setting forth such adjustment
or readjustment and showing in detail the facts upon which such adjustment or
readjustment is based. The Corporation shall, upon the written request at any
time of any holder of Class A Convertible Preferred Stock, furnish or cause to
be furnished to such holder of Class A Convertible Preferred Stock, furnish or
cause to be furnished to such holder a like certificate setting forth (i) such
adjustment and readjustments, (ii) the Conversion Price for such series of Class
A Convertible Preferred Stock at the time in effect, and (iii) the number of
shares of Common Stock and the amount, if any, of other property which at the
time would be received upon the conversion of the Class A Convertible Preferred
Stock.
(f) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Corporation
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of the Class A Convertible Preferred Stock, such number of its shares
of Common Stock as shall from time to time be sufficient to effect the
conversion of all outstanding shares of the Class A Convertible Preferred Stock;
and if at any time the number of authorized but unissued shares of Common Stock
shall not be sufficient to effect the conversion of all then outstanding shares
of the Class A Convertible Preferred Stock, the Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to increase
its authorized but unissued shares of Common Stock to such number of shares as
shall be sufficient for such purpose, including, without limitation, engaging in
best efforts to obtain the requisite shareholder approval of any necessary
amendment to the Corporation's Articles of Incorporation.
(g) FRACTIONAL SHARES. No fractional share shall be issued upon the
conversion of any share or shares of Class A Convertible Preferred Stock. All
shares of Common Stock (including fractions thereof) issuable upon conversion of
more than one share of Class A Convertible Preferred Stock by a holder thereof
shall be aggregated for purposes of determining whether the conversion would
result in the issuance of any fractional shares. If, after the aforementioned
aggregation, the conversion would result in the issuance of a fraction of a
share of Common Stock, the Corporation shall, in lieu of issuing any fractional
share, pay the holder otherwise
<PAGE>
entitled to such fraction a sum in cash equal to the fair market value of such
fraction on the date of conversion.
(h) NOTICES. Any notice required by the provisions of this Section 4 to
be given to the holders of shares of Class A Convertible Preferred Stock shall
be deemed given if deposited in the United States mail, postage prepaid, and
addressed to each holder of record at his address appearing on the books of the
Corporation.
5. REDEMPTION.
(a) OPTIONAL REDEMPTION PRIOR TO MAY 1, 2003. Commencing on the later
of June 30, 1998, or such date that the Company's registration statement on Form
S-3 for the Common Stock underlying the Class A Convertible Preferred Stock is
declared effective, and on not less than thirty (30) days prior written notice,
the Corporation shall have the option to redeem the Class A Convertible
Preferred Stock at a redemption price of $13.125 per share, if the closing bid
price for the Company's Common Stock equals or exceeds 200% of the Conversion
Price for ten (10) consecutive trading days within the ten calendar days of the
date of call. The Corporation shall be limited, however, to call only one-third
of the original Class A Convertible Preferred Stock in any 180-day period as
measured from the Redemption Date as specified in Section 5(d).
OPTIONAL REDEMPTION ON OR AFTER MAY 1, 2003. The Corporation shall also
have the option to redeem the Class A Convertible Preferred in whole or in part
at a price of $13.125 on or after May 1, 2003. Any redemption pursuant to this
Section 5 (b) shall be pro rata among all remaining preferred stockholders based
upon their holdings on the date of call.
(c) MECHANICS OF REDEMPTION. If the Corporation desires to exercise its
right to redeem the Class A Convertible Preferred Stock, it shall mail a notice
of redemption to each of the holders of the Class A Convertible Preferred Stock,
first class, postage prepaid, not later than the thirtieth day before the date
fixed for redemption, at their last address as shall appear on the records of
the Corporation. Any notice mailed in this manner shall be conclusively presumed
to have been duly given whether or not the holder receives such notice.
(d) NOTICE OF REDEMPTION. The notice of redemption shall specify (i)
the redemption price, (ii) the date fixed for redemption (the "Redemption
Date"), (iii) the place where the Class A Convertible Preferred Certificates
shall be delivered and the redemption price paid, and (iv) the right to convert
the shares of the Class A Convertible Preferred Stock into the Corporation's
Common Stock shall terminate at 5:00 pm (Minneapolis time) on the business day
immediately preceding the date fixed for redemption. No failure to mail such
notice nor any defect therein or in the mailing shall affect the validity of the
proceedings for such redemption except as to a holder (a) to whom notice was not
mailed or (b) whose notice was defective. An affidavit of the Secretary of the
Corporation that notice of redemption has been mailed shall, in the absence of
fraud, be prima facie evidence of the facts stated therein.
(e) TERMINATION OF CONVERSION RIGHTS. Any right to convert any share of
Class A
<PAGE>
Convertible Preferred Stock into Common Stock of the Corporation that has been
called for redemption shall terminate at 5:00 p.m. (Minneapolis time) on the
business day immediately preceding the Redemption Date. On and after the
Redemption Date, holders of the redeemed Class A Convertible Preferred Stock
shall have no further rights except as to receive, upon surrender of the
redeemed Class A Convertible Preferred Stock, the Redemption Price.
(f) PAYMENT OF REDEMPTION PRICE. From and after the date specified for
redemption, the Corporation shall, at the place specified in the notice of
redemption, upon presentation and surrender to the Corporation by or on behalf
of the holder of any shares of Class A Convertible Preferred Stock to be
redeemed, deliver, or cause to be delivered to, or upon the written order of
such holder a sum in cash equal to the Redemption Price for each such share of
Class A Convertible Preferred Stock. From and after the date fixed for such
redemption and upon the deposit or setting aside by the Corporation of a sum
sufficient to redeem all of the shares of Class A Convertible Preferred Stock
called for redemption, such shares of Class A Convertible Preferred Stock shall
expire and become void and all rights hereunder, except the right to receive the
Redemption Price, shall cease.
NAVARRE CORPORATION
By: /s/ Eric H. Paulson
----------------------
Its: President
---------------------
By:/s/ Charles E. Cheney
-----------------------
Its: Secretary
---------------------
Exhibit 3
REGISTRATION RIGHTS
1. Shelf Registration
(a) Shelf Registration. The Company shall, as promptly as
practicable, after the Closing file with the SEC a
Registration Statement for an offering to be made on a
continuous basis pursuant to Rule 415 covering all of the
Purchased Stock (as hereinafter defined) (the "Initial Shelf
Registration"). The Company shall use its best efforts to file
with the SEC the Initial Shelf Registration on the earlier of
(i) June 30, 1998 or (ii) 10 days from the date of filing of
the Company's Form 10-K for the year ended March 31, 1998, and
shall use its best efforts to cause such Shelf Registration to
be declared effective under the Securities Act as promptly as
practicable thereafter. The Initial Shelf Registration shall
be on Form S-3 or another appropriate form permitting
registration of such Purchased Stock for resales by holders in
the manner or manners designated by them (including, without
limitation, one or more underwritten offerings). The Company
shall not permit any securities other than the Purchased Stock
to be included in any Shelf Registration without the consent
of the holders of Purchased Stock. The Company shall use its
best efforts to keep the Initial Shelf Registration
continuously effective under the Securities Act of 1933, as
amended (the "Securities Act") until the date which is 36
months from the date of filing (the "Effectiveness Period") or
such shorter period ending when (i) all Purchased Stock
covered by the Initial Shelf Registration have been sold in
the manner set forth and as contemplated in the Initial Shelf
Registration or (ii) a Subsequent Shelf Registration covering
all of the Purchased Stock has been declared effective under
the Securities Act.
(b) Subsequent Shelf Registration. If the Initial Shelf
Registration or any Subsequent Shelf Registration ceases to be
effective for any reasons at any time during the Effectiveness
Period (other than because of the sale of all of the
securities registered thereunder), the Company shall use its
best efforts to obtain the prompt withdrawal of any order
suspending the effectiveness thereof, and in any event shall
within 30 days of such cessation of effectiveness amend the
Shelf Registration in a manner to obtain the withdrawal of the
order suspending the effectiveness thereof, or file an
additional "shelf" Registration Statement pursuant to Rule 415
covering all of the Purchased Stock (a "Subsequent Shelf
Registration"). If a Subsequent Shelf Registration is filed,
the Company shall use its best efforts to cause the Subsequent
Shelf Registration to be declared effective as soon as
practicable after such filing and to keep such Subsequent
Shelf Registration continuously effective for a period equal
to the number of days in the Effectiveness Period less the
aggregate number of days during which the Initial Shelf
Registration or any Subsequent Shelf Registration was
previously continuously
<PAGE>
effective. As used herein, the term "Shelf Registration" means
the Initial Shelf Registration and any Subsequent Shelf
Registration.
(c) Supplements and Amendments. The Company shall promptly
supplement and amend any Shelf Registration if required by the
rules, regulations or instructions applicable to the
registration form used for such Shelf Registration, if
required by the Securities Act, or if reasonably requested by
the holders of a majority of the Purchased Stock covered by
such Shelf Registration or by any underwriter of such
Purchased Stock, in each case, with the Company's consent,
which consent shall not be unreasonably withheld or delayed.
2. Required Registration. Commencing upon the expiration of the 36 month
period specified in Section 1, if the Company shall receive a written
request therefor from any holder of the Purchased Stock not theretofore
registered under the Securities Act, and sold, the Company shall
prepare and file a registration statement under the Securities Act
covering the shares of Purchased Stock which are the subject of such
request and shall use its best efforts to cause such registration
statement to become effective. In addition, upon the receipt of such
request, the Company shall promptly give written notice to all other
record holders (if any) of shares of Purchased Stock not theretofore
registered under the Securities Act and sold that such registration is
to be effected. The Company shall include in such registration
statement such shares of Purchased Stock for which it has received
written requests to register by such other record holders within 30
days after the delivery of the Company's written notice to such other
record holders. The Company shall be obligated to prepare, file and
cause to become effective only three registration statements pursuant
to this Section 2.
Without the written consent of the holders of seventy-five percent
(75%) of the Purchased Stock for which registration has been requested
pursuant to this paragraph 2, neither the Company nor any other holder
of securities of the Company may include securities in such
registration if in the good faith judgment of the managing underwriter
of such public offering the inclusion of such securities would
interfere with the successful marketing of the Purchased Stock or
require the exclusion of any portion of the Purchased Stock to be
registered.
3. Incidental Registration. Each time the Company shall determine to
proceed with the actual preparation and filing of a registration
statement under the Securities Act in connection with the proposed
offer and sale for cash of any of its securities by it or any of its
security holders (other than a registration statement on a form that
does not permit the inclusion of shares by its security holders), the
Company will give written notice of its determination to all record
holders of Purchased Stock not theretofore registered under the
Securities Act and sold. Upon the written request of a record holder of
any shares of Purchased Stock given within 30 days after receipt of any
such notice from the Company, the Company will, except as herein
provided, cause all such shares of Purchased Stock, the record holders
of which have so requested registration thereof, to be included in such
<PAGE>
registration statement, all to the extent requisite to permit the sale
or other disposition by the prospective seller or sellers of the
Purchased Stock to be so registered; provided, however, that nothing
herein shall prevent the Company from, at any time, abandoning or
delaying any such registration initiated by it; provided further,
however, that if the Company determines not to proceed with a
registration after the registration statement has been filed with 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. If any registration
pursuant to this paragraph 3 shall be underwritten in whole or in part,
the Company may require that the Purchased Stock requested for
inclusion pursuant to this paragraph 3 be included in the underwriting
on the same terms and conditions as the securities otherwise being sold
through the underwriters. If in the good faith judgment of the managing
underwriter of a proposed underwritten public offering the inclusion of
all of the Purchased Stock 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 Purchased Stock
otherwise to be included in the underwritten public offering may be
reduced pro rata (by number of shares) among the holders thereof
requesting such registration, provided, however, that after any such
required reduction the Purchased Stock to be included in such offering,
together with any shares to be included in such offering that are being
offered by other selling shareholders, shall constitute at least 25% of
the total number of shares to be included in such offering. Those
shares of Purchased Stock which are thus excluded from the underwritten
public offering shall be withheld from the market by the holders
thereof for a period, not to exceed 90 days, which the managing
underwriter reasonably determines if necessary in order to effect the
underwritten public offering.
4. Registration Procedures. If and whenever the Company is required by the
provisions of paragraph 1, 2 or 3 hereof to effect the registration of
shares of Purchased Stock under the Securities Act, the Company will:
(a) prepare and file with the Commission a registration statement
with respect to such securities, and use its best efforts to
cause such registration statement to become and remain
effective for such period as may be reasonably necessary to
effect the sale of such securities, not to exceed (i)
thirty-six months in the case of the Shelf Registration
specified in Section 1 and (ii) nine months with respect to a
registration statement not covered by Section 1;
(b) prepare and file with the Commission such amendments to such
registration statement and supplements to the prospectus
contained therein as may be necessary to keep such
registration statement effective for such period as may be
reasonably necessary to effect the sale of such securities,
not to exceed (i) thirty-six months in the case of the Shelf
Registration specified in Section 1 and (ii) nine months with
respect to a registration statement not covered by Section 1;
<PAGE>
(c) furnish to the security holders participating in such
registration 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 such underwriters may
reasonably request in order to facilitate the public offering
of such securities;
(d) use its best efforts to register or qualify the securities
covered by such registration statement under such state
securities or blue sky laws of such jurisdictions as such
participating holders may reasonably request in writing within
20 days following the original filing of such registration
statement, except that the Company shall not for any purpose
be required to execute a general consent to service of process
or to qualify to do business as a foreign corporation in any
jurisdiction wherein it is not so qualified.
(e) notify the security holders participating in such
registration, promptly after it shall receive notice thereof,
of the time when such registration statement has become
effective or a supplement to any prospectus forming a part of
such registration statement has been filed;
(f) notify such holders promptly of any request by the Commission
for the amending or supplementing of such registration
statement or prospectus or for additional information;
(g) prepare and file with the Commission, promptly upon the
request of any such holders, any amendments or supplements to
such registration statement or prospectus which, in the
opinion of counsel for such holders (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 Purchased Stock by such holder;
(h) prepare and promptly file with the Commission and promptly
notify such holders of the filing of such amendment or
supplement to such registration statement or prospectus as may
be necessary to correct any statements or omissions if, at the
time when a prospectus relating to such securities is required
to be delivered under the Securities Act, any event shall have
occurred as the result of which any such prospectus or any
other prospectus as then in effect would include an untrue
statement of a material fact or omit to state any material
fact necessary to make the statements therein, in the light of
the circumstances in which they were made, not misleading;
(i) advise such holders, 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 the purpose and promptly use its best efforts
to prevent the
<PAGE>
issuance of any stop order or to obtain its withdrawal if such
stop order should be issued;
(j) not file any amendment or supplement to such registration
statement or prospectus to which a majority in interest of
such holders shall have reasonably objected on the grounds
that such amendment or supplement does not comply in all
material respects with the requirements of the Securities Act
or the rules and regulations thereunder, after having been
furnished with a copy thereof at least five business days
prior to the filing thereof, unless in the opinion of counsel
for the Company the filing of such amendment or supplement is
reasonably necessary to protect the Company from any
liabilities under any applicable federal or state law and such
filing will not violate applicable law; and
(k) at the request of any such holder, furnish: (i) an opinion,
dated as of the closing date, of the counsel representing the
Company for the purposes of such registration, addressed to
the underwriters, if any, and to the holder or holders making
such request, covering such matters as such underwriters and
holder or holders may reasonably request; and (ii) letters
dated as of the effective date of the registration statement
and as of the closing date, from the independent certified
public accountants of the Company, addressed to the
underwriters, if any, and to the holder or holders making such
request, covering such matters as such underwriters and holder
or holders may reasonably request.
(l) use its best efforts to have the Purchased Stock listed on the
Nasdaq Stock Market or such other of the principal market or
principal exchange on which the Company's stock is then listed
or quoted.
5. Expenses. With respect to each registration, the Company shall bear all
fees, costs and expenses including, without limitation,: 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), all internal Company expenses,
all legal fees and disbursements and other expenses of complying with
state securities or blue sky laws of any jurisdictions in which the
securities to be offered are to be registered or qualified, and the
premiums and other costs of policies of insurance against liability (if
any) arising out of such public offering and underwriting discounts and
commissions and transfer taxes relating to the shares included in the
offering by the selling security holders.
<PAGE>
6. Indemnification. In the event that any Purchased Stock is included in a
registration statement under paragraph 1, 2 or 3 hereof:
(a) The Company will indemnify and hold harmless each holder of
shares of Purchased Stock which are included in a registration
statement pursuant to the provisions of paragraph 1, 2 or 3
hereof, its directors and officers, and any underwriter (as
defined in the Securities Act) for such holder and each
person, if any, who controls such holder or such underwriter
within the meaning of the Securities Act, from and against,
and will reimburse such holder and each such underwriter and
controlling person with respect to, 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
information furnished by such holder, such underwriter or such
controlling person in writing specifically for use in the
preparation thereof.
(b) Each holder of shares of Purchased Stock which are included in
a registration pursuant to the provisions of this paragraph 1,
2 or 3 hereof will indemnify and hold harmless the Company,
its directors and officers, any controlling person or any
underwriter from and against, and will reimburse the Company,
its directors and officers, any controlling person and any
underwriter with respect to, any and all loss, damage,
liability, cost or expense to which the Company or any
controlling person and/or any underwriter may become subject
under the Securities Act or otherwise, insofar as such losses,
damages, liabilities, costs or expenses are caused by any
untrue or alleged untrue statement of any material fact
contained in such registration statement, any prospectus
contained therein or any amendment or supplement thereto, or
arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be
stated therein or necessary to make the statements therein, in
light of the circumstances in which they were made, not
misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement
or omission or alleged omission was so made in reliance upon
and in strict conformity with written information furnished by
such holder specifically for use in the preparation thereof.
Notwithstanding the foregoing, each holder's liability for
indemnification shall be limited to the amount of the holder's
original purchase price of the Purchased Stock.
<PAGE>
(c) Promptly after receipt by an indemnified party pursuant to the
provisions of paragraph (a) and (b) of this paragraph 6 of
notice of the commencement of any action involving the subject
matter of the foregoing indemnity provisions such indemnified
party will, if a claim thereof is to be made against the
indemnifying party pursuant to the provisions of said
paragraph (a) or (b), promptly notify the indemnifying party
of the commencement thereof; but the omission to so notify the
indemnifying party will not relieve it from any liability
which it may have to any indemnified party otherwise than
hereunder. In case such action is brought against any
indemnified party and it notifies the indemnifying party of
the commencement thereof, the indemnifying party shall have
the right to participate in, and, to the extent that it may
wish, jointly with any other indemnifying party similarly
notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party, provided, however, if
the defendants in any action include both the indemnified
party and the indemnifying party and the indemnified party
shall have reasonably concluded that there may be legal
defenses available to it and/or other indemnified parties
which are different from or additional to those available to
the indemnifying party, or if there is a conflict of interest
which would prevent counsel for the indemnifying party from
also representing the indemnified party, the indemnified party
or parties shall have the right to select separate counsel to
participate in the defense of such action on behalf of such
indemnified party or parties. After notice from the
indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party will
not be liable to such indemnified party pursuant to the
provisions of said paragraph (a) or (b) for any legal or other
expense subsequently incurred by such indemnified party in
connection with the defense thereof other than reasonable
costs of investigation, unless (i) the indemnified party shall
have employed counsel in accordance with the proviso of the
preceding sentence, (ii) the indemnifying party shall not have
employed counsel satisfactory to the indemnified party to
represent the indemnified party within a reasonable time after
the notice of the commencement of the action, or (iii) the
indemnifying party has authorized the employment of counsel
for the indemnified party at the expense of the indemnifying
party.
7. Special Definition. "Purchased Stock" shall mean the Company's Common Stock
into which the Company's Class A Convertible Preferred Stock is convertible,
together with Common Stock underlying Warrants, purchased pursuant to the Class
A Convertible Preferred Stock Purchase Agreement dated April 21, 1998 and the
stock or other securities of the Company issued in a conversion, stock split or
reclassification of, or a stock dividend or other distribution on or in
substitution or exchange for, or otherwise in connection with, any of the
foregoing securities, or in a merger or consolidation involving the Company or a
sale of all or substantially all of the Company's assets.
Exhibit 4
RESTRICTION ON TRANSFER
THE SECURITIES EVIDENCED HEREBY MAY NOT BE TRANSFERRED WITHOUT (i) THE
OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH TRANSFER MAY BE
LAWFULLY MADE WITHOUT REGISTRATION UNDER THE FEDERAL SECURITIES ACT OF 1933 AND
ALL APPLICABLE STATE SECURITIES LAWS OR (ii) SUCH REGISTRATION.
WARRANT
To Subscribe for and Purchase Common Stock of
Navarre Corporation
W-1
THIS CERTIFIES THAT, for value received, [investor name], or registered
assigns is entitled to subscribe for and purchase from Navarre Corporation (the
"Company"), a corporation organized and existing under the laws of the State of
Minnesota, at the price specified below (subject to adjustment as noted below)
at any time from and after the date hereof to and including May 1, 2003, _______
fully paid and nonassessable shares of the Company's Common Stock (subject to
adjustment as noted below).
The Warrant purchase price (subject to adjustment as noted below) shall
be $3.50 per share.
This Warrant is subject to the following provisions, terms and
conditions:
1. The Company has the right to call on not less than thirty (30) days
prior written notice, at $.01 per share, fifty percent (50%) of the shares of
Common Stock represented by this Warrant at any time after May 1, 1999, if the
closing bid price for the Company's Common Stock equals or exceeds $5.00 for ten
(10) consecutive trading days within the ten (10) calendar days of the date of
the call. The Company also has the right to call on not less than thirty (30)
days prior written notice, at $.01 per share, one hundred percent (100%) of the
Common Stock represented by this Warrant at any time after May 1, 2000 if the
closing bid price for the Company's Common Stock equals or exceeds $7.50 for ten
(10) consecutive trading days within the ten (10) calendar days of the date of
the call. If the Company desires to exercise its right to call the rights
represented by this Warrant, it shall do so by written notice to each of the
holders of this Warrant, first class mail, postage prepaid, at their last
address as shall appear on the records of the Company. Any notice mailed in this
manner shall be conclusively presumed to have been duly given whether or not the
holder receives such notice.
2. The rights represented by this Warrant may be exercised by the
holder hereof, in whole or in part, by written notice of exercise delivered to
the Company no more than twenty 20 days prior to the intended date of exercise
and by the surrender of this Warrant (properly endorsed if required) at the
principal office of the Company and upon payment to it by check of the purchase
price for such
<PAGE>
shares. The Company agrees that the shares so purchased shall be and are deemed
to be issued to the holder hereof as the record owner of such shares as of the
close of business on the date on which this Warrant shall have been surrendered
and payment made for such shares as aforesaid. Subject to the provisions of the
next succeeding paragraph, certificates for the shares of stock so purchased
shall be delivered to the holder hereof within a reasonable time, not exceeding
10 days, after the rights represented by this Warrant shall have been so
exercised, and, unless this Warrant has expired, a new Warrant representing the
number of shares, if any, with respect to which this Warrant shall not then have
been exercised shall also be delivered to the holder hereof within such time.
3. Notwithstanding the foregoing, however, the Company shall not be
required to deliver any certificate for shares of stock upon exercise of this
Warrant except in accordance with the provisions, and subject to the
limitations, of paragraph 7 hereof and the restrictive legend under the heading
"Restriction on Transfer."
4. The Company covenants and agrees that all shares that may be issued
upon the exercise of the rights represented by this Warrant will, upon issuance,
be duly authorized and issued, fully paid and nonassessable. The Company further
covenants and agrees that during the period within which the rights represented
by this Warrant may be exercised, the Company will at all times have authorized,
and reserved for the purpose of issue or transfer upon exercise of the
subscription rights evidenced by this Warrant, a sufficient number of shares of
its Common Stock to provide for the exercise of the rights represented by this
Warrant, and if at any time the number of authorized but unissued shares of
Common Stock shall not be sufficient to allow the exercise of this Warrant and
the issuance of the number of shares of Common Stock represented by this
Warrant, the Company will take such corporate action as may, in the opinion of
its counsel, be necessary to increase its authorized but unissued shares of
Common Stock to such number of shares as shall be sufficient for such purpose,
including without limitation, engaging in best efforts to obtain the requisite
shareholder approval of any necessary amendment to the Company's Articles of
Incorporation.
5. The above provisions are, however, subject to the following:
(a) The warrant purchase price shall, from and after the date of
issuance of this Warrant, be subject to adjustment from time to time as
hereinafter provided. Upon each adjustment of the warrant purchase price, the
holder of this Warrant shall thereafter be entitled to purchase, at the warrant
purchase price resulting from such adjustment, the number of shares obtained by
multiplying the warrant purchase price in effect immediately prior to such
adjustment by the number of shares purchasable pursuant hereto immediately prior
to such adjustment and dividing the product thereof by the warrant purchase
price resulting from such adjustment.
(b) In case the Company shall at any time subdivide its outstanding
shares of Common Stock into a greater number of shares, the warrant purchase
price in effect immediately prior to such subdivision shall be proportionately
reduced, and conversely, in case the outstanding shares of Common Stock of the
Company shall be combined into a smaller number of shares, the warrant purchase
price in effect immediately prior to such combination shall be proportionately
increased.
<PAGE>
(c) If any event occurs as to which in the opinion of the Board of
Directors of the Company the other provisions of this paragraph 4 are not
strictly applicable or if strictly applicable would not fairly protect the
purchase rights of the holder of this Warrant or of Common Stock in accordance
with the essential intent and principles of such provisions, then the Board of
Directors shall make an adjustment in the application of such provisions, in
accordance with such essential intent and principles, so as to protect such
purchase rights as aforesaid.
6. This Warrant shall not entitle the holder hereof to any voting
rights or other rights as a stockholder of the Company.
7. The holder of this Warrant, by acceptance hereof, agrees to give
written notice to the Company before transferring this Warrant or transferring
any Common Stock issuable or issued upon the exercise hereof of such holder's
intention to do so, describing briefly the manner of any proposed transfer of
this Warrant or such holder's intention as to the disposition to be made of
shares of Common Stock issuable or issued upon the exercise hereof. Such holder
shall also provide the Company with an opinion of counsel satisfactory to the
Company to the effect that the proposed transfer of this Warrant or disposition
of shares may be effected without registration or qualification (under any
Federal or State law) of this Warrant or the shares of Common Stock issuable or
issued upon the exercise hereof. Upon receipt of such written notice and opinion
by the Company, such holder shall be entitled to transfer this Warrant, or to
exercise this Warrant in accordance with its terms and dispose of the shares
received upon such exercise or to dispose of shares of Common Stock received
upon the previous exercise of this Warrant, all in accordance with the terms of
the notice delivered by such holder to the Company, provided that an appropriate
legend respecting the aforesaid restrictions on transfer and disposition may be
endorsed on this Warrant or the certificates for such shares.
8. (a) Subject to the restrictions and limitations specified below,
this Warrant is subject to the registration rights as set forth in Exhibit B to
the Class A Convertible Preferred Stock Purchase Agreement. If at any time after
the Common Stock represented by this Warrant is not subject to an effective
Registration Statement as set forth in Exhibit B to the Class A Convertible
Stock Purchase Agreement, and prior to the end of the one-year period following
complete exercise of this Warrant or May 1, 2004, whichever occurs earlier, the
Company proposes to register under the 1933 Act (except by a Form S-4 or Form
S-8 Registration Statement or any successor forms thereto) or qualify for a
public distribution under Section 3(b) of the 1933 Act, any of its equity
securities or debt with equity features, it will give written notice to all
holders of this Warrant of its intention to do so and, on the written request of
any such holder given within twenty (20) days after receipt of any such notice
(which request shall specify the "Warrant Shares" then issued or issuable upon
exercise of this Warrant intended to be sold or disposed of by such holder and
describe the nature of any proposed sale or other disposition thereof), the
Company will use its best efforts to cause all such Warrant Shares, the holders
of which shall have requested the registration or qualification thereof, to be
included in such registration statement proposed to be filed by the Company;
provided, however, that if a greater number of Warrant Shares is offered for
participation in the proposed offering than in the reasonable opinion of the
managing underwriter of the proposed offering can be accommodated without
adversely affecting the proposed offering, then the amount
<PAGE>
of Warrant Shares proposed to be offered by such holders for registration, as
well as the number of securities of any other selling shareholders participating
in the registration, shall be proportionately reduced to a number deemed
satisfactory by the managing underwriter.
(b) Further, on a one-time basis only commencing after the
Common Stock represented by this Warrant is not subject to an effective
Registration Statement as set forth in Exhibit B to the Class A Convertible
Stock Purchase Agreement, and subject to the limitations and restrictions set
forth below, upon request by a majority in interest of Warrants, or by the
holders of a majority of the shares of the Common Stock issued upon exercise
thereof, the Company will, at its expense, promptly take all necessary steps to
register or qualify the Warrant Shares under a Registration Statement on Form
S-3 or successor thereof (provided that the Company's Common Stock is then
eligible for registration on a Form S-3 or successor thereof) under Section 3(b)
or Section 6 of the Securities Act of 1933 and such state laws as such holders
may reasonably request; provided that such request must be made before the
earlier of the end of the one-year period following complete exercise of this
Warrant or May 1, 2004. The Company shall keep effective and maintain any
registration, qualification, notification or approval specified in this
paragraph for such period as may be necessary for the holders of the Warrants
and such common stock to dispose thereof and from time to time shall amend or
supplement, at the Company's expense, the prospectus or offering circular used
in connection therewith to the extent necessary in order to comply with
applicable law, provided that the Company shall not be obligated to maintain any
registration for a period of more than six (6) months after effectiveness except
that a Form S-3 Registration Statement or successor thereof shall be maintained
for up to twelve (12) months after effectiveness. If Form S-3 is not available,
the Company will have no obligation to effect the registration provided by this
Section 8(b) until such Form S-3 is available.
(c) With respect to each inclusion of securities in a
registration statement pursuant to Section 8(a), the Company shall bear the
following fees, costs, and expenses: all registration, filing and NASD fees,
Nasdaq 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 offering is underwritten
and the Company is required to bear such fees and disbursements), all internal
expenses, the premiums and other costs of policies of insurance against
liability arising out of the public offering, if any, and legal fees and
disbursements and other expenses of complying with state securities laws of any
jurisdictions in which the securities to be offered are to be registered or
qualified. Fees and disbursements of special counsel and accountants for the
selling holders, underwriting discounts and commissions, and transfer taxes for
selling holders and any other expenses relating to the sale of securities by the
selling holders not expressly included above shall be borne by the selling
holders.
(d) The Company hereby indemnifies each of the holders of this
Warrant and of any Warrant Shares, and the officers and directors, if any, who
control such holders, within the meaning of Section 15 of the 1933 Act, against
all losses, claims, damages, and liabilities caused by (1) any untrue statement
or alleged untrue statement of a material fact contained in any Registration
Statement or Prospectus (and as amended or supplemented if the Company shall
have furnished any amendments thereof or supplements thereto), any Preliminary
Prospectus or any state securities law
<PAGE>
filings; (2) 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, except insofar as such losses, claims, damages, or liabilities are
caused by any untrue statement or omission contained in information furnished in
writing to the Company by such holder expressly for use therein; and each such
holder by its acceptance hereof severally agrees that it will indemnify and hold
harmless the Company, each of its officers who signs such Registration
Statement, and each person, if any, who controls the Company, within the meaning
of Section 15 of the 1933 Act, with respect to losses, claims, damages, or
liabilities which are caused by any untrue statement or omission contained in
information furnished in writing to the Company by such holder expressly for use
therein.
9. Subject to the provisions of paragraph 7 hereof, this Warrant and
all rights hereunder are transferable, in whole or in part, at the principal
office of the Company by the holder hereof in person or by duly authorized
attorney, upon surrender of this Warrant properly endorsed. Each taker and
holder of this Warrant, by taking or holding the same, consents and agrees that
the bearer of this Warrant, when endorsed, may be treated by the Company and all
other persons dealing with this Warrant as the absolute owner hereof for any
purpose and as the person entitled to exercise the rights represented by this
Warrant, or to the transfer hereof on the books of the Company, any notice to
the contrary notwithstanding; but until such transfer on such books, the Company
may treat the registered holder hereof as the owner for all purposes.
10. This Warrant is exchangeable, upon the surrender hereof by the
holder hereof at the principal office of the Company, for new Warrants of like
tenor representing in the aggregate the right to subscribe for and purchase the
number of shares which may be subscribed for and purchased hereunder, each of
such new Warrants to represent the right to subscribe for and purchase such
number of shares as shall be designated by said holder hereof at the time of
such surrender.
11. All questions concerning this Warrant will be governed and
interpreted and enforced in accordance with the internal law of the State of
Minnesota.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer and this Warrant to be dated as of May 1, 1998.
NAVARRE CORPORATION
By: /s/ Charles E. Cheney
---------------------
Its: Secretary
---------------------
<PAGE>
FORM OF ASSIGNMENT
(To Be Signed Only Upon Assignment)
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
unto
this Warrant, and appoints
to transfer this Warrant on the books of the Company with the full power of
substitution in the premises.
Dated:
In the presence of:
------------------------------------------
(Signature must conform in all respects
to the name of the holder as specified on
the face of this Warrant without
alteration, enlargement or any change
whatsoever, and the signature must be
guaranteed in the usual manner)
<PAGE>
SUBSCRIPTION FORM
To be Executed by the Holder of this Warrant if such Holder
Desires to Exercise this Warrant in Whole or in Part:
To: Navarre (the "Company")
The undersigned _________________________
Please insert Social Security or other
identifying number of Subscriber:
_________________________
hereby irrevocably elects to exercise the right of purchase represented by this
Warrant for, and to purchase thereunder, ________ shares of the Common Stock
provided for therein and tenders payment herewith to the order of the Company in
the amount of $_______, such payment being made as provided on the face of this
Warrant.
The undersigned requests that certificates for such shares of
Common Stock be issued as follows:
Name: ___________________________________________________________________
Address: ___________________________________________________________________
Deliver to: ___________________________________________________________________
Address: ___________________________________________________________________
and, if such number of shares of Common Stock shall not be all the shares of
Common Stock purchasable hereunder, that a new Warrant for the balance remaining
of the shares of Common Stock purchasable under this Warrant be registered in
the name of, and delivered to, the undersigned at the address stated above.
Dated:
Signature ___________________________________
Note: The signature on this
Subscription Form must correspond
with the name as written upon the
face of this Warrant in every
particular, without alteration or
enlargement or any change whatever.
