As filed with the Securities and Exchange Commission
on November 25, 1996
Registration No. 333-9231
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________
Amendment No. 2 to
FORM S-3
Registration Statement
Under
The Securities Act of 1933
____________________
NAVARRE CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 41-1704319
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
7400 49th Avenue North
New Hope, Minnesota 55428
(612) 535-8333
(Address, including zip code, and telephone number,
including area code, of registrant's principal executive
office)
__________________
Eric H. Paulson
Chairman and Chief Executive Officer
Navarre Corporation
7400 49th Avenue North
New Hope, Minnesota 55428
(612) 535-8333
(Name, address, including zip code, and telephone
number, including area code, of agent for service)
_________________
COPIES TO:
Thomas G. Lovett, IV
Lindquist & Vennum P.L.L.P.
4200 IDS Center
80 South Eighth Street
Minneapolis, Minnesota 55402
Telephone: (612) 371-3211
Approximate date of commencement of proposed sale to
public: From time to time after this Registration
Statement becomes effective. If the only securities
being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans,
please check the following box. ____
If any of the securities being registered on this Form
are to be offered on a delayed or continuous basis
pursuant to Rule 415 under the Securities Act of 1933,
other than securities offered only in connection with
dividend or interest reinvestment plans, check the
following box: If this Form is filed to register
additional securities for an offering pursuant to Rule
462(b) under the Securities Act, please check the
following box and list the Securities Act registration
statement number of the earlier effective registration
statement for the same offering: If this Form is a
post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and
list the Securities Act registration statement number
of the earliest effective registration statement for
the same offering:
If delivery of the prospectus is expected to be made
pursuant to Rule 434, please check the following box:
The registrant hereby amends this registration statement on
such date or dates as may be necessary to delay its
effective date until the registrant shall file a further
amendment that specifically states that this registration
statement shall thereafter become effective in accordance
with Section 8(a) of the Securities Act of 1933 or until
the registration statement shall become effective on such
date as the Commission, acting pursuant to said Section
8(a), may determine.
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION, DATED NOVEMBER 25, 1996
PROSPECTUS
NAVARRE CORPORATION
530,000 Shares of
Common Stock
This Prospectus relates to the offering of up to
530,000 shares (the "Shares") of Common Stock, no par
value, of Navarre Corporation (the "Company") which may be
offered from time to time by the shareholders named herein (the
"Selling Shareholders"). The Company will not receive any
of the proceeds from the sale of the Shares by the Selling
Shareholders. See "Use of Proceeds."
The Company will bear all expenses of the offering
hereunder other than underwriting discounts and
commissions incurred in connection with the sale of the
Shares by the Selling Shareholders. The Company's Common
Stock is quoted on The Nasdaq National Market under the
symbol "NAVR." On November 22, 1996, the last reported
sale price of the Company's Common Stock on The Nasdaq
National Market was $3.75.
For information concerning risk factors which should
be considered by prospective purchasers of the Common Stock
offered hereby, see "Risk Factors" beginning on page 5 of
this Prospectus.
The Selling Shareholders have advised the Company
that they intend to sell the Shares from time to time in
transactions on The Nasdaq National Market at prices
prevailing at the time of the sale or otherwise as set forth
below. The Selling Shareholders have also advised the
Company that, as of the date hereof, they have made no
arrangement with any brokerage firm for the sale of the
Shares. The Selling Shareholders may be deemed to be
"underwriters" within the meaning of the Act, in which case
any commissions received by a broker or dealer may be deemed
to be underwriting commissions or discounts under the Act.
See "Plan of Distribution.,,
THESE SECURITIES HAVE NOT BEEN APPROVED OR
DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE COMMISSION OR ANY STATE SECURITIES
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
___________________________________________________
__
The date of this Prospectus is November 25, 1996
AVAILABLE INFORMATION
The Company is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), and in accordance therewith files reports,
proxy statements and other information with the Securities
and Exchange Commission (the "Commission"). The reports,
proxy and information statements and other information can
be inspected and copied at the public facilities maintained
by the Commission at Judiciary Plaza, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and are also
available at the Commission's Regional Offices at 7 World
Trade Center, 13th Floor, New York, New York 10048, and
Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such material also can
be obtained at prescribed rates from the Public Reference
Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The Commission also maintains a
Web site (http://www.sec.gov) at which reports, proxy and
information statements and other information regarding the
Company may be accessed. The Company's Common Stock is
quoted on The Nasdaq National Market ("Nasdaq").
The Company has filed with the Commission a Registration
Statement under the Securities Act ] c 3, as amended,
with respect to the shares offered hereby. This Prospectus
does not contain all of the information set orth in the
Registration Statement and the exhibits thereto, certain
parts of which were omitted as permitted by the rules and
regulations of the Commission. Such additional information
may be obtained from the Commission's principal office in
Washington, D.C. Statements contained in this Prospectus or
in any document incorporated in this Prospectus by
reference as to the content of any contract or other
document referred to herein or therein are not necessarily
complete, and in each instance reference is made to the
copy of such contract or other document filed as an exhibit
to the Registration Statement or each other document, each
such statement being qualified in all respects by such
reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed with the Commission by the
Company (File No. 0-22982) are incorporated by reference in
this Prospectus: (i) the Company's Annual Report on Form
10K for the year ended March 31, 1996; (ii) the Company's
Proxy Statement for its Annual Meeting of Shareholders held
on September 5, 1996; (iii) the Company's Quarterly Reports
on Form 10-Q for the periods ended June 30, 1996 and
September 30, 1996; and (iv) the description of the
Company's Common Stock as set forth in the Company's
Registration Statement on Form 8-A dated November 1993,
including any amendments or reports filed for the purpose
of updating such information.
All documents filed by the Company pursuant to Sections
13(a), 13(c), 14 or 15 of the 1934 Act after the date of
this Prospectus and prior to the termination of the
offering of securities contemplated hereby shall also be
deemed to be incorporated by reference in this Prospectus
and to be a part hereof from the date of filing of such
documents or reports. Any statement contained in a
document incorporated or deemed to be incorporated by
reference herein shall be deemed to be modified or
superseded for purposes of this Prospectus to the extent
that a statement contained herein or in any other
subsequently filed document which also is or is deemed to
be incorporated by reference herein modifies or supersedes
such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
This Prospectus incorporates documents by reference which
are not presented herein or delivered herewith. Such
documents (other than exhibits to such documents, unless
such exhibits are specifically incorporated by reference to
such documents) are available, without charge, to any
person, including any beneficial owner, to whom this
Prospectus is delivered, on written or oral request, to
Navarre Corporation, 7400 49th Avenue North, New Hope,
Minnesota 55428, Attention: Investor Relations, or by
telephone at (612) 535-8333.
________________________
This Prospectus, including the information incorporated by
reference herein, contains forward-looking statements
within the meaning of Section 27A of the Securities Act of
1933 and Section 21E of the Securities Exchange Act of
1934. Actual results could differ significantly from those
projected or contemplated in the forward-looking statements
as a result, in part, of the risk factors set forth
elsewhere in this Prospectus. In connection with the
forward-looking statements which appear in these
disclosures, prospective purchasers of the Company's Common
Stock offered hereby should carefully review all of such
risk factors.
PROSPECTUS SUMMARY
The following summary is qualified in its entirety
by the more detailed information and financial statements
appearing elsewhere in this Prospectus and in documents
incorporated herein by reference. Unless otherwise
indicated, all share information in this Prospectus has been
adjusted to reflect a two-for-one stock split effective in
June 1996.
The Company
Navarre Corporation ("Navarre" or the "Company"), a
Minnesota corporation, has been engaged in the distribution
of prerecorded music and personal computer software since
1983.
The Company operates through two principal
divisions, its Music Products Division and its Computer
Products Division. Building upon its strength and expertise
as a leading independent distributor of prerecorded music,
the Company has achieved increasing sales in the growing
market for personal computer software and interactive CD-ROM
software. The Company's product line contains over 20,000
SKUs of compact discs, cassettes, personal computer software
and interactive CD-ROM software sold to over 500 customers
with over 9,000 locations throughout the United States.
Its primary customers include (i) music and computer
specialty chains, (ii) membership wholesale clubs, (iii)
mass merchandisers and discount retailers and (iv)
wholesalers and rackjobbers.
In 1994 the Company established a CD-ROM publishing
company named Digital Entertainment, Inc., which was owned
eighty percent by Navarre. All of its products are
exclusively distributed by the Company through its Computer
Products Division. During fiscal 1996, the Company
acquired the minority shareholder interest in Digital
Entertainment Inc.
The Company s principal executive offices are located
at 7400 49th Avenue North, New Hope, Minnesota 55428 and its
telephone number is (612) 535-8333.
The Offering
Common Stock offered by Selling Shareholders 530,000
Common Stock outstanding after offering (1) 6,944,508
Nasdaq Symbol NAVR.
_______________________
(1) Includes 180,000 shares issuable upon exercise of
warrants by warrant holders and excludes shares of
Common Stock reserved for under the Company's 1992 Stock
Option Plan.
Use of Proceeds
The Company will not receive any proceeds from sales
of the Shares by the Selling Shareholders except to the extent
that the warrant holders exercise their warrants to purchase
common stock. The Company intends to use the $702,000 for
working capital purposes. See "Use of Proceeds."
RISK FACTORS
Prospective purchasers of the Common Stock offered
hereby should consider carefully all the information contained
in this Prospectus and, in particular, the following risk
factors.
Dependence Upon Significant Customers
In each of the past several years, the Company has
had one or more customers that has accounted for ten
percent or more of the Company's net sales. During the six
month period ended September 30, 1996, sales to three
customers, Comp USA, Musicland Stores Corporation and Best
Buy, each represented more than ten percent of net sales.
The Company competes with other companies for the business
of each of its customers and there can be no assurance that
the Company will continue to recognize a significant amount
of revenue from sales to any specific customers. If the
Company is unable to continue to sell its products to all
or any of these three customers or is unable to continue to
maintain its sales to these customers at their current
levels, and is unable to find other customers to replace
the list sales, there might be an adverse impact on the
Company's revenues
and future profitability.
Seasonality
Much of the Company's business is seasonal in
nature with a higher percentage of sales during the second
half of the calendar year. As a distributor of products
ultimately sold at retail, the Company's business is
affected by the pattern of seasonability common to other
suppliers of retailers, particularly the holiday selling
season. Historically, more than 70% of the Company's sales
and a substantial portion of the Company's profits have
been in the third and fourth quarters of the calendar year.
Due to the lower level of sales during the off periods, the
Company has historically incurred losses during these
periods. Because of this seasonality, if the Company
experiences a weak holiday season, it could significantly
affect the Company's profitability for the entire year.
Dependence Upon Bank Borrowings
The Company has relied upon bank borrowings to
finance its expansion, primarily for inventory and accounts
receivable financing and currently has a $35.0 million credit
facility in place. At September 30, 1996, the Company a
total bank borrowings of $22.8 million. The Company believes
that it may be necessary for it to acquire additional bank
financing in the future depending upon the growth of its
business and the possible financing of acquisitions. If the
Company is unable to obtain additional bank financing, its
future growth and profitability would be adversely affected.
Under the terms of the Company credit facility, borrowings
are dependent upon the eligibility of accounts receivable and
inventory, in the discretion of the bank.
Low Industry Margins
Competition in the prerecorded music and personal
computer software distribution industry is often based on
price, and distributors such as the Company generally
experience low gross and operating margins. Consequently, the
Company's profitability is highly dependent upon achieving
expected sales levels as well as effective cost and
management controls. Any erosion in the Company's gross
profit margins could affect the Company's ability to maintain
profitability.
Dependence Upon Management
Eric H. Paulson, the Company's President and Chief
Executive Officer, and Charles E. Cheney, its Executive Vice
President and Chief Financial Officer, have been with the
Company since its inception in 1983 and since 1985,
respectively. Although the Company has invested a
substantial amount of time and effort in developing its total
management team and its management team has over 90 years of
experience in the Industry, the loss of either Mr. Paulson or
Mr. Cheney could have a material adverse effect upon the
Company. The Company carries "key person" insurance on the
life of Mr. Paulson in the amount of $1.0 million, one-half
of which is pledged to cover any existing indebtedness to the
bank.
Need for Additional Capital
As a distributor of prerecorded music and personal
computer software products, the Company purchases products
directly from manufacturers for resale to retailers. As a
result, the Company has significant working capital
requirements, the majority of which are to finance
inventory and accounts receivable. These working capital
needs will expand as inventory and accounts receivable
increase in response to the Company's growth. Future
growth will likely require additional working capital.
Although the Company has obtained financing sufficient to
meet its requirements to date, there can be no assurance
that the Company will be able to obtain additional
financing upon favorable terms when required in the
future.
Dependence Upon Recording Artists
A portion of the sales of the Company's Music
Products Division are made pursuant to exclusive distribution
agreements. The continued growth and success of the Company
depends partly upon its ability to procure and retain these
agreements and sell the underlying recordings. In addition,
the Company is dependent upon these artists and labels to
generate additional quality recordings. In order to procure
future marketing agreements, the Company regularly reviews
artists. There are no assurances that the Company will sign
such artists to distribution agreements or that it will be
able to sell recordings under existing distribution
agreements. Further, there can be no assurance that any
current distribution agreements will be renewed or that
current agreements will not be terminated.
Dependence Upon Software Developers and Manufacturers
The Company, through its wholly owned subsidiary
Digital Entertainment, Inc., distributes interactive CD-
ROM software pursuant to distribution agreements with
software developers and manufacturers. A portion of the
sales are made pursuant to exclusive distribution
agreements. The continued growth and success of the
Company depends partly upon its ability
to procure and retain these agreements and sell the
underlying software. There can be no assurances that the
Company will sign such developers and manufacturers to
distribution agreements or that it will be able to sell
software under existing distribution agreements. Further,
there can be no assurance that any current distribution
agreements will be renewed or that current agreements will
not be terminated.
Effect of Technology Developments on Distribution
Prerecorded music and personal computer software
presently are marketed and delivered on a physical
delivery basis. If in the future these products are
marketed and delivered through technology transfers, such
as "electronic downloading" to a retail store or
consumer's home, then retail and distribution could be
revolutionized. Although the Company has made certain
acquisitions and taken other measures that are designed to
mitigate the potential impact that such changes in the
retail and distribution industry could have on the
Company, if this type of sales of prerecorded music and
personal computer software became widespread, it could
have a material adverse impact on the Company. The
Company believes, however, that technological changes in
sales methods will occur slowly.
Returns; Inventory Obsolescence
The Company maintains a significant investment in
product inventory and, like other companies in this
industry, experiences a relatively high level of product
returns as a percentage of revenues. The Company's
agreements with its suppliers generally permit the Company
to return products that are in the suppliers, current
product listing. Adverse financial or other developments
with respect to a particular supplier could cause a
significant decline in the value and marketability of its
products, and could make it difficult for the Company to
return products to such a supplier and recover its initial
product acquisition costs. Such an event could have a
material adverse effect upon the Company's business and
financial results. The Company maintains a sales return
reserve based on its trailing twelve months experience of
sales returns by product line and small inventory
obsolescence reserve. The Company has historically
experienced an actual return rate range of 13% to 20%,
depending upon the product, which the Company believes is
in line with the industry experience. Although the
Company's past experience indicates that these levels are
adequate to cover potential returns in these areas, there
can be no assurance that these reserves are adequate or
will be adequate in the future. The Company also takes a
portion of its product offerings on consignment in order to
lessen its exposure to this risk.
Adverse Changes in Methods of Distribution
The success of the Company's current sales strategy
depends upon its wholesale and retail customers' continued
purchasing of products through the Company rather than
directly from manufacturers, through other distributors or
through other means of distribution. These customers and
retailers are constantly searching for ways to lower costs
in an attempt to maintain competitive prices and meet the
pricing demands of consumers. The Company's business could
be adversely affected if its customers decide to purchase
directly from manufacturers, other distributors or other
distribution channels rather than from the Company.
Competition
The prerecorded music and personal computer
software distribution industry is highly competitive. The
Company's competitors include other national and regional
distributors as well as certain suppliers that sell
directly to retailers. Certain of these competitors have
substantially greater financial and other resources than
the Company. The ability of the Company to effectively
compete in the future depends upon a number of factors,
including its ability to (i) obtain exclusive national
distribution contracts and licenses with independent labels
and manufacturers, (ii) maintain its margins and volume,
(iii) expand its sales through a varied range of products
and personalized services, (iv) anticipate changes in the
marketplace including technological developments, and (v)
maintain operating expenses at an appropriate level.
Recent Acquisitions
On September 3, 1996, the Company entered into a
Unit Purchase Agreement and Operating Agreement (the
"Agreement") with Velvel Musical Industries, Inc. Under
the terms of this Agreement, Velvel Musical Industries,
Inc. agreed to
form Velvel Records LLC a Delaware limited liability
company ("Velvel Records") and contribute certain of its
assets to Velvel Records. The Company agreed to make an
investment of $5.0 million in Velvel Records on November
15, 1996 and an additional investment of $5.0 million in
Velvel Records on or before April 10, 1997. In connection
with its investment, the Company received the right for a
period of five years to distribute substantially all of the
Velvel Records products within the United States. The
Company is also entitled to a percent of the assets of
Velvel Records in the event of a liquidation, and in the
future, if, and when Velvel Records obtain profitability,
the Company will be entitled to convert its interest into
an additional interest in the share of the profits of
Velvel Records. Although the Company believes this
acquisition will help to expand its national presence in
the prerecorded music industry, there can be no assurance
that this acquisition will enable the Company to achieve
its goal.
In June 1996, the Company acquired all the outstanding
stock of Record Service, Inc., and Surfside Distributors,
Inc., a Hawaiian-based distributor of prerecorded music, in an
effort to expand its national presence in the prerecorded
music industry. Although the Company believes the
acquisitions will enable it to expand its national presence
and to act as an exclusive distributor for two major recording
labels in Hawaii, there can be no assurance that these
acquisitions will enable the Company to achieve these results.
In May 1996, the Company acquired an equity interest
in Net Radio Corporation, which owns and operates Net Radio
Network, an Internet-only radio network, in an effort to
increase its presence in the marketplace as a content provider
on the Internet, and to become a publisher and distributor on
an international basis in both music and interactive CD-ROM.
There can be no assurance that the purchase of Net Radio
Corporation will help achieve these goals.
Possible Volatility of Stock Price
The stock markets have experienced price and volume
fluctuations, resulting in changes in the market prices of the
stock of many companies which may not have been directly
related to the operating performance of those companies. In
addition, the market price of the Company's Common Stock has
increased and fluctuated significantly since April 1996.
The Company believes that factors such as indications of
the market's acceptance of the Company's products and
failure to meet market expectations, as well as general
volatility in the securities markets, could cause the
market price of the Common Stock to fluctuate
substantially.
USE OF PROCEEDS
The Company will not receive any proceeds from sales
of the Shares by the Selling Shareholders except to the extent
that the warrant holders exercise their warrants to purchase
common stock. The Company intends to use the $702,000 in
proceeds from the exercise of warrants for working capital
purposes.
SELLING SHAREHOLDERS
The Selling Shareholders in the table below, with the
exception of Stewart Marlowe, who are the shareholders of Net
Radio Corporation ("NRC"), acquired the Shares from the
Company in a private transaction on May 1, 1996 pursuant to an
Option Agreement among the Company, NRC, and the shareholders
of NRC. Stewart Marlowe acquired Shares from the Company in a
private transaction on June 27, 1996 pursuant to a Stock
Purchase Agreement between the Company and Stewart Marlowe, as
the sole shareholder of Record Service, Inc., and its
subsidiary Surfside Distributors, Inc. The holders of
warrants ("Warrant Holders") to purchase the Company's Common
Stock, identified in the table below, received their warrants
in connection with the Company's 1993 Public Offering of its
Common Stock. The Company originally issued a warrant to
Hamilton Investments, Inc., the Representative of the
Underwriters in connection with the Company's initial public
offering. Hamilton Investments, Inc. subsequently transferred
warrants to purchase 36,000 shares to persons who were then
officers or employees of Hamilton Investments, Inc.
The following table sets forth certain information
with respect to the beneficial ownership of the company's
Common Stock by all Selling Shareholders and Warrant Holders
as of November 1, 1996, and as adjusted to reflect the sale of
the Shares.
Number of Maximum Number of Shares
Shares Beneficially Number of to be Beneficially
Owned Prior Shares to Owned After
Name to offering be Sold(l) the Offering(l)
- ------------------------------------------------------------------------
Stewart Marlowe 180,000 180,000 0
Hamilton Investments, Inc2 144,000 144,000 0
Robert W. Griggs 36,676 36,676 0
Scott Bourne 26,302 26,302 0
Scot Combs 24,450 24,450 0
Terrence K. Mahoney 16,300 16,300 0
Pablo Nyarady 13,584 13,584 0
Patrick Mahoney 13,584 13,584 0
Carl Halverson 8,892 8,892 0
Thomas Mandt 8,212 8,212 0
Mark Bartholomay2 7,200 7,200 0
Geoffrey S. Parker2 7,200 7,200 0
Deborah Hopp 7,026 7,026 0
Douglas Lennick 6,792 6,792 0
Randy L. Hines2 5,400 5,400 0
Douglas McConnell2 5,400 5,400 0
Terry T. Stewart2 5,400 5,400 0
Mark Hempel 5,126 5,126 0
Ron Buck 3,056 3,056 0
William M. Gerstner2 2,700 2,700 0
Joseph W. Kacergis2 2,700 2,700 0
-----------------------------------
Total 530,000 530,000 0
___________________________________
(1) Assumes the sale of all the Shares offered
hereunder.
(2) Represents shares issuable upon exercise of
warrant.
PLAN OF DISTRIBUTION
The Company has been advised that the Selling
Shareholders may sell the Shares from time to time in one
or more transactions (which may include block transactions)
on Nasdaq at market prices prevailing at the time of the
sale or at prices otherwise negotiated.
The Shares may, without limitation, be sold by one
or more of the following: (i) a block trade in which the
broker or dealer so engaged will attempt to sell the
securities as agent but may position and resell a portion of
the block as principal to facilitate the transaction; (ii)
purchases by a broker or dealer as principal and resale by
such broker or dealer for its account pursuant to this
Prospectus; and (iii) ordinary brokerage transactions and
transactions in which the broker solicits purchasers.
The Company has been advised that, as of the date
hereof, the Selling Shareholders have made no arrangement
with any broker for the sale of the Shares. Underwriters,
brokers or dealers may participate in such transactions as
agents and may, in such capacity, receive brokerage
commissions from the Selling Shareholders or purchasers of
such securities. Such underwriters, brokers or dealers may
also purchase Shares and resell such Shares for their own
account in the manner described above. The Selling
Shareholders and such underwriters, brokers or dealers may
be considered "underwriters" as that term is defined by the
Securities Act of 1933, although the Selling Shareholders
disclaim such status. Any commissions, discounts or profits
received by such underwriters, brokers or dealers in
connection with the foregoing transactions may be deemed to
be underwriting discounts and commissions under the
Securities Act of 1933.
In addition to the foregoing, the Company has
entered into a lock-up agreement which places additional
restrictions on Mr. Marlowe's ability to sell Shares of the
Company received by Mr. Marlowe in connection with the
Company's purchase of Record Service, Inc. and its
subsidiary, Surfside Distributors, Inc. Specifically, Mr. Marlowe,
subject to any additional requirements under the federal securities
laws, has agreed to sell his Shares subject to the following
restrictions: (i) 45,000 Shares may be sold immediately;
(ii) 60,000 Shares held pursuant to an escrow agreement
entered into at the time of the Company's acquisition for
Record Service, Inc. may be sold from time to time as such
Shares are released from the escrow agreement; and (iii)
75,000 Shares may be sold after a period of two years have
elapsed from the date of issuance of such Shares.
LEGAL MATTERS
The validity of the issuance of the Common Stock
offered hereby will be passed upon for the Company by Lindquist
& Vennum P.L.L.P., Minneapolis, Minnesota.
EXPERTS
The consolidated financial statements of Navarre
Corporation at March 31, 1996 and 1995, and for each of the
fiscal years or periods ended March 31, 1996, 1995 and 1994
and the year ended December 31, 1993 appearing in Navarre
Corporation's Annual Report (Form 10-K) for the year ended
March 31, 1996, have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon
included therein and incorporated herein by reference and
in the registration statement. Such consolidated financial
statements are incorporated herein by reference in reliance
upon such reports given upon the authority of such firm as
experts in accounting and auditing.
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14: Other Expenses of Issuance and Distribution
SEC registration fee $ 1,508
Accounting fees and expenses 2,000
Legal fees and expenses 5,000
Miscellaneous 1,492
Total $10,000
Except for the SEC fee, all of the foregoing
expenses have been estimated.
ITEM 15: Indemnification of Directors and Officers
The Company's Bylaws require indemnification of its
directors and officers to the fullest extent permitted by
Minnesota law. The Bylaws provide that the Company shall
indemnify any person made or threatened to be made a party
to any threatened, pending or completed civil, criminal
administrative, arbitration or investigative proceeding,
including a proceeding by or in the right of the
corporation, by reason of the former or present official
capacity of the person, provided the person seeking
indemnification meets five criteria set forth in Section
302A.521 of the Minnesota Business Corporation Act.
The Company's Bylaws also authorize the Board of
Directors, to the extent permitted by applicable law, to
indemnify any person or entity not described in the Bylaws
pursuant to, and to the extent described in, an agreement
between the Company and such person, or as otherwise
determined by the Board of Directors in its discretion.
Section 302A.521 of the Minnesota Business
Corporation Act provides that a corporation shall indemnify
any person who was or is made or is threatened to be made a
party to any proceeding by reason of the former or present
official capacity of such person against judgments,
penalties, fines including, without limitation, excise
taxes assessed against such person with respect to an
employee benefit plan, settlements, and reasonable
expenses, including attorneys' fees and disbursements,
incurred by such person in connection with the proceeding
if, with respect to the acts or omissions or such person
complained of in the proceeding, such person (i) has not
been indemnified by another organization or employee
benefit plan for the same expenses with respect to the same
acts or omissions; (ii) acted in good faith; (iii) received
no improper personal benefit and Section 302A.255
(regarding conflicts of interest), if applicable, has been
satisfied; (iv) in the case of a criminal proceeding, has
no reasonable cause to believe the
conduct was unlawful; and (v) in the case of acts or
omissions by person in their official capacity for the
corporation, reasonably believed that the conduct was in
the best interests of the corporation, or in the case of
acts or omissions by persons in their capacity for other
organizations, reasonably believed that the conduct was not
opposed to the best interests of the corporation.
Item 16. Exhibits
Exhibit Description
No.
5.1 Opinion and Consent of Lindquist & Vennum
P.L.L.P., counsel to the Company(1)
23.1 Consent of Ernst & Young LLP
23.2 Consent of Lindquist & Vennum P.L.L.P. (see
Exhibit 5.1 above)
24 Powers of Attorney (included on signature page
hereof) (1)
(1) Previously filed.
Item 17. Undertakings
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or
sales are being made, a post-effective amendment to this
registration statement:
(i) to include any prospectus required by
Section 10(a)(3) of the Securities Act of
1933;
(ii) to reflect in the Prospectus any facts or
events arising after the effective date of
the registration statement (or the most recent
post-effective amendment thereof) which,
individually or in the aggregate, represent a
fundamental change in the information set forth
in the registration statement; and
(iii) to include any material information with
respect to the plan of distribution not
previously disclosed in the registration
statement or any material change to such
information in the registration statement.
provided, however, that paragraphs (a)(1)(i) and (a)(1)(ii) do
not apply if the Registration Statement is on Form S-3 or Form S-
8, and the information required to be included in a post-
effective amendment by those paragraphs is contained in periodic
reports filed by the Registrant pursuant to Section 13 or Section
15(d)of the Securities Exchange Act of 1934 that are incorporated
by reference in the Registration Statement.
(2) That, for the purpose of determining any
liability under the Securities Act of 1933, each such post-
effective amendment shall be deemed to be a new registration
statement relating to the securities offered herein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-
effective amendment any of the securities being registered
which remain unsold at the termination of the offering.
(b) The undersigned Registrant hereby undertakes that, for
purposes of determining any liability under the Securities
Act of 1933, each filing of the Registrant's Annual Report
pursuant to Section 13(a) or Section 15(d) of the Securities
Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new
registration statement relating to the securities offered
therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
(c) Insofar as indemnification for liabilities arising under
the Securities Act of 1933 may be permitted to directors,
officers and controlling persons of the registrant pursuant
to the foregoing provisions or otherwise, the registrant
has been advised that, in the opinion of the Securities and
Exchange Commission, such indemnification is against public
policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for
indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant
in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or
controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of
its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against
public policy as expressed in the Act and will be governed
by the final adjudication of such issue.
SIGNATURES
Pursuant to the requirements of the Securities Act
of 1933, the registrant certifies that it has reasonable
grounds to believe it meets all of the requirements for
filing this Amendment No. 2 to the Registration Statement
and has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized,
in the City of New Hope, State of Minnesota, on the 25th day
of November, 1996.
NAVARRE CORPORATION
By /s/ Charles E. Cheney
Charles E. Cheney
Executive Vice
President and Chief
Accounting Officer
Pursuant to the requirements of the Securities Act
of 1933, this registration statement has been signed by the
following persons on November 25, 1996 in the capacities
indicated.
Signature Title
/s/ Eric H. Paulson* Chairman, President and Chief
Executive Officer
Eric H. Paulson (principal executive officer)
________________________
/s/Charles E. Cheney Secretary, Treasurer, Executive
Vice President
Charles E. Cheney and Chief Financial Officer
(principal financial and accounting
officer) and Director
/s/Dickinson G. Wiltz* Director
Dickinson G. Wiltz
/s/ James G. Sippl* Director
James G. Sippl
/s/ Michael L. Snow* Director
Michael L. Snow
*By Charles E. Cheney, as Attorney-In-Fact
RESTATED AND AMENDED
ARTICLES OF INCORPORATION
OF
NAVARRE CORPORATION
The following constitutes the Restated and Amended Articles of Incorporation of
Navarre Corporation effective as of September 11, 1996.
ARTICLE I.
The name of the Corporation is Navarre Corporation.
ARTICLE II.
The purposes of this Corporation are general business purposes.
ARTICLE III.
This Corporation shall possess all powers necessary to conduct any business in
which it is authorized to engage, including but not limited to all those powers
expressly conferred upon business corporations by Minnesota Statutes, together
with those powers implied therefrom.
ARTICLE IV.
This Corporation shall have perpetual duration.
ARTICLE V.
The location and post office address of the registered office of this
Corporation in Minnesota is 7400 49th Avenue North, New Hope, Minnesota 55428.
ARTICLE VI.
The aggregate number of shares that the Corporation has authority to issue
shall be 25,000,000 shares, no par value per share, which shall consist of
20,000,000 shares of common stock and 5,000,000 shares of preferred stock.
The Board of Directors of the Corporation is authorized to establish from the
preferred shares, by resolution adopted and filed in the manner provided by law,
one or more classes or series of shares, to designate each class or series, and
to fix the relative powers, qualifications, restrictions, rights and preferences
of each such class or series, including, without limitation, the right to create
voting, dividend and liquidation rights and preferences greater than those of
common stock. There shall be no cumulative voting by shareholders of the
Corporation. The shareholders of the Corporation shall not have preemptive
rights to subscribe for or acquire securities or rights to purchase securities
of any kind, class or series of the Corporation.
ARTICLE VII.
Section 1. Number and Term. The business and affairs of this
Corporation shall be managed by or under the direction of a Board of Directors
consisting of not less than three (3) or more than nine (9) directors, as may
be designated by the Board of Directors from time to time. The directors shall
be divided into three (3) classes, as nearly equal in number as the then total \
number of directors constituting the whole Board permits, with the term of
office of one class expiring each year at the annual meeting of shareholders.
Except as otherwise provided in this Article VII, each director shall be elected
by the shareholders to hold office for a term of three consecutive years.
Each director shall serve until a successor shall have been duly elected and
qulified, or until the earlier death, resignation, removal, or disqualification
of the director.
Section 2. Transitional Board. Upon the adoption of this new Article VII
to the Articles of Incorporation, one class of directors shall hold office for a
term expiring at the annual meeting of shareholders to be held after the end of
the Corporation's 1997 fiscal year, another class shall hold office for a term
expiring at the annual meeting of shareholders to be held after the end of the
Corporation's 1998 fiscal year and another class shall hold office for a term
expiring at the annual meeting of shareholders to be held after the end of the
Corporation's 1999 fiscal year. After the expiration of each term, the
provisions of Section 1 of this Article VII shall control.
Section 3. Vacancies. Any vacancies occurring in the Board of
Directors for any reason, and any newly created directorships resulting from an
increase in the number of directors, may be filled by a majority of the
directors then in office. Any directors so chosen shall hold office until the
next election of the class for which such directors shall have been chosen and
until their successors shall be elected and qualified subject, however, to prior
retirement, resignation, death or removal from office. Any newly created
directorships resulting from an increase in the authorized number of directors
shall be apportioned by the Board of Directors among the three classes of
directors so as to maintain such classes as nearly equal in number as
possible.
Section 4. Quorum. A majority of the members of the Board of
Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, but if less than such a majority is present
at a meeting, a majority of the directors present may adjourn the meeting from
time to time without further notice. The directors present at a duly organized
meeting may continue to transact business until adjournment notwithstanding that
the withdrawal of enough directors originally present leaves less than the
number otherwise required for a quorum.
Section 5. Nomination. Advance notice of nominations for the election
of directors, other than by the Board of Directors or a committee thereof, shall
be given within the time and in the manner provided in the Bylaws.
Section 6. Written Action by Directors. Any action required or permitted
to be taken at a meeting of the Board of Directors, or a committee thereof, may
be taken by written action, or counterparts of a written action, signed by all
of the directors or, in cases where the action need not be approved by the
shareholders, by written action, or counterparts of a written action, signed by
the number of directors that would be required to take the same action at a
meeting of the Board or a committee thereof at which all directors were present.
ARTICLE VIII.
The personal liability of the directors of this Corporation is hereby eliminated
to the fullest extent permitted by Minnesota Statutes, Section 302A.251, as the
same may be amended and supplemented.
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 1st day of October, 1996,
by and between NAVARRE CORPORATION, a Minnesota corporation (the
"Company"), and ERIC H. PAULSON, a resident of the State of Minnesota
("Executive").
W I T N E S S E T H:
WHEREAS, Executive has a unique knowledge of the Company's business, and
has special expertise in the management and future planning of its affairs, and
has been a key Executive of the Company, helping to develop the image of the
business; and
WHEREAS, the Company believes that Executive's continued involvement in the
management and affairs of the business are essential to its management and
planning in the future; and
WHEREAS, a previous employment agreement expired as of September 30, 1996
and it is the desire of the parties to extend the terms thereof.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants and obligations of this Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
I. Employment. Subject to all of the terms and conditions of this
Agreement, the Company hereby employs Executive, and Executive hereby
accepts employment with the Company, as its President and Chief
Executive Officer.
I. Duties.
A. President/Chief Executive Officer. The services of
Executive are exclusive to the Company. Executive will devote
substantially all of his business hours to, and make the best use of his
energy, knowledge and training in, performing his duties as
President and Chief Executive Officer of the Company within the
general guidelines established by the Board of Directors of the
Company as the same may, from time to time, be modified by the
Company's Board of Directors. Executive will report to the Board of
Directors of the Company and have all the duties normally
subscribed to the Chief Executive Officer. Notwithstanding
anything in this Agreement
to the contrary, the duties of Executive under this Agreement do not
(i) require Executive to relocate his principal office or residence
from the Minneapolis/St. Paul, Minnesota metropolitan area without
the prior written consent of Executive, or (ii) prevent Executive from
owning, directly or indirectly, securities of, or otherwise
participating in the ownership of, any publicly-owned business,
trade, industry or venture. Executive will perform his duties in a
competent and professional manner, consistent with that expected of
a chief executive officer of the Company.
A. Director. During the term of this Agreement,
Executive shall also serve as Chairman of the Board of Directors of
the Company and shall perform all duties incident to services as a
director of the Company.
A. Consultant. If Executive should make an election as
described in Section 5(d) hereof, the Company agrees to retain
Executive and Executive agrees to serve in a position of consultant
and advisor to the Company (with or without retention of his
position as President or Chief Executive Officer or as a director, at
the election of the Company), for a period commencing upon such
election and ending on October 31, 2001. During the period of
consulting and advising, Executive shall render consulting and
advisory services in connection with business activities similar to
those carried on by the Company during the period of his
employment by the Company. Executive shall perform such
consulting and advisory services and attend meetings, as and when
reasonably requested by the Company in advance, provided that
Executive shall not be required to devote thereto in the aggregate
more than thirty (30) days per year. Executive shall have discretion
in choosing the times and places of performance of his services to
the Company compatible with his other activities. Compensation to
Executive under this Section 2 (c) shall continue to be due from the
Company as if Executive continued to be employed by the Company
pursuant to Section 2 (a) and (b) hereof.
I. Term. Subject only to earlier termination in accordance with Section
5 of this Agreement, Executive's term of employment shall commence on
the date hereof and continue for a period of five (5) years (the "Initial
Term"). Upon the expiration of the Initial Term, this Agreement shall be
automatically renewed for successive additional one (1)-year terms unless
this Agreement is terminated in writing by either party hereto at least ninety
(90) days prior to the expiration of the Initial Term or any subsequent
renewal term. The Initial Term and any subsequent renewal terms shall be
referred to collectively herein as the "Employment Period."
I. Compensation. As compensation for all of Executive's services
under this Agreement, the Company agrees to pay Executive during the
Employment Period and on retirement, and Executive agrees to accept the
following:
A. Base Salary. A base salary of $285,000 per annum
(the "Base Salary"), payable in accordance with the Company's
standard payroll practices. On each anniversary of this Agreement,
the Base Salary shall be adjusted by the Company's Board of
Directors based upon the level of performance by Executive,
provided that in no event shall the Base Salary for any fiscal year
hereunder be less than the sum provided above for the first full fiscal
year. If conditions require and Executive agrees, temporary cuts in
pay can be effected.
A. Performance Bonus. As additional compensation for
Executive, Executive shall be eligible to receive a bonus determined
by the Board of Directors with a maximum bonus (the "Bonus")
equal to 80% of the Base Salary of Executive. If no Bonus is
otherwise declared by the Board of Directors, Executive will be
entitled to receive a bonus equal to 80% of Executive's Base Salary.
Executive's Bonus shall be paid semi-annually not later than 45 days
after March 31st and September 30th of each year.
A. Loan. At the expiration of the Employment Period and/or the
termination of this Agreement for any reason whatsoever, any and all
sums owed by Executive to Company as of such date shall be
deemed paid and satisfied in full including, without limitation, the
outstanding loan owed by Executive to the Company in the
approximate amount of $200,000.
A. Benefits.
1. Expenses. The Company shall reimburse
Executive for any and all ordinary, necessary and reasonable
business expenses that Executive incurs in connection with
the performance of his duties under this Agreement, including
entertainment, telephone, travel and miscellaneous expenses,
provided that Executive provides the Company with
documentation for such expenses in a form sufficient to
sustain the Company's deduction for such expenses under
Section 162 of the Internal Revenue Code of 1986, as
amended. These expenses include all dues and assessments to
Executive's social, athletic, golf or country club.
1. Medical and Disability Insurance.
Subject to Executive taking and passing the physical
examination required by the Company's insurance carrier, the
Company shall provide Executive with full medical and
disability insurance coverage provided to other officers of the
Company.
1. Life Insurance. Subject to the same
physical examination and cost provisions, the Company shall
provide Executive with a $2,000,000 term life insurance
policy insuring Executive's life during the term of Executive's
employment with the Company and shall pay all premiums
thereon. Such policy shall be owned by the Executive and
shall be payable to such beneficiary or beneficiaries as
Executive directs by written instrument delivered to the
Company or the insurer under the life insurance policy.
1. Vacation. Executive shall be entitled to
a paid vacation period of four (4) weeks each year, which may
be taken at any time subject to the Company's business needs.
1. Automobile Expenses. The Company
will pay or reimburse the Executive for all reasonable costs of
licensing, sales taxes, property taxes, maintenance, repair, oil,
gasoline and insurance for his automobile.
1. Benefit Changes. No reference in this
Agreement to any policy or any employee benefit plan
established or maintained by the Company shall preclude the
Company from changing any such policies or amending or
terminating any such benefit plans if a substantially similar
benefit is provided to Executive by the Company.
1. Other Plans. Nothing contained herein
is intended to or shall be deemed to be granted to Executive
in lieu of any rights or privileges which Executive may be
entitled to as an employee of the Company under any other
policies or benefit plans that are currently in effect or that
may hereafter be adopted. Executive shall be entitled to
participate in any other employee benefit plans of the
Company generally applicable to officers of the Company, its
divisions or subsidiaries, occupying similar positions as
Executive, including, but not limited to, any profit sharing,
pension, stock option, stock appreciation rights, stock
ownership, health, medical, dental, vacation, insurance or
other employee benefit plans.
I. Termination. This Agreement may not be terminated prior to the
end of the Employment Period except as follows:
A. By the Company for Company Cause. The
Company may terminate this Agreement for Company Cause upon
Executive's material breach of this Agreement. Except as to
subparagraph (iii) below, the Company shall give Executive thirty
(30) days' advance written notice of such termination, which notice
shall be via registered mail, return receipt requested, and which shall
describe in detail the acts or omissions which the Company believes
constitute such breach. Notwithstanding the foregoing, Executive
shall not be deemed to have been terminated for Company Cause
unless and until there shall have been delivered to Executive a copy
of a resolution duly adopted by the affirmative vote of not less than
seventy-five (75%) of the entire membership of the Board of
Directors (certified by the Secretary of the Board of Directors) at a
meeting of the Board of Directors called and held for the purpose
(after reasonable notice to Executive and an opportunity for
Executive, together with Executive's counsel, to appear before the
Board), finding that in the good faith opinion of the Board of
Directors, Executive was guilty of conduct described in this Section
5(a), and specifying the particulars thereof in detail. The Company
shall not be allowed to terminate this Agreement pursuant to this
Section 5(a) if Executive is able to cure such breach within thirty
(30) days following delivery of such notice. However, in no event
shall a breach of the provisions of Sections 5(a)(iii) or 7 be subject to
cure. Acts or omissions which constitute a material breach of this
Agreement constituting "Company Cause" shall be limited strictly to
the following:
1. Any material breach by Executive of his
obligations under this Agreement;
1. Gross misconduct of Executive which is
manifestly injurious to Company, or habitual failure or
inability of Executive to perform his duties under this
Agreement; and
1. Any fraud, theft or embezzlement by
Executive of the Company's assets, or any other unlawful or
criminal act which is punishable as a felony.
A. Death. Subject to the provisions of Section 6, this
Agreement shall terminate upon Executive's death.
A. Disability. Subject to the provisions of Section 6, this
Agreement shall terminate upon Executive's Disability. As used
herein, the term "Disability" shall have such meaning as set forth in
the Company's disability policy in effect at the date hereof and shall
include both permanent and temporary disability, short term and long
term disability, and total and partial disability. If there is no policy
in effect at the date of Executive's potential disability, Disability
shall mean Executive becoming substantially incapable of
performing his duties hereunder for a period of six (6) months or
more.
A. By Executive for Executive Cause. Executive shall have the
right, at his election, to terminate this Agreement or to change his
position to that of consultant and advisor as described in Section 2(c)
herein, upon thirty (30) days' written notice to the Company upon the
occurrence, without Executive's express written consent, of any one
or more of the following events, provided that Executive shall not
have the right to terminate this Agreement if the Company is able to
cure such event within thirty (30) days following delivery of such
notice:
1. The Company is in material breach of this Agreement;
1. Executive is required to report to or accept assignments
from persons other than the Board of Directors of the
Company or he is removed without his written consent as the
President and Chief Executive Officer of the Company and
such removal is not pursuant to Section 5(a) hereof;
1. The Board of Directors should fail to elect Executive
as President and Chief Executive Officer, or if Executive
should have a policy dispute with the Board of Directors;
1. The Shareholders should fail to elect Executive as a
director;
1. An adverse change in Executive's status or position as
an executive officer of the Company, including, without
limitation, any adverse change in Executive's status or
position as a result of a material diminution in Executive's
duties, responsibilities or authority as of the date of this
Agreement (or any status or position to which Executive may
be promoted after the date hereof) or the assignment to
Executive of any duties or responsibilities which, in
Executive's reasonable judgment, are inconsistent with
Executive's status or position, or any removal of Executive
from or any failure to reappoint or reelect Executive to such
positions (except in connection with the termination of
Executive's employment in accordance with Section 5(a)
hereof);
1. A reduction by the Company of Executive's Base
Salary as the same may be increased time to time, or a change
in the eligibility requirements or performance criteria for any
benefit other than salary, which adversely effects Executive;
1. Without replacement by a plan providing benefits to
Executive equal to or greater than those discontinued, the
failure by the Company to continue in effect, within its
maximum stated term, any employee benefit plan in which
Executive is participating immediately prior to the date of this
Agreement or the taking of any action by the Company that
would adversely effect Executive's participation or materially
reduce Executive's benefits under any such plan;
1. The taking of any action by the Company that would
materially adversely effect the physical conditions existing
immediately prior to this Agreement in or under which
Executive performs his employment duties;
1. The Company's requiring Executive to be based
anywhere other than the Minneapolis/St. Paul, Minnesota
metropolitan statistical area, except for required travel on the
Company's business to an extent substantially consistent with
the business travel obligations which Executive has typically
undertaken on behalf of the Company prior to the date of this
Agreement; or
1. Any purported termination by the Company of this
Agreement or the employment of Executive by Company
which is not expressly authorized by this Agreement or any
breach of this Agreement by the Company which is not
remedied by the Company within thirty (30) days after the
Company's receipt of notice thereof from Executive.
A. Retirement. At such time as Executive reaches the age of
60 and remains as an employee of the Company, Executive may
retire and, subject to the provisions of Section 6 below, this
Agreement shall terminate.
I. Payments Upon Termination.
A. Death. Upon Executive's death during the
Employment Period, the heirs or legal representatives of Executive
shall be entitled to receive as a lump sum payment payable within
sixty (60) calendar days of his death, 2.99 times the average of the
aggregate base and incentive compensation paid to Executive over
the preceding five years, provided, however, that in no event shall
the amount due and payable hereunder constitute a "Parachute
Payment" within the meaning of Section 280G(b)(2) of the Internal
Revenue Code of 1986, as amended.
A. Disability. In the event that this Agreement is terminated due
to Executive's Disability, Executive shall be paid (i) his Base Salary
for a period of one year following the date of such Disability or until
Executive begins receiving benefits under the Company's disability
benefits plan, whichever occurs first, (ii) all bonuses to which
Executive would have been entitled for the fiscal year in which such
Disability occurred, prorated to the date of Disability, (iii) his
accrued but unpaid vacation pay for the year in which such
Disability occurred, pro rated to the date of such Disability, and (iv)
any unpaid expense reimbursement.
A. Termination by Company for Company Cause or by
Executive Without Executive Cause. If Executive is terminated
pursuant to Section 5(a) hereof, or Executive terminates this
Agreement other than in accordance with Section 5(d) hereof, the
Company shall pay to Executive (i) his Base Salary through the date
written notice is properly mailed to Executive pursuant to Section
5(a) hereof, and (ii) all Bonus payments owing to Executive for the
fiscal year prior to the year such written notice is received by
Executive (to the extent that any such payments were unpaid on the
date of termination), and for the current year.
A. Termination Without Company Cause or by Executive for
Executive Cause. In addition to any other rights granted Executive
hereunder, if the Company should terminate this Agreement other
than in accordance with Section 5(a) hereof, or if Executive should
terminate this Agreement pursuant to Section 5(d) hereof, the
Company shall pay to Executive (i) his Base Salary through the end
of the term of this Agreement or two years, whichever is more, in
exchange for a properly executed non-compete agreement between
Executive and the Company, (ii) any payments owing to Executive
pursuant to Section 4(b) hereof for the fiscal year prior to the year of
termination (to the extent any such payments were unpaid on the
date of termination, as well as for the current year), (iii) a sum
equivalent to any accrued but unpaid vacation for the year in which
he is terminated, and (iv) any unpaid expense reimbursement.
Furthermore, for the remainder of the term of this Agreement, or one
year whichever is more, the Company shall maintain in full force and
effect for the continued benefit of Executive and his dependents all
(i) pension plans, (ii) medical and disability policies, (iii) stock
option plans, and (iv) life insurance plans in which Executive
participated immediately prior to his termination (or if such
participation is barred, shall arrange for individual policies of
insurance providing benefits substantially similar, on an after-tax
basis, to those which Executive otherwise would have been entitled
hereunder) for the remainder of the term of this Agreement.
A. Change of Control And Ownership. In the event that (i)
Executive's employment with the Company is terminated by the
Company other than in accordance with Sections 5(a), (b), or (c)
hereof during the Employment Period and (ii) such termination
occurs after a Change in Control (as defined hereinbelow), Company
shall pay Executive a cash bonus ("Severance Payment") in an
amount equal to Executive's Average Annual Compensation (as
defined hereinbelow), multiplied by a factor of 2.99, provided,
however, that in no event shall the amount due and payable
hereunder constitute a "Parachute Payment" within the meaning of
Section 280G(b)(2) of the Internal Revenue Code of 1986, as
amended. In the event that any portion of the Severance Payment
would be deemed a Parachute Payment, the amount of the Severance
Payment shall be reduced only to the extent necessary to eliminate
any such treatment or characterization.
For purposes of this Agreement, "Change in Control" shall mean (i)
the sale of all or substantially all of the assets of the Company, (ii)
the acquisition by any means of more than fifty percent (50%) of the
issued and outstanding voting stock of the Company by any entity,
person or group of persons acting in concert, (iii) the merger of the
Company with, or the consolidation of the Company into, another
corporation or entity, or (iv) the election to the Board of Directors of
the Company without the recommendation or approval of the
incumbent Board of Directors of the Company the lesser of (i) three
directors or (ii) directors constituting a majority of the number of
directors of the Company then in office.
For purposes of this Agreement, "Average Annual Compensation"
shall mean the average of all taxable compensation and fringe
benefits paid to or on behalf of Executive by Company, based on the
five (5) most recent calendar years. Amounts payable pursuant to
this Section 6(e) shall be in addition to, and not in lieu of, all other
compensation, rights and benefits accruing or afforded to Executive
pursuant to this Agreement.
A. Retirement. Upon Executive's retirement pursuant to
Section 5(e) above, Executive and his heirs or legal representatives
shall be entitled to receive the following: (i) average annual
compensation for a period of three (3) years in exchange for a
properly executed non-compete agreement between Executive and
the Company, (ii) any payments owing to Executive pursuant to
Section 4(b) hereof through the date of retirement (to the extent any
such payments were unpaid on the date of retirement, as well as for
the current year), (iii) a sum equivalent to any accrued but unpaid
vacation for the year in which he retires, and (iv) any unpaid expense
reimbursement. Furthermore, for a period of five (5) years after
retirement, the Company shall maintain in full force and effect for
the continued benefit of Executive and his dependents all (i) pension
plans, (ii) medical and disability policies, (iii) stock option plans and
(iv) life insurance plans in which Executive participated immediately
prior to his termination (or if such participation is barred, shall
arrange for individual policies of insurance providing benefits
substantially similar, on an after-tax basis, to those which Executive
otherwise would have been entitled hereunder) for the remainder of
the term of this Agreement.
I. Ownership of Properties; Confidentiality; Exclusivity;
Investments.
A. Ownership of Properties. The Company, as employer, shall
own, and Executive hereby transfers and assigns to the Company, all
rights in and to any material and/or ideas written, suggested or
submitted by Executive during the Employment Period and all other
results and proceeds of his services under this Agreement (the
"Properties"). Without limiting the generality of the foregoing, these
rights shall include all motion picture, television, radio, dramatic,
musical, publication and other rights in and to the Properties,
including the sole and exclusive right to photograph and record the
same with or without dialogue, music and other sounds
synchronously recorded, and to perform, exhibit, distribute,
reproduce, transmit, broadcast or otherwise communicate the same
and/or motion picture, dramatic or other versions or adaptations
thereof, theatrically, nontheatrically and/or by means of television,
radio, the legitimate stage and/or any other means now known or
hereafter devised and to manufacture, publish, or vend printed and/or
recorded versions or adaptations thereof, either publicly or privately
and for profit or otherwise. The Company and its licensees and
assigns shall have the right to adapt, change, revise, delete from, add
to and/or rearrange the Properties or any part thereof written or
submitted by Executive and to combine the same with other works to
any extent, and to change or substitute the title thereof and in this
connection Executive hereby waives any so-called "moral rights" of
authors. Executive agrees to execute and deliver to the Company
such releases, assignments or other instruments as the Company may
require from time to time to evidence its ownership of the results and
proceeds of Executive's services hereunder' provided, however, that
nothing in this Section 7(a) shall be deemed in any manner to restrict
or qualify Executive's ownership or right to exploit Executive's
personal memoirs.
The requirements of this Section 7(a) do not apply to Properties for
which no equipment, facility or confidential information of the
Company was used and which were developed entirely on
Executive's own time, and which (i) do not relate directly to the
Company's business or to the Company's actual research or
development, or (ii) do not result from any work Executive
performed for the Company. Except as previously disclosed to the
Company in writing, Executive does not have and will not assert any
claims to or rights under any Properties as having been made,
conceived, authored or acquired by Executive prior to his
employment by the Company.
A. Confidentiality. Executive acknowledges that his services
will, throughout the Employment Period, bring Executive in close
contact with many confidential affairs of the Company and its
affiliates, including information about costs, profits, financial data,
markets, trade secrets, sales, products, computer programs, key
personnel, pricing policies, customer lists, development projects,
operational methods, technical processes, plans for future
development, business affairs and methods and other information not
readily available to the public. Executive further acknowledges that
the businesses of the Company and its affiliates are international in
scope, that their products are marketed throughout the world, that the
Company and its affiliates compete in nearly all of their business
activities with other organizations which are or could be located in
nearly any part of the world and that the nature of Executive's
services, position and expertise are such that he is capable of
competing with the Company and its affiliates from nearly any
location in the world. In recognition of the foregoing Executive
covenants and agrees:
1. that Executive will keep secret all material confidential
matters of the Company and its affiliates which are not
otherwise in the public domain and will not disclose them to
anyone outside of the Company or its affiliates, either during
or after the Employment Period, except with the Company's
written consent and except for such disclosure as is necessary
in the performance of Executive's duties during the
Employment Period; and
1. that Executive will deliver promptly to the Company
on termination of his employment with the Company or at any
other time the Company may so request, at the Company's
expense, all confidential memoranda, notes, records, reports
and other documents (and all copies thereof) relating to the
Company's and its affiliates' business, which Executive
obtained while employed by, or otherwise serving or acting
on behalf of, the Company or which the Executive may then
possess or have under his control.
A. Exclusivity. Executive agrees that during his employment
with the Company, he will not alone, or in any capacity with another
entity or person, (i) engage in any commercial activity that competes
with the Company's business, as it is conducted during the
Employment Period, within any state of the United States, (ii) in any
way interfere or attempt to interfere with the Company's
relationships with any of its current or potential customers, or (iii)
attempt to employ any of the Company's then employees on behalf
of any other entities competing with the Company. Executive
further acknowledges that all services of Executive shall be
exclusive to the Company, and that Executive's performances and
services hereunder are of a special, unique, unusual, extraordinary
and intellectual character which gives them peculiar value, the loss
of which cannot be reasonably or adequately compensated in an
action at law for damages and that a breach by Executive of the
terms hereof (including without limitation this Section 7) will cause
the Company irreparable injury. Executive agrees that the Company
is entitled to injunctive and other equitable relief to prevent a breach
or threatened breach of this Agreement, which shall be in addition to
any other rights or remedies to which the Company may be entitled.
For purposes of this Section 7(c), the term "Company" shall include
the Company, its successors, assigns and affiliates.
A. Investments. Notwithstanding anything contained herein to
the contrary, during the Employment Period Executive may acquire
and/or retain, solely as an investment, and take customary actions to
maintain and preserve Executive's ownership of:
1. securities of any corporation which are
registered under Sections 12(b) or 12(g) of the Securities
Exchange Act of 1934 and which are publicly traded, so long
as Executive is not part of any control group of such
corporation; and
1. any securities of a partnership, trust, corporation,
limited liability company or other entity so long as (i)
Executive remains a passive investor in that entity and does
not become part of any control group thereof (except in a
passive capacity) and (ii) such entity is not, directly or
indirectly, in competition with the Company or its affiliates,
regardless of whether Executive is a passive investor or part
of any control group thereof.
I. Remedies. The parties hereto recognize and agree that, because the
material breach of this Agreement or any part hereof would result in
damages difficult to ascertain, upon any allegation of material breach of this
Agreement, either party hereto shall be entitled:
A. Proceedings. To institute proceedings in a court located in
the State of Minnesota to enjoin the breach, termination, or
threatened termination of this Agreement. Such injunctive remedy
shall be in addition to and not in lieu of any right to recover money
damages for any such breach.
A. Costs and Expenses. The successful party in any action
brought concerning the breach or termination of this Agreement shall
be entitled to recover all costs and expenses, including attorney's fees
incurred or associated with the enforcement of any covenant of this
Agreement.
A. Additional Costs. Additionally, if there shall be any breach
of this Agreement by the Company, and Executive shall institute any
action (or counterclaim) in connection therewith, Executive shall be
entitled, if successful in such action or if the Company sues and if
Executive is successful in that action, to recover as damages the
discounted value (at a rate of 6%) of all amounts unpaid under this
Agreement, or Executive may, at his election, recover as damages
each monthly payment of Base Salary and additional compensation
at such time as it becomes payable or would have become payable
under the terms of this Agreement, and the Company agrees not only
to pay such sums, but, in addition thereto, interest thereon at the
prime rate then in effect, until such payment is made. In any such
action, the fact that Executive did or did not seek or engage in any
other employment or in other activities shall not affect, reduce or
mitigate the amount of recovery allowable to Executive. Executive's
rights hereunder, upon his death, accrue to his legal representatives
or to his designated beneficiary.
II. Miscellaneous.
A. Successors and Assigns. This Agreement is binding on and
inures to the benefit of the Company's successors and assigns,
provided, however, that this Agreement may not be assigned by any
of the parties hereto without the prior written consent of each of the
parties hereto. This Agreement shall be binding upon and inure to
the benefit of any successor of the Company, and any such successor
shall absolutely and unconditionally assume all of the Company's
obligations hereunder. Upon the written request of Executive, the
Company shall seek to have any successor, by agreement in form
and substance satisfactory to Executive, assent to the fulfillment by
the Company of its obligations under this Agreement. Failure to
attain such assent at least thirty (30) business days prior to the time a
person or entity becomes a successor in interest to the Company
shall be considered Executive Cause for termination of this
Agreement in accordance with Section 5(d) hereof.
A. Offsets. In no event shall any amount payable to Executive
pursuant to this Agreement be reduced for purposes of offsetting,
either directly or indirectly, any indebtedness or liability of
Executive to Company.
A. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original
but all of which together shall constitute one and the same
instrument.
A. Construction. Wherever possible, each provision of this
Agreement will be interpreted so that it is valid under the applicable
law. If any provision of this Agreement is to any extent invalid
under the applicable law, that provision will still be effective to the
extent it remains valid. The remainder of this Agreement also will
continue to be valid, and the entire Agreement will continue to be
valid in other jurisdictions.
A. Waivers. No failure or delay by either the Company or
Executive in exercising any right or remedy under this Agreement
will waive any provision of this Agreement, nor will any single or
partial exercise by either the Company or Executive of any right or
remedy under this Agreement preclude either of them from
otherwise or further exercising these rights or remedies, or any other
rights or remedies granted by any law or any related document.
A. Captions. The headings in this Agreement are for
convenience of reference only and do not affect the interpretation of
this Agreement.
B. Modification/Entire Agreement. This Agreement may not
be altered, modified or amended except by an instrument in writing
signed by all of the parties hereto. No person, whether or not an
officer, agent, employee or representative of any party, has made or
has any authority to make for or on behalf of that party any
agreement, representation, warranty, statement, promise,
arrangement or understanding not expressly set forth in this
Agreement or in any other document executed by the parties
concurrently herewith ("Parol Agreements"). This Agreement and
all other documents executed by the parties concurrently herewith
constitute the entire agreement between the parties and supersede all
express or implied, prior or concurrent, Parol Agreements and prior
written agreements with respect to the subject matter hereof
including, but not limited to, that certain Employment Agreement,
dated September 1, 1993, and Amendment to Employment
Agreement, dated December 1, 1993. The parties acknowledge that
in entering into this Agreement, they have not relied and will not in
any way rely upon any Parol Agreements.
A. Governing Law. The laws of the State of Minnesota shall
govern the validity, construction and performance of this Agreement.
Any legal proceeding related to this Agreement shall be brought in
an appropriate Minnesota court, and each of the parties hereto hereby
consents to the exclusive jurisdiction of the courts of the State of
Minnesota for this purpose.
A. Notices. All notices and other communications required or
permitted under this Agreement shall be in writing and sent by
registered first class mail, postage prepaid, and shall be deemed
received five (5) days after mailing to the addresses stated below:
If to the Company:
Navarre Corporation
7400 49th Avenue North
New Hope, Minnesota 55428
Attention: Chairman of the Board of Directors
With a copy to:
Scott J. Dongoske, Esq.
Winthrop & Weinstine, P.A.
3000 Dain Bosworth Plaza
60 South Sixth Street
Minneapolis, Minnesota 55402
If to Executive:
Eric H. Paulson
2605 Maple Ridge Lane
Excelsior, Minnesota 55331
A. Survival. Notwithstanding the termination of this Agreement
or Executive's employment with the Company, the terms of this
Agreement concerning rights and remedies of the parties shall
survive such termination and shall govern in perpetuity all rights,
disputes, claims or causes of action arising out of or in any way
related to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NAVARRE CORPORATION
By:
___________________________________
Its:
____________________________
____________________________________
Eric H. Paulson
(Signature to Employment Agreement)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of the 1st day of October, 1996,
by and between NAVARRE CORPORATION, a Minnesota corporation (the
"Company"), and CHARLES E. CHENEY, a resident of the State of Minnesota
("Executive").
W I T N E S S E T H:
WHEREAS, Executive has a unique knowledge of the Company's business, and
has special expertise in the management and future planning of its affairs, and
has been a key Executive of the Company, helping to develop the image of the
business; and
WHEREAS, the Company believes that Executive's continued involvement in the
management and affairs of the business are essential to its management and
planning in the future; and
WHEREAS, a previous employment agreement expired as of September 30, 1996
and it is the desire of the parties to extend the terms thereof.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants and obligations of this Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
I. Employment. Subject to all of the terms and conditions of this
Agreement, the Company hereby employs Executive, and Executive hereby
accepts employment with the Company, as its Executive Vice President,
Chief Financial Officer and Treasurer.
I. Duties.
A. Executive Vice President, Chief Financial Officer
and Treasurer. The services of Executive are exclusive to the
Company. Executive will devote substantially all of his business
hours to, and make the best use of his energy, knowledge and
training in, performing his duties as Executive Vice President, Chief
Financial Officer and Treasurer of the Company within the general
guidelines established by the Board of Directors of the Company as
the same may, from time to time, be modified by the Company's
Board of Directors. Executive will report to the Board of Directors
of the
Company and have all the duties normally subscribed to the Chief
Financial Officer. Notwithstanding anything in this Agreement to
the contrary, the duties of Executive under this Agreement do not (i)
require Executive to relocate his principal office or residence from
the Minneapolis/St. Paul, Minnesota metropolitan area without the
prior written consent of Executive, or (ii) prevent Executive from
owning, directly or indirectly, securities of, or otherwise
participating in the ownership of, any publicly-owned business,
trade, industry or venture. Executive will perform his duties in a
competent and professional manner, consistent with that expected of
a chief financial officer of the Company.
A. Director. During the term of this Agreement,
Executive shall also serve as a director of the Company.
A. Consultant. If Executive should make an election as
described in Section 5(d) hereof, the Company agrees to retain
Executive and Executive agrees to serve in a position of consultant
and advisor to the Company (with or without retention of his
position as Executive Vice President, Chief Financial Officer and
Treasurer or as a director, at the election of the Company), for a
period commencing upon such election and ending on October 31,
2001. During the period of consulting and advising, Executive shall
render consulting and advisory services in connection with business
activities similar to those carried on by the Company during the
period of his employment by the Company. Executive shall perform
such consulting and advisory services and attend meetings, as and
when reasonably requested by the Company in advance, provided
that Executive shall not be required to devote thereto in the
aggregate more than thirty (30) days per year. Executive shall have
discretion in choosing the times and places of performance of his
services to the Company compatible with his other activities.
Compensation to Executive under this Section 2 (c) shall continue to
be due from the Company as if Executive continued to be employed
by the Company pursuant to Section 2 (a) and (b) hereof.
I. Term. Subject only to earlier termination in accordance with Section
5 of this Agreement, Executive's term of employment shall commence on
the date hereof and continue for a period of five (5) years (the "Initial
Term"). Upon the expiration of the Initial Term, this Agreement shall be
automatically renewed for successive additional one (1)-year terms unless
this Agreement is terminated in writing by either party hereto at least ninety
(90) days prior to the expiration of the Initial Term or any subsequent
renewal term. The Initial Term and any subsequent renewal terms shall be
referred to collectively herein as the "Employment Period."
II. Compensation. As compensation for all of Executive's services
under this Agreement, the Company agrees to pay Executive during the
Employment Period and on retirement, and Executive agrees to accept the
following:
A. Base Salary. A base salary of $200,000 per annum
(the "Base Salary"), payable in accordance with the Company's
standard payroll practices. On each anniversary of this Agreement,
the Base Salary shall be adjusted by the Chief Executive Officer and
the Company's Board of Directors based upon the level of
performance by Executive, provided that in no event shall the Base
Salary for any fiscal year hereunder be less than the sum provided
above for the first full fiscal year. If conditions require and
Executive agrees, temporary cuts in pay can be effected.
A. Performance Bonus. As additional compensation for
Executive, Executive shall be eligible to receive a bonus determined
by the Board of Directors with a maximum bonus (the "Bonus")
equal to 60% of the Base Salary of Executive. If no Bonus is
otherwise declared by the Board of Directors, Executive will be
entitled to receive a bonus equal to 60% of Executive's Base Salary.
Executive's Bonus shall be paid semi-annually not later than 45 days
after March 31st and September 30th of each year.
A. Benefits.
1. Expenses. The Company shall reimburse
Executive for any and all ordinary, necessary and reasonable
business expenses that Executive incurs in connection with
the performance of his duties under this Agreement, including
entertainment, telephone, travel and miscellaneous expenses,
provided that Executive provides the Company with
documentation for such expenses in a form sufficient to
sustain the Company's deduction for such expenses under
Section 162 of the Internal Revenue Code of 1986, as
amended. These expenses include all dues and assessments to
Executive's social, athletic, golf or country club.
1. Medical and Disability Insurance.
Subject to Executive taking and passing the physical
examination required by the Company's insurance carrier, the
Company shall provide Executive with full medical and
disability insurance coverage provided to other officers of the
Company.
1. Life Insurance. Subject to the same
physical examination and cost provisions, the Company shall
provide Executive with a $250,000 term life insurance policy
insuring Executive's life during the term of Executive's
employment with the Company and shall pay all premiums
thereon. Such policy shall be owned by the Executive and
shall be payable to such beneficiary or beneficiaries as
Executive directs by written instrument delivered to the
Company or the insurer under the life insurance policy.
1. Vacation. Executive shall be entitled to
a paid vacation period of four (4) weeks each year, which may
be taken at any time subject to the Company's business needs.
1. Automobile Expenses. The Company
agrees to lease an automobile selected by Executive for use by
the Executive (the "Automobile"), the monthly lease cost of
which shall not exceed $750 (the "Lease Amount").
Alternatively, at Executive's request, the Company will pay
$750 to Executive during the Employment Period for an
automobile allowance. In addition, the Company will make
pay or reimburse the Executive for all reasonable costs of
licensing, sales taxes, property taxes, maintenance, repair, oil,
gasoline and insurance for such Automobile. Executive
agrees that he shall operate the Automobile provided by the
Company with "reasonable care". In addition, Executive
agrees that his use of the Automobile provided hereunder is
subject to the Company's business use policy, as such policy
may from time to time be determined by the Board of
Directors of the Company, and that Executive shall be
responsible for any taxes with respect to his personal use of
the Automobile provided hereunder. The Company agrees
that it shall provide Executive with a comparable replacement
vehicle every three (3) years after the date hereof. The
Executive shall have the right at any time to purchase the
Automobile (or any substitute vehicle) by tendering to the
Company a cash payment in an amount equal to the greater of
(a) the undepreciated book value of such Automobile as
contained in the books and records of the Company for
federal income tax purposes and (b) One and 00/100 Dollars
($1.00).
1. Benefit Changes. No reference in this
Agreement to any policy or any employee benefit plan
established or maintained by the Company shall preclude the
Company from changing any such policies or amending or
terminating any such benefit plans if a substantially similar
benefit is provided to Executive by the Company.
1. Other Plans. Nothing contained herein
is intended to or shall be deemed to be granted to Executive
in lieu of any rights or privileges which Executive may be
entitled to as an employee of the Company under any other
policies or benefit plans that are currently in effect or that
may hereafter be adopted. Executive shall be entitled to
participate in any other employee benefit plans of the
Company generally applicable to officers of the Company, its
divisions or subsidiaries, occupying similar positions as
Executive, including, but not limited to, any profit sharing,
pension, stock option, stock appreciation rights, stock
ownership, health, medical, dental, vacation, insurance or
other employee benefit plans.
I. Termination. This Agreement may not be terminated prior to the
end of the Employment Period except as follows:
A. By the Company for Company Cause. The
Company may terminate this Agreement for Company Cause upon
the Executive's material breach of this Agreement. Except as to
subparagraph (iii) below, the Company shall give the Executive
thirty (30) days' advance written notice of such termination, which
notice shall be via registered mail, return receipt requested, and
which shall describe in detail the acts or omissions which the
Company believes constitute such breach. Notwithstanding the
foregoing, Executive shall not be deemed to have been terminated
for Company Cause unless and until there shall have been delivered
to Executive a copy of a resolution duly adopted by the affirmative
vote of not less than seventy-five (75%) of the entire membership of
the Board of Directors (certified by the Secretary of the Board of
Directors) at a meeting of the Board of Directors called and held for
the purpose (after reasonable notice to Executive and an opportunity
for Executive, together with Executive's counsel, to appear before
the Board), finding that in the good faith opinion of the Board of
Directors, Executive was guilty of conduct described in this Section
5(a), and specifying the particulars thereof in detail. The Company
shall not be allowed to terminate this Agreement pursuant to this
Section 5(a) if Executive is able to cure such breach within thirty
(30) days following delivery of such notice. However, in no event
shall a breach of the provisions of Sections 5(a)(iii) or 7 be subject to
cure. Acts or omissions which constitute a material breach of this
Agreement constituting "Company Cause" shall be limited strictly to
the following:
1. Any material breach by the Executive of
his obligations under this Agreement;
1. Gross misconduct of the Executive
which is manifestly injurious to Company, or habitual failure
or inability of the Executive to perform his duties under this
Agreement; and
1. Any fraud, theft or embezzlement by the
Executive of the Company's assets, or any other unlawful or
criminal act which is punishable as a felony.
A. Death. Subject to the provisions of Section 6, this
Agreement shall terminate upon Executive's death.
A. Disability. Subject to the provisions of Section 6, this
Agreement shall terminate upon Executive's Disability. As used
herein, the term "Disability" shall have such meaning as set forth in
the Company's disability policy in effect at the date hereof and shall
include both permanent and temporary disability, short term and long
term disability, and total and partial disability. If there is no policy
in effect at the date of Executive's potential disability, Disability
shall mean Executive becoming substantially incapable of
performing his duties hereunder for a period of six (6) months or
more.
A. By Executive for Executive Cause. Executive shall have the
right, at his election, to terminate this Agreement or to change his
position to that of consultant and advisor as described in Section 2(c)
herein, upon thirty (30) days' written notice to the Company upon the
occurrence, without Executive's express written consent, of any one
or more of the following events, provided that Executive shall not
have the right to terminate this Agreement if the Company is able to
cure such event within thirty (30) days following delivery of such
notice:
1. The Company is in material breach of this Agreement;
1. Executive is required to report to or accept assignments
from persons other than the Chief Executive Officer and/or
the Board of Directors of the Company or he is removed
without his written consent as the Executive Vice President,
Chief Financial Officer and Treasurer of the Company and
such removal is not pursuant to Section 5(a) hereof;
1. The Chief Executive Officer appoints Executive as
Executive Vice President, Chief Financial Officer and
Treasurer, or if Executive should have a policy dispute with
the Chief Executive Officer;
2. The Shareholders should fail to elect Executive as a
director;
1. An adverse change in Executive's status or position as
an executive officer of the Company, including, without
limitation, any adverse change in Executive's status or
position as a result of a material diminution in Executive's
duties, responsibilities or authority as of the date of this
Agreement (or any status or position to which Executive may
be promoted after the date hereof) or the assignment to
Executive of any duties or responsibilities which, in
Executive's reasonable judgment, are inconsistent with
Executive's status or position, or any removal of Executive
from or any failure to reappoint or reelect Executive to such
positions (except in connection with the termination of
Executive's employment in accordance with Section 5(a)
hereof);
1. A reduction by the Company of Executive's Base
Salary as the same may be increased time to time, or a change
in the eligibility requirements or performance criteria for any
benefit other than salary, which adversely effects Executive;
1. Without replacement by a plan providing benefits to
Executive equal to or greater than those discontinued, the
failure by the Company to continue in effect, within its
maximum stated term, any employee benefit plan in which
Executive is participating immediately prior to the date of this
Agreement or the taking of any action by the Company that
would adversely effect Executive's participation or materially
reduce Executive's benefits under any such plan;
1. The taking of any action by the Company that would
materially adversely effect the physical conditions existing
immediately prior to this Agreement in or under which
Executive performs his employment duties;
1. The Company's requiring Executive to be based
anywhere other than the Minneapolis/St. Paul, Minnesota
metropolitan statistical area, except for required travel on the
Company's business to an extent substantially consistent with
the business travel obligations which Executive has typically
undertaken on behalf of the Company prior to the date of this
Agreement; or
1. Any purported termination by the Company of this
Agreement or the employment of Executive by Company
which is not expressly authorized by this Agreement or any
breach of this Agreement by the Company which is not
remedied by the Company within thirty (30) days after the
Company's receipt of notice thereof from Executive.
A. Retirement. At such time as Executive reaches the age of
60 and remains as an employee of the Company, Executive may
retire and, subject to the provisions of Section 6 below, this
Agreement shall terminate.
I. Payments Upon Termination.
A. Death. Upon Executive's death during the
Employment Period, the heirs or legal representatives of Executive
shall be entitled to receive as a lump sum payment payable within
sixty (60) calendar days of his death, 2.99 times the average of the
aggregate base and incentive compensation paid to Executive over
the preceding five years, provided, however, that in no event shall
the amount due and payable hereunder constitute a "Parachute
Payment" within the meaning of Section 280G(b)(2) of the Internal
Revenue Code of 1986, as amended.
A. Disability. In the event that this Agreement is terminated due
to Executive's Disability, Executive shall be paid (i) his Base Salary
for a period of one year following the date of such Disability or until
Executive begins receiving benefits under the Company's disability
benefits plan, whichever occurs first, (ii) all bonuses to which
Executive would have been entitled for the fiscal year in which such
Disability occurred, prorated to the date of Disability, (iii) his
accrued but unpaid vacation pay for the year in which such
Disability occurred, pro rated to the date of such Disability, and (iv)
any unpaid expense reimbursement.
A. Termination by Company for Company Cause or by
Executive Without Executive Cause. If Executive is terminated
pursuant to Section 5(a) hereof, or Executive terminates this
Agreement other than in accordance with Section 5(d) hereof, the
Company shall pay to Executive (i) his Base Salary through the date
written notice is properly mailed to Executive pursuant to Section
5(a) hereof, and (ii) all Bonus payments owing to Executive for the
fiscal year prior to the year such written notice is received by
Executive (to the extent that any such payments were unpaid on the
date of termination), and for the current year.
A. Termination Without Company Cause or by Executive for
Executive Cause. In addition to any other rights granted Executive
hereunder, if the Company should terminate this Agreement other
than in accordance with Section 5(a) hereof, or if Executive should
terminate this Agreement pursuant to Section 5(d) hereof, the
Company shall pay to Executive (i) his Base Salary through the end
of the term of this Agreement or two years, whichever is more, in
exchange for a properly executed non-compete agreement between
Executive and the Company, (ii) any payments owing to Executive
pursuant to Section 4(b) hereof for the fiscal year prior to the year of
termination (to the extent any such payments were unpaid on the
date of termination, as well as for the current year), (iii) a sum
equivalent to any accrued but unpaid vacation for the year in which
he is terminated, and (iv) any unpaid expense reimbursement.
Furthermore, for the remainder of the term of this Agreement, or one
year whichever is more, the Company shall maintain in full force and
effect for the continued benefit of Executive and his dependents all
(i) pension plans, (ii) medical and disability policies, (iii) stock
option plans, and (iv) life insurance plans in which Executive
participated immediately prior to his termination (or if such
participation is barred, shall arrange for individual policies of
insurance providing benefits substantially similar, on an after-tax
basis, to those which Executive otherwise would have been entitled
hereunder) for the remainder of the term of this Agreement.
A. Change of Control And Ownership. In the event that (i)
Executive's employment with the Company is terminated by the
Company other than in accordance with Sections 5(a), (b), or (c)
hereof during the Employment Period and (ii) such termination
occurs after a Change in Control (as defined hereinbelow), Company
shall pay Executive a cash bonus ("Severance Payment") in an
amount equal to Executive's Average Annual Compensation (as
defined hereinbelow), multiplied by a factor of 2.99, provided,
however, that in no event shall the amount due and payable
hereunder constitute a "Parachute Payment" within the meaning of
Section 280G(b)(2) of the Internal Revenue Code of 1986, as
amended. In the event that any portion of the Severance Payment
would be deemed a Parachute Payment, the amount of the Severance
Payment shall be reduced only to the extent necessary to eliminate
any such treatment or characterization.
For purposes of this Agreement, "Change in Control" shall mean (i)
the sale of all or substantially all of the assets of the Company, (ii)
the acquisition by any means of more than fifty percent (50%) of the
issued and outstanding voting stock of the Company by any entity,
person or group of persons acting in concert, (iii) the merger of the
Company with, or the consolidation of the Company into, another
corporation or entity, or (iv) the election to the Board of Directors of
the Company without the recommendation or approval of the
incumbent Board of Directors of the Company the lesser of (i) three
directors or (ii) directors constituting a majority of the number of
directors of the Company then in office.
For purposes of this Agreement, "Average Annual Compensation"
shall mean the average of all taxable compensation and fringe
benefits paid to or on behalf of Executive by Company, based on the
five (5) most recent calendar years. Amounts payable pursuant to
this Section 6(e) shall be in addition to, and not in lieu of, all other
compensation, rights and benefits accruing or afforded to Executive
pursuant to this Agreement.
A. Retirement. Upon Executive's retirement pursuant to
Section 5(e) above, Executive and his heirs or legal representatives
shall be entitled to receive the following: (i) average annual
compensation for a period of two (2) years in exchange for a
properly executed non-compete agreement between Executive and
the Company, (ii) any payments owing to Executive pursuant to
Section 4(b) hereof through the date of retirement (to the extent any
such payments were unpaid on the date of retirement, as well as for
the current year), (iii) a sum equivalent to any accrued but unpaid
vacation for the year in which he retires, and (iv) any unpaid expense
reimbursement. Furthermore, for a period of five (5) years after
retirement, the Company shall maintain in full force and effect for
the continued benefit of Executive and his dependents all (i) pension
plans, (ii) medical and disability policies, (iii) stock option plans and
(iv) life insurance plans in which Executive participated immediately
prior to his termination (or if such participation is barred, shall
arrange for individual policies of insurance providing benefits
substantially similar, on an after-tax basis, to those which Executive
otherwise would have been entitled hereunder) for the remainder of
the term of this Agreement.
I. Ownership of Properties; Confidentiality; Exclusivity;
Investments.
A. Ownership of Properties. The Company, as employer, shall
own, and Executive hereby transfers and assigns to the Company, all
rights in and to any material and/or ideas written, suggested or
submitted by Executive during the Employment Period and all other
results and proceeds of his services under this Agreement (the
"Properties"). Without limiting the generality of the foregoing, these
rights shall include all motion picture, television, radio, dramatic,
musical, publication and other rights in and to the Properties,
including the sole and exclusive right to photograph and record the
same with or without dialogue, music and other sounds
synchronously recorded, and to perform, exhibit, distribute,
reproduce, transmit, broadcast or otherwise communicate the same
and/or motion picture, dramatic or other versions or adaptations
thereof, theatrically, nontheatrically and/or by means of television,
radio, the legitimate stage and/or any other means now known or
hereafter devised and to manufacture, publish, or vend printed and/or
recorded versions or adaptations thereof, either publicly or privately
and for profit or otherwise. The Company and its licensees and
assigns shall have the right to adapt, change, revise, delete from, add
to and/or rearrange the Properties or any part thereof written or
submitted by Executive and to combine the same with other works to
any extent, and to change or substitute the title thereof and in this
connection Executive hereby waives any so-called "moral rights" of
authors. Executive agrees to execute and deliver to the Company
such releases, assignments or other instruments as the Company may
require from time to time to evidence its ownership of the results and
proceeds of Executive's services hereunder' provided, however, that
nothing in this Section 7(a) shall be deemed in any manner to restrict
or qualify Executive's ownership or right to exploit Executive's
personal memoirs.
The requirements of this Section 7(a) do not apply to Properties for
which no equipment, facility or confidential information of the
Company was used and which were developed entirely on
Executive's own time, and which (i) do not relate directly to the
Company's business or to the Company's actual research or
development, or (ii) do not result from any work Executive
performed for the Company. Except as previously disclosed to the
Company in writing, Executive does not have and will not assert any
claims to or rights under any Properties as having been made,
conceived, authored or acquired by Executive prior to his
employment by the Company.
A. Confidentiality. Executive acknowledges that his services
will, throughout the Employment Period, bring Executive in close
contact with many confidential affairs of the Company and its
affiliates, including information about costs, profits, financial data,
markets, trade secrets, sales, products, computer programs, key
personnel, pricing policies, customer lists, development projects,
operational methods, technical processes, plans for future
development, business affairs and methods and other information not
readily available to the public. Executive further acknowledges that
the businesses of the Company and its affiliates are international in
scope, that their products are marketed throughout the world, that the
Company and its affiliates compete in nearly all of their business
activities with other organizations which are or could be located in
nearly any part of the world and that the nature of Executive's
services, position and expertise are such that he is capable of
competing with the Company and its affiliates from nearly any
location in the world. In recognition of the foregoing Executive
covenants and agrees:
1. that Executive will keep secret all material confidential
matters of the Company and its affiliates which are not
otherwise in the public domain and will not disclose them to
anyone outside of the Company or its affiliates, either during
or after the Employment Period, except with the Company's
written consent and except for such disclosure as is necessary
in the performance of Executive's duties during the
Employment Period; and
1. that Executive will deliver promptly to the Company
on termination of his employment with the Company or at any
other time the Company may so request, at the Company's
expense, all confidential memoranda, notes, records, reports
and other documents (and all copies thereof) relating to the
Company's and its affiliates' business, which Executive
obtained while employed by, or otherwise serving or acting
on behalf of, the Company or which the Executive may then
possess or have under his control.
A. Exclusivity. Executive agrees that during his employment
with the Company, he will not alone, or in any capacity with another
entity or person, (i) engage in any commercial activity that competes
with the Company's business, as it is conducted during the
Employment Period, within any state of the United States, (ii) in any
way interfere or attempt to interfere with the Company's
relationships with any of its current or potential customers, or (iii)
attempt to employ any of the Company's then employees on behalf
of any other entities competing with the Company. Executive
further acknowledges that all services of Executive shall be
exclusive to the Company, and that Executive's performances and
services hereunder are of a special, unique, unusual, extraordinary
and intellectual character which gives them peculiar value, the loss
of which cannot be reasonably or adequately compensated in an
action at law for damages and that a breach by Executive of the
terms hereof (including without limitation this Section 7) will cause
the Company irreparable injury. Executive agrees that the Company
is entitled to injunctive and other equitable relief to prevent a breach
or threatened breach of this Agreement, which shall be in addition to
any other rights or remedies to which the Company may be entitled.
For purposes of this Section 7(c), the term "Company" shall include
the Company, its successors, assigns and affiliates.
A. Investments. Notwithstanding anything contained herein to
the contrary, during the Employment Period Executive may acquire
and/or retain, solely as an investment, and take customary actions to
maintain and preserve Executive's ownership of:
1. securities of any corporation which are
registered under Sections 12(b) or 12(g) of the Securities
Exchange Act of 1934 and which are publicly traded, so long
as Executive is not part of any control group of such
corporation; and
1. any securities of a partnership, trust, corporation,
limited liability company or other entity so long as (i)
Executive remains a passive investor in that entity and does
not become part of any control group thereof (except in a
passive capacity) and (ii) such entity is not, directly or
indirectly, in competition with the Company or its affiliates,
regardless of whether Executive is a passive investor or part
of any control group thereof.
I. Remedies. The parties hereto recognize and agree that, because the
material breach of this Agreement or any part hereof would result in
damages difficult to ascertain, upon any allegation of material breach of this
Agreement, either party hereto shall be entitled:
A. Proceedings. To institute proceedings in a court located in
the State of Minnesota to enjoin the breach, termination, or
threatened termination of this Agreement. Such injunctive remedy
shall be in addition to and not in lieu of any right to recover money
damages for any such breach.
A. Costs and Expenses. The successful party in any action
brought concerning the breach or termination of this Agreement shall
be entitled to recover all costs and expenses, including attorney's fees
incurred or associated with the enforcement of any covenant of this
Agreement.
A. Additional Costs. Additionally, if there shall be any breach
of this Agreement by the Company, and Executive shall institute any
action (or counterclaim) in connection therewith, Executive shall be
entitled, if successful in such action or if the Company sues and if
Executive is successful in that action, to recover as damages the
discounted value (at a rate of 6%) of all amounts unpaid under this
Agreement, or Executive may, at his election, recover as damages
each monthly payment of Base Salary and additional compensation
at such time as it becomes payable or would have become payable
under the terms of this Agreement, and the Company agrees not only
to pay such sums, but, in addition thereto, interest thereon at the
prime rate then in effect, until such payment is made. In any such
action, the fact that Executive did or did not seek or engage in any
other employment or in other activities shall not affect, reduce or
mitigate the amount of recovery allowable to Executive. Executive's
rights hereunder, upon his death, accrue to his legal representatives
or to his designated beneficiary.
I. Miscellaneous.
A. Successors and Assigns. This Agreement is binding on and
inures to the benefit of the Company's successors and assigns,
provided, however, that this Agreement may not be assigned by any
of the parties hereto without the prior written consent of each of the
parties hereto. This Agreement shall be binding upon and inure to
the benefit of any successor of the Company, and any such successor
shall absolutely and unconditionally assume all of the Company's
obligations hereunder. Upon the written request of Executive, the
Company shall seek to have any successor, by agreement in form
and substance satisfactory to Executive, assent to the fulfillment by
the Company of its obligations under this Agreement. Failure to
attain such assent at least thirty (30) business days prior to the time a
person or entity becomes a successor in interest to the Company
shall be considered Executive Cause for termination of this
Agreement in accordance with Section 5(d) hereof.
A. Offsets. In no event shall any amount payable to Executive
pursuant to this Agreement be reduced for purposes of offsetting,
either directly or indirectly, any indebtedness or liability of
Executive to Company.
A. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original
but all of which together shall constitute one and the same
instrument.
A. Construction. Wherever possible, each provision of this
Agreement will be interpreted so that it is valid under the applicable
law. If any provision of this Agreement is to any extent invalid
under the applicable law, that provision will still be effective to the
extent it remains valid. The remainder of this Agreement also will
continue to be valid, and the entire Agreement will continue to be
valid in other jurisdictions.
A. Waivers. No failure or delay by either the Company or
Executive in exercising any right or remedy under this Agreement
will waive any provision of this Agreement, nor will any single or
partial exercise by either the Company or Executive of any right or
remedy under this Agreement preclude either of them from
otherwise or further exercising these rights or remedies, or any other
rights or remedies granted by any law or any related document.
A. Captions. The headings in this Agreement are for
convenience of reference only and do not affect the interpretation of
this Agreement.
A. Modification/Entire Agreement. This Agreement may not
be altered, modified or amended except by an instrument in writing
signed by all of the parties hereto. No person, whether or not an
officer, agent, employee or representative of any party, has made or
has any authority to make for or on behalf of that party any
agreement, representation, warranty, statement, promise,
arrangement or understanding not expressly set forth in this
Agreement or in any other document executed by the parties
concurrently herewith ("Parol Agreements"). This Agreement and
all other documents executed by the parties concurrently herewith
constitute the entire agreement between the parties and supersede all
express or implied, prior or concurrent, Parol Agreements and prior
written agreements with respect to the subject matter hereof
including, but not limited to, that certain Employment Agreement,
dated September 1, 1993, and Amendment to Employment
Agreement, dated December 1, 1993. The parties acknowledge that
in entering into this Agreement, they have not relied and will not in
any way rely upon any Parol Agreements.
A. Governing Law. The laws of the State of Minnesota shall
govern the validity, construction and performance of this Agreement.
Any legal proceeding related to this Agreement shall be brought in
an appropriate Minnesota court, and each of the parties hereto hereby
consents to the exclusive jurisdiction of the courts of the State of
Minnesota for this purpose.
A. Notices. All notices and other communications required or
permitted under this Agreement shall be in writing and sent by
registered first class mail, postage prepaid, and shall be deemed
received five (5) days after mailing to the addresses stated below:
If to the Company:
Navarre Corporation
7400 49th Avenue North
New Hope, Minnesota 55428
Attention: Chairman of the Board of Directors
With a copy to:
Scott J. Dongoske, Esq.
Winthrop & Weinstine, P.A.
3000 Dain Bosworth Plaza
60 South Sixth Street
Minneapolis, Minnesota 55402
If to Executive:
Charles E. Cheney
4316 Lake Point Court
Shoreview, Minnesota 55126
A. Survival. Notwithstanding the termination of this Agreement
or Executive's employment with the Company, the terms of this
Agreement concerning rights and remedies of the parties shall
survive such termination and shall govern in perpetuity all rights,
disputes, claims or causes of action arising out of or in any way
related to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NAVARRE CORPORATION
By:
___________________________________
Its:
____________________________
____________________________________
Charles E. Cheney
(Signature to Employment Agreement)
EMPLOYMENT AGREEMENT
THIS AGREEMENT is made and entered into as of this 21st day of November,
1996, by and between NAVARRE CORPORATION, a Minnesota corporation
(the "Company"), and GUY M. MARSALA, a resident of the State of Minnesota
("Executive").
W I T N E S S E T H:
WHEREAS, it is the desire of the parties to enter into this employment
agreement on the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the foregoing premises, the mutual
covenants and obligations of this Agreement and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the parties hereto agree as follows:
I. Employment. Subject to all of the terms and conditions of this
Agreement, the Company hereby employs Executive, and Executive hereby
accepts employment with the Company, as its Chief Operating Officer.
I. Duties as Chief Operating Officer. The services of Executive are
exclusive to the Company. Executive will devote substantially all of his
business hours to, and make the best use of his energy, knowledge and
training in, performing his duties as Chief Operating Officer of the
Company within the general guidelines established by the Chief Executive
Officer of the Company as the same may, from time to time, be modified by
the Company's Board of Directors. Executive will always report to the
Chief Executive Officer of the Company and have all the duties normally
subscribed to the Chief Operating Officer. Notwithstanding anything in this
Agreement to the contrary, the duties of Executive under this Agreement do
not (i) require Executive to relocate his principal office or residence from
the Minneapolis/St. Paul, Minnesota metropolitan area without the prior
written consent of Executive, or (ii) prevent Executive from owning,
directly or indirectly, securities of, or otherwise participating in the
ownership of, any publicly-owned business, trade, industry or venture.
Executive will perform his duties in a competent and professional manner,
consistent with that expected of a chief operations officer of the Company.
I. Term. Subject only to earlier termination in accordance with Section
5 of this Agreement, Executive's term of employment shall commence on
the date hereof and continue for a period of one (1) year (the "Initial
Term"). Upon the expiration
of the Initial Term, this Agreement shall be automatically renewed for
successive additional one (1)-year terms unless this Agreement is
terminated in writing by either party hereto at least sixty (60) days prior to
the expiration of the Initial Term or any subsequent renewal term. The
Initial Term and any subsequent renewal terms shall be referred to
collectively herein as the "Employment Period."
I. Compensation. As compensation for all of Executive's services
under this Agreement, the Company agrees to pay Executive during the
Employment Period and on retirement, and Executive agrees to accept the
following:
A. Base Salary. A base salary of $195,000 per annum
(the "Base Salary"), payable in accordance with the Company's
standard payroll practices. On each anniversary of this Agreement,
the Base Salary shall be adjusted by the Chief Executive Officer
based upon the level of performance by Executive.
A. Performance Bonus. As additional compensation for
Executive, Executive shall be eligible to receive a bonus determined
by the Chief Executive Officer based on a mutually agreed upon
MBO program, with a maximum bonus (the "Bonus") equal to 60%
of the Base Salary of Executive. Executive's Bonus shall be paid
semi-annually not later than 45 days after March 31 and September
30 of each year.
A. Stock Options. As outlined in Addendum 1.
A. Benefits.
1. Expenses. The Company shall reimburse
Executive for any and all ordinary, necessary and reasonable
business expenses that Executive incurs in connection with
the performance of his duties under this Agreement, including
entertainment, telephone, travel and miscellaneous expenses,
provided that Executive provides the Company with
documentation for such expenses in a form sufficient to
sustain the Company's deduction for such expenses under
Section 162 of the Internal Revenue Code of 1986, as
amended.
1. Medical and Disability Insurance. The
Company shall provide Executive with the same medical,
dental and disability insurance coverage provided to other
officers of the Company.
1. Life Insurance. Subject to passing the
physical examination required by the Company's insurance
carrier, the Company shall provide Executive with a $250,000
term life insurance policy insuring Executive's life during the
term of Executive's employment with the Company and the
Company shall pay all premiums thereon. Such policy shall
be owned by the Executive and shall be payable to such
beneficiary or beneficiaries as Executive directs by written
instrument delivered to the Company or the insurer under the
life insurance policy.
1. Vacation; Sick Leave. Executive shall
be entitled to a paid vacation period of four (4) weeks each
year, which may be taken at any time subject to the
Company's business needs, plus nine paid holidays per year.
Executive shall have sick leave of six days per year accruing
at the rate of one-half day per month.
1. Automobile Expenses. The Company
agrees to provide Executive an automobile allowance of $750
per month to be applied towards Executive's purchase or lease
of a car. In addition, the Company will pay or reimburse the
Executive for all reasonable costs of licensing, sales taxes,
property taxes, maintenance, repair, oil, gasoline and
insurance for such automobile. Executive agrees that he shall
operate any automobile provided by the Company with
"reasonable care". In addition, Executive agrees that his use
of any automobile provided hereunder is subject to the
Company's business use policy, as such policy may from time
to time be determined by the Board of Directors of the
Company, and that Executive shall be responsible for gas, oil
and any taxes with respect to his personal use of any
automobile provided hereunder.
1. Benefit Changes. No reference in this
Agreement to any policy or any employee benefit plan
established or maintained by the Company shall preclude the
Company from changing any such policies or amending or
terminating any such benefit plans if a substantially similar
benefit is provided to Executive by the Company.
1. Other Plans. Nothing contained herein
is intended to or shall be deemed to be granted to Executive
in lieu of any rights or privileges which Executive may be
entitled to as an employee of the Company under any other
policies or benefit plans that are currently in effect or that
may hereafter be adopted. Executive shall be entitled to
participate in any other employee benefit plans of the
Company generally applicable to officers of the Company, its
divisions or subsidiaries, occupying similar positions as
Executive, including, but not limited to, any profit sharing,
401(k), pension, stock option, stock appreciation rights, stock
ownership, health, medical, dental, vacation, insurance or
other employee benefit plans.
I. Termination. This Agreement may not be terminated prior to the
end of the Employment Period except as follows:
A. By the Company for Company Cause. The
Company may terminate this Agreement for Company Cause upon
Executive's material breach of this Agreement. Except as to
subparagraph (iii) below, the Company shall give Executive thirty
(30) days' advance written notice of such termination, which notice
shall be via registered mail, return receipt requested, and which shall
describe in detail the acts or omissions which the Company believes
constitute such breach. The Company shall not be allowed to
terminate this Agreement pursuant to this Section 5(a) if Executive is
able to cure such breach within thirty (30) days following delivery of
such notice. However, in no event shall a breach of the provisions of
Sections 5(a)(iii) or 7 be subject to cure. Acts or omissions which
constitute a material breach of this Agreement constituting
"Company Cause" shall be limited strictly to the following:
1. Any material breach by Executive of his
obligations under this Agreement;
1. Gross misconduct of Executive which is
manifestly injurious to Company; and
1. Any fraud, theft or embezzlement by
Executive of the Company's assets, or any other unlawful or
criminal act which is punishable as a felony.
A. Death. Subject to the provisions of Section 6, this
Agreement shall terminate upon Executive's death.
A. Disability. This Agreement shall terminate upon
Executive's total and/or permanent Disability which renders him
incapable of performing his duties hereunder for a period of six (6)
months or more.
A. By Executive for Executive Cause. Executive shall have the
right to terminate this Agreement upon thirty (30) days' written
notice to the Company upon the occurrence, without Executive's
express written consent, of any one or more of the following events,
provided that Executive shall not have the right to terminate this
Agreement if the Company is able to cure such event within thirty
(30) days following delivery of such notice:
1. The Company is in material breach of this Agreement;
1. Executive is removed without his written consent as
the Chief Operating Officer of the Company and such
removal is not pursuant to Section 5(a) hereof;
1. The Company's requiring Executive to be based
anywhere other than the Minneapolis/St. Paul, Minnesota
metropolitan statistical area, except for required travel on the
Company's business to an extent substantially consistent with
the business travel obligations which Executive has typically
undertaken on behalf of the Company prior to the date of this
Agreement; or
1. Any purported termination by the Company of this
Agreement or the employment of Executive by Company
which is not expressly authorized by this Agreement or any
breach of this Agreement by the Company which is not
remedied by the Company within thirty (30) days after the
Company's receipt of notice thereof from Executive.
I. Payments Upon Termination.
A. Death. In the event that this Agreement is terminated due to
Executive's death, Executive's estate shall be paid (i) his Base Salary
and prorated Bonus through the end of the month in which his death
occurred, (ii) his accrued but unpaid vacation pay for the year in
which his death occurred, pro rated to the date of his death, and (iii)
any unpaid expense reimbursement.
A. Disability. In the event that this Agreement is terminated due
to Executive's Disability, Executive shall be paid (i) his Base Salary
and prorated Bonus through the end of the 6th month which defines
the disability period (ii) his accrued but unpaid vacation pay for the
year in which such Disability occurred, pro rated to the date of such
Disability, and (iii) any unpaid expense reimbursement.
A. Termination for Cause. If Executive is terminated pursuant
to Section 5(a) hereof or he terminates his own employment to
accept another position, the Company shall pay to Executive (i) his
Base Salary through the termination date after receiving the written
notice as required herein and (ii) any unpaid expense reimbursement.
A. Termination Without Company Cause. In addition to any
other rights granted Executive hereunder, if the Company should
terminate this Agreement other than in accordance with Section 5(a),
5(b) or 5(c) hereof, the Company shall pay to Executive an
additional amount equal to his Base Salary for twelve (12) months,
according to the current standard payroll practice or until Executive
becomes re-employed.
A. Change of Control And Ownership. In the event that (i)
Executive's employment with the Company is terminated by the
Company other than in accordance with Sections 5(a), (b), or (c)
hereof during the Employment Period and (ii) such termination
occurs after a Change in Control (as defined hereinbelow), Company
shall pay Executive a cash bonus ("Severance Payment") in an
amount equal to Executive's Average Annual Compensation (as
defined hereinbelow).
For purposes of this Agreement, "Change in Control" shall mean (i)
the sale of all or substantially all of the assets of the Company, (ii)
the acquisition by any means of more than fifty percent (50%) of the
issued and outstanding voting stock of the Company by any entity,
person or group of persons acting in concert, or (iii) the merger of
the Company with, or the consolidation of the Company into,
another corporation or entity.
For purposes of this Agreement, "Average Annual Compensation"
shall mean the average of all taxable compensation and fringe
benefits paid to or on behalf of Executive by Company, based on the
five (5) most recent calendar years (or the entire length of
Executive's employment if less than five (5) years). Amounts
payable pursuant to this Section 6(e) shall be in addition to, and not
in lieu of, all other compensation, rights and benefits accruing or
afforded to Executive pursuant to this Agreement.
I. Ownership of Properties; Confidentiality; Exclusivity;
Investments.
A. Ownership of Properties. The Company, as employer, shall
own, and Executive hereby transfers and assigns to the Company, all
rights in and to any material and/or ideas written, suggested or
submitted by Executive during the Employment Period and all other
results and proceeds of his services under this Agreement (the
"Properties"). Without limiting the generality of the foregoing, these
rights shall include all motion picture, television, radio, dramatic,
musical, publication and other rights in and to the Properties,
including the sole and exclusive right to photograph and record the
same with or without dialogue, music and other sounds
synchronously recorded, and to perform, exhibit, distribute,
reproduce, transmit, broadcast or otherwise communicate the same
and/or motion picture, dramatic or other versions or adaptations
thereof, theatrically, nontheatrically and/or by means of television,
radio, the legitimate stage and/or any other means now known or
hereafter devised and to manufacture, publish, or vend printed and/or
recorded versions or adaptations thereof, either publicly or privately
and for profit or otherwise. The Company and its licensees and
assigns shall have the right to adapt, change, revise, delete from, add
to and/or rearrange the Properties or any part thereof written or
submitted by Executive and to combine the same with other works to
any extent, and to change or substitute the title thereof and in this
connection Executive hereby waives any so-called "moral rights" of
authors. Executive agrees to execute and deliver to the Company
such releases, assignments or other instruments as the Company may
require from time to time to evidence its ownership of the results and
proceeds of Executive's services hereunder' provided, however, that
nothing in this Section 7(a) shall be deemed in any manner to restrict
or qualify Executive's ownership or right to exploit Executive's
personal memoirs.
The requirements of this Section 7(a) do not apply to Properties for
which no equipment, facility or confidential information of the
Company was used and which were developed entirely on
Executive's own time, and which (i) do not relate directly to the
Company's business or to the Company's actual research or
development, or (ii) do not result from any work Executive
performed for the Company. Except as previously disclosed to the
Company in writing, Executive does not have and will not assert any
claims to or rights under any Properties as having been made,
conceived, authored or acquired by Executive prior to his
employment by the Company.
A. Confidentiality. Executive acknowledges that his services
will, throughout the Employment Period, bring Executive in close
contact with many confidential affairs of the Company and its
affiliates, including information about costs, profits, financial data,
markets, trade secrets, sales, products, computer programs, key
personnel, pricing policies, customer lists, development projects,
operational methods, technical processes, plans for future
development, business affairs and methods and other information not
readily available to the public. Executive further acknowledges that
the businesses of the Company and its affiliates are international in
scope, that their products are marketed throughout the world, that the
Company and its affiliates compete in nearly all of their business
activities with other organizations which are or could be located in
nearly any part of the world and that the nature of Executive's
services, position and expertise are such that he is capable of
competing with the Company and its affiliates from nearly any
location in the world. In recognition of the foregoing Executive
covenants and agrees:
1. that Executive will keep secret all material confidential
matters of the Company and its affiliates which are not
otherwise in the public domain and will not disclose them to
anyone outside of the Company or its affiliates, either during
or after the Employment Period, except with the Company's
written consent and except for such disclosure as is necessary
in the performance of Executive's duties during the
Employment Period; and
1. that Executive will deliver promptly to the Company
on termination of his employment with the Company or at any
other time the Company may so request, at the Company's
expense, all confidential memoranda, notes, records, reports
and other documents (and all copies thereof) relating to the
Company's and its affiliates' business, which Executive
obtained while employed by, or otherwise serving or acting
on behalf of, the Company or which the Executive may then
possess or have under his control.
A. Exclusivity. Executive agrees that during his employment
with the Company, he will not alone, or in any capacity with another
entity or person, (i) engage in any commercial activity that competes
with the Company's business, as it is conducted during the
Employment Period, within any state of the United States, (ii) in any
way interfere or attempt to interfere with the Company's
relationships with any of its current or potential customers, or (iii)
attempt to employ any of the Company's then employees on behalf
of any other entities competing with the Company. Executive
further acknowledges that all services of Executive shall be
exclusive to the Company, and that Executive's performances and
services hereunder are of a special, unique, unusual, extraordinary
and intellectual character which gives them peculiar value, the loss
of which cannot be reasonably or adequately compensated in an
action at law for damages and that a breach by Executive of the
terms hereof (including without limitation this Section 7) will cause
the Company irreparable injury. Executive agrees that the Company
is entitled to injunctive and other equitable relief to prevent a breach
or threatened breach of this Agreement, which shall be in addition to
any other rights or remedies to which the Company may be entitled.
For purposes of this Section 7(c), the term "Company" shall include
the Company, its successors, assigns and affiliates.
A. Investments. Notwithstanding anything contained herein to
the contrary, during the Employment Period Executive may acquire
and/or retain, solely as an investment, and take customary actions to
maintain and preserve Executive's ownership of:
1. securities of any corporation which are
registered under Sections 12(b) or 12(g) of the Securities
Exchange Act of 1934 and which are publicly traded, so long
as Executive is not part of any control group of such
corporation; and
1. any securities of a partnership, trust, corporation,
limited liability company or other entity so long as (i)
Executive remains a passive investor in that entity and does
not become part of any control group thereof (except in a
passive capacity) and (ii) such entity is not, directly or
indirectly, in competition with the Company or its affiliates,
regardless of whether Executive is a passive investor or part
of any control group thereof.
I. Remedies. The parties hereto recognize and agree that, because the
material breach of this Agreement or any part hereof would result in
damages difficult to ascertain, upon any allegation of material breach of this
Agreement, either party hereto shall be entitled:
A. Proceedings. To institute proceedings in a court located in
the State of Minnesota to enjoin the breach, termination, or
threatened termination of this Agreement. Such injunctive remedy
shall be in addition to and not in lieu of any right to recover money
damages for any such breach.
A. Costs and Expenses. The successful party in any action
brought concerning the breach or termination of this Agreement shall
be entitled to recover all costs and expenses, including attorney's fees
incurred or associated with the enforcement of any covenant of this
Agreement.
I. Miscellaneous.
A. Successors and Assigns. This Agreement is binding on and
inures to the benefit of the Company's successors and assigns,
provided, however, that this Agreement may not be assigned by any
of the parties hereto without the prior written consent of each of the
parties hereto. This Agreement shall be binding upon and inure to
the benefit of any successor of the Company, and any such successor
shall absolutely and unconditionally assume all of the Company's
obligations hereunder.
A. Offsets. Amounts payable to Executive pursuant to this
Agreement may reduced for purposes of offsetting, either directly or
indirectly, any indebtedness or liability of Executive to Company.
A. Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed to be an original
but all of which together shall constitute one and the same
instrument.
A. Construction. Wherever possible, each provision of this
Agreement will be interpreted so that it is valid under the applicable
law. If any provision of this Agreement is to any extent invalid
under the applicable law, that provision will still be effective to the
extent it remains valid. The remainder of this Agreement also will
continue to be valid, and the entire Agreement will continue to be
valid in other jurisdictions.
A. Waivers. No failure or delay by either the Company or
Executive in exercising any right or remedy under this Agreement
will waive any provision of this Agreement, nor will any single or
partial exercise by either the Company or Executive of any right or
remedy under this Agreement preclude either of them from
otherwise or further exercising these rights or remedies, or any other
rights or remedies granted by any law or any related document.
A. Captions. The headings in this Agreement are for
convenience of reference only and do not affect the interpretation of
this Agreement.
A. Modification/Entire Agreement. This Agreement may not
be altered, modified or amended except by an instrument in writing
signed by all of the parties hereto. No person, whether or not an
officer, agent, employee or representative of any party, has made or
has any authority to make for or on behalf of that party any
agreement, representation, warranty, statement, promise,
arrangement or understanding not expressly set forth in this
Agreement or in any other document executed by the parties
concurrently herewith. This Agreement and all other documents
executed by the parties concurrently herewith constitute the entire
agreement between the parties and supersede all express or implied,
prior or concurrent, with respect to the subject matter hereof.
A. Governing Law. The laws of the State of Minnesota shall
govern the validity, construction and performance of this Agreement.
Any legal proceeding related to this Agreement shall be brought in
an appropriate Minnesota court, and each of the parties hereto hereby
consents to the exclusive jurisdiction of the courts of the State of
Minnesota for this purpose.
A. Notices. All notices and other communications required or
permitted under this Agreement shall be in writing and sent by
registered first class mail, postage prepaid, and shall be deemed
received five (5) days after mailing to the addresses stated below:
If to the Company:
Navarre Corporation
7400 49th Avenue North
New Hope, Minnesota 55428
Attention: Chief Executive Officer
With a copy to:
Scott J. Dongoske, Esq.
Winthrop & Weinstine, P.A.
3000 Dain Bosworth Plaza
60 South Sixth Street
Minneapolis, Minnesota 55402
If to Executive:
Guy M. Marsala
______________________________
______________________________
A. Survival. Notwithstanding the termination of this Agreement
or Executive's employment with the Company, the terms of this
Agreement concerning rights and remedies of the parties shall
survive such termination and shall govern in perpetuity all rights,
disputes, claims or causes of action arising out of or in any way
related to this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the day and year first above written.
NAVARRE CORPORATION
By: ______________________________
______________________________
GUY M. MARSALA
Its ___________________________
Addendum 1 to Marsala Employment Agreement
Guy Marsala will receive a 1-year stock option for 100,000 shares of Navarre
Common Stock. The option price will be based on the closing price of Navarre's
stock on the NASDAQ exchange on the day Guy Marsala received the offer from
Navarre Corporation, October 18, 1996.
After the completion of a successful fiscal year, Guy Marsala will receive an
additional 5-year stock option for 100,000 shares of Navarre Common Stock.
Such options shall be issued pursuant to the Company's standard stock option
plan, with pricing and other terms of the options determined in accordance with
such plan.
Exhibit 23.1
Consent of Ernst & Young LLP
We consent to the reference to our firm under the caption "Experts" in the
Registration Statement (Form S-3) and related Prospectus of Navarre Corporation
for the registration of 530,000 shares of its common stock, and to the
incorporation by reference therein of our report dated April 26, 1996, with
respect to the consolidated financial statement
s of Navarre Corporation incorporated by reference in its
Annual Report (Form 10-K) for the year ended March 31, 1996,
and the related financial statement schedule included
therein, filed with the Securities and Exchange Commission.
Ernst & Young LLP
Minneapolis, Minnesota
November 21, 1996
