PROSPECTUS
NAVARRE CORPORATION
16,000,000 SHARES OF COMMON STOCK
This Prospectus relates to the offering of up to 16,000,000 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 in this
Prospectus (the "Selling Shareholders"). The Shares represent the following: (1)
7,619,050 shares of Common Stock of the Company issuable upon the conversion of
the Company's Class A Convertible Preferred Stock and 7,619,050 shares of Common
Stock upon the exercise of accompanying warrants, both of which the Company
offered in a private placement on May 1, 1998 to a group of accredited investors
for aggregate consideration of $20.0 million; (2) up to 380,947 shares of Common
Stock as dividends on the Preferred Stock to the Selling Shareholders and resold
by the Selling Shareholders and (3) 380,953 shares of Common Stock of the
Company issuable upon the exercise of a warrant issued to Delphi Financial
Corporation ("Delphi"), the Company's Agent in the private placement. The Class
A Convertible Preferred Stock was issued at a price of $13.125 per share and is
convertible into five shares of Common Stock at any time after June 30, 1998. In
addition, for each share of Class A Convertible Preferred Stock acquired, each
investor received a five-year warrant to purchase five shares of Common Stock at
a price $3.50 per share. In connection with the offering, Delphi received a
four-year warrant representing 380,953 shares of Common Stock exercisable at
$2.625 per share. Some of the rights to Common Stock underlying the Delphi
warrant have been transferred to certain Selling Shareholders identified in this
Prospectus.
The Company will not receive any of the proceeds from the sale of the Shares by
the Selling Shareholders except for funds received upon the exercise of
warrants. See "Use of Proceeds." The Company will bear all expenses of the
offering other than underwriting discounts and commissions incurred in
connection with the sale of the Shares by the Selling Shareholders. The Company
and the Selling Shareholders have agreed to indemnify each other against certain
liabilities including liabilities arising under the Securities Act of 1933.
The Company's Common Stock is quoted on the Nasdaq National Market under the
symbol "NAVR." On July 15, 1998, the last reported sale price of the Company's
Common Stock on the Nasdaq National Market was $5.125. For information
concerning risk factors that should be considered by prospective purchasers of
the Common Stock to be offered, SEE "RISK FACTORS" BEGINNING ON PAGE 3 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 JULY 16, 1998
<PAGE>
THE COMPANY
Navarre Corporation ("Navarre" or the "Company"), a Minnesota corporation formed
in 1983, is a major distributor of music, software and interactive CD ROM
products. In addition, through its wholly-owned subsidiary, NetRadio
Corporation, Navarre also owns and operates NetRadio Network, a leading audio
content provider on the Internet. Navarre sells to major music and software
retailers, wholesalers and rackjobbers.
The Company operates through two principal divisions, its Computer Products
Division and its Music Products Division. The only major distributor to
distribute both music and software, the Company is recognized as an industry
leader in the distribution of consumer software in addition to being recognized
as a leader in the distribution of independent music labels and artists. The
Company's product line contains over 20,000 SKU's 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. The Company's
broad base of customers include (i) wholesale clubs, (ii) mass merchandisers,
(iii) computer specialty stores, (iv) music specialty stores and (v) book
stores.
Digital Entertainment, Inc., a wholly-owned subsidiary of the Company, is a
CD-ROM publishing company which has its products exclusively distributed by the
Company through its Computer Products Division.
NetRadio Corporation is the first Internet-only radio network and is currently
one of the world's largest on-demand Webcaster of originally programmed audio
content, with over 150 channels of on-demand music and information.
The Company's executive offices are located at 7400 49th Avenue North, New Hope,
Minnesota 55428 and its phone number is (612) 535-8333.
<PAGE>
RISK FACTORS
THIS PROSPECTUS CONTAINS AND INCORPORATES BY REFERENCE CERTAIN FORWARD-LOOKING
STATEMENTS BASED ON CURRENT EXPECTATIONS WHICH INVOLVE RISKS AND UNCERTAINTIES.
ACTUAL RESULTS AND THE TIMING OF CERTAIN EVENTS MAY DIFFER MATERIALLY FROM THOSE
PROJECTED IN SUCH FORWARD-LOOKING STATEMENTS DUE TO A NUMBER OF RISK FACTORS,
INCLUDING THOSE SET FORTH BELOW. THE COMPANY HAS TRIED, WHEREVER POSSIBLE, TO
IDENTIFY THESE FORWARD-LOOKING STATEMENTS BY USING WORDS SUCH AS "BELIEVE,"
"ANTICIPATE," "ESTIMATE," "EXPECT" AND SIMILAR EXPRESSIONS. THE COMPANY
UNDERTAKES NO OBLIGATION TO RELEASE PUBLICLY THE RESULTS OF ANY REVISIONS TO ANY
SUCH FORWARD- LOOKING STATEMENTS THAT MAY BE MADE TO REFLECT EVENTS OR
CIRCUMSTANCES AFTER THE DATE OF THIS PROSPECTUS OR TO REFLECT THE OCCURRENCE OF
UNANTICIPATED EVENTS.
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 fiscal year ended March 31, 1998, sales to three customers, CompUSA,
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 $45.0
million credit facility in place. At June 19, 1998, the Company had total bank
borrowings of $29.9 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, and certain other covenants 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.
<PAGE>
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, 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 have traditionally been
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, through the
Internet or another delivery mechanism, 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
<PAGE>
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
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 March 1997,
the Company, which had an equity interest in Net Radio Corporation, completed an
acquisition of all of the outstanding stock of Net Radio Corporation
<PAGE>
("Net Radio"), 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. Net Radio owns and
operates the NetRadio Network, an Internet-only radio network. There can be no
assurance that the purchase of Net Radio Corporation will help achieve these
goals. Net Radio has operated at a loss since the Company acquired it.
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 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.
PREFERRED STOCK DIVIDEND
On May 1, 1998, the Company issued its Class A Convertible Preferred stock to
accredited investors in a private placement for aggregate consideration of $20.0
million. The Class A Convertible Preferred Stock was issued at a price of
$13.125 per share and is convertible into five shares of Common Stock at any
time after June 30, 1998. The holders of the Class A Convertible Preferred Stock
are entitled to receive cumulative dividends of 10% per annum payable quarterly
beginning July 1, 1998. The Company's obligation to pay this dividend may
adversely affect the Company's revenues and future profitability.
YEAR 2000
The Company has performed an assessment of its major information technology
systems and expects that all necessary modifications or replacements of existing
systems will be completed prior to December 1998. Progress in this effort is
being monitored by senior management as well as the Audit Committee. Based on
current expenditures and estimates, the costs of addressing issues related to
the Year 2000 are not expected to be material to the financial results or
operations of the Company. The Company intends to contact its significant
vendors and suppliers regarding Year 2000 issues and the status of their
compliance. At this time the impact on the Company of significant vendors and
suppliers are not in full compliance cannot be reasonably estimated. However,
the Company will be developing plans to mitigate the impact of vendors of
suppliers who are not in compliance with issues related to the Year 2000.
USE OF PROCEEDS
The Company will not receive any of the proceeds from the conversion of the
Class A Convertible Preferred Stock or the Common Stock underlying the Class A
Convertible Preferred Stock.
The Company will only receive proceeds from sales of the Shares if the Selling
Shareholders exercise 1,5123,810 five year warrants to purchase 7,619,050 shares
of Common Stock at $3.50 per share, and four year warrants to purchase 380,953
shares of Common Stock at $2.625 per share. If all warrants are exercised, the
Company will receive aggregate proceeds of $27.6 million. There can be no
assurance that any of the warrants will be exercised. If any of the warrants are
exercised, the Company intends to use the proceeds for working capital purposes.
<PAGE>
SELLING SECURITY HOLDERS
The Selling Shareholders in the table below, acquired the Shares from the
Company in a private transaction on May 1, 1998. The Shares represent the Common
Stock of the Company issuable upon the conversion of the Company's Class A
Convertible Stock and the exercise of accompanying warrants that the Company
offered in a private placement on May 1, 1998 to a group of accredited investors
for aggregate consideration of $20.0 million. The Company also issued a
four-year warrant representing 380,957 shares of Common Stock at $2.625 per
share to Delphi, the Company's agent in the private placement. Delphi has
transferred some of the shares covered by its warrant to affiliates as noted
below.
The following table sets forth certain information with respect to the
beneficial ownership of the Company's Common Stock by all Selling Shareholders.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF
COMMON STOCK UPON NUMBER OF SHARES OF MAXIMUM NUMBER NUMBER OF SHARES
CONVERSION OF COMMON STOCK UPON OF SHARES TO BE BENEFICIALLY OWNED
NAME PREFERRED STOCK EXERCISE OF WARRANT SOLD(1) AFTER OFFERING(1)
---- ------------------- ------------------- ------- ------------------
<S> <C> <C> <C> <C>
Alfred & Annie Teo (2) (5)
783 West Shore Drive
Kinnelon, New Jersey 07405........................761,900..................761,900............1,523,800................0
American Gramaphone Company(3).......................403,180..................403,180..............806,360................0
Bernard E. Williams, Jr...............................19,045...................19,045...............38,090................0
Cranshire Capital, L.P...............................419,045..................419,045..............838,090................0
Dakota Partners.......................................80,000...................80,000..............160,000................0
Daniel S. Perkins, Trustee of Trust
for the Benefit of Daniel S. Perkins
Dated May 12, 1988.................................10,000...................10,000...............20,000................0
Daniel S. Perkins and Patrice M. Perkins
Joint Tenants......................................10,000...................20,000...............40,000................0
Delta Plastics Company 401(k) Plan...................190,475..................190,475..............380,950................0
Dennis D. Gonyea......................................10,000...................10,000...............20,000................0
Elmer Salovich........................................38,095...................38,095...............76,190................0
Elara, Ltd...........................................285,000..................285,000..............570,000................0
Ellis Limited Partnership.............................25,000...................25,000...............50,000................0
Goldhawk, Ltd........................................952,380..................952,380............1,904,760................0
H. William Lurton.....................................38,095...................38,095...............76,190................0
Industricorp & Co., Inc. for benefit of
Twin City Carpenter's Pension Plan.................75,000...................75,000..............150,000................0
Irwin and Nora Friedman..............................190,475..................190,475..............380,950................0
Jerry E. Mathwig......................................38,095...................38,095...............76,190................0
K.A. Investments, L.D.C..............................761,900..................761,900............1,523,800................0
KAE Opportunity Master Fund, L.P.....................380,950..................380,950..............761,900................0
Kevin S. Underkofler..................................15,235...................15,235...............30,470................0
Keyway Investments, Ltd..............................761,900..................761,900............1,523,800................0
Gary S. Kohler IRA....................................38,095...................38,095...............76,190................0
Mary Lach.............................................19,045...................19,045...............38,090................0
Namax Corporation.....................................95,235...................95,235..............190,470................0
Nicholson Boys, L.P...................................38,095...................38,095...............76,190................0
Okabena Partnership K................................380,950..................380,950..............761,900................0
PGPI Investors, LLC (5)
3000 Dundee Road, Suite 105
Northbrook, IL 60062................................471,420..................471,420..............942,840................0
Patrice M. Perkins Trustee of Trust
for the Benefit of Patrice M. Perkins
Dated May 12, 1988.................................10,000...................10,000...............20,000................0
Pemigewasset Partners L.P.............................95,235...................95,235..............190,470................0
Pequot Scout Fund, L.P (5)
354 Pequot Avenue
Southport, CT 06490...............................380,950..................380,950..............761,900................0
Perkins Capital Management, Inc.
<PAGE>
Profit Sharing Plan & Trust...........................12,500...................12,500...............25,000................0
Piper Jaffray as Custodian FBO
Richard C. Perkins IRA................................10,000...................10,000...............20,000................0
Piper Jaffray as Custodian FBO
James G. Peters IRA...................................10,000...................10,000...............20,000................0
Piper Jaffray as Custodian FBO
David H. Potter IRA...................................10,000...................10,000...............20,000................0
Pyramid Partners, L.P................................100,000..................100,000..............200,000................0
Robert G. Allison.....................................10,000...................10,000...............20,000................0
Robert D. Furst, Jr...................................80,000...................80,000..............160,000................0
S. Robert Production..................................95,235...................95,235..............190,470................0
Stanford Baratz Revolving Trust
dated September 7, 1994...............................19,045...................19,045...............38,090................0
Tewaukon Partners.....................................20,000...................20,000...............40,000................0
Thomas J. Schrade.....................................57,000...................57,000..............114,000................0
Westfield Performance Fund, L.P......................190,475..................190,475..............380,950................0
Delphi Financial Corp......................................0..................145,716..............145,716................0
Jack Levi(4)...............................................0..................171,430..............171,430................0
Roger Lucas(4).............................................0...................25,713...............25,713................0
Terry Stewart(4)...........................................0...................34,094...............34,094................0
Laura K. Stewart(4)........................................0....................2,000................2,000................0
Amy K. Stewart(4)..........................................0....................2,000................2,000................0
Total..............................................7,619,050................8,000,003...........15,619,053................0
</TABLE>
- ---------------------
(1) Assumes the sale of all the Shares offered by this Prospectus.
(2) Alfred Teo became a member of the Company's Board of Directors on or about
May 1, 1998.
(3) For the past 5 years, American Gramaphone Company has been a significant
supplier of prerecorded music to the Company's Music Products Division.
(4) Transferees at Delphi who acquired their Shares in an authorized transfer
under the warrant issued to Delphi.
(5) Denotes person who is known by the Company to hold five percent or more
voting power of the Common Stock of the Company.
RESALE OF ADDITIONAL SHARES ACQUIRED PURSUANT TO DIVIDEND ON PREFERRED STOCK
Under the terms of the Certificate of Rights and Preferences of the Class A
Convertible Preferred Stock of the Company, the holders of the Preferred Stock
receive cumulative dividends of 10% per annum payable quarterly, beginning on
June 30, 1998. The dividend can be paid in cash or if the preferred shareholder
has so elected, in Navarre Common Stock. Any Common Stock will be accrued and
issued on the same date the preferred shareholder converts the Preferred Stock
into Common Stock, at a conversion price equal to the average closing bid price
of the Common Stock on the last three (3) trading days of the quarter in which
such dividend was accrued (the "Accrued Dividend Conversion Price"). This
Prospectus covers the resale of up to an additional 380,947 shares that may be
issued by the Company and sold by the Selling Shareholders pursuant to this
provision. Because the Company does not yet know to what extent the Selling
Shareholders will elect to receive shares of Common Stock rather than cash, no
amount has not been included in the table above with respect to the Selling
Shareholder.
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,
<PAGE>
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.
INTERESTS OF NAMED EXPERTS AND COUNSEL
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.
The consolidated financial statements of Navarre Corporation at March 31,1998
and 1997, and for each of the fiscal years or periods ended March 31, 1998, 1997
and 1996 appearing in Navarre Corporation's Annual Report on Form 10-K for the
year ended March 31, 1998, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their report thereon included therein and incorporated
by reference and in the registration statement. Such consolidated financial
statements are incorporated by reference in reliance upon such reports given
upon the authority of such firm as experts in accounting and auditing.
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR SECURITIES ACT LIABILITIES
The Company's Bylaws provide for indemnification of directors to the full extent
permitted by the Minnesota Business Corporation Act. Minnesota Statutes Section
302A.521 provides that a Minnesota corporation shall indemnify any director,
officer employee or agent of the corporation made or threatened to be made a
party to a proceeding, by reason of the former or present official capacity of
the person, against judgments, penalties, fines, settlements, and reasonable
expenses incurred by the person in connection with the proceeding if certain
statutory standards are met. "Proceeding" means a threatened, pending or
completed civil, criminal, administrative, arbitration or investigative
proceeding, including one by or in the right of the Company.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers or persons controlling the
registrant pursuant to the foregoing provisions, the registrant has been
informed 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.
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 website that contains
reports, proxy and information statements and other information regarding the
Company. The address of the Commission's website is http://www.sec.gov.
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 of 1933, as amended, with respect to the shares offered by this
Prospectus. This Prospectus does not contain all of the information set forth in
the Registration Statement and its exhibits, certain parts of which were omitted
as permitted by the rules and regulations of the Commission. Such additional
information
<PAGE>
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 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 is qualified
in all respects by such reference.
No person is authorized to give information or to make any representations,
other than those contained or incorporated by reference in this Prospectus, in
connection with this offering, and, if given or made such information or
representations must not be relied upon as having been authorized by the
Company. This Prospectus does not constitute an offer to sell or a solicitation
of an offer to buy any securities other than the registered securities to which
it relates. This Prospectus does not constitute an offer to sell or a
solicitation of an offer to buy any securities in any jurisdiction to any person
to whom it is unlawful to make such an offer or solicitation in such
jurisdiction. Neither the delivery of this Prospectus nor any sale made
hereunder shall under any circumstances, create any implication that there has
been no change in the affairs of the Company since the date of this Prospectus,
or that the information contained or incorporated by reference in this
Prospectus is correct as of any time subsequent to its date.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents, filed with the Commission by the Company under the
Exchange Act (File No. 0-22982) are incorporated by reference in this
Prospectus:
(i) The Company's Report on Form 10-K for the year ended March 31,
1998; and
(ii) The Company's Current Report on Form 8-K dated May 1, 1998; and
(iii) The Company's definitive Proxy Statement dated May 29, 1998 for
its Special Meeting of Shareholders held June 19, 1998; 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 shall be deemed
to be modified or superseded for purposes of this Prospectus to the extent that
a statement contained in this Prospectus or in any other subsequently filed
document which also is or is deemed to be incorporated by reference 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 or
delivered with this Prospectus. 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, 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.
