SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant [ ]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[X] Preliminary proxy statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[ ] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
NAVARRE CORPORATION
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(Name of Registrant as Specified in Its Charter)
Minnesota 41-1704319
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
0-22982
(Commission File Number)
7400 49th Avenue North
New Hope, Minnesota 55428
(Address of principal executive (Zip Code)
offices)
Registrant's telephone number, including area code: (612) 535-8333
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
(2) Aggregate number of securities to which transactions applies:
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11. (Set forth the amount on which the
filing fee is calculated and state how it was determined.)
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(4) Proposed maximum aggregate value of transaction:
(5) Total fee paid:
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount previously paid:
(2) Form, Schedule or Registration Statement No.:
(3) Filing party:
(4) Date filed:
<PAGE>
NAVARRE CORPORATION
7400 49TH AVENUE NORTH
NEW HOPE, MN 55428
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
JUNE 19, 1998 AT 1:00 P.M.
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TO NAVARRE CORPORATION SHAREHOLDERS:
The Special Meeting of Shareholders (the "Special Meeting") of Navarre
Corporation (the "Company") will be held June 19, 1998 at 1:00 p.m., local time,
at the headquarters of Navarre Corporation, 7400 49th Avenue North, New Hope,
Minnesota 55428, for the following purposes:
1. To ratify and approve an amendment to the Company's Articles
of Incorporation to increase the number of authorized shares
of Common and Preferred Stock.
2. To transact such other business as may properly come before
the meeting or any adjournments thereof.
Shareholders of record at the close of business on May 18, 1998 will be entitled
to vote at the Special Meeting or any adjournments or postponements thereof. All
shareholders are cordially invited to attend the Special Meeting.
IF YOU DO NOT EXPECT TO BE PRESENT AT THE SPECIAL MEETING, YOU ARE REQUESTED TO
FILL IN, DATE AND SIGN THE ENCLOSED PROXY AND TO MAIL IT PROMPTLY IN THE
ENCLOSED ENVELOPE TO MAKE SURE THAT YOUR SHARES ARE REPRESENTED AT THE SPECIAL
MEETING. IN THE EVENT YOU DECIDE TO ATTEND THE SPECIAL MEETING IN PERSON, YOU
MAY, IF YOU DESIRE, REVOKE YOUR PROXY AND VOTE YOUR SHARES IN PERSON.
By Order of the Board of Directors
Charles E. Cheney
Secretary
May 26, 1998.
<PAGE>
NAVARRE CORPORATION
7400 49TH AVENUE SOUTH
NEW HOPE, MN 55428
(612) 535-8333
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PROXY STATEMENT
SPECIAL MEETING OF SHAREHOLDERS
JUNE 19, 1998
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SOLICITATION OF PROXIES
This Proxy Statement is being furnished to the shareholders of Navarre
Corporation (the "Company") in connection with the solicitation of proxies by
the Board of Directors of the Company (the "Board of Directors") for use at the
Special Meeting of Shareholders (the "Special Meeting") to be held on June 19,
1998 at 1:00 p.m., local time, at the headquarters of Navarre Corporation, 7400
49th Avenue South, New Hope, Minnesota 55428 and at any adjournments or
postponements thereof. This Proxy Statement and accompanying proxy are first
being mailed to the shareholders of the Company on or about May 26, 1998.
The cost of preparing, assembling, and mailing the proxy material and of
reimbursing brokers, nominees, and fiduciaries for the out-of-pocket and
clerical expenses of transmitting copies of the proxy material to the beneficial
owners of shares held of record by such persons will be borne by the Company.
The Company does not intend to solicit proxies otherwise than by use of the
mail, but certain officers and regular employees of the Company or its
subsidiaries, without additional compensation, may use their personal efforts,
by telephone or otherwise, to obtain proxies.
The Company has two classes of stock, no par value common stock and no par value
Class A Convertible Preferred Stock ("Common Stock" and "Preferred Stock"
respectively). Only holders of record of shares of the Company's Common Stock
and Preferred Stock at the close of business on May 18, 1998, will be entitled
to notice of and to vote at the Special Meeting and any adjournment thereof.
The securities of the Company outstanding as of May 18, 1998, the record date
for the Special Meeting consist of 7,009,170 shares of Common Stock, each share
being entitled to one vote, and 1,523,810 shares of Preferred Stock, each share
of Preferred Stock is convertible into five shares of Common Stock, and is
entitled to five votes. The total shares eligible to vote at the Special Meeting
is expected to be 14,247,450. This represents 7,009,170 shares of Common Stock,
and 7,238,280 shares of Common Stock into which the Preferred Stock is
convertible. Although the Preferred Stock is convertible into five shares of
Common Stock, certain holders of Preferred Stock have entered into agreements
with the Company ("Five Percent Letters"), under which these holders agree that,
notwithstanding the number of shares of Common Stock they may be entitled to
vote based upon their Preferred Stock or warrants, they will exercise voting
power with respect to no greater than 4.9% of the number of shares of the
Company's issued and outstanding Common Stock as calculated in accordance with
Rule 13d-3 of the Regulations of the Securities Exchange Act of 1934.
Shareholders do not have the right to cumulate votes for the election of
directors.
<PAGE>
The enclosed proxy may be revoked at any time before it is voted by the
execution and delivery of a proxy bearing a later date or by notification in
writing given to the Secretary of the Company prior to the meeting. The enclosed
proxy may also be revoked by attending the meeting and electing to vote in
person.
The enclosed Board of Directors' proxy, when properly signed and returned to the
Company, will be voted at the Special Meeting as directed. Proxies in which no
direction is given with respect to the various matters of business to be
transacted at the meeting will be voted FOR Proposal No. 1. While the Board of
Directors knows of no matters to be presented at the Special Meeting or any
adjournment thereof, all proxies returned to the Company will be voted on any
such matter in accordance with the judgment of the proxy holders.
A quorum, consisting of a majority of the shares of Common Stock entitled to
vote at the Special Meeting, must be present in person or by proxy before action
may be taken at the Special Meeting. If an executed proxy is returned and the
shareholder has abstained from voting on any matter, the shares represented by
such proxy will be considered present at the meeting for purposes of determining
a quorum and for purposes of calculating the vote, but will not be considered to
have been voted in favor of such matter. If an executed proxy is returned by a
broker holding shares in "street name" which indicates that the broker does not
have discretionary authority as to certain shares to vote on one or more
matters, such shares will be considered present at the meeting for purposes of
determining a quorum, but will not be considered to be represented at the
meeting for purposes of calculating the vote with respect to such matters.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of May 1, 1998 with
respect to the beneficial ownership of the Common Stock or Preferred Stock of
the Company by (i) all persons who are known by the Company to hold five percent
or more of the Common Stock of the Company, (ii) each of the directors of the
Company, and (iii) all directors and officers of the Company as a group. Because
the Preferred Stock has voting rights equal to the Common Stock into which it is
convertible, all Preferred Stock (other than shares with respect to those
shareholders who have executed Five Percent Letters with the Company) is treated
as outstanding.
<TABLE>
<CAPTION>
Common Stock
Name and Address Underlying Options and Percent of Common
of Beneficial Owner Common Stock Preferred Stock Warrants(1) Shares Outstanding
- ------------------- ------------ --------------- ----------- ------ -----------
<S> <C> <C> <C> <C>
Eric H. Paulson 2,405,657(2) 270,000 18.4%
7400 49th Avenue North
New Hope, MN 55428
Charles E. Cheney 690,730 196,250 6.1%
7400 49th Avenue North
New Hope, MN 55428
Dickinson G. Wiltz 211,500 51,876 1.8%
7141 Willow Creek Road
Eden Prairie, MN 55344
<PAGE>
James G. Sippl 10,000 36,400 *
One Merrill Circle
St. Paul, MN 55108
Michael L. Snow 1,135 30,000 *
3300 Norwest Center
Minneapolis, MN 55402
Alfred Teo 761,900 761,900 10.2%
783 West Shore Drive
Kinnelon, New Jersey 07405
Pequot Scout Fund, L.P. 380,950 380,950 5.2%
354 Pequot Avenue
Southport, Ct 06490
Paradigm Group, L.L.C. 471,420 471,420 6.4%
3000 Dundee Road, Suite 105
Northbrook, IL 60062
All directors and officers 3,319,040 761,900 1,346,426 27.5%
as a group (6 persons)
</TABLE>
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* Indicates ownership of less than one percent.
(1) Includes shares of Common Stock issuable upon exercise of outstanding
options and warrants exercisable within 60 days of as of May 1, 1998.
(2) Includes 35,141 shares of Common Stock beneficially owned by members of
Mr. Paulson's family. All of the shares beneficially owned by Mr.
Paulson are subject to voting trust agreements through which he has
sole voting discretion. The voting trust agreements also grant Mr.
Paulson a right of first refusal to purchase the underlying shares.
PROPOSAL 1 - AMENDMENT TO ARTICLES OF INCORPORATION
TO INCREASE THE AMOUNT OF AUTHORIZED COMMON AND PREFERRED STOCK
The Board of Directors has unanimously approved an amendment to the Company's
Articles of Incorporation and recommends that the shareholders approve the
amendment by voting in favor of Proposal One. Proposal One would amend the
Articles of Incorporation to authorize fifty million (50,000,000) shares of no
par value
<PAGE>
common stock, and up to ten million (10,000,000) shares of no par value
preferred stock which would be available for issuance by the Board of Directors.
The Board believes adoption of this proposal is in the best interests of all the
shareholders and recommends that shareholders vote in favor of its adoption.
Proposed Article One would authorize fifty million (50,000,000) shares of common
stock no par value. The newly authorized common stock will have the same voting
rights, dividend rights, dividend rate, redemption rights or privileges, rights
on liquidation or dissolution, conversion rights and privileges, sinking or
purchase fund rights and other preferences, privileges and restrictions as the
current issued and outstanding Common Stock.
The Company recently completed a private placement (`Private Placement") to
certain accredited investors (the "Investors") of $20 million of convertible
preferred stock units. The convertible preferred stock unit was priced at
$13.125 per share, is convertible into five shares of Common Stock, and includes
a five year warrant to purchase five shares of the Company's Common Stock at
$3.50 per share. The proceeds of the Private Placement are being used by the
Company for working capital purposes. The Company currently has a $45 million
credit facility with a financial institution. The funds from the Private
Placement together with the credit facility are the primary sources used by the
Company to support its operations.
The Company sold an aggregate 1,523,810 shares of Preferred Stock in connection
with the Private Placement, these shares are convertible into an aggregate
7,619,050 shares of the Company's Common Stock. The Company also issued warrants
to purchasers in an aggregate amount of 7,619,050 shares of the Company's Common
Stock. Together, the convertible preferred stock units represent rights to
15,238,100 shares of Common Stock. The Company presently has twenty million
(20,000,000) shares of Common Stock authorized, and 7,009,170 shares
outstanding. Absent an increase in the number of authorized shares of Common
Stock, the Company has an insufficient amount of authorized shares of Common
Stock to satisfy the conversion of all of the issued and outstanding Preferred
Stock, and the exercise of all of the warrants issued in connection with the
Private Placement. In connection with the Private Placement, the Company agreed
to call this Special Meeting to increase its authorized capital.
In addition to permitting conversion of the Investor's Preferred Stock and
Warrants, the Board has also concluded that it would be appropriate to have
available common stock so that management would have greater flexibility in
acquisitions and financing. Therefore the Board recommends increasing the amount
of authorized Common Stock to fifty million (50,000,000) shares.
Proposed Article One would also authorize ten million (10,000,000) shares of
preferred stock no par value. The Board of Directors will be authorized to
determine, without any further action by the holders of the Company's Common
Stock, the voting rights, dividend rights, dividend rate, redemption rights or
privileges, rights on liquidation or dissolution, conversion rights and
privileges, sinking or purchase fund rights and other preferences, privileges
and restrictions of any series of preferred stock, the number of shares
constituting any such series, and the designation thereof. Should the Board of
Directors elect to exercise its authority, the rights, preferences and
privileges of holders of the Company's Common Stock would be made subject to the
rights, preferences and privileges of the preferred stock. The Board of
Directors used this authority to designate the rights, preferences and
privileges of the Company's issued and outstanding Class A Convertible Preferred
Stock offered in connection with the Private Placement.
The Board has also determined with respect to the preferred stock that it would
be appropriate to have available preferred stock so that management would have
greater flexibility in acquisitions and financing. If the proposal
<PAGE>
to authorize preferred stock is approved, the Board of Directors would be
authorized to determine the conditions and terms for the issuance of preferred
stock. The Board has no present plans to utilize any additional shares of
preferred stock.
Although the Board of Directors has no present plans to do so, authorized and
unissued common stock and preferred stock could be issued in one or more
transactions with terms, provisions and rights which would make more difficult
and, therefore, less likely, a takeover of the Company. Any such issuance of
additional shares could have the effect of diluting the earnings per share and
book value per share of existing shares of Common Stock, and such additional
shares could be used to dilute the share ownership of persons seeking to obtain
control of the Company. The Board and its financial and legal advisers are aware
that a number of corporations have adopted special "shareholders' rights plans"
or "poison pills" with a view toward creating significant defensive mechanisms
against the possibilities of hostile take-over actions. Whether or not the
proposed amendment to the Articles of Incorporation is adopted by shareholders,
the Board could determine to implement a shareholders' rights plan in the
future. The Board has no present intention to propose in the future any other
amendments to the Company's Articles or Bylaws which might be considered
anti-takeover devices.
As indicated above, the voting rights to be accorded to any shares of preferred
stock to be issued remain to be fixed by the Board of Directors. Accordingly, if
the Board of Directors so authorizes, the holders of preferred stock may be
entitled to vote separately as a class in connection with the approval of
certain extraordinary corporate transactions in circumstances where Minnesota
law does not require such class vote, or might be given a disproportionately
large number of votes. Such shares of preferred stock could also be convertible
into a large number of shares of Common Stock under certain circumstances or
have other terms which might make acquisition of a controlling interest in the
Company more difficult or more costly. Potentially, the preferred stock could be
used to create voting impediments or to frustrate persons seeking to effect a
merger or otherwise gain control of the Company. Also, the preferred stock could
be privately placed with purchasers who might side with the management of the
Company in opposing a hostile tender offer or other attempt to obtain control.
Issuance of preferred stock as an anti-takeover device might preclude
shareholders from taking advantage of a situation which they may consider to be
favorable to their interests.
In addition, if the proposal described herein are adopted, the Board of
Directors could, although it has no present intention of doing so, authorize the
issuance of Common Stock or preferred stock to a holder who might thereby obtain
sufficient voting power to ensure that any proposal to remove directors, or to
alter, amend or repeal the Articles, would not receive the requisite shareholder
vote required to remove the directors or amend the Articles.
The affirmative vote of the holders of a majority of the common stock entitled
to vote at the meeting is necessary to approve Proposal One. If not otherwise
specified, properly executed proxies will be voted in favor of Proposal One.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE FOLLOWING RESOLUTION THAT
WILL BE PRESENTED AT THE SPECIAL MEETING:
RESOLVED, that Article VI of the Articles of Incorporation of
the Company be, and it hereby is, amended to read as set forth
in Exhibit A to the Proxy Statement distributed in connection
with the Special Meeting of Shareholders of the Company.
<PAGE>
THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE FOR THE APPROVAL OF
THE AMENDMENT AS SET FORTH IN PROPOSAL 1.
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GENERAL
SHAREHOLDERS PROPOSALS
The proxy rules of the Securities and Exchange Commission permit shareholders of
a company, after timely notice to the company, to present proposals for
shareholder action in the Company's proxy statement where such proposals are
consistent with applicable law, pertain to matters appropriate for shareholder
action and are not properly omitted by company action in accordance with the
proxy rules. The Navarre Corporation 1999 Annual Meeting of Shareholders is
expected to be held in September 1999, and proxy materials in connection with
that meeting are expected to be mailed on or about July 26, 1999. Shareholder
proposals prepared in accordance with the proxy rules must be received by the
Company on or before March 26, 1999.
OTHER BUSINESS
All items of business intended by the management to be brought before the
meeting are set forth in the Proxy Statement, and the management knows of no
other business to be presented. If other matters of business not presently known
to the Board of Directors shall be properly raised at the Annual Meeting, it is
the attention of the persons named in the proxy to vote on such matters in
accordance with their best judgment.
Shareholders may receive without charge a copy of the Company's Annual Report
and Form 10-K, including financial statements and schedules thereto, as filed
with the Securities and Exchange Commission, by writing to: Navarre Corporation,
7400 49th Avenue North, New Hope, MN 55428, Attention: Charles E. Cheney, or by
calling the Company at (612) 535-8333.
By Order of the Board of Directors
Charles E. Cheney
Secretary
Dated: May 26, 1998
<PAGE>
EXHIBIT A
Article VI of the Company's Articles of Incorporation is hereby amended to
provide as follows:
ARTICLE VI
The aggregate number of shares that the Corporation has authority to issue shall
be 60,000,000 shares, no par value per share, which shall consist of 50,000,000
shares of common stock and 10,000,000 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 the shareholders of the
Corporation. The shareholders of the Corporation shall not have pre-emptive
rights to subscribe for or acquire securities or rights to purchase securities
of any kind, class or series of the Corporation.
