UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-K/A
AMENDMENT NO.1 TO FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1999
Commission File Number 0-22982
NAVARRE CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
MINNESOTA 41-1704319
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7400 49TH AVENUE NORTH, NEW HOPE, MN 55428
(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 535-8333
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: COMMON STOCK,
NO PAR VALUE
Indicate by checkmark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes (x) No ( )
Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. ( )
As of June 21, 1999, the aggregate value of the Company's Common Stock held by
non-affiliates of the Company was $229,461,245 based on the last reported sale
price of $9.81 on the Nasdaq Stock Market on that date.
As of June 21, 1999, the Company had outstanding 23,383,394 shares of Common
Stock, no par value.
DOCUMENTS INCORPORATED BY REFERENCE
None.
<PAGE>
PART III
The following items are amended to read as follows:
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Pursuant to the terms of the Amended and Restated Articles of Incorporation of
the Company, directors are divided into three classes, with the term of one
class expiring each year. As the term of each class expires, the successors to
the directors in that class will be elected for a term of three years. The terms
of Messrs. Eric H. Paulson and James G. Sippl expire at the Annual Meeting of
Shareholders following fiscal year 1999, the terms of Mr. Michael L. Snow and
Mr. Alfred Teo expire at the Annual Meeting of Shareholders following fiscal
year 2000 and the terms of Messrs. Charles E. Cheney and Dickinson G. Wiltz
expire at the Annual Meeting of Shareholders following fiscal year 2001.
Vacancies on the Board of Directors and newly created directorships can be
filled by vote of a majority of the directors then in office.
Two directors will be elected at the Annual Meeting to serve until the Annual
Meeting of Shareholders following fiscal year 2002 or until their successors are
elected. The Board of Directors has nominated for election the persons named
below. Each nominee is currently a director and was elected by the shareholders.
Unless otherwise indicated, each director has been engaged in his present
occupation as set forth below, or has been an officer with the organization
indicated, for more than four years. The names of the nominees and other
directors filling unexpired terms are set forth below, based upon information
furnished to the Company by the nominees and directors.
Name and Age Principal Occupation and Other Directorships
- --------------------------------------------------------------------------------
NOMINEES PROPOSED FOR ELECTION FOR TERM EXPIRING AT THE ANNUAL MEETING FOLLOWING
FISCAL 2002
Eric H. Paulson(54).......... Mr. Paulson is the founder and has been
president and chief executive officer of the
Company since its inception in 1983. Mr. Paulson
also served as the executive vice president and
chief operating officer at Lieberman
Enterprises, Inc. during the period from January
1990 to October 1991 when Live Entertainment,
Inc., and Lieberman Enterprises, Inc. owned the
Company. Prior to 1983, Mr. Paulson served as
senior vice president and general manager of
Pickwick Distribution Companies, a distributor
of records and tapes. Mr. Paulson has been a
director of the Company since October 1991. He
was also a director from the time of the
inception of the Company in 1983 until the Live
Entertainment acquisition in 1990. Mr. Paulson
is also chairman of NetRadio Corporation.
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James G. Sippl(51)........... Mr. Sippl has served as a director of the
Company since July 1993. Mr. Sippl has served as
a financial consultant for Sippl & Associates
since May 1998. Prior to that Mr. Sippl was
chief operating officer of IntraNet Solutions, a
software company from January 1997 to May 1998.
Mr. Sippl has served as vice president of
business development, with Merrill Corporation,
a financial printer from November 1990 to
January 1997. Prior to joining Merrill
Corporation, Mr. Sippl was president of Chicago
Cutlery, a manufacturer of fine cutlery, from
1985 to 1989. From 1970 to 1985, Mr. Sippl was
employed at Coopers & Lybrand, most recently as
a partner.
DIRECTORS SERVING CONTINUING TERMS.
Charles E. Cheney(56)........ Mr. Cheney has served as executive vice
president and chief financial officer of the
Company since 1985. Mr. Cheney has been a
director of the Company since October 1991. Mr.
Cheney also served as senior vice president of
Lieberman Enterprises, Inc., and general manager
of the Company during 1990 and 1991. Prior to
joining the Company, Mr. Cheney was employed by
Control Data Corporation in various financial
capacities for twelve years, most recently as
controller of Control Data Commerce
International. Mr. Cheney is a certified public
accountant.
Michael L. Snow(48).......... Mr. Snow has served as a director of the Company
since April 1995. Mr. Snow is of counsel with
the Minnesota law firm of Maslon Edelman Borman
& Brand, a Limited Liability Partnership, which
he joined in 1976. He has served as a director,
officer or founder in numerous public and
private corporations and currently serves as a
director of Osmonics, Inc. and Satellite
Industries, Inc.
Alfred Teo(53)............... Mr. Teo has served as a director of the Company
since May 1998. Mr. Teo is chairman and chief
executive officer of The Sigma Plastics Group
which he started in 1979. He is a member of the
board of directors of Fleet Bank NA, American
Bank Note and Cirrus Logic. Mr. Teo is also
member of the board of trustees of St. Joseph's
Hospital and Medical Center and a trustee for
Stevens Institute of Technology. In addition,
Mr. Teo is the chairman and chief executive
officer of Hillman Eye Center and Alpha
Technology, Inc.
Dickinson G. Wiltz(70)....... Mr. Wiltz has served as a director of the
Company since October 1991. He was also a
director from the time of inception of the
Company in 1983 until the Live Entertainment
acquisition in 1990. Mr. Wiltz has been a
self-employed business management consultant
since 1974.
DIRECTOR COMPENSATION
The non-employee members of the Board of Directors each receive $500 per
meeting. Under the terms of the Company's 1992 Stock Option Plan, each
non-employee director is to receive on April 1 of each year beginning April
1997, a non-qualified stock option to purchase 6,000 shares of Company common
stock
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at the fair market value on the day of the grant. Pursuant to the Plan, each of
Messrs. Sippl, Snow and Wiltz received options to purchase 6,000 shares at a
price of $2.5625 on April 1, 1998 and each of Messrs. Sippl, Snow, Wiltz and Teo
received options to purchase 6,000 shares at a price of $15.375 on April 1,
1999.
BOARD ACTIONS AND COMMITTEES
During fiscal 1999, the Board of Directors held eight formal meetings and each
director attended seventy-five percent or more of the meetings of the Board and
of the committees on which the directors served. Board members also met
informally during fiscal 1999 to discuss various aspects of the business affairs
of the Company.
The Board of Directors has established an Audit Committee and Compensation
Committee. The Audit Committee of the Board of Directors for fiscal 1999 was
comprised of James G. Sippl and Michael L. Snow who are non-employee directors
of the Company. The Audit Committee annually recommends independent accountants
for appointment by the Board of Directors, reviews the services to be performed
by the independent accountants, and receives and reviews the reports submitted
by them. During fiscal year ended March 31, 1999, the Audit Committee held two
meetings.
The Compensation Committee of the Board of Directors for fiscal 1999 was
comprised of Mr. Sippl and Mr. Teo who are non-employee directors of the
Company. The Compensation Committee has general responsibility for all employee
compensation, bonus and benefit matters, including recommendations to the full
Board on compensation arrangements of officers and directors, bonuses, benefit
plans and stock option grants. The Compensation Committee held two meetings
during fiscal year ended March 31, 1999.
The Company does not have a nominating committee. The officers of the Company
are appointed by the Board of Directors and hold office until their successors
are chosen and qualified or until their earlier death, resignation or removal
from office.
EXECUTIVE OFFICERS OF THE COMPANY
The Company's executive officers and other key members of management are as
follows:
Name Age Position with the Company
---- --- -------------------------
Eric H. Paulson 54 Chairman of the Board, President and Chief Executive
Officer
Charles E. Cheney 56 Secretary, Treasurer and Director, Executive Vice
President and Chief Financial Officer
James S. Chiado 49 Vice President and General Manager, Independent Music
Division
Kathleen A. Conlin 55 Vice President, Corporate Controller
Thomas J. Lenaghan 49 Vice President and General Manager, Alternative
Retail Marketing
Edward A. Tomechko 50 Chief Executive Officer and Director, NetRadio
Corporation
John Turner 45 Vice President, Operations
Ian R. Warfield 51 Vice President and General Manager, Computer Products
Division
The following is a brief summary of the business experience of each of the key
members of management of the Company. Information with respect to Mr. Paulson
and Mr. Cheney is set forth above.
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JAMES S. CHIADO has been vice president and general manager,
Independent Music Division since joining the Company in March 1998. Prior to
joining the Company, Mr. Chiado was senior vice president of sales at Simitar
Entertainment from 1997 to 1998, senior vice president of sales and marketing at
Essec Entertainment from 1994 to 1997 and senior vice president of sales at
Arista Records from 1991 to 1993. In addition, Mr. Chiado's twenty-five year
industry career included various management positions with CBS Records and Sony
Music Distribution for more than sixteen years.
KATHLEEN A. CONLIN has been vice president, corporate controller since
1995. Prior to that, she served as controller, accounting manager and full
charge bookkeeper since joining the Company in April of 1984.
THOMAS J. LENAGHAN has been vice president and general manager,
Alternative Retail Marketing since joining the Company in June 1997. Prior to
joining the Company, Mr. Lenaghan was employed by the Handleman Company for
twelve years, most recently as vice president of sales. In addition, Mr.
Lenaghan's career covers a total of twenty-five years in the music industry in
various management positions with both Handleman and Pickwick International.
EDWARD A. TOMECHKO has served as President, Chief Financial Officer and
director of NetRadio Corporation since January 1999 and served as Chief
Financial Officer from August 1998 until March 15, 1999. From April 1997 to
April 1998, Mr. Tomechko served as Senior Vice President and Chief Financial
Officer of David's Bridal, Inc. From January 1996 to April 1997, Mr. Tomechko
was Senior Vice President and Chief Financial Officer of the County Seat Stores,
Inc., and from 1990 to 1996, Mr. Tomechko served as Vice President and Treasurer
of County Seat. In October 1996, County Seat filed a voluntary petition for
reorganization under Chapter 11 of Title 11 of the United States Code, In the
United States Bankruptcy Court for the District of Delaware. On October 29,
1997, the Plan of Reorganization was consummated.
JOHN TURNER has been vice president of operations since joining the
Company in September 1995. Prior to joining Navarre, Mr. Turner was senior
director of distribution for Nordic Track in Chaska, MN from July 1993 to
September 1995. Prior to that he held various positions in logistics in the
United States and in the United Kingdom.
IAN R. WARFIELD has been vice president and general manager, Computer
Products Division since joining the Company in January 1998. Prior to joining
Navarre, Mr. Warfield served as senior vice president of sales and marketing for
Point Group Corporation from November 1994 to January 1998, a provider of global
OEM software services. In addition, Mr. Warfield's twenty-year industry career
included senior management roles at Software, Etc. from March 1992 to February
1994 and Technology Marketing Group from March 1990 until February 1992. His
consulting experience as a former partner at the national consulting firm IMS
from April 1994 until November 1995 included the provision of strategic,
tactical and process consulting to IBM, Compaq, Hewlett Packard, Samsonite and
American Airlines.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires the
Company's directors and executive officers, and persons who own more than 10
percent of a registered class of the Company's equity securities, to file with
the Securities and Exchange Commission initial reports of ownership and reports
of changes in ownership of Common stock and other equity securities of the
Company. These insiders are required by Securities and Exchange Commission
regulations to furnish the Company with copies of all Section 16(a) forms they
file, including Forms 3, 4 and 5. Based upon its review of Forms 3, 4 and 5
filed by the Company's insiders, the Company believes all such forms with
respect to transactions occurring in fiscal 1999 were filed on a timely basis.
During fiscal 1999, Charles E. Cheney and Dickinson G. Wiltz each failed to
report in a timely manner one transaction. During fiscal 1999, Alfred Teo failed
to report in a timely manner two filings, which related to 28 transactions.
ITEM 11. EXECUTIVE COMPENSATION
The following table sets forth the annual compensation and other components of
compensation for the fiscal years ending March 31, 1999, 1998, and 1997, for
Eric H. Paulson, the chief executive officer of the Company, Charles E. Cheney,
and Guy M. Marsala, the only other executive officers of the Company
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whose total cash compensation exceeded $100,000 (together, the "Named Executive
Officers") during the fiscal year ended March 31, 1999.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Long-Term
Compensation
Annual Compensation Awards
------------------- ------
Securities
Name and Fiscal Other Annual Underlying All Other
Principal Position Year Salary Bonus Compensation Options Compensation
- -------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Eric H. Paulson 1999 $293,082 $125,000 -- 100,000 $ 77,500(2)
Chairman of the Board, 1998 $246,542 -- -- 75,000 $ 72,000(2)
Chief Executive Officer 1997 $249,246 $172,000(3) $ 11,769(1) -- --
and President
Charles E. Cheney 1999 $205,385 $ 75,000 $ 9,000(1) 100,000 $ 77,500(2)
Executive Vice President 1998 $180,769 -- $ 9,000(1) 45,000 $ 72,000(2)
Chief Financial Officer 1997 $174,680 $ 87,600(3) $ 9,000(1) -- --
Secretary and Treasurer
Guy M. Marsala (4) 1999 $128,250 $100,000 $ 5,711(1) 80,000 --
Chief Operating Officer 1998 $195,000 -- $ 9,000(1) -- --
1997 $ 67,500 -- $ 3,115(1) -- --
</TABLE>
(1) Represents car allowance.
(2) Amounts reflect loan guarantee fees paid to both Mr. Paulson and Mr. Cheney
in consideration of their guarantees of the Company's obligations.
(3) Amounts reflect $86,000 for Eric H. Paulson and $43,800 for Charles E.
Cheney, which was accrued in fiscal 1996 but not paid until 1997.
(4) Employment terminated on November 10, 1998.
EMPLOYMENT AGREEMENTS
The Company entered into employment agreements (the "Employment Agreements")
with Mr. Paulson and Mr. Cheney effective October 1, 1996. The Employment
Agreements protect the proprietary rights of the Company to all material and
ideas developed by Mr. Paulson and Mr. Cheney during their employment and
prohibit the disclosure of any confidential matters by these employees during or
after their employment with the Company. The agreement with Mr. Paulson
terminates on September 30, 2001 and is automatically renewable for one-year
periods. The agreement currently provides for a base salary of $300,000 per
year, subject to annual adjustments by the Board of Directors, and a year end
bonus of up to eighty percent of his base salary.
The agreement with Mr. Cheney terminates on September 30, 2001 and is
automatically renewable for one-year periods. The agreement currently provides
for a base salary of $210,000 per year, subject to annual adjustments by the
Board of Directors, and a year end bonus of up to sixty percent of his base
salary.
Under the terms of the Employment Agreements, if the employment of either
Messrs. Paulson or Cheney is terminated without cause by the Company or by the
employee, for the employee cause as defined in the Agreements, the Employment
Agreements require the payment to Messrs. Paulson and Cheney respectively of (i)
their base salaries through the end of the term of the Agreement or for two
years, whichever is more, in exchange for a properly executed non-compete
agreement between the employee
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and the Company and (ii) certain benefits to Mr. Paulson for the greater of two
years or the remaining term of the Agreement and Mr. Cheney for the greater of
one year or the remaining term of the Agreement. In addition, if the termination
by the Company without cause or by the employee for employee cause occurs after
the change of control or ownership of the Company, the employee is entitled to
receive benefits equal to the amount determined by multiplying 2.99 by the
average annual compensation and fringe benefits paid to the employee over the
five most recent fiscal years, an amount currently equal to approximately
$1,024,503 with respect to Mr. Paulson, $681,844 with respect to Mr. Cheney. The
Agreements further provide, however, that in no event shall the amount due and
payable be such that it would constitute a "parachute payment" within the
meaning of the Internal Revenue Code, and that, in the event that any portion of
the severance payment would be deemed a parachute payment, then the amount of
the severance payment would be reduced to the extent necessary to eliminate such
treatment or characterization.
STOCK OPTION PLAN
The Company's 1992 Stock Option Plan (the "Stock Plan") was approved by the
Board of Directors on September 1, 1992. A total of 2,174,000 shares of the
Company's authorized common stock are reserved for issuance under the Stock Plan
and an additional 1,300,000 shares have been authorized pending shareholder
approval at the Annual Shareholders Meeting. The purpose of the Stock Plan is to
attract and retain talented employees, non-employee directors, consultants and
independent contractors, as well as reward such persons who contribute to the
achievement to the Company's economic objectives, by giving them a proprietary
interest in the Company. The Stock Plan provides for both incentive stock
options and non-statutory stock options. Incentive stock options are granted at
an exercise price based upon fair market value and receive favorable tax
treatment under the Internal Revenue Code. Non-statutory stock options are
granted at an exercise price determined by the Board of Directors and do not
qualify for favorable tax treatment.
The following table provides required information concerning the year end value
of stock options under the Stock Plan to highly compensated executive officers
of the Company identified on the table below. The following table sets forth
certain information regarding stock options granted to the executive officers
named in the Summary Compensation Table during the Company's 1999 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
---------------------------------------------------------------- POTENTIAL REALIZABLE
PERCENT OF VALUE AT ASSUMED
NUMBER OF TOTAL OPTIONS ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR
UNDERLYING EMPLOYEES IN EXERCISE EXPIRATION OPTION TERM(1)
NAME OPTIONS GRANTED FISCAL YEAR PRICE ($/Sh) DATE 5% 10%
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Eric H. Paulson 100,000 19.4 $2.9375 10/19/04 $81,172 $179,368
Charles E. Cheney 100,000 19.4 $2.9375 10/19/04 $81,172 $179,368
Guy M. Marsala(2) 80,000 15.6 $3.7500 11/10/98 $82,884 $183,153
</TABLE>
(1) Represents the potential realizable value of grant of options assuming that
the market price of the underlying common stock appreciates in value from its
fair market value on the date of the grant to the end of the option term at the
indicated annual rates.
(2) Mr. Marsala's options expired after termination of his employment.
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The following table sets forth information with respect to the Company's
executive officers concerning the exercise of options during fiscal 1999 and
unexercised options held at March 31, 1999.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES(1)
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
SHARES NUMBER OF UNEXERCISED IN-THE-MONEY
ACQUIRED VALUE OPTIONS AT YEAR END OPTIONS AT YEAR END
NAME ON EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Eric H. Paulson 205,000 2,258,888 40,000 230,000 467,500 2,135,500
Charles E. Cheney 40,000 513,700 125,000 170,000 1,391,458 1,865,780
Guy M. Marsala 112,000 1,103,750 -- -- -- --
</TABLE>
(1) Based on the difference between the March 31, 1999 closing price of $13.9375
per share as reported on the Nasdaq Stock Market and the exercise price of the
options.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information as of July 1, 1999 with
respect to the beneficial ownership of the common 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 and current Named
Executive Officers of the Company, and (iii) all directors and officers of the
Company as a group.
<TABLE>
<CAPTION>
NAME AND ADDRESS AMOUNT AND NATURE OF
OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(1) PERCENT OF CLASS
- -------------------------------------------------------------------------------------
<S> <C> <C>
Eric H. Paulson(2) 2,350,669(3) 10.0%
Charles E. Cheney 591,720 2.5%
Dickinson G. Wiltz 115,888 *
James G. Sippl 7,200 *
Michael L. Snow 7,200 *
Alfred Teo 746,900 3.2%
All directors and executive officers
as a group (12 persons) 3,851,747 16.4%
</TABLE>
* Indicates ownership of less than one percent.
(1) Includes shares of common stock issuable upon exercise of outstanding
options and warrants exercisable within sixty days of July 1, 1999 in the
following amounts: Eric H. Paulson - 70,000 shares; Charles E. Cheney - 16,000
shares; Dickinson G. Wiltz - 800 shares; James G. Sippl - 7,200 shares; Michael
L. Snow - 7,200 shares; and Alfred Teo - no shares and all directors and
executive officers as a group - 133,370 shares.
(2) Mr. Paulson's address is 7400 - 49th Avenue North, New Hope, Minnesota
55428.
(3) Includes 3,650 shares owned by Mr. Paulson's wife with respect to which he
disclaims beneficial ownership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
In connection with the Company's past borrowings, the Company's President, Eric
H. Paulson, and its
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Executive Vice President, Charles E. Cheney, have been required to guarantee
obligations of the Company. In certain cases, these officers have received
additional compensation from the Company in consideration of their guarantees.
In connection with the Company's negotiating a $3.0 million overline in
September 1997 with respect to the Company's $45 million credit facility with
Congress Financial Corporation, Mr. Paulson and Mr. Cheney were required to
personally guarantee the overline. As consideration for this guarantee, the
Company agreed to pay to both Mr. Paulson and Mr. Cheney an amount equal to five
percent of the total amount guaranteed, with payments to be made over a
twelve-month period. During fiscal 1999, a total of $77,000 was paid to each of
Mr. Paulson and Mr. Cheney pursuant to these guarantees. In the event that
officers of the Company are required to guarantee bank obligations of the
Company in the future, the Company anticipates paying them additional
compensation for these guarantees.
At March 31, 1999, Mr. Paulson was indebted to the Company in the principal
amount of $255,299. This indebtedness represents the largest principal amount
outstanding during fiscal 1999. Mr. Paulson pays the Company interest on the
outstanding indebtedness at the rate of 8.5 percent.
In January 1995, the Company decided to exercise its option to purchase the
property on which its principal facilities and adjoining land were located, in
part because of continuing disputes with its landlord with respect to matters in
connection with the construction and the operation of the building. In September
1995, the Company entered into a settlement agreement with the landlord under
which all matters with respect to the building were resolved and the Company
acquired the building. At the time of the acquisition of the building, the
Company was unable to arrange satisfactory permanent financing for the building.
Accordingly, the Company entered into a Lease Agreement with a limited liability
company the members of whom were Eric H. Paulson and Charles E. Cheney, the
Company's President and Executive Vice President, respectively, which limited
liability company acquired the building. Under the terms of the lease agreement,
the Company agreed to lease the building for approximately the same price as the
contract with the original landlord, provided, that the management fee to be
paid in connection with the leasing of the building was decreased from five
percent of the aggregate rent to three percent of the aggregate rent, and the
cost of living increases in the rent, rather than being effective at the end of
five years, were effective at the end of each year. In addition, the Company
received a purchase option, under which it had the right to purchase the
building for an amount equal to the net present value of future income payments
under the lease, which approximated the purchase option it had under the old
agreement. The proposed transaction was approved unanimously by the
disinterested directors of the Company's Board of Directors and the Company
believes that the terms under which the Company leased the building from the
limited liability company were on terms no less favorable than could be obtained
from independent third parties. In August 1998, the building was sold to a
non-related third party. During the fiscal year ended March 31, 1999, the
Company made lease payments through August 1, 1998 to the limited liability
company totaling $172,092.
During the fiscal year ended March 31, 1999, Mr. Paulson also served as Chairman
of the Board of NetRadio Corporation and also served at NetRadio's Chief
Executive until January 1999. Mr. Cheney served Chief Financial Officer for
NetRadio from March 1997 until September 1998 and continues to serve as a
director of NetRadio. In June 1998, Mr. Paulson received an option to purchase
90,000 shares of NetRadio common stock and Mr. Cheney received an option to
purchase 60,000 shares of NetRadio common stock. Each option vested with respect
to twenty percent of the shares immediately with the remainder vesting over a
four-year period. The options were granted a price of $1.64 per share which was
equal to the fair market value on the date of the grant. In September 1998, Mr.
Paulson's wife purchased 10,000 shares of common stock of NetRadio for $1.64 per
share.
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SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Navarre Corporation
(Registrant)
July 28, 1999 By /s/ Eric H. Paulson
-------------------------
Eric H. Paulson
Chairman of the Board, President
and Chief Executive Officer
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