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 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
NAVARRE CORPORATION
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
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.)
(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:
NAVARRE CORPORATION
7400 49TH AVENUE NORTH
NEW HOPE, MINNESOTA 55428
-------------------------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 7, 2000
------------------------------------------------
The Annual Meeting of the Shareholders of Navarre Corporation (the "Company")
will be held Thursday, September 7, 2000 at 3:30 p.m., local time, at the
Marquette Hotel, St. Croix River Room, Third Floor, 710 Marquette Avenue,
Minneapolis, Minnesota, 55402, for the following purposes:
1. To elect two directors to hold office for a term of three years or
until their successors are elected and qualified and
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 July 14, 2000 will be
entitled to vote at the meeting or any adjournments or postponements thereof.
All shareholders are cordially invited to attend the meeting.
If you do not expect to be present at the 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 meeting. You may
also vote your shares by telephone or through the Internet by following the
instructions we have provided on the proxy form. In the event you decide to
attend the meeting in person, you may, if you desire, revoke your proxy and vote
your shares in person, even if you have previously submitted a proxy in writing,
by telephone or through the Internet.
By Order of the Board of Directors
/s/ Charles E. Cheney
Secretary
July 25, 2000
NAVARRE CORPORATION
7400 49TH AVENUE NORTH
NEW HOPE, MINNESOTA 55428
(763) 535-8333
-----------------------------------
PROXY STATEMENT
ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 7, 2000
-----------------------------------
SOLICITATION OF PROXIES
This Proxy Statement is being furnished to the shareholders of Navarre
Corporation in connection with the solicitation of proxies by the Board of
Directors of the Company for use at the Annual Meeting of Shareholders to be
held on Thursday, September 7, 2000 at 3:30 p.m., local time, at The Marquette
Hotel, St. Croix River Room, Third Floor, 710 Marquette Avenue, Minneapolis,
Minnesota, 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 July 28, 2000.
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 other 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.
Only shareholders of record as of the close of business on July 14, 2000 will be
entitled to vote at the Annual Meeting. On that date, the Company had
outstanding 25,649,492 shares of common stock, no par value, each of which is
entitled to one vote per share on each matter to be voted upon at the Annual
Meeting.
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 Annual Meeting as directed
therein. 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 the
election of the nominees for the Board of Directors named in this Proxy
Statement and for other matter presented by the Board of Directors. While the
Board of Directors knows of no matters to be presented at the Annual 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.
1
A quorum, consisting of a majority of the shares of common stock entitled to
vote at the Annual Meeting, must be present in person or by proxy before action
may be taken at the Annual Meeting. If an executed proxy is returned and the
shareholder has abstained from voting on any matter, the shares represented by
the 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, the 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 July 1, 2000 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.
Name and Address Amount and Nature of
of Beneficial Owner Beneficial Ownership (1) Percent of Class
----------------------------------------- ------------------------------- ----------------------------
Eric H. Paulson (2) 2,437,939 9.4%
Charles E. Cheney 650,720 2.5%
James G. Sippl 15,600 *
Michael L. Snow 23,600 *
Alfred Teo 738,100 2.9%
Dickinson G. Wiltz 125,800 *
Fletcher International Limited (3) 1,456,632 5.6%
All directors and executive
officers as a group (6 persons) 3,991,759 15.4%
*Indicates ownership of less than one percent.
(1) Includes shares of common stock issuable upon exercise of outstanding
options exercisable within sixty days of July 1, 2000 in the following amounts:
Eric H. Paulson - 165,000 shares; Charles E. Cheney - 75,000 shares; James G.
Sippl - 15,600 shares; Michael L. Snow - 23,600 shares; Alfred Teo - 1,200
shares and Dickinson G. Wiltz - 10,712 shares; and all directors and executive
officers as a group - 291,112 shares.
(2) Mr. Paulson's address is 7400 - 49th Avenue North, New Hope, Minnesota
55428. Mr. Paulson's total includes 3,650 shares owned by Mr. Paulson's wife
with respect to which he disclaims beneficial ownership.
(3) Fletcher's address is 22 East 67th Street, New York, New York 10021. The
shares listed for Fletcher include 1,247,157 shares of common stock owned as of
June 30, 2000 and an additional 209,475 shares issuable as of that date upon
conversion of Class B Preferred Stock of Navarre owned by Fletcher. At July 1,
2000, Fletcher owned 13,610 shares of Class B Preferred Stock and a warrant to
purchase an additional 16,000 shares of Class B Preferred Stock. The Class B
Preferred Stock is convertible into common stock based upon the market price of
Navarre common stock and subject to the terms of an Amended and Restated
Subscription Agreement dated as of July 31, 1999 between Navarre and Fletcher
and a Certificate of Rights and Preferences of Class B Preferred Stock, both of
which were filed with the United States Securities and Exchange Commission as
exhibits to a Form 8-K dated August 20, 1999.
2
ELECTION OF DIRECTORS
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. Michael L. Snow and Alfred Teo expire at the Annual Meeting of
Shareholders following fiscal year 2000, the terms of Messrs. Charles E. Cheney
and Dickinson G. Wiltz expire at the Annual Meeting of Shareholders following
fiscal year 2001, and the terms of Messrs. Eric H. Paulson and James G. Sippl
expire at the Annual Meeting of Shareholders following fiscal year 2002.
Vacancies on the Board of Directors and newly created directorship 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 2003 or until their successors are
elected and qualified. The Board of Directors has nominated for election the
persons named below. The nominees are currently directors and were elected by
the shareholders.
The Board is proposing that the shareholders elect the named nominees. It is
intended that proxies will be voted for the named nominees. 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
five years. The Board of Directors believes that the nominees named below will
be able to serve, but should the nominees be unable to serve as directors, the
persons named in the proxies have advised that they will vote for the election
of such substitute nominees as the Board of Directors may propose. The names of
the nominees and other directors filling unexpired terms is set forth below.
Name and Age Principal Occupation and Other Directorships
- ------------ --------------------------------------------
NOMINEES PROPOSED FOR ELECTION FOR TERM EXPIRING AT THE ANNUAL MEETING FOLLOWING FISCAL 2003
Michael L. Snow (49) ........... 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 (54).................. 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 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 Alpha
Technology, Inc.
3
DIRECTORS SERVING CONTINUING TERMS.
Charles E. Cheney (57)...... 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 and became Vice-Chairman of the Company in November 1999. 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 also a director of NetRadio
Corporation, Chairman and Chief Executive Officer of eSplice, Inc., a
wholly-owned subsidiary of the Company, and a certified public accountant.
Eric H. Paulson (55)........ Mr. Paulson is the founder and has been President and Chief Executive Officer
of the Company since its inception in 1983. 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 also serves as a director of eSplice, Inc., a wholly-owned
subsidiary of the Company, and is Chairman of NetRadio Corporation.
James G. Sippl (52)......... Mr. Sippl has served as a director of the Company since July 1993. Mr. Sippl
has been general manager and chief financial officer of Wealth Enhancement
Group since December 1999. Prior to that Mr. Sippl served as a financial
consultant for Sippl & Associates from May 1998 to December 1999 and chief
operating officer of IntraNet Solutions, a software company from January 1997
to May 1998. Mr. Sippl 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.
Dickinson G. Wiltz (71)..... Mr. Wiltz has served as a director of the Company since October 1983. 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, a non-qualified
stock option to purchase 6,000 shares of Company common stock 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 $3.688 on
April 3, 2000. In addition, on October 15, 2000 each of Messrs. Sippl, Snow, Teo
and Wiltz received options to purchase 10,000 shares at a price of $7.875, which
was the fair market value on that date.
4
BOARD ACTIONS AND COMMITTEES
During fiscal 2000, 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 2000 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 2000 was
comprised of Mr. Sippl and Mr. 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, 2000, the Audit Committee held one
meeting.
The Compensation Committee of the Board of Directors for fiscal 2000 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 the fiscal year ended March 31, 2000.
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 55 Chairman of the Board, President and Chief Executive Officer
and Chairman of NetRadio Corporation
Charles E. Cheney 57 Vice-Chairman, Secretary, Treasurer and Director, Executive Vice
President and Chief Financial Officer.
Brian Burke 30 Vice President and General Manager, Computer Products Division
James Chiado 50 Vice President and General Manager, Independent Music Division
Kathleen Conlin 56 Vice President, Corporate Controller
Joyce Fleck 48 Vice President, Marketing
Thomas Lenaghan 50 Vice President and General Manager, Alternative Retail Marketing
Margot McManus 42 Vice President, Human Resources
John Turner 46 Vice President, Operations
Ian Warfield 52 President and Chief Operating Officer, eSplice, Inc.
5
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 under "Election of Directors."
BRIAN BURKE has been Vice President and General Manager, Computer
Products Division since July 2000. Prior to July 2000, Mr. Burke had served in a
series of positions of increasing responsibility in the Computer Products
Division since joining the Company in July 1995. Prior to joining the company,
Mr. Burke held various marketing, sales and account manager positions with
Imtron and Blue Cross/Blue Shield of Minnesota.
JAMES 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 Essex
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 CONLIN has been Vice President, Corporate Controller since
1995. Ms. Conlin had served in a series of positions of increasing
responsibility since joining the Company in April 1984.
JOYCE FLECK has been Vice President, Marketing since January 2000. Ms.
Fleck also served as Director of Marketing since joining Navarre in May 1999.
Prior to joining Navarre she held divisional marketing and merchandising
positions at The Musicland Group from 1986 to 1997 and senior buying positions
at Grow Biz International, from 1997 to 1999.
THOMAS 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 managmenet positions with both Handleman and Pickwick International.
MARGOT MCMANUS has been Vice President, Human Resources since January
2000. Ms. McManus also served as Director of Human Resources since joining the
Company in August of 1995. Prior to joining Navarre she had fifteen years of
human resources and business experience serving as director of human resources
for Access Management, a technology company, as well as director of human
resources and training for Conpal Restaurant Corporation.
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.
6
IAN WARFIELD has been President and Chief Operating Officer of eSplice
since January 2000. Prior to that Mr. Warfield was Vice President and General
Manager, Computer Products Division of Navarre Corporation from January 1998
when he joined the Company. Prior to joining Navarre, Mr. Warfield served as
senior vice president of sales and marketing for Point Group Corporation, a
provider of global OEM software services, from November 1994 to January 1998. 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.
EXECUTIVE COMPENSATION
The following table sets forth the annual compensation and other components of
compensation for the fiscal years ending March 31, 2000, 1999, and 1998 for Eric
H. Paulson, the Chief Executive Officer of the Company and Charles E. Cheney,
the only other executive officer of the Company whose total cash compensation
exceeded $100,000 (together, the "Named Executive Officers") during the fiscal
year ended March 31, 2000.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------
------------------- SECURITIES ALL OTHER
NAME AND FISCAL OTHER ANNUAL UNDERLYING COMPEN-
PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS SATION
- -------------------------------- --------- ----------- ----------- ------------------- --------------- -------------
Eric H. Paulson 2000 $325,950 ---- ---- 100,000 ----
Chairman of the Board, 1999 $293,082 $125,000 ---- 100,000 $77,000(2)
Chief Executive Officer 1998 $246,542 ---- ---- 75,000 $72,000(2)
and President
Charles E. Cheney 2000 $232,500 ---- $9,346(1) 100,000 ----
Vice-Chaiman, Executive 1999 $205,385 $75,000 $9,000(1) 100,000 $77,000(2)
Vice President, Chief 1998 $180,769 ---- $9,000(1) 45,000 $72,000(2)
Financial Officer,
Secretary and Treasurer
(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.
7
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 $325,000 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 $235,000 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 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 $1,129,079 with respect to Mr. Paulson, and
$801,368 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 3,474,000 shares of the
Company's authorized common stock are reserved for issuance under the Stock
Plan. 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.
8
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 2000 fiscal year.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
------------------------------------------------------------------ POTENTIAL
REALIZABLE
NUMBER OF PERCENT OF VALUE AT ASSUMED
SECURITIES TOTAL OPTIONS ANNUAL RATES OF STOCK
UNDERLYING GRANTED TO EXERCISE PRICE APPRECIATION FOR
OPTIONS EMPLOYEES IN PRICE EXPIRATION OPTION TERM (1)
NAME GRANTED FISCAL YEAR ($/SH) DATE 5% 10%
- ------------------------- --------------- ------------------ ------------ -------------- --------------------------
Eric H. Paulson 100,000 16.9% 5.875 1/12/05 $162,315 $358,675
Charles E. Cheney 100,000 16.9% 5.875 1/12/05 $162,315 $358,675
(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.
The following table set forth information with respect to the Company's
executive officers concerning the exercise of options during fiscal 2000 and
unexercised options held at March 31, 2000.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND YEAR-END OPTION VALUES (1)
SHARES VALUE OF UNEXERCISED
ACQUIRED NUMBER OF UNEXERCISED IN-THE-MONEY
ON VALUE OPTIONS AT YEAR END OPTIONS AT YEAR END
NAME EXERCISE REALIZED EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ------------------------- -------------- ------------ -------------------------------- --------------------------------
Eric H. Paulson ---- ---- 115,000 175,185 $115,000 $127,930
Charles E. Cheney 125,000 $350,730 49,000 65,847 $101,000 $108,758
(1) Based on the difference between the March 31, 2000 closing price of $3.938
per share as reported on the Nasdaq Stock Market and the exercise price of
the options.
9
CERTAIN TRANSACTIONS
At March 31, 2000, Mr. Paulson was indebted to the Company in the principal
amount of $278,622. This indebtedness represents the largest principal amount
outstanding during fiscal 2000. Mr. Paulson pays the Company interest on the
outstanding indebtedness at the rate of 8.5 percent.
REPORT OF THE COMPENSATION COMMITTEE
Decisions on compensation of the Company's executives are generally made by the
two member Compensation Committee of the Board (the "Committee") consisting of
Mr. Sippl and Mr. Teo who are non-employee directors. All decisions by the
Committee relating to the compensation of the Company's executive officers are
reviewed by the full Board, except for decisions about awards under the
Company's 1992 Stock Option Plan, which are made solely by the Committee.
Set forth below is a report submitted by the Committee addressing the Company's
compensation policies its executive officers, including Mr. Paulson the
Company's Chief Executive Officer for fiscal 2000. The following report shall
not be deemed incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any filing under the Securities and
Exchange Act of 1933 (the "1933 Act") or the Securities and Exchange Act of 1934
(the "1934 Act"), except to the extent that the Company specifically
incorporates this information by reference, and shall not otherwise be deemed
filed under the 1933 Act or the 1934 Act.
COMPENSATION PHILOSOPHY
The Committee's executive compensation policies are designed to provide
competitive levels of compensation in order to attract and retain highly
qualified executives, establish compensation levels based upon a comparison of
job responsibility within the Company to similar positions in comparable
companies and industries, and recognize individual performance based upon
long-term specific goals, as opposed to short-term or arbitrary measurements of
performance.
BASE SALARY
The Committee annually reviews each executive officer's salary. In determining
appropriate base salary levels, the Committee considers levels of
responsibility, performance on behalf of the Company, the overall performance of
the Company and external pay practices. With respect to external pay practices,
the Committee uses various surveys of executive compensation for companies of
similar size and comparable industries as a basis for determining competitive
levels of cash compensations.
ANNUAL INCENTIVE AWARDS
The Company pays bonuses to its executive officers based upon the performance of
the Company. Mr. Paulson may receive an amount up to eighty percent of his base
salary and Mr. Cheney may receive an amount up to sixty percent of his base. The
Committee may award executive officers either cash, common stock or a
combination of cash and common stock as incentive compensation. No bonuses were
given with respect to fiscal 2000.
10
STOCK OPTIONS
In order to promote improved long-term performance by the Company, the Committee
awards stock options to the Company's executive officers. Stock options are
awarded in order to achieve competitive compensation levels and to reward
individual performance of executive officers. Stock options only have value for
the executive officers if the price of the Company's stock appreciates in value
from the date the stock options are granted. Shareholders also benefit from such
stock price appreciation. The Compensation Committee believes that the grant of
restricted stock grants provides additional compensation to the Company officers
by providing them with an additional equity interest in the Company's
securities.
CHIEF EXECUTIVE OFFICER COMPENSATION
Mr. Paulson's base pay for fiscal 2000 was $325,000. The compensation package
for Mr. Paulson was set by the Board of Directors. Mr. Paulson's base salary was
established in connection with the executive of a new employment agreement in
October 1996. During fiscal 2000, the Company made cost of living adjustments to
the base salary. Mr. Paulson was not paid a bonus during fiscal 2000. The terms
of Mr. Paulson's employment agreement are set forth in the section entitled
"Employment Agreements and Change of Control Provisions."
SUBMITTED BY THE 2000 COMPENSATION COMMITTEE OF
THE COMPANY'S BOARD OF DIRECTORS
James G. Sippl Alfred Teo
PERFORMANCE GRAPH
The following Performance Graph compares performance of the Company's Common
stock on the Nasdaq National Market System to the Nasdaq Stock Market (US
Companies) Index and a Peer Group Index described below. The graph compares the
cumulative total return from March 31, 1995 to March 31, 2000 on $100 invested
on March 31, 1995 assumes reinvestment of all dividends and has been adjusted to
reflect stock splits.
The Peer Group Index below includes the stock performance of the following
companies which were used in the Company's performance graph in the Company's
proxy statement for fiscal 2000: Handleman Co., Ingram Micro Inc., Merisel Inc.,
Platinum Entertainment, Inc. and Tech Data Corp. This group is comprised of
companies that, in fiscal 2000 had similar music or software distribution
operations.
11
PERFORMANCE GRAPH
NAVARRE CORPORATION
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURNS
3/31/95 3/31/96 3/31/97 3/31/98 3/31/99 3/31/00
----------- ----------- ------------ ----------- ----------- -----------
Navarre Corporation 100.0 167.5 115.0 105.0 557.5 157.5
Nasdaq Stock Market 100.0 135.8 150.9 228.9 309.2 575.5
Self-Determined Peer Group 100.0 98.6 134.9 213.0 141.4 135.9
GENERAL
INDEPENDENT AUDITORS
The Board of Directors has selected the firm of Ernst & Young LLP, independent
public accountants, as auditors to the Company for the year ended March 31,
2001. Ernst & Young LLP has audited the Company's financial statements since
1988. A representative of Ernst & Young LLP is expected to be present at the
Annual Meeting to make a statement if he or she so desires and to respond to
appropriate questions.
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
12
filed by the Company's insiders, the Company believes all such forms with
respect to transactions occurring in fiscal 2000 were filed on a timely basis,
except that each of Messrs. Cheney, Sippl, Snow, Teo and Wiltz failed to report
one transaction in a timely manner due to an administrative error by the Company
which was assisting them in preparing their filings.
SHAREHOLDER PROPOSALS
Any shareholder desiring to submit a proposal for action at the 2001 Annual
Meeting of Shareholders and presentation in the Company's proxy statement with
respect to such meeting should arrange for such proposal to be delivered to the
Company's offices, 7400 49th Avenue North, New Hope, Minnesota 55428 addressed
to Secretary, no later than March 30, 2001 in order to be considered for
inclusion in the Company's proxy statement relating to the meeting. Matters
pertaining to such proposals, including the number and length thereof,
eligibility of persons entitled to have such proposals included and other
aspects are regulated by the Securities Exchange Act of 1934, Rules and
Regulations of the Securities and Exchange Commission and other laws and
regulations to which interested persons should refer.
In addition, SEC Rule 14a-4 governs the Company's use of its discretionary proxy
voting authority with respect to a shareholder proposal that is not addressed in
the Company's proxy statement. The Rule provides that if a proponent of a
proposal fails to notify the Company at least 45 days prior to the month and day
of mailing of the prior year's proxy statement, then the Company will be allowed
to use its discretionary voting authority when the proposal is raised at the
meeting, without any discussion of the matter in the proxy statement. With
respect to the Company's 2001 Annual Meeting, if the Company is not provided
notice of a shareholder proposal prior to June 13, 2001, the Company will be
allowed to use its voting authority as described above.
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.
The Annual Report of the Company for fiscal 2000 is enclosed herewith.
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, Minnesota 55428, Attention: Charles E. Cheney,
or by calling the Company at (763) 535-8333.
By Order of the Board of Directors
/s/ Charles E. Cheney
Secretary
Dated: July 25, 2000
13
NAVARRE CORPORATION
ANNUAL MEETING OF SHAREHOLDERS
SEPTEMBER 7, 2000
3:30 P.M.
NAVARRE CORPORATION
7400 - 49TH AVENUE NORTH
NEW HOPE, MN 55428
NAVARRE CORPORATION
PROXY SOLICITED BY BOARD OF DIRECTORS PROXY
- --------------------------------------------------------------------------------
The undersigned, revoking all prior proxies, hereby appoints Charles E. Cheney
and Eric H. Paulson, and either of them, as proxy or proxies, with full power of
substitution and revocation, to vote all shares of common stock of Navarre
Corporation (the "Company") of record in the name of the undersigned at the
close of business on July 14, 2000, at the Annual Meeting of Shareholders to be
held on Thursday, September 7, 2000, or at any adjournment thereof, upon the
following matters:
(CONTINUED ON REVERSE SIDE)
----------------------
COMPANY #
CONTROL #
----------------------
THERE ARE THREE WAYS TO VOTE YOUR PROXY
YOUR TELEPHONE OR INTERNET VOTE AUTHORIZES THE NAMED PROXIES TO VOTE YOUR SHARES
IN THE SAME MANNER AS IF YOU MARKED, SIGNED AND RETURNED YOUR PROXY CARD.
VOTE BY PHONE -- TOLL FREE -- 1-800-240-6326 -- QUICK *** EASY *** IMMEDIATE
* Use any touch-tone telephone to vote your proxy 24 hours a day, 7 days a
week, until 12:00 p.m. on September 6, 2000.
* You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above.
* Follow the simple instructions the Voice provides you.
VOTE BY INTERNET -- http://www.eproxy.com/navr/ -- QUICK *** EASY *** IMMEDIATE
* Use the Internet to vote your proxy 24 hours a day, 7 days a week, until
12:00 p.m. on September 6, 2000.
* You will be prompted to enter your 3-digit Company Number and your 7-digit
Control Number which are located above to obtain your records and create an
electronic ballot.
VOTE BY MAIL
Mark, sign and date your proxy card and return it in the postage-paid envelope
we've provided or return it to NAVARRE CORPORATION c/o Shareowner Services(SM),
P.O. Box 64873, St. Paul, MN 55164-0873.
IF YOU VOTE BY PHONE OR INTERNET, PLEASE DO NOT MAIL YOUR PROXY CARD
[ARROW] PLEASE DETACH HERE [ARROW]
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEM 1.
1. Election of directors: 01 Michael L. Snow [ ] Vote FOR [ ] Vote WITHHELD
02 Alfred Teo all nominees except from all nominees
as indicated below
________________________________________
(INSTRUCTIONS: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDICATED NOMINEE, | |
WRITE THE NUMBER(S) OF THE NOMINEE(S) IN THE BOX PROVIDED TO THE RIGHT.) |________________________________________|
2. In their discretion, the proxies are authorized to vote upon such other business as may properly come before the
meeting.
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED FOR THE
ELECTION OF THE NOMINEES LISTED IN THE PROXY STATEMENT.
Address Change? Mark Box [ ]
Indicate changes below: Date ________________________________
________________________________________
| |
| |
|________________________________________|
Signature(s) in Box
Please sign exactly as your name(s) appear
on Proxy. If held in joint tenancy, all
persons must sign. Trustees, administrators,
etc., should include title and authority.
Corporations should provide full name of
corporation and title of authorized officer
signing the proxy.