SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: AUGUST 20, 1999
NAVARRE CORPORATION
(Exact name of registrant as specified in its charter)
Minnesota 0-22982 41-1704319
(State or other (Commission (I.R.S. Employer
jurisdiction File Number) Identification No.)
of Incorporation)
7400 49TH AVENUE NORTH, NEW HOPE, MN 55428
(Address of principal executive offices)
Registrant's telephone number, including area code: (612) 535-8333
Items 1, 2, 3, 4, 6, and 8 are not applicable and therefore omitted.
Item 5. Other Events.
ISSUANCE OF CLASS B CONVERTIBLE PREFERRED STOCK
On August 20, 1999, Navarre announced that it had entered into a
subscription agreement with Fletcher International Limited ("Fletcher") for the
issuance of up to 150,000 shares of Navarre's Class B Convertible Preferred
Stock ("Class B Preferred Stock") for an aggregate purchase price of up to $37.5
million (the "Subscription Agreement"). The Class B Preferred Stock may be
issued in three principal tranches. On August 20, 1999, Navarre issued the first
tranche, consisting of 34,000 shares of Class B Preferred Stock and a three-year
warrant to purchase up to 16,000 shares of Class B Preferred Stock. Fletcher
paid a purchase price of $8.5 million, or $250 per share of Class B Preferred
Stock, and will pay an additional $4.0 million, or $250 per share of Class B
Preferred Stock, if Fletcher exercises the warrant in its entirety.
Subject to certain conditions, Navarre may require Fletcher to purchase
the second tranche at any time beginning six months from the date a registration
statement covering the common stock underlying the Class B Preferred Stock
issued in the first tranche is declared effective and ending on August 20, 2002.
The second tranche consists of 34,000 shares of Class B Preferred Stock and a
three-year warrant to purchase up to 16,000 shares of Class B Preferred Stock.
The purchase price will be equal to $8.5 million, or $250 per share of Class B
Preferred Stock, and the warrant exercise price is $4.0 million, or $250 per
share of Class B Preferred Stock, if Fletcher exercises the warrant in its
entirety. If Navarre fails to exercise its option within this time frame,
Fletcher will have one year to demand that Navarre issue Fletcher up to 50,000
additional shares of Class B Preferred Stock at a purchase price of $250 per
share.
The third tranche consists of 34,000 shares of Class B Preferred Stock
and a four-year warrant to purchase 16,000 shares of Class B Preferred Stock.
Subject to certain conditions, Navarre is required to issue the third tranche,
at Fletcher's option, during the period beginning six months from the date a
registration statement covering the common stock underlying the securities
issued in the first tranche becomes effective and ending three years from the
date the option commences. The purchase price will be $8.5 million, or $250 per
share of Class B Preferred Stock, and the warrant exercise price is $4.0
million, or $250 per share of Class B Preferred Stock, if Fletcher exercises the
warrant in its entirety. If the Fletcher fails to exercise its option within
this time frame, Navarre will have one year to demand that Fletcher purchase up
to 50,000 additional shares of Class B Preferred Stock at a purchase price of
$250 per share.
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Fletcher may convert shares of Class B Preferred Stock into shares of
Navarre's common stock ("Common Stock") at any time after issuance provided
certain conditions are met. In addition, subject to certain conditions, Navarre
may demand conversion of the 34,000 shares of Class B Preferred Stock issued in
the first tranche and the 34,000 share of Class B Preferred Stock issued in the
second tranche one year from the date the Class B Preferred Stock was issued.
The conversion ratio is determined by dividing $250 by a variable conversion
price which is tied to the market price of the Common Stock. The conversion
price can be no greater than 180% of the closing price of the Common Stock on
the date prior to the date the Class B Preferred Stock or the warrant covering
shares of Class B Preferred Stock was issued. In addition, for the six month
period ended February 20, 2000, the conversion price can be no less than $9.25.
Subject to certain conditions, the Class B Preferred Stock will be automatically
converted into Common Stock three years after the issuance of the Class B
Preferred Stock.
The holders of Class B Preferred Stock are entitled to a $250 per share
liquidation preference in the event Navarre ceases operations. Holders of Class
B Preferred Stock are not entitled to receive dividends unless a default event
has occurred. If a default event occurs, the holders of Class B Preferred Stock
are entitled to receive dividends of fifteen percent (15%) of $250 on an annual
basis for each share owned until the default event is cured. Holders of Class B
Preferred Stock do not have voting rights unless a default event has occurred
and Navarre fails to pay dividends. Upon the occurrence of a default event and
non-payment of dividends, the holders may appoint members of the Board of
Directors in proportion to their ownership of outstanding Common Stock as though
all outstanding Class B Preferred Stock had been converted into Common Stock.
A default event occurs if Navarre fails to (i) register the Common
Stock underlying the Class B Preferred Stock within a specified time frame, (ii)
obtain the consent of its shareholders to the issuance of shares when required,
or (iii) redeem Class B Preferred Stock owned by holders who objected to
combinations that do not meet certain criteria for a 33% premium over the
liquidation preference.
In connection with the execution of the Subscription Agreement, and the
issuance of the Class B Preferred Stock to Fletcher, Navarre engaged Wit Capital
Corporation as its investment banker and agreed to pay Wit Capital Corporation a
fee of five percent (5%) of the gross proceeds it receives under the
Subscription Agreement. Fees will be paid as funds are received by Navarre.
The Subscription Agreement was dated and entered into on July 31, 1999,
but was subject to subsequent approval by the Navarre Board of Directors and
satisfaction of certain closing conditions.
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Item 7(c) Exhibits
Exhibit 1. Subscription Agreement between Navarre Corporation and
Fletcher International Limited
Exhibit 2. Certificate of Rights and Preferences of Class B Convertible
Preferred Stock
Exhibit 3. Form of Warrant
Exhibit 4. Press Release dated August 23, 1999 announcing execution of
the Subscription Agreement
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
NAVARRE CORPORATION
By /s/ Charles E. Cheney
--------------------------------
Charles E. Cheney
Executive Vice President, Chief
Financial Officer and Secretary
September 1, 1999
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