SECOND AMENDMENT TO FOURTH AMENDED AND RESTATED CREDIT AGREEMENT
SECOND AMENDMENT TO FOURTH AMENDED AND
RESTATED CREDIT AGREEMENT
RESTATED CREDIT AGREEMENT
This SECOND AMENDMENT TO FOURTH AMENDED AND RESTATED CREDIT AGREEMENT (this
“Amendment”), is effective as of 30th day of June, 2007, by NAVARRE CORPORATION,
a Minnesota corporation (“Borrower”), the Credit Parties signatory hereto, GENERAL ELECTRIC
CAPITAL CORPORATION, a Delaware corporation, as agent (the “Agent”) for itself and the
Lenders under and as defined in the Credit Agreement (as hereinafter defined), and the Lenders.
Unless otherwise specified herein, capitalized terms used in this Amendment shall have the meanings
ascribed to them by the Credit Agreement.
RECITALS
WHEREAS, the Borrower, the Credit Parties, the Agent and the Lenders have entered into that
certain Fourth Amended and Restated Credit Agreement, dated as of March 22, 2007 (as amended,
supplemented, restated or otherwise modified from time to time, the “Credit Agreement”);
and
WHEREAS, the Borrower, the Credit Parties, the Agent and the Lenders have agreed to amend
certain provisions of the Credit Agreement as herein set forth.
NOW THEREFORE, in consideration of the foregoing recital, mutual agreements contained herein
and for good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Borrower, the Credit Parties, the Agent, and the Lenders hereby agree as follows:
SECTION 1. Amendments.
(a) The definition of “Borrowing Base” set forth in Annex A to the Credit
Agreement is hereby amended and restated to read in its entirety as follows:
“Borrowing Base” means, as of any date of determination by Agent, from time to
time, an amount equal to the sum at such time of:
(a) the product of (x) the lesser of 85% and the Eligible Accounts Dilution Percentage
at such time multiplied by (y) the book value of Eligible Accounts;
(b) the lesser of (i) 50% of the Eligible Inventory of the Eligible Credit Parties
valued at the lower of cost (FIFO) or market or (ii) 85% of the Orderly Liquidation Value
of the Eligible Inventory of the Eligible Credit Parties;
(c) the lesser of (i) the Eligible Investment Funds Amount or (ii) 95% of the Eligible
Investment Funds.
in each case less the Minimum Excess Availability Reserve less any
additional Reserves established by Agent from time to time; provided however that at
no time shall the amount of the Borrowing Base attributable to the Eligible Accounts arising
from the Publishing Business shall exceed 25% of the aggregate Borrowing Base attributable
to
Eligible Accounts; provided further that at no time shall the amount of the
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Borrowing
Base attributable to the Eligible Inventory of Eligible Credit Parties exceed (1)
$10,000,000 during the Fiscal Months of February, March, April, May and June of each Fiscal
Year, (2) $12,000,000 during the Fiscal Months of July and August of each Fiscal Year, (3)
$15,000,000 during the Fiscal Months of September and October of each Fiscal Year, (4)
$14,000,000 during the Fiscal Month of November of each Fiscal Year, (5) $13,000,000 during
the Fiscal Month of December of each Fiscal Year and (6) $12,000,000 during the Fiscal Month
of January of each Fiscal Year (each such amount is an “Applicable Sublimit
Amount”); provided that Agent may at any time, in its sole discretion, increase
the Applicable Sublimit Amounts to $15,000,000 pursuant to a written notice to Borrower
specifically referring to this definition (provided that at all times following the
occurrence of a Triggering Event, such amount shall be reduced, on the first day of each
Fiscal Quarter, to an amount not less than $5,000,000 and equal to the lesser of (x) the
Applicable Sublimit Amount or (y) $15,000,000 minus the product of (i) $1,250,000
multiplied by (ii) the number of Fiscal Quarters which have commenced since the
occurrence of the Triggering Event). As used herein, “Triggering Event” occurs if
the Fixed Charge Coverage Ratio (as defined in Annex G hereto) for the 12 month
period then ended (i) as of the last day of the Fiscal Quarters ending June 30, 2007,
September 30, 2007 and December 31, 2007 is less than 0.90:1 or (ii) as of the last day of
the Fiscal Quarter ending March 31, 2008 and any Fiscal Quarter ending thereafter is less
than 1.20:1. The value of any Eligible Accounts denominated in Canadian Dollars shall be
included in the Borrowing Base using such Accounts’ Dollar Amount.”
(b) The definition of “EBITDA” set forth in Annex A to the Credit Agreement is
hereby amended and restated to read in its entirety as follows:
“EBITDA” means, with respect to any Person for any fiscal period, without
duplication, an amount equal to (a) consolidated net income of such Person for such period,
determined in accordance with GAAP, minus (b) the sum of (i) income tax credits,
(ii) interest income, (iii) gain from extraordinary items for such period, (iv) any
aggregate net gain (but not any aggregate net loss) during such period arising from the
sale, exchange or other disposition of capital assets by such Person (including any fixed
assets, whether tangible or intangible, all inventory sold in conjunction with the
disposition of fixed assets and all securities), (v) any other non-cash gains that have been
added in determining consolidated net income, in each case to the extent included in the
calculation of net income of such Person for such period in accordance with GAAP, but
without duplication and (vi) amounts paid on behalf of or for the benefit of Goldhil Media,
Tower Records or any trust, trustee or fund relating thereto or successor to any of the
foregoing, plus (c) the sum of (i) any provision for income taxes, (ii) Interest
Expense, (iii) loss from extraordinary items for such period, (iv) depreciation and
amortization for such period (other than amortization with respect to Vendor Advances), (v)
amortized debt discount for such period, (vi) the amount of any deduction to consolidated
net income as the result of any grant to any members of the management of such Person of any
Stock, (vii) write-offs of Accounts owing to Borrower from (x) Goldhil Media in the
aggregate amount not to exceed $2,100,000 and (y) Tower Records in the aggregate amount not
to exceed $1,900,000 and (viii) losses arising from the operations of Navarre Entertainment
in an aggregate amount not to exceed (w)
$1,865,000 with respect to the 12 month period ending on June 30, 2007, (x) $2,275,000
with respect to the 12 month
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period
ending on September 30, 2007, (y) $3,038,000 with respect to the 12 month period ending on December 31, 2007 and (z) $3,233,000 with respect
to the 12 month period ending on March 31, 2008, in each case to the extent included in the
calculation of consolidated net income of such Person for such period in accordance with
GAAP, but without duplication. For purposes of this definition, the following items shall
be excluded in determining consolidated net income of a Person: (1) the income (or deficit)
of any other Person accrued prior to the date it became a Subsidiary of, or was merged or
consolidated into, such Person or any of such Person’s Subsidiaries; (2) the income (or
deficit) of any other Person (other than a Subsidiary) in which such Person has an ownership
interest, except to the extent any such income has actually been received by such Person in
the form of cash dividends or distributions; (3) the undistributed earnings of any
Subsidiary of such Person to the extent that the declaration or payment of dividends or
similar distributions by such Subsidiary is not at the time permitted by the terms of any
contractual obligation or requirement of law applicable to such Subsidiary; (4) any
restoration to income of any contingency reserve, except to the extent that provision for
such reserve was made out of income accrued during such period; (5) any write-up of any
asset; (6) any net gain from the collection of the proceeds of life insurance policies; (7)
any net gain arising from the acquisition of any securities, or the extinguishment, under
GAAP, of any Indebtedness, of such Person, (8) in the case of a successor to such Person by
consolidation or merger or as a transferee of its assets, any earnings of such successor
prior to such consolidation, merger or transfer of assets, and (9) any deferred credit
representing the excess of equity in any Subsidiary of such Person at the date of
acquisition of such Subsidiary over the cost to such Person of the investment in such
Subsidiary.”
(c) The definition of “Minimum Excess Availability Reserve” set forth in Annex
A to the Credit Agreement is hereby amended and restated to read in its entirety as follows:
“Minimum Excess Availability Reserve” shall mean a special Reserve maintained
by Agent in an amount at all times equal to $11,500,000; provided that Agent may at
any time, in its sole discretion, reduce such amount to $8,500,000 pursuant to a written
notice to Borrower specifically referring to this definition.”
(d) Clause (a) of Annex G to the Credit Agreement is hereby amended and
restated to read in its entirety as follows:
“(a) Maximum Capital Expenditures. Borrower and its Subsidiaries on a
consolidated basis shall not make Capital Expenditures during the following periods that
exceed in the aggregate the amounts set forth opposite each of such periods:
| Period | Maximum Capital Expenditures per Period | |||
Fiscal Year ending on or about March 31, 2008 |
$ 11,300,000 | |||
Fiscal Year ending on or about March 31, 2009 |
$3,500,000 plus an amount equal to an amount of Capital Expenditures not to exceed $1,000,000 incurred in connection with the installation of the ERP computer system during such Fiscal Year | |||
Fiscal Year
ending on or about March 31, 2010 and each Fiscal Year ending thereafter” |
$ 3,500,000 | |||
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(e) Clause (b) of Annex G to the Credit Agreement is hereby amended and
restated to read in its entirety as follows:
“(b) Minimum Fixed Charge Coverage Ratio. Borrower and its Subsidiaries shall
have on a consolidated basis, as of the last day of the Fiscal Quarter ending on June 30,
2007 and as of the last day of each Fiscal Quarter thereafter, for the 12 month period then
ended, a ratio (the “Fixed Charge Coverage Ratio”) of (A) the sum of (i) EBITDA
plus (ii) the aggregate of all Vendor Advance Expenses for such period, plus
(iii) interest income received during such period minus (iii) Capital Expenditures
during such period (other than Capital Expenditures financed other than with the proceeds of
Loans), minus (iv) income taxes paid in cash during such period, minus (v)
the aggregate of all Vendor Advances made during such period to (B) the sum of, without
duplication, (i) the aggregate of all Interest Expense paid or accrued during such period,
plus (ii) scheduled payments of principal with respect to Indebtedness during such
period (other than scheduled principal payments made by Borrower during such period with
respect to Term Loan B (as defined and under the Existing Credit Agreement) pursuant to the
Existing Credit Agreement), plus, (iii) all Restricted Payments made by a Credit
Party during such period (other than Restricted Payments (a) made to another Credit Party or
(b) which have caused EBITDA to be reduced for such period) of at least the ratio set forth
below opposite such Fiscal Quarter:
| Fiscal Quarter Ending | Ratio | |||
June 30, 2007 |
0.90 :1 | |||
September 30, 2007 |
0.80 :1 | |||
December 31, 2007 |
0.80 :1 | |||
March 31, 2008 |
1.20:1 | |||
June 30, 2008 |
1.20:1 | |||
September 30, 2008 |
1.20:1 | |||
December 31, 2008 |
1.20:1 | |||
March 31, 2009 |
1.30:1 | |||
June 30, 2009 |
1.30:1 | |||
September 30, 2009 |
1.30:1 | |||
December 31, 2009 |
1.30:1 | |||
March 31, 2010 and each Fiscal Quarter ending thereafter” |
1.40:1 | |||
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(f) Clause (d) of Annex G to the Credit Agreement is hereby amended and
restated to read in its entirety as follows:
“(d) Minimum EBITDA. Borrower and its Subsidiaries shall have on a
consolidated basis, as of the last day of the Fiscal Quarter ending on June 30, 2007 and as
of the last day of each Fiscal Quarter thereafter, for the 12 month period then ended,
EBITDA of at least the amount set forth below opposite such Fiscal Quarter:
| Fiscal Quarter Ending | Amount | |||
June 30, 2007
|
$ | 32,000,000 | ||
September 30, 2007
|
$ | 26,000,000 | ||
December 31, 2007
|
$ | 27,000,000 | ||
March 31, 2008
|
$ | 29,000,000 | ||
June 30, 2008
|
$ | 31,000,000 | ||
September 30, 2008
|
$ | 31,000,000 | ||
December 31, 2008
|
$ | 31,000,000 | ||
March 31, 2009
|
$ | 32,000,000 | ||
June 30, 2009
|
$ | 34,000,000 | ||
September 30, 2009 and each Fiscal Quarter ending thereafter”
|
$ | 35,000,000 | ||
SECTION 2. Conditions to Effectiveness. The effectiveness of this Amendment is subject to
the satisfaction of each the following conditions precedent:
(a) this Amendment shall have been duly executed and delivered by the Borrower, the Credit
Parties, the Agent and each Lender;
(b) Borrower shall have executed and delivered to Agent that certain fee letter supplement,
dated as of the date hereof, between GE Capital and the Borrower (the “Fee Letter
Supplement”); and
(c) Agent shall have received a certified copy of the fully executed copy of (i) a Second
Amendment to the Second Lien Credit Agreement and (ii) a letter agreement between Agent and Monroe
Capital Advisors, LLC, as second lien agent, in each case in form and substance satisfactory to
Agent.
SECTION 3. Representations and Warranties. In order to induce the Agent and each Lender to
enter into this Amendment, each Credit Party hereby represents and warrants to the Agent and each
Lender, which representations and warranties shall survive the execution and delivery of this
Amendment, that:
(a) all of the representations and warranties contained in the Credit Agreement and in each
Loan Document are true and correct as of the date hereof after giving effect to this Amendment,
except to the extent that any such representations and warranties expressly relate to an earlier
date;
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(b) the execution, delivery and performance by such Credit Party of this Amendment has been
duly authorized by all necessary corporate, limited liability company or partnership action
required on its part and this Amendment, and the Credit Agreement is the legal, valid and binding
obligation of such Credit Party enforceable against such Credit Party in accordance with its terms,
except as its enforceability may be affected by the effect of bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect relating to or
affecting the rights or remedies of creditors generally;
(c) neither the execution, delivery and performance of this Amendment by such Credit Party,
the performance by such Credit Party of the Credit Agreement nor the consummation of the
transactions contemplated hereby does or shall contravene, result in a breach of, or violate (i)
any provision of any Credit Party’s certificate or articles of incorporation or bylaws or other
similar documents, or agreements, (ii) any law or regulation, or any order or decree of any court
or government instrumentality, or (iii) any indenture, mortgage, deed of trust, lease, agreement or
other instrument to which any Credit Party or any of its Subsidiaries is a party or by which any
Credit Party or any of its Subsidiaries or any of their property is bound, except in any such case
to the extent such conflict or breach has been waived herein or by a written waiver document, a
copy of which has been delivered to Agent on or before the date hereof; and
(d) no Default or Event of Default has occurred and is continuing.
SECTION 4. Reference to and Effect Upon the Credit Agreement.
(a) Except as specifically set forth above, the Credit Agreement and the other Loan Documents
shall remain in full force and effect and are hereby ratified and confirmed; and
(b) The amendments set forth herein are effective solely for the purposes set forth herein and
shall be limited precisely as written, and shall not be deemed to (i) be a consent to any
amendment, waiver or modification of any other term or condition of the Credit Agreement or any
other Loan Document, (ii) operate as a waiver or otherwise prejudice any right, power or remedy
that the Agent or the Lenders may now have or may have in the future under or in connection with
the Credit Agreement or any other Loan Document or (iii) constitute an amendment or waiver of any
provision of the Credit Agreement or any Loan Document, except as specifically set forth herein.
Upon the effectiveness of this Amendment, each reference in the Credit Agreement to “this
Agreement”, “herein”, “hereof” and words of like import and each reference in the Credit Agreement
and the Loan Documents to the Credit Agreement shall mean the Credit Agreement as amended hereby.
This Amendment shall be construed in connection with and as part of the Credit Agreement.
SECTION 5. GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE
WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS.
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SECTION 6. Headings. Section headings in this Amendment are included herein for
convenience of reference only and shall not constitute part of this Amendment for any other
purposes.
SECTION 7. Counterparts. This Amendment may be executed in any number of counterparts,
each of which when so executed shall be deemed an original, but all such counterparts shall
constitute one and the same instrument.
(signature pages follow)
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IN WITNESS WHEREOF, the parties hereto have executed and delivered this Amendment as of the
date first written above.
| BORROWER: | ||||||
| NAVARRE CORPORATION | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
[Signature Page to Second Amendment To Fourth Amended and Restated Credit Agreement]
S-1
| GENERAL ELECTRIC CAPITAL CORPORATION, as Agent and Lender | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
[Signature Page to Second Amendment To Fourth Amended and Restated Credit Agreement]
S-2
IN WITNESS WHEREOF, this Amendment has been duly executed as of the date first written above
by below Persons in their capacity as Credit Parties not as Borrower.
| ENCORE SOFTWARE, INC., as Credit Party | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| BCI ECLIPSE COMPANY, LLC, as Credit Party | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| FUNIMATION PRODUCTIONS LTD., as Credit Party | ||||||
| By: | Xxxxxxx XX, LLC, its General Partner | |||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| ANIMEONLINE, LTD (F/K/A THE FUNIMATION STORE LTD.), as Credit Party | ||||||
| By: | Xxxxxxx XX, LLC, its General Partner | |||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| XXXXXXX XX, LLC, as Credit Party | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
[Signature Page to Second Amendment To Fourth Amended and Restated Credit Agreement]
S-3
| NAVARRE CLP, LLC, as Credit Party | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| XXXXXXX XX, LLC, as Credit Party | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| NAVARRE LOGISTICAL SERVICES, INC., as Credit Party | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| NAVARRE DIGITAL SERVICES, INC., as Credit Party | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| NAVARRE ONLINE FULFILLMENT SERVICES, INC., as Credit Party | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| NAVARRE DISTRIBUTION SERVICES, INC., as Credit Party | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
[Signature Page to Second Amendment To Fourth Amended and Restated Credit Agreement]
S-4
| FUNIMATION CHANNEL, INC., as Credit Party | ||||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
[Signature Page to Second Amendment To Fourth Amended and Restated Credit Agreement]
S-5
