LIMITED WAIVER AND FIFTH
AMENDMENT TO FOURTH AMENDED AND
RESTATED CREDIT AGREEMENT
This LIMITED
WAIVER AND FIFTH AMENDMENT TO FOURTH AMENDED AND RESTATED CREDIT
AGREEMENT (this “ Amendment ”), is dated as of
5 th
day of February, 2009, 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.
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 waive and 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 .
Subject to the satisfaction of each of the conditions to
effectiveness set forth in Section 3 hereof, the Credit
Agreement is hereby amended as follows:
(a) The last
sentence of Section 1.1(a) of the Credit Agreement is
hereby deleted.
(b)
Section 1.5(a) of the Credit Agreement is hereby
amended and restated to read in its entirety as follows:
“(a)
Borrower shall pay interest to Agent, for the ratable benefit of
Lenders in accordance with the Loans being made by each Lender, in
arrears on each applicable Interest Payment Date, at the Index Rate
plus 5.75% per annum or, at the election of Borrower, at the
applicable LIBOR Rate plus 4.75% per annum.”
(c)
Section 1.9(b) of the Credit Agreement is hereby
amended and restated to read in its entirety as follows:
“(b) As
additional compensation for the Revolving Lenders, Borrower shall
pay to Agent, for the ratable benefit of such Lenders, in arrears,
on the first Business Day of each month prior to the Commitment
Termination Date and on the Commitment Termination Date, a Fee for
Borrower’s non-use of available funds in an amount equal to
the Applicable Unused Line Fee Margin per annum (calculated on the
basis of a 360 day
1
year for actual
days elapsed) multiplied by the difference between (x) the
Maximum Amount (as it may be reduced from time to time) and
(y) the average for the period of the daily closing balances
of the Revolving Loan and the Swing Line Loan outstanding during
the period for which the such Fee is due (the “ Average
Outstanding Amount ”).”
(d)
Section 1.9 (c) of the Credit Agreement is hereby
amended and restated in its entirety to read as follows:
“(c)
[Intentionally Omitted]”
(e) The
following definitions are hereby added to Annex A to the
Credit Agreement in alphabetical order:
“ Average
Outstanding Amount ” has the meaning ascribed to it in
Section 1.9(b) .
“ Fifth
Amendment Date ” shall mean February 5,
2009.
(f) The
following definitions set forth in Annex A to the Credit
Agreement are hereby amended and restated in their entirety to read
as follows:
“
Applicable Unused Line Fee Margin ” means
(i) 0.75% if the Average Outstanding Amount during the
applicable period is less than $40,000,000 or (ii) 1.00% if
the Average Outstanding Amount during the applicable period is
greater than or equal to $40,000,000.
“
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 65% 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) 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 Borrowing Base attributable
to the Eligible Inventory of Eligible Credit Parties exceed (1)
$12,000,000 during the Fiscal Months of November and December of
each Fiscal Year, and (2) $10,000,000 during all other Fiscal
Months 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. The
value of any Eligible Accounts denominated in Canadian Dollars
shall be included in the Borrowing Base using such Accounts’
Dollar Amount.
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“
Commitment Termination Date ” means the earliest of
(a) June 30, 2010, (b) the date of termination of
Lenders’ obligations to make Advances and to incur Letter of
Credit Obligations or permit existing Loans to remain outstanding
pursuant to Section 8.2(b) , and (c) the date of
indefeasible prepayment in full by Borrower of the Loans and the
cancellation and return (or stand-by guarantee) of all Letters of
Credit or the cash collateralization of all Letter of Credit
Obligations pursuant to Annex B , and the permanent
reduction of the Commitments to zero dollars ($0).
“
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 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, 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, 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) losses arising from the operations of Navarre
Entertainment in an aggregate amount not to exceed (w) $3,233,000
with respect to the 12 month period ending on March 31,
2008, (x) $1,368,000 with respect to the 12 month period
ending on June 30, 2008, (y) $394,000 with respect to the
12 month period ending on September 30, 2008, (z) $27,000
with respect to the 12 month period ending on
December 31, 2008, (viii) non cash expenses incurred on
or prior to March 31, 2009 solely as a result of the closure
of the business of BCI Eclipse in an aggregate amount not to exceed
$18,600,000, (ix) cash severance payments made to employees
whose employment with BCI Eclipse was terminated on or after
October 31, 2008 but on or prior to March 31, 2009 in
connection with the closure of the business of BCI Eclipse in an
aggregate amount not to exceed $500,000, (x) cash severance
payments made to employees of the Borrower whose employment with
the Borrower was terminated on or after October 31, 2008 but
on or prior to March 31, 2009 in an aggregate amount not to
exceed $750,000, (xi) non-cash impairment charges incurred by the
FUNimation Companies on or prior to December 31, 2008 in an
aggregate amount not to exceed $9,400,000, (xii) additional
non-cash impairment charges incurred by the FUNimation Companies on
or prior to March 31, 2010 in an aggregate amount not to
exceed $4,400,000, (xiii) non-cash impairment charges incurred
by Encore Software on or prior to March 31, 2010 in an
aggregate amount not to exceed $44,000 and (xiv) all expenses
or losses for impairment of goodwill, 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
3
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.
“ Minimum
Excess Availability Reserve ” shall mean a special
Reserve maintained by Agent in an amount at all times equal to
$11,700,000; provided that (x) such amount shall be
increased by $100,000 on March 1, 2009; (y) commencing on
April 1, 2009 and ending on March 31, 2010, such amount
shall be increased on the first day of each calendar month during
such period by (i) $300,000 or (ii) $100,000 as long as (A) no
Default or Event of Default has occurred and is continuing and
(B) Borrower and the Subsidiaries have met each of the Reserve
Tests as of each Fiscal Quarter ending on or after March 31,
2009; and (z) commencing on April 1, 2010, such amount
shall be increased by $500,000 on April 1, 2010 and on the
first day of each calendar month thereafter ( provided ,
however, that if Borrower and its Subsidiaries have met each of the
Reserve Tests as of the most recently completed Fiscal Quarter, the
Minimum Excess Availability Reserve shall not be increased to an
amount greater than $14,500,00 pursuant to the above proviso). As
used herein, “ Reserve Tests ”
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