EXHIBIT 10.56
LIMITED WAIVER AND SECOND AMENDMENT TO AMENDED AND RESTATED
CREDIT AGREEMENT
This LIMITED WAIVER AND SECOND AMENDMENT TO AMENDED AND RESTATED CREDIT
AGREEMENT (this "Waiver and Amendment") is entered into as of this 18th day of
October, 2004, 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
Waiver and 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 Amended and Restated Credit Agreement, dated as of
June 18, 2004 (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 Lenders hereby agree as follows:
SECTION 1. LIMITED WAIVER. As long as Borrower complies with the Maximum Capital
Expenditures covenant set forth in clause (a) of Annex G to Credit Agreement (as
in effect after giving effect to this Waiver and Amendment and as may be further
amended, supplemented or otherwise modified after the date hereof) for the
Fiscal Year ending on or about March 31, 2005, the Agent and the Lenders hereby
waive any breach or violation of the Credit Agreement (and any resulting Event
of Default) which has occurred solely as a result of the failure of Borrower to
comply with the Maximum Capital Expenditures covenant set forth in clause (a) of
Annex G to Credit Agreement for the Fiscal Year ending on or about March 31,
2005 (the "Specified Default").
SECTION 2. AMENDMENTS.
(a) Section 6.2 of the Credit Agreement is hereby amended and restated to
read in its entirety as follows:
"6.2. Investments; Loans and Advances. No Credit Party shall make or
permit to exist any investment in, or make, accrue or permit to exist
loans or advances of money to, any Person, through the direct or indirect
lending of money, holding of securities or otherwise, except that: (a)
Borrower, Encore Software and BCI Eclipse may hold
investments comprised of notes payable, or stock or other securities
issued by Account Debtors to Borrower, Encore Software or BCI Eclipse, as
applicable pursuant to negotiated agreements with respect to settlement of
such Account Debtor's Accounts in the ordinary course of business, so long
as the aggregate amount of such Accounts so settled by Borrower, Encore
Software and BCI Eclipse does not exceed $500,000 (in the aggregate for
Borrower, Encore Software and BCI Eclipse combined); (b) each Credit Party
may maintain its existing investments in its Subsidiaries as of the
Closing Date; (c) Borrower may maintain Eligible Certificate of Deposits;
(d) so long as no Default or Event of Default has occurred and is
continuing and there is no outstanding Revolving Loan or Acquisition Loan
balance, Borrower may make investments, subject to Control Letters in
favor of Agent for the benefit of Lenders or otherwise subject to a
perfected security interest in favor of Agent for the benefit of Lenders,
in (i) marketable direct obligations issued or unconditionally guaranteed
by the United States of America or any agency thereof maturing within one
year from the date of acquisition thereof, (ii) commercial paper maturing
no more than one year from the date of creation thereof and currently
having the highest rating obtainable from either Standard & Poor's Ratings
Group or Moody's Investors Service, Inc., (iii) certificates of deposit
maturing no more than one year from the date of creation thereof issued by
(A) the Business Bank, a Minnesota corporation, or (B) commercial banks
incorporated under the laws of the United States of America, each having
combined capital, surplus and undivided profits of not less than
$300,000,000 and having a senior unsecured rating of "A" or better by a
nationally recognized rating agency (an "A Rated Bank"), (iv) time
deposits maturing no more than 30 days from the date of creation thereof
with A Rated Banks and (v) mutual funds that invest solely in one or more
of the investments described in clauses (i) through (iv) above; (e)
Borrower, Encore Software and BCI Eclipse may provide advances to Vendors
described in Part A of Disclosure Schedule 6.2; (f) Borrower, Encore
Software and BCI Eclipse may provide advances to Vendors so long as (i) at
the time of each such advance the Borrowing Availability immediately after
giving effect to such advance is at least $20,000,000, (ii) the aggregate
outstanding amount of advances to Vendors permitted solely pursuant to
Section 6.2(e) and this Section 6.2(f) does not exceed $15,000,000 at any
time and (iii) with respect to each advance to a Vendor to be made by
Encore Software or BCI Eclipse, immediately after giving effect thereto
the Borrower would be permitted to make at least $500,000 of additional
advances to Encore Software or BCI Eclipse, as applicable pursuant to
Section 6.2(i) hereof (provided, however, that the amount set forth in
this Section 6.2(f) shall be reduced from time to time by the amount of
advances to Vendors otherwise permitted by Section 6.2(e) and/or Section
6.2(f) which have been written off as uncollectible in accordance with
Borrower's policies and as determined in accordance with GAAP to the
extent that the amount of such write off has not caused a reduction in the
EBITDA of Borrower in the fiscal period such write off is taken; (g)
Borrower may provide advances to Vendors described in Part B of Disclosure
Schedule 6.2; (h) Borrower may provide advances by a Credit Party to its
employees expressly permitted by Section 6.4(b) hereof; (i) Borrower may
make loans to Encore Software in an aggregate outstanding principal amount
not to exceed, at any time, $10,000,000; (j) the Borrower may make loans
to BCI Eclipse in an aggregate outstanding principal amount not to exceed,
at any time, $5,000,000; (k) the Borrower may (i) make one or more loans
(each a "Mix & Burn Loan") to Mix & Burn, Inc., a
2
Minnesota corporation ("Mix & Burn") pursuant to that certain Amended and
Restated Discretionary Revolving Loan Agreement and that certain Second
Discretionary Revolving Loan Agreement, each dated as of June 29, 2004,
between the Borrower and Mix & Burn and those certain Amended and Restated
Promissory Note, Promissory Note, each dated as of June 29, 2004,
Promissory Note, dated on or about October 18, 2004, by Mix & Burn in
favor of Borrower, and any additional promissory notes executed from time
to time by Mix & Burn in favor of Borrower (each a "Mix & Burn Promissory
Note"), as long as (a) the aggregate principal amount of all such Mix &
Burn Loans does not exceed $2,500,000, (b) the Mix & Burn Loans are fully
secured by fully perfected first priority Liens in and to all or
substantially all of the assets of Mix & Burn pursuant to that certain
Amended and Restated Security Agreement dated as of June 29, 2004 between
the Borrower and Mix & Burn (the "Mix & Burn Security Agreement"), and (c)
Borrower has granted to Agent, for itself and the benefit of Lenders,
fully perfected first priority Liens, pursuant to documentation in form
and substance satisfactory to Agent, in and to the Mix & Burn Promissory
Notes, the Liens granted to Borrower under the Mix & Burn Security
Agreement, all of the Stock owned by Borrower from time to time in Mix &
Burn whether (1) Borrower has acquired such Stock as a result of the
conversion of the Mix & Burn Promissory Notes into equity, (2) consisting
of warrants issued by Mix & Burn in favor of the Borrower in connection
with the Mix & Burn Loans or (3) Borrower has acquired such Stock in any
other manner, (ii) own Stock in Mix & Burn issued to Borrower for no
additional consideration in connection with the Mix & Burn Loans, (iii)
convert the obligations relating to the Mix & Burn Loans into Stock of Mix
& Burn and own such Stock on terms and subject to conditions satisfactory
to Agent; and (l) other investments not exceeding $100,000 in the
aggregate at any time outstanding."
(b) Clause (a) of Annex G to 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, 2005 $4,000,000
Fiscal Year ending on or about March 31, 2006 $3,000,000
and each Fiscal Year ending thereafter
provided, however, that the amount of permitted Capital Expenditures
during any measuring period set forth above shall be increased by the
amount of the cash proceeds received during such measuring period from a
sale-leaseback of the Minnesota Facility (as long as such sale-leaseback
is consented to by Agent) to the extent that the construction of the
assets subject to such sale-leaseback were funded with the proceeds of
loans under the Construction Loan Agreement or proceeds of the Revolving
Loans on or after April 1, 2003."
3
SECTION 3. EFFECTIVENESS. The effectiveness of this Waiver and Amendment is
subject to the satisfaction of each the following conditions precedent:
(a) this Waiver and Amendment shall have been duly executed and delivered
by the Borrower, the Credit Parties, the Agent and each Lender;
(b) the Agent shall have received a certified copy of each of (i) that
certain Promissory Note, dated on or about October 18, 2004, by Mix & Burn in
favor of Borrower (the "October Mix & Burn Promissory Note") and (ii) all
related agreements, documents and other instruments executed and/or delivered in
connection therewith (collectively, the "Mix & Burn Agreements") and the Mix &
Burn Agreements shall be in form and substance satisfactory to Agent;
(c) the Agent shall have received a Pledge Amendment, in form and
substance satisfactory to Agent, executed by Borrower in favor of Agent,
pledging the October Mix & Burn Promissory Note, together with an original copy
of the October Mix & Burn Promissory Note endorsed to Agent;
(d) the Borrower shall have paid to the Agent an amendment fee of $5,000
(which fee shall be fully earned and payable on the date hereof); and
(e) the representations and warranties contained herein shall be true and
correct in all respects.
Notwithstanding the foregoing, the effectiveness of the limited waiver set
forth in Section 1 hereof and the amendment set forth in Section 2(b) hereof is
only subject to the satisfaction of the conditions precedent set forth in
clauses (a), (d) and (e) above.
SECTION 4. REPRESENTATIONS AND WARRANTIES. In order to induce the Agent and each
Lender to enter into this Waiver and 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 Waiver and
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 Waiver and Amendment (determined as if all
references to "Closing Date" were references to October 18, 2004), except to the
extent that any such representations and warranties expressly relate to an
earlier date;
(b) the execution, delivery and performance by such Credit Party of this
Waiver and Amendment has been duly authorized by all necessary corporate action
required on its part and this Waiver and 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;
4
(c) Neither the execution, delivery and performance of this Waiver and
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, (iii) 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 other
than the Specified Default.
SECTION 5. 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 waiver and amendments set forth herein is 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 a waiver of any provision of the Credit Agreement or any Loan
Document, except as specifically set forth herein. Upon the effectiveness of
this Waiver and 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 Waiver and Amendment shall be
construed in connection with and as part of the Credit Agreement.
SECTION 6. COSTS AND EXPENSES. As provided in Section 11.3 of the Credit
Agreement, the Borrower agrees to reimburse Agent for all fees, costs, and
expenses, including the reasonable fees, costs, and expenses of counsel or other
advisors for advice, assistance, or other representation in connection with this
Waiver and Amendment.
SECTION 7. GOVERNING LAW. THIS WAIVER AND AMENDMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS.
SECTION 8. HEADINGS. Section headings in this Waiver and Amendment are included
herein for convenience of reference only and shall not constitute part of this
Waiver and Amendment for any other purposes.
5
SECTION 9. COUNTERPARTS. This Waiver and 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 page follows)
6
IN WITNESS WHEREOF, the parties hereto have executed and delivered this
Waiver and Amendment as of the date first written above.
BORROWER:
NAVARRE CORPORATION
By:_______________________________
Name:_____________________________
Title:____________________________
GENERAL ELECTRIC CAPITAL
CORPORATION, AS AGENT AND LENDER
By:_______________________________
Name:_____________________________
Title:____________________________
S-1
[Signature Page to Limited Waiver and Second Amendment To Credit Agreement]
IN WITNESS WHEREOF, this Waiver and 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:___________________________________
S-2
[Signature Page to Limited Waiver and Second Amendment To Credit Agreement]