SECOND AMENDMENT TO FOURTH AMENDED AND
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]

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                  GENERAL ELECTRIC CAPITAL CORPORATION, as Agent and Lender    
 
           
 
  By:        
 
  Name:  
 
   
 
           
 
  Title:        
 
           

[Signature Page to Second Amendment To Fourth Amended and Restated Credit
Agreement]

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     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:   Navarre CP, LLC, its General Partner    
 
           
 
  By:        
 
  Name:  
 
   
 
           
 
  Title:        
 
           
 
                ANIMEONLINE, LTD (F/K/A THE FUNIMATION STORE LTD.), as Credit
Party    
 
   
 
  By:   Navarre CS, LLC, its General Partner    
 
           
 
  By:        
 
  Name:  
 
   
 
           
 
  Title:        
 
           
 
                NAVARRE CP, LLC, as Credit Party    
 
           
 
  By:        
 
  Name:  
 
   
 
           
 
  Title:        
 
           

[Signature Page to Second Amendment To Fourth Amended and Restated Credit
Agreement]

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                  NAVARRE CLP, LLC, as Credit Party    
 
           
 
  By:        
 
  Name:  
 
   
 
           
 
  Title:        
 
           
 
                NAVARRE CS, 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]

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                  FUNIMATION CHANNEL, INC., as Credit Party    
 
           
 
  By:        
 
  Name:  
 
    
 
           
 
  Title:        
 
           

[Signature Page to Second Amendment To Fourth Amended and Restated Credit
Agreement]

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