exv10w2






Exhibit 10.2




CONSENT AND AMENDMENT NO. 2

TO CREDIT AGREEMENT




          THIS CONSENT AND AMENDMENT NO. 2 TO CREDIT AGREEMENT (this “Amendment”) is entered
into as of May 17, 2010, by and among the Lenders identified on the signature pages hereof (such
Lenders, together with their respective successors and permitted assigns, are referred to
hereinafter each individually as a “Lender” and collectively as the “Lenders”),
WELLS FARGO CAPITAL FINANCE, LLC, formerly known as Wells Fargo Foothill, LLC, a Delaware limited
liability company, as the arranger and administrative agent for the Lenders (in such capacity,
“Agent”) and NAVARRE CORPORATION, a Minnesota corporation (“Borrower”).




          WHEREAS, Borrower, Agent, and Lenders are parties to that certain Credit Agreement dated as of
November 12, 2009 (as amended, modified or supplemented from time to time, the “Credit
Agreement”);




          WHEREAS, Encore Software, Inc. (“Encore”), a Loan Party and a Subsidiary of Borrower,
desires to purchase substantially all of the assets of Punch Software LLC, a Delaware limited
liability company (“Punch”), pursuant to that certain Asset Purchase Agreement dated as of
the date hereof and a copy of which is attached as Exhibit A (the “Punch Acquisition
Agreement”) by and among Encore, Borrower and Punch (such transaction, the “Punch
Acquisition”);




          WHEREAS, Borrower has requested that Agent and Lenders consent to the consummation of the
Punch Acquisition, and Agent and Lenders have agreed to the foregoing subject to the terms and
conditions contained herein; and




          WHEREAS, in connection with the foregoing, Borrower, Agent and Lenders have agreed to amend
the Credit Agreement in certain respects;




          NOW THEREFORE, in consideration of the premises and mutual agreements herein contained, the
parties hereto agree as follows:




          1. Defined Terms. Unless otherwise defined herein, capitalized terms used herein
shall have the meanings ascribed to such terms in the Credit Agreement.




          2. Consent. Subject to the satisfaction of the conditions set forth in Section
7 below and in reliance upon the representations and warranties of Borrower set forth in
Section 8 below, Agent and Lenders hereby consent to the consummation of the Punch
Acquisition by Encore pursuant to the terms of the Punch Acquisition Agreement. This is a limited
consent and shall not be deemed to constitute a consent or waiver of any other term, provision or
condition of the Credit Agreement or any other Loan Document, as applicable, or to prejudice any
right or remedy that Agent or any Lender may now have or may have in the future under or in
connection with the Credit Agreement or any other Loan Document.




          3. Amendments to Credit Agreement: In reliance upon the representations and
warranties of Borrower set forth in Section 8 below, the Credit Agreement is hereby amended
in the following respects:




 









 





          (a) Section 4.27 of the Credit Agreement is amended and restated in its entirety as follows:




          4.27. Punch Acquisition Documents.





     (a) Borrower has delivered to Agent a complete and correct copy of the Punch
Acquisition Documents, including all schedules and exhibits thereto. The execution,
delivery and performance of each of the Punch Acquisition Documents has been duly
authorized by all necessary action on the part of Borrower and Encore. Each Punch
Acquisition Document is the legal, valid and binding obligation of Encore (and in
the case of the Punch Acquisition Agreement, Borrower and Encore), enforceable
against Encore (and in the case of the Punch Acquisition Agreement, Borrower and
Encore), in accordance with its terms, in each case, except (i) as may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to or affecting generally the enforcement of creditors’ rights and (ii) the
availability of the remedy of specific performance or injunctive or other equitable
relief is subject to the discretion of the court before which any proceeding
therefor may be brought. Neither of Borrower nor Encore is in default in the
performance or compliance with any provisions thereof. All representations and
warranties made by Borrower or Encore in the Punch Acquisition Documents and in the
certificates delivered in connection therewith are true and correct in all material
respects. To Borrower’s and Encore’s knowledge, none of Punch’s representations or
warranties in the Punch Acquisition Documents contain any untrue statement of a
material fact or omit any fact necessary to make the statements therein not
misleading, in any case that could reasonably be expected to result in a Material
Adverse Change.




     (b) As of the Punch Acquisition Closing Date, the Punch Acquisition has been
consummated in all material respects, in accordance with all applicable laws. As of
the Punch Acquisition Closing Date, all requisite approvals by Governmental
Authorities having jurisdiction over Encore and, to Borrower’s knowledge, Punch,
with respect to the Punch Acquisition, have been obtained (including filings or
approvals required under the Hart-Scott-Rodino Antitrust Improvements Act), except
for any approval the failure to obtain could not reasonably be expected to be
material to the interests of the Lenders. As of the Punch Acquisition Closing Date,
after giving effect to the transactions contemplated by the Punch Acquisition
Documents, Encore will have good title to the assets acquired pursuant to the Punch
Acquisition Agreement, free and clear of all Liens other than Permitted Liens.



          (b) Clause (ii) of Section 6.7(a) of the Credit Agreement is amended and restated in its
entirety as follows:





     (ii) make any payment on account of Indebtedness that has been contractually
subordinated in right of payment (including, without limitation, Indebtedness under
the Punch Seller Note and the Punch Earn-Out) if such



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payment is not permitted at such time under the subordination terms and
conditions, or



          (c) Section 8.2(a) of the Credit Agreement is amended and restated in its entirety as follows:





     (a) fails to perform or observe any covenant or other agreement contained in
any of (i) Sections 5.1, 5.2, 5.3 (solely if Borrower is not
in good standing in its jurisdiction of organization), 5.6, 5.7
(solely if Borrower refuses to allow Agent or its representatives or agents to visit
Borrower’s properties, inspect its assets or books or records, examine and make
copies of its books and records, or discuss Borrower’s affairs, finances, and
accounts with officers and employees of Borrower), 5.10, 5.11,
5.13, 5.14 or 5.17 of this Agreement, (ii) Sections
6.1 through 6.16 of this Agreement, (iii) Section 7 of this
Agreement, or (iv) Section 6 of the Security Agreement;



          (d) Schedule 1.1 of the Credit Agreement is amended by adding the following new defined terms
thereto in their appropriate alphabetical order as follows:





     “Encore” means Encore Software, Inc., a Minnesota corporation.




     “Punch” means Punch Software LLC, a Delaware limited liability company.




     “Punch Acquisition” means the acquisition by Encore of substantially
all of the assets of Punch pursuant to the Punch Acquisition Agreement and the other
Punch Acquisition Documents.




     “Punch Acquisition Agreement” means that certain Asset Purchase
Agreement, dated as of May 17, 2010, by and among Encore, Navarre and Punch.




     “Punch Acquisition Closing Date” means May 17, 2010.




     “Punch Acquisition Documents” means the Punch Acquisition Agreement and
all other documents related thereto and executed in connection therewith.




     “Punch Earn-Out” means the contingent earn-out payment of up to
$2,500,000 owed by Encore to Punch pursuant to Section 3.5 of the Punch Acquisition
Agreement.




     “Punch Seller Note” means that certain Subordinated Promissory Note in
the principal amount of $1,100,000 dated as of the Punch Acquisition Closing Date
executed by Encore in favor of Punch.




     “Punch Seller Subordination Agreement” means that certain Subordination
Agreement dated as of the Punch Acquisition Closing Date by and among Punch, Encore,
Borrower and Agent.



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          (e) Schedule 1.1 of the Credit Agreement is amended by amending the defined term “Eligible
Accounts” set forth therein by (i) deleting the word “or” following clause (q) of such definition,
(ii) deleting the period at the end of clause (r) of such definition, (iii) adding “, or” to the
end of clause (r) of such definition, and (iv) adding the following new clause (s) to such
definition:





     (s) Accounts originally created by Punch and acquired by Encore from Punch in
under the Punch Acquisition Agreement (provided that the foregoing shall not include
Accounts created by Encore after the Punch Acquisition Closing Date).



          (f) Schedule 1.1 of the Credit Agreement is amended by amending and restating the defined term
“Loan Documents” set forth therein in its entirety as follows:





     “Loan Documents” means the Agreement, the Bank Product Agreements, any
Borrowing Base Certificate, the Collateral Access Agreements, the Controlled Account
Agreements, the Control Agreements, the Copyright Security Agreement, the Fee
Letter, the Guaranty, the Intercompany Subordination Agreement, the Letters of
Credit, the Patent Security Agreement, the Security Agreement, the Trademark
Security Agreement, the Punch Seller Subordination Agreement, any note or notes
executed by Borrower in connection with the Agreement and payable to any member of
the Lender Group, any letter of credit application entered into by Borrower in
connection with the Agreement, and any other agreement entered into, now or in the
future, by Borrower or any of its Subsidiaries and any member of the Lender Group in
connection with the Agreement.



          (g) Schedule 1.1 of the Credit Agreement is amended by amending the defined term “Permitted
Indebtedness” set forth therein by (i) deleting the word “and” following clause (i) of such
definition, (ii) deleting the period at the end of clause (j) of such definition, (iii) adding “,
and” to the end of clause (j) of such definition, and (iv) adding the following new clause (k) to
such definition:





     (k) Indebtedness of Encore under the Punch Earn-Out and the Punch Seller Note
(each as in effect on the Punch Acquisition Closing Date) and the guaranty of such
Indebtedness by Borrower, so long as all of such Indebtedness is subject to the
Punch Seller Subordination Agreement.



          (h) The following Schedules to the Credit Agreement are amended and restated in their entirety
as set forth on Exhibit B to this Amendment: Schedule 4.13 (Intellectual Property) and
Schedule 4.17 (Material Contracts).




          4. Continuing Effect. Except as expressly set forth in Section 2 and
Section 3 of this Amendment, nothing in this Amendment shall constitute a modification or
alteration of the terms, conditions or covenants of the Credit Agreement or any other Loan
Document, or a waiver of any other terms or provisions thereof, and the Credit Agreement and the
other Loan Documents shall remain unchanged and shall continue in full force and effect, in each
case as amended hereby.







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          5. Reaffirmation and Confirmation. Borrower hereby ratifies, affirms, acknowledges
and agrees that the Credit Agreement and the other Loan Documents represent the valid, enforceable
and collectible obligations of Borrower, and further acknowledges that there are no existing
claims, defenses, personal or otherwise, or rights of setoff whatsoever with respect to the Credit
Agreement or any other Loan Document. Borrower hereby agrees that this Amendment in no way acts as
a release or relinquishment of the Liens and rights securing payments of the Obligations. The
Liens and rights securing payment of the Obligations are hereby ratified and confirmed by Borrower
in all respects.




          6. Amendment Fee. To induce Agent and Lenders to enter into this Amendment, Borrower
agrees to pay to Agent, for the ratable benefit of the Lenders, a non-refundable fee equal to
$32,500 (the “Amendment Fee”), which shall be due and payable on the date hereof.




          7. Conditions to Effectiveness. This Amendment shall become effective upon the
satisfaction of each of the following conditions precedent, each in form and substance acceptable
to Agent:




          (a) Agent shall have received a fully executed copy of this Amendment (along with the Consent
and Reaffirmation attached hereto) and each of the additional documents, instruments and agreements
listed on the Closing Checklist attached hereto as Exhibit C, each in form and substance
acceptable to Agent, together with such other documents, agreements and instruments as Agent may
require or reasonably request;




          (b) Agent shall have received the Amendment Fee; and




          (c) No Default or Event of Default shall have occurred and be continuing on the date hereof or
as of the date of the effectiveness of this Amendment.




          8. Representations and Warranties. In order to induce Agent and Lenders to enter into
this Amendment, Borrower hereby represents and warrants to Agent and Lenders that, after giving
effect to this Amendment:




          (a) All representations and warranties contained in the Credit Agreement and the other Loan
Documents are true and correct on and as of the date of this Amendment, in each case as if then
made, other than representations and warranties that expressly relate solely to an earlier date (in
which case such representations and warranties were true and correct on and as of such earlier
date);




          (b) No Default or Event of Default has occurred and is continuing; and




          (c) This Amendment and the Credit Agreement, as modified hereby, constitute legal, valid and
binding obligations of Borrower and are enforceable against Borrower in accordance with their
respective terms.




          9. Miscellaneous.




          (a) Expenses. Borrower agrees to pay on demand all Lender Group Expenses of Agent
(including, without limitation, the fees and expenses of outside counsel for Agent) in




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connection with the preparation, negotiation, execution, delivery and administration of this
Amendment and all other instruments or documents provided for herein or delivered or to be
delivered hereunder or in connection herewith. All obligations provided herein shall survive any
termination of this Amendment and the Credit Agreement as modified hereby.




          (b) Governing Law. This Amendment shall be a contract made under and governed by the
internal laws of the State of Illinois.




          (c) Counterparts. This Amendment may be executed in any number of counterparts, and
by the parties hereto on the same or separate counterparts, and each such counterpart, when
executed and delivered, shall be deemed to be an original, but all such counterparts shall together
constitute but one and the same Amendment. Delivery of an executed counterpart of this Amendment
by facsimile or electronic mail shall be equally effective as delivery of an original executed
counterpart of this Amendment.




          10. Release.




          (a) In consideration of the agreements of Agent and Lenders contained herein and for other
good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged,
Borrower and each Guarantor (by its execution and delivery of the attached Consent and
Reaffirmation), on behalf of itself and its successors, assigns, and other legal representatives,
hereby absolutely, unconditionally and irrevocably releases, remises and forever discharges Agent
and Lenders, and their successors and assigns, and their present and former shareholders,
affiliates, subsidiaries, divisions, predecessors, directors, officers, attorneys, employees,
agents and other representatives (Agent, each Lender and all such other Persons being hereinafter
referred to collectively as the “Releasees” and individually as a “Releasee”), of
and from all demands, actions, causes of action, suits, covenants, contracts, controversies,
agreements, promises, sums of money, accounts, bills, reckonings, damages and any and all other
claims, counterclaims, defenses, rights of set-off, demands and liabilities whatsoever
(individually, a “Claim” and collectively, “Claims”) of every name and nature,
known or unknown, suspected or unsuspected, both at law and in equity, which Borrower, any
Guarantor or any of their respective successors, assigns, or other legal representatives may now or
hereafter own, hold, have or claim to have against the Releasees or any of them for, upon, or by
reason of any circumstance, action, cause or thing whatsoever in relation to, or in any way in
connection with any of the Credit Agreement, or any of the other Loan Documents or transactions
thereunder or related thereto which arises at any time on or prior to the day and date of this
Amendment.




          (b) Each of Borrower and each Guarantor understands, acknowledges and agrees that the release
set forth above may be pleaded as a full and complete defense and may be used as a basis for an
injunction against any action, suit or other proceeding which may be instituted, prosecuted or
attempted in breach of the provisions of such release.




          (c) Each of Borrower and each Guarantor agrees that no fact, event, circumstance, evidence or
transaction which could now be asserted or which may hereafter be discovered shall affect in any
manner the final, absolute and unconditional nature of the release set forth above.




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[signature pages follow]




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          IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be executed by their
respective officers thereunto duly authorized and delivered as of the date first above written.




	 	 	 	 	 	 	 

	 	 	NAVARRE CORPORATION,

a Minnesota corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 








 









 








	 	 	 	 	 	 	 

	 	 	WELLS FARGO CAPITAL FINANCE, LLC,

formerly known as Wells Fargo Foothill, LLC,

a Delaware limited liability company, as Agent and as a Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 






 









 





	 	 	 	 	 	 	 

	 	 	CAPITAL ONE LEVERAGE FINANCE CORP.,

as a Lender	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 







 












 






CONSENT AND REAFFIRMATION




     Each of the undersigned hereby (i) acknowledges receipt of a copy of the foregoing Consent and
Amendment No. 2 to Credit Agreement (terms defined therein and used, but not otherwise defined,
herein shall have the meanings assigned to them therein); (ii) consents to Borrower’s execution and
delivery thereof; (iii) agrees to be bound by the terms of the Amendment, including Section 10
thereof; and (iv) affirms that nothing contained therein shall modify in any respect whatsoever any
Loan Document to which any of the undersigned is a party and reaffirm that each such Loan Document
is and shall continue to remain in full force and effect. Although each of the undersigned has
been informed of the matters set forth herein and has acknowledged and agreed to same, each of the
undersigned understands that Agent and Lenders have no obligation to inform any of the undersigned
of such matters in the future or to seek any of the undersigned’s acknowledgment or agreement to
future consents, amendments or waivers, and nothing herein shall create such a duty.



     IN WITNESS WHEREOF, each of the undersigned has executed this Consent and Reaffirmation on and
as of the date of such Amendment.



	 	 	 	 	 	 	 

	 	 	NAVARRE DISTRIBUTION SERVICES, INC., 


a Minnesota corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	NAVARRE ONLINE FULFILLMENT SERVICES, INC., 

a Minnesota corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	ENCORE SOFTWARE, INC., 


a Minnesota Corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 






 









 






	 	 	 	 	 	 	 

	 	 	FUNIMATION PRODUCTIONS, LTD., 


a Texas limited partnership	 	 
	 
	 	 	 	 	 	 
	 	 	By: Navarre CP, LLC, its General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	ANIMEONLINE, LTD., 


a Texas limited partnership	 	 
	 
	 	 	 	 	 	 
	 	 	By: Navarre CS, LLC, its General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	NAVARRE CP, LLC,

a Minnesota limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	NAVARRE CLP, LLC,

a Minnesota limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	NAVARRE CS, LLC,

a Minnesota limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	FUNIMATION CHANNEL, INC., 


a Minnesota corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 






 









 






	 	 	 	 	 	 	 

	 	 	BCI ECLIPSE COMPANY, LLC,

a Minnesota limited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	NAVARRE LOGISTICAL SERVICES, INC., 


a Minnesota corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	NAVARRE DIGITAL SERVICES, INC., 


a Minnesota corporation	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 
	 
	 	 	 	 	 	 
	 	 	NAVARRE DISTRIBUTION SERVICES ULC,

a British Columbia unlimited liability company	 	 
	 
	 	 	 	 	 	 
	 

	 	By:	 	 	 	 
	 

	 	Title:
	 	 

	 	 
	 

	 	 	 	 

	 	 






 









 






EXHIBIT A




Punch Acquisition Agreement



See Attached.



 









 





EXHIBIT B




Certain Amended and Restated Schedules



See Attached.



 









 





EXHIBIT C




Closing Checklist



See Attached.