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not at the rate as determinedabove, but at the Index Rate plus the Applicable Revolver Index Margin per annum or, at theelection of Borrower, at the applicable LIBOR Rate plus the Applicable Revolver LIBOR Marginper annum, based on the aggregate Revolving Credit Advances outstanding from time to time.As of July 1, 2008, the Applicable Margins are as follows:     Applicable Revolver Index Margin  1.50%     Applicable Revolver LIBOR Margin  2.75%     Applicable L/C Margin  2.75%     Applicable Unused Line Fee Margin  0.375%     The Applicable Margins shall be adjusted (up or down) prospectively on a quarterly basis asdetermined based upon the average daily Borrowing Availability for the then most recently endedFiscal Quarter, commencing with the Fiscal Quarter ending on June 30, 2008. All adjustments in theApplicable Margins thereafter shall be implemented quarterly on a prospective basis at any timethere is a need for an adjustment (the determination as to whether an adjustment is necessary to bemade by Agent in good faith). Adjustments in Applicable Margins will be determined by reference tothe following grids:   **If average daily Borrowing** **Level of****Availability for the Fiscal Quarter is:** **Applicable Margins:**3$45,000,000 Level I3  $35,000,000, but < $45,000,000 Level II3 $20,000,000, but < $35,000,000 Level III3  $7,500,000, but < $20,000,000 Level IV< $7,500,000 Level V                       **Level I** **Level II** **Level III** **Level IV** **Level V**Applicable RevolverIndex Margin  0.75%  1.00%  1.25%  1.50%  1.75%Applicable RevolverLIBOR Margin  2.00%  2.25%  2.50%  2.75%  3.00%Applicable L/CMargin  2.00%  2.25%  2.50%  2.75%  3.00%Applicable UnusedLine Fee Margin  0.375%  0.375%  0.375%  0.375%  0.375%
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If any Default or an Event of Default has occurred and is continuing at the time anyreduction in the Applicable Margins is to be implemented, that reduction shall be deferreduntil the first day of the first calendar month following the date on which all Defaults orEvents of Default are waived or cured.”     (c) Section 1.9 (c) of the Credit Agreement is hereby amended and restated in itsentirety to read as follows:“(c) If, on or prior to the third anniversary of the Third Amendment Date, Borrower prepaysthe Revolving Loan and/or reduces or terminates the Revolving Loan Commitment, whethervoluntarily or involuntarily and whether before or after acceleration of the Obligations orif the Revolving Loan Commitments are reduced or terminated, Borrower shall pay to Agent,for the benefit of Lenders as liquidated damages and compensation for the costs of beingprepared to make funds available hereunder an amount equal to the Applicable Percentage (asdefined below) multiplied by the amount of the reduction of the Revolving Loan Commitment.As used herein, the term “Applicable Percentage” shall mean (x) one and one half ofone percent (1.5%), in the case of a reduction on or prior to the first anniversary of theThird Amendment Date, (y) one percent (1%), in the case of a reduction after the firstanniversary of the Third Amendment Date but on or prior to the second anniversary thereofand (z) one half of one percent (0.5%), in the case of a reduction after the secondanniversary of the Third Amendment Date but on or prior to the third anniversary thereof.The Credit Parties agree that the Applicable Percentages are a reasonable calculation ofLenders’ lost profits in view of the difficulties and impracticality of determining actualdamages resulting from an early termination of the Revolving Loan Commitment.Notwithstanding the foregoing, no prepayment fee shall be payable by Borrower upon amandatory prepayment made pursuant to Sections 1.3(b) 1.16(c) or 5.4(d);provided that Borrower does not permanently reduce or terminate the Revolving LoanCommitment upon any such prepayment and, in the case of prepayments made pursuant toSections 1.3(b)(ii) or (b)(iii), the transaction giving rise to the applicableprepayment is a sale of a Subsidiary or division of Borrower expressly permitted underSection 6.”     (d) Section 6.3(a)(vii) of the Credit Agreement is hereby amended and restated in itsentirety to read as follows:          “(vii) [Intentionally Omitted]”     (e) A new Section 6.21, which shall read in it entirety as follows, is hereby added tothe Credit Agreement immediately following Section 6.20:          “6.21 Independent Advisor. The Credit Parties hereby agree that they shall not failto engage the Independent Advisor on or prior to July 14, 2008.”     (f) The following definitions are hereby added to Annex A to the Credit Agreement inalphabetical order:     “Designated Amount” shall mean $6,000,000; provided, however,on the 15th day after the delivery of the financial statements and related documentsrequired by clause
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(c) of Annex E for each Fiscal Year of the Borrower toend after the Third Amendment Date, as long as the Borrower has provided a calculation, indetail and form acceptable to the Agent, of the Excess Cash Flow for such Fiscal Year, theDesignated Amount shall be reduced, to an amount not less than zero, by 50% of the ExcessCash Flow for such Fiscal Year.     “Excess Cash Flow” shall mean, with respect to the Borrower for any period, anamount (if positive) equal to: (i) the amount for such period of EBITDA, minus (ii) the sum,without duplication, of the amounts for such period of (a) scheduled repayments ofIndebtedness for borrowed money, (b) Capital Expenditures (net of any proceeds of (y) anyrelated financing, including purchase money financings, with respect to such expendituresand (z) any Capital Expenditures made with the proceeds of asset dispositions), (c) InterestExpense, (d) taxes paid in cash during such period based upon net income, and (e) theaggregate Net Vendor Advances made during such period.     “Independent Advisor” shall mean a third party advisory firm engaged by theCredit Parties (from a list of three firms provided by Agent) to review the Projections forthe Fiscal Year ending on or about March 31, 2009, with the scope and timing of such reviewto be satisfactory to Agent in its sole discretion.”     “Third Amendment Date” shall mean June 12, 2008     (g) The following definitions set forth in Annex A to the Credit Agreement are herebyamended and restated in their entirety to read as follows:     “Commitment Termination Date” means the earliest of (a) March 22, 2012, (b) thedate of termination of Lenders’ obligations to make Advances and to incur Letter of CreditObligations or permit existing Loans to remain outstanding pursuant to Section8.2(b), and (c) the date of indefeasible prepayment in full by Borrower of the Loans andthe cancellation and return (or stand-by guarantee) of all Letters of Credit or the cashcollateralization of all Letter of Credit Obligations pursuant to Annex B, and thepermanent reduction of the Commitments to zero dollars ($0).     “EBITDA” means, with respect to any Person for any fiscal period, withoutduplication, 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) anyaggregate net gain (but not any aggregate net loss) during such period arising from thesale, exchange or other disposition of capital assets by such Person (including any fixedassets, whether tangible or intangible, all inventory sold in conjunction with thedisposition of fixed assets and all securities), (v) any other non-cash gains that have beenadded in determining consolidated net income, in each case to the extent included in thecalculation of net income of such Person for such period in accordance with GAAP, butwithout 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 theforegoing, plus (c) the sum of (i) any provision for income taxes, (ii) InterestExpense, (iii) loss from extraordinary items for such period, (iv) depreciation and
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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 consolidatednet income as the result of any grant to any members of the management of such Person of anyStock, (vii) write-offs of Accounts owing to Borrower from (x) Goldhil Media in theaggregate amount not to exceed $2,100,000 and (y) Tower Records in the aggregate amount notto exceed $1,900,000 and (viii) losses arising from the operations of Navarre Entertainmentin an aggregate amount not to exceed (w) $3,233,000 with respect to the 12 month periodending on March 31, 2008 (x) $1,368,000 with respect to the 12 month period ending on June30, 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, in each case to theextent included in the calculation of consolidated net income of such Person for such periodin accordance with GAAP, but without duplication. For purposes of this definition, thefollowing 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 Subsidiaryof, 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 suchPerson has an ownership interest, except to the extent any such income has actually beenreceived by such Person in the form of cash dividends or distributions; (3) theundistributed earnings of any Subsidiary of such Person to the extent that the declarationor payment of dividends or similar distributions by such Subsidiary is not at the timepermitted by the terms of any contractual obligation or requirement of law applicable tosuch Subsidiary; (4) any restoration to income of any contingency reserve, except to theextent 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 lifeinsurance policies; (7) any net gain arising from the acquisition of any securities, or theextinguishment, under GAAP, of any Indebtedness, of such Person, (8) in the case of asuccessor to such Person by consolidation or merger or as a transferee of its assets, anyearnings 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 Personat the date of acquisition of such Subsidiary over the cost to such Person of the investmentin such Subsidiary.”     “Minimum Excess Availability Reserve” shall mean a special Reserve maintainedby Agent in an amount at all times equal to the sum of (i) $11,500,000; providedthat Agent may at any time, in its sole discretion, reduce such amount to $8,500,000pursuant to a written notice to Borrower specifically referring to this definitionminus (ii) at all times on or prior to October 10, 2008, $6,000,000”     (h) Clause (b) of Annex G to the Credit Agreement is hereby amended andrestated to read in its entirety as follows:     “(b) Minimum Fixed Charge Coverage Ratio. Borrower and its Subsidiaries shallhave 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 thenended, a ratio (the “Fixed Charge Coverage Ratio”) of (A) the sum of (i) EBITDAplus (ii) the aggregate of all Vendor Advance Expenses for such period, plus(iii) interest
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income received during such period minus (iii) Capital Expendituresduring such period (other than Capital Expenditures financed other than with the proceeds ofLoans), 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, withoutduplication, (i) the aggregate of all Interest Expense paid or accrued during such period,plus (ii) scheduled payments of principal with respect to Indebtedness during suchperiod (other than scheduled principal payments made by Borrower during such period withrespect to Term Loan B (as defined and under the Existing Credit Agreement) pursuant to theExisting Credit Agreement), plus, (iii) all Restricted Payments made by a CreditParty 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 forthbelow opposite such Fiscal Quarter:     Fiscal Quarter Ending  RatioJune 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  0.85:1 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      (i) Clause (d) of Annex G to the Credit Agreement is hereby amended andrestated to read in its entirety as follows:     “(d) Minimum EBITDA. Borrower and its Subsidiaries shall have on aconsolidated basis, as of the last day of the Fiscal Quarter ending on June 30, 2007 and asof 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 AmountJune 30, 2007 $32,000,000 September 30, 2007 $26,000,000 December 31, 2007 $27,000,000      March 31, 2008 $27,000,000      June 30, 2008 $22,750,000 September 30, 2008 $25,000,000 
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     Fiscal Quarter Ending AmountDecember 31, 2008 $25,000,000 March 31, 2009 $27,000,000 June 30, 2009 $29,000,000 September 30, 2009 $30,000,000 December 31, 2009 $31,000,000 March 31, 2009 $33,000,000 September 30, 2009 and each Fiscal Quarter ending thereafter $35,000,000 **SECTION 2.****Limited Waivers****.**Effective as of March 31, 2008, Agent and Lenders hereby waiveany Event of Default under subsection 8.1 (b) of the Credit Agreement arising solely as aresult of the failure to comply with clause (d) of Annex G  for the Fiscal Quarterending March 31, 2008. In addition, Agent and Lenders hereby waive the provisions of Section6.3(b) and Section 6.14 of the Credit Agreement to the extent necessary to permitBorrower to repay the obligations under the Second Lien Credit Agreement in full on the datehereof. The waivers set forth above shall be limited precisely as written and shall not be deemedor otherwise construed to constitute a waiver of any other Default or Event of Default or any otherprovision or to prejudice any right, power or remedy which Agent or Lenders may now have or mayhave in the future under or in connection with the Credit Agreement or any other Loan Document, allof which rights, power and remedies are hereby expressly reserved by Agent and Lenders.**SECTION 3.****Conditions to Effectiveness**. The effectiveness of this Amendment is subject tothe satisfaction of each the following conditions precedent:     (a) this Amendment shall have been duly executed and delivered by the Borrower, the CreditParties, 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 LetterSupplement”); and     (c) Agent shall have received such other documents, instruments, agreements and legal opinionsas Agent shall reasonably request in connection with the transactions contemplated by thisAmendment, including those listed in the Closing Checklist attached hereto as Annex A, eachin form and substance reasonably satisfactory to Agent.**SECTION 4.****Representations and Warranties**. In order to induce the Agent and each Lender toenter into this Amendment, each Credit Party hereby represents and warrants to the Agent and eachLender, which representations and warranties shall survive the execution and delivery of thisAmendment, that:     (a) all of the representations and warranties contained in the Credit Agreement and in eachLoan 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 earlierdate;
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     (b) the execution, delivery and performance by such Credit Party of this Amendment has beenduly authorized by all necessary corporate, limited liability company or partnership actionrequired on its part and this Amendment, and the Credit Agreement is the legal, valid and bindingobligation 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 oraffecting 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 thetransactions 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 othersimilar documents, or agreements, (ii) any law or regulation, or any order or decree of any courtor government instrumentality, or (iii) any indenture, mortgage, deed of trust, lease, agreement orother instrument to which any Credit Party or any of its Subsidiaries is a party or by which anyCredit Party or any of its Subsidiaries or any of their property is bound, except in any such caseto the extent such conflict or breach has been waived herein or by a written waiver document, acopy 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 those waivedpursuant hereto).**SECTION 5.****Intercreditor Agreement****.**Lenders hereby authorize and direct Agent to executesuch documents as are necessary or appropriate to permit Borrower to repay the obligations underthe Second Lien Credit Agreement in full on the date hereof.**SECTION 6.****Reference to and Effect Upon the Credit Agreement****.**     (a) Except as specifically set forth above, the Credit Agreement and the other Loan Documentsshall 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 andshall be limited precisely as written, and shall not be deemed to (i) be a consent to anyamendment, waiver or modification of any other term or condition of the Credit Agreement or anyother Loan Document, (ii) operate as a waiver or otherwise prejudice any right, power or remedythat the Agent or the Lenders may now have or may have in the future under or in connection withthe Credit Agreement or any other Loan Document or (iii) constitute an amendment or waiver of anyprovision 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 “thisAgreement”, “herein”, “hereof” and words of like import and each reference in the Credit Agreementand 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.
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**SECTION 7.****GOVERNING LAW**. THIS AMENDMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCEWITH THE INTERNAL LAWS OF THE STATE OF ILLINOIS.**SECTION 8.****Headings**. Section headings in this Amendment are included herein forconvenience of reference only and shall not constitute part of this Amendment for any otherpurposes.**SECTION 9.****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 shallconstitute 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 ofthe 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 aboveby 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**