EXHIBIT 10.11.3
As of May 1, 1998
Congress Financial Corporation
(Central)
000 Xxxxx Xxxxxx Xxxxx
Xxxxxxx, Xxxxxxxx 00000
Re: Amendment No. 3 to Financing Agreements
Gentlemen:
Reference is made to the Loan and Security Agreement, dated June 12,
1997, between Congress Financial Corporation (Central) ("Lender") and Navarre
Corporation ("Borrower"), as amended by Amendment No. 1 to Financing Agreements,
dated as of September 19, 1997, and Amendment No. 2 to Financing Agreements,
dated as of October 29, 1997 (the "Loan Agreement"), together with all other
agreements, documents, supplements and instruments now or at any time hereafter
executed and/or delivered by Borrower or any other person, with, to or in favor
of Lender in connection therewith (all of the foregoing, together with this
Amendment and the other agreements and instruments delivered hereunder, as the
same now exist or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced, collectively, the "Financing Agreements"). All
capitalized terms used herein and not otherwise defined herein shall have the
meanings given to them in the Loan Agreement.
Borrower has requested that Lender (a) consent to certain
transactions to be effected pursuant to the Class A Preferred Stock Purchase
Agreements (as hereinafter defined), (b) waive the Event of Default arising by
reason of the change in majority control of Borrower upon the sale of the Class
A Preferred Stock pursuant to the Class A Preferred Stock Purchase Agreement,
and (c) permit certain dividend payments to the holders of the Class A Preferred
Stock. Lender is willing to do so to the extent and subject to the terms and
conditions set forth herein.
In consideration of the foregoing, the mutual agreements and
covenants contained in this Amendment No. 3 to Financing Agreements (this
"Amendment"), and other good and valuable consideration, the adequacy and
sufficiency of which are hereby acknowledged, Borrower and Lender agree as
follows:
1. Additional Definitions. As used herein or in any of the other
Financing Agreements, the following terms shall have the respective meanings
given to them below, and the Loan Agreement shall be deemed and is hereby
amended to include, in addition and not in limitation, each of the following
definitions:
(a) "Change of Control" shall mean the occurrence of any of the
following: (i) the failure of the Permitted Holders at any time (A) to own
beneficially free and clear of all security interests, liens, pledges or other
encumbrances at all times, at least fifty-one (51%) percent of the issued and
outstanding shares of capital stock of Borrower (both voting and non-voting), on
a fully diluted basis or (B) to have and exercise voting power for the election
of at least a majority of the Board of Directors of Borrower; (ii) the direct or
indirect acquisition by any Person or a group (as such term is defined in
Section 13(d)(3) of the Securities Exchange Act), other than Permitted Holders,
of beneficial ownership (as such term is defined in Rule 13D-3 issued under the
Securities Exchange Act) of twenty (20%) percent or more of the outstanding
shares of capital stock of Borrower; (iii) a change in the majority of the Board
of Directors of Borrower as in effect on the date hereof; or (iv) a change in
the chief executive officer or chief financial officer of Borrower as elected,
appointed and serving on the date hereof.
(b) "Class A Preferred Stock" shall mean the Class A Convertible
Preferred Stock issued pursuant to the Class A Preferred Stock Purchase
Agreements as designated pursuant to the Certificate of Rights and Preferences
of Class A Convertible Preferred Stock of Navarre Corporation.
(c) "Class A Preferred Stock Purchase Agreements" shall mean,
collectively, (i) the Class A Convertible Preferred Stock Purchase Agreement,
dated April 21, 1998, among the investors named on Exhibit A thereto and
Borrower, as amended by Amendment Number One to the Class A Convertible
Preferred Stock Purchase Agreement and Escrow Agreement, dated April 28, 1998,
among Borrower, the investors listed on Exhibit A thereto, and Xxxxxxxxx &
Xxxxxx, P.L.L.P., (ii) the Certificate of Rights and Preferences of Class A
Convertible Preferred Stock of Navarre Corporation, (iii) the Warrants, and (iv)
all other agreements, documents and instruments related to the issuance of the
Class A Preferred Stock, as the same now exist among hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
(d) "NASDAQ Consent Letter" shall mean the letter, dated April
23, 1998, from the counsel's office of The NASDAQ Stock Market, Inc. to
Xxxxxxxxx & Xxxxxx, P.L.L.P., counsel for Borrower, re: Navarre Corporation,
NASDAQ Listing Qualifications Panel, Division 2076NC-98, as in effect on April
23, 1998.
(e) "Permitted Holders" shall mean the Persons listed on Exhibit
A hereto.
(f) "Securities Exchange Act" shall mean the Securities Exchange
Act of 1934, as amended, as the same now exists or may hereafter be amended,
modified, recodified or supplemented, together with all rules, regulations and
interpretations thereunder or related thereto.
(g) "Securities Laws" shall mean the Securities Act of 1993, as
amended, the Securities Exchange Act, and all rules, regulations and
interpretations issued pursuant thereto or in connection therewith, and all
State and local statutes, rules and regulations issued in connection therewith
or related thereto, including, without limitation, the rules and regulations of
The NASDAQ Stock Market, Inc., as the same now exist or may hereafter be
amended, modified, interpreted, recodified or supplemented.
(h) "Warrants" shall mean the Warrants issued to the purchasers
of the Class A Preferred Stock as provided in the Class A Preferred Stock
Purchase Agreements, as the same now exist or may hereafter be amended,
modified, supplemented, extended, renewed, restated or replaced.
2. Consent. Notwithstanding anything contained in Section 9.7(b) of
the Loan Agreement to the contrary, and subject to the terms and conditions
contained herein, Lender hereby consents to the sale of up to 2,000,000 shares
of Class A Preferred Stock and Warrants in consideration of the aggregate gross
cash purchase price of up to $20,000,000, as provided in the Class A Preferred
Stock Purchase Agreements (as in effect on the date hereof).
3. Waiver. Notwithstanding anything contained in Section 10.1(j) of
the Loan Agreement to the contrary, Lender hereby waives the Event of Default
arising under Section 10.1(j) by reason of the change of controlling ownership
of Borrower upon the consummation of the sale of the Class A Preferred Stock
pursuant to the Class A Preferred Stock Purchase Agreements (as in effect on the
date hereof).
4. Dividends and Redemptions. Section 9.11 of the Loan Agreement is
hereby deleted in its entirety and replaced with the following:
"9.11 Dividends and Redemptions. Borrower shall not, directly or
indirectly, declare or pay any dividends on account of any shares of
any class of capital stock of Borrower now or hereafter outstanding,
or set aside or otherwise deposit or invest any sums for such
purpose, or redeem, retire, defease, purchase or otherwise acquire
any shares of any class of capital stock (or set aside or otherwise
deposit or invest any sums for such purpose) for any consideration
other than common stock, or apply or set apart any sum, or make any
other distribution (by reduction of capital or otherwise) in respect
of any such shares, or agree to do any of the foregoing, except
that, Borrower may, out of legally available funds therefor, pay
dividends to the holders of the Class A Preferred Stock; provided,
that,
as to each payment of dividends, each of the following conditions is
satisfied as determined by Lender: (a) Lender shall have received
not less than five (5) days prior written notice of the intention of
Borrower to pay such dividend; (b) as of the date of such payment
and after giving effect thereto, no Event of Default or act,
condition or event that with notice or passage of time or both would
constitute an Event of Default, shall exist or have occurred and be
continuing, (c) as of the date of such payment and after giving
effect thereto, the Excess Availability of Borrower for each of the
immediately preceding thirty (30) days shall have been not less than
One Dollar ($1.00), (d) as of the date of any such payment and after
giving effect thereto, the Excess Availability of Borrower shall be
not less than One Dollar ($1.00), and (e) Lender has received from
Borrower, together with the written notice of Borrower as provided
in Section 9.11(a) hereof, financial projections, in form and
substance satisfactory to Lender, indicating that for each day of
the three (3) months immediately following any such payment,
Borrower is projected to have Excess Availability of not less than
One Dollar ($1.00) and to satisfy Section 9.14 hereof."
5. Adjusted Net Worth. Section 9.14 of the Loan Agreement is hereby
amended by replacing the reference to the figure "$4,000,000" with the figure
"$12,000,000".
6. Events of Default. Section 10.1(j) of the Loan Agreement is
hereby deleted in its entirety and replaced with the following:
"(j) any Change of Control;
7. Representations, Warranties and Covenants. In addition to the
continuing representations, warranties and covenants heretofore or hereafter
made by Borrower to Lender pursuant to the other Financing Agreements, Borrower
hereby represents, warrants and covenants with and to Lender as follows (which
representations, warranties and covenants are continuing and shall survive the
execution and delivery hereof and shall be incorporated into and made a part of
the Financing Agreements):
(a) The Class A Preferred Stock Purchase Agreements and the
transactions contemplated thereunder have, contemporaneously herewith, been duly
executed, delivered and performed in accordance with their terms by the
respective parties thereto in all respects, including the fulfillment (not
merely the waiver) of all conditions precedent set forth therein.
(b) All of the shares of the Class A Preferred Stock have been
duly authorized, validly issued and are fully paid and non-assessable. All of
the shareholders of Borrower who own of record, or, directly or indirectly
beneficially own, five
(5%) percent or more of the issued and outstanding shares of capital stock of
Borrower are listed, and their percentage ownership of record and beneficial
ownership, is set forth next to that shareholder's name, on Exhibit B attached
hereto.
(c) All actions and proceedings required by the Class A Preferred
Stock Purchase Agreements, applicable law and regulation have been taken and the
transactions required thereunder have, contemporaneously herewith, been duly and
validly taken and consummated, including, without limitation, all requirements
set forth in the NASDAQ Consent Letter, including the notice given by Borrower
to shareholders and the issuance by Borrower of a press release with respect to
the transactions contemplated by the Class A Preferred Stock Purchase Agreement.
Borrower has received no notice of, and does not know of, any objection by any
of the shareholders of Borrower to the transactions contemplated by the Class A
Preferred Stock Purchase Agreements.
(d) No court of competent jurisdiction has issued any injunction,
restraining order or other order which prohibits consummation of any of the
transactions described in the Class A Preferred Stock Purchase Agreements, and
no governmental action or proceeding has been threatened or commenced seeking
any injunction, restraining order or other order which seeks to void or
otherwise modify the transactions contemplated by or any provision of the Class
A Preferred Stock Purchase Agreements.
(e) Borrower has delivered, or caused to be delivered, to Lender
true, correct and complete copies of the Class A Preferred Stock Purchase
Agreements.
(f) Neither the execution and delivery of the Class A Preferred
Stock Purchase Agreements and the instruments and documents to be delivered
pursuant thereto, nor the consummation of the transactions therein contemplated,
nor compliance with the provisions thereof, (i) has violated or will violate any
Securities Laws or any other law or regulation or any order or decree of any
court or governmental instrumentality in any respect or (ii) does or will
conflict with or result in the breach of, or constitute a default in any respect
under, any indenture, mortgage, deed of trust, agreement or instrument to which
Borrower is a party or may be bound, or (iii) result in the creation or
imposition of any lien, charge or encumbrance upon any of the property of
Borrower, except as specifically permitted under the other Financing Agreements,
or (iv) does or shall violate any provision of the Certificate of Incorporation
or By-Laws of Borrower.
(g) The NASDAQ Consent Letter is in full force and effect as of
the date hereof and has not been rescinded, revoked, superseded, amended,
modified or supplemented.
(h) No Event of Default exists on the date of this Amendment
(after giving effect to the consents and waiver under, and amendments to the
Loan Agreement provided in, this Amendment).
(i) This Amendment has been duly authorized, executed and
delivered by Borrower, and the agreements and obligations of Borrower contained
herein constitute legal, valid and binding obligations of Borrower enforceable
against Borrower in accordance with its terms.
(j) Borrower shall furnish to Lender a copy of the filing with,
contemporaneously with the sending thereof to, the Securities and Exchange
Commission and NASDAQ, (as required to be sent on or before May 15, 1998, unless
extended by the NASDAQ Stock Market, Inc., as agreed to by Lender in writing)
together with all financial statements and other documents indicating that
Borrower has net tangible assets of at least $5,000,000 as set forth in the
NASDAQ Consent Letter.
8. Conditions Precedent. The effectiveness of the consent, waiver
and amendments set forth herein shall be subject to the receipt by Lender of
each of the following, in form and substance satisfactory to Lender:
(a) an original of this Amendment, duly authorized, executed and
delivered by Borrower;
(b) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Borrower has received net cash proceeds from the
sale of the Class A Preferred Stock and Warrants of not less than $18,000,000;
(c) all requisite corporate action and proceedings in connection
with this Amendment and the documents and instruments to be delivered hereunder
shall be in form and substance satisfactory to Lender, and Lender shall have
received all information and copies of all documents, including, without
limitation, records of requisite corporate action and proceedings which Lender
may have requested in connection therewith, such documents where requested by
Lender or its counsel to be certified by appropriate corporate officers or
governmental authorities;
(d) Lender shall have received the NASDAQ Consent Letter and
evidence, in form and substance satisfactory to Lender, that Borrower has
satisfied the requirements set forth therein other than the May 15, 1998 filing
described in Section 7(i) hereof;
(e) an opinion letter of counsel to Borrower, addressed to Lender
or upon which Lender is expressly permitted to rely, with respect to the Class A
Preferred Stock Purchase Agreements and such other matters as Lender may
request; and
(f) after giving effect to the consents and waivers under, and
amendments to the Loan Agreement provided in, this Amendment, no Event of
Default shall exist or have occurred and no event or condition shall have
occurred or exist which with notice or passage of time or both would constitute
an Event of Default.
9. Effect of this Amendment. This Amendment and any instruments and
agreements delivered pursuant hereto constitute the entire agreement of the
parties with respect to the subject matter hereof and thereof, and supersede all
prior oral or written communications, memoranda, proposals, negotiations,
discussions, term sheets and commitments with respect to the subject matter
hereof and thereof. Except for the specific amendments, consents and waivers
expressly set forth herein, no other changes or modifications to or consents or
waivers under the Financing Agreements are intended or implied, and in all other
respects the Financing Agreements are hereby specifically ratified, restated and
confirmed by all parties hereto as of the effective date hereof. To the extent
of conflict between the terms of this Amendment and the other Financing
Agreements, the terms of this Amendment shall control. The Loan Agreement and
this Amendment shall be read and construed as one agreement.
10. Further Assurances. Borrower shall execute and deliver such
additional documents and take such additional action as may be reasonably
requested by Lender to effectuate the provisions and purposes of this Amendment.
11. Governing Law. The rights and obligations hereunder of each of
the parties hereto shall be governed by and interpreted and determined in
accordance with the internal laws of the State of Illinois (without giving
effect to principles of conflicts of law).
12. Binding Effect. This Amendment shall be binding upon and inure
to the benefit of each of the parties hereto and their respective successors and
assigns.
13. Counterparts. This Amendment may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment, it shall not be necessary
to produce or account for more than one counterpart thereof signed by each of
the parties hereto.
Please sign in the space provided below and return a counterpart of this
Amendment, whereupon this Amendment, as so agreed to and accepted, shall become
a binding agreement between Borrower and Lender.
Very truly yours,
NAVARRE CORPORATION
By: /s/ Xxxxxxx Xxxxxx
-----------------------------------
Xxxxxxx Xxxxxx
Title: Chief Financial Officer
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[SIGNATURES CONTINUE ON NEXT PAGE]
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
AGREED AND ACCEPTED:
CONGRESS FINANCIAL CORPORATION
(CENTRAL)
By: /s/ Xxxxx Xxxxxxx
-------------------------------------
Title: Vice President
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EXHIBIT A
PERMITTED HOLDERS
Xxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxx
Xxxxxxxxx X. Xxxxx
Xxx X. Xxxxxxx
Xxxxxx and Xxxxx Xxx
American Gramaphone
Xxxxxxx Xxxxxxxx
Cranshire Capital, LP
Dakota Partners
Xxxxxx X. Xxxxxxx
Xxxxxx and Xxxxxxx Xxxxxxx
Delta Plastics 401K
Xxxxxx X. Xxxxxx
Xx. Xxxxx Xxxxxxxx
ELARA, LTD
(Tailisman Capital)
Xxxxx Limited Partnership
Goldhawk, LTD
H. Xxxxxxx Xxxxxx
Industricorp & Co
Xxxxx and Xxxx Xxxxxxxx
Xxxxx Xxxxxxx
KA Investments
KAE Opportunity Master Fund LP
Xxxxx X. Xxxxxxxxxxx
Keyway Investments
Kohler Capital Management: Xxxx Xxxxxx
Xxxx Xxxx
Namax Corp
(Cranshire Affiliates I)
Xxxxxxxxx Boys, LP
Okabena Partnership K
Paradigm Group, LLC
Xxxxxxx X. Xxxxxxx
Pemigewasset Partners, LP
(Xxxx Capital)
Pequot Scout Fund, LP
(Dawson Samberg)
Xxxxxxx Capital Management, Inc Profit Share Plan & Trust
Xxxxx Xxxxxxx as Cust FBO Xxxxxxx X. Xxxxxxx XXX
Xxxxx Jaffray as Cust FBO Xxxxx X. Xxxxxx XXX
Xxxxx Jaffray as Cust FBO Xxxxx X. Xxxxxx XXX
Pyramid Partners LP
Xxxxxx X. Xxxxxxx
Xxxxxx X. Xxxxx
S. Xxxxxx Production
(Cranshire Affiliates II)
Xxxxxxxx Xxxxxx (Revocable Trust Dated 9-7-94)
Tewaukon Partners
Xxxxxx Xxxxxxx
Westfield Capital Performance Fund, LP
EXHIBIT B
5% BENEFICIAL OWNERSSHIP
No. of Shares
Shareholder of Common Stock % Ownership(1)(2)
Xxxx X. Xxxxxxx 2,675,657 17.9%
Xxxxxxx X. Xxxxxx 886,980 5.9%
Xxxxxx Xxx 1,523,800 9.9%
American Gramaphone 806,360 5.3%
Cranshire Capital 838,090 5.5%
Pequot Scout Fund, L.P. 761,900 5.0%
KAE Opportunity Master Fund, L.P. 761,900 5.0%
Keyway Investments, LTD 1,523,800 9.9%
Goldhawk LTD 1,904,760 12.2%
Okabena Partnership K 761,900 5.0%
Paradigm Group, LLC 942,840 6.2%
KA Investments, LDC 1,523,800 9.9%
-------------------
(1) Ownership numbers and percentages are computed in accordance with
Securities and Exchange Rule 13d-3. One or more of the Preferred Stockholders
has entered into an agreement with the Company providing that they will convert
their Preferred Stock into Common Stock and or exercise their Warrants in such a
manner that they will not, as a result of such conversion and/or exercise,
beneficially own more than 4.9% of the then outstanding Common Stock of the
Company, and that they will only be authorized or entitled to vote or exercise
proxies with respect to no more than 4.9% of the then outstanding Common Stock
of the Company. The percentage ownership shown here does not give effect to
those agreements.
(2) This list should not be construed as a legal conclusion that the
person listed is necessarily an affiliate of another.
May 1, 1998
Navarre Corporation
0000 00xx Xxxxxx Xxxxx
Xxx Xxxx, Xxxxxxxxx 00000
Re: Certain Post-Closing Items
Gentlemen:
Reference is made to the Loan and Security Agreement, dated June 12, 1997
(the "Loan Agreement"), between Congress Financial Corporation (Central)
("Lender") and Navarre Corporation ("Borrower"), as amended by Amendment No. 1
to Financing Agreements, dated as of September 19, 1997, Amendment No. 2 to
Financing Agreements, dated as of October 29, 1997, and Amendment No. 3 to
Financing Agreements, dated of even date herewith ("Amendment No. 3 to Financing
Agreements"), together with all other agreements, documents, supplements and
instruments now or at any time hereafter executed and/or delivered by Borrower
or any other person, with, to or in favor of Lender in connection therewith (all
of the foregoing, together with this Amendment and the other agreements and
instruments delivered hereunder, as the same now exist or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced,
collectively, the "Financing Agreements"). All capitalized terms used herein and
not otherwise defined herein shall have the meanings given to them in the Loan
Agreement as amended by Amendment No. 3 to Financing Agreements.
In order to induce Lender to enter into Amendment No. 3 to Financing
Agreements and to continue to make the Loans to Borrower under the Financing
Agreements:
1. Borrower hereby agrees that, in addition to all other terms, conditions
and provisions set forth in Amendment No. 3 to Financing Agreements, Borrower
shall deliver or cause to be delivered to Lender, the following items, each in
form and substance satisfactory to Lender, as soon as possible, but in any
event, no later than fifteen (15) days after the date hereof:
(a) a replacement Exhibit A to Amendment No. 3 to Financing
Agreements setting forth, in form and substance satisfactory to Lender, the list
of Permitted Holders, together with any related information that Lender may
reasonably request with respect thereto; and
(b) a replacement Exhibit B to Amendment No. 3 to Financing
Agreements setting forth, in form and substance satisfactory to Lender, the list
of five percent (5%) beneficial holders of all of the capital stock of Borrower,
together with any related information that Lender may reasonably request with
respect thereto.
2. This Agreement shall not limit or otherwise affect the right of Lender
to require Borrower to execute and deliver of obtain or cause to be executed
and/or delivered any further agreements, documents or instruments as provided in
the Financing Agreements, including, without limitation, the letter agreement
re: Certain Post-Closing Matters, dated as of June 12, 1997, or otherwise or to
take any other actions otherwise required under the Financing Agreements,
including that letter agreement. The failure of Borrower to deliver the items
provided for in paragraph 1 above by the respective dates set forth therein
shall, at Lender's option, constitute an Event of Default.
Very truly yours,
CONGRESS FINANCIAL CORPORATION
(CENTRAL)
By: /s/ Xxxxx Xxxxxxx
-------------------------------------
Title: Vice President
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AGREED:
NAVARRE CORPORATION
By: /s/ Xxxxxxx Xxxxxx
-------------------------------------
Title: Chief Financial Officer
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