ELEVENTH
AMENDMENT TO CREDIT AND GUARANTY AGREEMENT
ELEVENTH
AMENDMENT TO CREDIT AND GUARANTY AGREEMENT, dated as of
September 17, 2008 (this “ Amendment ”), to
the Credit and Guaranty Agreement, dated as of April 30, 2007
(as amended, restated, supplemented or modified from time to time,
the “ Credit Agreement ”), by and among
Handleman Company, a Michigan corporation (“ Holdings
”), Handleman Services Company, a Michigan corporation
(“ Handleman Services ”), certain subsidiaries
of Holdings identified on the signature page hereto as
“Borrowers” (such Subsidiaries, together with Handleman
Services, are referred to individually as a “ Borrower
” and collectively, jointly and severally, as “
Borrowers ”), certain subsidiaries of Holdings
identified on the signature page hereto as “Guarantors”
(such subsidiaries, together with Holdings, are referred to
individually as a “ Guarantor ” and
collectively, jointly and severally, as “ Guarantors
”), the lenders party hereto from time to time (“
Lenders ”), and Silver Point Finance, LLC (“
Silver Point ”), as administrative agent for Lenders
(in such capacity, together with its successors and assigns in such
capacity, the “ Administrative Agent ”) and as
collateral agent for Lenders (in such capacity, together with its
successors and assigns in such capacity, the “ Collateral
Agent ” and together with Administrative Agent, each an
“ Agent ” and collectively the “
Agents ”).
WHEREAS,
Borrowers and Guarantors have requested that Agents and Lenders
agree to amend certain terms and conditions of the Credit
Agreement, in each case, as more fully set forth herein;
and
WHEREAS,
Agents and Lenders have agreed to make such amendments to the
Credit Agreement, in each case, subject to the terms and conditions
set forth herein.
NOW,
THEREFORE, in consideration of the foregoing and the mutual
covenants herein contained, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereby agree as follows:
1.
Definitions . All terms used herein which are defined in the
Credit Agreement and not otherwise defined herein are used herein
as defined therein.
2.
Amendments to Credit Agreement .
(a) Section 1.1
of the Credit Agreement is hereby amended by adding the following
new definitions thereto, in appropriate alphabetical order, to read
in their entirety as follows:
“‘ Eleventh
Amendment ’ means the Eleventh Amendment to Credit and
Guaranty Agreement, dated as of September 17, 2008, by and
among Credit Parties, Lenders and Agents.”
“‘ Eleventh
Amendment Effective Date ’ has the meaning ascribed to
the term ‘Amendment Effective Date’ in the Eleventh
Amendment.”
“‘ UK
Purchase Agreement ’ means the Asset Purchase Agreement,
dated as of September 16, 2008, by and between U.K. OpCo,
Holdings and Oakwood Distribution Limited.”
(b) Section 1.1
of the Credit Agreement is hereby amended by amending and restating
the definitions of the following terms to read in their entirety as
follows:
“‘ Blocked
Cash ’ means, as of any date of determination, with
respect to any Cash or Cash Equivalents maintained in Canada, the
amount of unrestricted Cash and Cash Equivalents of the Canadian
Guarantors maintained in a deposit account which is subject to a
tri-party blocked account agreement and provides Agent with
perfected first-priority Lien on such account and the contents
thereof and grants Agent sole dominion and control over such
account.”
“‘ Material
Contract ’ means, collectively, any contract or other
arrangement to which Holdings or any of its Subsidiaries is a party
(other than the Credit Documents) for which breach, nonperformance,
cancellation or failure to renew could reasonably be expected to
have a Material Adverse Effect, and including, in any event each
contract or agreement to which Holdings or any of its Subsidiaries
is a party involving aggregate consideration payable to or by
Holdings or such Subsidiary of $5,000,000 or more (other than
purchase orders in the ordinary course of the business of Holdings
or such Subsidiary and other than contracts that by their terms may
be terminated by Holdings or such Subsidiary in the ordinary course
of its business upon less than 60 days’ notice without
penalty or premium), and including, without limitation, the
Anderson Purchase Agreement, the Canadian Purchase Agreement and
the UK Purchase Agreement, and all documents executed or delivered
in connection with any of the foregoing.”
“‘ Working
Capital Borrowing Base ’ has the meaning assigned to the
term “Borrowing Base” in the Working Capital Agreement,
as in effect on the Closing Date, whether or not such agreement
remains in effect, plus , without duplication, the amount of
unrestricted Cash and Cash Equivalents of the Credit Parties
maintained in a deposit account in the U.S. which is subject to a
tri-party blocked account agreement and provides Collateral Agent
with perfected first-priority Lien on such account and the contents
thereof and grants Agent sole dominion and control over such
account;”
(c) Section 3.2(a)(vi)
of the Credit Agreement is hereby amended and restated to read in
its entirety as follows:
“(vi) after giving
effect to such Credit Extension, (A) the aggregate Cash and
Cash Equivalents of Holdings and its Subsidiaries shall not exceed
the amounts specified in Section 6.6(a) or any clause thereof,
and (B) the aggregate amount of Cash and Cash Equivalents of
Holdings and its Subsidiaries maintained in the United States
(whether or not in Blocked Accounts) shall not exceed $50,000 for
more than one Business Day (excluding (x) amounts required to
be maintained pursuant to Section 6.28, (y) amounts held
in the payroll account not in excess of the amount required to pay
the immediately-succeeding payroll payment, and (z) amounts
received by any Credit Party in any Deposit Account following the
daily sweep of all funds contained therein to Administrative
Agent’s Account);”
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(d) Section 5.1(q)
of the Credit Agreement is hereby amended and restated to read in
its entirety as follows:
“(q) Borrowing
Base Certificate . On (i) each Business Day, current as of
the close of business on the immediately preceding Business Day
(except (A) the Accounts and Inventory of Crave Entertainment
Group, Inc. and its Subsidiaries, which shall be current as of the
close of business on the second preceding Business Day,
(B) the Accounts of Handleman UK Limited, which shall be
current on a weekly basis and (C) the accounts payable aging
report of each Credit Party, which shall be current on a weekly
basis), (x) a Borrowing Base Certificate, supported by schedules
showing the derivation thereof and containing such detail and other
information as the Administrative Agent may reasonably request from
time to time, (y) an Accounts aging report of each Credit
Party (collectively and by individual customer), and (z) an
accounts payable aging report of each Credit Party (collectively
and by individual vendor); and (ii) the twentieth day of each
Fiscal Month, or if such date is not a Business Day, the next
succeeding Business Day, a final Borrowing Base Certificate,
current as of the close of business on the last Business Day of the
immediately preceding Fiscal Month, supported by schedules showing
the derivation thereof and containing such detail and other
information as Agents may reasonably request from time to time,
together with all accrual updates since the previous Borrowing Base
Certificate delivered pursuant to this clause (ii); provided
that (A) (1) the Working Capital Borrowing Base set forth
in the Borrowing Base Certificate shall be effective from and
including the date such Borrowing Base Certificate is duly received
by the Agents but not including the date on which a subsequent
Borrowing Base Certificate is received by the Agents, unless the
Agents dispute the eligibility of any property included in the
calculation of the Working Capital Borrowing Base or the valuation
thereof, and (2) in the event of any dispute about the
eligibility of any property included in the calculation of the
Working Capital Borrowing Base or the valuation thereof, the
Agents’ good faith business judgment shall control, and
(B) for the period from September 19, 2008 (the “
Start Date ”) until October 1, 2008 (the “
End Date ”), the following adjustments shall be made
to the calculation of the Working Capital Borrowing Base:
(x) the amount of “Eligible Accounts” shall be
determined on the Start Date and reduced on a daily basis by the
amount of Cash received by the Credit Parties on each such day
until the End Date, and (y) the percentage of Accounts that do
not constitute “Eligible Accounts” shall be determined
on the Start Date and deemed to apply until the End
Date;”
(e) Section 5.21
of the Credit Agreement is hereby amended and restated to read in
its entirety as follows:
“ 5.21 U.K.
Deposit Accounts . After the occurrence and during the
continuance of an Event of Default, Credit Parties shall,
immediately upon the request of the Administrative Agent, transfer
all Cash and Cash Equivalents of the
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