NINTH AMENDMENT TO CREDIT AND
GUARANTY AGREEMENT
NINTH
AMENDMENT TO CREDIT AND GUARANTY AGREEMENT, dated as of
July 24, 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:
“‘
Canadian Purchase Agreement ’ means the Asset Purchase
Agreement, dated as of July 24, 2008, by and between Canadian
OpCo, Holdings, Anderson Merchandisers-Canada, Inc., a Delaware
corporation and Anderson Merchandisers, L.P., a Texas limited
partnership.”
“‘
Ninth Amendment ’ means the Ninth Amendment to Credit
and Guaranty Agreement, dated as of July 24, 2008, by and
among Credit Parties, Lenders and Agents.”
“‘
Ninth Amendment Effective Date ’ has the meaning
ascribed to the term ‘Amendment Effective Date’ in the
Ninth Amendment.”
(b) Section 1.1
of the Credit Agreement is hereby amended by amending and restating
the definitions of the following terms contained therein to read in
their entirety as follows:
“‘
Extraordinary Receipts ’ means any cash received by or
paid to or for the account of Holdings or any of it Subsidiaries
not in the ordinary course of business, including any foreign,
United States, state or local tax refunds, pension plan reversions,
judgments, proceeds of settlements or other consideration of any
kind in connection with any cause of action, condemnation awards
(and payments in lieu thereof), indemnity payments and any purchase
price adjustment received in connection with any purchase agreement
and proceeds of insurance (excluding, however, any Net
Insurance/Condemnation Proceeds which are subject to Section
2.13(b)).”
“‘
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 and the Canadian
Purchase Agreement and all documents executed or delivered in
connection with any of the foregoing.”
(c) Section 1.1
of the Credit Agreement is hereby amended by amending and restating
clause (iv) of the definition of the term
“Indebtedness” contained therein to read in its
entirety as follows:
“(iv) any
obligation owed for all or any part of the deferred purchase price
of property or services (excluding trade payables incurred in the
ordinary course of business) which purchase price is (a) due
more than four (4) months from the date of incurrence of the
obligation in respect thereof or (b) evidenced by a note or
similar written instrument;”
(d) Section 1.1
of the Credit Agreement is hereby amended by adding the following
sentence to the end of the definition of “Net Asset Sale
Proceeds” contained therein:
“For the
avoidance of doubt, it is understood and agreed that 100% of the
amount of the Hold Back (as defined in the Canadian Purchase
Agreement, as in effect on the Ninth Amendment Effective Date),
including all amounts payable under the Promissory Note (as defined
in the Canadian Purchase Agreement, as in effect on the Ninth
Amendment Effective Date), shall be deemed to constitute ‘Net
Asset Sale Proceeds’ upon receipt of any such amount by
Holdings or any of its Subsidiaries and, notwithstanding anything
to the contrary contained in Section 2.14(b), shall be applied
to the Obligations (after payment of any Working Capital
Obligations then outstanding) as follows (A) first, to the
Tranche B Term Loans until paid in full; and (B) second, to
the
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Revolving Loans
until paid in full (it being understood that the Revolving
Commitment shall be permanently reduced by the amount of any such
prepayment).”
(e) Section 2.13(l)
of the Credit Agreement is hereby amended and restated to read in
its entirety as follows:
(l) Certain
Receipts . Commencing on the date of the closing of the
acquisition contemplated by the Canadian Purchase Agreement, no
later than the first Business Day following each date on which
Holdings or any of its Subsidiaries receives any proceeds of any
Accounts owing to Canadian OpCo in respect of the distribution of
music products in Canada, the Borrowers shall prepay the Loans in
an aggregate amount equal to 100% of such proceeds (after payment
of any Working Capital Obligations then outstanding) as follows:
(i) first, to the Tranche B Term Loans until paid in full; and (ii)
second, to the Revolving Loans, until paid in full (it being
understood that the Revolving Commitment shall be permanently
reduced by the amount of any such prepayment); provided that
the amount of any mandatory payment required to be made under this
Section 2.13(l) shall be reduced, on a dollar-for-dollar
basis, by the amount of any corresponding mandatory prepayment made
under the Working Capital Agreement;
(f) Section 6.25
of the Credit Agreement is hereby amended and restated to read in
its entirety as follows:
“ 6.25
Delivery of Amendment . By not later than August 1, 2008,
the Credit Parties shall not fail to execute and deliver to Agents
an amendment to this Agreement in form and substance satisfactory
to Agents.”
3.
Consent . (a) Credit Parties have advised Agents and
Lenders that Canadian OpCo and Holdings are entering into an Asset
Purchase Agreement, dated as of July 24, 2008, with Anderson
Merchandisers-Canada, Inc., a Delaware corporation (the “
Purchaser ”) and Anderson Merchandisers, L.P., a Texas
limited partnership (“ Merchandisers ”), in the
form of Annex A attached hereto (the “ Purchase
Agreement ”), which Purchase Agreement provides for the
sale of certain assets related to Canadian OpCo’s business
consisting of the distribution of certain music product in
Canada.
(b) Subject
to the terms and conditions contained herein and notwithstanding
anything to the contrary set forth in the Credit Agreement or any
other Credit Document, the Agents and the Lenders hereby consent to
the sale of the Purchased Assets to Purchaser in accordance with
the terms and conditions of the Purchase Agreement as in effect on
the Ninth Amendment Effective Date; provided , that
(i) the cash proceeds of such sale (including the Incentive
Payment (as defined in the Anderson Purchase Agreement as in effect
on the Seventh Amendment Effective Date) but excluding the amounts
payable under the Promissory Note referred to in clause
(vii) below) that will be received on the date of such sale
are at least $5,000,000, (ii) all of such cash proceeds are
paid to Administrative Agent for application to the Obligations
(after payment of any Working Capital Obligations then outstanding)
as follows: (A) first, to the Tranche B Term Loans until paid
in full; and (B) second, to the Revolving Loans, until paid in
full (it being understood that the Revolving Commitment shall be
permanently reduced by the amount of any such prepayment);
provided , that the amount of any mandatory payment required
to be made under this clause (ii) shall be reduced, on a
dollar-for-dollar basis, by the amount of
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any
corresponding mandatory prepayment made under the Working Capital
Agreement, (iii) the Borrowers pay to the Administrative Agent
all accrued interest payable in respect of the amount prepaid
pursuant to clause (ii) above (it being understood that the
Make-Whole Amount payable in respect of the amount prepaid pursuant
to clause (ii) above shall be paid-in-kind on such date by
capitalizing such Make-Whole Amount and adding it to the
outstanding principal amount of the Tranche B Term Loan, whereupon
such Make-Whole Amount shall (A) constitute a portion of the
outstanding Tranche B Term Loan for purposes of the Credit
Agreement and all other Credit Documents, (B) be secured by
the Collateral, (C) constitute a portion of the Obligations
owing by the Credit Parties to Agents and Lenders, and (D) be
payable on the Term Loan Maturity Date), (iv) such sale or
disposition and application of proceeds shall occur on or before
October 15, 2008, (v) as of the date of such sale and
after giving effect thereto, (A) no Default or Event of
Default shall have occurred and be continuing, and (B) all
material creditors of Canadian OpCo not paid immediately upon the
closing of the Purchase Agreement shall have delivered to Canadian
OpCo, a Bulk Sales Act Waiver, substantially in the form of
Exhibit B hereto, and the Agents shall have received a
certificate from an Authorized Officer of Holdings and Canadian
OpCo, certifying that the statements contained in sub-clauses
(A) and (B) above are true and correct, (vi) the
Agents shall have received, in form and substance reasonably
satisfactory to the Agents, true, correct and complete copies of
the Purchase Agreement and each other document executed in
connection with any of the foregoing, together with all schedules
and exhibits thereto, duly authorized, executed and delivered by
the parties thereto (such documents, collectively, the “
Purchase Documents ”), and (vii) the Agents shall
have received a Pledge Amendment to the Canadian Security
Agreement, accompanied by the original Promissory Note (as defined
in the Canadian Purchase Agreement (as in effect on the Ninth
Amendment Effective Date), appropriate instruments of transfer
executed in blank and an acknowledgement duly executed by the
Purchaser with respect to such pledge, in each case, in form and
substance satisfactory to the Agents;
(c) The
Collateral Agent, with the consent of the Lenders, agrees to
execute and deliver to Purchaser (i) a release of liens in the
form attached hereto as Exhibit A (the “ Release
”) on the date of the proposed sale described in Section 3(b)
above, following the satisfaction of the conditions described in
sub-clauses (v), (vi) and (vii) of Section 3(b) above (it
being understood and agreed by each Credit Party that the failure
to satisfy any other condition specified in Section 3(b) on the
date of any such sale shall result in an immediate Event of Default
under the Credit Agreement), and (ii) a waiver in the
for
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