TENTH AMENDMENT TO CREDIT AND
GUARANTY AGREEMENT
TENTH
AMENDMENT TO CREDIT AND GUARANTY AGREEMENT, dated as of
August 5, 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:
“
‘Tenth Amendment’ means the Tenth Amendment to
Credit and Guaranty Agreement, dated as of August 5, 2008, by
and among Credit Parties, Lenders and Agents.”
“
‘Tenth Amendment Effective Date’ has the meaning
ascribed to the term ‘Amendment Effective Date’ in the
Tenth Amendment.”
“
‘Tesco Business’ means the business of the
Credit Parties relating to the distribution of Inventory by the
Credit Parties to Tesco Stores.”
(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:
“‘
Revolving Commitment Termination Date’ means the
earliest to occur of (i) May 1, 2007, if the Term Loans
are not made on or before that date; (ii) April 30, 2012;
(iii) the date the Revolving Commitments are permanently
reduced to zero pursuant to Section 2.12(b) or 2.13; and
(iv) the date of the termination of the Revolving Commitments
pursuant to Section 8.1.”
“
‘Term Loan Maturity Date ’ means the earlier of
(i) September 1, 2008, and (ii) the date that all
Tranche A Term Loans and Tranche B Term Loans shall become due and
payable in full hereunder, whether by acceleration or
otherwise.”
(c) The
second sentence of Section 2.5 of the Credit Agreement is
hereby amended and restated to read in its entirety as
follows:
“The
proceeds of the Revolving Loans made after the Closing Date (i)
shall be applied by the Borrowers for working capital and general
corporate purposes of Holdings and its Subsidiaries, including
Permitted Acquisitions, and (ii) on (and only on)
September 1, 2008, may be applied by the Borrowers to repay in
full the outstanding principal amount of the Tranche B Term Loans
to the extent that the aggregate outstanding principal amount of
the Tranche B Term Loans on such date (prior to giving effect to
such application) is less than $2,000,000; but shall in no event be
used to make or facilitate any Investment or Restricted Junior
Payment not otherwise permitted hereunder.”
(d) Section 2.11
of the Credit Agreement is hereby amended and restated to read in
its entirety as follows:
“ 2.11
Scheduled Payments/Commitment Reductions . (a) The
aggregate unpaid principal amount of the Term Loans together with
all other amounts owed hereunder with respect thereto, shall be
paid in full by the Borrowers no later than the Term Loan Maturity
Date. (b) The Revolving Commitments shall be (i) reduced
to $20,000,000 on the Tenth Amendment Effective Date,
(ii) reduced to $15,000,000 on August 30, 2008,
(iii) reduced to $10,000,000 on October 4, 2008,
(iv) reduced from time to time in connection with any
voluntary or mandatory reductions of the Revolving Commitments in
accordance with Sections 2.11, 2.12 and 2.13, as applicable,
and (v) terminated on the Revolving Commitment Termination
Date, and all amounts owed hereunder with respect thereto, shall,
in any event, be paid in full by the Borrowers no later than the
Revolving Commitment Termination Date.”
(e) Section 2.12(c)(i)
of the Credit Agreement is hereby amended by amending and restating
the last sentence thereof to read in its entirety as
follows:
“Notwithstanding anything to the contrary
contained in any Credit Document, (x) from the Fifth Amendment
Effective Date until (but not including) the Tenth Amendment
Effective Date, any Make-Whole Amount that is incurred shall not be
required to be paid in cash on the date on which such Make-Whole
Amount is incurred, but shall be paid-
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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 (i) constitute a portion of the
outstanding Tranche B Term Loan for purposes of the Credit
Agreement and all other Credit Documents, (ii) be secured by
the Collateral, (iii) constitute a portion of the Obligations
owing by the Credit Parties to Agents and Lenders, and (iv) be
payable on the Term Loan Maturity Date, and (y) on and after
the Tenth Amendment Effective Date, any Make-Whole Amount that is
incurred shall paid in cash with the proceeds of Revolving Loans;
and”
(f) Section 2.13(g)
of the Credit Agreement is hereby amended and restated to read in
its entirety as follows:
“(g)
Tranche A Term Loan and Revolving Loans . The Borrowers
shall make the payments required by Section 6.21 hereof. At
any time that the aggregate outstanding principal amount of the
Revolving Loans exceeds the Revolving Commitments at such time, the
Borrowers shall immediately prepay the Revolving Loans in an amount
equal to such excess.”
(g) Section 2.13(i)
of the Credit Agreement is hereby amended and restated to read in
its entirety as follows:
“(i)
Administrative Agent’s Account . At all times
following the Tenth Amendment Effective Date, but subject to
Section 5.15(b), so long as no Default or Event of Default has
occurred and is continuing (in which case funds shall be applied in
accordance with Section 2.15(g), unless Requisite Lenders
consent to another application), Administrative Agent shall apply
all funds transferred from the Blocked Accounts and deposited in
Administrative Agent’s Account, to the payment, in whole or
in part, of the outstanding principal amount of the Tranche B Term
Loan, until the Tranche B Term Loan is paid in full and then to the
payment of the Revolving Loans (without any permanent reduction of
the Revolving Commitment) until all Revolving Loans are paid in
full (in each case, together with accrued interest and fees on the
amount prepaid to the date of prepayment and the applicable
Make-Whole Amount or Prepayment Premium then due
thereon).”
(h) Section 2.13(l)of
the Credit Agreement is hereby amended and restated to read in its
entirety as follows:
“(l)
Wal-Mart Receipts . (i) 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
Holdings or any of its Subsidiaries from Wal-Mart Stores, Inc. or
any of its Affiliates in respect of U.S. music sales, the Borrowers
shall prepay the Loans in an aggregate amount equal to 75% of such
proceeds as follows: (A) first, to the Tranche B Term Loans,
until paid in full; and (B) second, to the Revolving Loans
(without any permanent reduction of the Revolving Commitment),
until paid in full, and (ii) commencing on the date of
the
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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 as follows:
(A) first, to the Tranche B Term Loans until paid in full; and
(B) second, to the Revolving Loans (without any reduction in
the Revolving Commitment), until paid in full;”
(i) Section 2.14(b)(ii)
of the Credit Agreement is hereby amended and restated to read in
its entirety as follows:
“(ii) So
long as no Default or Event of Default has occurred and is
continuing, any mandatory prepayment of any Loan pursuant to (A)
Section 2.13(a) shall be applied as follows: (x) first,
to the Tranche B Term Loans until paid in full; and
(y) second, to the Revolving Loans (without any reduction in
the Revolving Commitment) until paid in full; and
(B) Section 2.13(b) shall be applied as follows:
(x) first, to the Tranche B Term Loans until paid in full; and
(y) 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);
and”
(j) Section 2.15(g)(ii)
of the Credit Agreement is hereby amended by amending and restating
clauses (5), (6), (7) and (8) thereof to read in their
entirety as follows:
“(5)
fifth, ratably to pay interest due in respect of the Tranche B Term
Loans until paid in full;
(6) sixth,
ratably to pay interest due in respect of the Revolving Loans, on a
pro rata basis, until paid in full;
(7) seventh, ratably to pay principal of
the Tranche B Term Loans until paid in full;
(8) eighth, ratably to pay principal of the
Revolving Loans until paid in full;”
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