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EXHIBIT
10.4
THIRD AMENDMENT TO CREDIT
AND GUARANTY AGREEMENT
This THIRD AMENDMENT TO
CREDIT AND GUARANTY AGREEMENT, dated as of November 30, 2007
(this “ Amendment ”), to the Credit and Guaranty
Agreement, dated as of April 30, 2007, by and among Handleman
Company, a Michigan corporation (“ Holdings ”),
Handleman Entertainment Resources L.L.C., a Michigan limited
liability company (“ Handleman Entertainment ”),
the other subsidiaries of Holdings identified on the signature page
hereto as “Borrowers” (such Subsidiaries, together with
Handleman Entertainment, 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 “Credit
Parties” (“ Credit Parties ”), the lenders
party hereto from time to time (“ Lenders ”),
and Silver Point Finance, LLC (“ Silver Point
”), as administrative agent for the Lenders (in such
capacity, together with its successors and assigns in such
capacity, the “ Administrative Agent ”) and as
collateral agent for the Lenders (in such capacity, together with
its successors and assigns in such capacity, the “
Collateral Agent ” and together with the
Administrative Agent, each an “ Agent ” and
collectively the “ Agents ”).
WHEREAS, Holdings, Borrowers,
Credit Parties, Lenders and Agents are parties to that certain
Credit and Guaranty Agreement, dated April 30, 2007 (as
amended, restated, supplemented or modified from time to time, the
“ Credit Agreement ”), pursuant to which Lenders
have agreed to make, and have made, certain loans to
Borrowers;
WHEREAS, Handleman
Entertainment, in its capacity as Borrower Representative, has
advised the Agents that (i) Borrower Representative desires to
convert its legal status from a Michigan limited liability company
to a Michigan corporation, (ii) Borrowers desire to amend
Section 6.6(a) of the Credit Agreement with respect to
permitted Canadian and United Kingdom Investments and
(iii) certain Events of Default have occurred under
(a) Section 8.1(c) of the Credit Agreement due to the
aggregate Cash and Cash Equivalents of Holdings and its
Subsidiaries exceeding the amount specified in
Section 6.6(a)(iv) of the Credit Agreement on both
July 23, 2007 and August 1, 2007 and
(b) Section 5.1(r) of the Credit Agreement due to the
failure of Borrowers to deliver to Administrative Agent and
Lenders, within 15 days of the filing, each provincial income and
corporate tax return of each Canadian Credit Party (each such Event
of Default, the “ Specified Events of Default
”)
WHEREAS, at the request of
the Credit Parties, the Agents and the Lenders have agreed to amend
the Credit Agreement, 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 6.6(a) of
the Credit Agreement is hereby amended and modified by deleting
subsections (iv) and (v) in their entirety and inserting
in lieu thereof the following:
“(iv) maintained in
Canada, whether or not in Blocked Accounts, but excluding any
Blocked Cash, will not exceed (A) from May 17, 2007 until
January 10, 2008, $2,500,000 plus an amount sufficient to fund
any checks written on such Canadian Blocked Accounts that have not
yet cleared, and (B) on and after January 10, 2008,
$2,500,000, and (v) maintained in the United Kingdom, whether
or not in Blocked Accounts, but excluding any Blocked Cash, will
not exceed (A) from May 17, 2007 until January 10,
2008, $5,000,000 plus an amount sufficient to fund any checks
written on such United Kingdom Blocked Accounts that have not yet
cleared, and (B) on and after January 10, 2008,
$5,000,000;”
(b) Section 1.1
of the Credit Agreement is hereby modified and amended by deleting
the definition of “Company” in its entirety and
inserting in lieu thereof the following:
“‘ Company
’ means (i) prior to the merger between Handleman
Entertainment Resources L.L.C. and Handleman Services Company,
Handleman Entertainment Resources L.L.C., and (ii) thereafter,
Handleman Services Company, a Michigan
corporation.”
3. Waiver . At the
request of the Credit Parties, effective upon the date hereof, the
Agents and the Lenders hereby waive the Specified Events of
Default. The waiver set forth herein shall be effective only in
this specific instance and for the specific purpose set forth
herein, and does not allow for any other or further departure from
the terms and conditions of the Credit Agreement including, without
limitation, any further violation of Section 6.6(a) or
Section 5.1(r) of the Credit Agreement, as amended
hereby.
4. Conditions to
Effectiveness . This Amendment shall become effective (the
“ Amendment Effective Date ”) upon satisfaction
in full of the following conditions precedent:
(a) Immediately after giving
effect to this Amendment, (i) the representations and
warranties contained in this Amendment, the Credit Agreement and
the other Credit Documents shall be correct on and as of the date
of this Amendment as though made on and as of such date (except
where such representations and warranties relate to an earlier date
in which case such representations and warranties shall be true and
correct as of such earlier date) and (ii) no Default or Event
of Default shall have occurred and be continuing (or would result
from this Amendment becoming effective in accordance with its
terms).
(b) The Administrative Agent
shall have received counterparts of this Amendment that bear the
signatures of each of the Credit Parties, the Agents and the
Lenders.
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(c) The Administrative Agent
shall have received counterparts of the Joinder to the Credit
Agreement executed by Handleman Services, Handleman Company and the
Administrative Agent, along with all schedules to such
joinder.
(d) The Administrative Agent
shall have received counterparts of the Supplement to U.S. Security
Agreement, along with all exhibits to such supplement.
(e) The Collateral Agent
shall have received evidence satisfactory to Collateral Agent that
(for the benefit of itself and the Lenders) Collateral Agent has a
valid and perfected first priority security interest in the
Collateral, including, without limitation, such documents duly
executed by Handleman Services as Collateral Agent may request in
order to perfect its security interest in the
Collateral.
(f) The Collateral Agent
shall have received counterparts of the Supplement to the U.S.
Pledge Agreement executed by Handleman Company, along with the
original stock certificate of Handleman Services representing 100%
of the outstanding Equity Interests of Handleman Services with an
accompanying stock power executed in blank.
(g) The Administrative Agent
shall have received counterparts of the Loan Certificate of
Handleman Services, along with all exhibits to such
certificate.
(h) The Administrative Agent
shall have received a copy of an amendment (or similar agreement),
in form and substance reasonably satisfactory to the Agents, duly
executed by the Credit Parties, the Working Capital Agent, and the
Working Capital Lenders amending the corresponding
provisio
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