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EXHIBIT
10.2
EXECUTION
COPY
WAIVER AND FIRST AMENDMENT
TO CREDIT AGREEMENT
WAIVER AND FIRST AMENDMENT,
dated as of June 27, 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 (“ Company ”), certain domestic
subsidiaries of Holdings identified on the signature page thereto
as “Borrowers” (such Subsidiaries, together with the
Company, are referred to individually as a “ Borrower
” and collectively, jointly and severally, as “
Borrowers ”), certain subsidiaries of Holdings
identified on the signature page thereto as
“Guarantors”, as Guarantors (as defined therein), the
Lenders (as defined therein) party thereto from time to time, 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 ”), 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
”) and as co-lead arranger (in such capacity, a “
Co-Lead Arranger ”).
The Company, in its capacity
as Borrower Representative, has advised the Agents that
(a) certain Events of Default have occurred under
Section 8.1(c) of the Credit Agreement due to (i) the
failure of the Credit Parties to deliver to the Administrative
Agent by May 31, 2007, evidence satisfactory to the
Administrative Agent that (A) the Liens reflected on the
records of the Patent and Trademark Office against the Collateral
in favor of Sanwa Business Credit Corporation have been removed of
record, and (B) the UCC-1 financing statements filed in favor
of the Secretary of State of California against one or more of the
Credit Parties have been terminated of record, as required by
Section 5.22 of the Credit Agreement, and (ii) the
aggregate Cash and Cash Equivalents of Holdings and its
Subsidiaries exceeding the amounts specified in
Section 6.6(a)(iv) (such Events of Default, the (“
Specified Events of Default ”), and (b) certain
of the Credit Parties desire to amend their Organizational
Documents.
At the request of the Credit
Parties, the Agents and the Lenders have agreed to waive the
Specified Events of Default, amend the corresponding covenants
contained in the Credit Agreement and consent to certain amendments
of the Organizational Documents of certain of the Credit Parties,
subject to the terms and conditions set forth herein.
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 5.22 of the
Credit Agreement is hereby amended and restated to read in its
entirety as follows:
“ 5.22 Post-Closing
Matters . Provide evidence, satisfactory in form and substance
to the Administrative Agent, by not later than
(a) May 31, 2007 that (i) the Liens reflected on the
records of the Patent and Trademark Office against the Collateral
in favor of Heller Financial, Inc. have been removed of record, and
(ii) an
estoppel letter has been
issued by GE VFF Canada Limited Partnership confirming that the
Lien reflected by the PPSA financing statement registered in favor
of GE VFF Canada Limited Partnership, as secured party, against
Canadian OpCo is secured only by certain specified equipment, and
(b) August 31, 2007 that (i) the Liens reflected on
the records of the Patent and Trademark Office against the
Collateral in favor of Sanwa Business Credit Corporation have been
removed of record, and (ii) the UCC-1 financing statements
filed in favor of the Secretary of State of California against one
or more of the Credit Parties have been terminated of
record.”
(b) Clauses (iv) and
(v) of Section 6.6(a) of the Credit Agreement are hereby
amended and restated to read in their entirety as
follows:
“(iv) maintained in
Canada, whether or not in Blocked Accounts, but excluding any
Blocked Cash, will not exceed (A) from May 17, 2007 until
August 31, 2007, $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 August 31, 2007,
$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 August 31,
2007, $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 August 31, 2007,
$5,000,000;”
3. Waivers and
Consents . (a) At the request of the Credit Parties,
effective upon the Amendment Effective Date, each of the Agents and
the Lenders hereby (i) waives each Specified Event of Default
that occurred prior to the date hereof, and (ii) consents to
the amendment of the operating agreements of (A) Artist To
Market Distribution LLC, (B) the Company, (C) Handleman
Real Estate LLC and (D) REPS, L.L.C. (each Credit Party
identified in clauses (A) through (D) above, a “
Specified Credit Party ”); provided that such
amendments are adopted in the form attached hereto as Exhibit
A .
(b) The waivers and consents
set forth in Section 3(a) above shall be effective only in
this specific instance and for the specific purposes set forth
herein, and (b) do not allow for any other or further
departure from the terms and conditions of the Credit Agreement
(including, without limitation, any further violation of Sections
5.22 or Section 6.6(a) of the Credit Agreement (each as
amended hereby), or any further amendment of the Organizational
Documents of the Specified Credit Parties (or any other Credit
Party)) or any other Credit Document, which terms and conditions
shall continue in full force and effect.
2
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
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