EXHIBIT 10.2
August 1, 2008
Handleman Company
500 Kirts Blvd.
Troy, Michigan 48084
Attn: Chief Executive Officer
Handleman Company
500 Kirts Blvd.
Troy, Michigan 48084
Attn: Chief Financial Officer
     Re: Payoff Letter
Ladies and Gentlemen:
          Reference is made to (i) that certain Credit Agreement, dated as of
April 30, 2007 (as amended, restated, supplemented or otherwise modified from
time to time, the “Credit Agreement”; capitalized terms used herein but not
otherwise defined shall have the meanings given to such terms in the Credit
Agreement), among Handleman Company, a Michigan corporation (“Holdings”),
Handleman Services Company, a Michigan corporation (“Administrative Borrower”),
the other Subsidiaries of Holding identified on the signature pages thereto as
“Borrowers” (such Subsidiaries, together with Handleman Services, each referred
to individually as a “Borrower” and, collectively, as “Borrowers”), the other
Credit Parties signatory thereto, General Electric Capital Corporation, for
itself, as Lender, and as Agent for Lenders (in such capacity, “Agent”), and the
other Lenders signatory thereto from time to time, and (ii) the other Loan
Documents (as defined in the Credit Agreement) and all guaranties, security
agreements, mortgages, subordination agreements, intercreditor agreements,
pledge agreements, blocked account agreements, notes and other documents and
instruments relating thereto (together with the Credit Agreement, collectively,
the “Credit Documents”).
          Upon Agent’s receipt today of (i) a federal funds wire transfer in the
amount of $54,003.47 (the “Payoff Amount”), which amount represents the
Obligations outstanding under the Credit Documents (which includes legal
expenses of $26,350.00), (ii) $3,050,697.47 (the “Cash Collateral”) to be held
by the Agent for purposes of reimbursement of draws under, and satisfying other
Letter of Credit Obligations relating to, the outstanding Letters of Credit
listed on Schedule A hereto (the “Continuing L/Cs”) and (iii) a fully executed
counterpart of this letter agreement (“Agreement”) signed by Borrowers and each
Credit Party (the time at which all of the conditions in the foregoing clauses
(i), (ii) and (iii) shall first be satisfied is herein referred to as the
“Payoff Effective Time”), Agent agrees to deliver to Holdings as soon as
reasonably practicable UCC-3 termination statements, mortgage satisfactions,
releases of liens, discharges, terminations and other release documentation
executed by it releasing Agent’s liens and security

 

--------------------------------------------------------------------------------

 

interests in all of the assets and property of Borrowers and the Credit Parties
(the “Property”); provided, however, any original stock certificates or other
possessory collateral in the Agent’s possession shall be delivered to the Term
Loan Agent in accordance with the Intercreditor Agreement.
          Upon the Payoff Effective Time, the Agent (on behalf of itself and the
Lenders) agrees and acknowledges that (subject to the paragraphs below with
respect to Letters of Credit and Letter of Credit Obligations) (i) all
outstanding indebtedness (including, without limitation, for principal, interest
and fees) and other obligations of Borrowers or the Credit Parties under or
relating to the Credit Documents shall be paid and satisfied in full and
irrevocably discharged, terminated and released, (ii) all security interests and
other liens granted to or held by Agent for the benefit of the Lenders in any
Property as security for such indebtedness shall be forever and irrevocably
satisfied, released and discharged, and (iii) the Credit Documents shall
terminate and be of no further force or effect other than those provisions
therein that specifically survive termination. Further, Agent agrees to take all
reasonable additional steps requested by Borrowers as may be necessary to
release its security interests in the Property. Borrowers agree to pay Agent for
all out-of-pocket costs and expenses incurred by Agent in connection with the
matters referred to in the previous sentence, and acknowledges that Agent’s
execution of and/or delivery of any documents releasing any security interest or
claim in any property of Borrowers as set forth herein is made without recourse,
representation, warranty or other assurance of any kind by Agent as to Agent’s
rights in any collateral security for amounts owing under the Credit Documents,
the condition or value of any Collateral, or any other matter. Borrowers hereby
confirms that the commitments of Lenders and Agent to make Loans or incur Letter
of Credit Obligations under the Credit Documents are terminated as of the Payoff
Effective Time, and, as of the Payoff Effective Time, none of Lenders or Agent
shall have any further obligation to make Loans to, or incur Letter of Credit
Obligations on behalf of, Borrowers or to renew, extend or amend any existing
Letter of Credit Obligations. Notwithstanding anything to the contrary contained
herein or in any of such releases or other documents, the obligations and
liabilities of Borrowers and the other Credit Parties to Lenders and Agent under
or in respect of the Credit Documents insofar as such obligations and
liabilities survive termination of the Credit Documents shall continue in full
force and effect in accordance with their terms.
          The Payoff Amount and the Cash Collateral referred to above, should be
sent by federal funds wire transfer to Deutsche Bank Trust Company Americas, New
York, New York, Account No. 50279513, ABA No. 021-001-033, Account Name: GECC
CFS CIF Collection Account, Reference: CFN 8731, no later than 2:00 p.m. (New
York time) today.
          Borrowers hereby (i) pledges and grants to Agent a present and
continuing security interest in the Cash Collateral as security for all Letter
of Credit Obligations related to the Continuing L/Cs, and (ii) agrees that Agent
may apply the Cash Collateral to all such Obligations.

 

--------------------------------------------------------------------------------

 

          Borrowers shall, within 120 days (as may be extended by Agent in its
sole and absolute discretion) of the date hereof cause all Continuing L/Cs to be
returned to the Agent for cancellation. Within thirty (30) days of such
cancellation, the Agent shall return to Borrowers any remaining portion of the
Cash Collateral.
          In addition, Borrowers and the other Credit Parties agree that, upon
the Payoff Effective Time, such Credit Parties release the Agent and Lenders and
their respective affiliates and subsidiaries and their respective officers,
directors, employees, shareholders, agents and representatives as well as their
respective successors and assigns from any and all claims, obligations, rights,
causes of action, and liabilities, of whatever kind or nature, whether known or
unknown, whether foreseen or unforeseen, arising on or before the date hereof,
which the such Credit Parties ever had, now have or hereafter can, shall or may
have for, upon or by reason of any matter, cause or thing whatsoever, which are
based upon, arise under or are related to the Credit Documents.
          The Payoff Amount has been calculated assuming that the proceeds of
all checks or similar instruments for the payment of money (collectively,
“Checks”) that have been received by Agent and credited to Borrowers’ account
with Agent are good collected funds. In consideration of Agent and Lenders’
release of the Liens and security interests in and to any Property, Borrowers
agree to reimburse Agent for all losses and liabilities which Agent may incur at
any time as a result of any nonpayment, claim, refund, or chargeback of any
Check together with any expense or other charges incident thereto. The amount of
any such losses or liabilities reimbursed hereunder shall be paid to Agent
promptly by Borrower upon Agent’s demand therefore, and the amount of such
demand shall be conclusive upon Borrowers in the absence of manifest error.
          This Agreement shall be governed by the internal laws of the State of
New York. No party may assign its rights, duties or obligations under this
Agreement without the prior written consent of the other parties. This Agreement
may be executed in any number of separate counterparts, each of which shall,
collectively and separately, constitute one agreement. The undersigned parties
have signed below to indicate their consent to be bound by the terms and
conditions of this Agreement.
[remainder of page intentionally left blank]

 

--------------------------------------------------------------------------------

 

          If you need additional information, please do not hesitate to contact
us.

            Very truly yours,

GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and Lender
      By:           Name:           Its: Duly Authorized Signatory     

          ACCEPTED and AGREED:

HANDLEMAN CATEGORY MANAGEMENT
COMPANY
      By:           Name:           Title:           HANDLEMAN SERVICES COMPANY
      By:           Name:           Title:           HANDLEMAN REAL ESTATE LLC
      By:           Name:           Title:           SVG DISTRIBUTION, INC.
      By:           Name:           Title:        

Payoff Letter

 

--------------------------------------------------------------------------------

 

         

          CRAVE ENTERTAINMENT, INC.
      By:           Name:           Title:           ARTIST TO MARKET
DISTRIBUTION LLC
      By:           Name:           Title:           REPS, L.L.C.
      By:           Name:           Title:           HANDLEMAN COMPANY
      By:           Name:           Title:           CRAVE ENTERTAINMENT GROUP,
INC.
      By:           Name:           Title:           HANLEY ADVERTISING COMPANY
      By:           Name:           Title:        

Payoff Letter

 

--------------------------------------------------------------------------------

 

         

          HANDLEMAN COMPANY OF CANADA
LIMITED
      By:           Name:           Title:           HANDLEMAN UK LIMITED
      By:           Name:           Title:        

Payoff Letter

 

--------------------------------------------------------------------------------

 

         

EXHIBIT A
OUTSTANDING LETTERS OF CREDIT