Exhibit 10.2
EXECUTION COPY
ELEVENTH AMENDMENT TO CREDIT AND GUARANTY AGREEMENT
          ELEVENTH AMENDMENT TO CREDIT AND GUARANTY AGREEMENT, dated as of
September 17, 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:
“‘Eleventh Amendment’ means the Eleventh Amendment to Credit and Guaranty
Agreement, dated as of September 17, 2008, by and among Credit Parties, Lenders
and Agents.”
“‘Eleventh Amendment Effective Date’ has the meaning ascribed to the term
‘Amendment Effective Date’ in the Eleventh Amendment.”
“‘UK Purchase Agreement’ means the Asset Purchase Agreement, dated as of
September 16, 2008, by and between U.K. OpCo, Holdings and Oakwood Distribution
Limited.”
               (b) Section 1.1 of the Credit Agreement is hereby amended by
amending and restating the definitions of the following terms to read in their
entirety as follows:

 

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“‘Blocked Cash’ means, as of any date of determination, with respect to any Cash
or Cash Equivalents maintained in Canada, the amount of unrestricted Cash and
Cash Equivalents of the Canadian Guarantors maintained in a deposit account
which is subject to a tri-party blocked account agreement and provides Agent
with perfected first-priority Lien on such account and the contents thereof and
grants Agent sole dominion and control over such account.”
“‘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, the Canadian Purchase Agreement and the UK Purchase
Agreement, and all documents executed or delivered in connection with any of the
foregoing.”
“‘Working Capital Borrowing Base’ has the meaning assigned to the term
“Borrowing Base” in the Working Capital Agreement, as in effect on the Closing
Date, whether or not such agreement remains in effect, plus, without
duplication, the amount of unrestricted Cash and Cash Equivalents of the Credit
Parties maintained in a deposit account in the U.S. which is subject to a
tri-party blocked account agreement and provides Collateral Agent with perfected
first-priority Lien on such account and the contents thereof and grants Agent
sole dominion and control over such account;”
               (c) Section 3.2(a)(vi) of the Credit Agreement is hereby amended
and restated to read in its entirety as follows:
“(vi) after giving effect to such Credit Extension, (A) the aggregate Cash and
Cash Equivalents of Holdings and its Subsidiaries shall not exceed the amounts
specified in Section 6.6(a) or any clause thereof, and (B) the aggregate amount
of Cash and Cash Equivalents of Holdings and its Subsidiaries maintained in the
United States (whether or not in Blocked Accounts) shall not exceed $50,000 for
more than one Business Day (excluding (x) amounts required to be maintained
pursuant to Section 6.28, (y) amounts held in the payroll account not in excess
of the amount required to pay the immediately-succeeding payroll payment, and
(z) amounts received by any Credit Party in any Deposit Account following the
daily sweep of all funds contained therein to Administrative Agent’s Account);”

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               (d) Section 5.1(q) of the Credit Agreement is hereby amended and
restated to read in its entirety as follows:
“(q) Borrowing Base Certificate. On (i) each Business Day, current as of the
close of business on the immediately preceding Business Day (except (A) the
Accounts and Inventory of Crave Entertainment Group, Inc. and its Subsidiaries,
which shall be current as of the close of business on the second preceding
Business Day, (B) the Accounts of Handleman UK Limited, which shall be current
on a weekly basis and (C) the accounts payable aging report of each Credit
Party, which shall be current on a weekly basis), (x) a Borrowing Base
Certificate, supported by schedules showing the derivation thereof and
containing such detail and other information as the Administrative Agent may
reasonably request from time to time, (y) an Accounts aging report of each
Credit Party (collectively and by individual customer), and (z) an accounts
payable aging report of each Credit Party (collectively and by individual
vendor); and (ii) the twentieth day of each Fiscal Month, or if such date is not
a Business Day, the next succeeding Business Day, a final Borrowing Base
Certificate, current as of the close of business on the last Business Day of the
immediately preceding Fiscal Month, supported by schedules showing the
derivation thereof and containing such detail and other information as Agents
may reasonably request from time to time, together with all accrual updates
since the previous Borrowing Base Certificate delivered pursuant to this clause
(ii); provided that (A) (1) the Working Capital Borrowing Base set forth in the
Borrowing Base Certificate shall be effective from and including the date such
Borrowing Base Certificate is duly received by the Agents but not including the
date on which a subsequent Borrowing Base Certificate is received by the Agents,
unless the Agents dispute the eligibility of any property included in the
calculation of the Working Capital Borrowing Base or the valuation thereof, and
(2) in the event of any dispute about the eligibility of any property included
in the calculation of the Working Capital Borrowing Base or the valuation
thereof, the Agents’ good faith business judgment shall control, and (B) for the
period from September 19, 2008 (the “Start Date”) until October 1, 2008 (the
“End Date”), the following adjustments shall be made to the calculation of the
Working Capital Borrowing Base: (x) the amount of “Eligible Accounts” shall be
determined on the Start Date and reduced on a daily basis by the amount of Cash
received by the Credit Parties on each such day until the End Date, and (y) the
percentage of Accounts that do not constitute “Eligible Accounts” shall be
determined on the Start Date and deemed to apply until the End Date;”
               (e) Section 5.21 of the Credit Agreement is hereby amended and
restated to read in its entirety as follows:
“5.21 U.K. Deposit Accounts. After the occurrence and during the continuance of
an Event of Default, Credit Parties shall, immediately upon the request of the
Administrative Agent, transfer all Cash and Cash Equivalents of the Credit
Parties then held in the United Kingdom to a Blocked Account in the United
States.“

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               (f) Section 6.1 of the Credit Agreement is hereby amended by
adding a new clause (m) thereto to read in its entirety as follows:
“(m) the guarantee made by each of U.K. Opco and Holdings under the UK Purchase
Agreement, as in effect on the date hereof.”
               (g) Section 6.6(a) of the Credit Agreement is hereby amended and
restated to read in its entirety as follows:
“(a) Investments in Cash and Cash Equivalents; provided, that, the aggregate
amount of Cash and Cash Equivalents of Holdings and its Subsidiaries
(i) maintained in Deposit Accounts in the United States that do not constitute
Blocked Accounts will not exceed $50,000, (ii) maintained in Deposit Accounts in
Canada that do not constitute Blocked Accounts will not exceed $50,000, (iii)
maintained in Canada, whether or not in Blocked Accounts, but excluding any
Blocked Cash, will not exceed $150,000 for more than one Business Day;
(iv) maintained in Canada and constituting Blocked Cash will not exceed
$500,000, and (v) maintained in the United Kingdom will not exceed £13,000,000
for more than one Business Day, or £7,000,000 for more than two Business Days;
provided; however, that notwithstanding anything to the contrary contained in
this Section 6.6(a), under no circumstances shall Deposit Accounts used for
collection of customer payments be maintained unless such Deposit Account is
also a Blocked Account;”
               Section 6.7(e) of the Credit Agreement is hereby amended and
restated to read in its entirety as follows:
“(e) Minimum Asset Coverage. Credit Parties shall not permit, at any time
(i) between the Eleventh Amendment Effective Date through (but not including)
October 31, 2008, the positive difference between (A) the Working Capital
Borrowing Base at such time (without taking into account the Term Loan Reserve,
the Minimum Availability Amount or any other Reserves (as defined in the Working
Capital Agreement)) and (B) the principal amount of all Indebtedness outstanding
under this Agreement at such time (such positive difference, the “Minimum Asset
Coverage”) to be less than an amount equal to the greater of (x) the principal
amount of all Indebtedness outstanding under this Agreement at such time, and
(y) $20,000,000, and (ii) on and after October 31, 2008, the Minimum Asset
Coverage to be less than $70,000,000.”
               (h) Clause (b) of Section 6.24 of the Credit Agreement is hereby
amended and restated to read in its entirety as follows:
“(b) by not later than October 31, 2008, a historical and projected return on
investment report for each title owned by the Crave Entities for which there are
any outstanding obligations, which report shall be in form and substance
satisfactory to Agents.”
               (i) Article VI of the Credit Agreement is hereby amended by
adding a new Section to the end thereof to read in its entirety as follows:

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“6.28 Unencumbered Cash. At all times following the Eleventh Amendment Effective
Date, Credit Parties shall not fail to maintain unrestricted Cash in an
aggregate amount of at least $3,000,000 in a deposit account which is subject to
a tri-party blocked account agreement and provides Collateral Agent with
perfected first-priority Lien on such account and the contents thereof and
grants Agent sole dominion and control over such account.”
          3. 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) Administrative Agent shall have received counterparts of this
Amendment that bear the signatures of each of Credit Parties, Agents and
Lenders.
          4. Credit Parties’ Representations and Warranties. Each Credit Party
represents and warrants to Agents and Lenders as follows:
          (a) Such Credit Party (i) is duly organized, validly existing and in
good standing under the laws of the state of its organization and (ii) has all
requisite power, authority and legal right to execute, deliver and perform this
Amendment and to perform the Credit Agreement, as amended hereby.
          (b) The execution, delivery and performance by such Credit Party of
this Amendment and the Purchase Documents and the performance by such Credit
Party of the Credit Agreement, as amended hereby (i) have been duly authorized
by all necessary action, (ii) do not and will not violate or create a default
under such Credit Party’s organizational documents, any applicable law or any
contractual restriction binding on or otherwise affecting such Credit Party or
any of such Credit Party’s properties, and (iii) except as provided in the
Credit Documents, do not and will not result in or require the creation of any
Lien, upon or with respect to such Credit Party’s property.
          (c) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority is required in connection with the
due execution, delivery and performance by such Credit Party of this Amendment
or the Purchase Documents or the performance by such Credit Party of the Credit
Agreement, as amended hereby.
          (d) This Amendment and the Credit Agreement, as amended hereby, and
the Purchase Documents constitute the legal, valid and binding obligations of
such Credit Party, enforceable against such Credit Party in accordance with
their terms except to the extent the enforceability thereof may be limited by
any applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws from time to time in effect affecting generally the enforcement of
creditors’ rights and remedies and by general principles of equity.

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          (e) Immediately after giving effect to this Amendment, (i) the
representations and warranties contained in the Credit Agreement are correct on
and as of the date of this Amendment as though made on and as of the date hereof
(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 has occurred and is
continuing (or would result from this Amendment becoming effective in accordance
with its terms).
          5. Continued Effectiveness of Credit Agreement. Each Credit Party
hereby confirms and agrees that (a) the Credit Agreement and each other Credit
Document to which it is a party is, and shall continue to be, in full force and
effect and is hereby ratified and confirmed in all respects except that on and
after the Amendment Effective Date all references in any such Credit Document to
“the Credit Agreement”, “hereto”, “hereof”, “hereunder”, “thereto”, “thereof”,
“thereunder” or words of like import referring to the Credit Agreement shall
mean the Credit Agreement as amended by this Amendment, (b) to the extent that
any such Credit Document purports to assign or pledge to Collateral Agent, for
the ratable benefit of Lenders, or to grant to Collateral Agent, for the ratable
benefit of Lenders a security interest in or Lien on, any Collateral as security
for the Obligations of the Credit Party, or any of their respective Subsidiaries
from time to time existing in respect of the Credit Agreement and the other
Credit Documents, such pledge, assignment and/or grant of the security interest
or Lien is hereby ratified and confirmed in all respects, and (c) no amendment
or waiver of any terms or provisions of the Credit Agreement, or the amendments
or consents granted hereunder, shall relieve any Credit Party from complying
with such terms and provisions other than as expressly amended or consented to
hereby or from complying with any other term or provision thereof or herein.
          6. Release. Each Credit Party hereby acknowledges and agrees that:
(a) neither it nor any of its Affiliates has any claim or cause of action
against any Agent or any Lender (or any of their respective Affiliates,
officers, directors, employees, attorneys, consultants or agents) and (b) each
Agent and each Lender has heretofore properly performed and satisfied in a
timely manner all of its obligations to Credit Parties and their Affiliates
under the Credit Agreement and the other Credit Documents. Notwithstanding the
foregoing, Credit Parties wish (and Agents and Lenders agree) to eliminate any
possibility that any past conditions, acts, omissions, events or circumstances
would impair or otherwise adversely affect any Agent’s or any Lenders’ rights,
interests, security and/or remedies under the Credit Agreement and the other
Credit Documents. Accordingly, for and in consideration of the agreements
contained in this Amendment and other good and valuable consideration, each
Credit Party (for itself and its Affiliates and the successors, assigns, heirs
and representatives of each of the foregoing) (collectively, the “Releasors”)
does hereby fully, finally, unconditionally and irrevocably release and forever
discharge each Agent and each Lender and each of their respective Affiliates,
officers, directors, employees, attorneys, consultants and agents (collectively,
the “Released Parties”) from any and all debts, claims, obligations, damages,
costs, attorneys’ fees, suits, demands, liabilities, actions, proceedings and
causes of action, in each case, whether known or unknown, contingent or fixed,
direct or indirect, and of whatever nature or description, and whether in law or
in equity, under contract, tort, statute or otherwise, which any Releasor has
heretofore had or now or hereafter can, shall or may have against any Released
Party by reason of any act, omission or thing whatsoever done or omitted to be
done, arising out of, connected with or related in any way to the Credit
Agreement or any other Credit Document, or any act, event or transaction related
or attendant thereto, or the agreements of any Agent or any Lender contained
therein, or the possession, use, operation or control of any of the assets of
any Credit Party, or the making of any Loans or other advances, or the
management of such Loans or advances or the Collateral.
          7. Miscellaneous.

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          (a) This Amendment may be executed in any number of counterparts and
by different parties hereto in separate counterparts, each of which shall be
deemed to be an original but all of which taken together shall constitute one
and the same agreement. Delivery of an executed counterpart of this Amendment by
telefacsimile or electronic method shall be equally as effective as delivery of
an original executed counterpart of this Amendment.
          (b) Section and paragraph headings herein are included for convenience
of reference only and shall not constitute a part of this Amendment for any
other purpose.
          (c) This Amendment shall be governed by, and construed in accordance
with, the laws of the State of New York. Each of the parties to this Amendment
hereby irrevocably waives all rights to trial by jury in any action, proceeding
or counterclaim arising out of or relating to this Amendment.
          (d) Borrowers will pay on demand all reasonable fees, costs and
expenses of Agents and Lenders in connection with the preparation, execution and
delivery of this Amendment or otherwise payable under the Credit Agreement,
including, without limitation, reasonable fees disbursements and other charges
of counsel to Agents and Lenders.
          (e) This Amendment is a Credit Document executed pursuant to the
Credit Agreement and shall be construed, administered and interpreted in
accordance with the terms thereof. Accordingly, it shall be an Event of Default
under the Credit Agreement if any representation or warranty made or deemed made
by any Credit Party under or in connection with this Amendment shall have been
incorrect when made or deemed made or if any Credit Party fails to perform or
comply with any covenant or agreement contained herein.
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          IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered by their respective officers thereunto duly
authorized as of the date first written above.

            BORROWERS:

HANDLEMAN CATEGORY MANAGEMENT COMPANY
      By:           Name:           Title:          
HANDLEMAN SERVICES COMPANY
      By:           Name:           Title:          
HANDLEMAN REAL ESTATE LLC
      By:           Name:           Title:          
ARTIST TO MARKET DISTRIBUTION LLC
      By:           Name:           Title:          
REPS, L.L.C.
      By:           Name:           Title:        

Eleventh Amendment To Credit And Guaranty Agreement

 

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            GUARANTORS:

HANDLEMAN COMPANY
      By:           Name:           Title:           CRAVE ENTERTAINMENT GROUP,
INC.
      By:           Name:           Title:           HANLEY ADVERTISING COMPANY
      By:           Name:           Title:           HANDLEMAN COMPANY OF CANADA
LIMITED
      By:           Name:           Title:           HANDLEMAN UK LIMITED
      By:           Name:           Title:        

Eleventh Amendment To Credit And Guaranty Agreement

 

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            SVG DISTRIBUTION, INC.
      By:           Name:           Title:          
CRAVE ENTERTAINMENT, INC.
      By:           Name:           Title:        

Eleventh Amendment To Credit And Guaranty Agreement

 

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            ADMINISTRATIVE AGENT AND COLLATERAL AGENT:

SILVER POINT FINANCE, LLC,
as Administrative Agent and Collateral Agent
      By:           Name:           Title:        

Eleventh Amendment To Credit And Guaranty Agreement

 

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            LENDERS:

SPF CDO I, LTD.
      By:           Name:           Title:           SPCP GROUP, LLC
      By:           Name:           Title:           THERMOPYLAE FUNDING CORP.
      By:           Name:           Title:           FIELD POINT I, LTD.
      By:           Name:           Title:           FIELD POINT II, LTD.
      By:           Name:           Title:        

Eleventh Amendment To Credit And Guaranty Agreement