Exhibit 10.3
NINTH AMENDMENT TO CREDIT AGREEMENT
          NINTH AMENDMENT TO CREDIT AGREEMENT, dated as of July 24, 2008 (this
“Amendment”) 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 (as defined below) party
hereto, and General Electric Capital Corporation, as administrative agent for
the Lenders (in such capacity, together with its successors and assigns in such
capacity, “Agent”).
          WHEREAS, Holdings, Borrowers, Guarantors, the lenders party thereto
from time to time (“Lenders”) and Agent are parties to that certain Credit
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 and other financial accommodations
to Borrowers;
          WHEREAS, Borrowers and Guarantors have requested that Agent and
Lenders agree to amend certain terms and conditions of the Credit Agreement, in
each case, as more fully set forth herein; and
          WHEREAS, Agent 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 1.3(b) of the Credit Agreement, Mandatory
Prepayments, is hereby amended and modified by deleting clause (ix) in its
entirety and inserting the following in lieu thereof:
“(ix) Certain Receipts. Commencing on the date of the 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, Borrowers shall prepay the Loans to
the Agent or the Term Loan Agent, as

 

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applicable, in an aggregate amount equal to 100% of such proceeds as follows:
(i) first, to the Obligations, until paid in full, (ii) second to the Tranche B
Term Loans (as defined in the Term Loan Agreement), until paid in full, and
(iii) third, to the Last-Out Revolving Loans, until paid in full (it being
understood that the Revolving Commitment (as defined in the Term Loan Agreement)
shall be permanently reduced by the amount of any such prepayment).”
               (b) Section 6.25 of the Credit Agreement, Delivery of Amendment,
is hereby amended and restated by deleting such section in its entirety and
inserting the following in lieu thereof:
“6.25 Delivery of Amendment. By not later than August 1, 2008, the Credit
Parties shall not fail to execute and deliver to Agent an amendment to this
Agreement in form and substance satisfactory to Agent.”
               (c) Annex A of the Credit Agreement, Definitions, is hereby
amended by adding the following new definitions thereto, in appropriate
alphabetical order, to read in their entirety as follows:
““Canadian Purchase Agreement” means the Asset Purchase Agreement, dated as of
July 24, 2008, by and among Canadian Operating Company, Holdings, Anderson
Merchandisers-Canada, Inc., a Delaware corporation and Anderson Merchandisers,
L.P., a Texas limited partnership.
“Ninth Amendment” means the Ninth Amendment to Credit Agreement, dated as of
July 24, 2008, by and among Credit Parties, Lenders and Agent.
“Ninth Amendment Effective Date” has the meaning ascribed to the term ‘Amendment
Effective Date’ in the Ninth Amendment.”
               (d) Annex A of the Credit Agreement, Definitions, is hereby
further amended by amending and restating the definitions of the following terms
contained therein to read in their entirety as follows:
““Extraordinary Receipts” means any cash received by or paid to or for the
account of Holdings or any of it Subsidiaries not in the ordinary course of
business, including any foreign, United States, state or local tax refunds,
pension plan reversions, judgments, proceeds of settlements or other
consideration of any kind in connection with any cause of action, condemnation
awards (and payments in lieu thereof), indemnity payments and any purchase price
adjustment received in connection with any purchase agreement and proceeds of
insurance (excluding, however, any Net

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Insurance/Condemnation Proceeds which are subject to Section 1.3(b)).
“Material Contract” means, collectively, any contract or other arrangement to
which Holdings or any of its Subsidiaries is a party (other than the Loan
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 and the Canadian Purchase Agreement and all documents
executed or delivered in connection with any of the foregoing.”
               (e) Annex A of the Credit Agreement, Definitions, is hereby
further amended by deleting clause (iv) from the definition of “Indebtedness”
contained therein and insert the following in lieu thereof:
“(iv) any obligations owned for all or any part of the deferred purchase price
of property or services (excluding trade payables incurred in the ordinary
course of business) which purchase price is (a) due more than four (4) months
from the date of incurrence of the obligation in respect thereof or
(b) evidenced by a note or similar written instrument;”
               (f) Annex A of the Credit Agreement, Definitions, is hereby
further amended by adding the following sentence to the end of the definition of
“Net Asset Sale Proceeds” contained therein:
“For the avoidance of doubt, it is understood and agreed that 100% of the amount
of the Hold Back (as defined in the Canadian Purchase Agreement, as in effect on
the Ninth Amendment Effective Date), including all amounts payable under the
Promissory Note (as defined in the Canadian Purchase Agreement, as in effect on
the Ninth Amendment Effective Date), shall be deemed to constitute ‘Net Asset
Sale Proceeds’ upon receipt of any such amount by Holdings or any of its
Subsidiaries and, notwithstanding anything to the contrary contained in
Section 1.3, shall be paid to the Agent or the Term Loan Agent, as applicable,
to be applied (A) first, to the Obligations, until paid in full, (B) second, to
the Tranche B Term Loans (as defined in the Term Loan

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Agreement) until paid in full; and (C) third, to the Last-Out Revolving Loans,
until paid in full (it being understood that the Revolving Commitment (as
defined in the Term Loan Agreement) shall be permanently reduced by the amount
of any such prepayment).”
          3. Consent. (a) Credit Parties have advised Agent and Lenders that
Canadian Operating Company and Holdings are entering into an Asset Purchase
Agreement, dated as of July 24, 2008, with Anderson Merchandisers-Canada, Inc.,
a Delaware corporation (the “Purchaser”) and Anderson Merchandisers, L.P., a
Texas limited partnership (“Merchandisers”), in the form of Annex A attached
hereto (the “Purchase Agreement”), which Purchase Agreement provides for the
sale of certain assets related to Canadian Operating Company’s business
consisting of the distribution of certain music product in Canada.
               (b) Subject to the terms and conditions contained herein and
notwithstanding anything to the contrary set forth in the Credit Agreement or
any other Loan Document, the Agent and the Lenders hereby consent to the sale of
the Purchased Assets (as defined in the Purchase Agreement) to Purchaser in
accordance with the terms and conditions of the Purchase Agreement as in effect
on the Ninth Amendment Effective Date; provided, that (i) the cash proceeds of
such sale (including the Incentive Payment (as defined in the Anderson Purchase
Agreement as in effect on the Seventh Amendment Effective Date) but excluding
the amounts payable under the Promissory Note referred to in clause (vii) below)
that will be received on the date of such sale are at least $5,000,000, (ii) all
of such cash proceeds are paid to Agent for application to the Obligations as
set forth in Section 1.3(c) of the Credit Agreement until the Obligations are
paid in full, and then to the Term Loan Agent for application to the Term Loan
Debt as follows: (A) first, to the Tranche B Term Loans (as defined in the Term
Loan Agreement) until paid in full; and (B) second, to the Last-Out Revolving
Loans, until paid in full (it being understood that the Revolving Commitment (as
defined in the Term Loan Agreement) shall be permanently reduced by the amount
of any such prepayment), (iii) the Borrowers pay to the Term Loan Agent all
accrued interest payable in respect of the amount prepaid pursuant to clause
(ii) above (it being understood that the Make-Whole Amount (as defined in the
Term Loan Agreement) payable in respect of the amount prepaid pursuant to clause
(ii) above shall be paid-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 (A) constitute a portion of the
outstanding Tranche B Term Loan for purposes of the Term Loan Agreement and all
other Credit Documents (as defined in the Term Loan Agreement), (B) be secured
by the Collateral (as defined in the Term Loan Agreement), (C) constitute a
portion of the Obligations (as defined in the Term Loan Agreement) owing by the
Credit Parties (as defined in the Term Loan Agreement) to the Term Loan Agent
and the Term Loan Lenders and (D) be payable on the Term Loan Maturity Date,
(iv) such sale or disposition and application of proceeds shall occur on or
before October 15, 2008, (v) as of the date of such sale and after giving effect
thereto, (A) no Default or Event of Default shall have occurred and be
continuing, and (B) all material creditors of Canadian OpCo not paid immediately
upon the closing of the Purchase Agreement shall have delivered to Canadian
OpCo, a Bulk Sales Act Waiver, substantially in the form of Exhibit B hereto,
and Agent shall have received a certificate from an Authorized Officer of
Holdings and Canadian OpCo, certifying that the statements contained in
sub-clauses (A) and (B) above are true and correct,

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(vi) Agent shall have received, in form and substance reasonably satisfactory to
the Agent, true, correct and complete copies of the Purchase Agreement and each
other document executed in connection with any of the foregoing, together with
all schedules and exhibits thereto, duly authorized, executed and delivered by
the parties thereto (such documents, collectively, the “Purchase Documents”),
and (vii) Agent shall have received a Pledge Amendment to the Canadian Security
Agreement and the Term Loan Agent shall have received the original Promissory
Note (as defined in the Canadian Purchase Agreement (as in effect on the Ninth
Amendment Effective Date), appropriate instruments of transfer executed in blank
and an acknowledgement duly executed by the Purchaser with respect to such
pledge, in each case, in form and substance satisfactory to Agent;
               (c) Agent, with the consent of the Lenders, agrees to execute and
deliver to Purchaser (i) a release of liens in the form attached hereto as
Exhibit A (the “Release”) on the date of the proposed sale described in Section
3(b) above, following the satisfaction of the conditions described in
sub-clauses (v), (vi) and (vii) of Section 3(b) above (it being understood and
agreed by each Credit Party that the failure to satisfy any other condition
specified in Section 3(b) on the date of any such sale shall result in an
immediate Event of Default under the Credit Agreement), and (iii) a waiver in
the form attached hereto as Exhibit V (the “Bulk Sales Act Waiver”) on the date
of the proposed sale described in Section 3(b) above, following the satisfaction
of all of the conditions described in Section 3(b) above. The Credit Parties
hereby acknowledge and consent to the Release and the Bulk Sales Act Waiver.
               (d) Except as provided in Section 3(b), the Credit Agreement and
the other Loan Documents shall remain in full force and effect, and the
foregoing waivers and consents shall be limited to the matters set forth herein
and shall not extend to any other transaction. The foregoing waivers and
consents do not allow any other or further departure from the terms of the
Credit Agreement or any other Loan Document.
          4. Waiver. (a) The Company, in its capacity as Borrower
Representative, has advised Agent that certain Events of Default have occurred
under Section 8.1(c) of the Credit Agreement, due to the incurrence of certain
Indebtedness by the Credit Parties resulting from the failure of the Credit
Parties to pay all trade payables in excess of $2,000,000 within 60 days of the
due date therefor in violation of Section 6.1 of the Credit Agreement (such
Events of Default, the “Specified Events of Default”). At the request of the
Credit Parties, effective upon the Amendment Effective Date, Agent and the
Lenders hereby waives each Specified Event of Default that occurred prior to the
date hereof.
               (a) The waivers and consents set forth in Section 4(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 Section 6.1 of the Credit Agreement) or any other Loan
Document, which terms and conditions shall continue in full force and effect.
          5. Conditions to Effectiveness. This Amendment shall become effective
(the “Amendment Effective Date”) upon satisfaction in full of the following
conditions precedent:

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               (a) Immediately after giving effect to this Amendment, (i) the
representations and warranties contained in this Amendment, the Credit Agreement
and the other Loan 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) Agent shall have received counterparts of this Amendment that
bear the signatures of each of Credit Parties, Agent and Lenders.
               (c) Agent shall have received a copy of an amendment (or similar
agreement), in form and substance reasonably satisfactory to Agent, duly
executed by Credit Parties, Term Loan Agent, and Term Loan Lenders amending and
waiving the corresponding provisions of the Term Loan Agreement.
          6. Credit Parties’ Representations and Warranties. Each Credit Party
represents and warrants to Agent 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 Loan
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).
               7. Continued Effectiveness of Credit Agreement. Each Credit Party
hereby confirms and agrees that (a) the Credit Agreement and each other Loan
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 Loan 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 Loan Document purports to assign or pledge to Agent, for the ratable
benefit of Lenders, or to grant to 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 Loan Documents, such
pledge, assignment and/or grant of the security interest or Lien is hereby
ratified and confirmed in all respects, (c) the execution and delivery of this
Amendment does not limit any other action that Agent is entitled to take, or
that the Credit Parties are required to perform, under the Fifth Amendment Fee
Letter, and (d) no amendment or waiver of any terms or provisions of the Credit
Agreement, or the amendments or waivers granted hereunder, shall relieve any
Credit Party from complying with such terms and provisions other than as
expressly amended or waived hereby or from complying with any other term or
provision thereof or herein.
               8. 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 Agent or any Lender (or any of their respective Affiliates, officers,
directors, employees, attorneys, consultants or agents) and (b) 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 Loan Documents. Notwithstanding the foregoing, Credit
Parties wish (and Agent and Lenders agree) to eliminate any possibility that any
past conditions, acts, omissions, events or circumstances would impair or
otherwise adversely affect Agent’s or any Lenders’ rights, interests, security
and/or remedies under the Credit Agreement and the other Loan 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 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

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whatsoever done or omitted to be done, arising out of, connected with or related
in any way to the Credit Agreement or any other Loan Document, or any act, event
or transaction related or attendant thereto, or the agreements of 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.
               9. Miscellaneous.
               (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 Agent 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 Agent and Lenders.
               (e) This Amendment is a Loan 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:        

            SVG DISTRIBUTION, INC.
      By:           Name:           Title:        

            CRAVE ENTERTAINMENT, INC.
      By:           Name:           Title:      

 

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            ARTIST TO MARKET DISTRIBUTION LLC
      By:           Name:           Title:        

            REPS, L.L.C.
      By:           Name:           Title:      

 

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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:      

 

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            ADMINISTRATIVE AGENT AND LENDERS:

GENERAL ELECTRIC CAPITAL
CORPORATION, as Agent and Lender
      By:           Name:           Title:      

 

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EXHIBIT A TO NINTH AMENDMENT
General Electric Capital Corporation
500 W. Monroe
Chicago, IL 60661
Anderson Merchandisers-Canada, Inc.
421 S.E. 34th Avenue
Amarillo, TX 79103
               Re: RELEASE AND TERMINATION OF LIENS
Ladies and Gentlemen:
               Reference is hereby made to the Credit Agreement, dated as of
April 30, 2007 (as amended, restated, supplemented or modified from time to
time, the “Credit Agreement”; all terms used herein which are defined in the
Credit Agreement and not otherwise defined herein are used herein as defined
therein), 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 thereto 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
thereto as “Credit Parties” (such subsidiaries, together with Holdings and the
Borrowers, are referred to individually as a “Credit Party” and collectively,
jointly and severally, as “Credit Parties”), the lenders party thereto from time
to time (“Lenders”), and General Electric Capital Corporation, as administrative
agent for Lenders (in such capacity, together with its successors and assigns in
such capacity, “Agent”). Agent, on behalf of itself and the Lenders, holds a
security interest in and lien on the assets and property of Handleman Company of
Canada Limited, a corporation organized under the laws of the Province of
Ontario (“Seller”). Agent and the Lenders have been advised that Seller is
selling, conveying, transferring and assigning to Anderson Merchandisers-Canada,
Inc., a Delaware corporation (the “Purchaser”), the Purchased Assets (as defined
in the Asset Purchase Agreement, dated as of July      , 2008, by and among
Seller, Holdings, Purchaser, and Anderson Merchandisers, L.P., as in effect on
the date hereof). As a condition to such proposed sale, Agent is required to
release all of its liens on such Purchased Assets.
               1. Release of Security Interest. Effective upon receipt by Term
Loan Agent of the payment set forth in Section 2 hereof, Agent hereby releases,
terminates and discharges, without recourse and without any representation or
warranty of any kind, express or implied, all security interests and liens of
any nature whatsoever in its favor in or on the Purchased Assets. Nothing
contained herein shall be deemed a release or termination by Agent of any
security interests in and liens on any assets of any Credit Party other than the
Purchased Assets, all of which shall continue in full force and effect. Except
as specifically set forth herein, nothing contained herein shall be construed in
any manner to constitute a waiver, release or termination or to otherwise limit
or impair any of the obligations or indebtedness of any Credit Party or any

 

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other person or entity to Agent and the Lenders, or any duties, obligations or
responsibilities of the Credit Parties or any other person or entity to Agent
and the Lenders.
               2. Effectiveness of Release. The release, termination and
discharge of Agent’s security interests in and liens on the Purchased Assets
pursuant to Section 1 hereof shall be effective, without further action by
Agent, upon the Term Loan Agent’s receipt, from or on behalf of the Credit
Parties (including by direct payment by the Purchaser), of an aggregate amount
of not less than $5,000,000 in immediately available funds to the bank account
specified on Schedule I hereto by not later than noon (New York City time) on
               , 2008. (To the extent such payment is not received by such time,
this Release and Termination of Liens shall terminate and be of no further force
or effect.)
               3. Further Assurances. Agent will, at the reasonable request of
the Borrowers or the Purchaser and after receipt of the payment set forth in
Section 2 hereof by the Term Loan Agent, execute and/or deliver such instruments
and other writings as may be necessary to effect or evidence the termination of
the liens of Agent on the Purchased Assets, but without representation, warranty
or recourse to Agent or the Lenders and at the sole cost and expense of the
Borrowers.
               4. Miscellaneous. Delivery of an executed counterpart of this
Release and Termination of Liens by facsimile or electronic mail shall be
equally effective as delivery of a manually executed counterpart. This Release
and Termination of Liens shall be governed by and interpreted and determined in
accordance with the laws of the State of New York (without regard to principles
of conflict of laws).

           
Very truly yours,

GENERAL ELECTRIC CAPITAL CORPORATION, as
Agent and on behalf of the Lenders
      By:           Name:          Title:     

 

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Schedule I
Bank Account Details
Citibank, NA
ABA # 021000089
A/C Name: Silver Point Finance, LLC
A/C # 48680439
RE: Handleman / Sweep Payment

 

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ANNEX A TO NINTH AMENDMENT
PURCHASE AGREEMENT
See attached.

 

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EXHIBIT B TO NINTH AMENDMENT
FORM 2
(Section 8 (1) (c))
Bulk Sales Act
WAIVER
In the matter of the sale in bulk
Between
     Seller
-and-
     Buyer
I,                     , of the                      of                     , in
the                      of                     , a secured (or unsecured) trade
creditor of the above-named seller, hereby waive the provisions of the Bulk
Sales Act that require that adequate provision be made for the immediate payment
in full of my claim forthwith after completion of the sale, and I hereby
acknowledge and agree that the buyer may pay or deliver the proceeds of the sale
to the seller and thereupon acquire the property of the seller in the stock
without making provision for the immediate payment of my claim and that any
right to recover payment of my claim may, unless otherwise agreed, be asserted
against the seller only.
Dated at                     this       day of                     , 20     
Witness: