exv10w2






EXHIBIT 10.2




Exhibit 3.4

U.S. Transition Services

June 2, 2008




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Requirements




1.0 Inventory Purchase Transition




1.1 Order Communication




Requirements





	Ø	 	Effective June 2, 2008, (“Closing”), Anderson will begin to sell music to the
Wal~Mart stores in the United States (WMS) currently serviced by HDL. At Closing,
Anderson will become the vendor of record for each WMS.
	 
	Ø	 	Exhibit 1.1.1 of the Purchase Agreement is a listing by SKU (with the cost per unit
of each SKU) of HDL’s inventory to be bought by Anderson at the Closing (which Anderson
and HDL have identified as buckets 1-3 and 11-13 of 13 buckets of HDL’s inventory), the
intention being that HDL will not sell to Anderson at the Closing what HDL believes
will be a 30-day supply of inventory with which HDL will service its customers other
than WMS.  Exhibit 1.1.1 is a preliminary listing based on HDL’s perpetual inventory
system.  The actual listing of inventory bought by Anderson will be finalized and
documented in the verified truck manifests (see Section 1.3 procedures below).
	 
	Ø	 	Handleman will provide Anderson with a list of all SKU’s with quantity on hand and
current average cost by end of day May 31, 2008.
	 
	Ø	 	On the morning of June 2, 2008, Anderson will provide an electronic file to
Handleman of orders by Ship To location for the June 10, 2008 new releases. The new
release orders provided to Handleman will be the first priority to pick, pack, and load
on a trailer on June 2, 2008.
	 
	Ø	 	On June 2, 2008, Anderson will provide an electronic order file to Handleman by Ship
To location for the remaining SKU’s not included as part of the new release orders
above. The orders will be picked, packed, and loaded on trailers over the next seven
business days.
	 
	Ø	 	Handleman will contact the vendors on June 2, 2008 to change the PO quantities for
the June 17, 2008 and June 24, 2008 new release PO’s to what Handleman requires for
non-Wal-Mart customers.
	 
	Ø	 	Anderson will contact vendors on June 2, 2008 and issue new PO’s for what they
require for the June 17, 2008 and June 24, 2008 new release PO’s. Anderson will be
responsible for vendor payment. Handleman will provide Kris Cartrite the PO data ahead
of time so that Anderson can create the PO’s in advance. Dave Jones and Kris Cartrite
will develop a plan to communicate to vendors.
	 
	Ø	 	Anderson requested and received a list of titles related to Hawaii, as well as
Wal-Mart exclusives and new release titles identified subsequent to the initial
category 1-3 SKU identification. Parties will meet and agree on additional titles for
the June 2, 2008 purchase.
	 
	Ø	 	Handleman will provide Anderson with a status of current in store promotions/events,
as well as store backorder information.





			
	 	 	 
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Requirements




1.2 Pick, Pack, Load




Requirements





	Ø	 	Beginning the morning of June 2, 2008, Anderson will provide trailers to the
Handleman Indianapolis Distribution Center to accommodate the SKU’s purchased from
Handleman to be shipped via an Anderson carrier (FOB shipping). Anderson and Handleman
will jointly determine how many trucks are required. The initial estimate is 2-5 per
day.
	 
	Ø	 	Anderson will arrange for an LTL carrier for the new release shipments on June 2,
2008.
	 
	Ø	 	On June 2, 2008, Handleman will pick, pack and load the ordered product onto
pallets, starting with new releases, box lot quantities only, no loose pick boxes. A
separate manifest containing UPC, title, artist, and quantity for each SKU will be
generated for each pallet, which will be tied to a truck (i.e. Truck 1, Pallet 1).
Each pallet will be labeled with a copy of the pallet manifest signed off on by
Anderson and Handleman representatives (see Shipment Audit below). The shipping
manifest for the truck will consist of a summary of the pallet manifests. The truck
shipping manifest and individual pallet manifests will be electronically transmitted to
Anderson at the time the truck leaves the Indianapolis warehouse.
	 
	Ø	 	Anderson will be responsible for scheduling the departure of loaded and jointly
approved trucks from the Indianapolis warehouse.





1.3 Shipment Audit and Management




Requirements





	Ø	 	Anderson and Handleman will each assign a team of five on-site representatives,
comprised of a manager and four shipment auditors. The managers from each company will
work together to provide oversight to the entire process and resolve issues. Shipment
auditors from each company will pair up and conduct the auditing of pallet manifests
and truck shipping manifests.
	 
	Ø	 	Anderson and Handleman will validate pallet manifests and at least one box of
product per pallet will be opened and title verified. Handleman and Anderson will
provide a joint approval by way of signature on the pallet manifests prior to the
pallets being loaded onto the trailer. In addition, the audit representatives will
also verify the accuracy of the truck shipping manifest which consists of a summary of
the pallets loaded on the trailer. Immediately after verifying the truck shipping
manifest, the trailer will be sealed.
	 
	Ø	 	After a trailer is sealed, Anderson will coordinate the departure of the truck.
	 
	Ø	 	The truck manifest and individual pallet manifests will be sent electronically in an
Excel spreadsheet for Anderson to receive against.





			
	 	 	 
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Requirements




1.4 Handleman to Anderson Invoice for Inventory Purchased




Requirements





	Ø	 	Handleman will invoice Anderson based on the mutually approved truck/pallet shipping
manifests generated at the time of shipping. Handleman will invoice Anderson based on
the Handleman average cost of each individual SKU shipped. Handleman will provide the
average cost by SKU to Anderson with the SKU file on May 31, 2008.
	 
	Ø	 	Anderson will remit payment to Handleman within three days of product shipment.





1.5 Handleman Receiving





	Ø	 	Vendor shipments received in the Indianapolis Distribution Center post May 31, 2008
will be received into Handleman inventory. Depending on the timing of the receipt,
Anderson will either purchase the product as part of the initial transition or as part
of the end of transition purchase.





1.6 Anderson Receiving





	Ø	 	Given there will be a joint audit and approval at the time the trailers are loaded
and sealed, there will be no audit and reconciliation required at the point of
receiving at the Anderson locations.





1.7 Other





	Ø	 	Anderson will pay Handleman $175,000 for transitional services.
	 
	Ø	 	Anderson will pay Handleman $5 million for pick, pack and ship costs and
warehousing, billing and management costs incurred by Handleman at the closing.





2.0 Product Purchasing




Requirements





	Ø	 	Handleman will provide Anderson with product requirements and Anderson will
reasonably accommodate HDL product requests.
	 
	Ø	 	Handleman will provide Anderson with requirements in advance for product that is
required to be ordered for non-Wal-Mart accounts beginning June 2, 2008.
	 
	Ø	 	Handleman will provide Anderson with a SAN # for the vendor ASN.
	 
	Ø	 	Anderson will create a separate PO for orders going to the Indianapolis Distribution
Center. Anderson will provide Handleman with an electronic or hard copy of the PO’s
generated.
	 
	Ø	 	Anderson will request vendors drop ship product directly to the Handleman
Indianapolis Distribution Center.
	 
	Ø	 	The selling price of product is equal to Anderson cost (in the case of on-hand
inventory) plus .31 per unit (pick pack and ship) or vendor invoice.





			
	 	 	 
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Requirements





	Ø	 	Handleman will manually check the product in and confirm the quantities received to
Anderson. Handleman will remit payment to Anderson based on quantities received thirty
days after product receipt.
	 
	Ø	 	HDL agrees to provide Anderson an unconditional $3 million letter of credit as
collateral for any amounts due Anderson, and Anderson is under no obligation to ship
product to HDL that might exceed the letter of credit.





3.0 Wal-Mart Store Returns




Requirements





	Ø	 	Anderson will be the vendor of record for all Wal-Mart stores beginning June 2, 2008.
	 
	Ø	 	Handleman REPS personnel will stop processing all Wal-Mart store returns by May 30,
2008. REPS personnel will follow up with Wal-Mart stores the week of June 2, 2008 to
ensure the returns processed by reps in the weeks prior to June 2, 2008 are closed out
and shipped to the Handleman Indianapolis Distribution Center.
	 
	Ø	 	Handleman will provide Anderson with the price file maintenance file related to the
June 2, 2008 Wal-Mart download on May 30, 2008.
	 
	Ø	 	Returns in-transit to Handleman as of June 2, 2008 will be processed by Handleman
and Handleman will own the related returned product. Anderson agrees to purchase from
Handleman clean, salable return product of a SKU included in the initial inventory
purchase. In addition, Handleman will generate a process for the collection of pick up
memos.
	 
	Ø	 	Handleman will provide Anderson with a file of store specific inventory including
the vendor cross-reference and Wal-Mart cost. An initial file will be provided on May
23, 2008, a second file will be provided on May 31, 2008.
	 
	Ø	 	Beginning June 2, 2008, Handleman and Anderson will instruct Wal-Mart to process
product returns to Anderson and Anderson will process its own return credit to
Wal-Mart.
	 
	Ø	 	Anderson will refund to Handleman any deductions taken by Wal-Mart resulting from
any activity (such as returns) after June 2, 2008.
	 
	Ø	 	In the event there is a return exception related to a store return processing error,
Handleman and Anderson will jointly agree on an option for handling the exception as
defined in the table below.
	 
	Ø	 	Return exception scenarios are defined as follows:




Return Exceptions — Returns Processed by Handleman before Close but Processed by Wal-Mart
after June 1st




	 	 	 
	SCENARIO	 	Resolution
	Scenario 1
	 	 
	Wal-Mart Deducts Return from HDL

	 	•   AMD Ships Product to HDL

	Wal-Mart Ships Product to Anderson

	 	•   HDL pays shipping cost







			
	 	 	 
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	Scenario 2
	 	 
	Wal-Mart Deducts Return from AMD

	 	•   AMD reverses WMT deduction and ships product to HDL

	Wal-Mart Ships Return to AMD

	 	•   HDL pays shipping cost

	 

	 	•   HDL issues WMT credit for return

	 
	 	 
	Scenario 3
	 	 
	Wal-Mart Deducts Return from AMD

	 	•   AMD reverses WMT deduction

	Wal-Mart Ships Product to Handleman

	 	•   HDL Keeps Product

	 

	 	•   HDL issues WMT credit for return






Return Exceptions — Anderson Returns Processed Beginning by Wal-Mart after June 1st




	 	 	 
	SCENARIO	 	Resolution
	Scenario 4
	 	 
	Wal-Mart Deducts Return from AMD

	 	•   Handleman Ships Product to Anderson

	Wal-Mart Ships Product to HDL

	 	•   Anderson pays shipping cost

	 
	 	 
	Scenario 5
	 	 
	Wal-Mart Deducts Return from HDL

	 	•   AMD Keeps Product

	Wal-Mart Ships Return to AMD

	 	•   AMD Pays HDL for Product

	 
	 	 
	Scenario 6
	 	 
	Wal-Mart Deducts Return from HDL

	 	•   HDL ships product to AMD

	Wal-Mart Ships Product to HDL

	 	•   AMD pays shipping cost

	 

	 	•   AMD pays HDL for product







4.0 Wal-Mart Store Receiving




Requirements





	Ø	 	Anderson will become the vendor of record on June 2, 2008.
	 
	Ø	 	Handleman will instruct Wal-Mart to manually receive any shipments from Handleman
that are received and/or processed after May 31, 2008.





5.0 Post Transition Inventory Purchases




Requirements





	Ø	 	Anderson will buy the following at the close of business on August 28, 2008, FOB
Anderson’s warehouses: (i) at supplier invoice cost, whatever inventory then exists in
buckets 1-3 and 11-13; and (ii) at supplier invoice cost whatever existing inventory
mutually agreed to and authorized as returnable by music suppliers in buckets 4-10 and
can be returned, less 





			
	 	 	 
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Requirements





	 	 	$0.31/unit for each unit and less any handling fees charged by
the suppliers. Reference is made to the Asset Purchase Agreement section 1.3.2
	 
	Ø	 	Handleman will provide Anderson with weekly updates regarding the quantity of return
product of a SKU included in the initial inventory purchase, as well as any other
salable new release SKU’s agreed to by both parties not included on the initial
inventory list.
	 
	Ø	 	Handleman will provide Anderson with a final inventory file the morning of August
29, 2008. Anderson will communicate final orders to Handleman the morning of September
2, 2008.
	 
	Ø	 	Beginning the morning of September 3, 2008, Anderson will provide trailers to the
Handleman Indianapolis Distribution Center to accommodate the SKU’s purchased from
Handleman to be shipped via an Anderson carrier (FOB destination). Anderson and
Handleman will jointly determine how many trucks are required.
	 
	Ø	 	Starting September 3, 2008, Handleman will pick, pack and load the ordered product
onto pallets. A separate manifest containing UPC, title, artist, and quantity for each
SKU will be generated for each pallet, which will be tied to a truck (i.e. Truck 1,
Pallet 1). Each pallet will be labeled with a copy of the pallet manifest signed off
on by Anderson and Handleman representatives (see Shipment Audit below). The shipping
manifest for the truck will consist of a summary of the pallet manifests. The truck
shipping manifest and individual pallet manifests will be electronically transmitted to
Anderson at the time the truck leaves the Indianapolis warehouse.
	 
	Ø	 	Anderson will be responsible for scheduling the departure of loaded and jointly
approved trucks from the Indianapolis warehouse.





6.0 Wal-Mart Field Service




REPS Servicing of Wal-Mart Stores




Requirements





	Ø	 	REPS will service Wal-Mart stores on behalf of Anderson beginning the week of June
2, 2008 until Anderson no longer requires REPS to perform the service.
	 
	Ø	 	Handleman REPS field services employees will stop processing returns at all Wal-Mart
stores on May 23, 2008.
	 
	Ø	 	Handleman will bill Anderson for REPS associate labor for the hours serviced in
Wal-Mart stores (until the associate is hired or Anderson assigns an associate) at HDL
direct labor cost, plus fringe and taxes. Invoice detail will support the hours worked
per store (see Attachment II). Invoicing will occur weekly based on calendar weeks.
For example, the first invoice will be for the period of June 1, 2008 through June 7,
2008. Invoicing will occur four days after the last day of the period. Invoice terms
are Net 3.
	 
	Ø	 	Prior to Closing, Handleman working with Anderson will identify up to 200 Field
full-time employees and 40 Field part-time employees. Anderson may offer employment to
these Handleman employees that pass Anderson pre-employment tests and interviews.
Anderson 





			
	 	 	 
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Requirements




	 	 	will assume the leases for the automobiles for the employees that accept Anderson’s offer of employment.








	 	o	 	Handleman agrees to offer to sell to Anderson equipment owned
by Handleman and presently used by its field employees at a mutually agreed
value and with all software and confidential Handleman information deleted.
	 
	 	o	 	Until the earlier of (1) June 30, 2008, or (2) the date
Anderson gives Handleman the list of Handleman’s employees Anderson wishes to
hire, Handleman (i) will not terminate the employment of the employees (except
for cause), and (ii) will bill Anderson for reimbursement of Handleman’s direct
payroll (i.e. salary, fringes and employment taxes) for such employees with
respect to WMS. In addition, HDL will continue the medical coverage of such
employees, at its cost, for the month of June 2008.
	 
	 	o	 	Handleman agrees to make any corporate employees available for
interviews post closing.






	Ø	 	The hiring process and timeline are outlined below:






	 	Field Hiring Process
	 
	 	o	 	No contact with employees until the agreement is signed
	 
	 	o	 	Interviews (in person, in market with Regional Management & HR)  (15-20 min)
	 
	 	o	 	Taleo testing (at time of interview) (15-20 min)
	 
	 	o	 	Hire decisions by Friday June, 6th
	 
	 	o	 	Offers contingent on background check, MVR, drug testing
	 
	 	Timeline
	 
	 	6/2	 	Announcement
	 
	 	6/3-6/4	 	REPS management interviews (all DMs and RDs)
	 
	 	6/4-6/6	 	REPS FT/PT interviews (based on geography needs)
	 
	 	6/5-6/6	 	REPS FT/PT hiring decisions made
	 
	 	6/6	 	Hiring decisions made for Field Management and Bentonville Office
	 
	 	6/9	 	Start date: training, transition
	 
	 	6/13	 	Hiring decisions made for Corporate Management




The interview schedule is defined as follows:




	 	 	 	 	 	 	 	 	 	 	 
	Area	 	# EE’s	 	 	Interview Dates	 	Location	 	AM Interviewer(s)
	Field — Regional
Directors
	 	 	2	 	 	Friday - May 30th	 	Amarillo, TX	 	Girard
	 
	 	 	 	 	 	 	 	 	 	 
	Field District
Managers
	 	 	7	 	 	Tuesday - June 3rd	 	Chicago, IL	 	Crunk, VanderDoes, Tobiason






			
	 	 	 
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Requirements




	 	 	 	 	 	 	 	 	 	 	 
	Area	 	# EE’s	 	 	Interview Dates	 	Location	 	AM Interviewer(s)
	Hawaii
	 	 	1	 	 	Wednesday – June 4th	 	Phone Interview	 	Ed Hardy
	 
	 	 	 	 	 	 	 	 	 	 
	Field FT Reps
	 	 	103	 	 	Wednesday - Friday - June 4th - 6th	 	Local to Rep	 	Regional/DSM for area
	 
	 	 	 	 	 	 	 	 	 	 
	Field PT Reps
	 	 	40	 	 	Wednesday - Friday - June 4th - 6th	 	Local to Rep	 	Regional/DSM for area
	 
	 	 	 	 	 	 	 	 	 	 
	Corporate — Troy
Office
	 	 	11	 	 	Wednesday - June 4th	 	Troy, MI	 	Lardie, Johnson & Shufeldt
	 
	 	 	 	 	 	 	 	 	 	 
	Wal-Mart Customer
Team — Bentonville
	 	 	13	 	 	Monday/Tuesday - June 2nd & 3rd	 	Bentonville, AR	 	McClanahan
	 
	 	 	 	 	 	 	 	 	 	 
	 
	 	 	 	 	 	TBD - Tuesday/Wednesday - June 3rd	 	 	 	 
	Indy ADC
	 	 	6	 	 	& 4th	 	Indianapolis, IN	 	Coile
	 
	 	 	 	 	 	 	 	 	 	 
	Totals:
	 	 	183	 	 	 	 	 	 	 






7.0 Hawaii




Requirements





	Ø	 	The process for transition will be determined between Handleman, Anderson and
Pacific Hawaiian on June 2, 2008.




8.0 Credit Terms —  Throughout this document transactions are contemplated which may result
in Handleman owing Anderson balances created from the transactions. Any such balances are
included under the coverage of the $3 million letter of credit referenced in 2.0 above.




			
	 	 	 
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