Document:

EX-10.1

Exhibit 10.1

Asset Purchase Agreement

(July 24, 2008)

AMONG

Handleman Company of Canada Limited,

(“Seller”),

Handleman Company

(“Seller Parent”)

and

Anderson Merchandisers-Canada, Inc.

(“Purchaser”)

and

Anderson Merchandisers, L.P.

(“Merchandisers”)

 

-i-

ASSET PURCHASE AGREEMENT

	 	 	 	 	 	 	 
	1.
	 	 	 	AGREEMENT TO PURCHASE AND SELL	 	1
	 
	 	 	 	 	 	 
	 
	 	1.1.	 	Purchase	 	1
	 
	 	1.2.	 	Excluded Assets	 	2
	 
	 	1.3.	 	Assumed Obligations	 	2
	 
	 	1.4.	 	Excluded Obligations	 	3
	 
	 	 	 	 	 	 
	2.
	 	 	 	PURCHASE PRICE AND PAYMENTS	 	3
	 
	 	 	 	 	 	 
	 
	 	2.1.	 	Purchase Price	 	3
	 
	 	2.2.	 	Allocation of Purchase Price	 	3
	 
	 	2.3.	 	Payment and Hold Back	 	4
	 
	 	2.4.	 	Adjustments	 	4
	 
	 	2.5.	 	Closing	 	4
	 
	 	 	 	 	 	 
	3.
	 	 	 	ADDITIONAL PROVISIONS	 	5
	 
	 	 	 	 	 	 
	 
	 	3.1.	 	Employees	 	5
	 
	 	3.2.	 	Accounts Receivable	 	5
	 
	 	3.3.	 	Transition Services	 	5
	 
	 	3.4.	 	Third Party Consents	 	6
	 
	 	3.5.	 	Governmental Approvals	 	6
	 
	 	3.6.	 	Bulk Sales Act	 	7
	 
	 	3.7.	 	GST	 	7
	 
	 	3.8.	 	Income Tax Election	 	8
	 
	 	 	 	 	 	 
	4.
	 	 	 	REPRESENTATIONS AND WARRANTIES OF SELLER AND SELLER PARENT	 	8
	 
	 	 	 	 	 	 
	 
	 	4.1.	 	Status of Seller and Seller Parent	 	8
	 
	 	4.2.	 	Authority	 	8
	 
	 	4.3.	 	Title to Purchased Assets	 	8
	 
	 	4.4.	 	Litigation	 	9
	 
	 	4.5.	 	Insolvency Proceedings	 	9
	 
	 	4.6.	 	No Violation or Breach	 	9
	 
	 	4.7.	 	Broker’s or Finder’s Fees	 	9
	 
	 	4.8.	 	Taxes	 	9
	 
	 	4.9.	 	Competition Act	 	10
	 
	 	4.10.	 	Canadian Seller	 	11
	 
	 	4.11.	 	Financial Statements	 	11
	 
	 	4.12.	 	Subsequent Events	 	11
	 
	 	4.13.	 	Undisclosed Liabilities	 	12
	 
	 	4.14.	 	Leased Real Property	 	12
	 
	 	4.15.	 	Tangible Assets	 	13
	 
	 	4.16.	 	Inventories	 	13
	 
	 	4.17.	 	Contracts	 	13

 

	 	 	 	 	 	 	 
	 
	 	4.18.	 	Insurance	 	14
	 
	 	4.19.	 	Employees	 	14
	 
	 	4.20.	 	Pension and benefits	 	15
	 
	 	4.21.	 	Customers and Suppliers	 	17
	 
	 	 	 	 	 	 
	5.
	 	 	 	REPRESENTATIONS AND WARRANTIES OF PURCHASER AND MERCHANDISERS	 	17
	 
	 	 	 	 	 	 
	 
	 	5.1.	 	Status of Purchaser	 	17
	 
	 	5.2.	 	Authority	 	17
	 
	 	5.3.	 	Investment Evaluation	 	17
	 
	 	5.4.	 	Litigation	 	17
	 
	 	5.5.	 	Broker’s or Finder’s Fees	 	17
	 
	 	5.6.	 	Competition Act	 	18
	 
	 	5.7.	 	Goods and Services Tax and Harmonized Sales Tax Registration	 	18
	 
	 	 	 	 	 	 
	6.
	 	 	 	CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER AT CLOSING	 	18
	 
	 	 	 	 	 	 
	 
	 	6.1.	 	Accuracy of Representations and Warranties	 	18
	 
	 	6.2.	 	Seller’s Performance	 	18
	 
	 	6.3.	 	No Proceedings	 	18
	 
	 	6.4.	 	Closing Deliveries	 	19
	 
	 	6.5.	 	Bulk Sales and Retail Sales Tax Compliance	 	19
	 
	 	6.6.	 	WSIB Certificate	 	19
	 
	 	 	 	 	 	 
	7.
	 	 	 	CONDITIONS PRECEDENT TO OBLIGATIONS OF SELLER AT CLOSING	 	20
	 
	 	 	 	 	 	 
	 
	 	7.1.	 	Accuracy of Representations and Warranties	 	20
	 
	 	7.2.	 	Closing Deliveries	 	20
	 
	 	 	 	 	 	 
	8.
	 	 	 	TERMINATION	 	20
	 
	 	 	 	 	 	 
	9.
	 	 	 	INDEMNIFICATION	 	20
	 
	 	 	 	 	 	 
	 
	 	9.1.	 	By the Seller Parties	 	20
	 
	 	9.2.	 	By the Purchaser Parties	 	21
	 
	 	9.3.	 	Procedure for Claims	 	22
	 
	 	9.4.	 	Claims Period	 	23
	 
	 	9.5.	 	Third Party Claims	 	23
	 
	 	9.6.	 	Supplier/Creditor Claims	 	23
	 
	 	9.7.	 	Hold Back	 	24
	 
	 	 	 	 	 	 
	10.
	 	 	 	CONFIDENTIALITY	 	24
	 
	 	 	 	 	 	 
	11.
	 	 	 	NOTICES	 	25
	 
	 	 	 	 	 	 
	12.
	 	 	 	EXHIBITS	 	25

 

	 	 	 	 	 	 	 
	13.
	 	 	 	MISCELLANEOUS	 	25

      

 

-1-

ASSET PURCHASE AGREEMENT

     This Asset Purchase Agreement (this “Agreement”) is made effective as of July      , 2008 (the
“Effective Date”) by and between Handleman Company of Canada Limited (“Seller” or “HDL-CND”), an
Ontario corporation, with offices at Unit #1 60 Leek Crescent, Richmond Hill, Ontario, Canada, L4B
1H1; Handleman Company, a Michigan corporation (“HDL” or “Seller Parent”), with offices at 500
Kirts Boulevard, Troy, MI 48084 which indirectly owns all of the issued and outstanding capital
stock of Seller; Anderson Merchandisers—Canada, Inc., a Delaware corporation (“Purchaser”), with
offices at 421 S.E. 34th Avenue, Amarillo, TX 79103, and Anderson Merchandisers, L.P., a
Texas limited partnership (“Merchandisers”), with offices at 421 S.E. 34th Avenue,
Amarillo, TX 79103, an affiliate of Purchaser.

RECITALS

     The following is a recital of facts underlying this Agreement:

          A. A portion of HDL’s business (the “US WMS Business”) consisted of distribution of certain
music product to Wal-Mart stores in the United States. HDL sold certain assets related to the US
WMS Business to Merchandisers pursuant to an Asset Purchase Agreement (WMS Related Assets) dated as
of June 2, 2008.

          B. Seller’s business (the “Business”) is distribution of music products in Canada, including
distribution of products to Wal-Mart Stores in Canada.

          C. Seller desires to sell, and Purchaser desires to purchase, substantially all of the assets
of Seller used in the Business, on the terms and conditions set forth herein.

     NOW THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is
hereby acknowledged, the parties hereby agree as follows:

1. Agreement to Purchase and Sell.

     1.1. Purchase.

     At the Closing, Purchaser shall purchase and Seller shall sell and transfer all of Seller’s
right, title and interest in and to substantially all of the assets of Seller used in the Business
(the “Purchased Assets”) as follows (but excluding the Excluded Assets):

          (a) all merchandise inventory (the “Inventory”);

          (b) the real property leased pursuant to the lease for the premises located at Unit #1, 60
Leek Crescent, Richmond Hill, Ontario (the “Lease”), including rights to leasehold improvements (if
any);

          (c) any and all office furniture, computers, and any and all other machinery and equipment,
warehouse racking and other distribution equipment, including but not limited to forklifts, pallet
jacks, conveyors, turntables and carts, spare parts and all other tangible properties, wherever
located (collectively the “Equipment”) owned by Seller or leased pursuant

 

-2-

to the equipment leases (including the employee fleet vehicle leases) (“Equipment Leases”)
listed in Exhibit 1.1(e), together with computer software licensed by Seller for use with the
Equipment;

          (d) retail store display fixtures, whether located in stores or in storage;

          (e) customer contracts, supply contracts and other contracts relating to the Business listed
in Exhibit 1.1(e) (the “Contracts”); and

          (f) all telephone numbers, post office boxes, customer records, vendor records, such
warranties on the Equipment as exist as of the Closing Date, all licenses, permits and other
governmental authorizations necessary or desirable for the conduct of the Business to the extent
the same are transferable (the “Intangibles”).

     1.2. Excluded Assets.

     Notwithstanding Section 1.1, Seller’s right, title and interest in and to the following
assets are specifically excluded from the Purchased Assets (collectively, the “Excluded Assets”):

          (a) all cash and cash equivalents;

          (b) customer accounts receivable, gross amounts arising from customer and supplier discounts
and rebates, and other customer- or supplier-related receivables arising prior to the Closing;

          (c) deferred taxes and claims for tax refunds;

          (d) intercompany investments in and loans to and other receivables from Seller Parent and
other entities owned or controlled directly or indirectly, in whole or in part, by Seller Parent;

          (e) assets relating to any Benefit Plans (defined in Section 4.20);

          (f) the field sales handheld equipment listed in Exhibit 1.2(F); and

          (g) any Contracts and other assets that would otherwise constitute Purchased Assets if and to
the extent that Seller is unable after reasonable commercial effort to obtain a required consent or
is otherwise prohibited from transferring its rights in such Purchased Assets.

     1.3. Assumed Obligations.

     As of the Closing, Purchaser shall assume Seller’s obligations and liabilities arising after
the Closing with respect to the Lease, the Equipment Leases, and the Contracts, including but not
limited to any obligations to ship products to Seller’s customers after the Closing Date and the
obligation to accept returns of products from Seller’s customers following the Closing which
obligation shall be represented by the amount reflected on Seller’s books and records as Future
Return Reserve as of the Closing (the “Assumed Obligations”).

 

-3-

     1.4. Excluded Obligations.

     Except for the Assumed Obligations set forth in Section 1.3 above, Buyer shall not assume and
shall in no event be liable for any liabilities, debt or obligations of Seller, whether accrued,
absolute, matured, known or unknown, liquidated or unliquidated, contingent or otherwise (the
“Excluded Obligations”), including without limitation:

     (a) Any liabilities of Seller for federal, provincial, local or foreign Taxes (as
defined in Section 4.8 below);

     (b) Any indebtedness or other obligation to Seller Parent or its affiliates, including
without limitation, loans, advances, tax sharing agreement obligations, and intercompany
accounts;

     (c) Any severance liabilities in favor of the employees of Seller arising prior to the
Closing;

     (d) Any liabilities resulting from, arising out of, relating to, in the nature of, or
caused by any breach of contract, breach of warranty, tort, infringement, violation of law,
or environmental matter;

     (e) Any liabilities resulting from, arising out of, or relating to any Benefit Plans or
Statutory Plans (defined in Section 4.20 below); and

     (f) Any liabilities and obligations relating to the Excluded Assets.

2. Purchase Price and Payments.

     2.1. Purchase Price.

     In consideration for acquisition of the Purchased Assets (the “Purchase Price”), Purchaser
shall pay to Seller, subject to the adjustment thereto set out in Section 2.5, the following: (a)
One Million Dollars US (US$1,000,000.00) plus (b) the Net Book Value of the Purchased Assets as set
forth on Exhibit 2.1. In determining the Net Book Value, the Seller shall update the values set
out on Exhibit 2.1 in accordance with Section 12(b). In determining the Net Book Value of
Inventory as of the Closing at the Closing Date, the parties shall take a physical inventory, in
accordance with the physical inventory procedures set out in Exhibit 3.3, immediately prior to
Closing, and the amount set forth on the Exhibit at the Closing shall be the amount agreed to by
the parties following such physical inventory, as adjusted for receipts and shipments after the
taking of the inventory.

     2.2. Allocation of Purchase Price.

     The Purchase Price shall be allocated in the manner set forth on Exhibit 2.2. The parties
agree to be bound by such allocation for all federal, provincial, and local income tax purposes.

 

-4-

     2.3. Payment and Hold Back.

          (a) Purchase Price Payment. On the Closing Date, Purchaser shall pay to Seller an
amount equal to the Purchase Price minus (i) the book value as shown on the Seller’s accounting
records as of the Closing Date of all Assumed Obligations which pursuant to generally accepted
accounting principles are required to be reflected as liabilities on such accounting records, minus
(ii) the amount required to make immediate payment of the Creditor Claims (as defined in Section
3.6(b)(i)) and minus (iii) the Hold Back (defined in Section 2.3(c) below), in immediately
available funds (the “Closing Payment”). The balance of the Purchase Price, as adjusted, shall be
paid from the Hold Back in accordance with Section 9.3.

          (b) Gross Closing Payment. Seller shall use its best efforts to ensure that, as of
the Closing Date, the aggregate amount of the Creditor Claims (as defined in Section 3.6(b)(i)) to
be paid by Purchaser (the “Aggregate Creditor Claims Amount”) shall not exceed the amount of the
Closing Payment before deducting the Aggregate Creditor Claims Amount (the “Gross Closing
Payment”). If the Aggregate Creditor Claims Amount does exceed the Gross Closing Payment, then the
Seller shall, on Closing, pay to the Purchaser an amount equal to the Aggregate Creditor Claims
Amount minus the Gross Closing Payment for the purpose of paying the Creditor Claims and Purchaser
agrees that it shall use such amount solely to pay Creditor Claims in accordance with Section
3.6(b).

          (c) Hold Back A portion of the Purchase Price in the amount of Seven Hundred and
Fifty Thousand Dollars (US$750,000) (the “Hold Back”) shall be retained by Purchaser pending the
final settlement of all Claims and liabilities of the Business and shall be paid in accordance with
Section 9.7.

     2.4. Adjustments.

     At the Closing, the following shall be adjusted and, to the extent practicable, all such
adjustments shall be computed and paid at the Closing, and to the extent not practicable, as soon
as practicable after the Closing:

          (a) Prepaid Amounts. Purchaser shall pay to the Seller all prepaid amounts paid by
the Seller under the Lease (including, without limitation, rental (including prepaid rent and
security deposits), common area maintenance charges, utilities charges and business taxes) relating
to periods after the Closing Date. Purchaser shall pay to the Seller all other prepaid amounts
which Purchaser elects to acquire or from which Purchaser will realize value following the Closing
Date. All prepaid amounts to be paid to the Seller by Purchaser shall be determined based on the
unamortized portion of the prepayment.

          (b) Transfer Fees; Sales Taxes. Purchaser and Seller shall each pay 50% of all
transfer fees and applicable sales taxes (other than as provided in Section 3.7 and excluding any
portion of such sales taxes that is recoverable or refundable), if any, arising under or on account
of the purchase and sale of the Purchased Assets.

 

-5-

     2.5. Closing.

     The closing of the transaction herein contemplated (the “Closing”) shall be held at the
offices of Seller Parent, on a date specified by Seller and Purchaser, which date shall be no later
than the tenth business day following the satisfaction or waiver of the conditions set forth in
Sections 6 and 7 (other than conditions that by their nature are to be satisfied at the Closing,
but subject to the satisfaction of such conditions), or at such other date and place as may be
mutually agreed by the Parties (the “Closing Date”). At the Closing, the parties will execute and
deliver the closing documents set forth in Sections 6 and 7. If the Closing Date occurs after
September 2, 2008, provided that (i) any delay in Closing beyond September 2, 2008 is not the
result of a default by Purchaser or Merchandisers hereunder, and (ii) all of the closing conditions
are satisfied or waived at the Closing:

          (a) The Closing of the transactions herein contemplated shall be deemed to have occurred,
solely with respect to the benefit of the net profit (loss) generated from the Purchased Assets,
effective as of the opening of business of September 1, 2008 (the “Effective Date”), and the
Purchase Price shall be reduced (increased) by the amount of after tax net profit (loss) realized
by Seller in respect of the Business during the period from the Effective Date to the Closing Date,
which net profit (loss) shall be retained by Seller, and the Closing Payment shall earn interest
for the account of the Seller from the Effective Date to the Closing Date (the “Interim Period”) at
the rate set forth in Section 9.7(c). The net profit (loss) shall be determined in accordance
with GAAP and on a basis consistent with the Financial Statements by the Seller, with the
reasonable input of the Purchaser, in a manner consistent with the Seller’s past practice. In
calculating the after tax earnings of the Business for the Interim Period or, if applicable, the
net loss of the Business for the Interim Period for the purposes of Section 2.5, “net profit or
“net loss” shall mean gross profit from net shipping activity of the Business, less operating
expenses of the Business on a fully absorbed basis (including customary allocations of home office
expenses), but excluding any write downs, account reconciliation adjustments, and other balance
sheet adjustments.

3. Additional Provisions.

     3.1. Employees.

          (a) Purchaser shall offer employment to all of Seller’s employees effective as of the Closing
Date at the same hourly rate of pay or periodic salary; the same vacation, sick leave, holiday
policies; prior service credit for all service with the Seller for purposes of determining
eligibility and vesting for all benefits; a defined contribution retirement plan with the same
employer contribution and employer matching provisions as the Seller’s existing defined
contribution plan, and health, dental and life insurance benefits substantially similar to the
Seller’s existing Benefit Plans.

          (b) Seller shall be responsible for all liabilities including notice of termination,
termination pay, severance pay and other obligations to the employees who do not accept employment
with the Purchaser, whether under contract, common law, statute or otherwise, and Seller and Seller
Parent, jointly and severally, shall indemnify and save the Purchaser harmless in respect of all
such obligations.

 

-6-

          (c) All employees who accept the Purchaser’s offer of employment (the “Transferred Employees”)
shall cease to participate in and accrue benefits under the Seller’s Benefit Plans on the Closing
Date.

          (d) The Purchaser shall have no liability for any Claim Incurred (as defined below) prior to
the Closing Date by the employees in respect of the Benefit Plans, and the Seller shall remain
responsible for all such Claims Incurred.

     3.2. Accounts Receivable.

     All accounts receivable for transactions occurring on or before the Closing Date shall remain
the property of Seller irrespective of any payment for it to Purchaser. If Purchaser receives
payment for any of Seller’s accounts receivable existing as of the Closing Date, Purchaser shall
promptly forward payment directly to Seller. If Seller receives payment for any accounts
receivable for Purchaser transactions after the Closing Date, Seller shall promptly forward payment
directly to Purchaser.

     3.3. Transition Services.

     The parties have agreed to cooperate in transitioning the Business and consummating the sale
as set forth in Exhibit 3.3 (the “Transition Services”), pursuant to which (a) Seller Parent will
provide bookkeeping and IT related services to support Purchaser’s operation of the Business for a
period (the “Transition Period”) ending on the earlier of (i) three (3) days after Purchaser gives
notice of termination and (ii) sixty (60) days after the Closing, for a fee as set forth in such
Exhibit, and (b) Purchaser, at the option of Seller or Seller Parent, will perform pick, pack, ship
and return processing services for Crave Entertainment relating to its Canadian customers at a fee
as set forth in Exhibit 3.3 (HDL-CND’s fully absorbed cost plus 10% (pick, pack and freight)), in
each case, with 30 day payment terms for a period not to exceed six (6) months following the
Closing. Notwithstanding anything in Exhibit 3.3 or this Agreement neither Seller nor Seller
Parent shall be required to hire or otherwise retain any employees to the extent that personnel
voluntarily leave their employment or are terminated for cause, but, during the period commencing
on the Effective Date and terminating upon the expiration of the Transition Period, neither Seller
nor Seller Parent will terminate any personnel employed in providing the Transition Services
without Purchaser’s consent, except for cause.

     3.4. Third Party Consents.

     At no expense to the Purchaser, the Seller will:

          (a) use reasonable efforts to obtain the consent of the landlord under the Lease to the
assignment of the Lease to the Purchaser, such consent to be in the form attached hereto as Exhibit
3.4.

          (b) obtain the consent of Silver Point Finance, LLC under the lending agreement between Seller
and Silver Point Finance, LLC dated April 30, 2007; and

 

-7-

          (c) obtain the consent of General Electric Capital Corporation under the lending agreement
between Seller and General Electric Capital Corporation dated April 30, 2007.

     3.5. Governmental Approvals.

          A. Investment Canada Act Approval

     (a) The following definitions apply to this Agreement:

          (i) “Investment Canada Act” means the Investment Canada Act, R.S.C. c.28 (1st Supp.);
and

          (ii) “Investment Canada Act Approval” means the approval or deemed approval pursuant to
the Investment Canada Act by the appropriate Minister.

          (b) The Purchaser shall use reasonable efforts to obtain Investment Canada Act Approval
as soon as reasonably practicable, and will keep the Seller informed as to the status of its
efforts to obtain such approval.

          (c) The Seller shall furnish to the Purchaser such information and assistance as the
Purchaser may reasonably request in connection with its efforts to obtain Investment Canada
Act Approval.

          B. PST and Other Clearance Certificates. The Seller shall provide on Closing a
clearance certificate pursuant to Section 6 of the Retail Sales Tax Act (Ontario) and if
applicable any similar or corresponding provision under any other tax legislation applicable to
Seller.

     3.6. Bulk Sales Act

          (a) Each of the Seller and the Purchaser shall do, or cause to be done, all such things and
take, or cause to be taken, all such actions as may be required to comply with the Bulk Sales Act
(Ontario) R.S.O. 1990, c B.14 (the “Bulk Sales Act”) and shall provide all such reasonable
assurances as the other Party may reasonably request with respect to the other party’s compliance.
Without limiting the generality of the foregoing, the Seller and the Purchaser shall make such
filings as may be required or provide such further documents or instruments as may be reasonably
desirable to comply with the Bulk Sales Act and effect the purpose of this Agreement and carry out
its provisions.

          (b) Procedures.

          (i) Subject to the Seller’s compliance with Section 2.3(b), if applicable, Purchaser
shall immediately after Closing pay, from the Purchase Price, all claims (in the amounts due
to the applicable Trade Creditor (as defined below) as of the Closing Date) (“Creditor
Claims”) of Seller’s unsecured trade creditors and secured trade creditors (collectively,
the “Trade Creditors”) who are listed on the statement of trade creditors provided to the
Purchaser by the Seller pursuant to the Bulk Sales Act, the form of which statement is
attached hereto as Exhibit 3.6(b)(i), other than such creditors who

 

-8-

have delivered a waiver of immediate payment in the form prescribed under the Bulk
Sales Act. For greater certainty the Purchaser shall have no obligation hereunder to pay
any amounts to any Trade Creditors that is in excess of the amount of the Creditor Claims
listed on the statement of trade creditors.

          (ii) Purchaser shall make the payments contemplated in Section 3.6(b)(i) in accordance
with the procedures set out in Exhibit 3.6(b)(ii).

          (iii) Within five (5) days after the Closing Date, the Purchaser shall file, pursuant
to the Bulk Sales Act, an affidavit setting out the particulars of the sale, which shall,
among other matters include as an exhibit thereto duplicate originals of the statement in
Exhibit 3.6(b)(i) and any waivers of immediate payment provided by Trade Creditors.

     3.7. GST.

     The Purchaser and the Seller shall jointly elect, under subsection 167(l) of Part IX of the
Excise Tax Act (Canada), and any equivalent or corresponding provision under any applicable
provincial or territorial legislation imposing a similar value added or multi-staged tax, that no
tax be payable with respect to the purchase and sale of the Purchased Assets under this Agreement.
The Purchaser and the Seller shall make such election(s) in prescribed form containing prescribed
information and the Purchaser shall file such election(s) in compliance with the requirements of
the applicable legislation.

     3.8. Income Tax Election.

     In accordance with the requirements of the Income Tax Act (Canada), the regulations
thereunder, the administrative practice and policy of the Canada Revenue Agency and any applicable
equivalent or corresponding provincial or territorial legislative, regulatory and administrative
requirements, the Purchaser and the Seller shall make and file, in a timely manner, a joint
election to have the rules in subsection 20(24) of the Income Tax Act (Canada), and any equivalent
or corresponding provision under applicable provisional or territorial tax legislation, apply to
the obligations of the Seller in respect of undertakings which arise from the operation of the
Business, and to which paragraph 12(l)(a) of the Income Tax Act (Canada) applies. The Purchaser
and the Seller acknowledge that the Seller is transferring assets to the Purchaser which have a
value equal to the elected amount as consideration for the assumption by the Purchaser of such
obligations of the Seller.

     3.9. Delay in Closing.

     Provided that the Purchaser is not in default of its obligations hereunder, if the Closing has
not occurred by September 2, 2008, Seller will not ship to its customers any holiday themed product
during the month of September 2008 and Seller will provide Purchaser with reasonable access to the
Seller’s customer orders, including by providing to the Purchaser item level detail stating the
product title of all customer orders shipped during such month or any other reasonable information
that Purchaser requests to ensure that Seller has not shipped, or is not shipping, any holiday
themed products to the Seller’s customers during the month of September 2008. Notwithstanding the
foregoing, Seller may ship the Faith Hill Christmas album to its customers

 

-9-

on the release date for such album, provided that Seller agrees to limit its shipments to no
more than [1,000] units during the month of September 2008.

4. Representations and Warranties of Seller and Seller Parent.

Seller and Seller Parent, jointly and severally, represent and warrant the following:

     4.1. Status of Seller and Seller Parent.

     Seller is an Ontario corporation, duly organized, validly existing, and in good standing under
the laws of the Province of Ontario and is duly qualified as a foreign corporation and in good
standing in each jurisdiction in which the failure to be so qualified would have a material adverse
effect on the Business. Exhibit 4.1 lists each foreign qualification of Seller. Seller Parent is
a Michigan corporation, duly organized, validly existing and in good standing under the laws of
Michigan. Seller Parent indirectly owns all of the issued and outstanding capital stock of Seller.

     4.2. Authority.

     Each of Seller and Seller Parent has the corporate power and authority, and is duly
authorized, to enter into and carry out the transactions contemplated by this Agreement. When
executed, this Agreement will be a legal, valid, and binding obligation of each of Seller and
Seller Parent. The execution and delivery of this Agreement by Seller and Seller Parent and the
consummation of the transactions described herein do not and will not (a) contravene the terms of
Seller’s or Seller Parent’s respective articles of incorporation or bylaws; (b) conflict with or
result in any breach or contravention of, or the creation of any lien under, or require any payment
to be made under (i) any contract, mortgage, indenture or agreement to which Seller or Seller
Parent is a party or affecting Seller or Seller Parent or their respective assets (subject to the
receipt of necessary consents, approvals, procedures and releases described in Sections 3.4 (Third
Party Consents), 3.5 (Governmental Approvals), 3.6 (Bulk Sales Act) and 7.2(a) (lender lien
releases)) or (ii) any order, injunction, writ or decree of any governmental authority or any
arbitral award to which Seller or Seller Parent or their respective property is subject; or (c)
violate any law.

     4.3. Title to Purchased Assets.

     At Closing, Seller will transfer to Purchaser good title to the Purchased Assets, including
the leasehold estates described in the Lease and the rights under the Equipment Leases, subject to
no mortgage, pledge, lien, encumbrance, security interest, or charge, except liens that will be
released upon payment of the Purchase Price as described in Section 7.2(a) and Creditor Claims
that will be released pursuant to the procedures set forth in Section 3.6 (Bulk Sales Act) and for
which the Purchaser will have no liability. The Purchased Assets constitute all the material
assets and rights used in the conduct of the Business, except for the Excluded Assets and rights
which will be provided to Buyer by Seller Parent pursuant to the Transition Services.

 

-10-

     4.4. Litigation.

     There are no actions, suits, or proceedings pending or, to Seller’s knowledge, threatened
against Seller, before any court, administrative agency, or other body which will become a
liability or obligation of Purchaser or Merchandisers; and no judgment, order, writ, injunction,
decree, or other similar command of any court or governmental agency has been entered against or
served upon Seller which will become a liability or obligation of Purchaser or Merchandisers.

     4.5. Insolvency Proceedings.

     Seller is not involved in any proceeding by or against Seller in any court under the
Bankruptcy and Insolvency Act or any other insolvency or debtor’s relief act, whether provincial or
federal, or for the appointment of a trustee, receiver, liquidator, assignee, or other similar
official of Seller or Seller’s property. As of the execution of this agreement, to the knowledge of
Seller, the realizable value of Seller’s assets exceeds its liabilities.

     4.6. No Violation or Breach.

     The performance of this Agreement will not be in violation of any laws, statutes, local
ordinances, state or federal regulations, court or administrative order, or ruling, nor is the
performance of this Agreement in violation of the conditions or restrictions in effect for
financing pursuant to any loan documents, whether any such loan is secured or unsecured (subject to
the receipt of necessary consents, approvals, procedures and releases, and the making of the
payments described in Sections 3.4 (Third Party Consents), 3.5 (Governmental Approvals), 3.6
(Bulk Sales Act) and 7.2(a) (lender lien releases)), or any other agreement to which Seller is a
party or to which either the Purchased Assets is subject.

     4.7. Broker’s or Finder’s Fees.

     No agent, broker, investment banker, person, or firm acting on behalf of Seller or Seller
Parent is or will be entitled to any broker’s or finder’s fees or any other commission or similar
fee directly or indirectly for which the Purchaser or Merchandisers will have any liability in
connection with the sale of the Purchased Assets contemplated hereby.

     4.8. Taxes.

     Except as set out on Exhibit, neither Seller nor Seller Parent has liability for Taxes which
is or could become a lien on any of the Purchased Assets or a liability of Purchaser or
Merchandisers. Each of Seller and Seller Parent has timely filed all Tax Returns with respect to
such Taxes that it was required to file. All such Tax Returns were correct and complete in all
respects and were prepared in substantial compliance with all applicable laws and regulations. For
purposes of this Agreement, “Taxes” means all taxes, surtaxes, duties, levies, imposts, fees,
assessments, withholdings, dues and other charges of any nature, including interest additions to
tax and penalties applicable thereto, imposed or collected by any governmental authority, whether
disputed or not, including Canadian and US federal, provincial, territorial, municipal and local,
foreign and other income, franchise, gross receipts, capital, capital gains, real property,
personal property, withholding, payroll, health, employee health, transfer, goods and services and
other value added, sales, use, consumption, land transfer, ad valorem, excise, customs, anti-

 

-11-

dumping, countervail, net worth, stamp, registration, franchise, payroll, employment,
education, business, school, local improvement, development and occupation taxes, duties, levies,
imposts, fees, assessments and withholdings and Canada and Quebec pension plan contributions,
employment insurance premiums and all other taxes and similar governmental charges of any kind for
which the Seller or Seller Parent may have any liability imposed by any governmental authority and
including any obligation to indemnify or otherwise assume or succeed to the Tax liability of any
other Person, and “Tax Return” includes returns, reports, declarations, elections, notices,
filings, forms, statements and other documents (whether in tangible, electronic or other form) and
including any amendments, schedules, attachments, supplements, appendices and exhibits thereto,
made, prepared, filed or required to be made, prepared or filed by law in respect of Taxes.

          (a) No failure, if any, of the Seller to duly and timely pay all Taxes, including all
installments on account of Taxes for the current year, that are due and payable by it will result
in any lien or encumbrance on the Purchased Assets or become a liability or obligation of Purchaser
or Merchandisers.

          (b) Except as set forth in Exhibit 4.8, there are no proceedings, investigations, audits or
claims pending or threatened against the Seller in respect of any Taxes. There are no matters
under discussion, audit or appeal with any governmental authority relating to Taxes, which will
result in a lien or encumbrance on the Purchased Assets or become a liability or obligation of
Purchaser or Merchandisers.

          (c) The Seller has duly and timely withheld all Taxes, and other amount required by law to be
withheld by it (including taxes and other amounts required to be withheld by it in respect of any
amount paid or credited or deemed to be paid or credited by it to or for the account of or for the
benefit of any person, including any employees, officers, or directors and any non-resident person,
including but not limited to Seller Parent) and has duly and timely remitted to the appropriate
governmental authority such Taxes and other amounts required by law to be remitted by it.

          (d) The Seller has duly and timely collected all amounts on account of any sales or transfer
Taxes, including goods and services, harmonized sales and provincial or territorial sales Taxes,
required by law to be collected by it and has duly and timely remitted to the appropriate
governmental authority any such amounts required by law to be remitted by it.

     4.9. Competition Act

     Seller, together with its affiliates, as such term is defined in the Competition Act, (i) do
not have assets in Canada that exceed CDN$50 million in aggregate value, determined as of such time
and in such manner as is required under the Competition Act and its regulations in connection with
this transaction, and (ii) do not have gross revenues from sales in, from or into Canada,
determined for such annual period and in such manner as is required under the Competition Act and
its regulations in connection with this transaction, that exceed CDN$170 million.

 

-12-

     4.10. Canadian Seller

     Seller is not a non-resident of Canada for the purposes of the Income Tax Act (Canada).

     4.11. Financial Statements.

     Seller and Seller Parent have supplied to Buyer the unaudited balance sheet and income
statement (a) as of and for the fiscal year ended April 30, 2008 (the “Most Recent Fiscal Year
End”), and (b) as of and for each of the months ending May 31, 2008 and June 30, 2008 (which June
statement shall be in draft form), which, in the case of both (a) and (b), include the financial
results of the Business only (collectively (a) and (b), the “Financial Statements”). The Financial
Statements (including the notes thereto) have been prepared in accordance with generally accepted
US accounting principles applied on a consistent basis with prior periods, present fairly the
assets and liabilities of Seller as of the Most Recent Fiscal Year End and the revenues and
expenses for such period, and are consistent with the books and records of Seller.

     4.12. Subsequent Events.

     Since the Most Recent Fiscal Year End, there has not been any material adverse change in the
business, financial condition, operations, or results of operations of Seller or the Business.
Without limiting the generality of the foregoing, since that date:

          (a) Seller has not sold, leased, transferred, or assigned any assets, tangible or intangible,
outside the ordinary course of business;

          (b) Other than the inventory purchases described in Exhibit 3.6(b)(ii), Seller has not
entered into any agreement, contract, lease, or license outside the ordinary course of business;

          (c) Seller has not accelerated, terminated, made material modifications to, or canceled any
agreement, contract, lease, or license involving more than $50,000 to which Seller is a party;

          (d) Seller has not imposed any lien or encumbrance upon any of its assets, tangible or
intangible;

          (e) Seller has not made any capital expenditures outside the ordinary course of business;

          (f) Seller has not granted any license or sublicense of any material rights under or with
respect to any intellectual property;

          (g) Seller has not experienced any material damage, destruction, or loss (whether or not
covered by insurance) to its properties;

          (h) Seller has not entered into any employment contract or collective bargaining agreement,
written or oral, or modified the terms of any existing such contract or agreement;

 

-13-

          (i) Seller has not granted any increase in the base compensation of any of its employees
outside the ordinary course of business and a listing, by employee and amount, of all such
increases within the ordinary course of Business has been provided to Buyer;

          (j) Seller has not made any other material change in employment terms for any of its employees
outside the ordinary course of business;

          (k) Seller has not unreasonably delayed the payment of any liability, including but not
limited to, any supplier payables, and except as contemplated by Section 3.6 and in compliance
with the Bulk Sales Act, has not accelerated the payment of any liability, and has continued to pay
all such liabilities in the ordinary course of business;

          (l) Seller has not granted to any customer any extension of time for the payment of any
accounts receivable; and

          (m) Seller has not made any purchase commitments for merchandise or other products in excess
of the normal, ordinary and usual requirements of the Business or at any price in excess of the
then market price or upon terms and conditions more onerous than those usual and customary for
Seller, or made any change in the Seller’s selling, pricing, advertising or personnel practices
inconsistent with its prior practices.

     4.13. Undisclosed Liabilities.

     To the knowledge of Seller and Seller Parent, Seller has no liability (and there is no basis
for any present or future action, suit, proceeding, hearing, investigation, charge, complaint,
claim or demand against Seller giving rise to any liability), except for (i) liabilities set forth
on the face of the Financial Statements and (ii) liabilities which have arisen after the Most
Recent Fiscal Year End in the ordinary course of business and (iii) liabilities that are not of a
material nature or amount and (iv) liabilities which may arise pursuant to the provision of the
Transition Services and (v) potential liabilities set out in Exhibit 4.8, which liabilities, will
not, in the case of each of (i) — (v), become the liability or obligation of Purchaser or
Merchandisers.

     4.14. Leased Real Property.

     With respect to the Lease:

     (a) the Lease is legal, valid, binding, enforceable, and in full force and effect in
all material respects in accordance with its terms and will be in full force and effect in
all material respects in accordance with its terms immediately following the Closing;

     (b) no party to the Lease is in material breach or default, and, to the knowledge of
the Seller and Seller Parent, no event has occurred which, with notice or lapse of time,
would constitute a material breach or default or permit termination, modification, or
acceleration thereunder;

     (c) no party to the Lease has repudiated any material provision thereof;

 

-14-

     (d) there are no material disputes, oral agreements, or forbearance programs in effect
as to the Lease;

     (e) Seller has not assigned, transferred, conveyed, mortgaged, deeded in trust, or
encumbered any interest in the leasehold; and

     (f) other than to the extent that same would not materially affect the Business or the
premises, to the knowledge of Seller and Seller Parent, all facilities leased or subleased
thereunder have been operated and maintained under the Lease in accordance with applicable
laws, rules, and regulations in all material respects and neither the Seller, nor to the
knowledge of the Seller and Seller Parent the landlord under the Lease, has received any
notice of any violation of applicable law with respect to such facilities or the operation
thereof or any failure on the part of the landlord or the Seller to obtain any required
approvals of governmental authorities (including material licenses and permits) required in
connection with the operation thereof.

     4.15. Tangible Assets.

     The Equipment is free from material defects, has been maintained in accordance with normal
industry practice, and is in good operating condition and repair (subject to normal wear and tear).

     4.16. Inventories.

     Other than (a) the inventory or product belonging to Crave Entertainment held by Seller for
the purposes of performing pick, pack, ship and return processing services for Crave
Entertainment’s Canadian customers and (b) any inventory or product belonging to Zellers that is
held by Seller, Seller is not in possession of any inventory not owned by Seller, including goods
already sold. Inventories now on hand were purchased in the ordinary course of business in
reasonable quantities at a cost not exceeding market prices prevailing at the time of purchase.
All of Seller’s Inventory is clean and saleable in the ordinary course of business, and except as
disclosed on Exhibit 4.16 is returnable for full credit in the ordinary course of business to the
supplier from which such Inventory was acquired.

     4.17. Contracts.

     Other than the agreements required to provide the Transition Services, the Equipment Leases
and the Contracts constitute all of the material contracts, whether written or oral, to which
Seller is a party that are necessary or desirable for the operation of the Business in the manner
in which the Business has been operated by Seller. Seller has provided Buyer with true, correct
and complete copies of all written Equipment Leases and Contracts and written summaries of all
other Equipment Leases and Contracts. Each of the Equipment Leases and the Contracts is legal,
valid, binding, enforceable, and in full force and effect in all material respects; (y) neither
Seller nor, to the knowledge of Seller or Seller Parent, any other party is in material breach or
default, and, to the knowledge of the Seller or Seller Parent, no event has occurred prior to
Closing which with notice or lapse of time would constitute a material breach or default, or permit
termination, modification, or acceleration, under such Equipment Lease or Contract; and (z) neither
Seller

 

-15-

nor, to the knowledge of Seller or Seller Parent, any other party has repudiated any material
provision of such Equipment Lease or Contract.

     4.18. Insurance.

     Seller maintains and has maintained for the preceding three years insurance policies
(including, as applicable, policies providing property, casualty, liability, and workers’
compensation coverage and bond and surety arrangements) appropriate to the size and nature of the
Business. With respect to each such insurance policy, the policy is, or was at the time of its
effective date of coverage, legal, valid, binding, enforceable, and in full force and effect in all
material respects. Seller’s general liability and automobile liability insurance policies carry
deductibles of CDN$150,000 and CDN$250,000 respectively, and such policies are subject to
retrospective adjustments of premium or rating. With the exception of physical damage to leased
motor vehicles, Seller has not elected to self-insure any identified risks for which Seller could
obtain insurance in the ordinary course of business.

     4.19. Employees.

          (a) Exhibit 4.19(a) sets forth a complete list of all current employees of the Seller,
together with their titles, dates of hire and material terms of employment, including current
wages, salaries or hourly rate of pay, and most recent bonus payments paid to each such employee,
the date upon which such wage, salary, rate or bonus became effective and the terms and conditions
of any bonus program for such employee. Exhibit 4.19(a) will be updated not earlier than three (3)
days prior to the Closing Date. Except as disclosed, no employee is on short or long-term
disability leave or receiving benefits pursuant to the Workplace Safety and Insurance Act (Ontario)
or similar worker’s compensation legislation in other provinces.

          (b) Except for those written employment contracts with salaried employees identified in
Schedule 4.19(b), there are no written contracts of employment entered into with any employees or
any oral contracts of employment which require the payment of severance not otherwise required by
law or which cannot be terminated on the giving of reasonable notice in accordance with applicable
law. No employee is entitled to any payment or other entitlement as a result of the transactions
contemplated under this Agreement, including without limitation severance or change of control
payments or entitlements.

          (c) The Business has been and is being operated in full compliance with all material laws
relating to employees, including without limitation employment standards, occupational health and
safety, human rights, labour relations, pay equity, and workplace safety and insurance. There have
been no claims nor, to the knowledge of the Seller, are there any threatened complaints under such
laws against the Seller in respect of the Business which would, if successful, have a material
adverse effect on the Business. To the knowledge of the Seller, nothing has occurred which would
lead to a material claim or complaint against the Seller under any such laws. There are no
outstanding decisions or settlements or pending settlements which place any obligation upon the
Seller to do or refrain from doing any act in connection with the Business. There are no
investigations against the Seller or the Business under any laws relating to employees.

 

-16-

          (d) All current assessments under the Workplace Safety and Insurance Act (Ontario), or similar
legislation in other provinces, in relation to the Business have been paid or accrued by the Seller
and the Business has not been and is not subject to any special or penalty assessment under such
legislation which has not been paid.

          (e) The Seller is not a party, either directly or by operation of law, to any collective
agreement, letters of understanding, letters of intent or other written communication with any
trade union or association which may qualify as a trade union, which would cover any employees or
any dependent contractors of the Business. In this Section 4.19 “dependent contractor” means a
person, whether or not employed under a contract of employment, and whether or not furnishing
tools, vehicles, equipment, machinery, material, or any other thing owned by the dependent
contractor, who performs work or services for another person for compensation or reward on such
terms and conditions that the dependent contractor is in a position of economic dependence upon,
and under an obligation to perform duties for, that person more closely resembling the relationship
of an employee than that of an independent contractor.

          (f) There are no outstanding or, to the knowledge of the Seller, threatened labour board
proceedings of any kind, including any proceedings which could result in certification of a trade
union as bargaining agent for employees or dependent contractors of the Seller in respect of the
Business, and there have not been any such proceedings within the last two years.

          (g) To the knowledge of the Seller, there are no threatened or apparent union organizing
activities involving any employees or dependent contractors used in the Business.

          (h) To the knowledge of the Seller, Seller does not have any serious labour problems that it
reasonably believes will materially affect the value of the Business or lead to an interruption of
the operations at any location.

     4.20. Pension and benefits.

     The following definitions are used throughout this Agreement:

“Benefit Plans” means plans, arrangements, agreements, programs, policies, practices or
undertakings, whether oral or written, formal or informal, funded or unfunded, insured or
uninsured, registered or unregistered, to which the Seller is a party or bound or in which the
employees participate or under which the Seller has, or will have, any liability or contingent
liability, or pursuant to which payments are made, or benefits are provided to, or an entitlement
to payments or benefits may arise with respect to, any of the employees or former employees of the
Business, directors or officers of the Seller, individuals working on contract with the Seller
relating to the Business, or other individuals providing services to the Seller relating to the
Business of a kind normally provided by employees (or any spouses, dependants, survivors or
beneficiaries of any such persons).

“Claims” includes claims, demands, complaints, grievances, actions, applications, suits, causes of
action, orders, charges, indictments, prosecutions, informations or other similar processes,
assessments or reassessments, judgments, debts, liabilities, expenses, costs, damages or losses,

 

-17-

contingent or otherwise, whether liquidated or unliquidated, matured or unmatured, disputed or
undisputed, contractual, legal or equitable, including loss of value, professional fees, including
fees and disbursements of legal counsel on a full indemnity basis, and all costs incurred in
investigating or pursuing any of the foregoing or any proceeding relating to any of the foregoing;

“Incurred” means, in relation to Claims in respect of any Benefit Plan, the date on which the event
giving rise to such claim occurred and, in particular: (i) with respect to a death or dismemberment
claim, is the date of the death or dismemberment; (ii) with respect to a short-term or long-term
disability claim, is the date that the period of short-term or long-term disability commenced;
(iii) with respect to an extended health care claim, including, without limitation, dental and
medical treatments, is the date of the treatment; and (iv) with respect to a prescription drug or
vision care claim, the date that the prescription was filled.

“Multi-Employer Plans” means Benefit Plans to which the Seller is required to contribute pursuant
to a collective agreement or participation agreement and which are not maintained or administered
by the Seller or its affiliates.

“Statutory Plans” means statutory benefit plans which the Seller is required to participate in or
comply with, including the Canada and Quebec Pension Plans and plans administered pursuant to
applicable health tax, workplace safety insurance and employment insurance legislation.

          (a) Exhibit 4.20(a) sets forth a complete list of the Benefit Plans. None of the Benefit
Plans are Multi-Employer Plans.

          (b) Current and complete copies of all written Benefit Plans as amended to date or, where
oral, written summaries of the terms thereof, descriptions of how the Benefit Plans are funded, all
booklets and communications of a general nature provided to employees concerning the Benefit Plans,
all other material documents related to the Benefit Plans, and, without limiting the generality of
the foregoing, all trust agreements and participation agreements related to the Benefit Plans, have
been delivered or made available to the Purchaser.

          (c) Except as disclosed in Exhibit 4.20(c), the Seller has no formal plan and has made no
promise or commitment, whether legally binding or not, to create any additional program which if it
currently existed would constitute a Benefit Plan, or to improve or change the benefits provided
under any existing Benefit Plan.

          (d) Each of the Benefit Plans (and each related trust, insurance contract, or fund) has been
maintained, funded and administered in accordance with its terms and complies in form and in
operation with the applicable laws.

          (e) Seller does not maintain, contribute to or have any obligation to contribute to, or have
any liability or potential liability with respect to any Benefit Plan providing post-retirement or
post-termination medical, health, or life insurance or other welfare-type benefits for directors,
officers or employees of Seller (or any spouse or other dependent thereof).

 

-18-

     4.21. Customers and Suppliers.

     Exhibit 4.21A contains a summary of the terms and conditions of sale for each of the top 8
customers of Seller during the Most Recent Fiscal Year. None of such customers has notified Seller
of any proposed change in such terms and conditions or any reduction in the anticipated level of
business with Seller. To the knowledge of Seller or Seller Parent, none of such customers has
entered into agreements or expressed any intention to enter into agreements with other suppliers
for the goods sold by Seller or expressed any intention not to do business with the Purchaser.
Exhibit 4.21B contains a summary of the terms and conditions of purchase for each of the top 10
suppliers of Seller during the Most Recent Fiscal Year. None of such suppliers has notified Seller
of any material proposed change in such terms and conditions or any reduction in the anticipated
level of business with Seller. To the knowledge of Seller or Seller Parent, none of such suppliers
has expressed any intention not to do business with the Purchaser.

5. Representations and Warranties of Purchaser and Merchandisers.

Purchaser and Merchandisers, jointly and severally, represent and warrant the following:

     5.1. Status of Purchaser.

     Purchaser is Delaware corporation, duly organized, validly existing, and in good standing
under the laws of the State of Delaware. Merchandisers is a Texas limited partnership, duly
organized, validly existing and in good standing under the laws of the State of Texas.

     5.2. Authority.

     Each of Purchaser and Merchandisers has the corporate or partnership power and authority, and
is duly authorized, to enter into and carry out the transactions contemplated by this Agreement.
When executed, this Agreement will be a legal, valid, and binding obligation of each of Purchaser
and Merchandisers.

     5.3. Investment Evaluation.

     Purchaser has sufficient knowledge and expertise to evaluate the merits and risks of the
purchase of the Business.

     5.4. Litigation.

     There are no actions, suits, or proceedings pending or, to Purchaser’s knowledge, threatened
against Purchaser, before any court, administrative agency, or other body; and no judgment, order,
writ, injunction, decree, or other similar command of any court or governmental agency has been
entered against or served upon Purchaser relating to this Agreement and/or the transactions
contemplated by this Agreement.

     5.5. Broker’s or Finder’s Fees.

     No agent, broker, investment banker, person, or firm acting on behalf of Purchaser is or will
be entitled to any broker’s or finder’s fees or any other commission or similar fee directly or

 

-19-

indirectly which will become a liability of Seller or Seller Parent in connection with the
sale of the Purchased Assets contemplated by this Agreement.

     5.6. Competition Act.

     Purchaser, together with its affiliates, as such term is defined in the Competition Act, (i)
do not, prior to the Closing, have assets in Canada, determined as of such time and in such manner
as is required under the Competition Act and its regulations in connection with this transaction,
and (ii) do not have gross revenues from sales in, from or into Canada, determined for such annual
period and in such manner as is required under the Competition Act and its regulations in
connection with this transaction, that exceed US $5,000,000.

     5.7. Goods and Services Tax and Harmonized Sales Tax Registration.

     The Purchaser will, prior to Closing, be duly registered under Subdivision (d) of Division V
of Part IX of the Excise Tax Act (Canada) with respect to the goods and services tax and harmonized
sales tax.

6. Conditions Precedent to Obligations of Purchaser at Closing.

Purchaser’s obligation to close the sale of the Purchased Assets is subject to the satisfaction at
or prior to the Closing of the following conditions:

     6.1. Accuracy of Representations and Warranties.

     The representations and warranties of Seller and Seller Parent contained in this Agreement
shall be true and correct in all material respects with the same effect as if made at and as of the
Closing.

     6.2. Seller’s Performance.

     Seller shall have performed or complied with, in all respects, all of its obligations,
covenants, and agreements under this Agreement and the Purchaser shall have received the
certificate of an authorized officer of Seller confirming such performance and the satisfaction of
the condition set forth in Section 6.1 above.

     6.3. No Proceedings.

     No claim, action, suit, arbitration, investigation or other proceeding shall be pending or
shall have been brought or threatened against any of the parties hereto which (a), if decided
adversely to any such party, may have in the reasonable judgment of Purchaser a material adverse
effect on the Business or the transactions contemplated hereby or (b) seeks to restrain or
questions the validity or legality of the transactions contemplated hereby. No law or court order
shall have been enacted, entered, promulgated or enforced by any governmental body having
jurisdiction over any of the parties hereto, the Purchased Assets or the Business that is in effect
and has the effect of making the purchase and sale of the Purchased Assets illegal or otherwise
prohibiting the consummation of such purchase and sale.

 

-20-

     6.4. Closing Deliveries.

     Purchaser shall have received the following:

     (a) An executed Bill of Sale and Assignment and Assumption in substantially the form
attached hereto as Exhibit 6.4(a).

     (b) The certificate described in Section 6.2 above.

     (c) Such other documents as Purchaser may reasonably request which are not inconsistent
with the provisions of this Agreement.

     (d) The joint election pursuant to Section 167 of the Excise Tax Act filed pursuant to
Section 3.7 of this Agreement.

     (e) A release of liens on the Purchased Assets, including the Inventory and the
Equipment, from all applicable lenders that will be effective on or before the Closing Date.

     (f) Consents and approvals pursuant to Sections 3.4 (Third Party Consents) and 3.5
(Governmental Approvals), including evidence of compliance with section 6 of the Retail
Sales Tax Act (Ontario) and any equivalent or corresponding provision under any other
applicable tax legislation.

     (g) Certified copies of resolutions of the directors and shareholders of Seller and the
directors of Seller Parent authorizing the transaction contemplated herein.

     (h) The updated calculation of Net Book Value as contemplated in Section 12(b).

     (i) The updated employee data described in Section 4.19.

     6.5. Bulk Sales and Retail Sales Tax Compliance

     The Purchaser shall have received evidence reasonably satisfactory to it that, in respect of
the purchase and sale of the Purchased Assets under the Agreement, the Seller has complied with the
requirements of (a) the Bulk Sales Act and any other applicable bulk sales legislation and (b)
section 6 of the Retail Sales Tax Act (Ontario) and any similar or corresponding provision under
any other applicable tax legislation.

     6.6. WSIB Certificate

     The Purchaser shall have received a purchase certificate under the Workplace Safety and
Insurance Act (Ontario) and similar workers compensation legislation in other provinces in respect
of the Seller’s employees.

 

-21-

7. Conditions Precedent to Obligations of Seller at Closing.

Unless waived in writing by Seller, Seller’s obligation to close the sale of the Purchased Assets
is subject to the satisfaction at or prior to the Closing of the following conditions:

     7.1. Accuracy of Representations and Warranties.

     The representations and warranties of Purchaser contained in this Agreement shall be true and
correct in all material respects at and as of the Closing.

     7.2. Closing Deliveries.

     Seller shall have received the following:

     (a) A release of liens on the Purchased Assets, including the Inventory and the
Equipment, from all applicable lenders that will be effective on or before the Closing Date.

     (b) Consents and approvals pursuant to Sections 3.4 (Third Party Consents) and 3.5
(Governmental Approvals) and the consent of Silverpoint and GE Capital.

     (c) The Closing Payment.

     (d) An executed Bill of Sale and Assignment and Assumption in substantially the form
attached hereto as Exhibit 6.4(a).

     (e) The joint election pursuant to Section 167 of the Excise Tax Act filed pursuant to
Section 3.7 of this Agreement.

     (f) Such other documents as Seller may reasonably request which are not inconsistent
with the provisions of this Agreement.

8. Termination.

This Agreement may be terminated at any time prior to the Closing Date (a) by written agreement
signed by both Seller and Purchaser, or (b) by either Seller or Purchaser by written notice to the
other party if the Closing shall not have been consummated by October 1, 2008, unless such date
shall be extended by the mutual written consent of Seller and Purchaser, provided that no party may
give such notice if its breach of this Agreement has precluded the consummation of the Closing.

9. Indemnification.

     9.1. By the Seller Parties.

     To the extent provided in this Section 9, the Seller and the Seller Parent (the “Seller
Parties”), jointly and severally, shall indemnify and hold Purchaser and Merchandisers, and their
respective successors and assigns, and their respective officers, directors, employees,

 

-22-

stockholders, agents, and affiliates (each, an “Indemnified Purchaser Party”) harmless from
and against:

          (a) any liabilities, claims, demands, judgments, losses, costs, damages or expenses whatsoever
(including reasonable attorneys’, consultants’ and other professional fees and disbursements of
every kind, nature and description incurred by such Indemnified Purchaser Party in connection
therewith) (collectively, “Damages”) that such Indemnified Purchaser Party may sustain, suffer or
incur and that result from, arise out of or relate to:

          (i) any inaccuracy of any representation or warranty of the Seller Parties in this
Agreement, the agreements, assignments and other documents delivered in accordance with the
terms or conditions hereof (the “Transaction Documents”), or any certificate or other
writing delivered by or on behalf of any Seller Party in connection herewith or therewith;

          (ii) any non-fulfillment of any covenant or agreement on the part of any Seller Party
set forth in this Agreement or any Transaction Document;

          (iii) any Excluded Obligations;

          (iv) any liability of Seller involving Taxes due and payable by, or imposed with
respect to the Business, the Purchased Assets, or other properties or operations of Seller
for any and all taxable periods ending on or prior to the Closing Date (whether or not such
Taxes have been due and payable) other than the Purchaser’s fifty percent (50%) share of
those transfer fees and taxes referred to in Section 2.4(b);

          (v) other than with respect to any Transferred Employee, any liability arising out of
or related to the actual or constructive termination of any employee by Seller;

          (vi) any liability of Seller involving any Excluded Asset;

          (vii) other than with respect to any Assumed Obligations, any action or inaction prior
to the Closing Date of any of the Seller Parties or of any director, officer, employee,
agent, or representative of the Seller or of any affiliate of Seller; and

          (viii) any liability arising out of or related to the failure to obtain consent to the
assignment of any Contract.

          (b) any and all actions, suits, claims, proceedings, investigations, allegations, demands,
assessments, audits, fines, judgments, costs and other expenses (including reasonable attorneys’
fees and expenses) incident to any of the foregoing or to the enforcement of this Section 9.1.

     9.2. By the Purchaser Parties.

     To the extent provided in this Section 9, the Purchaser and Merchandisers (the “Purchaser
Parties”), jointly and severally, shall indemnify and hold Seller, and its successors

 

-23-

and assigns, and its officers, directors, employees, stockholders, agents, and affiliates
(each, an “Indemnified Seller Party”) harmless from and against:

          (a) any Damages (provided that for the purposes of this Section 9.2, the reference to
Indemnified Purchaser Party in the definition of Damages shall mean the Indemnified Seller Party)
that such Indemnified Seller Party may sustain, suffer or incur and that result from, arise out of
or relate to:

          (i) any inaccuracy of any representation or warranty of the Purchaser Parties in this
Agreement or the Transaction Documents;

          (ii) any non-fulfillment of any covenant or agreement on the part of any Purchaser
Party set forth in this Agreement or any Transaction Document;

          (iii) any liability arising out of or related to the actual or constructive termination
by Purchaser of any Transferred Employee who has accepted employment with Purchaser;

          (iv) any Assumed Obligations during the period post Closing;

          (v) the operation of the Business or with respect to the Purchased Assets during the
period post Closing; and

          (vi) the failure of Purchaser to pay (A) the Creditor Claims, as they may be adjusted
as of the Closing Date, or (B) the Purchaser’s fifty percent (50%) share of those transfer
fees and taxes referred to in Section 2.4(b), in each case, in accordance with this
Agreement,

          (b) any and all actions, suits, claims, proceedings, investigations, allegations, demands,
assessments, audits, fines, judgments, costs and other expenses (including reasonable attorneys’
fees and expenses) incident to any of the foregoing or to the enforcement of this Section 9.2.

     9.3. Procedure for Claims.

          (a) An Indemnified Purchaser Party or Indemnified Seller Party, as the case may be, that
desires to seek indemnification under any part of this Section 9 (the “Indemnified Party”) shall
give notice (a “Claim Notice”) to each party responsible or alleged to be responsible for
indemnification hereunder (an “Indemnitor”) prior to any applicable Expiration Date specified
below. Such notice shall briefly explain the nature of the claim (the “Indemnification Claim”) and
the parties known to be involved, and shall specify the amount thereof or a good faith estimate
thereof. Each Indemnitor to which a Claim Notice is given shall respond to any Indemnified Party
that has given a Claim Notice (a “Claim Response”) within 20 days (the “Response Period”) after the
date that the Claim Notice is given. Any Claim Notice or Claim Response shall be given in
accordance with the notice requirements hereunder, and any Claim Response shall specify whether or
not the Indemnitor giving the Claim Response disputes the claim described in the Claim Notice. A
failure to give timely notice as provided in this Section 9.3 shall not affect the rights or
obligations of any party except and only to the extent

 

-24-

that, as a result of such failure, any party entitled to receive such notice was deprived of
its right to recover any payment under its applicable insurance coverage or was otherwise directly
and materially damaged as a result of such failure.

          (b) If any Indemnitor shall be obligated to indemnify an Indemnified Party hereunder, such
Indemnitor shall pay the amount of the Damages (as determined pursuant to this Section 9.3(b)) to
such Indemnified Party within 30 days of: (i) the Indemnitor and the Indemnified Party agreeing to
the amount of such Damage payable by the Indemnitor; or (ii) a decision, by a governmental
authority from which no appeal lies or in respect of which all appeal rights have been exhausted
and all time periods for appeal have expired without appeals having been taken, that the Indemnitor
is liable for the amount of Damages.

          (c) If there shall be a dispute as to the amount or manner of indemnification under this
Section 9, the Indemnified Party may pursue whatever legal remedies may be available for recovery
of all Damages claimed from any Indemnitor. All amounts to be paid by an Indemnitor pursuant to
this Section 9 shall bear interest at the rate set forth in Section 9.7(c) below from the date
that the Indemnified Party disbursed funds, suffered damages or loss or incurred a loss, liability
or expense in respect of Damages for which the Indemnitor is liable to make payment pursuant to
this Section 9, to the date of payment by the Indemnitor to the Indemnified Party.

     9.4. Claims Period. Any claim for indemnification under this Section 9 shall be made
by giving a Claim Notice under Section 9.3 on or before the applicable “Expiration Date” specified
below in this Section 9.4, or the claim shall be invalid. “Expiration Date” means the first
anniversary date of the Closing with respect to all claims for Damages under Section 9.1(a) or
 9.2(a) except for claims for damages arising as a result of a breach of the representations and
warranties set forth in Sections 4.1, 4.2, 4.3, 4.8, 5.1 and 5.2 as to which the Expiration
Date shall be sixty (60) days after the expiration of the relevant statutory period of limitations
applicable to the underlying claim, after giving effect to any waiver or extension thereof and for
greater certainty in respect of the representations and warranties set forth in Section 4.8, and
any other representation or warranty in this Agreement, relating to Taxes, shall be sixty (60) days
after the relevant governmental authorities shall no longer be entitled to assess or reassess
liability for Taxes against the Seller or the Purchaser for that particular period, having regard,
without limitation, to any waivers given by the Seller or Purchaser in respect of any taxation year
or period..

     9.5. Third Party Claims.

     An Indemnified Party that desires to seek indemnification under any part of this Section 9
with respect to any actions, suits or other administrative or judicial proceedings (each, an
“Action”) that may be instituted by a third party shall give each Indemnitor prompt notice of a
third party’s institution of such Action. After such notice, any Indemnitor may, or if so
requested by such Indemnified Party, any Indemnitor shall, at its own expense participate in such
Action or assume the defense thereof, with counsel reasonably satisfactory to such Indemnified
Party; provided, however, that such Indemnified Party shall have the right to participate at its
own expense in the defense or settlement of such Action; and provided, further, that the Indemnitor
shall not consent to the entry of any judgment or enter into any settlement, except

 

-25-

with the written consent of such Indemnified Party (which consent shall not be unreasonably
withheld). Any failure to give prompt notice under this Section  9.5 shall not bar an Indemnified
Party’s right to claim indemnification under this Section  9, except to the extent that an
Indemnitor shall have been materially harmed by such failure.

     9.6. Supplier/Creditor Claims.

     If any supplier or creditor of Seller makes a claim against Purchaser for amounts regarding
the liability of Seller to such supplier or creditor, Purchaser will give Seller prompt notice of
such supplier or creditor claim, and Purchaser and Seller will cooperate to resolve such claim.

     9.7. Hold Back.

          (a) The Purchaser shall have the right to offset any amount payable by Seller to the Purchaser
as determined pursuant to Section  9.3(b) against the Hold Back.

          (b) The Purchaser shall:

          (i) six (6) months after the Closing Date, pay to Seller the amount of the balance of
the Hold Back exceeding US$250,000 plus interest; and

          (ii) twelve (12) months after the Closing Date, pay to the Seller the amount of the
balance of the Hold Back plus interest,

               provided that, in each case if there are any outstanding unpaid Indemnification Claims at the
time of such required payment, Purchaser shall have the right to retain, in addition to the
remaining permitted amount of the Hold Back held as of such time, funds equal to the aggregate
amount (being the aggregate amounts set out in the applicable Claim Notices) of such outstanding
unpaid Indemnification Claims (plus interest) and shall disburse any excess amounts (plus interest)
withheld promptly following the disposition of such Indemnification Claims. All interest amounts
payable under this Section  9.7(b) shall be calculated at the rate set out in Section  9.7(c).

          (c) Commencing on the Closing Date, the Hold Back shall accrue interest for the account of the
Seller at a rate equal to the three month London Interbank Offered Rate (LIBOR) plus one percent
(1%) in effect on the Closing Date, which interest rate shall be reset each 90 days thereafter
based on the LIBOR announced on such 90th day.

10. Confidentiality.

     The Purchaser Parties acknowledge that, pursuant to either of their inspections of Seller’s
books, records, and other documents and materials in contemplation of the acquisition of the
Purchased Assets, the Purchaser Parties may have become privy to confidential information of Seller
or Seller Parent, and that communication of such confidential information to third parties (whether
or not such communicated information is authorized by Purchaser) could injure Seller’s or Seller
Parent’s continuing business. The Purchaser Parties agree to take reasonable steps to ensure that
such information about Seller or Seller Parent, obtained by either of the Purchaser

 

-26-

Parties, shall remain confidential and shall not be disclosed or revealed to outside sources,
and further agree not to solicit any customers of Seller or Seller Parent disclosed from such
confidential information unless and until the Closing occurs. As used in this Agreement,
“confidential information” includes information ordinarily known only to Seller’s or Seller
Parent’s personnel, and information such as customer lists, supplier lists, trade secrets, channels
of distribution, pricing policy and records, inventory records, and other information normally
understood to be confidential or designated as such by Seller or Seller Parent. Seller and Seller
Parent will maintain the confidentiality of all confidential information relating to the Purchased
Assets and Seller’s Business, except as may be required by law (including but not limited to
disclosure required by securities laws) and as may be required by Seller’s or Seller Parent’s
lenders. This Section  10 shall survive Closing.

11. Notices.

     All notices, requests, demands, and other communications under this Agreement shall be in
writing and shall be deemed to have been duly given if delivered in person or by overnight delivery
service or mailed, first-class postage prepaid, to Seller, at Seller Parent’s address given in the
Preamble to this Agreement, or to Purchaser, at Purchaser’s address given in the Preamble this
Agreement, or to any other address that Purchaser or Seller shall designate in writing. In the
case of Purchaser, a copy of each such notice (which copy shall not constitute notice) shall also
be delivered to Timothy K. Corley, at 2815 Darby Drive, Florence, AL 35630.

12. Exhibits.

     (a) Preliminary Exhibits have been attached to this Agreement as of the date of this
Agreement.

     (b) Seller shall provide an updated Exhibit 2.1 (Net Book Value of Purchased Assets)
not less than three (3) business days prior to the scheduled Closing Date which shall be
updated after the final inventory set out in Section  2.1.

     (c) Seller may provide an updated Exhibit 1.1(e) (Equipment Leases) or Exhibit 1.1(e)
(Contracts) at any time prior to the Closing Date with Purchaser’s consent, which consent
shall not be unreasonably withheld or delayed.

     (d) Any other Exhibit may be added, modified, or deleted upon the mutual agreement of
Seller and Purchaser.

13. Miscellaneous.

     (a) Amendment. This Agreement shall not be amended, altered, or terminated
except by a writing executed by the parties.

     (b) Choice of Law. This Agreement shall be governed by the laws of the
Province of Ontario, and the federal laws of Canada applicable therein, but without regard
to its conflict of laws principles.

 

-27-

     (c) Entire Agreement. This Agreement (together with the documents to be
delivered at the Closing) sets forth the entire understanding of the parties, and shall
supersede any oral or written agreements relating to this subject matter entered into by the
parties before the date of this Agreement.

     (d) Waiver. The waiver by any party of any breach or breaches of any provision
of this Agreement shall not operate as or be construed to be a waiver of any subsequent
breach of any provision of this Agreement. No waiver shall be implied. A waiver shall be
valid only if in writing and signed by the party against whom the waiver is being asserted

     (e) Binding Effect. This Agreement, inclusive of its terms and provisions,
shall survive the Closing and shall be binding on and inure to the benefit of, and be
enforceable by, the respective heirs, legal representatives, successors, and assigns of the
parties.

     (f) Construction of Agreement. Each party and its respective legal counsel has
reviewed and revised this Agreement and has had equal opportunity for input into this
Agreement. Neither party nor their respective legal counsel shall be construed to be the
drafter or primary drafter of this Agreement. In the event of any dispute regarding the
construction of this Agreement or any of its provisions, ambiguities or questions of
interpretation shall not be construed more in favor of one party than the other; rather,
questions of interpretation shall be construed equally as to each party.

     (g) Execution. This Agreement may be executed in any number of counterparts,
each of which shall be deemed to be an original, and all counterparts, when taken together,
will constitute one and the same agreement. The parties agree that signatures on this
Agreement, as well as any other documents to be executed under this Agreement, may be
delivered by facsimile or other electronic means in lieu of an original signature, and the
parties agree to treat facsimile or other electronic signatures as original signatures and
agree to be bound by this provision.

     (h) Currency. Unless otherwise specified, all references to money amounts are
to lawful currency of Canada.

     (i) Headings. Headings of Articles and Sections are inserted for convenience
of reference only and do not affect the construction or interpretation of this Agreement.

     (j) Statutory references. A reference to a statute includes all regulations
and rules made pursuant to such statute and, unless otherwise specified, the provisions of
any statute, regulation or rule which amends, supplements or supersedes any such statute,
regulation or rule.

     (k) Time. Time is of the essence in the performance of the Parties’ respective
obligations.

     (l) Further Assurances. The Parties shall, with reasonable diligence, do all
such things and provide all such reasonable assurances as may be required to

 

-28-

consummate the transactions contemplated by this Agreement, and each Party shall
provide such further documents or instruments required by any other Party as may be
reasonably necessary or desirable to effect the purpose of this Agreement and carry out its
provisions, whether before or after the Closing.

     (m) Knowledge. Any reference to the knowledge of a party means:

          (i) with respect to the Seller or Seller Parent, to the best of the knowledge,
information and belief of Ned Talmey, Rozanne Kokko and Albert Koch after reasonable
investigation, and

          (ii) with respect to the Purchaser or Merchandisers, to the best of the knowledge,
information and belief of Bill Lardie, Chuck Taylor and Jay Maier, after reasonable
investigation.

[Signature Page Follows]

 

-29-

     The parties have executed this Agreement to be effective as of the Effective Date first set
forth above:

	 	 	 	 	 	 
	SELLER PARENT: 

Handleman Company 

 	 	SELLER:

Handleman Company of Canada Limited

 
	By:  	 	 	By:  	 
	 
	Its: 	 	Its: 	 

	 
	 
	MERCHANDISERS: 

Anderson Merchandisers, L.P.

By: Ander-Merch of Texas, Inc.

       General Partner

 	 	PURCHASER:

Anderson Merchandisers-Canada, Inc.

 
	By:  	 	 	By:  	 
	 
	Its: 	 	Its: 	 

 

 

	 	 	 	 	 

EXHIBITS

to

Asset Purchase Agreement

	 	 	 
	Exhibit 1.1(c)
	 	Equipment Leases
	Exhibit 1.1(e)
	 	Contracts
	Exhibit 1.2(F)
	 	List of Excluded Field Sales Equipment
	Exhibit 2.1
	 	Net Book Value of Purchased Assets
	Exhibit 2.2
	 	Purchase Price Allocation
	Exhibit 3.3
	 	Transition Services
	Exhibit 3.4
	 	Form of Consent to Assignment of the Lease
	Exhibit 3.6(b)(i)
	 	Form of Statement as to Seller’s Creditors
	Exhibit 3.6(b)(ii)
	 	Procedure for Payment of Creditor Claims
	Exhibit 4.1
	 	List of Foreign Jurisdictions
	Exhibit 4.8
	 	Tax Matters
	Exhibit 4.16
	 	Inventory Not Returnable for Full Credit
	Exhibit 4.19(a)
	 	List of Seller Employees
	Exhibit 4.19(b)
	 	List of Certain Employee Contracts
	Exhibit 4.20(a)
	 	List of Benefit Plans
	Exhibit 4.20(c)
	 	Changes to Benefit Plans
	Exhibit 4.21A
	 	Summary of Terms and Conditions of Sale for Top 10 Customers
	Exhibit 4.21B
	 	Summary of Terms and Conditions of Purchase for Top 10 Suppliers
	Exhibit 6.4(a)
	 	Form of Bill of Sale and Assignment and Assumption

 

 

EXHIBIT 1.1(C)

Equipment Leases

	1.	 	PHH VEHICLE AGREEMENT

	 	a.	 	PHH Maintenance Fuel Agreement
	 
	 	b.	 	PHH Lease

	2.	 	Document Management Solutions: Month to month agreement for 2 Konica Minolta bizhub
600’s
	 
	3.	 	SA Cole: Month to month lease for:

	 	a.	 	Raymond F45L Lift Truck
	 
	 	b.	 	Raymond 112TM-FRE60L Lift Truck

 

 

EXHIBIT 1.1(E)

List of Contracts:

Amazon.ca

Apple iPod

Hasbro

Learning Horizons

Maurice

Regent Sports

Wal-Mart Canada Corp.

Zellers — Music

Zellers — Picture Frames Department — Merchandising Services

Zellers — Book & Balloon Service

 

 

EXHIBIT 1.2(f)

List of Excluded Field Sales Equipment

See attached.

 

 

EXHIBIT 2.1

Net Book Value of Purchased Assets

See attached. This Exhibit will be updated prior to Closing.

 

 

EXHIBIT 2.2

Purchase Price Allocation

See attached.

 

 

EXHIBIT 3.3

Transition Services

See attached

 

 

EXHIBIT 3.4

Form of Consent to Assignment of the Lease

See attached

 

 

EXHIBIT 3.6(b)(i)

FORM 1

STATEMENT AS TO SELLER’S CREDITORS

Bulk Sales Act

(Section 4 (1))

Statement showing names and addresses of all unsecured trade creditors and secured trade creditors
of Handleman Company of Canada Limited of the town of Richmond Hill, in the province of Ontario and
the amount of the indebtedness or liability due, owing, payable or accruing due or to become due by
the seller to each of them.

UNSECURED TRADE CREDITORS

	 	 	 	 	 
	Name of Creditor	 	Address	 	Amount

SECURED TRADE CREDITORS

	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	Due or becoming due
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	on the date fixed
	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	 	for the completion
	Name of Creditor	 	Address	 	Amount	 	Nature of Security	 	of the sale

AFFIDAVIT

     I,<name>, of the <town/city etc.> of <municipality>, in the province of Ontario,
make oath (or affirmation) and say:

1. That the foregoing statement is a true and correct statement

	 	(a)	 	of the names and addresses of all the unsecured trade creditors of the said
Handleman Company of Canada Limited and of the amount of the indebtedness or liability
due, owing, payable or accruing due or to become due and payable by the said Handleman
Company of Canada Limited to each of the said unsecured trade creditors; and
	 
	 	(b)	 	of the names and addresses of all the secured trade creditors of the said
Handleman Company of Canada Limited and of the amount of the indebtedness

 

 

	 	 	 	or liability due, owing, payable or accruing due or to become due and payable by the
said Handleman Company of Canada Limited to each of the said secured trade
creditors, the nature of their security, and whether they are or in the event of
sale will become due and payable on the date fixed for the completion of the sale.

(and, if the seller is a corporation)

2. That I am <insert title/office> of the Corporation, and have personal knowledge of the
facts herein deposed to.

	 	 	 
	SWORN BEFORE ME at the of <*>, in 
	) 	 
	the Province of Ontario, this <*> day of 
	) 	 
	<*>, 2008. 
	) 	 
	
	) 	 
	
	) 	 
	 	) 	 
	Commissioner for taking affidavits

	) 	<insert name of affiant>
	
	) 	 

 

 

EXHIBIT 3.6(b)(ii)

Procedure for Payment of Creditor Claims

Note: The following process assumes that the Investment Canada Act Approval is obtained August 15,
2008 and the Closing date shall be September 2, 2008.

	 	 	 	 	 
	Action	 	Items	 	 
	 
	 	 	 	 
	1)
	 	Mail clearing cheques to all of the Seller’s vendors of product (“Vendors”)	 	23-Jul-08
	 
	 	 	 	 
	2)
	 	Sign this Agreement	 	25-Jul-08
	 
	 	 	 	 
	3)
	 	Send notice via mail to all Trade Creditors (including product, non-product) with activity over the last 18 months establishing August 15, 2008 as the “deadline” for claims to be raised.	 	25-Jul-08
	 
	 	 	 	 
	4)
	 	Stop all inventory returns to Vendors	 	1-Aug-08
	 
	 	 	 	 
	5)
	 	Obtain final statements from Vendors effective as of August 1, 2008.	 	5-Aug-08
	 
	 	 	 	 
	6)
	 	Reconcile and settle with all Vendors through August 1, 2008.  Seller will provide Purchaser with copies of the August 1, 2008 settlement statements signed by the applicable Vendor	 	15-Aug-08
	 
	 	 	 	 
	7)
	 	Investment Canada Act Approval granted	 	15-Aug-08
	 
	 	 	 	 
	8)
	 	Suspend purchases from all Vendors other than (Dep, Direct source, Archambault, EMI, Madacy, Sony, Koch, UMGD, Warner Music (the “Top Majors”)	 	15-Aug-08
	 
	 	 	 	 
	9)
	 	Purchase September 2 “New Releases” from the applicable Vendors (September 9 titles to be received after the Closing Date)	 	18-Aug-08
	 
	 	 	 	 
	10)
	 	Suspend all purchases of inventory through the Closing Date	 	22-Aug-08
	 
	 	 	 	 
	11)
	 	Require employee expense reports to be submitted for period through August 30, 2008	 	22-Aug-08
	 
	 	 	 	 
	12)
	 	Reconcile and settle all applicable Vendor claims	 	27-Aug-08
	 
	 	 	 	 
	13)
	 	Prepare draft statement of trade
creditors and related affidavit in the form set out in Exhibit
3.6(b)(i) (the “Bulk Sales Statement”)	 	28-Aug-08
	 
	 	*   Product Vendor amounts will be based upon mutually agreed upon settlement statements
	 	 
	 
	 	*   non-product vendor amounts will be scheduled based upon Seller’s books and records
	 	 
	 
	 	*   Employee expenses, payroll and vacation will be scheduled as per the Seller’s books and records
	 	 
	 
	 	 	 	 
	14)
	 	Deliver to Purchaser the Bulk Sales Statement as well as settlement statements from all Vendors.	 	2-Sept-08
	 
	 	 	 	 
	15)
	 	Purchaser and Seller will jointly administer and Seller will pay all Creditor Claims immediately on Closing and no later than 3 days after the Closing Date	 	5-Sept-08
	 
	 	*   Purchaser will initiate wires for all Creditor Claims over $25K
	 	 
	 
	 	*   Purchaser will issue cashier cheques for all Creditor Claims up to and including $25K
	 	 
	 
	 	*   Seller will have a designated person on site at Purchaser’s to validate payment transactions
	 	 
	 
	 	*   Purchaser will initiate a special payroll run at Closing to pay employees by September 5 for accrued wages and vacation through the Closing Date. Seller will obtain from ADP a document confirming that employee withholdings are funded
	 	 

 

 

	 	 	 	 	 
	Action	 	Items	 	 
	16)
	 	Purchaser files its affidavit containing the Bulk Sales Statement and other statutorily required documents pursuant to the Bulk Sales Act with the applicable Canadian court	 	No later than 
8-Sept-08

 

 

EXHIBIT 4.1

List of Foreign Jurisdictions

The Seller has Canadian extra-provincial registrations in the following jurisdictions:

	 	 	 
	Alberta

	 	Reg. No: 2113312462

Reg. Date: Jun 19, 2007

Agent: Fasken Martineau DuMoulin LLP 
Alberta
	 
	 	 
	British Columbia

	 	Reg. No: A0071832

Reg. Date: Jul 18, 2007

Agent: Fasken Martineau DuMoulin LLP 
Vancouver
	 
	 	 
	Manitoba

	 	Reg. No: 5513627

Reg. Date: Jun 19, 2007

Agent: Bruce S. Thompson
	 
	 	 
	New Brunswick

	 	Reg. No: 632595

Reg. Date: Jun 22, 2007

Return Resp: FMD

Agent: Clark Drummie (Saint John)
	 
	 	 
	Quebec

	 	Reg. No: 1164566797

Reg. Date: Jul 18, 2007

Agent: None
	 
	 	 
	Saskatchewan

	 	Reg. No: 101104467

Reg. Date: Jun 20, 2007

Agent: MacPherson, Leslie & Tyerman LLP -
 John A. Dipple,

Aaron D. Runge and Donald 
K.

 

 

EXHIBIT 4.8

Tax Matters

The Seller has received a notice of a proposed reassessment from the Ontario Ministry of Revenue
dated July 7, 2008 regarding a proposed Corporate Minimum Tax Reassessment of the Seller’s
predecessor company, by amalgamation, Handleman Ontario Limited for the taxation periods ended
January 9, 2002, April 27, 2002, May 3, 2003, May 1, 2004 and April 30, 2005 respecting interest
income from Specialty Debt.

 

 

EXHIBIT 4.16

Inventory Not Returnable for Full Credit

The Inventory not returnable for full credit in the ordinary course of business to the supplier
from which it was acquired is set out in the attached document.

 

 

EXHIBIT 4.19(A)

List of Seller Employees

See attached list of Seller employees.

 

 

EXHIBIT 4.19(B)

List of Certain Employee Contracts

There are no written employee contracts and no employee contracts which require the payment of
severance not otherwise required by law or which cannot be terminated on the giving of reasonable
notice in accordance with applicable law.

 

 

EXHIBIT 4.20(A)

1. List of Benefit Plans

Manulife — Medical, Short Term Disability, Vision

Alberta — Medical

British Columbia — Medical

Cigna — Dental

Minnesota Life — Life Insurance

Unum — Long Term Disability

Desjardin — New Canadian Retirement Plan

2. List of Incentive Plans

Annual Management Incentive Plan (see attached)

Key Employee Plan (see attached)

 

 

EXHIBIT 4.20(C)

Changes to Benefit Plans

1. Seller has formally planned, or has promised or committed to create the following additional
benefit plans:

None

2. Seller has formally planned, or has promised or committed to make the following approvals or
changes to the benefits provided under the following existing Benefit Plans:

	 	 	 
	Benefit Plan	 	Approval/Change
	None

	 	None

 

 

EXHIBIT 4.21A

Summary of Terms and Conditions of

Sale for Top 8 Customers

See attached

 

 

EXHIBIT 4.21B

Summary of Terms and Conditions of

Purchase for Top 10 Suppliers

See attached

 

 

EXHIBIT 6.4(A)

Form of Bill of Sale and

Assignment and Assumption

Bill of Sale and Assignment and Assumption

     Subject to and in accordance with the terms and conditions of the Asset Purchase Agreement
dated as of July ___, 2008 (the “Purchase Agreement”) by and between Handleman Company of Canada
Limited (“Seller”), Handleman Company, Andersen Merchandisers-Canada, Inc. (“Purchaser”) and
Anderson Merchandisers, L.P., Seller hereby transfers and assigns to Purchaser, all of Seller’s
right, title and interest in and to the Purchased Assets.

As set forth in the Purchase Agreement, the Purchased Assets, including the
Inventory and Equipment, is sold and transferred in an “as is” condition and on a
“where is” basis, without any warranty or condition of merchantable quality or
fitness for a particular purpose or any other warranty, guarantee, representation or
condition, express or implied, or arising by statute or otherwise in law or in
equity or from a course of dealing or usage of trade, except as otherwise expressly
set forth in the Purchase Agreement.

     Capitalized terms not otherwise defined herein shall have the meanings set forth in the
Purchase Agreement unless the context requires otherwise.

     IN WITNESS WHEREOF, Seller has caused this Bill of Sale and Assignment to be duly executed to
be effective upon payment of the applicable portion of the Purchase Price as set forth above.

	 	 	 	 	 
	 	SELLER:

Handleman Company of Canada Limited

 	 
	 	By:  	 	 
	 	 	Its:EX-10.2

Exhibit 10.2

EXECUTION COPY

NINTH AMENDMENT TO CREDIT AND GUARANTY AGREEMENT

          NINTH AMENDMENT TO CREDIT AND GUARANTY AGREEMENT, dated as of July 24, 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:

“‘Canadian Purchase Agreement’ means the Asset Purchase Agreement,
dated as of July 24, 2008, by and between Canadian OpCo, 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 and Guaranty
Agreement, dated as of July 24, 2008, by and among Credit Parties,
Lenders and Agents.”

“‘Ninth Amendment Effective Date’ has the meaning ascribed to the
term ‘Amendment Effective Date’ in the Ninth Amendment.”

               (b) Section 1.1 of the Credit Agreement is hereby 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
Insurance/Condemnation Proceeds which are subject to Section
2.13(b)).”

“‘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 and the Canadian Purchase Agreement and all documents
executed or delivered in connection with any of the foregoing.”

               (c) Section 1.1 of the Credit Agreement is hereby amended by amending and restating clause
(iv) of the definition of the term “Indebtedness” contained therein to read in its entirety as
follows:

“(iv) any obligation owed 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;”

               (d) Section 1.1 of the Credit Agreement is hereby 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 2.14(b), shall be applied to the Obligations (after payment of any
Working Capital Obligations then outstanding) as follows (A) first,
to the Tranche B Term Loans until paid in full; and (B) second, to
the

-2-

 

Revolving Loans until paid in full (it being understood that the
Revolving Commitment shall be permanently reduced by the amount of
any such prepayment).”

               (e) Section 2.13(l) of the Credit Agreement is hereby amended and restated to read in its
entirety as follows:

(l) 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, the Borrowers shall prepay the Loans in an
aggregate amount equal to 100% of such proceeds (after payment of
any Working Capital Obligations then outstanding) as follows: (i)
first, to the Tranche B Term Loans until paid in full; and (ii)
second, to the Revolving Loans, until paid in full (it being
understood that the Revolving Commitment shall be permanently
reduced by the amount of any such prepayment); provided that
the amount of any mandatory payment required to be made under this
Section 2.13(l) shall be reduced, on a dollar-for-dollar basis, by
the amount of any corresponding mandatory prepayment made under the
Working Capital Agreement;

               (f) Section 6.25 of the Credit Agreement is hereby amended and restated to read in its
entirety as follows:

“6.25 Delivery of Amendment. By not later than August 1, 2008, the
Credit Parties shall not fail to execute and deliver to Agents an
amendment to this Agreement in form and substance satisfactory to
Agents.”

          3. Consent. (a) Credit Parties have advised Agents and Lenders that Canadian OpCo 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 OpCo’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 Credit Document, the Agents and the Lenders
hereby consent to the sale of the Purchased Assets 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 Administrative Agent for application to the Obligations (after payment of any Working
Capital Obligations then outstanding) as follows: (A) first, to the Tranche B Term Loans until
paid in full; and (B) second, to the Revolving Loans, until paid in full (it being understood that the Revolving Commitment shall be
permanently reduced by the amount of any such prepayment); provided, that the amount of any
mandatory payment required to be made under this clause (ii) shall be reduced, on a
dollar-for-dollar basis, by the amount of

-3-

 

any corresponding mandatory prepayment made under the
Working Capital Agreement, (iii) the Borrowers pay to the Administrative Agent all accrued interest
payable in respect of the amount prepaid pursuant to clause (ii) above (it being understood that
the Make-Whole Amount 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 Credit Agreement
and all other Credit Documents, (B) be secured by the Collateral, (C) constitute a portion of the
Obligations owing by the Credit Parties to Agents and 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 the
Agents 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,
(vi) the Agents shall have received, in form and substance reasonably satisfactory to the Agents,
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) the Agents shall have received a Pledge Amendment to the
Canadian Security Agreement, accompanied by 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 the Agents;

               (c) The Collateral 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 (ii) a waiver in the form attached hereto as Exhibit B (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 Credit 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 Credit Document.

          4. Waiver. (a) The Company, in its capacity as Borrower Representative, has advised
the Agents 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, each of the Agents and the Lenders hereby waives each Specified Event of Default that occurred prior to
the date hereof.

-4-

 

               (b) 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
Credit 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:

               (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.

               (c) Administrative Agent shall have received a copy of an amendment (or similar
agreement), in form and substance reasonably satisfactory to Agents, duly executed by Credit
Parties, Working Capital Agent, and Working Capital Lenders amending and waiving the
corresponding provisions of the Working Capital Agreement.

          6. 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,

-5-

 

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.

               (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 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, (c) the
execution and delivery of this Amendment does not limit any other action that the Administrative
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 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,

-6-

 

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 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.

[remainder of this page intentionally left blank]

-7-

 

          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:  	 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	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:  	 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	SVG DISTRIBUTION, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 
	 
	 	CRAVE ENTERTAINMENT, INC.

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	ADMINISTRATIVE AGENT AND COLLATERAL AGENT:

SILVER POINT FINANCE, LLC,

as Administrative Agent and Collateral Agent

 	 
	 	By:  	
 	 
	 	 	Name:  	 	 
	 	 	Title:  	 	 

 

 

	 	 	 	 	 

	 	 	 	 	 
	 	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:  	 	 

 

 

	 	 	 	 	 

EXHIBIT A TO NINTH AMENDMENT

Silver Point Finance, LLC

Two Greenwich Plaza, First Floor

Greenwich, CT 06830

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 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 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 “Guarantors” (such subsidiaries, together with Holdings, are referred to
individually as a “Guarantor” and collectively, jointly and severally, as
“Guarantors”, and the Guarantors, together with 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 Silver Point Finance, LLC, 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”). The Collateral 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”). The Collateral
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
between Seller, Holdings, Purchaser, and Anderson Merchandisers, L.P., as in effect on the date
hereof). As a condition to such proposed sale, the Collateral Agent is required to release all of
its liens on such Purchased Assets.

 

 

          1. Release of Security Interest. Effective upon receipt by the Administrative Agent
of the payment set forth in Section 2 hereof, the Collateral 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 the
Collateral 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 other person or entity to the Agents and the Lenders, or
any duties, obligations or responsibilities of the Credit Parties or any other person or entity to
the Agents and the Lenders.

     2. Effectiveness of Release. The release, termination and discharge of the Collateral
Agent’s security interests in and liens on the Purchased Assets pursuant to Section 1 hereof shall
be effective, without further action by the Collateral Agent, upon the Administrative 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. The Collateral 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
Administrative Agent, execute and/or deliver such instruments and other writings as may be
necessary to effect or evidence the termination of the liens of the Collateral Agent on the
Purchased Assets, but without representation, warranty or recourse to the Agents 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,

SILVER POINT FINANCE, LLC, as Collateral Agent and on

 behalf of the Lenders

 	 
	 	By:  	
 	 
	 	 	Name: 	 
	 	 	Title: 	 

 

 

	 	 	 	 	 

Schedule I

Bank Account Details

Citibank, NA

ABA # 021000089

A/C Name: Silver Point Finance, LLC

A/C # 48680439

RE: Handleman / Sweep Payment

 

 

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:

 

 

ANNEX A TO NINTH AMENDMENT

PURCHASE AGREEMENT

See attached.

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00145-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00145-of-00352.parquet"}]]