Section 1. Registrant’s Business and Operations
Item 1.01 Entry into a Material Agreement
Defined terms not defined herein are defined in the Asset Purchase Agreement
(“APA”) between Handleman Company of Canada Limited (“HDL-Canada”) and Handleman
Company (“Seller-Parent”)(collectively “Seller”) and Anderson
Merchandisers-Canada, Inc. (“Anderson-Canada”)(“Purchase”) and Anderson
Merchandisers, L.P.(“Purchaser-Parent”, “Merchandisers”)(collectively “Anderson”)
dated July 24, 2008.
On
September 2, 2008, Seller closed the transaction as set forth in the APA with
Anderson pursuant to which HDL-Canada sold Anderson-Canada substantially all of
its assets used in the Canadian business. The assets include: all merchandise
inventory; the real property leased pursuant to the lease for HDL-Canada
distribution center, including rights to leasehold improvements; 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, owned by Seller or leased pursuant
to the equipment leases (including the employee fleet vehicle leases); retail
store display fixtures, whether located in stores or in storage; customer
contracts, supply contracts and other contracts relating to the Canadian
business; all telephone numbers, post office boxes, customer records, vendor
records, such warranties on the equipment as exist at the closing date, all
licenses, permits and government authorizations necessary or desirable for the
conduct of the Canadian business to the extent the same are transferable and
Seller’s universal product code. The assets sold did not include
trade accounts receivable.
Anderson-Canada retained Handleman’s Canadian workforce of approximately 230
employees. The parties also agreed that, from and after the Closing Date, as
defined below, the HDL-Canada employees who transfer to Anderson-Canada shall be
entitled to use and obtain their unsused and accrued vacation and vacation pay
entitlements under Seller’s vacation arrangements. The parties agreed that the
Seller’s defined contribution pension plan shall be deemed an Assumed Obligation
under the APA.
Anderson
paid HDL Canada CDN $1,0620,600 plus CDN $14,396,803, being the
net book value of the purchased assets. Pursuant to the agreement of the parties,
Anderson reduced the gross proceeds due to Handleman of CDN $15,396,803 by
the following amounts: CDN $1,862,108, of liabilities assumed; CDN$9,655,799
of trade accounts payble that were disbursed to HDL-
Canada’s vendors in compliance with the Province of
Ontario’s Bulk Sales Act; CDN$796,950 holdback in connection
with Handleman’s representations and warranties, which will be
released to Handleman in stages over the next 12 months; and
CDN$124,000 that was withheld by Handleman’s counsel to assure
payment of the Ratail Sales Tax for the province of Ontario. The total net
proceeds of CDN$3,020,545 were received by Handleman.
In connection with the closing of the Canadian transaction, Anderson also
remitted to Handleman US$4,000,000 pursuant to the Asset Purchase Agreement
entered into between Handleman Company and Anderson Merchandising, L.P. that
required Anderson to pay Handleman US$4,000,000 if Handleman Company identified
and sold or transitioned to Anderson any other Handleman business that would add
value to the U.S. music transaction.
(Also, see Exhibit 99.1, Handleman Company Press Release dated September 2, 2008).