EXHIBIT 10(p)

 

FORM OF

PERFORMANCE SHARE GRANT AGREEMENT

 

Dated:            , 200X

 

To: «FirstName» «LastName»

 

Pursuant to Handleman Company’s 2001 Stock Option and Incentive Plan (the
“Plan”), Handleman Company (the “Corporation”) hereby grants you the right to
receive shares (“shares”) of the Corporation’s common stock upon the terms of
this Agreement and the Plan, which Plan, as it may be amended from time to time,
is made a part of and incorporated by reference into this Agreement and is
available upon request.

 

  1. Your right to receive shares, and the number of shares you may receive,
under this Agreement shall be contingent upon achievement of the following
performance goals:

 

  (i) If Free Cash Flow (defined below) for the Performance Period (defined
below) is less than the XXth percentile of Free Cash Flow for the Peer Group
(defined below), you shall not be entitled to receive any shares under this
Agreement.

 

  (ii) If Free Cash Flow for the Performance Period is equal to or greater than
the XXth percentile, but less than the XXth percentile of Free Cash Flow for the
Peer Group, the number of shares you may receive under this Agreement shall
equal the sum of (i) fifty percent (50%) plus (ii) the product of 50% multiplied
by a percentage determined based upon where the Company’s actual Free Cash Flow
performance is within the range between the XXth percentile and the XXth
percentile of Free Cash Flow for the Peer Group, calculated linearly, multiplied
by the Target number of shares (see Exhibit 1).

 

  (iii) If Free Cash Flow for the Performance Period is equal to or greater than
the XXth percentile, but less than the XXth percentile of Free Cash Flow for the
Peer Group, the number of shares you may receive under this Agreement shall
equal the sum of (i) one hundred percent (100%) plus (ii) the product of 50%
multiplied by a percentage determined based upon where the Company’s actual Free
Cash Flow performance is within the range between the XXth percentile and XXth
percentile of Free Cash Flow for the Peer Group, calculated linearly, multiplied
by the Target number of shares (see Exhibit 1).

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  (iv) If Free Cash Flow for the Performance Period is equal to or greater than
XXth percentile of Free Cash Flow for the Peer Group, the number of shares you
may receive under this Agreement shall equal one hundred fifty percent (150%) of
the Target Number.

 

For the purposes of this Agreement Free Cash Flow is defined as:

 

Cash Flow from Operations minus Capital Expenditures plus Gains/ (minus losses)
from disposition of Property & Equipment

Sales

 

Performance Period – The performance period for this Agreement shall be the
three fiscal year period running from             , 200X to             , 200X.

 

Peer Group – The peer group is made up of 25 companies listed on Exhibit 2.

 

Handleman Company Free Cash Flow will be compared to Peer Group Free Cash Flow,
with performance levels at the XXth , XXth and XXth percentiles within the Peer
Group representing Threshold, Target and Maximum, respectively. The Target
Number of shares applicable to this Agreement shall be «M 2004 Shares» shares.

 

  2. Notwithstanding the foregoing, unless otherwise determined by the Committee
(as defined in the Plan), you shall not be entitled to receive any shares under
this Agreement unless you remain in the employ of the Corporation or a
Subsidiary (as defined in the Plan) for the entire duration of the Performance
Period.

 

  3. Unless otherwise determined by the Committee in accordance with the Plan,
you shall not have any right to receive any shares under this Agreement until
after (i) release by the Corporation of its audited consolidated financial
statements for the last fiscal year of the Performance Period, and (ii)
certification by the Committee that a performance goal set forth in Paragraph 1
of this Agreement has been achieved. Your right to receive shares under this
Agreement is further conditioned upon your providing to the Corporation the
representation required by Paragraph 19 of the Plan, if the shares have not been
registered under an effective registration statement filed with the Securities
and Exchange Commission pursuant to the Securities Act of 1933.

 

  4. Shares which you are entitled to receive under this Agreement shall be
issued to you without payment of any consideration by you. You shall have no
rights or privileges of a shareholder of the Corporation in respect of shares
issuable to you under this Agreement unless and until certificates representing
such shares shall have been issued.

 

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  5. In the discretion of the Committee and subject to the terms of the Plan, in
lieu of issuing all or a portion of the shares you are entitled to receive
pursuant to this Agreement, the Corporation may pay you cash in an amount based
upon the then fair market value of the shares.

 

  6. Nothing contained in this Agreement or in the Plan, nor any action taken by
the Committee, shall confer upon you any right with respect to continuation of
your employment by the Corporation or any Subsidiary, nor interfere in any way
with the right of the Corporation or a Subsidiary to terminate your employment
at any time, and your employment is and shall remain employment at will, unless
otherwise provided pursuant to a written employment agreement between you and
the Corporation or a Subsidiary.

 

  7. If, upon or as a result of your receipt of shares (or cash in lieu of
shares) under this Agreement, there shall be payable by the Corporation or a
Subsidiary any amount for income or employment tax withholding, you will
reimburse the Corporation or Subsidiary for such tax withholding by means of
paying such amount to the Corporation or by such other means as may be permitted
by the Committee in accordance with the Plan.

 

  8. Neither this Agreement, nor any rights under this Agreement, may be
transferred by you otherwise than by will or by the laws of descent and
distribution.

 

  9. The Committee shall have the right to resolve all questions which may arise
in connection with this Agreement and the Plan. Any interpretation,
determination or other action made or taken by the Committee regarding this
Agreement and the Plan shall be final, binding and conclusive.

 

Very Truly Yours,

        The above is agreed to and accepted by:  

HANDLEMAN COMPANY,

         

a Michigan corporation

         

 

By:

 

/s/ Stephen Strome

            

Stephen Strome

       «FirstName» «LastName»

Its:

 

CEO/Chairman of the Board

       Dated:    

 

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