exv10w5






Exhibit 10.5




			
	 	 	 
	
	 	Chicago       Dallas       Detroit       New York       San Francisco






May 29, 2008




Board of Directors

Handleman Company

500 Kirts Boulevard

Troy, MI 48084-5225




Re: Management Services Agreement — Second Addendum



Ladies and Gentlemen:



This letter represents the second addendum (the “Second Addendum”) to the agreement between AP
Services, LLC, a Delaware limited liability company (“APS”) and Handleman Company (“Handleman” or
the “Company”) dated November 26, 2007 (the “Engagement Letter.”) Unless otherwise modified
herein, the terms and conditions of the Engagement Letter remain in full force and effect.



Exhibit A to the Engagement Letter indicates that A. A. Koch is committed full time to the
engagement. As a consequence of actions taken and to be taken it is anticipated that Mr. Koch’s
required future commitment will be full time at some times and part time at other times.
Accordingly, Exhibit A is amended to read “as required by the circumstances” with respect to Mr.
Koch’s time commitment.



The attached Schedule 1 (“Fees and Expenses”) supersedes in its entirety the Schedule 1 that was
attached to the Engagement Letter dated November 26, 2007.




* * *



If these terms meet with your approval, please sign and return a copy of this First Addendum.
We look forward to our continuing relationship with you.




Sincerely yours,



AP Services, LLC




A. A. Koch

Managing Director




2000 Town Center | Suite 2400 | Southfield, MI | 48075 | 248.358.4420 | 248.358.1969 fax | www.alixpartners.com




 









 













Board of Directors

May 29, 2008

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Acknowledged and Agreed to by the Company’s Board of Directors:




	 	 	 	 	 	 	 
	HANDLEMAN COMPANY	 	 
	 
	 	 	 	 	 	 
	By:
	 	 	 	 	 	 
	 	 	 	 	 
	 

	 	Its:	 	 	 	 
	Dated:

	 	 	 	 

	 	 
	 	 	 	 	 






 












 












Schedule 1




Fees and Expenses as Amended May 29, 2008





	1.	 	Fees: APS’ fees will be based on the hours worked by APS personnel at APS’ regular hourly
rates, which are:





	 	 	 	 	 
	Managing Directors
	 	$	600-750	 
	Directors
	 	$	440-575	 
	Vice Presidents
	 	$	325-450	 
	Associates
	 	$	260-315	 
	Analysts
	 	$	210-230	 
	Paraprofessionals
	 	$	100-175	 
	Independent Contractors
	 	 	 	 







	 	 	APS reviews and revises its billing rates on January 1 of each year.
	 
	2.	 	Success Fee: In addition to hourly fees, APS will be compensated for its efforts by the
payment of a Success Fee. The Company understands and acknowledges that the Success Fee is an
integral part of APS’ compensation for the engagement.
	 
	 	 	The Success Fee shall be as follows:






APS shall receive 5% (five percent) of the fair value of cash and/or other assets that is
distributed to shareholders. The Success Fee payment shall be made in cash and the due
date shall be concurrent with the date(s) that distributions are made to the Company’s
shareholders. The following terms and conditions further define the calculation and
payment of this Success Fee and are an integral part of its definition and payment.




	 	A.	 	[Deleted]
	 
	 	B.	 	[Deleted]
	 
	 	C.	 	If the Board terminates Mr. Koch without cause then the full amount of the
Success Fee shall be earned and remain payable as set forth above. Furthermore, if the
individuals who today constitute the Board of Directors of the Company cease for any
reason to constitute at
least a majority of the Board of the Company then upon such occurrence it shall be
deemed to be a termination of Mr. Koch’s employment without cause.




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	 	D.	 	The right to receive the Success Fee shall vest monthly pro rata on the last
day of each month for the first 12 consecutive months of this engagement starting with
November 30, 2007. In the event that Mr. Koch voluntarily terminates his employment
the vested Success Fee shall be payable as set forth above. For example, if Mr. Koch
terminates his employment during the 12th month of service then 11/12 of the Success
Fee shall have been earned and remain payable as set forth above. Mr. Koch agrees that
he will give no less than 30 days notice of intent to terminate unless such termination
is occasioned by his death or disability.
	 
	 	E.	 	[Deleted]
	 
	 	F.	 	[Deleted]
	 
	 	G.	 	[Deleted]
	 
	 	H.	 	If the Company terminates Mr. Koch for cause then no Success Fee shall be
payable. Cause shall mean the following after receipt of written notice with the
opportunity to cure:






	 	a)	 	Koch’s failure or refusal to materially perform his duties and
responsibilities, or the failure of Koch to devote substantially all of his
business time and attention (unless Koch’s time commitment is reduced with the
Company’s consent) to the business and affairs of the Company;
	 
	 	b)	 	The willful misappropriation of the funds or property of the Company;
	 
	 	c)	 	Conviction of a felony or of any crime involving moral turpitude,
dishonesty, theft, unethical or unlawful conduct; or
	 
	 	d)	 	The commission by Koch of any willful or intentional act that could
reasonably be expected to injure the reputation, business, or business
relationships of the Company, or that may tend to bring Koch or the Company into
disrepute, or the commission of any act that is a breach of Koch’s fiduciary
duties to the Company.






	3.	 	Expenses: In addition to the fees set forth herein, the Company shall pay directly, or
reimburse APS upon receipt of periodic billings, for all reasonable out-of-pocket expenses
incurred in connection with this assignment, such as travel, lodging and postage.
	 
	4.	 	Break Fee: APS does not seek a Break Fee in connection with this engagement.
	 
	5.	 	Retainer: The Company shall pay APS a retainer of $250,000 to be applied against Fees and
Expenses as set forth in this Schedule and in accordance with Section 2 of the attached
General Terms and Conditions.




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