EXHIBIT
10(q)
PERFORMANCE SHARE AND
PERFORMANCE UNIT GRANT AGREEMENT
Dated: June 29, 2005
To: «FirstName» «Last
Name»
Pursuant to Handleman Company’s 2004 Stock
Plan (the “Plan”) and in consideration for the
covenants as stated in Paragraph E of this Performance Share and
Performance Unit Agreement (“Agreement”), Handleman
Company (the “Corporation”) hereby grants you the right
to receive shares (“shares”) of the Corporation’s
common stock as well as cash-based performance units
(“units”) upon the terms of this Agreement and the
Plan, which may be amended from time to time, is made a part of and
incorporated by reference into this Agreement and is available upon
request.
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1.
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You have been
awarded Performance shares and units. The number of shares and
units you may receive, under this Agreement shall be contingent
upon achievement of performance goals as well as your agreement to
the covenants as outlined in Paragraph E below.
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a.
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If Free Cash
Flow (defined below) for the Performance Period (defined below) is
equal to or greater than the 30th percentile, but less than the
50th percentile of Free Cash Flow for a Peer Group of companies
(see Exhibit 2), the number of shares and units you may receive
under this Agreement shall equal the sum of:
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i.
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fifty percent
(50%) plus
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ii.
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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 30th percentile and the 50th 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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b.
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If Free Cash
Flow for the Performance Period is equal to or greater than the
50th percentile, but less than the 70th percentile of Free Cash
Flow for a Peer Group of companies, the number of shares and units
you may receive under this Agreement shall equal the sum
of:
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i.
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one hundred
percent (100%) plus
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ii.
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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 50th percentile and 70th 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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c.
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If Free Cash
Flow for the Performance Period is equal to or greater than the
70th percentile of Free Cash Flow for a Peer Group of companies,
the number of shares and units you may receive under this Agreement
shall equal one hundred fifty percent (150%) of the Target
Number.
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d.
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If Free Cash
Flow for the Performance Period is less than the 30th percentile of
Free Cash Flow for a Peer Group of companies, you shall not be
entitled to receive any shares or units under this
Agreement.
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e.
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The pre-tax
value of each performance unit will be equal to the closing price
of the Company’s common stock on a day to be determined by
the Compensation Committee. The delivery vehicle for performance
units will be cash, subject to ordinary tax withholding.
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2.
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Notwithstanding
the foregoing, unless otherwise determined by the Committee (as
defined in the Plan), you shall be entitled to receive shares or
units under this Agreement only if you remain in the employ of the
Corporation or a Subsidiary (as defined in the Plan) for the entire
duration of the Performance Period.
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3.
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Performance
Shares and/or Units will be granted only after:
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a.
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Release by the
Corporation of its audited consolidated financial statements for
the last fiscal year of the Performance Period, and
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b.
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Certification
by the Committee that a performance goal set forth in Paragraph A
of this Agreement has been achieved. The Committee retains the
right to modify the payment date at its discretion.
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4.
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Shares and
units which you are entitled to receive under this Agreement shall
be issued to you without any payment by you. Until the certificates
representing share ownership have been issued, you will not have
the rights that are associated with share ownership for these
shares.
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5.
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At 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 in a manner similar to performance units.
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2
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6.
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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. As such, 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.
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7.
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If, upon or as
a result of your receipt of shares (or cash in lieu of shares) or
units 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.
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8.
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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.
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9.
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The Committee
will maintain 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.
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