Item 5.02 Appointment of Principal Officer

On October 19, 2006, Handleman Company (“Handleman”) publicly announced that Robert Kirby accepted the appointment as Handleman’s President and Chief Operating Officer. Mr. Kirby who is 51 years of age, comes to Handleman from Johnson & Johnson where he served as Vice President, North America Operations-Consumer Product Companies from 1999-2002, Vice President, Global Supply Chain-Consumer & Personal Care Group from 2002 to 2004 and his most recent position as President, Personal Products Company-Consumer Products Companies since 2004.

Mr. Kirby’s annual compensation is $550,000. Handleman will also pay Mr. Kirby a one-time $150,000 bonus payable with a $100,000 payment in January 2007 and a $50,000 payment after his family relocates to Michigan. Handleman awarded Mr. Kirby 40,000 performance shares of Handleman stock effective in October 2006, with an additional 40,000 performance unit award with a cash payout based on the same measure as the performance shares as defined in Handleman’s Performance Share and Performance Unit Grant Agreement. Handleman granted Mr. Kirby 100,000 stock options, with an option price determined by the Handleman stock price at the close of business on Mr. Kirby’s first day of work, that vest in equal amounts over the next three years and 20,000 shares of restricted stock vesting in equal amounts over the next two years on Mr. Kirby’s anniversary date. Handleman also guaranteed Mr. Kirby a fiscal year 2007 minimum bonus of $300,000 and a fiscal year 2008 minimum bonus of $150,000. Additionally, Mr. Kirby shall be entitled to receive a cash bonus based on the closing price of 100,000 shares of Handleman stock on his second anniversary with the Company and a cash bonus based on the closing price of 50,000 shares of Handleman stock on his third anniversary with the Company.

Handleman also entered into a severance arrangement with Mr. Kirby pursuant to which Handleman will provide Mr. Kirby with one year’s base salary plus a portion of his target bonus in the amount of $150,000 and will immediately vest Mr. Kirby’s cash bonus based on the closing price of 100,000 shares of Handleman stock on Mr. Kirby’s employment termination date, if Handleman terminates Mr. Kirby’s employment for any other reason than cause during the first two years of his employment. Handleman will also enter into a Change of Control Agreement with Mr. Kirby. Further, Handleman will provide Mr. Kirby with such other benefits as are generally awarded to its executive officers.

/s/ Thomas C. Braum, Jr.

Executive Vice President and

    Chief Financial Officer