Letter Agreement

Amendment to Letter Agreement

Second Amendment to Letter Agreement

Third Amendment to Letter Agreement

Amended and Restated Severance Agreement

 

 

 

 

EX-10.1 2 d46532exv10w1.htm LETTER AGREEMENT

 

Exhibit 10.1

May 8, 2007

Mr. Dinesh Paliwal

Dear Dinesh:

On behalf of Harman International Industries, Incorporated (“Harman”), I submit an offer for the position of President, Chief Executive Officer and Vice Chairman of Harman. The Board of Directors of Harman (“Board”) will use all reasonable efforts consistent with legal and NYSE listing requirements to appoint you as a member of the Board on your start date (defined below). In your capacity as President, Chief Executive Officer and Vice Chairman of Harman, all staff and other functions of the Company shall report, directly or indirectly (through a subordinate of yours who reports directly to you), only to you and you will report directly to me so long as I remain Executive Chairman. If I cease for any reason to be Executive Chairman, you will report solely to the Board. Your principal place of employment will be an office we shall establish in the Stamford, Connecticut area and you will have a supplemental office available in our Washington, D.C. office when you travel there on business. The terms of this offer have been approved by the Compensation and Option Committee of the Board (the “Compensation Committee”) and the full Board. This offer provides the following:

1. Start Date: Your start date will be July 1, 2007, but your first day in the office will be Monday, July 2, 2007.

2. Outside Boards. At any time during your service hereunder, you shall be entitled to serve on the board of directors of one outside public company; provided, however, that if you are appointed or elected to a second outside public company board, you may continue to serve on both boards for a limited transaction period; provided that, within four (4) months of the date on which you become a member of such second board, you resign from or otherwise cease to serve on one of the other outside public company boards on which you are then serving.

3. Base Salary: Your annual base salary will be $1,125,000, subject to annual review (for increase, but not decrease) commencing on the first anniversary of your start date, and payable in accordance with our regular payroll schedule. Your base salary as increased from time to time shall be referred to herein as “Base Salary”.

4. Signing Bonus: Within five business days after your start date, you will be paid a cash lump sum signing bonus in an aggregate amount of $1,200,000.

5. Bonus: Effective with fiscal year 2008, (i.e. the fiscal year commencing July 1, 2007), you will be eligible to participate in the Management Incentive Compensation program with a cash target bonus opportunity equal to 150% of your Base Salary and a maximum bonus of 200% of your Base Salary. This bonus program is based upon Harman’s achievement of its business plan, as well as your achievement of individual performance goals. Your cash bonus for fiscal year 2008 will be guaranteed at no less than 150% of Base Salary with no pro ration if you start after July 1, 2007.

 

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Mr. Dinesh Paliwal
May 8, 2007
Page 2

6. Stock Options: On your start date, you will receive a one-time stock option award (“Stock Option Award”) of 100,000 shares of Harman common stock under the terms of Harman’s 2002 Stock Option and Incentive Plan (“Plan”) at a per share exercise price equal to the fair market value of Harman common stock on your start date, vesting 20% per year over five years commencing on the first anniversary of your start date, with acceleration and other provisions as provided in the Plan and the grant. The Stock Option Award will have a ten (10) year term. The form of grant is annexed hereto as Exhibit A. You will also be eligible for an annual stock option grant under the Plan beginning in September 2008, at the good faith discretion of the Compensation Committee of the Board, at a level commensurate with your position, but with a targeted stock option award of 50,000 shares (with the number of options adjusted in accordance with Section 10 of the Plan). The Stock Option Award will provide you with a right to reduce options to cover minimum required withholding and, if there has been a Change in Control (as defined in the Severance Agreement, as defined below), to pay the exercise price.

7. Restricted Stock:

     (a) On your start date, you will receive an award of 15,000 shares of restricted Harman common stock (“Restricted Stock Award”) under the Plan, vesting on July 1, 2010, provided that you are employed by Harman on that date or as otherwise provided in the form of grant annexed hereto as Exhibit B.

     (b) On your start date, you will receive an award of 33,575 shares of restricted Harman common stock as an inducement award (“Inducement Stock Award”). Of the Inducement Stock Award, (i) 18,575 shares will vest on March 1, 2010, and (ii) 15,000 shares will vest 20% per year on each of the first 5 anniversaries of the date of grant; provided that you must be employed on the applicable date for the shares to so vest, or as otherwise provided in the form of grant annexed hereto as Exhibit C. The Inducement Stock Award is granted as an inducement grant outside of Harman’s equity plans, and shall be registered via Form S-8 and listed with the NYSE, prior to your start date, or if Form S-8 is not available to permit the immediate sale of the Inducement Stock Award upon vesting, Harman will file a registration statement on Form S-3 at least 60 days before the first vesting date to permit you to sell these shares and, if the Company is then listed on the NYSE, list with the NYSE.

     (c) On your start date, you will receive 16,004 shares of restricted Harman common stock (“Equity Replacement Award”). The Equity Replacement Award will vest as to 5,169 of the restricted shares on March 1, 2008, as to 5,418 on March 1, 2009, and as to 5,417 on March 1, 2010, provided that you are employed on such date for such respective shares to so vest and as otherwise provided in the form of grant annexed hereto as Exhibit D. The Equity Replacement Award is granted as an inducement grant outside of Harman’s equity plans, and shall be registered via Form S-8 and listed with the NYSE, prior to your start date, or if Form S-8 is not available to permit the immediate sale of the Equity Replacement Reward upon vesting, Harman will file a registration statement on Form S-3 at least 60 days before the first vesting date to permit you to sell the shares and, if the Company is then listed on the NYSE, list with the NYSE.

 

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Mr. Dinesh Paliwal
May 8, 2007
Page 3

     (d) Each Award in (a), (b) and (c) above will provide you with a right to cover the minimum required tax withholding upon vesting by utilizing shares of the Restricted Stock Award or Inducement Stock Award if there has been a Change in Control (as defined in the Severance Agreement), at or prior to the vesting date.

8. RSU Replacement Award. On your start date, you will receive an award of 32,291 restricted stock units (the “RSU Replacement Award”). The RSU Replacement Award will fully vest on March 1, 2008 and on such date you will be paid a cash amount equal to the greater of $3,875,000 or the fair market value of the 32,291 restricted stock units (with such fair market value determined in accordance with the definition of fair market value under the Plan or, if the Company is not then publicly traded, based on enterprise value with no discounts). The RSU Replacement Award will be in the form of Exhibit E attached hereto.

9. Supplemental Executive Retirement Plan:

     (a) You will be eligible to participate in Harman’s Supplemental Executive Retirement Plan, as amended and restated as of October 1, 1999, and as further amended effective September 24, 2002 (the “SERP”). Your annual age 65 single life annuity benefit with 120 months certain under the SERP (“Normal Retirement Benefit”) will be equal to 50% of the Average Compensation (as defined thereunder), provided that (i) for purposes of determining your Average Cash Compensation your compensation as recognized under your prior employer’s SERP for 2003, 2004, 2005 and 2006 shall be taken into account as Compensation under the SERP, and (ii) your Compensation (as defined under the SERP) for 2007 shall be deemed to be the sum of your Base Salary and Target Bonus; provided, however, that if after the eighteen month anniversary of your start date, you die or incur a Disability, or your employment is terminated by Harman without Cause or by you for Good Reason, Average Compensation shall be based on the three consecutive calendar years in which your Compensation is highest (i.e., with Harman, taking into account (ii) above, or as recognized under your prior employer’s SERP). Your Normal Retirement Benefit will be fully vested at all times.

     (b) Your Normal Retirement Benefit will be offset by the annual age 65 single life annuity benefit (actuarially adjusted to include a 120 months certain feature) at your prior employer accrued as of December 31, 2006 (a calculation of which has previously been provided by you to Harman) without regard to whether or not you receive it, or when it commences. Your Normal Retirement Benefit shall be actuarially adjusted to reflect the earlier commencement of your benefit hereunder based upon the actuarial factors currently set forth in the penultimate sentence of Section 5.06 of the SERP. The SERP obligation to you may not be terminated or reduced, or otherwise amended during your employment with Harman (notwithstanding any other provision of the SERP) without your prior written consent, except as required by law.

     (c) You will be credited with all years of service with your prior employer for purposes of determining your eligibility for the early commencement of benefits under the SERP.

 

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Mr. Dinesh Paliwal
May 8, 2007
Page 4

     (d) Your Pre-Retirement Death Benefit under the SERP will be equal to three times your highest Compensation, with Compensation for 2007 equal to the sum of your Base Salary and Target Bonus.

10. Company Car: You will have use of a company-leased automobile at the full sized luxury level, with a lease payment of approximately $2,500 per month. Harman will bear the car expenses (i.e., gasoline, insurance, car tax, repairs) associated with the business use of the company car. You may use the company car for private purposes, however taxes imposed with respect to private usage will be borne by you.

11. Severance: If your employment is terminated by Harman without Cause or by you for Good Reason (see definitions of “Cause” and “Good Reason” in the attachment), you will receive (i) a pro rata annual bonus for the fiscal year of termination based on actual performance (but with a 100% individual factor) and the portion of the fiscal year that you were employed, subject to any guarantee, and paid in the calendar year in which such fiscal year ends when bonuses are paid to other Harman executives but in any event prior to December 31 of such year (the “Pro Rata Bonus”); (ii) any unpaid bonus for the fiscal year preceding the year of termination based on actual performance for such year (but with a 100% individual factor if the bonuses for such year had not been determined for all Harman senior executives prior to such termination), subject to any guarantee, and paid in the calendar year in which the fiscal year ends when bonuses are paid to other Harman executives but in any event prior to December 31 of such year (the “Prior Year Bonus”); (iii) a severance payment equal to twice the sum of (X) your annual Base Salary at the time of your termination plus (Y) your target annual bonus at the time of your termination paid in a lump sum promptly after your termination, subject to “Delay” pursuant to the Section 409A Delay provision below. In addition, a prorated number of any unvested shares of your Restricted Stock Award, your Inducement Stock Award and your Stock Option Award (all based on the number of partial and completed months employed during the respective vesting periods) shall vest on such termination provided that no fewer than 30,000 shares of restricted stock (less any shares of such Restricted Stock Award or Inducement Stock Award previously vested) shall vest on such termination and your Equity Replacement Award and RSU Replacement Award will become fully vested and, in the case of the Equity Replacement Award, unrestricted (but the RSU Replacement Award shall still not be paid out until March 1, 2008). Such payments will be subject to the execution by you of a release in substantially the form annexed hereto as Exhibit F.

12. Change in Control:

     (a) Simultaneous herewith Harman is entering into a severance agreement with you in the form of Exhibit G. The Severance Agreement will provide that the consummation of the transaction contemplated by the Agreement and Plan of Merger among KHI Parent Inc., KHI Merger Sub Inc. and Harman International Industries, Incorporated, dated as of April 26, 2007 (the “KKR Transaction”), shall not constitute a Change in Control for purposes of your

 

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Mr. Dinesh Paliwal
May 8, 2007
Page 5

Severance Agreement; provided further that such Severance Agreement will not exempt the KKR Transaction from the excise tax gross-up provisions contained in Section 5 thereof.

     (b) Anything herein, or in any plan or agreement of Harman to the contrary notwithstanding (including, without limitation, your Stock Option Award, Restricted Stock Award, Inducement Stock Award, Equity Replacement Award and RSU Replacement Award agreements), the consummation of the KKR Transaction will be disregarded as a “Change in Control” under such plans and agreements except to the extent provided in the prior sentence.

13. Other Benefits: Additional benefits, as defined by Harman policies in effect from time to time applicable to other executive officers of Harman, will include medical, dental, vision, life insurance, short and long-term disability, tuition reimbursement for you, 401(k) Retirement Savings Plan, vacation (of at least four weeks), and all paid holidays. In addition, you will be provided with life insurance coverage (beside that under the SERP) of at least $3.5 million, accidental death and disability coverage of at least $3.5 million and long term disability coverage of at least sixty five percent of Base Salary.

14. Accrued Amounts. On any termination of your employment you shall receive payment for any accrued but unpaid Base Salary, any accrued but unused vacations, reimbursements of any incurred but unreimbursed business expenses and any other amounts then due pursuant to the terms of any Company benefit or equity plan, program or payroll practice (“Accrued Amounts”).

15. Death. Upon your death while employed, your beneficiary or estate shall receive your Accrued Amounts, the Prior Year Bonus and the Pro Rata Bonus.

16. Disability. You shall be deemed to incur a “Disability” in the event you have been unable to perform your material duties for six (6) consecutive months as a result of physical or mental incapacity (“Disability”). During your incapacity, prior to your termination for Disability you shall be entitled to compensation and benefits as if you were actively at work, provided, however, that the Board may temporarily assign your duties to other executives during the period of your incapacity without it being deemed “Good Reason.” Your employment shall automatically terminate at the end of such six (6) month period unless you and the Company agree otherwise. Upon any such termination you shall receive your Accrued Amounts, your Pro Rata Bonus and your Prior Year Bonus.

17. Business Expenses. The Company shall promptly reimburse your reasonable businesses expenses incurred in performing your duties upon presentation of documentation in accordance with Company policy. Travel for business purposes shall be on the same basis as permitted for the Executive Chairman. Connecticut shall be treated as your primary business location and any travel away from there shall be treated as a business trip. You shall have no after tax cost for any business expense or reimbursement thereof.

18. Code Section 409A: To the extent that there is a material risk that any payments under this letter, the Severance Agreement or any grant may result in the imposition of an additional tax to you under Internal Revenue Code Section 409A (“Section 409A”), Harman will

 

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Mr. Dinesh Paliwal
May 8, 2007
Page 6

reasonably cooperate with you to amend this letter and related documents such that such documents and payments thereunder comply with Section 409A without materially changing the economic value of this letter or the arrangements hereunder to either party.

19. Section 409A Delay. If you are at the time of your separation from service with Harman (other than as a result of your death) a “Specified Employee”, as such term is defined under Section 409A, any payment due to you hereunder that indicates it is subject to the Section 409A Delay shall be delayed until the earlier of your death or six (6) months after your separation from service (as defined under Section 409A) and shall then be promptly paid to you in a lump sum, together with interest for the period of delay, compounded annually, equal to the prime rate (as published in the Wall Street Journal) in effect as of the date the payment should otherwise have been provided.

20. Legal Fees: Whether or not you accept this offer, Harman will pay the reasonable legal fees and disbursements relating to the negotiation and documentation of your employment arrangements with Harman and any negotiations with any acquirer or proposed acquirer of Harman with respect to such acquisition or proposed acquisition and any continued employment arrangements therewith promptly upon presentation of invoices therefor and, to the extent such amount would be taxable to you, pay you an additional amount at such time so that you would have no after tax cost.

21. Miscellaneous. Harman will, in connection with your employment, withhold from any compensation and benefits payable to you all federal, state, city or other taxes as Harman is required to withhold pursuant to any law or government regulation or ruling.

You shall not be required to mitigate Harman’s obligations under Section 10 by seeking other employment. The payments due to you under Section 10 shall not be subject to offset by any remuneration received from a subsequent employer. There shall be no offset against amounts or benefits due you under this Agreement or otherwise on account of any claim Harman may have against you.

This Agreement may not be assigned by Harman except to an acquirer of all or substantially all of its assets and then only if such acquirer promptly delivers to you a written assumption of Harman’s obligations hereunder.

Harman shall indemnify and hold you harmless (including advancement of legal fees) to the maximum extent permitted by applicable law with regard to any actions or inactions as an officer or director of Harman or any other entity at its request or as a fiduciary of any benefit plan. In addition, Harman shall cause you to be covered under any directors and officers or fiduciary liability policy it maintains with regard to the indemnification. The obligations hereunder shall survive any termination of your service in any such role for so long as liability exists with regard to such period of service.

Harman is not hereby offering you lifetime employment or employment for a fixed or implied period of time. Either you or Harman may terminate your employment at any time, with or

 

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Mr. Dinesh Paliwal
May 8, 2007
Page 7

without cause or reason. Your employment relationship cannot be changed except in a written document signed by you and the Executive Chairman of Harman (or other Board member or Harman officers designated by the Board).

Any dispute concerning termination of your employment, this Agreement, or any related document shall be resolved by final and binding arbitration before a neutral arbitrator. The arbitrator shall be selected by mutual agreement or in accordance with the procedures of the American Arbitration Association and the commercial arbitration rules of the American Arbitrators Association shall apply. Such arbitration shall be conducted in Stamford, Connecticut. The law of Delaware (other than its conflict of laws rules) shall govern any such dispute, and the arbitrator shall not have authority to vary or alter the terms of this letter. In the event the arbitrator determines that you are the prevailing party in any arbitration, Harman shall promptly pay your legal fees and disbursements incurred in connection therewith, as well as all costs of the AAA and the arbitrator.

You acknowledge and agree that your acceptance of this offer will violate no agreements or arrangements with any other individuals or entities, or duties to your current employer. Harman represents that this offer and the documents related hereto have been approved by all persons or bodies whose action is required and when accepted by you will be fully binding on Harman. The parties acknowledge that it is intended that the Executive Chairman remain the “principal executive officer” as such term is defined under Rule 13a-14 of the Securities Exchange Act of 1934 until after the Form 10-K is filed for the fiscal year ending June 30, 2007 and until such filing is completed, the Executive Chairman shall retain and utilize such authority and control as is necessary to accomplish the foregoing. Harman represents and warrants that the financial statements of Harman filed with the SEC for, or during, the 2005, 2006 and 2007 fiscal years are true and correct in all material respects.

[INTENTIONALLY OMITTED]

 

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Mr. Dinesh Paliwal
May 8, 2007
Page 8

Please sign and return the original of this letter. You should retain one copy of this letter for your files.

I look forward to working with you and to our shared further development of this outstanding company.

 

 

 

Sincerely,

 

 

 

 

 

/s/ Sidney Harman

 

 

  

Sidney Harman

 

 

Executive Chairman

 

 

I accept your offer of employment and agree to the provisions stated in this letter. I acknowledge and agree that this letter and the other documents referred to herein constitutes the entire agreement between Harman and me and supersedes all prior verbal or written agreements, arrangements or understandings pertaining to my offer of employment. I understand that I am employed at will and that my employment can be terminated at any time, with or without cause, at the option of either Harman or me.

 

 

 

ACCEPTED AND AGREED:

 

 

 

 

 

/s/ Dinesh Paliwal

 

 

  

Dinesh Paliwal

 

 

Date: May 8, 2007

 

 

 

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Mr. Dinesh Paliwal
May 8, 2007
Page 9

Letter Attachment

Termination Definitions

“Cause” means:

(i)

 

You have been convicted of a felony;

(ii)

 

You have engaged in conduct that constitutes willful gross neglect or willful gross misconduct with respect to your employment duties which results in material economic harm to Harman.

No act or omission on your part shall be considered “willful” unless it is done by you in bad faith and without reasonable belief that your action was in the best interests of Harman.

The foregoing notwithstanding, Harman may not terminate your employment for Cause unless: (x) a determination that Cause exists is made and approved by three-quarters (3/4) of Harman’s Board (excluding you), (y) you are given at least 10 days prior written notice of the Board meeting called to make such determination, and (z) you and your legal counsel are given the opportunity to address such meeting prior to a vote of the Board.

“Good Reason” means any of the following without your prior written consent:

(i)

 

Reduction by Harman of your base salary or target bonus opportunity;

 

(ii)

 

Failure by Harman’s stockholders to elect or to reelect you as a member of the Board; or failure by the Board to use all reasonable efforts consistent with legal requirements and NYSE listing requirements to appoint you to the Board as of your start date;

 

(iii)

 

A diminution in any of your titles or a material diminution in your duties or responsibilities or the assignment to you of any duties or responsibilities inconsistent with your position and status as President, CEO and Vice Chairman (it being understood that the continuation of your duties with a successor (whether Harman or a successor is publicly-traded or privately-held) without such a material diminution following a Change of Control shall not constitute “Good Reason”);

 

(iv)

 

A change in your reporting relationship such that you no longer report directly to the Executive Chairman (so long as it is the current Executive Chairman) or the Board or a change such that all employees (other than the Executive Chairman) do not report directly or indirectly only to you; or

 

(v)

 

Any purported termination by Harman of your employment otherwise than as expressly permitted by this letter agreement;

 

(vi)

 

Any material breach of any provision of this Agreement by Harman.

 

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Mr. Dinesh Paliwal
May 8, 2007
Page 10

Provided that you must provide written notice to Harman of the existence of the Good Reason no later than 90 days after its initial existence and Harman shall have a period of 30 days following its receipt of your written notice during which it may remedy in all materials respects the Good Reason condition identified in such written notice; and you must terminate your employment with Harman no less than 1 year following the initial existence of the Good Reason condition identified in such written notice.

 

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EXHIBIT F

General Release

     Harman International Industries, Incorporated, its affiliates, subsidiaries, divisions, successors and assigns in such capacity, and the current, future and former employees, officers, directors, trustees and agents thereof (collectively referred to throughout this Agreement as “Employer”) and Dinesh Paliwal, his heirs, executors, administrators, successors and assigns (collectively referred to throughout this Agreement as “Employee”) agree:

     1. Last Day of Employment. Employee’s last day of employment with Employer is DATE. In addition, effective as of DATE, Employee resigns from his position as President, Chief Executive Officer and Vice Chairman of Harman International Industries, Incorporated, and will not be eligible for any benefits or compensation after DATE, other than as specifically provided in Paragraph 10 of the letter agreement between the Employer and Employee, dated as of May 8, 2007 (the “Letter Agreement”), in the Severance Agreement between the Employer and Employee, dated as of May 8, 2007 (the “Severance Agreement”) to the extent that it becomes applicable, and his right to indemnification and directors and officers liability insurance. Employee further acknowledges and agrees that, after DATE, he will not represent himself as being a director, employee, officer, trustee, agent or representative of the Employer for any purpose. In addition, effective as of DATE, Employee resigns from all offices, directorships, trusteeships, committee memberships and fiduciary capacities held with, or on behalf of, the Employer or any benefit plans of the Employer. These resignations will become irrevocable as set forth in Section 3 below.

     2. Consideration. The parties acknowledge that this General Release is being executed in accordance with Section 10 of the Letter Agreement.

     3. Revocation. Employee may revoke this General Release for a period of seven (7) calendar days following the day he executes this General Release. Any revocation within this period must be submitted, in writing, to Employer and state, “I hereby revoke my acceptance of our General Release.” The revocation must be personally delivered to the Company’s Chief Legal Officer, or his/her designee, or mailed to Employer, 1101 Pennsylvania Avenue, NW, Suite 1010, Washington, D. C. 20004, and postmarked within seven (7) calendar days of execution of this General Release. This General Release shall not become effective or enforceable until the revocation period has expired. If the last day of the revocation period is a Saturday, Sunday, or legal holiday in Washington, D.C., then the revocation period shall not expire until the next following day which is not a Saturday, Sunday, or legal holiday.

     4. General Release of Claim. Employee knowingly and voluntarily releases and forever discharges Employer from any and all claims, causes of action, demands, fees and liabilities of any kind whatsoever, whether known and unknown, against Employer, Employee has, has ever had or may have as of the date of execution of this General Release, including, but not limited to, any alleged violation of:

 

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The National Labor Relations Act, as amended;

 

 

 

Title VII of the Civil Rights Act of 1964, as amended

 

 

 

The Civil Rights Act of 1991;

 

 

 

Sections 1981 through 1988 of Title 42 of the United States Code, as amended;

 

 

 

The Employee Retirement Income Security Act of 1974, as amended;

 

 

 

The Immigration Reform and Control Act, as amended;

 

 

 

The Americans with Disabilities Act of 1990, as amended;

 

 

 

The Age Discrimination in Employment Act of 1967, as amended;

 

 

 

The Older Workers Benefit Protection Act of 1990;

 

 

 

The Worker Adjustment and Retraining Notification Act, as amended;

 

 

 

The Occupational Safety and Health Act, as amended;

 

 

 

The Family and Medical Leave Act of 1993, as amended;

 

 

 

The Connecticut Human Rights Act, as amended;

 

 

 

The Washington, D.C. Human Rights Act, as amended

 

 

 

The Connecticut Wage Payment and Collection Act, as amended;

 

 

 

The Washington, D.C. Wage Payment and Wage Collection Law, as amended;

 

 

 

Equal Pay Law for Connecticut, as amended;

 

 

 

Equal Pay Law for Washington DC, as amended;

 

 

 

Any other federal, state or local civil or human rights law or any other local, state or federal law, regulation or ordinance;

 

 

 

Any public policy, contract, tort, or common law; or

 

 

 

Any allegation for costs, fees, or other expenses including attorneys’ fees incurred in these matters.

     Notwithstanding anything herein to the contrary, the sole matters to which the General Release do not apply are: (i) the Employee’s rights of indemnification and

 

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directors and officers liability insurance coverage to which he was entitled immediately prior to DATE with regard to his service as an officer and director of the Employer (including, without limitation, under Paragraph 20 of the Letter Agreement); (ii) the Employee’s rights under any tax-qualified pension or claims for accrued vested benefits under any other employee benefit plan, policy or arrangement maintained by the Employer or under COBRA; (iii) the Employee’s rights under the provisions of the Letter Agreement, the Severance Agreement, and documents referred to in either of such agreements, which are intended to survive termination of employment; (iv) the Severance Agreement to the extent that it becomes applicable; or (v) the Employee’s rights as a stockholder.

     5. No Claims Permitted. Employee waives his right to file any charge or complaint against Employer arising out of his employment with or separation from Employer before any federal, state or local court or any state or local administrative agency, except where such waivers are prohibited by law. This Release, however, does not prevent Employee from filing a charge with the Equal Employment Opportunity Commission, any other federal government agency, and/or any government agency concerning claims of discrimination, although Employee waives his right to recover any damages or other relief in any claim or suit brought by or through the Equal Employment Opportunity Commission or any other state or local agency on behalf of Employee under the Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964 as amended, the Americans with Disabilities Act, or any other federal or state discrimination law, except where such waivers are prohibited by law.

     6. Affirmations. Employee affirms he has not filed, has not caused to be filed, and is not presently a party to, any claim, complaint, or action against Employer in any forum or form. Employee further affirms that he has been paid and/or has received all compensation, wages, bonuses, commissions, and/or benefits to which he may be entitled and no other compensation, wages, bonuses, commissions and/or benefits are due to him, except as provided in Paragraph 10 of the Letter Agreement. Employee also affirms he has no known workplace injuries.

     7. Cooperation; Return of Property. Employee agrees to reasonably cooperate with the Employer and its counsel in connection with any investigation, administrative proceeding or litigation relating to any matter that occurred during his employment in which he was involved or of which he has knowledge. The Employer will reimburse the Employee for any reasonable out-of-pocket travel, delivery or similar expenses incurred in providing such service to the Employer. Employee represents that he has returned to the Employer all property belonging to the Employer, including but not limited to any leased vehicle, laptop, cell phone, keys, access cards, phone cards and credit cards, provided that the Executive may retain, and the Company shall cooperate in transferring, his cell phone number, his rolodex and other address books.

     8. Governing Law and Interpretation. This General Release shall be governed and conformed in accordance with the laws of the State of Delaware without regard to its conflict of laws provision. In the event Employee or Employer breaches any provision of this General Release, Employee and Employer affirm either may institute an

 

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action to specifically enforce any term or terms of this General Release. Should any provision of this General Release be declared illegal or unenforceable by any court of competent jurisdiction and should the provision be incapable of being modified to be enforceable, such provision shall immediately become null and void, leaving the remainder of this General Release in full force and effect. Nothing herein, however, shall operate to void or nullify any general release language contained in the General Release.

     9. Nonadmission of Wrongdoing. Employee agrees neither this General Release nor the furnishing of the consideration for this Release shall be deemed or construed at any time for any purpose as an admission by Employer of any liability or unlawful conduct of any kind.

     10. Amendment. This General Release may not be modified, altered or changed except upon express written consent of both parties wherein specific reference is made to this General Release.

     11. Entire Agreement. This General Release sets forth the entire agreement between the parties hereto and fully supersedes any prior agreements or understandings between the parties; provided, however, that notwithstanding anything in this General Release, the provisions in the Letter Agreement, the Severance Agreement, and the documents referred to in either of such agreements which are intended to survive termination of the Letter Agreement shall survive and continue in full force and effect. Employee acknowledges he has not relied on any representations, promises, or agreements of any kind made to him in connection with his decision to accept this General Release.

     EMPLOYEE HAS BEEN ADVISED THAT HE HAS UP TO TWENTY-ONE (21) CALENDAR DAYS TO REVIEW THIS GENERAL RELEASE AND HAS BEEN ADVISED IN WRITING TO CONSULT WITH AN ATTORNEY PRIOR TO EXECUTION OF THIS GENERAL RELEASE.

     EMPLOYEE AGREES ANY MODIFICATIONS, MATERIAL OR OTHERWISE, MADE TO THIS GENERAL RELEASE DO NOT RESTART OR AFFECT IN ANY MANNER THE ORIGINAL TWENTY-ONE (21) CALENDAR DAY CONSIDERATION PERIOD.

     HAVING ELECTED TO EXECUTE THIS GENERAL RELEASE, TO FULFILL THE PROMISES SET FORTH HEREIN, AND TO RECEIVE THE SUMS AND BENEFITS SET FORTH IN THE LETTER AGREEMENT, EMPLOYEE FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION, ENTERS INTO THIS GENERAL RELEASE INTENDING TO WAIVE, SETTLE AND RELEASE ALL CLAIMS HE HAS OR MIGHT HAVE AGAINST EMPLOYER.

 

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     IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this General Release as of the date set forth below:

 

 

 

 

 

 

 

 

 

 

 

 

 

HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Name:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Date:

 

 

 

Date:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EX-10.2 2 d52016aexv10w2.htm AMENDMENT TO LETTER AGREEMENT

 

Exhibit 10.2

     November 29, 2007

     Mr. Dinesh Paliwal

     Dear Dinesh:

     Reference is made to the Letter Agreement, as amended, dated as of May 8, 2007 (the “Letter Agreement”) by and between Harman International Industries, Incorporated (the “Company”) and you. Capitalized terms not defined herein shall have the meanings ascribed to such terms in the Letter Agreement.

     The purpose of this letter is to evidence certain additional understandings between you and the Company, as follows:

     1. Paragraph 4 of the Letter Agreement shall be amended by adding the following sentence at the end thereof:

You shall receive an additional cash payment in the amount of $350,000 (less applicable withholding) on March 1, 2008 if you are then employed by the Company or have ceased employment with the Company prior thereto as a result of death, a termination by the Company without Cause or for Disability or a termination by you for Good Reason (a “Protected Termination”).

     2. The fourth and the fifth sentences of Paragraph 6 of the Letter Agreement are hereby deleted and replaced with the following new sentences:

You will also be eligible for an annual equity grant (the “Annual Equity Grant”) beginning with September 2008, and each September thereafter, under the Company’s then in force equity award plan. The Annual Equity Grant will have a grant date value equal to two (2) times the annual bonus awarded to you in respect of the immediately preceding fiscal year. The Annual Equity Grant will consist of a combination of twenty-five percent (25%) stock options (the “Annual Stock Options”) and seventy-five (75%) percent restricted stock units (the “Annual RSUs”). To the extent that the required grant amounts exceed any applicable equity plan limits, you and the Compensation Committee will mutually agree on an alternative compensation award equal to the value of such excess. The portion of the grant date value of the Annual Equity Grant in respect of shares underlying (i) the Annual Stock Option shall be determined using the Black-Scholes methodology utilized by the Company for financial reporting purposes as of the date of grant, and (ii) the Annual RSUs shall be determined based on the fair market value of the shares of Company common stock (or that of any successor) on the date of grant. The Stock Option Award, the Annual Stock Options and the Annual RSUs (or the alternative compensation award) shall vest 20% per year over five years commencing on the first anniversary of the grant date, with acceleration and exercise periods as provided in Exhibit A for the Stock Option Award, and Exhibit A (but with full vesting on Protected Terminations) for the Annual Stock Option and Exhibit H for the Annual RSUs. The grants shall be in the forms respectively of Exhibit A for the options and Exhibit H for the Annual RSUs; provided that in the event the Company’s equity plans in effect permit the grant and vesting of the Annual RSUs consistent with the terms set forth

 

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herein, the Company may grant such Annual RSUs under any such plan and provide for the settlement of such RSUs in shares of the Company’s common stock. The Stock Option Award, the Annual Stock Option award and the Annual RSUs will provide for an automatic reduction in the number of shares otherwise required to be delivered to you, as applicable, to cover minimum required withholding and, in the case of options, to pay the exercise price in all cases, unless and to the extent such reduction is prohibited by a material financing or other agreement that restricts the ability of the Company to permit such reduction.

     3. The Letter Agreement is hereby amended by adding the following new Paragraph 7(e).

You will receive a special one-time award of 34,608 restricted stock units (the “Special RSUs”) on January 2, 2008. The Special RSUs shall vest as follows: 8,039 Special RSUs shall vest at the same time as the Restricted Stock Award prescribed by Paragraph 7(a), 17,993 Special RSUs shall vest at the same time and in the same proportion as the Inducement Stock Award prescribed by Paragraph 7(b) and 8,576 Special RSUs shall vest at the same time and in the same proportion as the Equity Replacement Award prescribed by Paragraph 7(c) provided that in all cases the award shall fully vest on a Protected Termination. Such awards shall be in the form of Exhibit H.

     4. The Letter Agreement is hereby amended by adding the following new Paragraph 7(f).

(i) The Parties hereby agree that on November 9, 2012 (the “Measurement Date”), you will be entitled to a cash payment (the “Special Bonus”), determined as follows:

(A) The Enterprise Value of Harman as of close of business on November 9, 2007 shall be calculated (the “Base EV”).

(B) The Enterprise Value of Harman as of close of business on November 9, 2012 shall be calculated (the “Final EV”).

(C) If the Final EV is not greater than 1.3 times the Base EV, no payment will be made. If the Final EV is two (2) times the Base EV, a payment of fifty million dollars ($50,000,000) will be made to you. If the Final EV is three (3) times or more the Base EV, a payment of seventy-five million dollars ($75,000,000) will be made to you. If Final EV is between 1.3 times and 2 times or 2 times and 3 times the Base EV, straight line interpolation between the applicable levels shall be used to determine the amount due you.

(D) Payment under this paragraph 7(f) shall be reduced by the sum of (a) the excess, if any, of the fair market value of 100,000 shares of Harman common stock on the Measurement Date (or if, applicable the CIC Date, as defined below) over the aggregate exercise price of the Stock Option Award and (b) the excess, if any, of the fair market value of 100,000 shares of Harman common stock on the Measurement Date (or, if applicable, the CIC Date) over the aggregate exercise price of the option granted to you on October 18, 2007 (the “Additional Stock Option Award”). The foregoing shall apply

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whether or not you exercise the options prior to the Measurement Date (or, if applicable, the CIC Date).

(E) Subject to clause (iii) below, you will be paid the Special Bonus on the 70th day following the Measurement Date.

(F) For the avoidance of doubt, the Special Bonus will not be taken into account for purposes of determining your “Compensation” as that term is used in the Harman International Industries, Incorporated Supplemental Executive Retirement Plan.

(ii) Upon termination of your employment prior to the Measurement Date, you shall be eligible for the Special Bonus, if any, determined as follows:

(A) Upon termination of your employment with Harman, other than for a Protected Termination, you shall forfeit any right to the Special Bonus.

(B) Upon termination of your employment due to death or Disability prior to the Measurement Date, you (or your estate, in the event of your death) shall receive on the date specified in clause (i)(E) above a pro rata portion of the Special Bonus, if any, determined by multiplying the amount of the Special Bonus by a fraction, the numerator of which is the number of full or partial months from November 9, 2007 to the date of your death or Disability, as applicable, and the denominator of which is 60 (the “Pro Rata Portion”).

(C) Upon termination of your employment by the Company (other than for Cause, death or Disability) or by you for Good Reason, you will be entitled to the Special Bonus, if any, at the date specified in clause (i)(E) above as follows: 50% of the Special Bonus, if such termination occurs on or prior to November 9, 2008, 75% of the Special Bonus if such termination occurs after November 9, 2008 and on or prior to November 9, 2009 and 100% of the Special Bonus if such termination occurs after November 9, 2009. Notwithstanding the foregoing, if clause (iii) applies, the payment shall be equal to the full amount of the Special Bonus (as determined pursuant to clause (iii) below) and shall be paid as specified in clause (iii) below.

(iii) In the event there occurs a Change in Control, as defined in your Severance Agreement, prior to the Measurement Date and provided that you are still employed by the Company on the date such Change in Control is consummated (the “CIC Date”), or you incurred a Protected Termination prior thereto, in lieu of the Special Bonus calculated as provided above, you shall be eligible for the Special Bonus determined as follows: If the Change in Control occurs on or prior to November 9, 2009, you shall be entitled to a payment equal to the Pro Rata Portion of fifty million dollars ($50 million). If the Change in Control occurs after November 9, 2009, but prior to the Measurement Date, you shall be entitled to a Special Bonus calculated in accordance with clause (i) above, provided that the Measurement Date shall be the CIC Date and the 1.3 times, 2 times and 3 times and the $50 million and $75 million numbers all shall be proportionately reduced utilizing the Pro Rata Portion, but there shall be straight line interpolation above the reduced 3 times and reduced $75 million; however, in no event

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shall you receive greater than $75 million. The payments contemplated by this clause (iii) shall be paid to you within 30 days following the consummation of the Change in Control if such Change in Control satisfies the requirements for a change in control under Internal Revenue Code Section 409A(a)(2)(A)(v) and, if not, on the date specified in clause (i)(E) above. Notwithstanding the foregoing, for the avoidance of doubt, the target EV values shall be adjusted in a manner that does not include the Base EV. For example, after a three-year period (i.e., a Pro Rata Portion equal to 60%), the target values shall be equal to 1.18 (i.e., 1 plus (60% x 0.3)), 1.6 (i.e., 1 plus (60% x 1.0)) and 2.2 (i.e., 1 plus (60% x 2.0)).

(iv) For purposes of this Paragraph 7(f) “Enterprise Value” shall mean the sum of (A) market capitalization (the market price per share of Company common stock determined on the basis of the average market price of Company common stock over the 30 trading days preceding the Measurement Date (or, if the Measurement Date is the CIC Date, the closing market price of Company common stock on the day preceding the CIC Date) multiplied by the average number of common shares outstanding during such 30-day period) on such date, as the case may be plus (B) net debt (consolidated total financial indebtedness, including capitalized lease obligations and off-balance sheet items in the nature of financial indebtedness, minus cash and cash equivalents). In the event that prior to the Measurement Date a spinoff to stockholders of a portion of Harman’s business occurs or an extraordinary dividend is paid by Harman, then an amount equal to the Enterprise Value of the spun off entity on the date of such spinoff or the amount of such extraordinary dividend, plus interest from the date of such spinoff or extraordinary dividend through the Measurement Date based on the prime rate as reported in The Wall Street Journal on the first business day of January in each year, shall be added to the Enterprise Value as determined above to determine the Measurement Date Enterprise Value.

(v) For the avoidance of doubt and without any implication as to any other provision, the amounts due under this Section 7(f) shall be paid in addition to any amounts due hereunder, under the Severance Agreement or under any other plan or arrangement.

     5. Paragraph 8 of the Letter Agreement is hereby amended by adding the following sentences at the end thereof:

To the extent that the amount of the RSU Replacement Award is less than $3,974,000 (the “Adjustment Amount”), you shall be entitled to receive an additional payment on March 1, 2008 (less applicable withholding) equal to the Adjustment Amount less the amount of the RSU Replacement Award. You shall also be entitled to receive interest calculated based on an amount equal to the sum of the RSU Replacement Award and any additional payment payable to you pursuant to the preceding sentence, for the period commencing on November 1, 2007 and ending on March 1, 2008 at a rate equal to the “prime rate” reported in The Wall Street Journal on November 15, 2007.

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     This letter is intended to constitute an amendment to the Letter Agreement which, subject to the provisions hereof, shall otherwise remain in full force and effect. In order to evidence your agreement to the foregoing, please sign and return the enclosed copy of this document, which shall constitute a binding agreement between the Company and you.

[signature page follows]

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     IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this amendment to the Letter Agreement as of the date set forth below:

 

 

 

 

 

 

 

 

 

/s/ Dinesh Paliwal

 

 

 

HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED

 

 

 

 

 

 

 

 

 

Date: November 29, 2007

 

 

 

By:

 

/s/ Sidney Harman

 

Name: Sidney Harman

 

 

 

 

 

 

 

 

Title: Executive Chairman

 

 

 

 

 

 

 

 

Date: November 29, 2007

 

 

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EX-10.4 5 ex10_4.htm EXHIBIT 10.4


Exhibit 10.4

 

 

December 26, 2008

 

 

Mr. Dinesh Paliwal

[Address Intentionally Omitted]

 

Dear Dinesh:

 

Reference is made to the Letter Agreement dated as of May 8, 2007, as amended by the Letter Agreement dated as of November 29, 2007, each by and between Harman International Industries, Incorporated (the “Company”) and you (collectively, the “Letter Agreement”).

 

The purpose of this letter is to make certain revisions to the Letter Agreement in order to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended.  Capitalized terms not defined herein shall have the meanings ascribed to such terms in the Letter Agreement.

 

1.             Paragraph 5 of the Letter Agreement shall be amended by adding the following at the end thereof:

 

Bonuses will be paid in accordance with the terms of the applicable plans.

 

2.             Paragraph 11 of the Letter Agreement is amended in the following respects:

 

(a)

By amending clause (iii) thereof in its entirety to read as follows:

 

(iii) a severance payment equal to twice the sum of (X) your annual Base Salary at the time of your termination plus (Y) your target annual bonus at the time of your termination paid in a lump sum on the date that is six (6) months and one (1) day after your separation from service (within the meaning of Section 409A).

 

(b) 

By deleting the last sentence thereof and adding the following:

 

Notwithstanding the foregoing, (A) no payments shall be made to you under clause (iii) above unless your termination of employment is also a separation from service (within the meaning of Section 409A), (B) your right to receive the payments under this Paragraph 11 will be subject to your execution and delivery of a release, substantially in the form annexed hereto as Exhibit F, to the Company within 60 days following your separation from service, (C) the Company shall deliver an executed release to you within five business days following your separation from service and (D) if the Company does not execute and deliver the release to you within five business days following your separation from service, then any requirement for you to execute, deliver and not revoke the release as a condition of receiving any payments under this Paragraph 11 will have no effect, and you shall be entitled to receive any payments to which you otherwise qualify under this Paragraph 11.  Notwithstanding the foregoing, (x) the payment under clause (iii) shall be subject to Section 3(c) of your Severance Agreement and (y) the termination benefits provided by Paragraph 7(f) shall be provided in accordance with such Paragraph 7.

 

 

 


 

 

Mr. Dinesh Paliwal

December 26, 2008

Page 2

 

 

3.             Paragraph 14 of the Letter Agreement is amended by adding immediately after the phrase “On any termination of your employment” the following phrase:

 

or, if later, your separation from service (within the meaning of Section 409A),

 

4.             Paragraph 14 of the Letter Agreement is further amended by adding immediately after the parenthetical phrase “(“Accrued Amounts”)” the following:

 

, in each case, to be paid in accordance with the terms of the applicable Company benefit or equity plan or program.

 

5.             Paragraph 16 of the Letter Agreement is amended by deleting the last two sentences thereof and adding the following:

 

Your employment shall automatically terminate at the end of such six (6) month period unless you and the Company agree otherwise.  Upon any such termination or, if later, your separation from service (as defined under Section 409A), you shall receive your Accrued Amounts, your Pro Rata Bonus and your Prior Year Bonus.  Notwithstanding the foregoing, in the event that as a result of earlier absence because of mental or physical incapacity you incur a separation from service (within the meaning of Section 409A), you shall on such date automatically be terminated from employment as a Disability termination.

 

6.             Paragraph 17 of the Letter Agreement is amended by adding the following at the end thereof:

 

Any such reimbursement will be made no later than December 31 of the year following the year in which the expense was incurred; provided, however, that in no event will the reimbursements in one taxable year affect the amount of reimbursements in any other taxable year, nor shall the right to reimbursement be subject to liquidation or exchange for another benefit.  Any tax gross-up payment provided in this Paragraph 17 will be made no later than the end of the calendar year immediately following the calendar year in which you remit the related taxes.

 

 

 


 

 

Mr. Dinesh Paliwal

December 26, 2008

Page 3

 

 

7.             Paragraph 18 of the Letter Agreement is amended in its entirety to read as follows:

 

Code Section 409A.  The intent of the parties is that payments and benefits under this letter comply with or be exempt from Internal Revenue Code Section 409A and the regulations and guidance promulgated thereunder (collectively “Section 409A”) and, accordingly, to the maximum extent permitted, this letter shall be interpreted and administered to be in compliance therewith.  To the extent that there is a material risk that any payments under this letter, the Severance Agreement or any grant may result in the imposition of an additional tax to you under Section 409A, Harman will reasonably cooperate with you to amend this letter and related documents such that such documents and payments thereunder comply with Section 409A without materially changing the economic value of this letter or the arrangements hereunder to either party.  The Company shall use its best efforts to ensure ongoing compliance with Section 409A.  Notwithstanding any provision in this letter to the contrary, no payment or benefit that is deferred compensation for purposes of Section 409A and that is due upon your termination of employment will be paid or provided unless such termination is also a separation from service (within the meaning of Section 409A).  For purposes of Section 409A, your right to receive any installment payments pursuant to this letter shall be treated as a right to receive a series of separate and distinct payments.  Whenever a payment under this letter specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of Harman.

 

8.             Paragraph 19 of the Letter Agreement is amended in its entirety to read as follows:

 

Section 409A Delay.  If you are at the time of your separation from service (as defined in Section 409A) with Harman (other than as a result of your death) a “Specified Employee”, as such term is defined under Section 409A and using the identification methodology selected by the Company from time to time, then any payment or the provision of any benefit that is considered deferred compensation under Section 409A and that is payable on account of a separation from service shall be delayed until the earlier of your death or six (6) months after your separation from service (the “Section 409A Delay”) and shall then be promptly paid to you in a lump sum, together with interest for the period of delay, compounded annually, equal to the prime rate (as published in the Wall Street Journal) in effect as of the date the payment should otherwise have been provided, and any other payments and benefits due under the letter shall be paid or provided in accordance with the normal payment dates specified for them herein.

 

 

 


 

 

Mr. Dinesh Paliwal

December 26, 2008

Page 4

 

 

9.             Paragraph 20 of the Letter Agreement is amended by following at the end of such paragraph.

 

Any such reimbursement will be made no later than December 31 of the year following the year in which the expense was incurred; provided, however, that in no event will the reimbursements in one taxable year affect the amount of reimbursements in any other taxable year, nor shall the right to reimbursement be subject to liquidation or exchange for another benefit.

 

10.           The second paragraph of Paragraph 21 of the Letter Agreement is amended by substituting “Paragraph 11” for “Section 10” in the first and second sentences thereof.

 

11.           The last sentence of the sixth paragraph of Paragraph 21 of the Letter Agreement is amended to read as follows:

 

In the event the arbitrator determines that you are the prevailing party in any arbitration, Harman shall pay your legal fees and disbursements incurred in connection therewith on the 70th day after such determination, as well as all costs of the AAA and the arbitrator.

 

12.           Paragraph 7 of Exhibit F (General Release) to the Letter Agreement is amended by adding the following immediately after the second sentence thereof:

 

Any such reimbursement will be made no later than December 31 of the year following the year in which the expense was incurred; provided, however, that in no event will the reimbursements in one taxable year affect the amount of reimbursements in any other taxable year, nor shall the right to reimbursement be subject to liquidation or exchange for another benefit.

 

 

 


 

 

Mr. Dinesh Paliwal

December 26, 2008

Page 5

 

 

13.           Exhibit H (Restricted Share Unit Agreement) to the Letter Agreement is amended in the following respects.

 

(a)

Clause (ii) of Section 6 is amended to read as follows:

 

the date of his Qualifying Termination, provided that such Qualifying Termination constitutes a “separation from service” (within the meaning of Section 409A) or

 

(b)

The second sentence of Section 7 is amended in its entirety to read as follows:

 

From and after the Date of Grant and until the Grantee is paid pursuant to Section 6, the Company shall pay to the Grantee on the 30th day following the date on which a normal cash dividend is paid on shares of Common Stock, an amount of cash equal to the product of the per-share amount of the dividend paid times the number of such Restricted Stock Units.

 

14.           Each award of Restricted Share Units granted prior to the date hereof by the Company to you shall be considered to have been amended in the same manner as set forth in Paragraph 13 of this letter.

 

This letter is intended to constitute an amendment to the Letter Agreement which, subject to the provisions hereof, shall otherwise remain in full force and effect.  In order to evidence your agreement to the foregoing, please sign and return the enclosed copy of this document, which shall constitute a binding agreement between the Company and you.

 

[signature page follows]

 

 

 


 

 

Mr. Dinesh Paliwal

December 26, 2008

Page 6

 

 

IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this amendment to the Letter Agreement as of the date set forth below:

 

 

 

 

HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED

 

 

 

 

 

 

/s/ Dinesh Paliwal

 

By: 

John Stacey

 

 

 

Name: John Stacey

 

 

 

Title: Chief Human Resources Officer

Date: :December 26, 2008

 

 

Date: December 26, 2008

 

 


 

 

 

 

EX-10.4 2 dex104.htm AMENDMENT TO LETTER AGREEMENT

Exhibit 10.4

September 1, 2009

Mr. Dinesh Paliwal

Dear Dinesh:

Reference is made to the Letter Agreement, dated as of May 8, 2007, as amended on November 29, 2007 and December 26, 2008 (the “Letter Agreement”), by and between Harman International Industries, Incorporated (the “Company”) and you. Capitalized terms not defined herein shall have the meanings ascribed to such terms in the Letter Agreement.

The purpose of this letter is to evidence certain additional understandings between you and the Company, as follows:

1. Annual Bonus: Effective with the Company’s fiscal year commencing July 1, 2009 (“Fiscal 2010”), you will be eligible for an annual cash target bonus opportunity equal to 200% of your Base Salary and a maximum bonus of 300% of your Base Salary (the “Annual Bonus”). The Annual Bonus shall be based upon Harman’s achievement of its business plan targets as established annually by the Compensation Committee consistent with the Company’s 2008 Key Executive Officers Bonus Plan or its successor (the “Bonus Plan”). All or a portion of the Annual Bonus shall be awarded pursuant to the terms of the Bonus Plan or other applicable bonus plan, and the Annual Bonus shall be paid no later than March 15th of the calendar year immediately following the end of the applicable fiscal year. Your eligibility for the Annual Bonus shall be in lieu of, and not in addition to, any other rights that you may have to participate in the Bonus Plan. The provisions of this paragraph supersede the terms of Paragraph 5 of the Letter Agreement.

2. Fiscal 2010 Restricted Share Unit Awards: As of the date hereof, you will receive a time-based vesting restricted share unit grant in respect of 81,967 shares of Company common stock, in the form of grant set forth as Exhibit A hereto, and a performance-based vesting restricted share unit grant in respect of 163,934 shares of Company common stock, in the form of grant set forth as Exhibit B hereto.

3. Future Equity Grants. Paragraph 6 of the Letter Agreement is hereby deleted in its entirety, it being understood that such deletion shall not affect the terms of any outstanding awards granted prior to Fiscal 2010. With respect to the Company’s fiscal years commencing July 1, 2010, 2011 and 2012, you will be eligible for annual equity grants on a basis commensurate with your title and position at the Company (the “Annual Equity Awards”) under the Company’s then in-force equity award plan. The Annual Equity Awards in respect of an amount of Company common shares will have a grant date total opportunity equal to at least 600% of your Base Salary, with time-based vesting awards having a grant date total value of at least 200% of your Base Salary (a “Future Time-Based Award”) and the opportunity to earn (assuming achievement of the maximum level of performance) the remaining portion of the total


value of the Annual Equity Awards as a performance-based vesting award (a “Future Performance-Based Award”). The form and provisions of each Future Time-Based Award shall be established in good-faith by the Compensation Committee, provided that, except as otherwise agreed between you and the Compensation Committee, each Time-Based Award shall (i) have a vesting period of no more than three years from the applicable grant date and (ii) provide for full accelerated vesting upon a Protected Termination and a change in control. The form and provisions of each Future Performance-Based Award shall be established in good-faith by the Compensation Committee, provided that, except as otherwise agreed between you and the Compensation Committee, each Future Performance-Based Award shall (i) have a vesting period of no more than three years from the applicable grant date with all performance metrics and goals to be established by the Compensation Committee and (ii) provide for (A) upon a Protected Termination on or prior to the date that is six months from the date of grant, vesting of 50% of the number of Future Performance-Based Awards determined to be earned based on the achievement of the applicable performance metrics and goals, (B) upon a Protected Termination following the date that is six months after the date of grant, full vesting of the number of Future Performance-Based Awards determined to be earned based on the achievement of the applicable performance metrics and goals, and (C) upon a change in control, vesting consistent with the change in control vesting methodology set forth in Section 4(b) of Exhibit B attached hereto; provided, further, however, that such Future Performance-Based Award on a Protected Termination will be paid or settled only if the applicable threshold, target and/or maximum performance metrics and goals have been determined to have been met by the Compensation Committee at the end of the applicable performance cycle. To the extent that the required grant amounts exceed any applicable equity plan limits, you and the Compensation Committee will mutually agree on an alternative compensation award equal to the value of such excess. The grant date value of each Annual Equity Award shall be determined based on the fair market value of the shares of Company common stock (or that of any successor) (or, in the case of stock options and stock appreciation rights, the value of such stock options or stock appreciation rights) on the date of grant, applying the methodology employed by the Company for awarding equity compensation awards. Each Annual Equity Award will provide for an automatic reduction in the number of shares otherwise required to be delivered to you, as applicable, to cover minimum required withholding (and exercise price, if applicable) unless and to the extent such reduction is prohibited by a material financing or other agreement that restricts the ability of the Company to permit such reduction. With respect to the Company’s fiscal years commencing July 1, 2013 and thereafter, you will be eligible for annual equity incentive awards on a basis commensurate with your title and position at the Company.

4. Deletion of Section 7(f). Section 7(f) of the Letter Agreement is hereby deleted in its entirety, and you shall have no further rights under such deleted Section 7(f).


This letter is intended to constitute an amendment to the Letter Agreement which, subject to the provisions hereof, shall otherwise remain in full force and effect. In order to evidence your agreement to the foregoing, please sign and return the enclosed copy of this document, which shall constitute a binding agreement between the Company and you.

Sincerely,

 

/s/ John G. Stacey

Name:

 

John G. Stacey

Title:

 

Vice President HR and Chief Human Resources Officer

/s/ Edward H. Meyer

Name:

 

Edward H. Meyer

Title:

 

Chairman of the Compensation Committee

ACCEPTED AND AGREED:

/s/ Dinesh Paliwal

Dinesh Paliwal

Date:

 

September 1, 2009

 

 

 

 

 

 

EX-10.2 3 ex10_2.htm EXHIBIT 10.2


Exhibit 10.2

 

AMENDED AND RESTATED

SEVERANCE AGREEMENT

 

THIS AMENDED AND RESTATED SEVERANCE AGREEMENT (the “Agreement”), dated as of December 26, 2008, is made and entered by and between Harman International Industries, Incorporated (“Harman” or, including any successor thereto, the “Company”), a Delaware corporation, and Dinesh Paliwal (the “Executive”).

 

WHEREAS, the Executive is or will be a senior executive of Harman, and is expected to make major contributions to the Company’s short and long-term profitability, growth and financial strength;

 

WHEREAS, Harman recognizes that:  (a) top-quality executives may seek more secure career opportunities if a Change in Control, as defined below, occurs in the future; and (b) the Company may encounter difficulties in recruiting qualified senior executives unless it offers an employment security arrangement, applicable in Change in Control situations;

 

WHEREAS, Harman desires to assure itself of both present and future continuity of management and desires to establish certain minimum severance benefits for certain of its senior executives, including the Executive, applicable in the event of a Change in Control;

 

WHEREAS, Harman wishes to ensure that its senior executives are not practically disabled from discharging their duties in respect of a proposed or actual transaction involving a Change in Control; and

 

WHEREAS, Harman desires to provide additional inducement for the Executive to continue to remain in the Company’s employ.

 

NOW, THEREFORE, Harman and the Executive agree as follows:

 

1.             Certain Defined Terms.  In addition to terms defined elsewhere in this Agreement, the following terms have the following meanings:

 

(a)           “Base Pay” means the Executive’s annual base salary rate as in effect from time to time;

 

(b)           “Board” means Harman’s Board of Directors;

 

(c)           “Cause” shall have the meaning set forth in Executive’s employment letter dated May 8, 2007.

 

(d)           “Change in Control” means the occurrence during the Term of any of the following events:

 

 

 


 

 

(i)            The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of the combined voting power of the then outstanding Voting Stock of the Company; provided, however, that for purposes of this Section 1(d)(i), the following acquisitions shall not constitute a Change in Control:  (A) any issuance of Voting Stock of the Company directly from the Company that is approved by the Incumbent Board (as defined in Section 1(d)(ii), below), (B) any acquisition by the Company or a Subsidiary of Voting Stock of the Company, (C) any acquisition of Voting Stock of the Company by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Subsidiary, or (D) any acquisition of Voting Stock of the Company by any Person pursuant to a Business Combination that complies with clauses (A), (B) and (C) of Section 1(d)(iii), below; or

 

(ii)            individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a Director after the date hereof whose election, or nomination for election by the Company’s shareholders, was approved by a vote of at least two-thirds of the Directors then comprising the Incumbent Board (either by a specific vote or by approval of the proxy statement of the Company in which such person is named as a nominee for director, without objection to such nomination) shall be deemed to have been a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest (within the meaning of Rule 14a-11 of the Exchange Act) with respect to the election or removal of Directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; or

 

(iii)           consummation of a reorganization, merger or consolidation, a sale or other disposition of all or substantially all of the assets of the Company, or other transaction (each, a “Business Combination”), unless, in each case, immediately following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners of Voting Stock of the Company immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of the combined voting power of the then outstanding shares of Voting Stock of the entity resulting from such Business Combination (including, without limitation, an entity which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries), (B) no Person (other than the Company, such entity resulting from such Business Combination, or any employee benefit plan (or related trust) sponsored or maintained by the Company, any Subsidiary or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 25% or more of the combined voting power of the then outstanding shares of Voting Stock of the entity resulting from such Business Combination, and (C) at least a majority of the members of the Board of Directors of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement or of the action of the Board providing for such Business Combination; or

 

(iv)           approval by the shareholders of the Company of a complete liquidation or dissolution of the Company, except pursuant to a Business Combination that complies with clauses (A), (B) and (C) of Section 1(d)(iii).

 

 

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(v)           Notwithstanding anything in the foregoing to the contrary, the consummation of the Agreement and Plan of Merger among KHI Parent Inc., KHI Merger Sub Inc. and Harman International Industries, Incorporated, dated April 26, 2007 (the “KKR Transaction”) shall not constitute a Change in Control.

 

(e)           “Committee” means the Compensation and Option Committee of the Board or such similar committee of the Board comprised of non-officer directors and responsible for executive compensation matters of the Company generally;

 

(f)            “Competitive Activity” means the Executive’s participation, without the Company’s written consent, in the management of any business enterprise if such enterprise engages in substantial and direct competition with the Company or a Subsidiary and the enterprise’s sales of any product or service under the Executive’s supervision competitive with any product or service of the Company or a Subsidiary amounted to 10% of the enterprise’s net sales under the Executive’s supervision for its most recently completed fiscal year and if the Company’s and its Subsidiary’s net sales of said product or service amounted to 10% of the Company’s net sales for its most recently completed fiscal year. “Competitive Activity” will not include (i) the mere ownership of securities in any such enterprise and the exercise of rights appurtenant thereto or (ii) participation in the management of any such enterprise other than in connection with the competitive operations of such enterprise;

 

(g)           “Employee Benefits” means the perquisites, benefits and service credit for benefits as provided under any and all employee retirement income and welfare benefit policies, plans, programs or arrangements in which Executive is entitled to participate, including without limitation any stock option, performance share, performance unit, stock purchase, stock appreciation, savings, pension, supplemental executive retirement, or other retirement income or welfare benefit, deferred compensation, incentive compensation, group or other life, health, medical/hospital or other insurance (whether funded by actual insurance or self-insured by the Company or a Subsidiary), disability, salary continuation, expense reimbursement and other employee benefit policies, plans, programs or arrangements that may now exist or any equivalent successor policies, plans, programs or arrangements that may be adopted by the Company or a Subsidiary, providing perquisites, benefits and service credit for benefits at least as great in the aggregate as are payable thereunder prior to a Change in Control;

 

(h)           “Exchange Act” means the Securities Exchange Act of 1934, as amended from time to time;

 

(i)            “Incentive Pay” means an annual bonus, incentive or other payment of compensation, in addition to Base Pay, made or to be made in regard to services rendered in any year or other period pursuant to any bonus, incentive, profit-sharing, performance, discretionary pay or similar agreement, policy, plan, program or arrangement (whether or not funded) of the Company or a Subsidiary, or any successor thereto;

 

(j)            “Retirement Plans” means the retirement income, supplemental executive retirement, excess benefits and retiree medical, life and similar benefit plans providing retirement perquisites, benefits and service credit for benefits at least as great in the aggregate as are payable thereunder prior to a Change in Control;

 

 

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(k)           “Severance Period” means the period of time commencing six (6) months prior to the date of the first occurrence of a Change in Control and continuing until the earlier of (i) the second anniversary of the occurrence of the Change in Control, or (ii) the Executive’s death; provided, however, that commencing on each anniversary of the Change in Control, the Severance Period will automatically be extended for an additional year unless, not later than 90 calendar days before the anniversary date, either the Company or the Executive shall have given written notice to the other that the Severance Period is not to be so extended.

 

(l)            “Subsidiary” means an entity in which the Company, directly or indirectly, beneficially owns 50% or more of the outstanding Voting Stock;

 

(m)          “Term” means the period commencing as of the date hereof and expiring as of the later of (i) the close of business on December 31, 2012, or (ii) the expiration of the Severance Period.  However, commencing on January 1, 2012 and each January 1 thereafter, the term of this Agreement will automatically be extended for an additional year unless, not later than September 30 of the immediately preceding year, the Company or the Executive shall have given notice that it or the Executive, as the case may be, does not wish to have the Term extended.  Furthermore, if, prior to the date which is six (6) months prior to a Change in Control, the Executive ceases for any reason to be an officer of the Company or any Subsidiary, thereupon without further action the Term shall be deemed to have expired and this Agreement will immediately terminate and be of no further effect. For purposes of this Section, the Executive shall not be deemed to have ceased to be an officer of the Company and any Subsidiary by reason of the transfer of Executive’s employment between the Company and any Subsidiary, or among any Subsidiaries;

 

(n)           “Termination Date” means the date on which the Executive’s employment is terminated (the effective date of which shall be the date of termination, or such other date that may be specified by the Executive if the termination is pursuant to Section 3(b)); provided, however, that if the Termination Date precedes the Change in Control, then any additional payments and benefits that are due upon a Change in Control and that are deferred compensation within the meaning of Section 409A shall be subject to the Section 409A Delay and payable upon the Change in Control; and

 

(o)           “Voting Stock” means securities entitled to vote generally in the election of directors.

 

2.             Operation of Agreement.  This Agreement will be effective and binding immediately upon its execution, but, except for Section 5 (Certain Additional Payments By The Company) (which shall be effective upon execution), anything in this Agreement to the contrary notwithstanding, this Agreement will not be operative unless and until the date which is six (6) months prior to a Change in Control occurs.  If a Change in Control occurs at any time during the Term, this Agreement shall become operative immediately and retroactively including without limitation, notwithstanding that the Term may have since expired.

 

 

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3.             Termination Following a Change in Control.

 

(a)           In the event of the occurrence of a Change in Control, the Executive’s employment may be terminated by the Company or a Subsidiary during the Severance Period and the Executive shall be entitled to the benefits provided by Section 4 as a result thereof or any termination within six (6) months prior to a Change in Control unless such termination is the result of the occurrence of one or more of the following events:

 

(i)            The Executive’s death;

 

(ii)           The Executive becoming permanently disabled within the meaning of, and begins actually receiving disability benefits pursuant to, the long-term disability plan in effect for, or applicable to, Executive immediately prior to the Change in Control; and has been deemed to incur a Disability pursuant to the letter agreement dated May 8, 2007 (the “Employment Agreement”).

 

(iii)           Cause.

 

If, during the Severance Period, the Executive’s employment is terminated by the Company or any Subsidiary other than pursuant to Section 3(a)(i), 3(a)(ii) or 3(a)(iii), the Executive will be entitled to the benefits provided by Section 4 hereof.

 

(b)           In the event of the occurrence of a Change in Control, the Executive may terminate employment with the Company and any Subsidiary during the Severance Period with the right to severance compensation as provided in Section 4 upon the occurrence of one or more of the following events (regardless of whether any other reason, other than Cause, for such termination exists or has occurred, including without limitation other employment) and shall also have such severance compensation in the event he had terminated within six (6) months prior to the Change in Control for Good Reason (as defined in the Employment Agreement):

 

(i)            Failure to elect or reelect or otherwise to maintain the Executive in the office or the position, or a substantially equivalent office or position, of or with the Company and/or a Subsidiary (or any successor thereto by operation of law or otherwise), as the case may be, which the Executive held immediately prior to a Change in Control, or the removal of the Executive as a Director of the Company and/or a Subsidiary (or any successor thereto) if the Executive shall have been a Director of the Company and/or a Subsidiary immediately prior to the Change in Control;

 

(ii)           (A)           A significant adverse change in the nature or scope of the authorities, powers, functions, responsibilities or duties attached to the position with the Company and any Subsidiary which the Executive held immediately prior to the Change in Control, (B) a reduction in the aggregate of the Executive’s Base Pay and Incentive Pay received from the Company and any Subsidiary, or (C) the termination or denial of the Executive’s rights to Employee Benefits or a reduction in the scope or value thereof, any of which is not remedied by the Company within 10 calendar days after receipt by the Company of written notice from the Executive of such change, reduction or termination, as the case may be;

 

 

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(iii)           A determination by the Executive (which determination will be conclusive and binding upon the parties to this Agreement, provided that the determination has been made in good faith and in all events will be presumed to have been made in good faith unless otherwise shown by the Company by clear and convincing evidence) that a change in circumstances has occurred following a Change in Control, including, without limitation, a change in the scope of the business or other activities for which the Executive was responsible immediately prior to the Change in Control, which has rendered the Executive substantially unable to carry out, has substantially hindered Executive’s performance of, or has caused Executive to suffer a substantial reduction in, any of the authorities, powers, functions, responsibilities or duties attached to the position held by the Executive immediately prior to the Change in Control, which situation is not remedied within 10 calendar days after the Company receives written notice from the Executive of such determination;

 

(iv)           The liquidation, dissolution, merger, consolidation or reorganization of the Company or transfer of all or substantially all of its business and/or assets, unless the successor or successors (by liquidation, merger, consolidation, reorganization, transfer or otherwise) to which all or substantially all of its business and/or assets have been transferred (by operation of law or otherwise) assumed all duties and obligations of the Company under this Agreement pursuant to Section 11(a);

 

(v)           The Company relocates its principal executive offices (if such offices are the principal location of Executive’s work), or requires the Executive to have his principal location of work changed, to any location that, in either case, is in excess of 50 miles from the principal executive office’s location immediately prior to the Change in Control, or requires the Executive to travel away from his office in the course of discharging his responsibilities or duties at least 20% more (in terms of aggregate days in any calendar year or in any calendar quarter when annualized for purposes of comparison to any prior year) than was required of Executive in any of the three full years immediately prior to the Change in Control without, in either case, his prior written consent;

 

(vi)           For any reason, or no reason during the thirteenth calendar month following the Change in Control;

 

(vii)          Any reason that is Good Reason under the Employment Agreement;

 

(viii)         Without limiting the generality or effect of the foregoing, any material breach of this Agreement by the Company or any successor thereto which is not remedied by the Company within 10 calendar days after receipt by the Company of written notice from the Executive of such breach.

 

(c)           A termination by the Company pursuant to Section 3(a) or by the Executive pursuant to Section 3(b) will not affect any rights that the Executive may have pursuant to any agreement, policy, plan, program or arrangement of the Company or any Subsidiary providing Employee Benefits, which rights shall be governed by the terms thereof; provided that the Executive shall not be entitled to severance payments under Paragraph 11(iii) of the Employment Agreement if the Executive is entitled to the severance payments provided hereunder.

 

 

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4.             Severance Compensation.

 

(a)           If the Company or Subsidiary terminates the Executive’s employment during the Severance Period other than pursuant to Section 3(a)(i), 3(a)(ii) or 3(a)(iii), or if the Executive terminates his employment pursuant to Section 3(b), the Company will pay to the Executive, subject to Section 18 hereof as to the Section 409A Delay, the amounts described in Sections 1, 2 and 4 of Annex A on the date that is six (6) months and one (1) day after the Termination Date and will continue to provide to the Executive the benefits described in Section 3 of Annex A for the period described therein; provided, however, that no payment that would otherwise be made and no benefit that would otherwise be provided upon a termination of employment that is deferred compensation for purposes of Section 409A shall be made or provided, as the case may be, unless and until such termination of employment also constitutes a separation from service (within the meaning of Section 409A).

 

(b)           Without limiting the rights of the Executive at law or in equity, if the Company fails to make any payment or provide any benefit required to be made or provided under this Agreement on a timely basis, the Company will pay interest on the amount  or value thereof at an annualized rate of interest equal to the so-called composite “prime rate” as quoted from time to time during the relevant period in The Wall Street Journal , plus 2%.  Such interest will be payable as it accrues on demand.  Any change in such prime rate will be effective on and as of the date of such change.

 

(c)           Notwithstanding any provision of this Agreement to the contrary, the parties’ respective rights and obligations under this Section 4 and under Sections 5, 7 and 8 will survive any termination or expiration of this Agreement or the termination of the Executive’s employment following a Change in Control for any reason whatsoever.

 

5.             Certain Additional Payments by the Company.

 

(a)           Anything in this Agreement to the contrary notwithstanding, in the event that it shall be determined (as hereafter provided) that any payment (other than the Gross-Up payments provided for in this Section 5) or distribution by the Company or any of its affiliates to or for the benefit of the Executive, whether paid or payable or distributed or distributable under the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option, performance share, performance unit, stock appreciation right or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a “Payment”), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) (or any successor provision thereto) by reason of being considered “contingent on a change in ownership or control” of the Company, within the meaning of Section 280G of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such tax (such tax or  taxes, together with any such interest and penalties, being hereafter collectively referred to as the “Excise Tax”), then the Executive shall be entitled to receive, and the Company shall be required to pay, an additional payment or payments (collectively, a “Gross-Up Payment”); provided, however, that no Gross-up Payment shall be made with respect to the Excise Tax, if any, attributable to (i) any incentive stock option, as defined by Section 422 of the Code (“ISO”) granted prior to the execution of this Agreement, or (ii) any stock appreciation or similar right, whether or not limited, granted in tandem with any ISO described in clause (i).  The Gross-Up Payment shall be in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.

 

 

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(b)           Subject to the provisions of Section 5(f), all determinations required to be made under this Section 5, including whether an Excise Tax is payable by the Executive and the amount of such Excise Tax and whether a Gross-Up Payment is required to be paid by the Company to the Executive and the amount of such Gross-Up Payment, if any, shall be made by a nationally recognized accounting firm (the “Accounting Firm”) selected by the Executive in his sole discretion.  The Executive shall direct the Accounting Firm to submit its determination and detailed supporting calculations to both the Company and the Executive within 30 calendar days after the Termination Date, if applicable, and any such other time or times as may be requested by the Company or the Executive.  If the Accounting Firm determines that any Excise Tax is payable by the Executive, the Company shall pay the required Gross-Up Payment to the Executive within five business days after receipt of such determination and calculations with respect to any Payment to the Executive.  If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall, at the same time as it makes such determination, furnish the Company and the Executive an opinion that the Executive has substantial authority not to report any Excise Tax on his federal, state or local income or other tax return.  As a result of the uncertainty in the application of Section 4999 of the Code (or any successor provision thereto) and the possibility of similar uncertainty regarding applicable state or local tax law at the time of any determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made (an “Underpayment”), consistent with the calculations required to be made hereunder.  In the event that the Company exhausts or fails to pursue its remedies pursuant to Section 5(f) and the Executive thereafter is required to make a payment of any Excise Tax, the Executive shall direct the Accounting Firm to determine the amount of the Underpayment that has occurred and to submit its determination and detailed supporting calculations to both the Company and the Executive as promptly as possible.  Any such Underpayment shall be promptly paid by the Company to, or for the benefit of, the Executive within five business days after receipt of such determination and calculations.

 

(c)           The Company and the Executive shall each provide the Accounting Firm access to and copies of any books, records and documents in the possession of the Company or the Executive, as the case may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting Firm in connection with the preparation and issuance of the determinations and calculations contemplated by Section 5(b).  Any determination by the Accounting Firm as to the amount of the Gross-Up Payment shall be binding upon the Company and the Executive.

 

 

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(d)           The federal, state and local income or other tax returns filed by the Executive shall be prepared and filed on a consistent basis with the determination of the Accounting Firm with respect to the Excise Tax payable by the Executive.  The Executive shall make proper payment of the amount of any Excise Tax, and at the request of the Company, provide to the Company true and correct copies (with any amendments) of the applicable portions of his federal income tax return as filed with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as filed with the applicable taxing authority, and such other documents reasonably requested by the Company, evidencing such payment.  If prior to the filing of the Executive’s federal income tax return, or corresponding state or local tax return, if relevant, the Accounting Firm determines that the amount of the Gross-Up Payment should be reduced, the Executive shall within five business days pay to the Company the amount of such reduction.

 

(e)           The fees and expenses of the Accounting Firm for its services in connection with the determinations and calculations contemplated by Section 5(b) shall be borne by the Company.  If such fees and expenses are initially paid by the Executive, the Company shall reimburse the Executive the full amount of such fees and expenses within five business days after receipt from the Executive of a statement therefor and reasonable evidence of Executive’s payment thereof.

 

(f)            The Executive shall notify the Company in writing of any claim by the Internal Revenue Service or any other taxing authority that, if successful, would require the payment by the Company of a Gross-Up Payment.  Such notification shall be given as promptly as practicable but no later than 10 business days after the Executive actually receives notice of such claim and the Executive shall further apprise the Company of the nature of such claim and the date on which such claim is requested to be paid (in each case, to the extent known by the Executive).  The Executive shall not pay such claim prior to the earlier of (i) the expiration of the 30-calendar-day period following the date on which he gives such notice to the Company and (ii) the date that any payment of amount with respect to such claim is due.  If the Company notifies the Executive in writing prior to the expiration of such period that it desires to contest such claim, the Executive shall:

 

(i)            provide the Company with any written records or documents in his possession relating to such claim reasonably requested by the Company;

 

(ii)           take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including without limitation accepting legal representation with respect to such claim by an attorney competent in respect of the subject matter and reasonably selected by the Company;

 

(iii)           cooperate with the Company in good faith in order effectively to contest such claim; and

 

 

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(iv)           permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including interest and penalties) incurred in connection with such contest and shall indemnify and hold harmless the Executive, on an after-tax basis, for and against any Excise Tax or income tax, including interest and penalties with respect thereto, imposed as a result of such representation and payment of costs and expenses.  Without limiting the foregoing provisions of this Section 5(f), the Company shall control all proceedings taken in connection with the contest of any claim contemplated by this Section 5(f) and, at its sole option, may pursue or forego any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim (provided, however, that the Executive may participate therein at his own cost and expense) and may, at its option, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Executive to pay the tax claimed and sue for a refund, the Company shall advance the amount of such payment to the Executive on an interest-free basis and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income or other tax, including interest or penalties with respect thereto, imposed with respect to such advance; and provided further, however, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which the contested amount is claimed to be due is limited solely to such contested amount.  Furthermore, the Company’s control of any such contested claim shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

 

(g)           If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 5(f), the Executive receives any refund with respect to such claim, the Executive shall (subject to the Company’s complying with the requirements of Section 5(f)), promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after any taxes applicable thereto).  If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 5(f), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial or refund prior to the expiration of 30 calendar days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of any such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid by the Company to the Executive pursuant to this Section 5.

 

(h)           In the event any obligation of the Executive to repay any amounts due hereunder would be a violation of the “loan” provision of the Sarbanes-Oxley Act, such obligation shall be treated as null and void ab initio.

 

(i)            For the avoidance of any doubt, the Company’s obligations to Executive under this Section 5 remain in full force and effect with respect to the KKR Transaction regardless of Executive’s agreement to exclude the KKR Transaction from the definition of Change in Control hereunder.

 

 

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(j)            Notwithstanding the foregoing provisions of Section 5, (i) a Gross-Up Payment, or portion thereof, attributable to Section 1 or Section 4 of Annex A will be subject to the Section 409A Delay, (ii) Gross-Up Payments will be paid no later than the time prescribed therefor by Section 1.409A-3(i)(1)(v) of the Treasury Regulations; and (iii) reimbursements under Section 5(e) and Section 5(f) shall be paid no later than December 31 of the calendar year following the calendar year in which the related expense is incurred; provided that in no event shall the reimbursement provided by the Company in one taxable year affect the amount of reimbursement provided in any other taxable year nor shall Executive’s right to reimbursement be subject to liquidation or exchange for another benefit.

 

6.             No Mitigation Obligation.  The Company hereby acknowledges that it will be difficult and may be impossible for the Executive to find reasonably comparable employment following the Termination Date and that the non-competition covenant contained in Section 8 will further limit the employment opportunities for the Executive.  In addition, the Company acknowledges that its severance pay plans applicable in general to its salaried employees do not provide for mitigation, offset or reduction of any severance payment received thereunder.  Accordingly, the payment of the severance compensation by the Company to the Executive in accordance with the terms of this Agreement is hereby acknowledged by the Company to be reasonable, and the Executive will not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise, nor will any profits, income, earnings or other benefits from any source whatsoever create any mitigation, offset, reduction or any other obligation on the part of the Executive under this agreement or otherwise.

 

7.             Legal Fees and Expenses.

 

(a)            The Executive shall not be required to incur legal fees and the related expenses associated with the interpretation, enforcement or defense of Executive’s rights under this Agreement by litigation or otherwise because such costs substantially would detract from the Executive’s benefits under this Agreement.  Accordingly, if it should appear to the Executive that the Company has failed to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes or threatens to take any action to declare this Agreement void or unenforceable, or institutes any litigation or other action or proceeding designed to deny, or to recover from, the Executive the benefits provided or intended to be provided to the Executive hereunder, the Company irrevocably  authorizes the Executive from time to time to retain counsel of Executive’s choice, at the expense of the Company as hereafter provided, to advise and represent the Executive in connection with any such interpretation, enforcement or defense, including without limitation the initiation or defense of any litigation or other legal action, whether by or against the Company or any Director, officer, stockholder or other person affiliated with the Company, in any jurisdiction.  Notwithstanding any existing or prior attorney-client relationship between the Company and such counsel, the Company irrevocably consents to the Executive’s entering into an attorney-client relationship with such counsel, and in that connection the Company and the Executive agree that a confidential relationship shall exist between the Executive and such counsel.  Without respect to whether the Executive prevails, in whole or in part, in connection with any of the foregoing, the Company will pay and be solely financially responsible for any and all attorneys’ and related fees and expenses incurred by the Executive in connection with any of the foregoing.  However, if the Executive brings an action in bad faith, or with no colorable claim of success, the Company shall not pay for any of Executive’s attorneys’ fees or related expenses.

 

 

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(b)           Without limiting the obligations of the Company under Section 7(a) of this Agreement, in the event a Change in Control occurs, the performance of the Company’s obligations under this Section 7 shall be secured by amounts deposited or to be deposited in trust pursuant to certain trust agreements to which the Company shall be a party, which amounts deposited shall in the aggregate be not less than $1,000,000, providing that the fees and expenses of counsel selected from time to time by the Executive pursuant to Section 7(a) shall be paid, or reimbursed to the Executive if paid by the Executive, either in accordance with the terms of such trust agreements, or, if not so provided, on a regular, periodic basis upon presentation by the Executive to the trustee of a statement or statements prepared by such counsel in accordance with its customary practices.  Any failure by the Company to satisfy any of its obligations under this Section 7(b) shall not limit the rights of the Executive hereunder.  Subject to the foregoing, the Executive shall have the status of a general unsecured creditor of the Company and shall have no right to, or security interest in, any assets of the Company or any Subsidiary.

 

(c)           The reimbursement obligations of the Company under Section 7(a) and Section 7(b) will be subject to the requirements of Section 5(j)(iii).

 

8.           Competitive Activity; Confidentiality; Nonsolicitation.

 

(a)           For a period ending one year following the Termination Date, if the Executive shall have received or shall be receiving benefits under Section 4, the Executive shall not, without the prior written consent of the Company, which consent shall not be unreasonably withheld, engage in any Competitive Activity; provided that the foregoing shall not apply if the Termination Date was prior to the Change in Control and Executive had already commenced such activity.

 

(b)           During the Term, the Company agrees that it will disclose to Executive its confidential or proprietary information (as defined in this Section 8(b)) to the extent necessary for Executive to carry out his obligations to the Company.  The Executive hereby covenants and agrees that he will not, without the prior written consent of the Company, during the Term or thereafter disclose to any person not employed by the Company, or use in connection with engaging in competition with the Company, any confidential or proprietary information of the Company.  For purposes of this Agreement, the term “confidential or proprietary information” will include all information of any nature and in any form that is owned by the Company and that is not publicly available (other than by Executive’s breach of this Section 8(b)) or generally known to persons engaged in businesses similar or related to those of the Company.  Confidential or proprietary information will include, without limitation, the Company’s financial matters, customers, employees, industry contracts, strategic business plans, product development (or other proprietary product data), marketing plans, and all other secrets and all other information of a confidential or proprietary nature.  For purposes of the preceding two sentences, the term “Company” will also include any Subsidiary (collectively, the “Restricted Group”).  The foregoing obligations imposed by this Section 8(b) will not apply (i) during the Term, in the course of the business of and for the benefit of the Company, (ii) if such confidential or proprietary information will have become, through no fault of the Executive, generally known to the public or (iii) if the Executive is required by law to make disclosure (after giving the Company notice and, to the extent feasible, an opportunity to contest such requirement).

 

 

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(c)           The Executive hereby covenants and agrees that during the Term and for one year thereafter Executive will not, without the prior written consent of the Company, which consent shall not unreasonably be withheld, on behalf of Executive or on behalf of any person, firm or company, directly or indirectly, attempt to influence, persuade or induce, or assist any other person in so persuading or inducing, any management employee of the Restricted Group to give up employment with the Restricted Group, provided the foregoing shall not be violated by advertising or searches not specifically targeted at the management employees of the Restricted Group; or serving as a reference.

 

(d)           Executive and the Company agree that the covenants contained in this Section 8 are reasonable under the circumstances, and further agree that if in the opinion of any court of competent jurisdiction any such covenant is not reasonable in any respect, such court will have the right, power and authority to excise or modify any provision or provisions of such covenants as to the court will appear not reasonable and to enforce the remainder of the covenants as so amended.  Executive acknowledges and agrees that the remedy at law available to the Company for breach of any of his obligations under this Section 8 would be inadequate and that damages flowing from such a breach may not readily be susceptible to being measured in monetary terms.  Accordingly, Executive acknowledges, consents and agrees that, in addition to any other rights or remedies that the Company may have at law, in equity or under this Agreement, upon adequate proof of his violation of any such provision of this Agreement, the Company will be entitled to immediate injunctive relief and may obtain a temporary order restraining any threatened or further breach, without the necessity of proof of actual damage.

 

9.             Employment Rights.  Nothing expressed or implied in this Agreement will create any right or duty on the part of the Company or the Executive to have the Executive remain in the employment of the Company or any Subsidiary prior to or following any Change in Control.

 

10.           Withholding of Taxes.  The Company may withhold from any amounts payable under this Agreement all federal, state, city or other taxes as the Company is required to withhold pursuant to any applicable law, regulation or ruling.

 

11.           Successors and Binding Agreement.

 

(a)           The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company, by agreement in form and substance reasonably satisfactory to the Executive, expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place.  This Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the “Company” for the purposes of this Agreement), but will not otherwise be assignable, transferable or delegable by the Company.

 

 

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(b)           This Agreement will inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees.

 

(c)           This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in Sections 11(a) and 11(b).  Without limiting the generality or effect of the foregoing, the Executive’s right to receive payments hereunder will not be assignable, transferable or delegable, whether by pledge, creation of a security interest, or otherwise, other than by a transfer by Executive’s will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this Section 11(c), the Company shall have no liability to pay any amount so attempted to be assigned, transferred or delegated.

 

12.           Notices.  For all purposes of this Agreement, all communications, including without limitation notices, consents, requests or approvals, required or permitted to be given hereunder will be in writing and will be deemed to have been duly given when hand delivered or dispatched by electronic facsimile transmission (with receipt thereof orally confirmed), or five business days after having been mailed by United States registered or certified mail, return receipt requested, postage prepaid, or three business days after having been sent by a nationally recognized overnight courier service such as FedEx, UPS, or Purolator, addressed to the Company (to the attention of the Secretary of the Company) at its principal executive office and to the Executive at his address on the books of the Company, or to such other address as any party may have furnished to the other in writing and in accordance herewith, except that notices of changes of address shall be effective only upon receipt.

 

13.           Governing Law.  The validity, interpretation, construction and performance of this Agreement will be governed by and construed in accordance with the substantive laws of the State of Delaware, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction.

 

14.           Consent to Jurisdiction.  Any disputes, litigation, proceedings or other legal actions by any party to this Agreement in connection with or relating to this Agreement or any matters described or contemplated in this Agreement may be instituted in the courts of the State of Delaware or of the United States sitting in the State of Delaware.  Each party to this Agreement irrevocably submits to the jurisdiction of the courts of the State of Delaware and of the United States sitting in the State of Delaware in connection with any such dispute, litigation, proceeding or other legal action arising out of or relating to this Agreement.

 

15.           Validity.  If any provision of this Agreement or the application of any provision hereof to any person or circumstances is held invalid, unenforceable or otherwise illegal, the remainder of this Agreement and the application of  such provision to any other person or circumstances will not be affected, and the provision so held to be invalid, unenforceable or otherwise illegal will be reformed to the extent (and only to the extent) necessary to make it enforceable, valid or legal.

 

 

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16.           Miscellaneous.  No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing signed by the Executive and the Company.  No waiver by either party to this Agreement at any time of any breach by the other contracting party or compliance with any condition or provision of this Agreement to be performed by such other party will be deemed a waiver of similar or dissimilar provisions or conditions at the same or at any prior or subsequent time.  No agreements or representations, oral or otherwise, expressed or implied with respect to the subject matter hereof have been made by either party which are not set forth expressly in this Agreement.  References to Sections are to references to Sections of this Agreement.

 

17.           Code Section 409A.  The intent of the parties is that payments and benefits under this Agreement comply with or be exempt from Internal Revenue Code Section 409A and the regulations and guidance promulgated thereunder (collectively “Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted and administered to be in compliance therewith.  To the extent that there is a material risk that any payments under this Agreement may result in the imposition of an additional tax to the Executive under Section 409A, the Company will reasonably cooperate with the Executive to amend this Agreement such that payments hereunder comply with Section 409A without materially changing the economic value of this Agreement to either party.  The Company shall use its best efforts to ensure ongoing compliance with Section 409A.  Notwithstanding any provision in this Agreement to the contrary, no payment or benefit that is deferred compensation for purposes of Section 409A and that is due upon the Executive’s termination of employment will be paid or provided unless such termination is also a separation from service (within the meaning of Section 409A).  For purposes of Section 409A, the Executive’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.  Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.

 

18.           Section 409A Delay.  If the Executive is at the time of his separation from service (as defined in Section 409A) with the Company (other than as a result of his death) a “Specified Employee”, as such term is defined under Section 409A and using the identification methodology selected by the Company from time to time, then with regard to any payment or the provision of any benefit that is considered deferred compensation under Section 409A and that is payable on account of a separation from service shall be delayed until the earlier of his death or six (6) months after his separation from service (the “Section 409A Delay”) and shall then be promptly paid to the Executive in a lump sum, together with interest for the period of delay, compounded annually, equal to the prime rate (as published in the Wall Street Journal) and in effect as of the date the payment should otherwise have been provided, and any remaining payments and benefits due under this letter shall be paid or provided in accordance with the normal payment dates specified for them herein.

 

19.           Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same agreement.

 

 

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20.           Prior Agreement.  This Agreement amends and restates the Agreement dated as of May 8, 2008 (the “Prior Agreement”) between the Company and the Executive, which Prior Agreement will, without further action, be superseded as of the date first above written.

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered as of the date first above written.

 

 

HARMAN INTERNATIONAL

 

INDUSTRIES, INCORPORATED

 

 

 

 

 

 

 

 

 

By:

/s/ John Stacey

 

 

John Stacey

 

 

 

Chief Human Resources Officer

 

 

 

 

 

EXECUTIVE:

 

 

 

 

 

 

 

 

 

 

/s/ Dinesh Paliwal

 

Dinesh Paliwal

 

 

 

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ANNEX A

 

SEVERANCE COMPENSATION

 

(1)

(i) A lump sum payment in an amount equal to three times the sum of (A) Base Pay (at the highest rate in effect for any period prior to the Termination Date), plus (B) Incentive Pay (in an amount equal to not less than the highest aggregate Incentive Pay earned in any of the three fiscal years immediately preceding the year in which the Change in Control occurred, but in no event less than the Target Bonus under the Executive’s Employment Agreement).

(2)

For a period of eighteen months following the Termination Date (the “Continuation Period”), the Company will arrange to provide the Executive (and his dependents) with coverage under the Company’s medical, dental or other health plan, but only to the extent that the Executive makes a payment to the Company in an amount equal to the monthly COBRA premium payments on a timely basis required to maintain such coverage commencing with the first calendar month following the Termination Date and the Company shall reimburse the Executive on an after-tax basis for the amount of such premiums, if any, in excess of any employee contributions necessary to maintain such coverage for the Continuation Period (the “COBRA Reimbursement”).  The COBRA Reimbursement shall be subject to Section 18 and shall be made within 30 days following the date on which Executive incurs the expense but no later than December 31 of the year following the year in which Executive incurs the related expense; provided, that in no event shall the reimbursements or in-kind benefits to be provided by the Company in one taxable year affect the amount of reimbursements or in-kind benefits to be provided in any other taxable year, nor shall Executive’s right to reimbursement or in-kind benefits be subject to liquidation or exchange for another benefit.

 

(3)

Outplacement services for one year after the Termination Date by a firm selected by the Executive, at the expense of the Company in an amount up to 20% of the Executive’s Base Pay.

(4)

A lump sum payment in the amount of $30,000 representing the cost of welfare benefits for two years (less those provided under (2)) above plus a gross up so the Executive has no after tax cost therefor.  Any tax gross-up payment provided will be made no later than the end of the calendar year immediately following the calendar year in which the Executive remits the related taxes.

 

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