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).
(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;
(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.
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”).
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;
(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.
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
