Exhibit 10.3
AMENDED AND RESTATED
SEVERANCE
AGREEMENT
THIS AMENDED AND RESTATED SEVERANCE AGREEMENT
(the “ Agreement ”), dated as of December 22,
2008, is made and entered by and between Harman International
Industries, Incorporated (“ Harman ” or,
including any successor thereto, the “ Company
”), a Delaware corporation, and Herbert K. Parker (the
“ Executive ”).
WHEREAS, the Executive is 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 ” means that, prior to any termination pursuant
to Section 3(b), the Executive shall have:
(i)
been convicted of a criminal violation involving
fraud, embezzlement or theft in connection with his duties or in
the course of his employment with the Company or any
Subsidiary;
(ii) committed
intentional wrongful damage to property of Harman or any Harman
subsidiary;
(iii) committed
intentional wrongful disclosure of secret processes or confidential
information of Harman or any Subsidiary; or
(iv) committed
intentional wrongful engagement in any Competitive
Activity;
and any such
act shall have been demonstrably and materially harmful to
Harman. For purposes of this Agreement, no act or
failure to act on the part of the Executive shall be deemed
“intentional” if it was due primarily to an error in
judgment or negligence, but shall be deemed
“intentional” only if done or omitted to be done by the
Executive not in good faith and without reasonable belief that the
Executive’s action or omission was in the best interest of
Harman. Notwithstanding the foregoing, the Executive
shall not be deemed to have been terminated for “Cause”
hereunder unless and until there shall have been delivered to the
Executive a copy of a resolution duly adopted by the affirmative
vote of a majority of the Committee then in office at a meeting of
the Committee called and held for such purpose, after reasonable
notice to the Executive and an opportunity for the Executive,
together with the Executive’s counsel (if the Executive
chooses to have counsel present at such meeting), to be heard
before the Committee, finding that, in the good faith opinion of
the Committee, the Executive had committed an act constituting
“Cause” as defined in this Agreement and specifying the
particulars thereof in detail. Nothing in this Agreement
will limit the right of the Executive or his beneficiaries to
contest the validity or propriety of any such
determination;
(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 (as
defined in Section 1(d)(iii) below) 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).
(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 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 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
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, as defined below, 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 anything in this Agreement to
the contrary notwithstanding, this Agreement will not be operative
unless and until the date which is six 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 of any termination within six 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; or
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 employment
upon the occurrence of one or more of the following events within
six months prior to the Change in Control:
(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; or
(vi) 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 a
severance payment or benefit under any other agreement with the
Company, including, without limitation, any employment agreement,
if the Executive is entitled to a comparable payment or benefit
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 amount described in Paragraph (a) of Annex
A within five business days after the Termination Date and will
continue to provide to the Executive the benefits described in
Paragraphs (b) and (c) of Annex A for the periods 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
a
