FORM OF
SEVERANCE
AGREEMENT
THIS SEVERANCE AGREEMENT (the “
Agreement ”), dated as of _________, 2009, is made and
entered by and between Harman International Industries,
Incorporated (“ Harman ” or, including any
successor thereto, the “ Company ”), a Delaware
corporation, and _____________ (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. 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 sub
