Exhibit 10.1
[FORM]
SEVERANCE
AGREEMENT
THIS SEVERANCE AGREEMENT (the
“Agreement”), dated as of _______________, 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 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 (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 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 of 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; 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 (6) 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 Execut
