exv10w2



 





Exhibit 10.2




HARMAN INTERNATIONAL

MANAGEMENT INCENTIVE COMPENSATION PLAN

FOR GROUP EXECUTIVE AND KEY OPERATING MANAGERS




This Management Incentive Compensation Plan (“Plan”) of Harman International Industries,
Incorporated (“Company”) is designed to reward key managers for achieving or exceeding objectives
set forth in the Company’s business plan for the applicable fiscal year (“Plan Objectives”).



TARGET BONUS PERCENTAGE:




Each Plan participant is assigned a target bonus expressed as a percentage of base salary based on
his/her position in the Company. Hence, a Plan participant with an annual salary of $100,000 and a
target bonus percentage of 20% would be entitled to a target bonus of $20,000 if the applicable
organizational unit(s) for which he/she works achieves its Plan Objectives with respect to the
performance parameters described below and if the Plan participant achieves his/her personal
objectives.



The Chief Executive Officer of the Company shall establish target bonus percentages for all Plan
participants, other than executive officers, during the first quarter beginning of each fiscal
year. The Compensation and Option Committee shall establish target bonus percentages for all Plan
participants who are executive officers during the first quarter of each fiscal year.



PLAN PARTICIPANTS:




The Plan is designed to reward key employees whose actions have a direct and significant impact on
the results of the Company. Plan participants will be designated by the Chief Executive Officer of
the Company, and in the case of executive officers confirmed by the Compensation and Option
Committee, during the first quarter of each fiscal year and should be limited to key employees of
the Company. Sales personnel are typically not included in this Plan because they are covered by a
sales incentive plan.



PAYOUT PERCENTAGE:




The payout percentage is determined by a Plan participant’s organizational unit’s or units’
performance against the Plan Objectives with respect to the performance parameters described below.
The payout percentage can range from 50% to 150%. If a Plan participant’s organizational unit(s)
achieves its Plan Objectives for each of the performance parameters, the payout percentage is 100%.
Hence, a Plan participant with an annual base salary of $100,000 and a target bonus percentage of
20% would receive the following bonus if his/her organizational unit(s) achieves its Plan
Objectives with respect to each of the performance parameters described below.



			
	 	 	 
	 	 	 
	 
	 	Page 1 of 4






 









 





Base Salary x Target Bonus x Payout Percentage = Bonus Amount

$100,000 x 20% x 100% = $20,000




For executive officers, the Compensation and Option Committee, in its sole discretion, will approve
a minimum and maximum point for each performance parameter during the first quarter of each fiscal
year.



For all other Plan participants, the Executive Committee, in its sole discretion, will set a
minimum and maximum point for each performance parameter during the first quarter of each fiscal
year. At the minimum point, the payout percentage is 50%. At the maximum point, the payout
percentage is 150%. If an organizational unit does not reach a combined payout percentage of 50%,
no bonus is earned.



The payout percentage is determined using a linear interpolation between the minimum point and Plan
Objective or Plan Objective and the maximum point, as applicable.



PERFORMANCE PARAMETERS:




The parameters on which the payout percentage is based typically include Revenue Growth, with a
weight of 20%, Operating Income, with a weight of 30%, Free Cash Flow with a weight of 30% and
Global Footprint Index with a weight of 20%. Other parameters and other weightings may be used
occasionally, as circumstances require and as approved by the Compensation and Option Committee
with respect to executive officers and by the Chief Executive Officer of the Company with respect
to all other Plan participants.



Free cash flow is calculated as operating income plus depreciation and amortization plus change in
working capital (net accounts receivable from third parties, net inventories, less trade accounts
payable to third parties).

The Global Footprint Index has three components:




	 	•	 	Capital expenditures in low-cost countries as a percentage of the total budget.
	 
	 	•	 	Full-time equivalent employees in low-cost countries as a percentage of the total
budget.
	 
	 	•	 	Material purchases in low-cost countries as a percentage of the total budget.





All intercompany accounts are excluded.



			
	 	 	 
	 	 	 
	 
	 	Page 2 of 4






 









 





ACCRUAL:




Earnings used in any bonus calculation must include the accrual for the bonuses being contemplated.
Otherwise, earnings will be adjusted in the determination of the bonus amount.



INDIVIDUAL PERFORMANCE:




Once the bonus amount for a Plan participant has been determined under the calculations described
above, that amount is multiplied by a factor reflecting the Plan participant’s performance against
his/her personal objectives. The multiplier can range from zero to 120%. A Plan participant who
does not meet his/her personal objectives could receive no bonus even if his/her organizational
unit achieved its Plan Objectives.



A Plan participant’s performance rating is determined by the Chief Executive Officer for direct
reports (subject to approval by the Compensation and Option Committee for executive officers) and
division presidents for all other Plan participants.



MAXIMUM BONUS




The maximum bonus payable to any Plan participant is 150% of his/her target bonus. Hence, the
maximum bonus payable to a Plan participant with a target bonus of 20% is 30% of his/her base
salary. In no event, may any Plan participant’s bonus exceed 100% of his/her annual base salary.



PAYMENT:




The bonus amount will be paid to each Plan participant on the 70th day after the end of the
Company’s fiscal year.



INTERNAL REVENUE CODE SECTION 409A:




It is intended that the provisions of this Plan comply with Section 409A of the Internal Revenue
Code of 1986. All provisions of the Plan shall be construed and interpreted in a manner consistent
with the requirements for avoiding taxes or penalties under Section 409A.



If, at the time of a Plan participant’s separation from service (within the meaning of Section
409A), (i) the Plan participant is a specified employee (within the meaning of Section 409A and
using the identification methodology selected by the Company from time to time) and (ii) the
Company makes a good faith determination that an amount payable hereunder constitutes deferred
compensation (within the meaning of Section 409A) the payment of which is required to be delayed
pursuant to the six-month delay rule set forth in Section



			
	 	 	 
	 	 	 
	 
	 	Page 3 of 4






 









 





409A in order to avoid taxes or penalties under Section 409A, then the Company shall not pay such
amount on the otherwise scheduled payment date but shall instead pay it, without interest, on the
first business day after such six-month period expires.



Notwithstanding any provision of this Plan to the contrary, in light of the uncertainty with
respect to the proper application of Section 409A, the Company reserves the right to make such
amendments to this Plan as the Company deems necessary or desirable to avoid the imposition of
taxes or penalties under Section 409A. In any case, Plan participants shall be solely responsible
and liable for the satisfaction of all taxes and penalties that may be imposed on them in
connection with this Plan (including any taxes and penalties under Section 409A), and neither the
Company nor any of its affiliates shall have any obligation to indemnify or otherwise hold any Plan
participant harmless from any or all of such taxes or penalties.



ELIGIBILITY:




An employee must be on the active payroll for at least six months of the fiscal year and be on the
active payroll at the time of the distribution of the bonus in order to be eligible for a bonus
award. Employees with at least six months of service in a fiscal year are eligible for a prorated
bonus. Employees with less than six months of service are not eligible for a bonus in that fiscal
year.



ACTUAL RESULTS:




Actual results may be adjusted at the sole discretion of Company management, and in the case of
executive officers confirmed by the Compensation and Option Committee, to reflect extraordinary
circumstances, windfall profits or force majeure.



			
	 	 	 
	 	 	 
	 
	 	Page 4 of 4