exv10w2



 





Exhibit 10.2




     November 29, 2007



     Mr. Dinesh Paliwal



     Dear Dinesh:



     Reference is made to the Letter Agreement, as amended, dated as of May 8, 2007 (the “Letter
Agreement”) by and between Harman International Industries, Incorporated (the “Company”) and you.
Capitalized terms not defined herein shall have the meanings ascribed to such terms in the Letter
Agreement.



     The purpose of this letter is to evidence certain additional understandings between you and
the Company, as follows:



     1. Paragraph 4 of the Letter Agreement shall be amended by adding the following sentence at
the end thereof:




You shall receive an additional cash payment in the amount of $350,000 (less applicable
withholding) on March 1, 2008 if you are then employed by the Company or have ceased
employment with the Company prior thereto as a result of death, a termination by the Company
without Cause or for Disability or a termination by you for Good Reason (a “Protected
Termination”).



     2. The fourth and the fifth sentences of Paragraph 6 of the Letter Agreement are hereby
deleted and replaced with the following new sentences:




You will also be eligible for an annual equity grant (the “Annual Equity Grant”) beginning
with September 2008, and each September thereafter, under the Company’s then in force equity
award plan. The Annual Equity Grant will have a grant date value equal to two (2) times the
annual bonus awarded to you in respect of the immediately preceding fiscal year. The Annual
Equity Grant will consist of a combination of twenty-five percent (25%) stock options (the
“Annual Stock Options”) and seventy-five (75%) percent restricted stock units (the “Annual
RSUs”). To the extent that the required grant amounts exceed any applicable equity plan
limits, you and the Compensation Committee will mutually agree on an alternative
compensation award equal to the value of such excess. The portion of the grant date value
of the Annual Equity Grant in respect of shares underlying (i) the Annual Stock Option shall
be determined using the Black-Scholes methodology utilized by the Company for financial
reporting purposes as of the date of grant, and (ii) the Annual RSUs shall be determined
based on the fair market value of the shares of Company common stock (or that of any
successor) on the date of grant. The Stock Option Award, the Annual Stock Options and the
Annual RSUs (or the alternative compensation award) shall vest 20% per year over five years
commencing on the first anniversary of the grant date, with acceleration and exercise
periods as provided in Exhibit A for the Stock Option Award, and Exhibit A (but with full
vesting on Protected Terminations) for the Annual Stock Option and Exhibit H for the Annual
RSUs. The grants shall be in the forms respectively of Exhibit A for the options and
Exhibit H for the Annual RSUs; provided that in the event the Company’s equity plans in
effect permit the grant and vesting of the Annual RSUs consistent with the terms set forth



 









 







herein, the Company may grant such Annual RSUs under any such plan and provide for the
settlement of such RSUs in shares of the Company’s common stock. The Stock Option Award,
the Annual Stock Option award and the Annual RSUs will provide for an automatic reduction in
the number of shares otherwise required to be delivered to you, as applicable, to cover
minimum required withholding and, in the case of options, to pay the exercise price in all
cases, unless and to the extent such reduction is prohibited by a material financing or
other agreement that restricts the ability of the Company to permit such reduction.



     3. The Letter Agreement is hereby amended by adding the following new Paragraph 7(e).




You will receive a special one-time award of 34,608 restricted stock units (the “Special
RSUs”) on January 2, 2008. The Special RSUs shall vest as follows: 8,039 Special RSUs shall
vest at the same time as the Restricted Stock Award prescribed by Paragraph 7(a), 17,993
Special RSUs shall vest at the same time and in the same proportion as the Inducement Stock
Award prescribed by Paragraph 7(b) and 8,576 Special RSUs shall vest at the same time and in
the same proportion as the Equity Replacement Award prescribed by Paragraph 7(c) provided
that in all cases the award shall fully vest on a Protected Termination. Such awards shall
be in the form of Exhibit H.



     4. The Letter Agreement is hereby amended by adding the following new Paragraph 7(f).




(i) The Parties hereby agree that on November 9, 2012 (the “Measurement Date”), you will be
entitled to a cash payment (the “Special Bonus”), determined as follows:




(A) The Enterprise Value of Harman as of close of business on November 9, 2007 shall be
calculated (the “Base EV”).




(B) The Enterprise Value of Harman as of close of business on November 9, 2012 shall be
calculated (the “Final EV”).




(C) If the Final EV is not greater than 1.3 times the Base EV, no payment will be made. If
the Final EV is two (2) times the Base EV, a payment of fifty million dollars ($50,000,000)
will be made to you. If the Final EV is three (3) times or more the Base EV, a payment of
seventy-five million dollars ($75,000,000) will be made to you. If Final EV is between 1.3
times and 2 times or 2 times and 3 times the Base EV, straight line interpolation between
the applicable levels shall be used to determine the amount due you.




(D) Payment under this paragraph 7(f) shall be reduced by the sum of (a) the excess, if any,
of the fair market value of 100,000 shares of Harman common stock on the Measurement Date
(or if, applicable the CIC Date, as defined below) over the aggregate exercise price of the
Stock Option Award and (b) the excess, if any, of the fair market value of 100,000 shares of
Harman common stock on the Measurement Date (or, if applicable, the CIC Date) over the
aggregate exercise price of the option granted to you on October 18, 2007 (the “Additional
Stock Option Award”). The foregoing shall apply



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whether or not you exercise the options prior to the Measurement Date (or, if applicable,
the CIC Date).




(E) Subject to clause (iii) below, you will be paid the Special Bonus on the 70th
day following the Measurement Date.




(F) For the avoidance of doubt, the Special Bonus will not be taken into account for
purposes of determining your “Compensation” as that term is used in the Harman International
Industries, Incorporated Supplemental Executive Retirement Plan.




(ii) Upon termination of your employment prior to the Measurement Date, you shall be
eligible for the Special Bonus, if any, determined as follows:




(A) Upon termination of your employment with Harman, other than for a Protected Termination,
you shall forfeit any right to the Special Bonus.




(B) Upon termination of your employment due to death or Disability prior to the Measurement
Date, you (or your estate, in the event of your death) shall receive on the date specified
in clause (i)(E) above a pro rata portion of the Special Bonus, if any, determined by
multiplying the amount of the Special Bonus by a fraction, the numerator of which is the
number of full or partial months from November 9, 2007 to the date of your death or
Disability, as applicable, and the denominator of which is 60 (the “Pro Rata Portion”).




(C) Upon termination of your employment by the Company (other than for Cause, death or
Disability) or by you for Good Reason, you will be entitled to the Special Bonus, if any, at
the date specified in clause (i)(E) above as follows: 50% of the Special Bonus, if such
termination occurs on or prior to November 9, 2008, 75% of the Special Bonus if such
termination occurs after November 9, 2008 and on or prior to November 9, 2009 and 100% of
the Special Bonus if such termination occurs after November 9, 2009. Notwithstanding the
foregoing, if clause (iii) applies, the payment shall be equal to the full amount of the
Special Bonus (as determined pursuant to clause (iii) below) and shall be paid as specified
in clause (iii) below.




(iii) In the event there occurs a Change in Control, as defined in your Severance Agreement,
prior to the Measurement Date and provided that you are still employed by the Company on the
date such Change in Control is consummated (the “CIC Date”), or you incurred a Protected
Termination prior thereto, in lieu of the Special Bonus calculated as provided above, you
shall be eligible for the Special Bonus determined as follows: If the Change in Control
occurs on or prior to November 9, 2009, you shall be entitled to a payment equal to the Pro
Rata Portion of fifty million dollars ($50 million). If the Change in Control occurs after
November 9, 2009, but prior to the Measurement Date, you shall be entitled to a Special
Bonus calculated in accordance with clause (i) above, provided that the Measurement Date
shall be the CIC Date and the 1.3 times, 2 times and 3 times and the $50 million and $75
million numbers all shall be proportionately reduced utilizing the Pro Rata Portion, but
there shall be straight line interpolation above the reduced 3 times and reduced $75
million; however, in no event



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shall you receive greater than $75 million. The payments contemplated by this clause (iii)
shall be paid to you within 30 days following the consummation of the Change in Control if
such Change in Control satisfies the requirements for a change in control under Internal
Revenue Code Section 409A(a)(2)(A)(v) and, if not, on the date specified in clause (i)(E)
above. Notwithstanding the foregoing, for the avoidance of doubt, the target EV values
shall be adjusted in a manner that does not include the Base EV. For example, after a
three-year period (i.e., a Pro Rata Portion equal to 60%), the target values shall be equal
to 1.18 (i.e., 1 plus (60% x 0.3)), 1.6 (i.e., 1 plus (60% x 1.0)) and 2.2 (i.e., 1 plus
(60% x 2.0)).




(iv) For purposes of this Paragraph 7(f) “Enterprise Value” shall mean the sum of (A) market
capitalization (the market price per share of Company common stock determined on the basis
of the average market price of Company common stock over the 30 trading days preceding the
Measurement Date (or, if the Measurement Date is the CIC Date, the closing market price of
Company common stock on the day preceding the CIC Date) multiplied by the average number of
common shares outstanding during such 30-day period) on such date, as the case may be plus
(B) net debt (consolidated total financial indebtedness, including capitalized lease
obligations and off-balance sheet items in the nature of financial indebtedness, minus cash
and cash equivalents). In the event that prior to the Measurement Date a spinoff to
stockholders of a portion of Harman’s business occurs or an extraordinary dividend is paid
by Harman, then an amount equal to the Enterprise Value of the spun off entity on the date
of such spinoff or the amount of such extraordinary dividend, plus interest from the date
of such spinoff or extraordinary dividend through the Measurement Date based on the prime
rate as reported in The Wall Street Journal on the first business day of January in each
year, shall be added to the Enterprise Value as determined above to determine the
Measurement Date Enterprise Value.




(v) For the avoidance of doubt and without any implication as to any other provision, the
amounts due under this Section 7(f) shall be paid in addition to any amounts due hereunder,
under the Severance Agreement or under any other plan or arrangement.



     5. Paragraph 8 of the Letter Agreement is hereby amended by adding the following sentences at
the end thereof:




To the extent that the amount of the RSU Replacement Award is less than $3,974,000 (the
“Adjustment Amount”), you shall be entitled to receive an additional payment on March 1,
2008 (less applicable withholding) equal to the Adjustment Amount less the amount of the RSU
Replacement Award. You shall also be entitled to receive interest calculated based on an
amount equal to the sum of the RSU Replacement Award and any additional payment payable to
you pursuant to the preceding sentence, for the period commencing on November 1, 2007 and
ending on March 1, 2008 at a rate equal to the “prime rate” reported in The Wall Street
Journal on November 15, 2007.



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     This letter is intended to constitute an amendment to the Letter Agreement which, subject to
the provisions hereof, shall otherwise remain in full force and effect. In order to evidence your
agreement to the foregoing, please sign and return the enclosed copy of this document, which shall
constitute a binding agreement between the Company and you.



[signature page follows]




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     IN WITNESS WHEREOF, the parties hereto knowingly and voluntarily executed this amendment to
the Letter Agreement as of the date set forth below:



	 	 	 	 	 	 	 	 	 
	/s/ Dinesh Paliwal	 	 	 	HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
	 


	 	 	 	 	 	 	 	 
	Date: November 29, 2007

	 	 	 	By:
	 	/s/ Sidney Harman
 

Name: Sidney Harman
	 	 
	 

	 	 	 	 	 	Title: Executive Chairman	 	 
	 

	 	 	 	 	 	Date: November 29, 2007	 	 






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