exv10w1



 







Exhibit
10.1




MANAGING DIRECTOR EMPLOYMENT AGREEMENT

(Geschäftsführerdienstvertrag)

(this “Agreement”)




Between



Harman Management GmbH

Im Stockmaedle 1

76303 Karlsbad

Germany



represented by its shareholder Harman International Industries, Inc. (“HII”)




and



Helmut Schinagel

Adalbertstr. 98

80799 München

Germany




— hereinafter referred to as the “Executive” —




Article 1

Position and Scope of Duties





	1.1	 	Harman Management GmbH (the “Company”) shall employ the Executive as a joint managing
director (Geschäftsführer) with sole signing authority. For purposes of this Agreement, the
term “Automotive Group” shall refer to all the world-wide operations of the Automotive OEM and
Harman/Becker aftermarket Business of HII.
	 
	 	 	The Executive’s title shall be “Chief Executive Officer (CEO) of Harman Automotive Group of
Harman International”. The Executive shall have full P&L responsibility for the world-wide
operations of the Automotive Group including sales, engineering, manufacturing, finance,
administration, human resources and IT.
	 
	1.2	 	The Executive shall perform his duties by observing the diligence of a prudent businessman
and in accordance with the provisions of this Agreement, the Company’s Articles of Association
(Gesellschaftsvertrag), and as directed by the shareholder(s) (Gesellschafter) (the
“Shareholders”), and in accordance with applicable law.
	 
	1.3	 	The Executive shall report to the CEO and to the Executive Chairman of HII. The
responsibility of the Executive (subject to the limitations contained herein, in the Articles
of Association and Management By-Laws of the Company or otherwise under applicable law) shall
include, without limitation, the following:






	 	(a)	 	the preparation and submission to the Shareholders of the annual budgets and
strategic plans of the Automotive Group;
	 
	 	(b)	 	the management of the Automotive Group in accordance with budgets and strategic
plans approved by the Shareholders and in accordance with this Agreement and the
Company’s Articles of Association and Management By-Laws;




 









 






	 	(c)	 	advising the Shareholders of the material activities and operations of the
Automotive Group on an on-going basis;
	 
	 	(d)	 	hiring and firing management personnel and overseeing the hiring of such other
salaried and hourly rated employees as may be required for the proper and efficient
conduct of the business of the Automotive Group within the scope of the Executive’s
authority;
	 
	 	(e)	 	the making of commitments on behalf of the Automotive Group other than those
commitments requiring the approval of the Shareholders as provided by law, the
Company’s Articles of Association, any Management By-Laws or this Agreement; and
	 
	 	(f)	 	seeking the approval of the Shareholders in respect of any matter involving or
affecting the Automotive Group or their business which is out of the ordinary and usual
course of business of the Automotive Group.






	1.4	 	The Executive shall devote his full working time and ability to the Automotive Group’s
business. The Executive shall not engage in any other activity for remuneration or any other
activity that normally would give entitlement to remuneration, including any part-time work,
without the prior written consent of the Shareholders in each instance. The Executive shall
not serve on the supervisory board, advisory board (Beirat) or similar corporate function of
another company without the prior written consent of the Shareholders.
	 
	1.5	 	Significant amendments to the Executive’s areas of responsibility shall require prior consent
of the Executive, if and to the extent such changes result from changes to the scope of the
automotive activities of HII due to a reorganization, acquisition or sale of operational
units. Consent will not be withheld by the Executive for unreasonable reasons.
	 
	1.6	 	Notwithstanding the internal authority of the Executive as determined by the Shareholders,
the Executive shall, with respect to the exercise of his statutory representation authority,
be required to seek the approval of the Shareholders for the following activities (and any
other activities for which the Shareholders require their approval through the adoption of
Management By-Laws and/or Articles of Association either as now or later adopted):






	 	(a)	 	The acquisition, sale, lease or encumbrance of real property;
	 
	 	(b)	 	The conclusion or termination of rental or lease agreements with total payment
obligations of more than €100,000;
	 
	 	(c)	 	The establishment or termination of branches, subsidiaries or joint ventures;
	 
	 	(d)	 	The acquisition or disposition of securities and participations in other
enterprises in whatever form;
	 
	 	(e)	 	The appointment and termination of management employees and the granting and
recall of Prokuras and commercial powers of attorney (Handlungsvollmachten);
	 
	 	(f)	 	The taking on, granting or repayment of loans;
	 
	 	(g)	 	The granting of security interests;




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	 	(h)	 	All transactions which could threaten the liquidity of the Company or any other
company of the Automotive Group;
	 
	 	(i)	 	Investments which in the single case are greater than €500,000;
	 
	 	(j)	 	Approval of the overall business plan and related budget for any fiscal year;
	 
	 	(k)	 	The incurring of any capital expenditures exceeding, in the aggregate, the
capital expenditures budgeted in the approved budget in any fiscal year by more than
€500,000;
	 
	 	(l)	 	The increasing of salaries of any employee by more than 6% of the salary for
such employee budgeted in the approved budget for such fiscal year;
	 
	 	(m)	 	Increasing borrowings of the Company or any other company of the Automotive
Group at any one time; and
	 
	 	(n)	 	The payment of any bonus or similar benefit other than as budgeted in the
approved budget.






If the circumstances and the best interest of the Automotive Group require an immediate
judgement, decision and action by the Executive and if prior approval by the Shareholders
can not be obtained before such decision must be taken, the Executive shall be entitled to
decide and act without the Shareholders’ approval; provided, however, that the Executive
shall seek the Shareholders’ approval as soon as practicable following such action and
decision.



Article 2

Termination, Notice and Severance





	2.1	 	The Executive and the Company desire this Agreement to commence as soon as possible and agree
that this Agreement shall commence with effect as of January 1, 2007 or an earlier date (the
“Commencement Date”) should the Executive’s employment with his current employer be terminated
before December 31, 2006; provided, however, that the Commencement Date may be extended beyond
January 1, 2007 as long as necessary, but in no event later than April 1, 2007. In case of an
earlier or later commencement, all dates provided for in this Agreement shall be adjusted
accordingly. This Agreement may be terminated by either party without giving any reason
therefor upon at least six months’ prior written notice to the other party; provided, however,
that any termination under this section shall be effective no earlier than December 31, 2011.
Notice by either party must be in writing, must be delivered to the Shareholder(s) or the
Executive and shall be effective upon delivery. An extraordinary termination pursuant to
Section 626 BGB is not affected by these rules.
	 
	2.2	 	At any time during the term of this Agreement, the Shareholder(s) are entitled to relieve the
Executive from his obligation to work. In such a case, the Executive shall not engage in any
activity during the term of this Agreement for which he is, will be, or would normally be
entitled to remuneration without the prior written consent of the Shareholder(s), which
consent may be withheld for any reason.
	 
	2.3	 	In the event of relief of the Executive from his obligation to work, the Executive shall
continue to be entitled during the term of this Agreement to the Salary (as hereinafter
defined) and benefits (except that the Executive shall not be entitled to any bonus or pro




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	 	 	rata bonus payments pursuant to Section 4.3). The amount of payment to which the Executive
is entitled hereunder shall be reduced by the amount of any compensation earned by the
Executive in connection with services performed.





Article 3

Secrecy/Business Records





	3.1	 	The Executive shall not disclose to any third party, or use for his personal gain, any
confidential, technical or other business information entrusted to him, or which has otherwise
become known to him and which relates to the Automotive Group, the Company or to any of its
affiliates as defined in accordance with Section 15 of the German Stock Corporation Act
(“Affiliates”). In particular, the Executive shall not disclose any confidential or
proprietary information concerning the organization of the business, relations with customers
and suppliers or technical know-how, design or intellectual property, trade secrets, or any
other marketing, commercial or technical information considered confidential or proprietary by
the Automotive Group. This obligation shall not expire upon termination of Executive’s
employment but shall remain in force.
	 
	3.2	 	The Executive shall use business records of any kind, including private notes, concerning the
Automotive Group’s or the Company’s affairs and activities, only for business purposes. The
Executive shall not make copies or extracts or duplicates of drawings, calculations,
statistics, and the like, nor of any other business records, for purposes other than for the
Automotive Group’s business.
	 
	3.3	 	Upon termination of his employment (or upon request of the Shareholder(s) upon or after the
giving of notice of termination), the Executive shall return to the Company of his own accord
all business records and copies thereof which are in his possession. The Executive shall have
no right of retention as to any such records or copies. The Executive shall also at such time
return to the Company all keys, goods and other equipment in his possession which are the
property of the Company or any of its Affiliates or to which the Company or any of its
Affiliates has the right of possession.





Article 4

Salary, Allowable Expenses and Other Benefits





	4.1	 	Commencing January 1, 2007 the Executive shall receive an annual gross salary (the “Salary”)
of €650,000 (in words: six hundred and fifty thousand Euros). The Salary will be reviewed
annually in the third quarter of each calendar year and will not be decreased. The Salary
shall be payable in twelve equal monthly installments to be paid at the end of each month, all
after deduction of the amounts to be withheld in accordance with law. The Salary entitlement
may not be assigned or pledged by the Executive. The Salary includes payment for any work
performed by the Executive for the Automotive Group outside of normal working hours.
	 
	4.2	 	Travel expenses and other necessary and adequate expenses incurred by the Executive in the
furtherance of the Automotive Group’s business shall be reimbursed against proof to the extent
they are reasonable and in accordance with rules applicable in Germany for tax purposes and
with the then effective policy of the Company. The Executive is entitled to international
first class travel.
	 
	4.3	 	In addition to his Salary, the Executive may be entitled to an annual bonus based on
performance parameters as decided in consultation between the Company
and the Executive




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	 	 	each year and on a target of 70% of his Salary in accordance with HII’s Management
Incentive Compensation (“MIC”) plan. The annual bonus can be up to 50% higher if the
Automotive Group achieves superior results. The annual bonus shall be governed by the terms
and conditions of the MIC plan and parameters for the Automotive Group attached as Exhibit 1
hereto. For the fiscal year ending June 30, 2007, the annual bonus shall be guaranteed at
the target level of 70%, prorated for the period of employment (i.e., a minimum of EUR
455,000 prorated for the period of employment). It is understood and agreed by the parties
that any bonus payments by the Company shall be voluntary one-time remunerations and will
not result in any future obligations by the Company or any of its Affiliates.






	4.4	 	Within thirty (30) days of the Commencement Date, the Executive will receive a one-time grant
under HII’s Stock Option and Incentive Plan (the “2002 Plan”) of options to purchase a total
of 50,000 shares of its common stock. Subsequent grants, if any, will be at the sole
discretion of HII’s board of directors, and all grants will be solely governed by the terms of
the option 2002 Plan or such other plan or program under which they are granted.
	 
	4.5	 	Within thirty (30) days after the third anniversary of the Commencement Date, and provided
that the Executive is then employed by the Company, the Executive will be granted 25,000
shares of HII common stock under the 2002 Plan, which shares shall be non-forfeitable and
non-restricted on the date of grant. The Company believes Mr. Schinagel will have no adverse
tax consequence during the three year period prior to the grant. However, if any taxes are
owed, the parties will find a mutually-acceptable solution.
	 
	4.6	 	The Executive shall be entitled to a retirement benefit that is immediate and
non-forfeitable, to be calculated and paid as follows:






The annual gross pension payment (“Annual Pension”) shall correspond to 12.5% of the
Eligible Salary and shall be increased by a further 2.5% of the Eligible Salary for each
year of service under this Agreement completed after the fifth anniversary of the
Commencement Date; provided, that the Executive shall not be entitled to any Annual Pension
if this Agreement has been terminated by the Company pursuant to Section 626 BGB on or
before the fifth anniversary of the Commence Date; and provided further, that (i) any
entitlements of the Executive to company pensions from previous employers (“Other Pensions”)
shall be deducted from the Annual Pension in accordance with Section 5.1 BetrAVG, and (ii)
the Annual Pension shall not exceed 30% of the Eligible Salary minus the Executive’s
entitlement to Other Pensions. The Annual Pension shall be paid in twelve (12) equal
monthly installments commencing the month following the month during which the last one of
the following conditions has been satisfied:




	 	(i)	 	the Executive has reached the age of sixty (60), and
	 
	 	(ii)	 	the Executive is not employed by the Company or any of its Affiliates.






The right to payment of an Annual Pension hereunder shall cease upon the Executive’s death;
provided, however, that, in case the Executive dies after both of the above mentioned
conditions have been satisfied, the Executive’s spouse shall be entitled to continued
payment of the Annual Pension hereunder for a period of ten years less the period during
which Annual Pension payments have been made hereunder prior to the Executive’s death.



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In case of the Executive’s death during his employment with the Company, the Executive’s
spouse shall not be entitled to an Annual Pension, but shall instead be entitled to a death
benefit in the form of a one-time payment in an amount of €5,000,000 provided that death
will not have occurred by accident.




The Company shall conclude an accident insurance on behalf of the Executive to an amount of
€5,000,000 to be due in case of death or disability of the Executive.




For purposes of this Section 4.6 “Eligible Salary” shall mean the average Salary as earned
during the term of this Agreement. Eligible Salary shall not include any other kind of
payments, benefits, bonus or other compensation made or granted to the Executive.




	4.7	 	The Company shall provide to the Executive a company car equivalent to or equal to a BMW 7
Series. The Company shall bear those car expenses (e.g., insurance, car tax, repairs) that are
associated with the business use of the company car. The Executive may use the company car
for private purposes. The taxes imposed with respect to the private usage shall be borne by
the Executive.





Article 5

Vacation



The Executive shall be entitled to an annual vacation of thirty (30) working days excluding
Saturdays. The time of vacation shall be determined in consultation with the Shareholder(s) and
the other managing directors of Company, taking into consideration the personal preferences of the
Executive and the interests of the Automotive Group. In the year of termination of this Agreement,
the entitlement to vacation shall be calculated on a pro rata basis.




Article 6

Sickness



In case the Executive is temporarily unable to perform his duties as Executive due to sickness or
absence not caused by the Executive’s negligence, Company shall continue to pay the Executive the
Salary for a period of six months and, after such period, for a period of six months, the
difference between the statutory sickness allowance and the Executive’s latest net income from
Salary, but the Executive shall assign to Company any claims the Executive may have against third
parties relating to such sickness or absence.




Article 7

Inventions





	7.1	 	Any invention, design, concept, mark, know-how or other intellectual property which arises
out of the Executive’s activities for the Company or which is made with respect to the
experience, work or business of the Automotive Group (work-related intellectual property or
“WIP”) becomes the property of the Company without compensation.
	 
	7.2	 	Inventions, designs, concepts, marks, know-how or other intellectual property which do not
represent WIP (free intellectual property or “FIP”) must be reported to the Shareholder(s) in
writing immediately. The Shareholder(s), on behalf of the Company, may take an interest in
FIP with or without limitations. The Shareholder(s) must report their intention to the
Executive within four (4) months of the report of the FIP by the Executive to the
Shareholder(s).




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	7.3	 	In case of restricted acquisition of FIP, the Company shall receive a joint use right based
on terms provided by the Company; in the case of total acquisition, all rights in the FIP go
to the Companies. The Shareholder(s) and the Executive will agree on compensation according
to the provisions of the Law Concerning Inventions Made by Employees and the regulations
issued in connection with said law, which law shall apply in any case in case any portion of
this Article 7 is unenforceable, but only to the extent of such unenforceability.





Article 8

Covenant Not to Compete





	8.1	 	During the term and until the effective date of termination or expiration of this Agreement:






	 	(a)	 	lend money to or engage, participate, assist, invest or have an equity
interest, directly or indirectly, whether as partner, owner, consultant, agent or
otherwise, in any business or enterprise that is in competition with any business
activity of the Automotive Group or is in competition with the sale of any products
sold by the Automotive Group as exclusive dealer other than by holding less than 5% of
the shares, voting or otherwise, in a publicly-traded company quoted on a recognized
stock exchange;
	 
	 	(b)	 	engage, hire, suggest or assist in or influence the engagement or hiring by any
competing business or enterprise of, any salesman, distributor, supplier, employee or
officer of the Company or any company of the Automotive Group, or otherwise cause or
encourage any person having a business relationship with the Company or any company of
the Automotive Group to sever such relationship with, or commit any act inimical to,
the Company or any of its Affiliates;
	 
	 	(c)	 	use or divulge to others the customer or supplier lists of the Company or any
of their Affiliates, or, directly or indirectly, whether as a partner, owner,
consultant, agent or otherwise, solicit or transact business with any customers or
suppliers of the Companies or any company of the Automotive Group; or
	 
	 	(d)	 	cause or permit any person, legal or otherwise, directly or indirectly under
control of the Executive to do any of the foregoing.






	8.2	 	During the term and upon termination of this Agreement and for a period of two years
thereafter, the Executive shall not solicit or entice any officer, director or employee of the
Company or any of its Affiliates to leave their employment with the Company or its respective
Affiliate.





Article 9

Other Provisions





	9.1	 	Any amendments or supplements to this Agreement must be in writing signed by both the
Executive and the Shareholder(s) in order to be effective including any amendment to this
provision.




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	9.2	 	The English language version of this Agreement shall be controlling in all respects,
irrespective of the existence of a translation hereof into the German language. This Agreement
represents the entire agreement and understanding of the parties and supersedes and cancels
any prior written or oral agreement between the Executive and the Company and its Affiliates
or any of them, including, without limitation, any prior employment agreements or
arrangements, whether written or oral.
	 
	9.3	 	This Agreement shall be governed by the laws of the Federal Republic of Germany.
	 
	9.4	 	The invalidity of any provision of this Agreement shall not affect the validity of the
remainder hereof. Any invalid provision or any omission, if any, in this Agreement shall be
replaced by an appropriate provision which best approximates the economic arrangement intended
by the parties.
	 
	9.5	 	All disputes arising from this Agreement, the validity of its conclusion and its
interpretation, shall be decided by an arbitration court which shall have exclusive
jurisdiction over such matters, and which jurisdiction shall exclude the jurisdiction by any
court over such matters. Pursuant to Article 1031, para. 5 of the Federal Rules of Civil
Procedure, a special arbitration agreement is concluded thereon, which is attached to this
Agreement as Exhibit 2.





Harman Management GmbH

represented by its shareholder

Harman International Industries, Inc.




	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Sidney Harman
	 	 	 	Date:
	 	June 30, 2006
	 

	 	 	 	 	 	 	 	 
	Name: Sidney Harman

	 	 	 	 	 	 
	Title: Executive Chairman

	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ Helmut Schinagel	 	 	 	 	 	 
	 	 	 	 	 	 	 
	Helmut Schinagel	 	 	 	Date:	 	July 3, 2006






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Exhibit 2




ARBITRATION AGREEMENT




between




Harman Management GmbH




and




Helmut Schinagel



The parties agree hereby as follows: All disputes arising from the Managing Director Employment
Contract appended hereto (between Helmut Schinagel and Harman Management GmbH) including its
validity shall be finally settled by three arbitrators according to the Arbitration Rules of the
German Institution of Arbitration e.V. (DIS) without recourse to the ordinary courts of law. The
arbitration tribunal shall also decide on the validity of this arbitration agreement. The arbitral
tribunal shall apply German substantive law. The language of the arbitration proceedings shall be
English. If one party desires consideration of a document or of witness testimony in another
language, that party must undertake the prior translation or simultaneous translation,
respectively, of the same and alone carry such as a separate, non-refundable expense. The place of
arbitration shall be Frankfurt am Main, Federal Republic of Germany. With exception of possible
translation expenses as described above, the winning party is entitled to the award of all
necessary (in accordance to § 91, ZPO (German Civil Procedure Code)) costs and necessary (in
accordance to § 91, ZPO (German Civil Procedure Code)) expenses in connection with the proceedings
(including attorneys’ fees in accordance with the German Fee schedule (RVG)).




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Harman Management GmbH

represented by its shareholder

Harman International Industries, Inc.




	 	 	 	 	 	 	 	 	 
	By:

	 	/s/ Sidney Harman
	 	 	 	Date:
	 	June 30, 2006
	 

	 	 	 	 	 	 	 	 
	Name:

	 	Sidney Harman	 	 	 	 	 	 
	Title:

	 	Executive Chairman	 	 	 	 	 	 
	 
	 	 	 	 	 	 	 	 
	/s/ Helmut Schinagel	 	 	 	 	 	 
	 	 	 	 	 	 	 
	Helmut Schinagel	 	 	 	Date:	 	July 3, 2006







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