Document:

exv10w2

 

Exhibit 10.2

SEVERANCE AGREEMENT

     THIS SEVERANCE AGREEMENT (the “Agreement”), dated as of May 8, 2007, is made and entered by
and between Harman International Industries, Incorporated (“Harman” or, including any successor
thereto, the “Company”), a Delaware corporation, and Dinesh Paliwal (the “Executive”).

     WHEREAS, the Executive is or will be 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” shall have the meaning set forth in Executive’s employment letter dated May 8,
2007.

          (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).

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          (v) Notwithstanding anything in the foregoing to the contrary, the consummation of the
Agreement and Plan of Merger among KHI Parent Inc., KHI Merger Sub Inc. and Harman
International Industries, Incorporated, dated April 26, 2007 (the “KKR Transaction”) shall
not constitute a Change in Control.

          (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 under the Executive’s supervision 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;

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          (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)); 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, except for Section 5 (Certain Additional Payments By The Company) (which
shall be effective upon execution), 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 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:

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          (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; and has been
deemed to incur a Disability pursuant to the letter agreement dated May 8, 2007 (the
“Employment Agreement”).

          (iii) Cause.

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 within six (6) months prior to the Change in Control
for Good Reason (as defined in the Employment Agreement):

          (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

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Control, which has rendered the Executive substantially unable to carry out, has
substantially hindered Executive’s performance of, or has caused Executive to suffer a
substantial reduction in, any of the authorities, powers, functions, responsibilities or
duties attached to the position held by the Executive immediately prior to the Change in
Control, which situation is not remedied within 10 calendar days after the Company receives
written notice from the Executive of such determination;

          (iv) The liquidation, dissolution, merger, consolidation or reorganization of the
Company or transfer of all or substantially all of its business and/or assets, unless the
successor or successors (by liquidation, merger, consolidation, reorganization, transfer or
otherwise) to which all or substantially all of its business and/or assets have been
transferred (by operation of law or otherwise) assumed all duties and obligations of the
Company under this Agreement pursuant to Section 11(a);

          (v) The Company relocates its principal executive offices (if such offices are the
principal location of Executive’s work), or requires the Executive to have his principal
location of work changed, to any location that, in either case, is in excess of 50 miles
from the principal executive office’s location immediately prior to the Change in Control,
or requires the Executive to travel away from his office in the course of discharging his
responsibilities or duties at least 20% more (in terms of aggregate days in any calendar
year or in any calendar quarter when annualized for purposes of comparison to any prior
year) than was required of Executive in any of the three full years immediately prior to the
Change in Control without, in either case, his prior written consent;

          (vi) For any reason, or no reason during the thirteenth calendar month following the
Change in Control;

          (vii) Any reason that is Good Reason under the Employment Agreement;

          (viii) Without limiting the generality or effect of the foregoing, any material breach
of this Agreement by the Company or any successor thereto which is not remedied by the
Company within 10 calendar days after receipt by the Company of written notice from the
Executive of such breach.

          (c) A termination by the Company pursuant to Section 3(a) or by the Executive pursuant to
Section 3(b) will not affect any rights that the Executive may have pursuant to any agreement,
policy, plan, program or arrangement of the Company or any Subsidiary providing Employee Benefits,
which rights shall be governed by the terms thereof; provided that the Executive shall not be
entitled to severance pay under the Employment Agreement if entitled to it hereunder and any such
amounts received thereunder shall be offset against the amounts hereunder.

     4. Severance Compensation.

          (a) If the Company or Subsidiary terminates the Executive’s employment during the Severance
Period other than pursuant to Section 3(a)(i), 3(a)(ii) or 3(a)(iii), or if the

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Executive terminates his employment pursuant to Section 3(b), the Company will pay to the
Executive, subject to Section 18 hereof as to the Section 409A Delay, the amounts described in
Sections 1 and 4 of Annex A within five business days after the Termination Date and will continue
to provide to the Executive the benefits described in Sections 2 and 3 of Annex A for the periods
described therein.

          (b) Without limiting the rights of the Executive at law or in equity, if the Company fails to
make any payment or provide any benefit required to be made or provided under this Agreement on a
timely basis, the Company will pay interest on the amount or value thereof at an annualized rate
of interest equal to the so-called composite “prime rate” as quoted from time to time during the
relevant period in The Wall Street Journal , plus 2%. Such interest will be payable as it accrues
on demand. Any change in such prime rate will be effective on and as of the date of such change.

          (c) Notwithstanding any provision of this Agreement to the contrary, the parties’ respective
rights and obligations under this Section 4 and under Sections 5, 7, 8 and the last sentence of
Section 9 will survive any termination or expiration of this Agreement or the termination of the
Executive’s employment following a Change in Control for any reason whatsoever.

     5. Certain Additional Payments by the Company.

          (a) Anything in this Agreement to the contrary notwithstanding, in the event that it shall be
determined (as hereafter provided) that any payment (other than the Gross-Up payments provided for
in this Section 5) or distribution by the Company or any of its affiliates to or for the benefit of
the Executive, whether paid or payable or distributed or distributable under the terms of this
Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or
arrangement, including without limitation any stock option, performance share, performance unit,
stock appreciation right or similar right, or the lapse or termination of any restriction on or the
vesting or exercisability of any of the foregoing (a “Payment”), would be subject to the excise tax
imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) (or any
successor provision thereto) by reason of being considered “contingent on a change in ownership or
control” of the Company, within the meaning of Section 280G of the Code (or any successor provision
thereto) or to any similar tax imposed by state or local law, or any interest or penalties with
respect to such tax (such tax or taxes, together with any such interest and penalties, being
hereafter collectively referred to as the “Excise Tax”), then the Executive shall be entitled to
receive, and the Company shall be required to pay, an additional payment or payments (collectively,
a “Gross-Up Payment”); provided, however, that no Gross-up Payment shall be made with respect to
the Excise Tax, if any, attributable to (i) any incentive stock option, as defined by Section 422
of the Code (“ISO”) granted prior to the execution of this Agreement, or (ii) any stock
appreciation or similar right, whether or not limited, granted in tandem with any ISO described in
clause (i). The Gross-Up Payment shall be in an amount such that, after payment by the Executive
of all taxes (including any interest or penalties imposed with respect to such taxes), including
any Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Payment.

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          (b) Subject to the provisions of Section 5(f), all determinations required to be made under
this Section 5, including whether an Excise Tax is payable by the Executive and the amount of such
Excise Tax and whether a Gross-Up Payment is required to be paid by the Company to the Executive
and the amount of such Gross-Up Payment, if any, shall be made by a nationally recognized
accounting firm (the “Accounting Firm”) selected by the Executive in his sole discretion. The
Executive shall direct the Accounting Firm to submit its determination and detailed supporting
calculations to both the Company and the Executive within 30 calendar days after the Termination
Date, if applicable, and any such other time or times as may be requested by the Company or the
Executive. If the Accounting Firm determines that any Excise Tax is payable by the Executive, the
Company shall pay the required Gross-Up Payment to the Executive within five business days after
receipt of such determination and calculations with respect to any Payment to the Executive. If
the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall, at the
same time as it makes such determination, furnish the Company and the Executive an opinion that the
Executive has substantial authority not to report any Excise Tax on his federal, state or local
income or other tax return. As a result of the uncertainty in the application of Section 4999 of
the Code (or any successor provision thereto) and the possibility of similar uncertainty regarding
applicable state or local tax law at the time of any determination by the Accounting Firm
hereunder, it is possible that Gross-Up Payments which will not have been made by the Company
should have been made (an “Underpayment”), consistent with the calculations required to be made
hereunder. In the event that the Company exhausts or fails to pursue its remedies pursuant to
Section 5(f) and the Executive thereafter is required to make a payment of any Excise Tax, the
Executive shall direct the Accounting Firm to determine the amount of the Underpayment that has
occurred and to submit its determination and detailed supporting calculations to both the Company
and the Executive as promptly as possible. Any such Underpayment shall be promptly paid by the
Company to, or for the benefit of, the Executive within five business days after receipt of such
determination and calculations.

          (c) The Company and the Executive shall each provide the Accounting Firm access to and copies
of any books, records and documents in the possession of the Company or the Executive, as the case
may be, reasonably requested by the Accounting Firm, and otherwise cooperate with the Accounting
Firm in connection with the preparation and issuance of the determinations and calculations
contemplated by Section 5(b). Any determination by the Accounting Firm as to the amount of the
Gross-Up Payment shall be binding upon the Company and the Executive.

          (d) The federal, state and local income or other tax returns filed by the Executive shall be
prepared and filed on a consistent basis with the determination of the Accounting Firm with respect
to the Excise Tax payable by the Executive. The Executive shall make proper payment of the amount
of any Excise Tax, and at the request of the Company, provide to the Company true and correct
copies (with any amendments) of the applicable portions of his federal income tax return as filed
with the Internal Revenue Service and corresponding state and local tax returns, if relevant, as
filed with the applicable taxing authority, and such other documents reasonably requested by the
Company, evidencing such payment. If prior to the filing of the Executive’s federal income tax
return, or corresponding state or local tax return, if relevant, the Accounting Firm determines
that the amount of the Gross-Up Payment should be reduced, the Executive shall within five business
days pay to the Company the amount of such reduction.

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          (e) The fees and expenses of the Accounting Firm for its services in connection with the
determinations and calculations contemplated by Section 5(b) shall be borne by the Company. If
such fees and expenses are initially paid by the Executive, the Company shall reimburse the
Executive the full amount of such fees and expenses within five business days after receipt from
the Executive of a statement therefor and reasonable evidence of Executive’s payment thereof.

          (f) The Executive shall notify the Company in writing of any claim by the Internal Revenue
Service or any other taxing authority that, if successful, would require the payment by the Company
of a Gross-Up Payment. Such notification shall be given as promptly as practicable but no later
than 10 business days after the Executive actually receives notice of such claim and the Executive
shall further apprise the Company of the nature of such claim and the date on which such claim is
requested to be paid (in each case, to the extent known by the Executive). The Executive shall not
pay such claim prior to the earlier of (i) the expiration of the 30-calendar-day period following
the date on which he gives such notice to the Company and (ii) the date that any payment of amount
with respect to such claim is due. If the Company notifies the Executive in writing prior to the
expiration of such period that it desires to contest such claim, the Executive shall:

          (i) provide the Company with any written records or documents in his possession
relating to such claim reasonably requested by the Company;

          (ii) take such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including without imitation accepting legal
representation with respect to such claim by an attorney competent in respect of the subject
matter and reasonably selected by the Company;

          (iii) cooperate with the Company in good faith in order effectively to contest such
claim; and

          (iv) permit the Company to participate in any proceedings relating to such claim;
provided, however, that the Company shall bear and pay directly all costs and expenses
(including interest and penalties) incurred in connection with such contest and shall
indemnify and hold harmless the Executive, on an after-tax basis, for and against any Excise
Tax or income tax, including interest and penalties with respect thereto, imposed as a
result of such representation and payment of costs and expenses. Without limiting the
foregoing provisions of this Section 5(f), the Company shall control all proceedings taken
in connection with the contest of any claim contemplated by this Section 5(f) and, at its
sole option, may pursue or forego any and all administrative appeals, proceedings, hearings
and conferences with the taxing authority in respect of such claim (provided, however, that
the Executive may participate therein at his own cost and expense) and may, at its option,
either direct the Executive to pay the tax claimed and sue for a refund or contest the claim
in any permissible manner, and the Executive agrees to prosecute such contest to a
determination before any administrative tribunal, in a court of initial jurisdiction and in
one or more appellate courts, as the Company shall determine; provided, however, that if the
Company directs the Executive to pay the tax claimed and sue for a refund, the Company shall
advance the amount of such payment to

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the Executive on an interest-free basis and shall indemnify and hold the Executive
harmless, on an after-tax basis, from any Excise Tax or income or other tax, including
interest or penalties with respect thereto, imposed with respect to such advance; and
provided further, however, that any extension of the statute of limitations relating to
payment of taxes for the taxable year of the Executive with respect to which the contested
amount is claimed to be due is limited solely to such contested amount. Furthermore, the
Company’s control of any such contested claim shall be limited to issues with respect to
which a Gross-Up Payment would be payable hereunder and the Executive shall be entitled to
settle or contest, as the case may be, any other issue raised by the Internal Revenue
Service or any other taxing authority.

          (g) If, after the receipt by the Executive of an amount advanced by the Company pursuant to
Section 5(f), the Executive receives any refund with respect to such claim, the Executive shall
(subject to the Company’s complying with the requirements of Section 5(f)), promptly pay to the
Company the amount of such refund (together with any interest paid or credited thereon after any
taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the
Company pursuant to Section 5(f), a determination is made that the Executive shall not be entitled
to any refund with respect to such claim and the Company does not notify the Executive in writing
of its intent to contest such denial or refund prior to the expiration of 30 calendar days after
such determination, then such advance shall be forgiven and shall not be required to be repaid and
the amount of any such advance shall offset, to the extent thereof, the amount of Gross-Up Payment
required to be paid by the Company to the Executive pursuant to this Section 5.

          (h) In the event any obligation of the Executive to repay any amounts due hereunder would be a
violation of the “loan” provision of the Sarbanes-Oxley Act, such obligation shall be treated as
null and void ab initio.

          (i) For the avoidance of any doubt, the Company’s obligations to Executive under this Section
5 remain in full force and effect with respect to the KKR Transaction regardless of Executive’s
agreement to exclude the KKR Transaction from the definition of Change in Control hereunder.

     6. No Mitigation Obligation. The Company hereby acknowledges that it will be
difficult and may be impossible for the Executive to find reasonably comparable employment
following the Termination Date and that the non-competition covenant contained in Section 8 will
further limit the employment opportunities for the Executive. In addition, the Company
acknowledges that its severance pay plans applicable in general to its salaried employees do not
provide for mitigation, offset or reduction of any severance payment received thereunder.
Accordingly, the payment of the severance compensation by the Company to the Executive in
accordance with the terms of this Agreement is hereby acknowledged by the Company to be reasonable,
and the Executive will not be required to mitigate the amount of any payment provided for in this
Agreement by seeking other employment or otherwise, nor will any profits, income, earnings or other
benefits from any source whatsoever create any mitigation, offset, reduction or any other
obligation on the part of the Executive under this agreement or otherwise, except as expressly
provided in the last sentence of Paragraph 2 set forth on Annex A.

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     7. Legal Fees and Expenses.

          (a) The Executive shall not be required to incur legal fees and the related expenses
associated with the interpretation, enforcement or defense of Executive’s rights under this
Agreement by litigation or otherwise because such costs substantially would detract from the
Executive’s benefits under this Agreement. Accordingly, if it should appear to the Executive that
the Company has failed to comply with any of its obligations under this Agreement or in the event
that the Company or any other person takes or threatens to take any action to declare this
Agreement void or unenforceable, or institutes any litigation or other action or proceeding
designed to deny, or to recover from, the Executive the benefits provided or intended to be
provided to the Executive hereunder, the Company irrevocably authorizes the Executive from time to
time to retain counsel of Executive’s choice, at the expense of the Company as hereafter provided,
to advise and represent the Executive in connection with any such interpretation, enforcement or
defense, including without limitation the initiation or defense of any litigation or other legal
action, whether by or against the Company or any Director, officer, stockholder or other person
affiliated with the Company, in any jurisdiction. Notwithstanding any existing or prior
attorney-client relationship between the Company and such counsel, the Company irrevocably consents
to the Executive’s entering into an attorney-client relationship with such counsel, and in that
connection the Company and the Executive agree that a confidential relationship shall exist between
the Executive and such counsel. Without respect to whether the Executive prevails, in whole or in
part, in connection with any of the foregoing, the Company will pay and be solely financially
responsible for any and all attorneys’ and related fees and expenses incurred by the Executive in
connection with any of the foregoing. However, if the Executive brings an action in bad faith, or
with no colorable claim of success, the Company shall not pay for any of Executive’s attorneys’
fees or related expenses.

          (b) Without limiting the obligations of the Company under Section 7(a) of this Agreement, in
the event a Change in Control occurs, the performance of the Company’s obligations under this
Section 7 shall be secured by amounts deposited or to be deposited in trust pursuant to certain
trust agreements to which the Company shall be a party, which amounts deposited shall in the
aggregate be not less than $1,000,000, providing that the fees and expenses of counsel selected
from time to time by the Executive pursuant to Section 7(a) shall be paid, or reimbursed to the
Executive if paid by the Executive, either in accordance with the terms of such trust agreements,
or, if not so provided, on a regular, periodic basis upon presentation by the Executive to the
trustee of a statement or statements prepared by such counsel in accordance with its customary
practices. Any failure by the Company to satisfy any of its obligations under this Section 7(b)
shall not limit the rights of the Executive hereunder. Subject to the foregoing, the Executive
shall have the status of a general unsecured creditor of the Company and shall have no right to, or
security interest in, any assets of the Company or any Subsidiary.

     8. Competitive Activity; Confidentiality; Nonsolicitation.

          (a) For a period ending one year following the Termination Date, if the Executive shall have
received or shall be receiving benefits under Section 4, the Executive shall not, without the prior
written consent of the Company, which consent shall not be unreasonably withheld, engage in any
Competitive Activity; provided that the foregoing shall not apply if the

11

 

          Termination Date was prior to the Change in Control and Executive had already commenced such
activity.

          (b) During the Term, the Company agrees that it will disclose to Executive its confidential or
proprietary information (as defined in this Section 8(b)) to the extent necessary for Executive to
carry out his obligations to the Company. The Executive hereby covenants and agrees that he will
not, without the prior written consent of the Company, during the Term or thereafter disclose to
any person not employed by the Company, or use in connection with engaging in competition with the
Company, any confidential or proprietary information of the Company. For purposes of this
Agreement, the term “confidential or proprietary information” will include all information of any
nature and in any form that is owned by the Company and that is not publicly available (other than
by Executive’s breach of this Section 8(b)) or generally known to persons engaged in businesses
similar or related to those of the Company. Confidential or proprietary information will include,
without limitation, the Company’s financial matters, customers, employees, industry contracts,
strategic business plans, product development (or other proprietary product data), marketing plans,
and all other secrets and all other information of a confidential or proprietary nature. For
purposes of the preceding two sentences, the term “Company” will also include any Subsidiary
(collectively, the “Restricted Group”). The foregoing obligations imposed by this Section 8(b)
will not apply (i) during the Term, in the course of the business of and for the benefit of the
Company, (ii) if such confidential or proprietary information will have become, through no fault of
the Executive, generally known to the public or (iii) if the Executive is required by law to make
disclosure (after giving the Company notice and, to the extent feasible, an opportunity to contest
such requirement).

          (c) The Executive hereby covenants and agrees that during the Term and for one year thereafter
Executive will not, without the prior written consent of the Company, which consent shall not
unreasonably be withheld, on behalf of Executive or on behalf of any person, firm or company,
directly or indirectly, attempt to influence, persuade or induce, or assist any other person in so
persuading or inducing, any management employee of the Restricted Group to give up employment with
the Restricted Group, provided the foregoing shall not be violated by advertising or searches not
specifically targeted at the management employees of the Restricted Group; or serving as a
reference.

          (d) Executive and the Company agree that the covenants contained in this Section 8 are
reasonable under the circumstances, and further agree that if in the opinion of any court of
competent jurisdiction any such covenant is not reasonable in any respect, such court will have the
right, power and authority to excise or modify any provision or provisions of such covenants as to
the court will appear not reasonable and to enforce the remainder of the covenants as so amended.
Executive acknowledges and agrees that the remedy at law available to the Company for breach of any
of his obligations under this Section 8 would be inadequate and that damages flowing from such a
breach may not readily be susceptible to being measured in monetary terms. Accordingly, Executive
acknowledges, consents and agrees that, in addition to any other rights or remedies that the
Company may have at law, in equity or under this Agreement, upon adequate proof of his violation of
any such provision of this Agreement, the Company will be entitled to immediate injunctive relief
and may obtain a temporary order restraining any threatened or further breach, without the
necessity of proof of actual damage.

12

 

     9. Employment Rights. Nothing expressed or implied in this Agreement will create any
right or duty on the part of the Company or the Executive to have the Executive remain in the
employment of the Company or any Subsidiary prior to or following any Change in Control.

     10. Withholding of Taxes. The Company may withhold from any amounts payable under
this Agreement all federal, state, city or other taxes as the Company is required to withhold
pursuant to any applicable law, regulation or ruling.

     11. Successors and Binding Agreement.

          (a) The Company will require any successor (whether direct or indirect, by purchase, merger,
consolidation, reorganization or otherwise) to all or substantially all of the business or assets
of the Company, by agreement in form and substance reasonably satisfactory to the Executive,
expressly to assume and agree to perform this Agreement in the same manner and to the same extent
the Company would be required to perform if no such succession had taken place. This Agreement
will be binding upon and inure to the benefit of the Company and any successor to the Company,
including without limitation any persons acquiring directly or indirectly all or substantially all
of the business or assets of the Company whether by purchase, merger, consolidation, reorganization
or otherwise (and such successor shall thereafter be deemed the “Company” for the purposes of this
Agreement), but will not otherwise be assignable, transferable or delegable by the Company.

          (b) This Agreement will inure to the benefit of and be enforceable by the Executive’s personal
or legal representatives, executors, administrators, successors, heirs, distributees and legatees.

          (c) This Agreement is personal in nature and neither of the parties hereto shall, without the
consent of the other, assign, transfer or delegate this Agreement or any rights or obligations
hereunder except as expressly provided in Sections 11(a) and 11(b). Without limiting the
generality or effect of the foregoing, the Executive’s right to receive payments hereunder will not
be assignable, transferable or delegable, whether by pledge, creation of a security interest, or
otherwise, other than by a transfer by Executive’s will or by the laws of descent and distribution
and, in the event of any attempted assignment or transfer contrary to this Section 11(c), the
Company shall have no liability to pay any amount so attempted to be assigned, transferred or
delegated.

     12. Notices. For all purposes of this Agreement, all communications, including
without limitation notices, consents, requests or approvals, required or permitted to be given
hereunder will be in writing and will be deemed to have been duly given when hand delivered or
dispatched by electronic facsimile transmission (with receipt thereof orally confirmed), or five
business days after having been mailed by United States registered or certified mail, return
receipt requested, postage prepaid, or three business days after having been sent by a nationally
recognized overnight courier service such as FedEx, UPS, or Purolator, addressed to the Company (to
the attention of the Secretary of the Company) at its principal executive office and to the
Executive at his address on the books of the Company, or to such other address as any party may
have furnished to the other in writing and in accordance herewith, except that notices of changes
of address shall be effective only upon receipt.

13

 

     13. Governing Law. The validity, interpretation, construction and performance of this
Agreement will be governed by and construed in accordance with the substantive laws of the State of
Delaware, excluding any conflicts or choice of law rule or principle that might otherwise refer
construction or interpretation of this Agreement to the substantive law of another jurisdiction.

     14. Consent to Jurisdiction. Any disputes, litigation, proceedings or other legal
actions by any party to this Agreement in connection with or relating to this Agreement or any
matters described or contemplated in this Agreement may be instituted in the courts of the State of
Delaware or of the United States sitting in the State of Delaware. Each party to this Agreement
irrevocably submits to the jurisdiction of the courts of the State of Delaware and of the United
States sitting in the State of Delaware in connection with any such dispute, litigation, proceeding
or other legal action arising out of or relating to this Agreement.

     15. Validity. If any provision of this Agreement or the application of any provision
hereof to any person or circumstances is held invalid, unenforceable or otherwise illegal, the
remainder of this Agreement and the application of such provision to any other person or
circumstances will not be affected, and the provision so held to be invalid, unenforceable or
otherwise illegal will be reformed to the extent (and only to the extent) necessary to make it
enforceable, valid or legal.

     16. Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in writing signed by the
Executive and the Company. No waiver by either party to this Agreement at any time of any breach
by the other contracting party or compliance with any condition or provision of this Agreement to
be performed by such other party will be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or representations, oral
or otherwise, expressed or implied with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. References to Sections are to
references to Sections of this Agreement.

     17. Code Section 409A. To the extent that there is a material risk that any payments
under this Severance Agreement may result in the imposition of an additional tax to you under
Internal Revenue Code Section 409A (“Section 409A”), Harman will reasonably cooperate with you to
amend this Severance Agreement such that payments hereunder comply with Section 409A without
materially changing the economic value of this Severance Agreement to either party.

     18. Section 409A Delay. If the Executive is at the time of his separation from
service (as defined under Section 409A) with Harman (other than as a result of his death) a
“Specified Employee”, as such term is defined under Section 409A, any payment due to the Executive
hereunder that indicates it is subject to the Section 409A Delay shall be delayed until the earlier
of his death or six (6) months after such separation from service and shall then be promptly paid
to the Executive in a lump sum, together with interest for the period of delay, compounded
annually, equal to the prime rate (as published in The Wall Street Journal), and in effect as of
the date the payment should otherwise have been provided.

14

 

     19. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will constitute one and the same
agreement.

     IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed and delivered
as of the date first above written.

	 	 	 	 	 
	 	 	HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
	 
	 	 	 	 
	 

	 	By:
	 	/s/ Sidney Harman
	 

	 	 	 	 
	 

	 	 	 	Sidney Harman
	 

	 	 	 	Executive Chairman
	 
	 	 	 	 
	 	 	EXECUTIVE:
	 
	 	 	 	 
	 	 	/s/ Dinesh Paliwal
	 	 	 
	 	 	Dinesh Paliwal

15

 

ANNEX A

SEVERANCE COMPENSATION

	(1)	 	(i) A lump sum payment in an amount equal to three times the sum of (A) Base Pay (at the
highest rate in effect for any period prior to the Termination Date), plus (B) Incentive Pay
(in an amount equal to not less than the highest aggregate Incentive Pay earned in any of the
three fiscal years immediately preceding the year in which the Change in Control occurred, but
in no event less than the Target Bonus under the Executive’s Employment Agreement).

	(2)	 	For a period of eighteen months following the Termination Date (the “Continuation Period”),
the Company will arrange to provide the Executive with coverage under the Company medical,
dental or other health plan.

	(3)	 	Outplacement services for one year by a firm selected by the Executive, at the expense of the
Company in an amount up to 20% of the Executive’s Base Pay.

	(4)	 	A lump sum payment in the amount of $30,000 representing the cost of welfare benefits for two
years (less those provided under (2)) above plus a gross up so the Executive has no after tax
cost therefor.

16exv10w3

 

Exhibit 10.3

Exhibit A

HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED

2002 STOCK OPTION AND INCENTIVE PLAN

NONQUALIFIED STOCK OPTION AGREEMENT

FOR OFFICERS AND KEY EMPLOYEES

     THIS NONQUALIFIED STOCK OPTION AGREEMENT (this “Agreement”), dated as of July 1, 2007,
is entered into between HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED, a Delaware corporation (the
“Company”), and Dinesh Paliwal (“Optionee”). Capitalized terms used herein but not
defined shall have the meanings assigned to those terms in the Company’s 2002 Stock Option and
Incentive Plan (the “Plan”).

W I T N E S S E T H:

     A. Optionee is an employee of the Company or a Subsidiary of the Company; and

     B. The execution of this Agreement in the form hereof has been authorized by the Compensation
and Option Committee of the Board (the “Committee”);

     NOW, THEREFORE, in consideration of these premises and the covenants and agreements set forth
in this Agreement, the Company and Optionee agree as follows:

     1. Grant of Option. The Company hereby grants to Optionee, effective as of the Date
of Grant (as defined in Section 3), an option (the “Option”) to purchase 100,000 shares
(the “Option Shares”) of the Company’s common stock, par value $0.01 per share (“Common
Shares”), at the price of $  per share (the “Option Price”). This Agreement
constitutes an “Evidence of Award” under the Plan.

     2. Type of Option. The Option is intended to be a nonqualified stock option and shall
not be treated as an “incentive stock option” within the meaning of Section 422 of the Code.

     3. Date of Grant. The effective date of the grant of this Option is July 1, 2007 (the
“Date of Grant”).

     4. Date of Expiration. This Option shall expire on the 10th anniversary of
the Date of Grant (the “Date of Expiration”), unless earlier terminated under Section 7(a).

     5. Vesting of Option.

     (a) Except as otherwise provided in this Agreement, the Option shall become vested and
exercisable to the extent of 20% of the Option Shares on each of the first five anniversaries of
the Date of Grant.

     (b) Notwithstanding the provisions of Section 5(a) above, the Option shall become immediately
exercisable in full upon the occurrence of a Change in Control (as defined

 

 

below) on or before the Termination Date. A “Change in Control” means the occurrence
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 Securities Exchange Act of 1934, as amended (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 securities of the Company entitled to vote generally in the election of
directors (the “Voting Shares”); provided, however, that for purposes of this
Section 5(b)(i), the following acquisitions shall not constitute a Change in Control: (A)
any issuance of Voting Shares directly from the Company that is approved by the Incumbent
Board (as defined in Section 5(b)(ii) below), (B) any acquisition by the Company or a
Subsidiary of Voting Shares, (C) any acquisition of Voting Shares by any employee benefit
plan (or related trust) sponsored or maintained by the Company or any Subsidiary or (D) any
acquisition of Voting Shares by any Person pursuant to a Business Combination that complies
with clauses (A), (B) and (C) of Section 5(b)(iii) below;

          (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 stockholders, was approved by a vote of at least
two-thirds of the Directors then constituting 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 12 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;

          (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 the
Business Combination, (A) all or substantially all of the individuals and entities who were
the beneficial owners of Voting Shares immediately prior to the Business Combination
beneficially own, directly or indirectly, more than 50% of the combined voting power of the
then outstanding Voting Shares of the entity resulting from the 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 the
Business Combination, or any employee benefit plan (or related trust) sponsored or
maintained by the Company, any Subsidiary or such entity resulting from the Business
Combination) beneficially owns, directly or indirectly, 25% or more of the combined voting
power of the then outstanding Voting Shares of the entity resulting from the Business
Combination and (C) at least a majority of the members of the board of directors of the
entity resulting from the Business Combination

2

 

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 the Business Combination; or

          (iv) approval by the stockholders 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 5(b)(iii) hereof.

          (v) Notwithstanding anything in the foregoing to the contrary, the consummation of the
Agreement and Plan of Merger among KHI Parent Inc., KHI Merger Sub Inc. and Harman
International Industries, Incorporated, dated as of April 26, 2007, shall not constitute a
Change in Control for purposes of this Agreement.

          (vi) Notwithstanding the provisions of Section 5(a) above, (i) the Option shall become
immediately exercisable in full if Optionee dies or becomes permanently disabled while in
the employ of the Company or a Subsidiary, and (ii) the Committee, in its sole discretion,
may determine that all or any portion of the Option shall become immediately exercisable if
Optionee retires while in the employ of the Company or a Subsidiary; provided, however, that
if the Optionee is terminated by the Company without Cause or terminates for Good Reason
(each as defined in the Letter Agreement between Optionee and the
Company, dated as of May 8, 2007 (the “Letter Agreement”)), the number of Options that shall become immediately
exercisable shall be determined by dividing the number of full and partial months completed
since July 1, 2007 by 60, then multiplying the resulting quotient by the full number of
Options granted and then subtracting from that result the number of Options that have
previously become exercisable.

6. Manner of Exercise.

          (a) To the extent the Option is exercisable in accordance with Section 5, the Option may be
exercised by Optionee at any time, or from time to time, in whole or in part on or prior to the
Termination Date; provided, however, that Optionee must exercise the Option in multiples of 50
Option Shares unless fewer than 50 Option Shares are available for purchase by Optionee under this
Agreement at the time of exercise.

          (b) Optionee shall exercise the Option by delivering a signed written notice to the Company,
which notice shall specify the number of Option Shares to be purchased and be accompanied by
payment in full of the Option Price and any required taxes (as provided in the Plan) for the number
of Option Shares specified for purchase.

          (c) Upon full payment of the Option Price and any required taxes, and subject to the
applicable terms and conditions of the Plan and the terms and conditions of this Agreement, the
Company will cause certificates for the Option Shares purchased hereunder to be delivered to
Optionee.

          (d) The Optionee may reduce options to cover minimum required tax withholding and, if there
has been a Change in Control, to pay the Option Price.

3

 

7. Termination.

          (a) The Option shall terminate on the earliest of the following dates (such date, the
“Termination Date”):

          (i) the date that Optionee’s employment with the Company terminates for any reason
other than death or permanent disability; provided, however, that the Optionee shall have 90
days from the date of termination of employment to exercise the portion of the Option that
had vested on or prior to the termination of Optionee’s employment; provided further, that
the Optionee shall have 180 days from the date of termination to exercise the portion of the
Option that is vested on or prior to the termination of Optionee’s employment if such
termination is by the Company without Cause or by the Optionee for Good Reason (each as
defined in the Letter Agreement between the Optionee and the Company
dated as of May 8, 2007, or if the Severance Agreement dated as of May 8, 2007 between the Company and the
Optionee (the “Severance Agreement”) is operative, as defined in the Severance Agreement ).

          (ii) one year after the death or permanent disability of Optionee, if Optionee dies or
becomes permanently disabled while an employee of the Company or a Subsidiary, or

          (iii) the Date of Expiration.

          (b) During the periods referred to in Section 7(a)(i) above and the one year period referred
to in Section 7(a)(ii) above, the Option may be exercised only to the extent that, at the time that
Optionee ceases to be an employee of the Company or a Subsidiary, it is exercisable pursuant to
Section 5 hereof.

          (c) For the purposes of this Agreement, the continuous employment of Optionee with the Company
or a Subsidiary shall not be deemed to have been interrupted, and Optionee shall not be deemed to
have ceased to be an employee of the Company or a Subsidiary, by reason of (i) the transfer of
Optionee’s employment among the Company and its Subsidiaries, (ii) an approved leave of absence of
not more than 90 days, or (iii) the period of any leave of absence required to be granted by the
Company under any law, rule, regulation or contract applicable to Optionee’s employment with the
Company or any Subsidiary.

          (d) Notwithstanding anything elsewhere to the contrary, in no event shall Section 17(g) of the
Plan be applicable to the Option.

     8. Share Certificates. All certificates evidencing Option Shares purchased pursuant
hereto, and any certificates for Common Shares issued as dividends on, in exchange of, or as
replacements for, certificates evidencing Option Shares which, in the opinion of counsel for the
Company, are subject to similar legal requirements, shall have endorsed thereon before issuance
such restrictive or other legends as the Company’s counsel may deem necessary or advisable. The
Company and any transfer agent shall not be required to register or record the transfer of any such
shares unless and until the Company or its transfer agent shall have received from Optionee’s
counsel an opinion, in a form satisfactory to the Company, that any such transfer will not be in
violation of any applicable law, rule or regulation. Optionee agrees not to sell, assign,

4

 

pledge or otherwise dispose of any Option Shares or any Common Shares that are subject to
restrictions on transfer described in this Section 8 without the Company first receiving such an
opinion.

     9. Transfer. The Option may not be transferred by Optionee except by will or the laws
of descent and distribution and may not be exercised during the lifetime of Optionee except by
Optionee or Optionee’s guardian or legal representative acting on behalf of Optionee in a fiduciary
capacity under state law and court supervision.

     10. Compliance with Law. The Company shall make reasonable efforts to comply with all
applicable federal or state securities laws; provided, however, that notwithstanding any other
provision of this Agreement, the Option shall not be exercisable if the exercise would result in a
violation of any such laws.

     11. Employment Rights. This Agreement shall not confer on Optionee any right with
respect to the continuance of employment or other service with the Company or any Subsidiary. No
provision of this Agreement shall limit in any way whatsoever any right that the Company or a
Subsidiary may otherwise have to terminate the employment of Optionee at any time.\

     12. Communications. All notices, demands and other communications required or
permitted hereunder or designated to be given with respect to the rights or interests covered by
this Agreement shall be deemed to have been properly given or delivered when delivered personally
or sent by certified or registered mail, return receipt requested, U.S. mail or reputable overnight
carrier, with full postage prepaid and addressed to the parties as follows:

	 	 	 	 	 
	 

	 	If to the Company, at:
	 	1101 Pennsylvania Avenue, N.W.
	 

	 	 	 	Suite 1010
	 

	 	 	 	Washington, D.C. 20004
	 

	 	 	 	Attention: Vice President-Financial Operations
	 
	 	 	 	 
	 

	 	If to Optionee, at:
	 	Optionee’s address on the books of the Company

Either the Company or Optionee may change the above designated address by written notice to the
other specifying such new address.

     13. Interpretation. The interpretation and construction of this Agreement by the
Committee shall be final and conclusive; provided, however, that the definitions of Cause, Good
Reason, and Disability and any other provision covered in the Letter Agreement or Severance
Agreement shall be interpreted in the manner set forth in the Letter Agreement or the Severance
Agreement, as applicable. No member of the Committee shall be liable for any such action or
determination made in good faith.

     14. Amendment in Writing. This Agreement may be amended as provided in the Plan;
provided, however, that all such amendments shall be in writing.

     15. Integration. The Option is granted pursuant to the Plan. Notwithstanding anything
in this Agreement to the contrary, this Agreement is subject to all of the terms and

5

 

conditions of the Plan, a copy of which is available upon request and which is incorporated
herein by reference, the Letter Agreement and the Severance Agreement. As such, this Agreement,
the Plan, the Letter Agreement and the Severance Agreement embody the entire agreement and
understanding of the Company and Optionee and supersede any prior understandings or agreements,
whether written or oral, with respect to the Option.

     16. Severance. In the event that one or more of the provisions of this Agreement
shall be invalidated for any reason by a court of competent jurisdiction, any provision so
invalidated shall be deemed to be separable from the other provisions hereof and the remaining
provisions hereof shall continue to be valid and fully enforceable.

     17. Governing Law. This Agreement is made under, and shall be construed in accordance
with, the laws of the State of Delaware.

     18. Counterparts. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one and the same
instrument.

[THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK]

6

 

     IN WITNESS WHEREOF, this Agreement is executed by a duly authorized representative of the
Company on the day and year first above written.

	 	 	 	 	 
	 	 	HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 	 
	 

	 	Name:	 	 
	 

	 	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 	 

The undersigned Optionee hereby acknowledges receipt of an executed original of
this Agreement and accepts the Option subject to the applicable terms and
conditions of the Plan and the terms and conditions hereinabove set forth.

	 	 	 	 	 	 	 
	Date:
	 	 	 	 	 	 
	 

	 	 
	 	 	 	 
	 

	 	 	 	 	 	Optionee

7

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