<PAGE>
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report under Section 13 or 15(d)
of the Securities Exchange Act of 1934
For Quarter Ended: DECEMBER 31, 1993 Commission File Number: 1-9764
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
(Exact name of registrant as specified in its charter)
DELAWARE 11-2534306
(State or other jurisdiction of (I.R.S. Employer Identification
corporation or organization) Number)
1101 PENNSYLVANIA AVENUE, N.W. WASHINGTON, D.C. 20004
(Address of principal executive offices) (Zip code)
(202) 393-1101
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
YES X NO
----- -----
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date.
14,952,307 shares of Common Stock, $.01 par value at January 31, 1994.
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES
INDEX
PART I. FINANCIAL INFORMATION PAGE NO.
Item 1. Financial Statements
Condensed Consolidated Balance Sheets - December
31, 1993 and June 30, 1993 3
Condensed Consolidated Statements of Operations -
Three and Six Months Ended December 31, 1993 and
1992 4
Condensed Consolidated Statements of Cash Flows -
Six Months Ended December 31, 1993 and 1992 5
Notes to Condensed Consolidated Financial
Statements 6
Item 2. Management's Discussion and Analysis of
the Results of Operations and Financial
Condition 7-9
PART II. OTHER INFORMATION 10
SIGNATURES 11
EXHIBIT 10.47 12
2
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1993 AND JUNE 30, 1993
(000s omitted except per share amounts)
<TABLE>
<CAPTION>
(Unaudited) (Audited)
ASSETS 12/31/93 6/30/93
----------- ----------
<S> <C> <C>
Current Assets:
Cash and short-term investments $ 18,028 $ 2,179
Receivables (less allowance for
doubtful accounts: $6,385 at
December 31, 1993, and $3,435
at June 30, 1993.) 157,037 127,648
Inventories
Finished goods and inventory
purchased for resale 102,495 86,681
Work in process 17,564 11,992
Raw materials and supplies 65,391 38,518
----------- ----------
Total inventories 185,450 137,191
Other current assets 23,608 21,803
----------- ----------
Total current assets 384,123 288,821
Investments 3,812 --
Investments in unconsolidated
subsidiaries 3,001 --
Property, plant and equipment, net 120,825 103,058
Other assets 9,679 9,603
Excess of cost over fair value of assets
acquired 34,495 30,244
----------- ----------
Total assets $ 555,935 $ 431,726
=========== ==========
LIABILITIES AND SHAREHOLDER'S EQUITY
Current Liabilities:
Notes Payable $ 37,410 $ 33,379
Current portion of long-term debt 5,673 4,383
Accounts payable 65,314 54,375
Accrued liabilities 71,940 49,192
----------- ----------
Total current liabilities 180,337 141,329
Other non-current liabilities 9,496 --
Senior long-term debt 36,519 60,583
Subordinated long-term debt 115,000 115,000
Deferred income 3,019 3,665
Minority interest 6,291 --
Shareholder's Equity:
Common stock, $0.01 par value 149 109
Additional paid-in capital 141,582 53,453
Equity adjustment from foreign
currency translation (6,991) (5,083)
Retained earnings 70,533 62,670
----------- ----------
Net shareholders' equity 205,273 111,149
----------- ----------
Total liabilities and
shareholders' equity $ 555,935 $ 431,726
=========== ==========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial
Statements.
3
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
FOR THE THREE MONTHS AND SIX MONTHS ENDED DECEMBER 31, 1993 AND
1992
(000s omitted except per share amounts)
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
December 31, December 31,
1993 1992 1993 1992
---------- ---------- ---------- ---------
<S> <C> <C> <C> <C>
Net Sales $ 222,726 $ 177,314 $ 386,387 $ 322,059
Cost of Sales 152,369 127,907 269,238 233,076
---------- ---------- ---------- ---------
Gross Profit 70,357 49,407 117,149 88,983
Selling, general and
administrative
expenses 50,947 37,791 90,174 74,054
---------- ---------- ---------- ---------
Operating income 19,410 11,616 26,975 14,929
Other expenses:
Interest expense 6,347 5,931 11,932 11,437
Miscellaneous, net 461 135 700 254
---------- ---------- ---------- ---------
Income before income
taxes and
extraordinary
items 12,602 5,550 14,343 3,238
Income tax expense 5,035 2,215 5,732 1,267
---------- ---------- ---------- ---------
Income before
extraordinary
items 7,567 3,335 8,611 1,971
Extraordinary items,
net of income taxes (748) -- (748) --
---------- ---------- ---------- ---------
Net income $ 6,819 $ 3,335 $ 7,863 $ 1,971
========== ========== ========== =========
Earnings per share of
common stock before
extraordinary items $ 0.59 $ 0.31 $ 0.72 $ 0.18
========== ========== ========== =========
Earnings per common
share $ 0.54 $ 0.31 $ 0.67 $ 0.18
========== ========== ========== =========
Weighted average number
of common shares
outstanding 12,617 10,803 11,748 10,799
========== ========== ========== =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial
Statements.
4
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED DECEMBER 31, 1993 AND 1992
($000s omitted)
(UNAUDITED)
<TABLE>
<CAPTION>
1993 1992
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 7,863 $ 1,971
---------- ----------
Adjustments to reconcile net income to
net cash provided by (used in)
operating activities:
Depreciation 14,357 11,538
Amortization of intangible assets 998 818
Amortization of deferred income (646) (647)
Changes in assets and liabilities, net
of effects from purchase of companies:
(Increase) in:
Receivables (8,839) (2,459)
Inventories (25,739) (2,339)
Other current assets (103) (2,756)
Increase (decrease) in:
Accounts payable 641 (2,451)
Accrued liabilities 810 1,884
---------- ----------
Total adjustments $(18,521) $ 3,588
---------- ----------
Net cash provided by (used in) operating
activities $(10,658) $ 5,559
Cash flow from investing activities:
Payment for purchase of companies,
net of cash acquired 2,568 --
Investments in unconsolidated
subsidiaries (2,500) --
Capital expenditures for property,
plant and equipment (17,155) (8,910)
Other items, net 2,124 3,266
---------- ----------
Net cash used in investing activities $(14,963) $ (5,644)
---------- ----------
Cash flow from financing activities:
Net (repayments of) lines of credit (20,503) (33,410)
Net proceeds from (repayments of)
long-term debt (24,288) 44,037
Proceeds from issuance of common stock 87,488 --
Proceeds from exercise of stock options 681 314
Net change, foreign currency translation (1,908) (11,131)
---------- ----------
Net cash flow provided by (used in)
financing activities $ 41,470 $ (190)
---------- ----------
Net increase (decrease) in cash and
short-term investments 15,849 (275)
Cash and short-term investments at
beginning of period 2,179 2,819
---------- ----------
Cash and short-term investments at
end of period $ 18,028 $ 2,544
- ---------------------------------- ========== ==========
Supplemental disclosures of cash flow
information:
Interest paid $11,696 $9,981
Income taxes paid $2,025 $1,390
Supplemental schedule of noncash investing
activities:
Fair value of assets acquired $70,149 $--
Cash paid for the capital stock -- --
---------- ----------
Liabilities assumed $70,149 $--
---------- ----------
</TABLE>
See accompanying Notes to Condensed Consolidated Financial
Statements.
5
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
NOTE A - BASIS OF PRESENTATION
The Company's Condensed Consolidated Financial Statements for the
three months and six months ended December 31, 1993 and 1992 have
not been audited by the Company's independent auditors; however, in
the opinion of management, the accompanying unaudited Condensed
Consolidated Financial Statements contain all adjustments
(consisting of only normal recurring accruals) necessary to present
fairly the condensed consolidated financial position of the Company
and subsidiaries as of December 31, 1993 and the results of their
operations and their cash flows for the periods presented.
The results of operations for the three months and six months ended
December 31, 1993 are not necessarily indicative of the results to
be expected for the full year.
NOTE B - IN-SUBSTANCE DEFEASANCE OF DEBT
In December 1993, the Company utilized funds from the recent Common
Stock offering to purchase United States government securities at a
cost of $26,850,650 which were deposited irrevocably with PNC Bank,
National Association to satisfy principal and interest payments
through the stated maturity on the Company's $25.0 million 10.08%
Senior Notes, Series A, due September 30, 1994. The debt and
accrued interest thereon were removed from the balance sheet in an
in-substance defeasance transaction resulting in an extraordinary
loss, net of a related tax benefit, of $748,000.
6
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Results of Operations
- ---------------------
COMPARISON OF THREE MONTH AND SIX MONTH PERIODS ENDED DECEMBER 31,
1993 AND 1992
Net sales for the quarter ended December 31, 1993 totaled $222.7
million, a 25.6 percent increase over the comparable period in the
prior year. For the first half of fiscal 1994, sales increased
20.0 percent to $386.4 million. Significant sales increases were
reported by the Professional Group, the Automotive OEM Group and the
Consumer Group. The International Distributing Group reported lower
sales due to the Company's decision to discontinue the distribution
of Maxell tapes at Harman Deutschland. Sales of Maxell tape
products were $12.1 million and $22.2 million in the prior year's
second quarter and first half, respectively.
The Professional Group sales increase reflects the contribution of
AKG, our newly acquired microphone manufacturer, whose operating
results are included for the first time this quarter, combined with
strong sales of JBL and Soundcraft products and the inclusion of the
sales of Lexicon, which was acquired in the third quarter of the
prior fiscal year. Contributing to the growth at Soundcraft was the
success of the "Spirit" line of mixing consoles. Higher sales at
JBL primarily reflects increased international strength.
Higher Automotive OEM Group sales reflect continued strong sales to
the automobile manufacturers. Contributing to the growth were the
successful introduction of an Infinity premium branded audio system
in the Jeep Grand Cherokee and the success of the Chrysler LH
automobile line in which Chrysler/Infinity ISI systems are
installed. Strong sales of the Ford Explorer and Lincoln Mark VIII,
in which the Ford/JBL premium sound systems are installed, also
contributed to improved performance.
The Consumer Group sales increase results from strong domestic JBL
and Infinity sales. Sales of Infinity "Sterling" and "Crescendo"
loudspeakers to Circuit City contributed to the Infinity results.
The International Distributing Group was the only group to report a
sales decrease, primarily due to the discontinuance of Maxell tape
distribution as discussed above. Harman Deutschland is providing
administrative support for Maxell, on a fee basis, through the end
of fiscal 1994 while continuing to shift its focus to the
distribution of products manufactured by the Company. Excluding the
Maxell sales, International Distributing Group sales for the quarter
and the first half of fiscal 1994 approximate the prior year despite
the difficult economic conditions in Europe and Japan.
The gross profit margin for the quarter ended December 31, 1993 was
31.6 percent compared to 27.9 percent in the prior year. The gross
profit margin for the first half of fiscal 1994 was 30.3 percent
compared to 27.6 percent in the previous year. The increases in
gross profit margin reflect operating leverage and favorable product
7
<PAGE>
mix at Harman Motive and cost reductions at the Manufacturing Group
associated with improved manufacturing efficiencies at the
Northridge and Audax facilities.
Selling, general and administrative expenses as a percentage of net
sales increased to 22.9 percent for the quarter ended December 31,
1993 from 21.3 percent in the comparable period in the prior year.
Selling, general and administrative expenses for the first half of
fiscal 1994 were 23.3 percent of sales compared to 23.0 percent in
the prior year. The increases for the quarter and the first half
reflect increased marketing costs associated with the implementation
of the Harman Marketing Units, significantly offset by cost savings
in overhead personnel due to the new organizational structure of the
Company and other cost reduction programs.
Operating income as a percentage of sales was 8.7 percent ($19.4
million) for the second quarter ended December 31, 1993 compared
with 6.6 percent ($11.6 million) for the same period in the prior
year. Operating income as a percentage of sales was 7.0 percent
($27.0 million) for the first half of fiscal 1994 compared with 4.6
percent ($14.9 million) in the first half of fiscal 1993. These
increases reflect improved gross profit percentages for the quarter
and the first six months as discussed above.
Interest expense increased from $5.9 million to $6.3 million from
the three months ended December 31, 1992 to the three months ended
December 31, 1993. For the six months ended December 31, 1993,
interest expense was $11.9 million compared to $11.4 million for the
six months ended December 31, 1992. Interest expense as a
percentage of sales was 2.8 percent for the second quarter ended
December 31, 1993, down from 3.3 percent for the comparable period
in the previous year. Interest expense as a percentage of sales for
the first half of fiscal 1994 was 3.1 percent compared with 3.6
percent in the first half of fiscal 1993.
The increases in interest expense resulted from higher levels of
average borrowings outstanding for the periods in fiscal 1994 when
compared to the same periods in fiscal 1993. The average borrowings
outstanding were $235.0 million for the second quarter and $227.0
million for the first half of fiscal 1994, compared to $220.9
million for the second quarter and $216.9 million for the first half
of fiscal 1993.
The average interest rate on borrowings was 10.80 percent for the
second quarter and 10.51 percent for the first half of fiscal 1994.
This compares to average interest rates of 10.74 percent for the
second quarter and 10.55 percent for the first half of fiscal 1993.
The increase in average interest rates for the quarter reflects the
repayment of short-term debt, which generally carried lower interest
rates than long-term debt, with the proceeds of the common stock
offering combined with higher interest rates on the debt assumed in
the AKG acquisition.
Income before income taxes and extraordinary items for the second
quarter of fiscal 1994 was $12.6 million, up from $5.6 million in
the previous year. For the six months ended December 31, 1993,
income before income taxes and extraordinary items was $14.3 million
compared to $3.2 million for the six months ended December 31, 1992.
8
<PAGE>
The effective tax rate for the second quarter of fiscal 1994 was
40.0 percent compared with 39.9 percent in the prior year. The
effective tax rate for the first half of fiscal 1994 was 40.0
percent compared to a rate of 39.1 percent in the prior year.
The Company reported an extraordinary charge, net of a related tax
benefit, of $748,000 in the second quarter of fiscal 1994 associated
with the extinguishment of $25.0 million of debt through an in-
substance defeasance of the 10.08% $25.0 million Senior Notes,
Series A, due September 30, 1994.
Net income for the three months ended December 31, 1993 was $6.8
million, or $0.54 per share, compared with $3.3 million, or $0.31
per share, in the previous year. Net income for the first half of
fiscal 1994 was $7.9 million, or $0.72 per share, compared with $2.0
million, or $0.18 per share, in the previous year.
Financial Condition
- -------------------
Net working capital at December 31, 1993 was $203.8 million,
compared with $147.5 million at June 30, 1993. The increase
primarily reflects the repayment of short-term borrowings with the
proceeds of the second quarter common stock issuance combined with
higher inventories and receivables associated with the AKG
acquisition.
The Company issued 4,025,000 shares of common stock in November
1993, which included full utilization of the over-allotment option
for 525,000 shares. The stock was issued at $23.00 per share,
generating net proceeds to the Company of $87.5 million after
underwriting discount and associated expenses. The proceeds were
used primarily to repay short- and long-term debt.
Other changes in the Company's balance sheet from June 30, 1993, the
end of the preceding fiscal year, to December 31, 1993 are as
follows:
- - Accounts receivable increased from $127.6 million at June 30,
1993 to $157.0 million at December 31, 1993. Of this increase,
$18.0 million was due to the inclusion of AKG and the remaining
increase reflects the impact of higher sales volume.
- - Inventories increased by $48.3 million from $137.2 million to
$185.5 million. Of this increase, $23.4 million is due to the
inclusion of AKG inventories, with the remainder primarily due to
the requirement for increased inventories to support increased
sales volumes.
Other
- -----
Although the Company's Northridge plant was near the epicenter of
the California earthquake, the manufacturing facility did not
sustain significant structural damage and is again fully
operational. Management believes the Company's earthquake and other
insurance coverage will be adequate to cover anticipated losses, and
the impact of the earthquake will not be material to the financial
condition of the Company.
9
<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED AND SUBSIDIARIES
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are various legal proceedings pending against the
registrant and its subsidiaries but, in the opinion of
management, liabilities, if any, arising from such claims
will not have a materially adverse effect upon the
consolidated financial condition of the registrant.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits Required by Item 601 of Regulation S-K
The following exhibits are filed as part of this
report.
Exhibit
No. Description
10.47 Escrow Agreement, dated as of
December 30, 1993, by and between
the Company and PNC Bank, N.A.
(b) Reports on Form 8-K
Form 8-K/A, dated September 24, 1993, filed on
November 15, 1993, containing the following items:
Item 2. Description of the acquisition of AKG.
Item 7. Financial statements of AKG, required by
Items 7(a)(1), (2) and (b)(1), incorporated by
reference to the Company's Registration Statement on
Statement on Form S-3, Registration No. 93-50683,
filed on October 20, 1993, and Amendment No. 1
thereto, filed on November 15, 1993; and the Share
Purchase Agreement dated September 24, 1993, which
effected the AKG acquisition, incorporated by
reference to the Form 8-K dated September 24, 1993,
and filed on October 12, 1993.
10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
(Registrant)
DATE: February 11, 1994 BY: /s/ Sidney Harman
----------------------
Sidney Harman
Chairman and Chief
Executive Officer
DATE: February 11, 1994 BY: /s/ Bernard A. Girod
----------------------
Bernard A. Girod
Chief Operating
Officer, Secretary and
Chief Financial Officer
11
<PAGE>
EXHIBIT 10.47
12
<PAGE>
ESCROW AGREEMENT
AGREEMENT made as of this 30th day of December, 1993, by and
between Harman International Industries, Incorporated, a Delaware
corporation ("Harman") and PNC Bank, National Association as escrow
agent (the "Escrow Agent").
WITNESSETH:
WHEREAS, Harman is defeasing its Series A Senior Notes due
September 30, 1994 (the "Notes") by placing $26,850,649.80 with the
Escrow Agent in the Escrow Fund for the benefit of the holders set
forth on Schedule A attached hereto (the "Noteholders").
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants herein contained, the parties hereto agree as
follows:
1. Acceptance by Escrow Agent. The Escrow Agent hereby
accepts the appointment as escrow agent hereunder and agrees to act
on the terms and conditions hereinafter set forth.
2. Irrevocable Escrow of Funds. Harman hereby transfers
irrevocably to the Escrow Agent $26,850,649.80 to fund the Escrow
Fund for the benefit of the Noteholders until the Termination Date
(as defined in paragraph 11 of this Agreement).
3. Investment of Escrow Fund. In accordance with the
express written direction of Harman as set forth in Schedule B
attached hereto (which Schedule B may be amended by Harman from
time to time by providing written notice to the Escrow Agent in
accordance with the terms hereof), the Escrow Agent shall invest
the Escrow Fund in one of the following monetary assets (the
13
<PAGE>
"Essentially Risk-Free Securities"): (1) Direct Obligations of the
U.S. government; (2) Obligations guaranteed by the U.S. government;
(3) Securities that are backed by U.S. government obligations as
collateral under an arrangement by which the interest and principal
payments on the collateral generally flow immediately through to
the holder of the security. The exact proportions of investments
in such Essentially Risk-Free Securities shall be as set forth in
Schedule B attached hereto and as amended in writing by Harman
subsequent to the date hereof.
4. Rights and Responsibilities of Escrow Agent. The
acceptance by the Escrow Agent of its duties hereunder is subject
to the following terms and conditions, which the parties to this
Agreement hereby agree shall govern and control with respect to the
Escrow Agent's rights, duties, liabilities and immunities:
(a) The Escrow Agent shall act hereunder as a depositary
only, and it shall not be responsible or liable in any manner
whatever for the sufficiency, correctness, genuineness or
validity of any document furnished to the Escrow agent or any
asset deposited with it.
(b) The Escrow Agent shall be protected in acting upon
written instructions from Harman if it, in good faith,
believes such written instructions to be genuine and what they
purport to be.
Harman shall from time to time file with the Escrow
Agent a certified copy of each resolution of its Board of
Directors authorizing the person or persons to give written
instructions. Such resolution shall specify the class of
instructions that may be given by each person to the Escrow
Agent, under this Agreement, together with certified
signatures of such persons authorized to sign. This shall
constitute conclusive evidence of the authority of the
signatories designated therein to act. It shall be considered
in full force and effect with the Escrow Agent fully protected
in acting in reliance thereon unless and until it receives
written notice to the contrary.
14
<PAGE>
(c) The Escrow Agent shall not be liable for any error
of judgment or for any action taken or omitted by it in good
faith, or for any mistake of fact or law, or for anything
which it may do or refrain from doing in connection herewith
except its own gross negligence or willful misconduct.
(d) Harman agrees to indemnify the Escrow Agent and hold
it harmless from and against any loss, liability, expenses
(including reasonable attorneys' fees and expenses), claim or
demand arising out of or in connection with the performance of
its obligations in accordance with the provisions of this
Escrow Agreement except for the gross negligence or willful
misconduct of the Escrow Agent. These indemnities shall
survive the resignation of the Escrow Agent or the termination
of this Escrow Agreement.
(e) The Escrow Agent shall have no duties except those
specifically set forth in this Agreement. This Agreement
represents the entire understanding of the parties hereto with
respect to the subject matter contained herein and supersedes
any and all other and prior agreements between them.
(f) In accordance with the schedule of charges attached
hereto as Schedule C, the fee of the Escrow Agent for its
services as required hereunder for a period of one year or
less shall be payable by Harman at or before the signing and
delivery of this Escrow Agreement, the receipt of which the
Escrow Agent acknowledges by the signing of this Escrow
Agreement. Should the services of the Escrow Agent continue
hereunder for a period of more than one year from the date
hereof, the Escrow Agent shall be entitled to additional fees
in accordance with the schedule of charges attached hereto as
Schedule C.
5. Statements. During the term of this Agreement, the
Escrow Agent shall provide Harman with monthly statements
containing the beginning balance in the escrow account as well as
all principal and income transactions for the statement period.
Harman shall be responsible for reconciling such statements. The
Escrow Agent shall be forever released and discharged from all
liability with respect to the accuracy of such statements, except
with respect to any such act or transaction as to which Harman
shall, within 90 days after the furnishing of the statement, file
written objections with the Escrow Agent.
15
<PAGE>
6. Distributions. The Escrow Agent shall distribute the
Escrow Funds to the Noteholders, or their successors and assigns,
in accordance with the express written instructions of Harman as
set forth on Schedule D attached hereto (which Schedule D may be
amended by Harman from time to time by providing written notice to
the Escrow Agent in accordance with the terms hereof). If the
funds provided by Harman's written instructions regarding the
investment of the Escrow Fund are insufficient to make any
distribution specified in Schedule D, Harman shall provide
additional funds to the Escrow Agent sufficient to make such
distribution. Moneys in the Escrow Fund, if any, remaining on the
Termination Date (as defined in paragraph 11 of this Agreement) in
excess of the amount required for the payments specified in
Schedule D represent an overpayment by Harman and shall be
transferred to Harman.
7. Income. All income, including interest and dividends,
earned on the Escrow Fund deposited hereunder (the "Income") shall
be added to and held in the escrow account created hereunder.
8. Tax Identification Number. All interest accrued in the
Escrow Fund shall be for the account of Harman and shall be
reported under applicable federal regulations using the tax
identification number of Harman, which is #11-2534306.
9. Indemnification as to Taxes, Penalties and Interest.
Harman shall indemnify and hold harmless the Escrow Agent against
and in respect of any liability for taxes and for any penalties or
interest in respect of taxes attributable to the investment of
16
<PAGE>
funds held in escrow by the Escrow Agent pursuant to this
Agreement.
10. Amendment. This Agreement may not be amended or
supplemented and no provision hereof may be modified or waived,
except by an instrument in writing, signed by the parties hereto.
11. Termination. The purpose of this Escrow Agreement and
the terms hereof shall terminate on the date of the final payment
specified in Schedule D (the "Termination Date"). Upon the
termination of this Agreement and upon the delivery of all or any
portion of the Escrow Funds by the Escrow Agent, in accordance with
the terms hereof, the Escrow Agent shall be relieved of any and all
further obligations hereunder.
12. Resignation. The Escrow Agent may resign at any time by
giving thirty (30) days written notice of such resignation to
Harman. If no successor Escrow Agent has been named at the
expiration of the thirty (30) day period, the Escrow Agent shall
have no further obligation hereunder except to hold the Escrow Fund
as a depository. Upon notification by Harman of the appointment of
a successor, the Escrow Agent shall promptly deliver the Escrow
Fund and all materials in its possession relating to the Escrow
Fund to such successor, and the duties of the resigning Escrow
Agent shall thereupon in all respects terminate, and it shall be
released and discharged from all further obligations hereunder.
Similarly, the Escrow Agent may be discharged from its
duties as Escrow Agent under this Agreement upon thirty (30) days
written notice from Harman and upon payment of any and all fees due
to Escrow Agent. In such event, the Escrow Agent shall be
17
<PAGE>
entitled to rely on instructions from Harman as to the disposition
and delivery of the Escrow Fund to a new escrow agent.
13. Execution. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such
counterparts together shall constitute one and the same instrument.
The effective date of this Agreement shall be the date it is
executed by the last party to do so.
14. Miscellaneous. All covenants and agreements contained in
this Agreement by or on behalf of the parties hereto shall bind and
inure to the benefit of such parties and their respective heirs,
administrators, legal representatives, successors and assigns, as
the case may be, and all references to such parties herein shall be
deemed to also refer to any successors, assigns, heirs,
administrators and legal representatives of said parties, as the
case may be. The headings in this Agreement are for convenience of
reference only and shall neither be considered as part of this
Agreement, nor limit or otherwise affect the meaning hereof. This
Agreement shall be construed and enforced in accordance with the
laws of the Commonwealth of Pennsylvania.
18
<PAGE>
15. Notices. All instructions, notices and other
communications hereunder must be in writing and shall be deemed to
have been duly given if delivered by hand or mailed by first class,
registered mail, return receipt requested, postage prepaid, and
addressed as follows:
(a) If to Harman:
Bernard A. Girod
Harman International Industries,
Incorporated
1101 Pennsylvania Ave., N.W.
Suite 1010
Washington, D.C. 20004
(b) If to the Escrow Agent:
PNC Bank, National Association
17th & Chestnut Streets, 5th Floor
Philadelphia, PA 19103
Attention: Stuart P. Papavassiliou
19
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement date first above written.
HARMAN INTERNATIONAL INDUSTRIES,
INCORPORATED
1101 Pennsylvania Ave., N.W.
Suite 1010
Washington, D.C. 20004
By: /s/ Bernard A. Girod
---------------------------------
Name: Bernard A. Girod
Title: Chief Operating Officer,
Chief Financial Officer
and Secretary
PNC BANK, NATIONAL ASSOCIATION
17th & Chestnut Streets
Philadelphia, Pennsylvania 19103
By: /s/ William C. Lambert
------------------------------
Name: William C. Lambert
Title: Vice President
20
<PAGE>
SCHEDULE A
THE NOTEHOLDERS
1. Connecticut Mutual Life Insurance, Private Placement
Investments, 140 Garden Street, Hartford, CT 06154 ,Tax ID # 51-
0339319, Account # 99001265, ABA# 011000028, Bank - State Street
Bank and Trust Co., Payment Details - Full & Co. Interest Series A
Notes AR9.
2. SMA Life Assurance Co., Securities Department,440 Lincoln
Street, Worcester, MA 01650,Tax ID # 04-6145677, Account #
40527368, ABA# 021000089, Bank - Citibank, Payment Details -
Interest Series A Notes AR4.
3. State Mutual Life Assurance Co., Securities Department,440
Lincoln Street, Worcester, MA 01650, Tax ID # 04-1867050, Account
# 40527296, ABA# 021000089, Bank - Citibank, Payment Details -
Interest Series A Notes AR5.
4. Massachusetts Mutual Life Insurance Co., GIA Insurance - 1295
State St. Springfield MA 01111-0001, Tax ID # 04-1590850, Account
# 321029852, ABA# 021000128, Bank - Chemical Bank, Payment Details
- - Interest Series A Notes AR2 & AR8 Institutional Custody Dept.
5. Massachusetts Mutual Life Insurance Co., GIA Pension - 1295
State St. Springfield MA 01111-0001, Tax ID # 04-1590850, Account
# 321029828, ABA# 021000128, Bank - Chemical Bank, Payment Details
- - Interest Series A Notes AR1 & AR7 Institutional Custody Dept.
6. Penn Mutual Life Insurance Co., Securties Investment Division,
Independence Square, Philadelphia, PA 19172, Tax ID # 23-0952300,
Account # 092497, ABA# 021001033, Bank - Bankers Trust Company,
Payment Details - Interest Series A Notes AR3 99087897 Private
Placement Administration.
21
<PAGE>
Schedule B
Escrow Fund Investments
The Escrow Fund Assets Will Be Invested In:
25,745 Treasury Notes @ 4.00% With A Par Value Of 13+ Due September
30, 1994. Total amount invested is $26,111,061.08.
2.98% Treasury Bills With A Par Value of $745,000.00 Due March 31,
1994. Total amount invested is $739,388.72.
Cash of $200.00 Deposited in Escrow Account.
22
<PAGE>
Schedule C
Fee Schedule For Escrow Agent Services
Annual Account Administration
$2,000.00
Standard Transactions
Manual Cash Movement $10.00 each
Book Entry $15.00 each
Physical $25.00 each
Temporary Investments of Excess Balances
Automatic cash investments .30%. The cash investment vehicle
will be one of the PNC Money Market Mutual Funds.
23
<PAGE>
Schedule D
Termination Date
Payments to be made by the Escrow Fund:
Payment Payment
3/31/94 9/30/94
Connecticut Mutual Life Insurance $252,000 $5,252,000
SMA Life Insurance Company $63,000 $1,313,000
State Mutual Life Assurance Co. $63,000 $1,313,000
Massachusetts Mutual Life Ins Co. $315,000 $6,565,000
Massachusetts Mutual Life Ins Co. $315,000 $6,565,000
Penn Mutual Life Insurance Co. $252,000 $5,252,000
24
