<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant X
Filed by a Party other than the Registrant
Check the appropriate box:
Preliminary Proxy Statement
X Definitive Proxy Statement
Definitive Additional Materials
Soliciting Material Pursuant to 240.14a-11(c) or 240.14a-12
Harman International Industries, Incorporated
(Name of Registrant as Specified in Its Charter)
Harman International Industries, Incorporated
(Name of Persons(s) Filing Proxy Statement)
Payment of Filing Fee (Check the appropriate box):
X $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(i)(2).
$500 per each party to the controversy pursuant to Exchange
Act Rule 14a-6(i)(3).
Fee computed on table below per Exchange Act Rules 14a-
6(i)(4) and 0-11.
1) Title of each class of securities to which transaction
applies:
2) Aggregate number of securities to which transaction
applies:
3) Per unit price or other underlying value of transaction
computed pursuant to Exchange Act Rule 0-11:*
4) Proposed maximum aggregate value of transaction:
* Set forth the amount on which the filing fee is calculated
and state how it was determined.
Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for
which the offsetting fee was paid previously. Identify the
previous filing by registration statement number, or the
Form or Schedule and the date of its filing.
1) Amount Previously Paid:
2) Form, Schedule or Registration Statement No.:
3) Filing Party:
4) Date Filed:
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[LOGO] HARMAN INTERNATIONAL
INDUSTRIES, INCORPORATED
1101 Pennsylvania Avenue, N.W., Suite 1010
Washington, D.C. 20004
September 28, 1994
Dear Harman International Stockholder:
You are cordially invited to attend the Annual Meeting of
Stockholders to be held on Wednesday, November 2, 1994 at 11:00
a.m. in the Chemical Bank building at 270 Park Avenue, New York,
New York. Information about the meeting, the nominee for
Director and the proposals to be considered is presented in the
Notice of Annual Meeting of Stockholders and the Proxy Statement
on the following pages.
In addition to the formal items of business to be presented
at the meeting, I will report on our Company's operations during
fiscal 1994. This will be followed by a question and answer
period.
It is important that your shares be represented at the
meeting regardless of the number of shares that you hold. To
ensure your representation, please sign, date and return the
enclosed proxy card promptly.
We look forward to seeing you on November 2nd.
Sincerely,
/s/ Sidney Harman
Sidney Harman
Chairman and Chief Executive Officer
<PAGE>
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[LOGO] HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
________________
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
November 2, 1994
________________
The 1994 Annual Meeting of Stockholders of Harman
International Industries, Incorporated (the "Company") will be
held at Chemical Bank, 270 Park Avenue, New York, New York on
November 2, 1994 at 11:00 a.m. for the following purposes:
(1) To elect one director to serve for a three-year
term expiring at the 1997 Annual Meeting of
Stockholders;
(2) To consider and take action upon a proposal to
adopt the Chief Executive Officer Incentive Plan;
(3) To consider and take action upon a proposal to
amend and restate the Company's 1992 Incentive Plan;
and to transact such other business as properly may come before
the meeting on November 2 or on any date to which the meeting may
be adjourned.
Stockholders of record as of the close of business on
September 16, 1994 are entitled to notice of, and to vote at, the
meeting.
If you plan to attend the meeting and will need special
assistance or accommodation due to a disability, please include
such information on the enclosed proxy card.
By Order of the Board of Directors
/s/ Bernard A. Girod
Bernard A. Girod
Secretary
Washington, D.C.
September 28, 1994
IMPORTANT
Whether or not you plan to attend in person, please vote by
means of the enclosed proxy which you are requested to sign, date
and return as soon as possible in the enclosed postage prepaid
envelope.
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<PAGE>
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
1101 Pennsylvania Avenue, N.W.
Suite 1010
Washington, D.C. 20004
_____________________
PROXY STATEMENT
_____________________
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Directors of Harman
International Industries, Incorporated (the "Company") for use at
the 1994 Annual Meeting of Stockholders (the "Meeting") and for
the purpose of considering and acting upon the matters specified
in the accompanying Notice of Annual Meeting. This Proxy
Statement and the enclosed proxy card were first sent or given to
stockholders on or about September 28, 1994.
Holders of record of the Company's common stock (the "Common
Stock"), par value $0.01 per share, as of the close of business
on September 16, 1994, will be entitled to vote at the Meeting or
at any adjournment thereof, and each stockholder of record on
such date will be entitled to one vote for each share of Common
Stock held. On September 16, 1994, there were 15,081,067 shares
of Common Stock outstanding.
Shares of Common Stock cannot be voted at the Meeting unless
the owner is present or represented by proxy. A proxy may be
revoked at any time before it is voted by giving written notice
of revocation or by the delivery of a new proxy to the Company at
the address shown above, or by the stockholder's personal vote at
the Meeting.
All properly executed proxies, unless previously revoked,
will be voted at the Meeting or any adjournment thereof in
accordance with the directions given. With respect to the
election of the one Director to serve until the 1997 Annual
Meeting, stockholders of the Company voting by proxy may vote in
favor of the nominee or may withhold their vote for the nominee.
With respect to the other proposals for stockholder action,
stockholders of the Company voting by proxy may vote in favor of
or against the proposals. If no specific instructions are given
with respect to the matters to be acted upon at the Meeting,
shares of Common Stock represented by a properly executed proxy
will be voted FOR (i) the election of the one nominee for
Director listed under the caption "Election of Directors," (ii)
the approval of the adoption a performance-based compensation
plan for the Company's Chief Executive Officer, and (iii) the
approval of an amendment and restatement of the Company's 1992
Incentive Plan (the "1992 Plan").
A majority of the outstanding shares of Common Stock must be
represented in person or by proxy at the Meeting in order to
constitute a quorum for the transaction of business. Abstentions
and non-votes will be counted for purposes of determining the
existence of a quorum at the Meeting. The candidate for election
as Director will be elected by the affirmative vote of a
plurality of the shares of Common Stock present in person or by
proxy and actually voting at the Meeting. All other matters
require for their approval the favorable vote of a majority of
the shares of Common Stock voted in person or by proxy at the
Meeting. Any action other than a vote for a nominee or proposal
(including abstentions and broker non-votes) will have the
practical effect of voting against the nominee or proposal, as
the case may be.
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ELECTION OF DIRECTORS
(Item 1 on Proxy Card)
Pursuant to the Company's Restated and Amended Certificate
of Incorporation, the Board of Directors is divided into three
classes. Two classes consist of two Directors and one class
consists of one Director. Each Director is elected for a three-
year term, with one class of Directors being elected at each
annual meeting of stockholders.
Set forth below is information concerning the one nominee
for Director to be elected at the Meeting, who is presently
serving as a Director, as well as information concerning the
Directors whose terms of office will extend beyond the Meeting.
The current nominee for Director at the Meeting will serve, if
elected, for a three-year term expiring at the 1997 Annual
Meeting. The Board of Directors expects that the nominee will be
available for election. In the event that the nominee for any
reason should become unavailable for election (which is not
anticipated), it is intended that the shares of Common Stock
represented by the proxies will be voted for a nominee who would
be designated by the Board of Directors, unless the Board of
Directors reduces the number of Directors. The Board of
Directors recommends a vote "FOR" the nominee.
Director to be Elected at the Meeting
Edward H. Meyer, age sixty-seven, has been a Director of the
Company since July 1990. Mr. Meyer has been the Chairman of the
Board, Chief Executive Officer and President of Grey Advertising,
Inc., New York, New York, an advertising firm, since 1972. Mr.
Meyer serves as a Director for May Department Stores Company,
Bowne & Co., Inc., Ethan Allen Interiors, Inc., and as a
director/trustee of thirty-one mutual funds advised by Merrill
Lynch Asset Management, Inc.
Directors Whose Terms Extend Beyond the Meeting
Bernard A. Girod, age fifty-two, has been Chief Financial
Officer of the Company since September 1986, Secretary of the
Company since November 1992, Chief Operating Officer of the
Company since March 1993, President since March 1994 and a
Director of the Company since July 1993. Mr. Girod's term as a
Director expires at the 1995 Annual Meeting.
Alan Patricof, age fifty-nine, has been a Director of the
Company since its formation in 1980. Mr. Patricof has been the
Chairman of the Board of Patricof & Co. Ventures Inc., New York,
New York, a private venture capital firm, since 1969. Mr.
Patricof is a director of Cellular Communications, Inc., Cellular
Communications International, Datascope Corporation, Inc., and
OCOM Corporation. Mr. Patricof's term as a Director expires at
the 1995 Annual Meeting.
Sidney Harman, Ph.D., age seventy-six, has been Chairman of
the Board, Chief Executive Officer and a Director of the Company
since the Company's founding in 1980. Dr. Harman served as Under
Secretary of Commerce of the United States from January 1977
until December 1978. Since 1993, Dr. Harman has been a director
of Foamex International Inc. Dr. Harman's term as a Director
expires at the 1996 Annual Meeting.
Shirley Mount Hufstedler, age sixty-nine, has been a
Director of the Company since September 1986. Ms. Hufstedler is
and has been for the past thirteen years in private law practice
with the firm of Hufstedler & Kaus in Los Angeles, California.
She served as Secretary of Education of the United States from
1979 to 1981 and as a judge on the United States Court of Appeals
for the Ninth Circuit from 1968 to 1979. Ms. Hufstedler is a
Director of US West, Inc. and Hewlett-Packard Company. Ms.
Hufstedler's term as a Director expires at the 1996 Annual
Meeting.
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THE BOARD OF DIRECTORS, ITS COMMITTEES AND COMPENSATION
The Board of Directors of the Company held four meetings
during the 1994 fiscal year. The Board of Directors has three
standing committees: the Executive Committee, the Audit Committee
and the Compensation and Option Committee (the "Compensation
Committee"). The Company does not have a standing committee on
nominations. All Directors attended at least seventy-five
percent of the meetings of the Board of Directors and the
committees on which such Directors served.
The Executive Committee, which held six meetings during the
1994 fiscal year, presently consists of Dr. Harman and Mr. Girod
and contains one vacancy. The Executive Committee is empowered
to exercise all of the power and authority of the Board of
Directors in the management of the business affairs of the
Company when the full Board of Directors is not in session,
except those which may not be delegated to it under the Company's
Restated and Amended Certificate of Incorporation or Bylaws, and
has been delegated certain authority by the Board of Directors
with respect to matters relating to the Company's 1987 Executive
Incentive Plan, the 1992 Plan and retirement plans.
The Audit Committee currently consists of Ms. Hufstedler and
Messrs. Meyer and Patricof. The Audit Committee, which held two
meetings during the 1994 fiscal year, reviews the results of the
annual audit with the Company's independent auditors and the
adequacy of the Company's internal accounting controls and
practices, and recommends to the Board of Directors the
independent auditors to be retained by the Company.
The Compensation Committee currently consists of Ms.
Hufstedler and Messrs. Meyer and Patricof. The Compensation
Committee held four meetings during the 1994 fiscal year. The
Compensation Committee establishes compensation each year for the
Chief Executive Officer and the other top executive officers and
reviews with the Chief Executive Officer the compensation of the
Company's other executive officers. The Compensation Committee
has been delegated certain authority by the Board of Directors
with respect to matters relating to the Company's 1987 Executive
Incentive Plan, the 1992 Plan and retirement plans.
Non-officer Directors receive an annual fee of $15,000 plus
$1,500 for each Board meeting attended. The Company does not pay
fees to Directors who also serve as officers of the Company or
its subsidiaries. The Company reimburses all Directors for
expenses incurred for attending meetings.
Under the 1992 Plan, immediately following each annual
meeting of stockholders, each incumbent non-officer Director who
continues to serve on the Board of Directors receives a stock
option to purchase 1,500 shares of Common Stock and is eligible
to receive additional options if the Company achieved a certain
Return on Consolidated Equity (as that term is defined in the
1992 Plan) for the previous fiscal year. If the Company achieved
a Return on Consolidated Equity of at least ten percent but less
than fifteen percent, each non-officer Director receives an
option to purchase 750 shares of Common Stock. If the Company
achieved a Return on Consolidated Equity of fifteen percent or
more, each non-officer Director receives an option to purchase
1,500 shares of Common Stock.
In November 1993, pursuant to the terms of the 1992 Plan,
each non-officer Director received stock options to purchase
1,500 shares of Common Stock and, because the Company achieved a
10.1% Return on Consolidated Equity for fiscal 1993, additional
stock options to purchase 750 shares of Common Stock. Similarly,
immediately after the Meeting, each non-officer Director will
receive stock options to purchase 1,500 shares of Common Stock
and, because the Company achieved a 15.0% Return on Consolidated
Equity for fiscal 1994, additional stock options to purchase
1,500 shares of Common Stock.
The exercise price of any option granted to a non-officer
Director under the 1992 Plan is equal to the fair market value of
the Common Stock on the date of grant. Each such option vests at
a rate of twenty percent per annum and expires ten years from the
date of grant.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 1, 1994,
certain information with respect to the following persons: (a)
all stockholders known by the Company to be the beneficial owners
of more than five percent of the Common Stock, (b) each of the
Company's current Directors, (c) the Company's Chief Executive
Officer and the four other most highly paid executive officers of
the Company, and (d) all of the Company's Directors and executive
officers as a group. Certain information in the table is based
upon information contained in filings made by the beneficial
owner of Common Stock with the Securities and Exchange
Commission.
<TABLE>
<CAPTION>
Amount and Nature of Approximate
Name Beneficial Ownership (1) Percent
---- -------------------- -----------
<S> <C> <C>
Sidney Harman 2,987,600 (2) 19.4%
Harman International
Industries, Incorporated
1101 Pennsylvania Avenue, N.W.
Suite 1010
Washington, D.C. 20004
FMR Corp. 1,814,360 (3) 12.0%
82 Devonshire Street
Boston, Massachusetts 02109
Wanger Asset Management, L.P. 994,000 (4) 6.6%
227 West Monroe
Suite 3000
Chicago, Illinois 60606
Acorn Investment Trust 754,000 (4) 5.0%
227 West Monroe Street
Suite 3000
Chicago, Illinois 60606
Bernard A. Girod 50,975 *
Alan J. Patricof 23,451 (5) *
Shirley M. Hufstedler 6,300 *
Edward H. Meyer 5,067 *
Gregory P. Stapleton 38,474 *
Thomas Jacoby 8,400 *
F. Michael Budd 7,889 *
All Directors and executive officers
as a group (15 persons) 3,173,411 20.4%
========= =====
__________________
* Less than one percent
</TABLE>
(1) Under the rules of the Securities and Exchange Commission, a
person is deemed to be a beneficial owner of a security if
he or she has or shares the power to vote or direct the
voting of such security or the power to dispose or direct
the disposition of such security. Accordingly, more than one
person may be deemed to be a beneficial owner of the same
securities. Unless otherwise indicated by footnote, the
persons named in the table have sole voting and investment
power with respect to the shares of Common Stock
beneficially owned. A person is also deemed to be a
beneficial owner of any securities of which that person has
the right to acquire beneficial ownership within 60 days.
Accordingly, the beneficial ownership amounts include shares
of Common Stock that may be acquired pursuant to stock
options exercisable within 60 days from August 1, 1994, by
the following stockholders in the indicated amounts: Dr.
Harman (364,500 shares), Mr. Girod (19,500 shares), Mr.
Patricof (8,000 shares), Ms. Hufstedler (5,000 shares), Mr.
Meyer (2,600 shares), Mr. Stapleton (32,000 shares), Mr.
Jacoby (6,500 shares), Mr. Budd (5,200 shares) and all
Directors and executive officers as a group (466,600
shares).
4
<PAGE>
(2) Includes 1,939,250 shares held in a trust for which Dr.
Harman has sole dispositive and sole voting power; 272,340
shares held in an irrevocable trust for various family
members for which the trustee has sole voting and
dispositive power; 408,510 shares held in two irrevocable
trusts for various family members for which Dr. Harman has
sole voting power but shared dispositive power; and 3,000
shares held by family members for which Dr. Harman has no
voting power or dispositive power and disclaims beneficial
ownership. The 364,500 shares subject to stock options
described above include a premium/performance option (the
"Option") to purchase 300,000 shares that the Board of
Directors granted to Dr. Harman on November 9, 1993. As
described more fully on pages 7-8, the Option is immediately
exercisable at graduated premiums over the closing price of
the stock on the date of grant and is subject to
cancellation (and any shares issued as a result of the
exercise of the Option is subject to repurchase), if certain
performance criteria are not met.
(3) Includes 115,560 shares held in an institutional account
managed by Fidelity Management Trust Company, a wholly-owned
subsidiary of FMR Corp., with respect to which FMR Corp. has
sole dispositive power, sole voting power of 101,860 shares
and no voting power of 13,700 shares; 1,682,800 shares held
by several investment companies for which Fidelity
Management & Research Company, a wholly owned subsidiary of
FMR Corp., serves as investment adviser and for which FMR
Corp. has sole dispositive power but no voting power; 2,000
shares held by various investment companies and certain
institutional investors for which Fidelity International
Limited serves as investment adviser and for which Fidelity
International Limited has sole voting and sole dispositive
power; and 14,000 shares beneficially owned by Edward C.
Johnson 3rd, Chairman of the Board of Directors and the
beneficial owner of 34% of the outstanding common stock of
FMR Corp. The shares of Common Stock beneficially owned by
Mr. Johnson include 10,000 shares for which Mr. Johnson has
sole voting and sole dispositive power and 4,000 shares for
which Mr. Johnson has neither voting nor dispositive power,
but which he beneficially owns due to his status as
beneficiary of a trust or as a trustee of trusts established
for the benefit of various family members. Mr. Johnson is
also deemed to be a beneficial owner of the 1,798,360 shares
of Common Stock beneficially owned by wholly-owned
subsidiaries of FMR Corp. set forth above, by virtue of his
position as Chairman of the Board and beneficial owner of
34% of the outstanding shares of FMR Corp.
(4) Wanger Asset Management, L.P. and Wanger Asset Management,
Ltd. (the sole general partner of Wanger Asset Management,
L.P.) had shared voting power and shared dispositive power
over 984,000 shares, of which 754,000 shares are held by
Acorn Investment Trust, Series Designated Acorn Fund for
which Wanger Asset Management, L.P. serves as investment
adviser.
(5) Includes 2,120 shares beneficially owned by Patricof & Co.
Ventures, Inc., a corporation controlled by Mr. Patricof.
5
<PAGE>
REPORT OF THE COMPENSATION AND OPTION COMMITTEE
ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors is
responsible for implementing the Company's executive compensation
program. The Compensation Committee has been delegated this
authority by the Board of Directors, and thereby makes
determinations regarding the compensation of the Company's
executive officers. The Compensation Committee has also been
delegated the authority to administer the Company's stock
incentive plans, in particular with respect to awards to
executive officers. The Compensation Committee is comprised
entirely of the Company's outside, non-employee Directors:
Shirley Mount Hufstedler, Edward Meyer and Alan Patricof. See
"The Board of Directors, Its Committees and Compensation."
The key elements of the Company's executive compensation
program consist of (a) base salaries which are determined based
upon concerns of competitive pay and performance; (b) cash bonus
awards which are driven solely by performance; and (c) ownership
of stock options to align the interests of management with those
of stockholders. Each of these elements is discussed in more
detail below.
Annual Cash Compensation
Salary. Decisions with respect to base salaries are
typically made before the beginning of each fiscal year and are
based upon two factors -- considerations of competitive pay and
of pay for performance, with more weight given to setting
competitive salaries. The Company conducts its business in an
increasingly competitive industry, and while pursuing a high-
growth strategy, recognizes that it operates in a competitive
global marketplace where the best people are in great demand.
Because the Company seeks to attract and retain the best people -
- - - people with demonstrated skills and experience -- the Company's
competitive pay structure is evaluated and set against market
data developed based upon compensation practices by industry
competitors, companies of comparable size, high growth companies
and successful global marketing companies.
For fiscal year 1994, the Compensation Committee set base
salaries for the top four executive officers in July 1993, based
upon competitive pay information accumulated by the Company's
Vice President, Human Resources, but also once a complete review
of the Company's results of operations for the 1993 fiscal year
could be undertaken by the Compensation Committee. The
competitive pay information was derived in part from data
furnished by outside compensation consulting firms which surveyed
the compensation practices of companies (1) in the electrical and
electronics industry and (2) high-growth companies. Although
this survey group is different from the group used by the Company
for comparing stock performance (see "Stock Price Performance
Graph"), the Compensation Committee believes that the survey
group offers more reliable information for compensation
practices. In setting compensation for individual executive
officers, the Company and the Compensation Committee sought to
establish base salaries at the 50th - 75th percentile, consistent
with the Company's competitive pay goals. The salary changes for
fiscal year 1994 reflected changes in the survey group, but also
responded to the significant improvement in performance at every
level of the Company, both in sales and earnings, and on the
achievement of individual performance objectives.
Bonus Award Plan. Cash bonus awards are typically set
following the end of each fiscal year, and are based entirely
upon performance. Performance is measured in three ways. First,
annual bonus awards focus on current fiscal year financial
performance and continuous improvement. Award levels for the
executive officers vary and are based on corporate or group
earnings. Second, and most importantly, annual bonus awards are
based upon the attainment of personal performance objectives
established by the individual officer and approved by management.
Individual performance objectives vary from officer to officer,
and include financial objectives for appropriate business units
(such as earnings, asset management and sales growth), other
business objectives (such as timely introduction of new products
and the communication of new technologies and processes among
business units) and personal development objectives (such as
attention to personal and professional development, and effective
interaction with other business units). Similarly, these
individual performance objectives are incorporated annually into
the Company's business plan developed by
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management and approved by the Board of Directors. Finally, the
bonus award program also contemplates discretionary rewards for
exemplary individual performance in the form of a discretionary
bonus which is recommended by the Chief Executive Officer and
approved by the Compensation Committee.
Consistent with past practice, bonus awards for the
Company's top four officers were set by the Compensation
Committee in September 1994 based on fiscal year 1994
performance. Bonus awards for Messrs. Girod, Stapleton, Jacoby
and Budd for the 1994 fiscal year were awarded based upon the
extraordinary performance of the Company and the Automotive OEM,
Consumer and Manufacturing Groups, respectively.
Equity Based Compensation
The Company's stock option program reinforces the Company's
long term commitment to increasing shareholder value by aligning
executive officers' long-term interests with those of the
shareholder. Executive officers and key employees of the Company
are eligible to participate in the Company's stock option plan.
The amount of stock options awarded to executive officers is
determined based upon a discretionary recommendation made by the
Chief Executive Officer and approved by the Compensation
Committee. The Chief Executive Officer usually bases the amount
of awards upon his assessment of officer performance and the need
for future long-term incentive which is offered by stock options.
On July 1, 1993, the Compensation Committee approved the Chief
Executive Officer's recommendations and granted options to
purchase 15,000, 10,000, 5,000 and 7,500 shares of Common Stock
to each of Messrs. Girod, Stapleton, Jacoby and Budd,
respectively at an exercise price of $20.75 per share, the fair
market value of the Common Stock on the date of grant of the
options.
Fiscal 1994 Compensation for Chairman and Chief Executive Officer
In July 1993, after reviewing performance by the Company
during the 1993 fiscal year, the Compensation Committee awarded
Dr. Harman a pay increase of $75,000 or 17.6% of his January,
1993 salary, effective July 1, 1993. This increase, while
consistent with the competitive pay information developed from
the survey group discussed above, was based in large part upon
the impressive results of the Company during fiscal year 1993 in
sales, earnings and shareholder value which the Compensation
Committee attributes largely to the leadership provided by
Dr. Harman. In fiscal 1993, the Company earned $11.2 million on
sales of $664.9 million and the value of the Company's stock
nearly doubled.
In July 1994, following a review of Company and individual
performance during fiscal year 1994, the Compensation Committee
awarded Dr. Harman a bonus of $600,000, taking into account his
continuing personal contributions to the Company's 1994 fiscal
year performance. In fiscal 1994, the Company earned $25.7
million (compared to $11.2 million in fiscal 1993) on sales of
$862.1 million (compared to sales of $664.9 million in fiscal
1993). Since June 30, 1993 through September 16, 1994, the value
of the Company's stock increased more than 50%. In addition, on
July 1, 1993, the Compensation Committee granted options to 120
officers and key employees at the Company to purchase 226,750
shares of Common Stock at $20.75. Dr. Harman received an option
to purchase 25,000 shares, or approximately 11% of the total
shares subject to options granted on July 1, 1993.
As a result of Dr. Harman's extraordinary contributions to
the Company's success during the past three years and, in order
to retain his services and to provide him with a long-term
performance incentive to increase shareholder value, on
November 9, 1993, the Compensation Committee granted Dr. Harman a
premium/performance option to purchase 300,000 shares of Common
Stock that was immediately exercisable at graduated premiums over
the closing price of the stock on the date of grant, which price
was $22.625 per share. The five 60,000 share tranches underlying
the option are priced at $24.89 per share (a 10% premium), $27.15
per share (a 20% premium), $29.41 per share (a 30% premium),
$31.68 per share (a 40% premium) and $33.94 per share (a 50%
premium), respectively, resulting in an average exercise price of
$29.41. In
7
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addition, the option is subject to cancellation, and any shares
issued as a result of the exercise of the option are subject to
repurchase, if certain performance criteria are not met by the
end of the fiscal year ending June 30, 2001. The performance
criteria require either a compounded annual increase of 13% in
earnings per share per year (resulting in earnings per share of
$3.76 per share in the fiscal year ending June 30, 2001) or a
compounded annual increase of 13% in the price of the Common
Stock (resulting in a stock price of $53.24 per share at June 30,
2001), with certain lapses in the repurchase right for better
performance.
The base salary, the bonus award and the stock option grants
were each determined by the Compensation Committee to be
appropriate based on the Company's basic compensation performance
criteria as well as Dr. Harman's leadership in orchestrating a
turnaround in the Company's earnings over the past three years
and in repositioning the Company to take advantage of emerging
domestic and international long-term growth opportunities.
Limit on Deductibility of Certain Compensation
It is the responsibility of the Compensation Committee to
address issues raised by a recent change in the federal income
tax laws that made certain non-performance based compensation to
executive officers of public companies in excess of $1 million
non-deductible to such companies in taxable years beginning after
January 1, 1994. The Compensation Committee, as well as the full
Board of Directors, has approved a performance-based compensation
plan for the Company's Chief Executive Officer, who, it is
anticipated, may receive over $1 million in compensation in
fiscal 1995. If the stockholders approve the Chief Executive
Officer Incentive Plan (Item 2 on the Proxy Card), compensation
that the Company's Chief Executive Officer receives under such
plan would be deductible for the Company for Federal income tax
purposes.
Status of Report
The foregoing report on 1994 Executive Compensation was
provided by the Compensation Committee and shall not be deemed to
be "soliciting material," or to be "filed" with the Commission or
subject to Regulation 14A promulgated by the Commission or
Section 18 of the Securities Exchange Act of 1934.
Shirley Mount Hufstedler
Edward Meyer
Alan Patricof
8
<PAGE>
STOCK PRICE PERFORMANCE GRAPH
The following graph compares cumulative total returns
(assuming reinvestment of dividends) on the Common Stock, the S&P
Composite-500 Stock Index and a peer company index (based on the
Company's Standard Industrial Code) for the five-year period
ending June 30, 1994. This stock price performance graph assumes
that the value of the investment in the Common Stock and each
index was $100 on July 1, 1989. Through June 30, 1994, no
dividends were paid on the Common Stock. However, on August 15,
1994 the Company paid a dividend of $0.04 per share of Common
Stock to each holder of record as of July 29, 1994. The stock
price performance shown on the graph below is not necessarily
indicative of future price performance.
[STOCK PRICE GRAPH]
9
<PAGE>
PROPOSAL TO APPROVE THE CHIEF EXECUTIVE OFFICER INCENTIVE PLAN
(Item 2 on Proxy Card)
On August 30, 1994, the Compensation Committee adopted the
Chief Executive Officer Incentive Plan (the "CEO Plan") and
recommended its approval and adoption by the Company's full Board
of Directors, which, on the same day, duly approved and adopted
the CEO Plan and recommended its approval by the stockholders.
If approved by the stockholders, the CEO Plan would provide
"performance-based" compensation to the Company's Chief Executive
Officer.
Provisions of the CEO Plan are summarized below. Such
summaries do not purport to be complete and are qualified in
their entirety by reference to the full text of the CEO Plan, a
copy of which is attached hereto as Exhibit A.
Participation in the CEO Plan is limited to the Company's
Chief Executive Officer. Under the CEO Plan, an annual cash
bonus will be paid to the Company's Chief Executive Officer only
if a targeted return on shareholder equity goal ("Return on
Shareholder Equity Goal") has been met for the year. The CEO
Plan will be administered by the Compensation Committee.
At the beginning of each fiscal year, the Compensation
Committee will establish (a) the Return on Shareholder Equity
Goal for the year and (b) the maximum cash award ("the Award
Amount"), which is payable to the Company's Chief Executive
Officer if the goal is met for the year. At the end of the year,
the Committee will certify whether the Return on Shareholder
Equity Goal has been met for the year. If the goal has been met,
the Compensation Committee retains the discretion to reduce the
Award Amount for the year based upon subjective factors. The
Compensation Committee, however, does not have the discretion to
increase the Award Amount, and under no circumstance can the
Award Amount for a given year exceed $1 million.
It is intended that the Award Amount paid to the Chief
Executive Officer under the CEO Plan will constitute
"performance-based" compensation as defined in Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code").
Section 162(m) of the Code generally disallows a tax deduction to
public companies for compensation over $1 million paid to a
corporation's top executives. Performance-based compensation is
not taken into account in determining whether the $1 million
threshold has been exceeded.
The Company will not implement the CEO Plan without the
requisite stockholder approval. If the stockholders approve the
CEO Plan, it will become effective as of July 1, 1994, and remain
effective until June 30, 1997, subject to the right of the Board
of Directors to terminate the CEO Plan, on a prospective basis,
at any time.
The Board of Directors recommends a vote "FOR" the CEO Plan.
10
<PAGE>
PROPOSAL TO AMEND AND RESTATE THE 1992 INCENTIVE PLAN
(Item 3 on Proxy Card)
On November 10, 1992, the stockholders of the Company
adopted the 1992 Plan, which provides for the granting of stock
options and other benefits to officers, key employees and
consultants of the Company and its subsidiaries.
The Board of Directors believes that it is in the best
interests of the Company to continue the 1992 Plan and recommends
that the stockholders approve an amendment and restatement of the
1992 Plan to (i) increase the maximum aggregate number of shares
of Common Stock subject to issuance under the 1992 Plan from
500,000 to 900,000 shares, and (ii) limit the granting of stock
options (or stock appreciation rights) to any one eligible
individual to stock options (or stock appreciation rights) for no
more than 300,000 shares of Common Stock in any one fiscal year.
The provisions of the 1992 Plan, as amended and restated,
are summarized below. Such summaries do not purport to be
complete and are qualified in their entirety by reference to the
full text of the 1992 Plan, a copy of which is attached hereto as
Exhibit B.
Administration
The 1992 Plan is administered by the Compensation Committee,
which has been delegated the authority by the Board of Directors
to grant options or other awards pursuant to the 1992 Plan to
officers, key employees and consultants of the Company and its
subsidiaries. The Compensation Committee also makes any other
determinations necessary or advisable for the administration of
the 1992 Plan, including interpretation of the 1992 Plan and
related agreements and other documents; provided that the full
Board of Directors makes all determinations with respect to
grants to non-officer directors. The Compensation Committee
consists of not less than three non-officer directors who are
"disinterested persons" within the meaning of Rule 16b-3
promulgated by the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934.
Grants to Non-Officer Directors
The 1992 Plan provides that any person who becomes a non-
officer member of the Board of Directors after November 10, 1992,
shall be granted an option to purchase 3,000 shares of Common
Stock on the date such person first becomes a non-officer
director. In addition, immediately following each annual meeting
of stockholders, each incumbent non-officer director who
continues to serve on the Board of Directors is granted an option
to purchase 1,500 shares of Common Stock.
The 1992 Plan further provides that each non-officer
director is eligible to receive additional options if the Company
achieves a certain Return on Consolidated Equity in any fiscal
year. In the event of a Return on Consolidated Equity of at
least ten percent but less than fifteen percent, each non-officer
director shall receive an option to purchase 750 shares of Common
Stock. In the event of a Return on Consolidated Equity of fifteen
percent or more, each non-officer director shall receive an
option to purchase 1,500 shares of Common Stock.
The exercise price of each option granted to a non-officer
director under the 1992 Plan will be equal to the fair market
value of the Common Stock on the date of each annual meeting of
stockholders. Each such option shall vest at the rate of twenty
percent per annum and expire ten years from the date of grant.
Common Stock and Performance Units Subject to the Plan
The Company has reserved from its authorized but unissued
shares of Common Stock 900,000 shares for grants or awards
pursuant to the 1992 Plan. Subject to certain adjustments as
provided in the 1992 Plan, as amended, the number of shares that
may be issued or transferred under the 1992 Plan shall not exceed
in
11
<PAGE>
the aggregate 900,000 shares of Common Stock. Shares to be
issued may be of original issuance or shares held in treasury or
a combination of the two. For the purpose of determining the
shares available under the 1992 Plan, Restricted Stock is
considered to be issued or transferred only at the earlier of the
time when it ceases to be subject to a substantial risk of
forfeiture or the time when dividends are paid to the holder of
the award. The 1992 Plan limits the aggregate amount that may be
paid by the Company in satisfaction of a performance unit.
Eligibility
Executive officers (currently 12), employees (approximately
6,800), and consultants of the Company and its subsidiaries may
be granted options or other awards by the Compensation Committee.
Non-officer directors of the Company will be ineligible to
receive grants or awards under the 1992 Plan, except for the
automatic grants of options to purchase shares of Common Stock
described above.
Plan Benefits
The table sets forth the stock options that were granted to
each of the following persons or groups under the 1992 Plan in
fiscal 1994 and since inception of the 1992 Plan on November 10,
1992.
Plan Benefits Previously Granted
<TABLE>
<CAPTION>
Number of Stock Options
--------------------------
Dollar Fiscal Nov. 10, 1992-
Name and Position Value 1994 Sept. 16, 1994
----------------- ------- ------ --------------
<S> <C> <C> <C>
Sidney Harman.......................... (1) 300,000 300,000
Chairman and Chief Executive Officer
Bernard A. Girod....................... --- --- ---
President, Chief Operating Officer,
Chief Financial Officer and Secretary
Gregory P. Stapleton................... --- --- ---
President-Automotive OEM Group
Thomas Jacoby.......................... --- --- ---
President-Consumer Group
F. Michael Budd........................ --- --- ---
President-Manufacturing Group
Executive Officer Group................ (1) 300,000 300,000
Non-Officer Director Group............. (2) 2,250 15,250
Non-Executive Officer Employee Group
and Consultants...................... (2) 22,500 24,500
__________________
</TABLE>
(1) As described more fully on pages 7-8, the stock options
granted to Dr. Harman are immediately exercisable at
graduated premiums over the closing price of the stock on
the date of grant and are subject to cancellation (and any
shares issued as a result of the exercise of the Options are
subject to repurchase), if certain performance criteria are
not met.
(2) Stock options are granted under the 1992 Plan at exercise
prices equal to or exceeding the fair market value of the
Common Stock on the date of grant. The actual value, if
any, a person may realize will depend on the excess of the
stock price over the exercise price on the date the option
is exercised. On September 16, 1994, the last reported
closing price of the Common Stock on the New York Stock
Exchange was $32.00.
12
<PAGE>
The number of stock options to be granted in the future
under the 1992 Plan, as amended and restated, is not determinable
for the above persons or groups, except non-officer Directors.
As discussed above, pursuant to the 1992 Plan, each non-officer
Director receives (i) options to purchase 1,500 shares of Common
Stock in each year he or she continues to serve as a non-officer
Director and (ii) additional options if the Company achieves a
certain Return on Consolidated Equity in any fiscal year.
Option Rights
Options may be granted which entitle the optionee to
purchase Common Stock at a price equal to not less than the fair
market value at the date of grant. The option price is payable
in cash at the time of exercise; by the transfer to the Company
of nonforfeitable unrestricted Common Stock owned by the optionee
having a value at the time of exercise equal to the option price;
any other legal consideration the Committee may deem appropriate;
or a combination of such payment methods. Any grant may provide
for deferred payment of the option price from the proceeds of
sale through a bank or broker of some or all of the Common Stock
to which the exercise relates. Successive grants may be made to
the same optionee whether or not options previously granted
remain unexercised. The Compensation Committee may cancel
options and re-grant new options, as well as determine to limit,
waive or modify any limitation or requirement with respect to any
award under the 1992 Plan. The 1992 Plan does not require
holding an option for a specified period and would permit
immediate sequential exchanges of Common Stock at the time of
exercise of options.
No option right may be exercisable more than ten years from
the date of grant. Each grant to an employee provides for
termination of the option upon the termination of employment with
the Company or any subsidiary and may provide for the earlier
exercise of such option rights in the event of a "change of
control" of the Company or other similar transaction or event.
Successive grants may be made to the same optionee whether or not
option rights previously granted remain unexercised.
Option rights may constitute (i) incentive stock options or
other options which may be intended to qualify under particular
provisions of the Code, as in effect from time to time, (ii) non-
qualified options which are not intended to so qualify, or (iii)
combinations of the foregoing. The 1992 Plan, as amended and
restated, provides that no 1992 Plan participant may be granted
stock options (or stock appreciation rights) for more than
300,000 shares of Common Stock in any one fiscal year.
Stock Appreciation Rights
Stock appreciation rights which provide optionees an
alternative means of realizing the benefits of option rights may
be granted in tandem with options. The holder of a stock
appreciation right may, in lieu of exercising all or any part of
his option rights, receive from the Company an amount equal to
one hundred percent, or such lesser percentage as the
Compensation Committee may determine, of the spread between the
option price and the current value of the optioned shares.
Any grant of stock appreciation rights may specify that the
amount payable upon exercise thereof may be paid by the Company
in cash, in shares of Common Stock, or in any combination
thereof, and may either grant to the optionee or retain in the
Compensation Committee the right to elect among those
alternatives. If the stock appreciation right provides that the
optionee may elect to receive payment in either cash or shares of
Common Stock, an election to receive cash in whole or in part
will be subject to the approval of the Committee at the time of
such election.
The Compensation Committee may specify that the amount
payable upon exercise of a stock appreciation right may not
exceed a maximum specified by the Board of Directors at the date
of grant and may specify waiting periods before exercise and
permissible exercise dates or periods. A stock appreciation
right will not be exercisable except at a time when the related
option right is also exercisable and when the spread is positive.
Stock appreciation rights may include such other terms and
provisions, consistent with the 1992 Plan, as the Compensation
Committee may approve. The 1992 Plan also permits the
Compensation Committee to grant stock appreciation rights that
are exercisable only upon a Change in Control.
13
<PAGE>
Restricted Stock
A grant of restricted stock involves the immediate transfer
by the Company to a participant of ownership of a specific number
of shares of Common Stock in consideration of the performance of
services. The participant is entitled immediately to voting,
dividend and other ownership rights in such shares. Such
transfer may be made without additional consideration or in
consideration of a payment by the participant that is less than
current market value, as the Compensation Committee may
determine.
Each grant of restricted stock will be subject for a period
of time determined by the Compensation Committee to a
"substantial risk of forfeiture" within the meaning of Section 83
of the Code. For example, a grant of restricted stock may
provide that such stock will be forfeited if the participant
ceases to serve the Company as an officer or key employee prior
to the expiration of a specified period. In order to enforce
these forfeiture provisions, the transferability of restricted
stock will be prohibited or restricted in a manner and to the
extent prescribed by the Compensation Committee for the period
during which the forfeiture provisions are in effect. The
Compensation Committee may provide for the earlier termination of
the forfeiture provisions in the event of a change in control of
the Company.
Performance Units
A performance unit is the equivalent of $100. Upon any
award of performance units, a participant will be given an
achievement objective ("Management Objective") to meet within a
specified period determined by the Compensation Committee on the
date of grant ("Performance Period"). A minimum level of
acceptable achievement also will be established ("Minimum"). If
by the end of the Performance Period the participant has achieved
the specified Management Objective, he or she will be deemed to
have fully earned the performance unit. If the participant has
not achieved the Management Objective but has attained or
exceeded the Minimum, he or she will be deemed to have partly
earned the performance unit (such part to be determined in
accordance with a formula). To the extent earned, the
performance unit will be paid to the participant, at the time and
in the manner determined by the Compensation Committee, either in
cash or Common Stock or a combination thereof. Any award of
performance units may specify that the performance unit may
become payable in the event of a Change in Control of the
Company.
Management Objectives may be described either in terms of
Company-wide objectives or objectives that are related to
performance of the division, subsidiary, department or function
with the Company or a subsidiary in which the participant is
employed. The Compensation Committee may adjust any Management
Objective and the related Minimum if, in the sole judgment of the
Compensation Committee, events or transactions after the date of
grant which are unrelated to the participant's performance have
effected the Management Objective or the Minimum.
Federal Income Tax Consequences
The following is a brief summary of certain of the federal
income tax consequences to individuals receiving grants or awards
under the 1992 Plan. The following summary is based upon federal
income tax laws in effect on January 1, 1994 and is not intended
to be complete or to describe any state or local tax
consequences.
Non-Qualified Stock Options. In general, (i) no income will
be recognized by an optionee at the time a non-qualified stock
option is granted; (ii) at exercise, ordinary income will be
recognized by the optionee in an amount equal to the difference
between the option price paid for the shares and the fair market
value of the shares, if unrestricted, on the date of exercise;
and (iii) at sale, appreciation (or depreciation) after the date
of exercise will be treated as either short-term or long-term
capital gain (or loss) depending on how long the shares have been
held.
14
<PAGE>
Incentive Stock Options. No income generally will be
recognized by an optionee upon the grant or exercise of an
incentive stock option. If shares of Common Stock are issued to
the optionee pursuant to the exercise of an incentive stock
option, and if no disqualifying disposition of such shares is
made by such optionee within two years after the date of grant or
within one year after the transfer of such shares to the
optionee, then upon sale of such shares, any amount realized in
excess of the option price will be taxed to the optionee as a
long-term capital gain and any loss sustained will be a long-term
capital loss.
If shares of Common Stock acquired upon the exercise of an
incentive stock option are disposed of prior to the expiration of
either holding period described above, the optionee generally
will recognize ordinary income in the year of disposition in an
amount equal to the excess (if any) of the fair market value of
such shares at the time of exercise (or, if less, the amount
realized on the disposition of such shares if a sale or exchange)
over the option price paid for such shares. Any further gain (or
loss) realized by the participant generally will be taxed as
short-term or long-term capital gain (or loss), depending on the
holding period.
Stock Appreciation Rights. No income will be recognized by
an optionee in connection with the grant of a stock appreciation
right. When the appreciation right is exercised, the optionee
normally will be required to include as taxable ordinary income
in the year of exercise an amount equal to the amount of cash
received and the fair market value of any unrestricted shares of
Common Stock received on the exercise.
Restricted Stock. The recipient of shares of restricted
stock generally will be subject to tax at ordinary income rates
on the fair market value of the restricted stock (reduced by any
amount paid by the participant for such restricted stock) at such
time as the shares are no longer subject to forfeiture or
restrictions on transfer for purposes of Section 83 of the Code
("Restrictions"). However, a recipient who so elects under
Section 83(b) of the Code within thirty days of the date of
transfer of the shares will have taxable ordinary income on the
date of transfer of the shares equal to the excess of the fair
market value of such shares (determined without regard to the
Restrictions) over the purchase price, if any, of such restricted
stock. If a Section 83(b) election has not been made, any
dividends received with respect to restricted stock subject to
Restrictions generally will be treated as compensation that is
taxable as ordinary income to the participant.
Performance Units. No income generally will be recognized
upon the grant of performance units. Upon payment in respect of
the earn-out of performance units, the recipient generally will
be required to include as taxable ordinary income in the year of
receipt an amount equal to the amount of cash received and the
fair market value of any unrestricted shares of Common Stock
received.
Special Rules Applicable to Officers and Directors. In
limited circumstances where the sale of stock received as a
result of a grant or award could subject an officer or director
to suit under Section 16(b) of the Exchange Act, the tax
consequences to the officer or director may differ from the tax
consequences described above. In these circumstances, unless an
election under Section 83(b) of the Code has been made, the
principal difference (in cases where the officer or director
would otherwise be currently taxed upon his receipt of the stock)
usually will be to postpone valuation and taxation of the stock
received so long as the sale of the stock received could subject
the officer or director to suit under Section 16(b) of the
Exchange Act, but no longer than six months.
Tax Consequences to the Company. To the extent that a
participant recognizes ordinary income in the circumstances
described above, the participant's employer should be entitled to
a corresponding deduction, provided, among other things, (i) such
income meets the test of reasonableness, is an ordinary and
necessary business expense, and is not an "excess parachute
payment" within the meaning of Section 280G of the Code and is
not disallowed by the $1 million limitation on certain executive
compensation and (ii) any applicable withholding obligations are
satisfied.
15
<PAGE>
Accounting Treatment
Stock appreciation rights and performance units will require a
charge against income of the Company each year representing
appreciation in the value of such benefits which it is anticipated
will be exercised or paid. In the case of stock appreciation
rights, such charge is based on the excess of the current market
price of the Common Stock over the option price specified in the
released option rights; in the case of performance units, such
charge is based on the dollar amount expected to be paid at the end
of the Performance Period. Restricted stock will require a charge
against income equal to the fair market value of the awarded shares
at the time of award less the amount, if any, paid by the
participants. Such charge generally is spread over the period
during which the related services are performed.
Amendment
With the exception of certain provisions relating to automatic
option grants to non-officer directors, the 1992 Plan may be amended
from time to time by the Board of Directors, but without further
approval by the stockholders no such amendment shall (i) increase
the maximum number of shares of Common Stock that may be issued or
delivered thereunder or increase the number of performance units
that may be paid, (ii) change the definition of persons eligible to
participate in the 1992 Plan, or (iii) otherwise cause Rule 16b-3
promulgated by the Securities and Exchange Commission pursuant to
the Securities Exchange Act of 1934 to cease to be applicable to the
1992 Plan. In no event shall the provisions of Section 8 of the
1992 Plan relating to the amount, price or timing of options be
amended more than once every six months except to comport with
changes in the Internal Revenue Code or the regulations thereunder.
Miscellaneous
No option or stock appreciation right is transferable by an
optionee except upon death, by will or the laws of descent and
distribution. Options and stock appreciation rights are exercisable
during the optionee's lifetime only by the optionee.
The maximum number of shares of Common Stock that may be issued
and delivered under the 1992 Plan, the number of shares covered by
outstanding options and stock appreciation rights, and the prices
per share applicable thereto, are subject to adjustment in the event
of stock dividends, stock splits, combinations of shares,
recapitalizations, mergers, consolidations, spin-offs,
reorganizations, liquidations, issuances of rights or warrants and
similar events.
The Board of Directors recommends a vote "FOR" the amendment and
restatement of the 1992 Plan.
16
<PAGE>
COMPENSATION OF EXECUTIVE OFFICERS
Summary Compensation Table
The following table discloses compensation received by the
Company's Chief Executive Officer and the four other most highly
paid executive officers for the three fiscal years ended June 30,
1994:
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
---------------------------- ------------------------
Options
Name and Principal Fiscal Granted All Other
Position Year Salary Bonus Other(1) (shares) Compensation(2)
- - ------------------ ---- ---------------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
Sidney Harman 1994$500,000 $600,000 $90,385(3)325,000 $ 2,747
Chairman of the Board 1993 425,000 300,000 80,240(4) --- 13,918
and Chief Executive 1992 385,000 150,000 N/A 70,000 N/A
Officer
Bernard A. Girod 1994 275,000 250,000 --- 15,000 3,466
President, Chief 1993 220,000 127,000 --- --- 9,791
Operating Officer, 1992 190,000 50,000 N/A 25,000 N/A
Chief Financial
Officer and
Secretary
Gregory P. Stapleton 1994 245,000 200,000 --- 10,000 3,229
President - 1993 207,000 125,000 --- 10,000 16,130
Automotive OEM 1992 182,000 36,225 N/A 25,000 N/A
Group
Thomas Jacoby 1994 200,000 125,000 --- 5,000 3,358
President - Consumer 1993 160,000 90,000 --- 10,000 8,870
Group 1992 141,000 43,500 N/A --- N/A
F. Michael Budd 1994 210,000 100,000 --- 7,500 3,372
President - 1993 195,000 75,000 --- --- 12,889
Manufacturing Group 1992 182,500 15,000 N/A 7,500 N/A
__________________
</TABLE>
(1) Excludes perquisites and other personal benefits, unless the
aggregate amount of such compensation is at least $50,000 or
10% of the total annual salary and bonus reported for the
named executive officer. Pursuant to the transitional
provisions set forth in the proxy rules, amounts for Other
Annual Compensation are excluded for fiscal 1992.
(2) The amounts in All Other Long Term Compensation represent
Company contributions for each of the named executive
officers into the Company's Retirement Savings Plan.
Pursuant to the transitional provisions set forth in the
proxy rules, amounts for All Other Long Term Compensation
are excluded for fiscal 1992.
(3) Includes $44,566 representing the aggregate incremental cost
to the Company of an automobile purchased for use by Dr.
Harman to replace the automobile purchased for Dr. Harman
during the 1993 fiscal year and subsequently sold.
(4) This amount includes $24,838 and $30,415, representing the
aggregate incremental cost to the Company and the total
purchase price, respectively, of Company automobiles used by
Dr. Harman.
17
<PAGE>
Stock Option Grants in Last Fiscal Year
The following table contains information concerning the
grant of stock options under the Company's 1992 Incentive Plan to
the named executive officers during the year ended June 30, 1994.
<TABLE>
<CAPTION>
Individual Grants
-------------------------------------------------
Percent of
Total
Options
Granted to
Number of Employees Exercise
Options in Fiscal Price Expiration Grant Date
Name Granted Year ($/Share) Date Present Value
---- --------- -------- --------- ------------- ----------
<S> <C> <C> <C> <C> <C>
Sidney Harman..........60,000(1) 10.9% $24.89 Nov. 8, 2003 $622,800
60,000(1) 10.9% 27.15 Nov. 8, 2003 585,600
60,000(1) 10.9% 29.41 Nov. 8, 2003 552,000
60,000(1) 10.9% 31.68 Nov. 8, 2003 520,200
60,000(1) 10.9% 33.94 Nov. 8, 2003 491,400
25,000(2) 4.6% 20.75 June 30, 2003 253,250
Bernard A. Girod.......15,000(2) 2.7% 20.75 June 30, 2003 151,950
Gregory P. Stapleton...10,000(2) 1.8% 20.75 June 30, 2003 101,300
Thomas Jacoby.......... 5,000(2) 0.9% 20.75 June 30, 2003 50,650
F. Michael Budd........ 7,500(2) 1.4% 20.75 June 30, 2003 75,975
_________________
</TABLE>
(1) Represents stock options granted on November 9, 1993 under
the 1992 Plan as long-term performance incentive. The
options are exercisable immediately and are subject to
cancellation, and any shares issued as a result of the
exercise of the options are subject to repurchase, if
certain performance criteria are not met by the end of the
fiscal year ending June 30, 2001. The performance criteria
require either a compounded annual increase of 13% in
earnings per share per year (resulting in earnings per share
of $3.76 per share in fiscal year ending June 30, 2001) or a
compounded annual increase of 13% in the price of the Common
Stock (resulting in a stock price of $53.24 per share of
June 30, 2001), with certain lapses in the repurchase right
for better performance. The options are immediately
exercisable at graduated premiums over the closing price of
the Common Stock on the date of grant, which price was
$22.625 per share.
(2) Represents stock options granted on July 1, 1993 under the
1987 Plan. The exercise price of the options is equal to
the fair market value of the Common Stock on the date of
grant. The options vest at the rate of 20% annually
commencing one year from the date of grant.
(3) Based on the Black-Scholes option pricing model, which
requires assumptions to be made about the future movement of
the stock price. The Company used the following assumptions
to estimate the Grant Date Present Value: an estimated
dividend yield of 0.53%, an estimated risk-free interest
rate of 7.32%, an estimated volatility of 36.5%, and an
option term of 6.732 years, which is the estimated period
from time of grant until exercise of the options. There is
no assurance that the actual value realized by an executive
officer will equal the amounts estimated based upon the
Black-Scholes option pricing model.
18
<PAGE>
Stock Option Exercises in Last Fiscal Year and Fiscal Year-End
Option Values
For each of the named executive officers, the following
table shows information about stock options exercised during
fiscal 1994 and the value of unexercised options as of June 30,
1994.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised
Options At Fiscal In-the-Money Options
Year-End At Fiscal Year-End
Number of ------------------ --------------------
Shares Acquired Value Exer- Unexer- Exer- Unexer-
Name On Exercise Realized cisable cisable cisable cisable
----------- --------- --------- ------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Sidney Harman.......... --- --- 355,175 71,325 $849,082 $871,414
Bernard A. Girod.......12,800 $206,486 14,000 33,500 169,875 358,875
Gregory P. Stapleton... --- --- 27,600 19,400 425,075 181,600
Thomas Jacoby.......... --- --- 5,100 13,400 60,955 108,350
F. Michael Budd........15,600 241,538 --- 16,400 --- 147,431
</TABLE>
Executive Deferred Compensation Plan
Executives designated by the Board of Directors are eligible
to participate in the Company's Executive Deferred Compensation
Plan. Participants may elect to defer up to 50% of annual salary
and 100% of annual bonus payments. The minimum election is an
amount equal to 5% of total annual compensation per year for four
years, payable from salary or bonus. Amounts deferred are
credited to a Deferral Account. Participants may specify that
portions of their account be invested in several types of funds.
The Company credits earnings to Deferral Accounts by reference to
the rate of return on such funds less one and one-half percent
annually. Amounts credited to Deferral Accounts are always 100%
vested. After termination of employment, participants receive as
a lump sum the balance of their Deferral Accounts, less the cash
value of any Company-provided Split Dollar Life Insurance Policy
and any outstanding hardship loans made against the Deferral
Accounts.
Executive Split-Dollar Insurance Plan
The Company has an optional Executive Split-Dollar Insurance
Plan (the "Insurance Plan") in which executives designated as
eligible by the Board of Directors may participate. Under the
Insurance Plan, the Company purchases a life insurance policy of
which the participant is the owner. The Company retains certain
rights under the policy, and a participant may not surrender,
borrow against or transfer the policy until the Company releases
those rights. While the participant is an employee of the
Company, the Company pays annual premiums equal to the
participant's deferrals under the Executive Deferred Compensation
Plan. Participants gain full rights in the policy upon the
occurrence of either of the following: (i) A Security Release
Date, which the participant must specify two years in advance in
an irrevocable filing with the Company, and on which the
participant must be employed or (ii) A Qualifying Termination of
Employment, which includes termination for disability,
involuntary termination without cause, or termination within 36
months after a change-in-control of the Company. If employment
is terminated prior to these events, the participant forfeits the
cash value of the policy to the Company but retains ownership of
the policy. If a participant attains full policy rights, the
Company may cause the participant to withdraw an amount equal to
any loan balances owed by the participant to the Company and any
tax withholding obligations.
Supplemental Executive Retirement Plan
The Company maintains a Supplemental Executive Retirement
Plan (the "Supplemental Plan") that provides supplemental
benefits to certain key executive officers designated by the
Board of Directors. Currently, Dr. Harman, Messrs. Girod,
Stapleton, Jacoby, Budd and other officers of the Company and
certain subsidiaries have been designated as eligible under the
Supplemental Plan. The Supplemental Plan
19
<PAGE>
provides for retirement benefits based on the average cash
compensation (including bonuses) paid to such executive during
the five years prior to retirement at age sixty-five. Executive
officers that participate in the Supplemental Plan and retire at
age sixty-five receive a benefit equal to two percent of such
average cash compensation for each year of service up to a
maximum benefit of thirty percent of such average cash
compensation after fifteen years of service. Benefits are
generally in the form of a life annuity which are payable monthly
for a period of at least ten years, although the Supplemental
Plan permits the Board of Directors to allow payment of the
retirement benefit at a retirement date later than age sixty-five
and in a form other than a life annuity payable monthly. Benefits
under the Supplemental Plan are funded pursuant to specifically
allocable insurance contracts, except in the case of Dr. Harman
for whom such benefits are a direct obligation of the Company.
The following table sets forth the annual retirement
benefits that would be received under the Supplemental Plan at
various compensation levels after the specified years of service:
<TABLE>
<CAPTION>
Years of Service
-------------------------------------------------------
Remuneration 3 6 9 12 15
------------ ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
$250,000 $15,000 $30,000 $45,000 $60,000 $75,000
300,000 18,000 36,000 54,000 72,000 90,000
350,000 21,000 42,000 63,000 84,000 105,000
400,000 24,000 48,000 72,000 96,000 120,000
450,000 27,000 54,000 81,000 108,000 135,000
500,000 30,000 60,000 90,000 120,000 150,000
550,000 33,000 66,000 99,000 132,000 165,000
600,000 36,000 72,000 108,000 144,000 180,000
650,000 39,000 78,000 117,000 156,000 195,000
700,000 42,000 84,000 126,000 168,000 210,500
</TABLE>
Dr. Harman is the only executive officer who has reached age
sixty-five and has fully vested retirement benefits under the
Supplemental Plan.
The Supplemental Plan also entitles each participating
officer to an additional annual benefit, payable on the
participating officer's normal retirement date (age sixty-five),
equal to thirty percent of the average cash compensation paid to
such officer during the preceding five-year period if such
officer terminates employment within three years of a Change in
Control. Further, in the event of a Change in Control, a
participating officer will become one hundred percent vested in
Supplemental Plan retirement benefits if, within three years
after such Change in Control, the Supplemental Plan is
terminated, such officer's designation as a participating officer
is revoked or any participating officer's accrued or projected
benefits are eliminated or substantially reduced.
The Supplemental Plan provides for a pre-retirement death
benefit for participating executive officers. The amount of this
benefit is equal to twice the highest annual cash compensation,
excluding bonuses, paid to the participating executive officer
during his employment with the Company. Dr. Harman is not
entitled to pre-retirement death benefits under the Supplemental
Plan.
Finally, the Supplemental Plan provides for termination
benefits for each participating officer who retires or terminates
employment (whether voluntarily or involuntarily) subsequent to
age fifty-five, but prior to age sixty-five with at least fifteen
years of service. After fifteen years of service, a participating
officer is entitled to termination benefits equal to fifteen
percent of the average cash compensation (including bonuses) paid
to such officer during the five years prior to the termination of
such officer's employment. That percentage increases three
percent for each additional year of service, with a maximum
benefit equal to thirty percent of such compensation after twenty
years of service.
20
<PAGE>
The following table sets forth the annual termination
benefits that would be received under the Supplemental Plan at
various compensation levels after the specified years of service:
<TABLE>
<CAPTION>
Years of Service
--------------------------------------------------------------------
Remuneration 15 16 17 18 19 20
- - ------------ -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$250,000 $ 37,500 $ 45,000 $ 52,500 $ 60,000 $ 67,500 $ 75,000
300,000 45,000 54,000 63,000 72,000 81,000 90,000
350,000 52,500 63,000 73,500 84,000 94,500 105,000
400,000 60,000 72,000 84,000 96,000 108,000 120,000
450,000 67,500 81,000 94,500 108,000 121,500 135,000
500,000 75,000 90,000 105,000 120,000 135,000 150,000
550,000 82,500 99,000 115,500 132,000 148,500 165,000
600,000 90,000 108,000 126,000 144,000 162,000 180,000
650,000 97,500 117,000 136,500 156,000 175,500 195,000
700,000 105,000 126,000 147,000 168,000 189,000 210,000
</TABLE>
No executive officer has vested termination benefits under
the Supplemental Plan. Messrs. Girod, Stapleton, Jacoby and Budd
have seven years, six years, fourteen years, and five years,
respectively, of service with the Company. All benefits payable
under the Supplemental Plan are subject to deductions for Social
Security and Federal, state and local taxes.
In the event a participant terminates employment within
three years following a Change in Control (as defined in the
Supplemental Plan) but prior to the participant's Normal
Retirement Date (as defined in the Supplemental Plan), the
Supplemental Plan provides that benefits payable thereunder shall
be paid on the participant's Normal Retirement Date.
Supplemental Plan also indemnifies participants in the
Supplemental Plan for legal fees and expenses incurred to enforce
the Supplemental Plan following a Change in Control.
INDEPENDENT AUDITORS
KPMG Peat Marwick served as the independent auditors of the
Company for the fiscal year ended June 30, 1994 and has been
selected by the Board of Directors to serve as the Company's
independent auditors for the year ending June 30, 1995.
Representatives of the firm of KPMG Peat Marwick are expected to
be present at the Meeting with the opportunity to make a
statement, if they desire to do so, and to be available to
respond to appropriate questions.
STOCKHOLDER PROPOSALS FOR 1995 ANNUAL MEETING
Stockholders who wish to submit a proposal for consideration
at the 1995 Annual Meeting should submit the proposal in writing
to the Company at 1101 Pennsylvania Avenue, N.W., Suite 1010,
Washington, D.C. 20004. Proposals must be received by the
Company no later than June 1, 1995 for inclusion in next year's
proxy materials.
21
<PAGE>
OTHER MATTERS
The Company will bear the cost of preparing and mailing the
Proxy Statement, form of proxy and other material that may be
sent to stockholders in connection with this solicitation. In
addition to solicitations by mail, officers and other employees
of the Company may solicit proxies personally or by telephone or
facsimile.
The Board of Directors does not intend to present and knows
of no others who intend to present at the Meeting any matter of
business other than those matters set forth in the accompanying
Notice of Annual Meeting of Stockholders. However, if other
matters properly come before the Meeting, it is the intention of
the persons named in the enclosed proxy card to vote the proxy in
accordance with their best judgment.
By Order of the Board of Directors
/s/ Bernard A. Girod
Bernard A. Girod
President, Chief Operating Officer,
Chief Financial Officer and Secretary
Washington, D.C.
September 28, 1994
The Company's Annual Report on Form 10-K for the year ended June
30, 1994, as filed by the Company with the Securities and
Exchange Commission, is available without charge to each
stockholder upon written request to Sandra Robinson, Vice
President-Financial Operations, Harman International Industries,
Incorporated, 1101 Pennsylvania Avenue, N.W., Suite 1010,
Washington, D.C. 20004.
22
<PAGE>
EXHIBITS
<PAGE>
<PAGE>
Exhibit A
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
Chief Executive Officer Incentive Plan
1. Purpose. The purpose of the Chief Executive Officer
Incentive Plan ("Plan") of Harman International Industries,
Incorporated, a Delaware corporation (the "Company") is to
promote the long-term success of the Company by providing its
chief executive officer with incentives and rewards for superior
performance. The Plan is intended to provide performance-based
compensation as defined in Section 162(m) of the Internal Revenue
Code, as amended (the "Code").
2. Effective Date. Subject to its approval by the
shareholders, this Plan shall become effective July 1, 1994, and
shall remain effective until June 30, 1997, subject to any
further shareholder approvals (or reapprovals) mandated for
performance-based compensation under Section 162(m) of the Code,
or any successor provision, and subject to the right of the Board
of Directors ("Board") of the Company to terminate the Plan, on a
prospective basis only, at any time.
2. Eligibility. Participation in the Plan is limited to
the Chief Executive Officer of the Company, who shall hereinafter
be referred to as "Participant".
4. Awards.
4.1 At the beginning of each fiscal year (and no later than
September 28), the Committee (as defined in Section 8) shall
meet in order to establish (a) the targeted return on
shareholder equity goal ("Return on Shareholder Equity
Goal") for the year and (b) the maximum cash award ("Award
Amount") payable to the Participant if the goal is met for
the year. "Return on shareholder equity" shall mean net
income for the fiscal year determined in accordance with
generally accepted accounting principles as reported in the
Company's annual report divided by the average shareholder
equity for such year. "Average shareholder equity" shall
mean the sum of the shareholder equity at the beginning of
the year and the shareholder equity at the end of the year,
with such sum divided by two.
4.2 At the end of each fiscal year, the Committee shall
meet to determine and certify whether the Return on
Shareholder Equity Goal has been met for the year. In the
event that the goal has been met, the Committee shall
establish the Award Amount for the year, exercising
discretion only to reduce the amount of the maximum cash
award if in its judgment such a reduction is appropriate.
4.3 Notwithstanding any other provision of the Plan to the
contrary, in no event shall the Award Amount paid to the
Participant for a year exceed $1,000,000.
5. Payment of Awards. A Participant's Award Amount shall
be paid in cash to such Participant within 30 days after written
certification by the Award Amount pursuant to Section 4.2.
6. Non-transferability. Awards granted under the Plan
shall not be transferable or assignable other than by will or the
laws of descent and distribution.
7. Tax Withholding. The Company shall have the power and
right to deduct or withhold amounts sufficient to satisfy
federal, state and local taxes required by law to be withheld
with respect to any award.
8. Administration of the Plan. The Plan shall be
administered by a committee approved by the Board (the
"Committee"). The Compensation and Option Committee of the Board
shall be the Committee for so long as its membership shall
consist of two or more outside directors, as defined under
Section 162(m) of the Code and the underlying regulations, each
of whom shall be appointed by the Board. If the membership of
the Compensation and Option Committee at any time does not meet
such requirements, the Board shall
A-1
<PAGE>
promptly appoint the Committee as a separate committee of the
Board in compliance with such procedures. The Committee shall:
(a) Compute and certify the Award Amount as soon
as practicable after the close of a fiscal year,
reducing the Award Amount in accordance with Section
4.2 where appropriate, but in no event increasing the
Award Amount; and
(b) Generally administer, interpret and amend the
Plan provisions in compliance with the intent of the
Plan and any applicable laws, regulations and other
governmental authority. To the extent any amendment to
the Plan would require shareholder approval in order
for compensation paid pursuant to the Plan to continue
to qualify as "performance-based" compensation under
Section 162(m) of the Code, such amendment shall not be
effective until shareholder approval is received.
A-2
<PAGE>
Exhibit B
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
1992 Incentive Plan
1. Purpose. The Harman International Industries,
Incorporated 1992 Incentive Plan is an amendment and restatement
of such plan that was adopted on November 10, 1992. The purpose
of this Plan is to attract and retain officers, key employees and
Non-Officer Directors for Harman International Industries,
Incorporated, a Delaware corporation (the "Company"), and its
Subsidiaries and to provide to such persons incentives and
rewards for superior performance.
2. Definitions. As used in this Plan,
"Appreciation Right" means a right granted pursuant to
Paragraph 5 of this Plan.
"Board" means the Board of Directors of the Company.
"Committee" means the committee of the Board referred
to in Paragraph 13 of this Plan.
"Common Stock" means the common stock, par value $0.01
per share, of the Company or any security into which
such Common Stock may be changed by reason of any
transaction or event of the type described in Paragraph
10 of this Plan.
"Date of Grant" means the date specified by the
Committee on which a grant of Option Rights,
Appreciation Rights or Performance Units or a grant or
sale of Restricted Stock shall become effective (which
date shall not be earlier than the date on which the
Committee takes action with respect thereto), including
the date on which an automatic grant of Option Rights
to a Non-Officer Director becomes effective pursuant to
Section 8 of this Plan.
"Effective Date" means November 10, 1992.
"Eligible Participant" means a person who is selected
by the Committee to receive benefits under this Plan
and (a) who is at the time an officer or key employee
of the Company or any of its Subsidiaries, (b) who has
agreed to commence serving in any of such capacities
within 90 days of the Date of Grant or (c) who is at
the time a consultant of the Company or any of its
Subsidiaries.
"Less-Than-80-Percent Subsidiary" means a Subsidiary
with respect to which the Company, directly or
indirectly, owns or controls less than eighty percent
of the total combined voting or other decision-making
power.
"Management Objectives" means the achievement
objectives established pursuant to Paragraph 7 of this
Plan for Eligible Participants who have received grants
of Performance Units.
"Market Value Per Share" means the fair market value of
the Common Stock as determined by the Committee from
time to time.
"Non-Officer Director" means a member of the Board who
is not an officer or employee of the Company or any
Subsidiary.
"Optionee" means the optionee named in an agreement
evidencing an outstanding Option Right.
"Option Right" means the right to purchase a share of
Common Stock upon exercise of an option granted
pursuant to Paragraph 4 of this Plan.
"Performance Period" means, in respect of a Performance
Unit, a period of time established pursuant to
Paragraph 7 of this Plan within which the Management
Objectives relating to such Performance Unit are to be
achieved.
"Performance Unit" means a unit equivalent to U.S.
$100.00 awarded pursuant to Paragraph 7 of this Plan.
B-1
<PAGE>
"Restricted Stock" means shares of Common Stock granted
or sold pursuant to Paragraph 6 of this Plan as to
which neither the substantial risk of forfeiture nor
the prohibition on transfers referred to therein has
expired.
"Return on Consolidated Equity" means a fraction
(expressed as a percentage), the numerator of which is
the net income of the Company as set forth in the
Company's audited consolidated financial statements and
the denominator of which is the Company's shareholders'
equity at the beginning of the fiscal year plus the
Company's shareholders' equity at the end of the fiscal
year, divided by two.
"Rule 16b-3" means Rule 16b-3 of the Securities and
Exchange Commission promulgated under Section 16 of the
Securities Exchange Act of 1934, as amended (or any
successor rule to the same effect), as in effect from
time to time.
"Spread" means the excess of the Market Value Per Share
of Common Stock on the date when an Appreciation Right
is exercised over the option price provided for in the
related Option Right.
"Subsidiary" means a corporation, partnership, joint
venture, unincorporated association or other entity in
which the Company has a direct or indirect ownership or
other equity interest; provided, however, for purposes
of determining whether any person may be an Eligible
Participant for purposes of any grant of Incentive
Stock Options, "Subsidiary" means any corporation in
which the Company owns or controls, directly or
indirectly, more than fifty percent of the total
combined voting power represented by all classes of
stock issued by such corporation.
3. Shares and Units Available Under Plan. The shares of
Common Stock which may be (a) sold or transferred upon the
exercise of Option Rights or Appreciation Rights, (b) awarded or
sold as Restricted Stock and released from substantial risks of
forfeiture thereof or (c) transferred in payment of Performance
Units which have been earned, shall not exceed in the aggregate
900,000 shares, subject to adjustment as provided in Paragraph 10
of this Plan. Such shares may be shares of original Issuance or
treasury shares or a combination of the foregoing. Upon exercise
of any Appreciation Rights, there shall be deemed to have been
transferred under this Plan the number of shares of Common Stock
covered by the related Option Rights, regardless of whether such
Appreciation Rights were paid in cash or in shares of Common
Stock. For purposes of this Section 3, Restricted Stock shall be
deemed to have been issued or transferred at the earlier of the
time when such shares are no longer subject to a substantial risk
of forfeiture or when any dividends are paid thereon. No more
than 900,000 Performance Units will be paid in cash under the
1992 Plan.
4. Option Rights. The Committee may, from time to time and
upon such terms and conditions as it may determine, grant to
Eligible Participants options to purchase shares of Common Stock.
Without limiting the foregoing, each such grant may utilize any
or all of the authorizations, and shall be subject to all of the
limitations, contained in the following provisions:
(a) Each grant shall specify the number of shares of Common
Stock to which it pertains.
(b) Each grant shall specify an option price per share not
less than the Market Value Per Share on the Date of
Grant.
(c) Each grant shall specify the form of consideration to
be paid in satisfaction of the option price and the
manner of payment of such consideration, which may
include (i) cash in the form of currency or check or
other cash equivalent acceptable to the Corporation,
(ii) shares of nonforfeitable, unrestricted Common
Stock, which are already owned by the Optionee and have
a value at the time of exercise that is equal to the
option price, (iii) any other legal consideration that
the Committee may deem appropriate, including without
limitation any form of consideration authorized under
Section 4(d) below, on such basis as the Committee may
determine in accordance with this Plan and (iv) any
combination of the foregoing.
(d) On or after the Date of Grant of any Option Rights, the
Committee may determine that payment of the option
price may also be made in whole or in part in the form
of Restricted Stock or other Common Shares that are
subject to risk of forfeiture or restrictions on
transfer. Unless otherwise
B-2
<PAGE>
determined by the Committee on or after the Date of
Grant, whenever any option price is paid in whole or in
part by means of any of the forms of consideration
specified in this Section 4(d), the Common Stock
received by the Optionee upon the exercise of the
Option Rights shall be subject to the same risks of
forfeiture or restrictions on transfer as those that
applied to the consideration surrendered by the
Optionee; provided, however, that such risks of
forfeiture and restrictions on transfer shall apply
only to the same number of shares of Common Stock
received by the Optionee as applied to the forfeitable
or restricted Common Stock surrendered by the Optionee.
(e) Any grant may provide for deferred payment of the
option price from the proceeds of sale through a bank
or broker of some or all of the Common Stock to which
the exercise relates.
(f) Successive grants may be made to the same Eligible
Participant whether or not any Option Rights previously
granted to such Eligible Participant remain
unexercised.
(g) Each grant shall specify the period or periods of
continuous service by the Optionee with the Company or
any Subsidiary which is necessary (as consideration to
the Company) before the Option Rights or installments
thereof will become exercisable.
(h) Option Rights granted under this Plan may be (i)
options which are intended to qualify under particular
provisions of the Internal Revenue Code of 1986, as
amended from time to time ("Code"), provided, however,
that consultants to the Company or any of its
Subsidiaries shall not be eligible to receive incentive
stock options, (ii) options which are not intended to
so qualify, or (iii) combinations of the foregoing.
(i) No Option Right shall be exercisable more than ten
years from the Date of Grant.
(j) Each grant of Option Rights shall be evidenced by an
agreement executed on behalf of the Company by any
officer and delivered to the Optionee and containing
such terms and provisions, consistent with this Plan,
as the Committee may approve, including providing for
the acceleration of any vesting period for such Option
Rights in the event of a change in control of the
Company or other similar transaction or event.
(k) No Eligible Participant shall be granted Option Rights
(or Appreciation Rights in respect of Option Rights)
for more than 300,000 shares of Common Stock in any one
fiscal year of the Company, subject to adjustments
provided in Section 10 of this Plan.
5. Appreciation Rights. The Committee may, from time to
time and upon such terms and conditions as it may determine, also
grant to any Optionee Appreciation Rights in respect of Option
Rights granted hereunder. An Appreciation Right shall be a right
of the Optionee, exercisable by surrender of the related Option
Right, to receive from the Company an amount which shall be
determined by the Committee, and shall be expressed as a
percentage of the Spread (not exceeding one hundred percent) at
the time of exercise. Without limiting the foregoing, each such
grant may utilize any or all of the authorizations, and shall be
subject to all of the limitations, contained in the following
provisions:
(a) Any grant may specify that the amount payable on
exercise of an Appreciation Right may be paid by the
Company in cash, in shares of Common Stock, or in any
combination thereof, and may either grant to the
Optionee or retain in the Committee the right to elect
among those alternatives; provided, however, that if
the right to elect among those alternatives is granted
to the Optionee, the Committee shall have sole
discretion to consent to or disapprove the Optionee's
election to receive cash in full or partial settlement
of an Appreciation Right, which consent or disapproval
may be given at any time after the election to which it
relates.
(b) Any grant may specify that the amount payable on
exercise of an Appreciation Right (valuing shares of
Common Stock for this purpose at their Market Value Per
Share at the date of exercise) may not exceed a maximum
specified by the Committee at the Date of Grant.
(c) Any grant may specify waiting periods before exercise
and permissible exercise dates or periods, and shall
provide that no Appreciation Right may be exercised
except at a time when the related Option Right is also
exercisable and at a time when the Spread is positive.
B-3
<PAGE>
(d) Any grant may specify that an Appreciation Right may be
exercised only in the event of a change in control of
the Company or other similar transaction or event.
(e) Each grant may specify that the Committee may at any
time amend, suspend or terminate any notification or
document evidencing Appreciation Rights (provided that,
in the case of an amendment, the amended Appreciation
Rights shall conform to the provisions of this Plan).
(f) Each grant of Appreciation Rights shall be evidenced by
a notification executed on behalf of the Company by any
officer and delivered to and accepted by the Optionee,
which notification shall describe such Appreciation
Rights, identify the related Option Rights, state that
such Appreciation Rights are subject to all the terms
and conditions of this Plan, and contain such other
terms and conditions, consistent with this Plan, as the
Committee may approve.
6. Restricted Stock. The Committee may, from time to time
and upon such terms and conditions as it may determine, also
grant or sell to Eligible Participants Restricted Stock. Without
limiting the foregoing, each such grant or sale may utilize any
or all of the authorizations, and shall be subject to all of the
limitations, contained in the following provisions:
(a) Each such grant or sale shall constitute an immediate
transfer of the ownership of shares of Common Stock to
the Eligible Participant in consideration of the
performance of services, entitling such Eligible
Participant to voting, dividend and other ownership
rights, but subject to the substantial risk of
forfeiture and restrictions on transfer hereinafter
referred to.
(b) Each such grant or sale may be made without additional
consideration or in consideration of a payment by such
Eligible Participant that is less than Market Value Per
Share at the Date of Grant.
(c) Each such grant or sale shall provide that the shares
of Restricted Stock covered by such grant or sale shall
be subject, for a period to be determined by the
Committee at the Date of Grant, to a "substantial risk
of forfeiture" within the meaning of Section 83 of the
Code, and the regulations of the Internal Revenue
Service thereunder for a period to be determined by the
Committee on the Date of Grant, and any grant or sale
may provide for the earlier termination of such period
in the event of a change in control of the Company or
other similar transaction or event.
(d) Each such grant or sale shall provide that during the
period for which such substantial risk of forfeiture is
to continue, the transferability of the Restricted
Stock shall be prohibited or restricted in a manner and
to the extent prescribed by the Committee at the Date
of Grant (which restrictions may include, without
limiting the generality of the foregoing, rights of
repurchase or first refusal in the Company or
provisions subjecting the Restricted Stock to a
continuing substantial risk of forfeiture in the hands
of any transferee).
(e) Each grant or sale of Restricted Stock shall be
evidenced by an agreement executed on behalf of the
Company by any officer and delivered to and accepted by
the Eligible Participant and shall contain such terms
and conditions, consistent with this Plan, as the
Committee may approve.
7. Performance Units. The Committee may, from time to time
and upon such terms and conditions as it may determine, also
grant Performance Units which will become payable to an Eligible
Participant upon achievement of specified Management Objectives.
Without limiting the foregoing, each such grant may utilize any
or all of the authorizations, and shall be subject to all of the
limitations, contained in the following provisions:
(a) Each grant shall specify the number of Performance
Units to which it pertains.
(b) The Performance Period with respect to each Performance
Unit shall be such period of time commencing with the
Date of Grant as shall be determined by the Committee
at the time of grant.
(c) Each grant shall specify the Management Objectives that
are to be achieved by the Eligible Participant, which
may be described in terms of Company-wide objectives or
objectives that are related to performance of the
division or Subsidiary in which such Eligible
Participant is employed.
B-4
<PAGE>
(d) Each grant shall specify a minimum acceptable level of
achievement in respect of the specified Management
Objectives below which no payment will be made and
shall set forth a formula for determining the amount of
payment to be made if performance is at or above such
minimum, but short of full achievement of the
Management Objectives.
(e) Each grant shall specify the time and manner of payment
(whether in cash, shares of Common Stock or a
combination thereof) of Performance Units which have
been earned.
(f) The Committee may adjust Management Objectives and the
related minimum acceptable level of achievement if, in
the sole judgment of the Committee, events or
transactions have occurred after the Date of Grant
which are unrelated to the performance of the Eligible
Participant and result in distortion of the Management
Objectives or the related minimum.
(g) Any grant may specify that a Performance Unit may
become payable in the event of a change in control of
the Company or other similar transaction or event.
(h) Each grant of Performance Units shall be evidenced by a
notification executed on behalf of the Company by any
officer and delivered to and accepted by the Eligible
Participant, which notification shall describe the
Performance Units, state that such Performance Units
are subject to all the terms and conditions of this
Plan, and contain such other terms and conditions,
consistent with this Plan, as the Committee may
approve.
8. Automatic Grants of Nonqualified Stock Options to Non-
Officer Directors. Non-Officer Directors may only receive grants
or awards under this Plan pursuant to the terms of this Section.
If the Plan is approved by the requisite vote of the stockholders
of the Company, Option Rights shall be automatically granted to
Non-Officer Directors as follows:
(a) On the Effective Date of this Plan, an Option Right to
purchase 5,000 shares of Common Stock shall be granted
to each person who immediately after the annual meeting
on that date was an incumbent Non-Officer Director for
each of the five years preceding the Effective Date,
and an Option Right to purchase 3,000 shares of Common
Stock shall be granted to any other person who
immediately after the annual meeting on that date was
an incumbent Non-Officer Director for less than five
years.
(b) With respect to each person who first becomes a Non-
Officer Director after the Effective Date of this Plan,
an Option Right to purchase 3,000 shares of Common
Stock shall be granted on the date such person first
becomes a Non-Officer Director.
(c) Immediately after each annual meeting following the
Effective Date (excluding the annual meeting held on
the Effective Date), an Option Right to purchase 1,500
shares of Common Stock shall be granted to each Non-
Officer Director for so long as he or she continues to
be a Non-Officer Director.
(d) Option Rights, in addition, shall be automatically
granted to each Non-Officer Director at each annual
meeting of the Company based on the Company's Return on
Consolidated Equity as reported in the Company's annual
audited financial statements, as follows: either (i)
for a Return on Consolidated Equity of at least ten
percent but less than fifteen percent, each Non-Officer
Director shall receive an Option Right to purchase 750
shares of Common Stock; or (ii) for a Return on
Consolidated Equity of fifteen percent or more, each
Non-Officer Director shall receive an Option Right to
purchase 1,500 shares of Common Stock.
(e) Each such grant shall be evidenced by an agreement in
such form as shall be approved by the Committee, and
shall be subject to the following additional terms and
conditions:
(i) The option price per share for which each
such Option Right is exercisable shall be 100 percent
of the Market Value Per Share on the Date of Grant.
(ii) Each such Option Right shall become
exercisable to the extent of one-fifth of the number of
shares covered thereby one year after the Date of Grant
and to the extent of an additional one-fifth of such
shares after each of the next four successive years
thereafter. Such Option Rights shall become
exercisable in fill immediately in the event of a
change in control of the Company. Each
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such Option Right granted under the Plan shall expire
ten years from the Date of Grant and shall be subject
to earlier termination as hereinafter provided.
(iii) In the event of the termination of service
on the Board by the holder of any such Option Rights,
other than by reason of disability or death as set
forth in subparagraph (iv) hereof, the then outstanding
Option Rights of such holder may be exercised only to
the extent that they were exercisable on the date of
such termination and shall expire 90 days after such
termination, or on their stated expiration date,
whichever occurs first.
(iv) In the event of the death or disability of
the holder of any such Option Rights, each of the then
outstanding Option Rights of such holder may be
exercised at any time within one year after such death
or disability, but in no event after the expiration
date of the term of such Option Rights.
(v) If a Non-Officer Director subsequently
becomes an officer or employee of the Company or a
Subsidiary while remaining a member of the Board, any
Option Rights then held under the Plan by such
individual shall not be affected thereby.
(vi) Option Rights may be exercised by a Non-
Officer Director only upon payment to the Company in
full of the option price of the Common Stock to be
delivered. Such payment shall be made in cash or in
Common Stock previously owned by the optionee for more
than six months, or in a combination of cash and such
Common Stock.
9. Transferability. No Option Right or Appreciation Right
shall be transferable by an Optionee other than by will or the
laws of descent and distribution. Option Rights and Appreciation
Rights shall be exercisable during the Optionee's lifetime only
by him (or by his or her guardian or legal representative acting
under state law and court supervision).
10. Adjustments. The Committee may make or provide for
such adjustments in the numbers of shares of Common Stock covered
by outstanding Option Rights and Appreciation Rights granted
hereunder, in the prices per share applicable to such Option
Rights and Appreciation Rights and in the kind of shares covered
thereby, as the Committee in its sole discretion, exercised in
good faith, may determine is equitably required to prevent
dilution or enlargement of the rights of Optionees that otherwise
would result from (a) any stock dividend, stock split,
combination of shares, recapitalization or other change in the
capital structure of the Company, or (b) any merger,
consolidation, spin-off, reorganization, partial or complete
liquidation, issuance of rights or warrants to purchase
securities, or (c) any other corporate transaction or event
having an effect similar to any of the foregoing. In the event of
any such transaction or event, the Committee may provide in
substitution for any or all outstanding grants or awards under
this Plan such alternative consideration as it may in good faith
determine to be equitable under the circumstances and may require
in connection therewith the surrender of all awards so replaced.
Moreover, the Committee may on or after the Date of Grant provide
in the agreement evidencing any grant or award under this Plan
that the holder of the grant or award may elect to receive an
equivalent grant or award in respect of securities of the
surviving entity of any merger, consolidation or other
transaction or event having a similar effect, or the Committee
may provide that the holder will automatically be entitled to
receive such an equivalent grant or award. The Committee may also
make or provide for such adjustments in the number of shares
specified in Paragraph 3 of this Plan and in the number of shares
under options to be granted automatically pursuant to Section 8
of this Plan as the Committee in its sole discretion, exercised
in good faith, may determine is appropriate to reflect any
transaction or event described in the preceding sentence.
11. Fractional Shares. The Company shall not be required
to issue any fractional share of Common Stock pursuant to this
Plan. The Committee may provide for the elimination of fractions
or for the settlement of fractions in cash.
12. Withholding Taxes. To the extent that the Company is
required to withhold federal, state, local or foreign taxes in
connection with any payment made or benefit realized by an
Eligible Participant or other person under this Plan, and the
amounts available to the Company for such withholding are
insufficient, it
B-6
<PAGE>
shall be a condition to the receipt of such payment or the
realization of such benefit that the Eligible Participant or such
other person make arrangements satisfactory to the Company for
payment of the balance of such taxes required to be withheld. At
the discretion of the Committee, such arrangements may include
relinquishment of a portion of such benefit. The Company and any
Participant or such other person may also make similar
arrangements with respect to the payment of any taxes with
respect to which withholding is not required.
13. Participation by Employees of a Less-Than-80-Percent
Subsidiary. As a condition to the effectiveness of any grant or
award to be made hereunder to a Eligible Participant who is an
employee of a Less-Than-80-Percent Subsidiary, regardless whether
such Eligible Participant is also employed by the Company or
another Subsidiary, the Committee may require the Less-Than-80-
Percent Subsidiary to agree to transfer to the Eligible
Participant (as, if and when provided for under this Plan and any
applicable agreement entered into between the Eligible
Participant and the Less-Than-80-Percent Subsidiary pursuant to
this Plan) the Common Stock that would otherwise be delivered by
the Company upon receipt by the Less-Than-80-Percent Subsidiary
of any consideration then otherwise payable by the Eligible
Participant to the Company. Any such award may be evidenced by
an agreement between the Eligible Participant and the Less-Than-
80-Percent Subsidiary, in lieu of the Company, on terms
consistent with this Plan and approved by the Committee and the
Less-Than-80-Percent Subsidiary. All Common Stock so delivered
by or to a Less-Than-80-Percent Subsidiary will be treated as if
they had been delivered by or to the Company for purposes of
Section 3 of this Plan, and all references to the Company in this
Plan shall be deemed to refer to the Less-Than-80-Percent
Subsidiary except with respect to the definitions of the Board
and the Committee and in other cases where the context otherwise
requires.
14. Certain Terminations of Employment. Notwithstanding
any other provision of this Plan to the contrary, in the event of
termination of employment by reason of death or disability, or in
the event of hardship or other special circumstances, of an
Eligible Participant who holds an Option Right that is not
immediately and fully exercisable, any Restricted Stock as to
which the substantial risk of forfeiture or the prohibition or
restriction on transfer has not lapsed, or any Performance Units
that have not been fully earned, the Committee may in its sole
discretion take any action that it deems to be equitable under
the circumstances or in the best interests of the Company,
including without limitation waiving or modifying any limitation
or requirement with respect to any award under this Plan.
15. International Employees. In order to facilitate the
making of any grant or combination of grants under this Plan, the
Committee may provide for such special terms for awards to
Eligible Participants who are foreign nationals, or who are
employed by the Company or any Subsidiary outside of the United
States of America, as the Committee may consider necessary or
appropriate to accommodate differences in local law, tax policy
or custom. Moreover, the Committee may approve such supplements
to, or amendments, restatements or alternative versions of, this
Plan as it may consider necessary or appropriate for such
purposes without thereby affecting the terms of this Plan as in
effect for any other purpose; provided, however, that no such
supplements, amendments, restatements or alternative versions
shall include any provisions that are inconsistent with the terms
of this Plan, as then in effect, unless this Plan could have been
amended to eliminate such inconsistency without further approval
by the shareholders of the Company.
16. Administration of the Plan.
(a) This Plan shall be administered by one or more
committees of the Board, as determined by the Company's
Board of Directors, each of which shall consist of not
less than three directors appointed by the Board, each
of whom shall be a "disinterested person" under Rule
16b-3. Each such committee shall be deemed the
"Committee" hereunder with the limits of its authority
as prescribed by the Board of Directors. A majority of
the Committee shall constitute a quorum, and the action
of the members of the Committee present at any meeting
at which a quorum is present, or acts unanimously
approved in writing, shall be the acts of the
Committee.
B-7
<PAGE>
(b) The interpretation and construction by the Committee of
any provision of this Plan or of any agreement,
notification or document evidencing the grant of Option
Rights, Appreciation Rights, Restricted Stock or
Performance Units and any determination by the Board
pursuant to any provision of this Plan or of any such
agreement, notification or document shall be final and
conclusive. No member of the Committee or the Executive
Committee shall be liable for any such action or
determination made in good faith.
17. Amendments, Etc.
(a) With the exception of the provisions of Section 8
relating to the amount, price and timing of Option
Rights, which may only be amended by stockholder
approval, this Plan may be amended from time to time by
the Board, but without further approval by the
stockholders of the Company no such amendment shall (i)
increase the maximum number of shares specified in
Paragraph 3 of this Plan (except that adjustments
authorized by Paragraph 10 of this Plan shall not be
limited by this provision), (ii) change the definition
of "Eligible Participant", or (iii) otherwise cause
Rule 16b-3 to become inapplicable to this Plan. In no
event shall the provisions of Section 8 of the Plan
relating to the amount, price or timing of Option
Rights be amended more than once every 6 months except
to comport with changes in the Code or the regulations
thereunder.
(b) The Committee may, with the concurrence of the affected
Optionee, cancel or amend any agreement evidencing
Option Rights granted under this Plan. In the event of
cancellation, the Committee may authorize the granting
of new Option Rights (which may or may not cover the
same number of shares which had been the subject of the
prior agreement) in such manner, at such option price
and subject to the same terms, conditions and
discretion as would have been applicable under this
Plan had the cancelled Option Rights not been granted.
(c) The Committee may, in its sole discretion, accelerate
the time at which any Option Right or Appreciation
Right may be exercised or the time at which any
substantial risk of forfeiture or prohibition or
restriction on transfer will lapse or the time at which
any Performance Units will be deemed to have been fully
earned.
(d) In the event an Optionee shall intentionally commit an
act materially inimical to the interests of the Company
or any Subsidiary and the Committee in its sole
discretion, exercised in good faith, shall so find,
notwithstanding any other provision in this Plan the
Committee may terminate as of the time of such act any
Option Rights or other benefits under this Plan granted
such Optionee.
(e) This Plan shall not confer upon any Eligible
Participant any right with respect to continuance of
employment or other service with the Company or any
Subsidiary, nor shall it interfere in any way with any
right the Company or any Subsidiary would otherwise
have to terminate such Eligible Participant's
employment or other service at any time.
(f) This Plan is intended to comply with and be subject to
Rule 16b-3 as in effect prior to May 1, 1991. The
Committee may at any time elect that this Plan shall be
subject to Rule 16b-3 as in effect on or after May 1,
1991.
18. Ratification Date. This Plan was originally adopted by
the Board of Directors on September 8, 1992, and was approved by
the Company's stockholders and became effective on November 10,
1992. This amendment and restatement was adopted by the Board of
Directors on August 30, 1994 and was approved by the Company's
stockholders on _____________, 1994. No Option Rights shall be
granted under this Plan subsequent to November 9, 2002. Option
Rights outstanding subsequent to November 9, 2002 shall continue
to be governed by the provisions of this Plan.
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<PAGE>
Harman International Industries, Incorporated
Annual Meeting of Stockholders -- November 2, 1994
This Proxy is Solicited on Behalf of the Board of Directors
The undersigned hereby appoints Bernard A. Girod and Sandra B.
Robinson and each of them as Proxies and authorizes them to represent and
vote all the shares of Common Stock of Harman International Industries,
Incorporated that the undersigned may be entitled to vote at the Annual
Meeting of Stockholders to be held on November 2, 1994 and at any
adjournment thereof, as designated for the items set forth below and in the
Notice of Annual Meeting of Stockholders and the Proxy Statement dated
September 28, 1994.
If properly executed, this proxy will be voted as specified below or,
if not specified, will be voted FOR the one nominee in Item 1 and FOR the
proposals in Items 2 and 3.
The Board of Directors recommends a vote FOR the election of the
Director set forth below and FOR the proposals in Items 2 and 3.
1. Election of Edward H. Meyer as Director.
____ FOR the nominee____ WITHHOLD vote for the nominee
2. Proposal to adopt the Chief Executive Officer Incentive Plan.
____ FOR ____ AGAINST ____ ABSTAIN
(Continued and to be signed on the reverse side)
- - ----------------------------------------------------------------------
3. Proposal to amend and restate the 1992 Incentive Plan.
____ FOR ____ AGAINST ____ ABSTAIN
In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting or any adjournment
thereof. At this time, management knows of no such other business.
Please mark, date and sign exactly as the name appears herein and
return this proxy in the enclosed envelope. Persons signing as executors,
administrators, trustees, etc. should so indicate. If shares are held
jointly, each joint owner should sign. In the case of a corporation or
partnership, the full name of the organization should be used and the
signature should be that of a duly authorized officer or partner.
Dated: __________________________, 1994
________________________________________
Signature
________________________________________
Signature
(If held jointly)
