<PAGE>
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES EXCHANGE ACT OF
1934
(AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement [ ] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
[X] Definitive Proxy Statement RULE 14C-5(D)(2))
[_] Definitive Additional Materials
[ ] Soliciting Material Pursuant to (S)240.14a-11(c) or (S)240.14a-12
Harman International Industries, Incorporated
------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
Harman International Industries, Incorporated
------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or
Item 22(a)(2) of Schedule 14A.
[ ] $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:
______________________________________________________________________
(5) Total fee paid:
______________________________________________________________________
* Set forth the amount on which the filing fee is calculated and state how
it was determined.
[ ] Fee paid previously with preliminary materials.
[ ] 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: __________________________________________________________
Notes:
<PAGE>
HARMAN INTERNATIONAL
[LOGO OF HARMAN INDUSTRIES, INCORPORATED
INTERNATIONAL
APPEARS HERE] 1101 Pennsylvania Avenue, N.W., Suite 1010
Washington, D.C. 20004
September 22, 1995
Dear Harman International Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders to be
held on Tuesday, November 14, 1995 at 11:00 a.m. in the Chemical Bank building
at 270 Park Avenue, New York, New York. Information about the meeting, the
nominees 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 1995. 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 14th.
Sincerely,
/s/ Sidney Harman
Sidney Harman
Chairman and Chief Executive Officer
<PAGE>
[LOGO OF HARMAN
INTERNATIONAL HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
APPEARS HERE]
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 14, 1995
----------------
The 1995 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 14, 1995 at 11:00 a.m. for the following
purposes:
(1) To elect two directors to serve for a three-year term expiring at the
1998 Annual Meeting of Stockholders;
(2) To consider and take action upon a proposal to amend the Company's
1992 Incentive Plan;
and to transact such other business as properly may come before the meeting on
November 14 or on any date to which the meeting may be adjourned.
Stockholders of record as of the close of business on September 15, 1995 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 22, 1995
------------------------------------------------------------------------------
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.
------------------------------------------------------------------------------
<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 1995 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 22, 1995.
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 15, 1995, 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 15, 1995, there were 15,942,113 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 two Directors to serve until the 1998
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
one other proposal for stockholder action, stockholders of the Company voting
by proxy may vote in favor of or against the proposal. 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 two nominees for Director listed under
the caption "Election of Directors," and (ii) the approval of amendments to
the Company's 1992 Incentive Plan, as amended (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
candidates for election as Directors 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.
<PAGE>
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.
Two Directors are to be elected at the Meeting. Set forth below is
information concerning the two nominees for Director, as well as information
concerning the Directors whose terms of office will extend beyond the Meeting.
The current nominees for Director, if elected, will serve for a three-year
term expiring at the 1998 Annual Meeting. The Board of Directors expects that
the nominees 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" BOTH NOMINEES.
DIRECTORS TO BE ELECTED AT THE MEETING
Bernard A. Girod, age fifty-three, has been Chief Operating Officer of the
Company since March 1993, President since March 1994, Secretary since November
1992 and a Director of the Company since July 1993. Mr. Girod also served as
Chief Financial Officer of the Company from 1986 to September 1995.
Ann McLaughlin, age fifty-three, is Vice Chairman and a Trustee of The Aspen
Institute, a non-profit organization assisting in formulating the policies of
democratic institutions. She is also a member of the Board of Trustees of The
Urban Institute, a private, non-profit policy research and educational
organization. From May 1990 to September 1995, Ms. McLaughlin served as
President of the Federal City Council in Washington, D.C., a non-profit, non-
partisan organization dedicated to improving the nation's capital. She also
served as President and Chief Executive Officer of the New American Schools
Development Corporation from July 1992 to April 1993 and as Chairman of
President Bush's Commission on Aviation Security and Terrorism from September
1989 until the Commission concluded its work in May 1990. Ms. McLaughlin
served as the U.S. Secretary of Labor from 1987 until 1989. She also served as
Under Secretary of the Department of the Interior of the United States from
1984 to 1987, and as an Assistant Secretary of the Department of Treasury of
the United States from 1981 to 1984. Ms. McLaughlin serves as a Director for
AMR Corporation (and its subsidiary, American Airlines Inc.), General Motors
Corporation, Host Marriott Corporation, Kellogg Company, Nordstrom, Inc.,
Potomac Electric Power Company, Union Camp Corporation and Vulcan Materials
Company.
DIRECTORS WHOSE TERMS EXTEND BEYOND THE MEETING
Sidney Harman, Ph.D., age seventy-seven, 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 seventy, has been a Director of the Company
since September 1986. Ms. Hufstedler is and has been for the past fourteen
years in private law practice. She is currently with the firm of Morrison &
Foerster in Los Angeles, California and from 1981 to March 1995, was with the
firm of Hufstedler & Kaus. 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.
Edward H. Meyer, age sixty-eight, 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-five mutual funds advised by Merrill Lynch
Asset Management, Inc. Mr. Meyer's term as Director expires at the 1997 Annual
Meeting.
Alan Patricof has completed 15 years as a Director of the Company and has
determined not to stand for re-election. The Board expresses its gratitude for
his invaluable service.
2
<PAGE>
THE BOARD OF DIRECTORS, ITS COMMITTEES AND COMPENSATION
The Board of Directors of the Company held seven meetings during the 1995
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 two meetings during the 1995 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. The Executive Committee has
also 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, which included Ms. Hufstedler and Messrs. Meyer and
Patricof, held five meetings during the 1995 fiscal year. The Audit Committee
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, which included Ms. Hufstedler and Messrs. Meyer
and Patricof, held five meetings during the 1995 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 Chief Executive Officer Incentive Plan, the 1992 Plan and
retirement plans.
The Company does not pay fees to directors who also serve as officers of the
Company or its subsidiaries. For the 1995 fiscal year, non-officer directors
received an annual fee of $15,000 plus $1,500 for each Board meeting attended
and $750 for each committee meeting attended which occurred other than on the
day of a Board meeting. On July 12, 1995 the Board of Directors, based upon
the recommendations of an independent compensation consultant, approved
increases to non-officer director compensation. Effective for the 1996 fiscal
year, non-officer directors will receive an annual fee of $20,000 plus $2,500
for each Board meeting attended and $750 for each committee meeting attended
which occurred other than on the day of a Board meeting. The Company
reimburses all Directors for expenses incurred for attending meetings.
The 1992 Plan provides that any person who becomes a non-officer member of
the Board of Directors shall be granted an option to purchase 3,000 shares of
Common Stock on the date such person first becomes a non-officer director.
Pursuant to this provision, Ann McLaughlin, if elected as a Director at the
Meeting, will receive an option to purchase 3,000 shares of Common Stock on
the date of the Meeting. In addition, under the current 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. Based upon recommendations
from independent consultants, the Board of Directors approved an amendment to
the 1992 Plan increasing to 2,500 the number of options to purchase shares of
Common Stock automatically granted to each non-officer director who continues
to serve on the Board of Directors following each annual meeting of
stockholders. This proposal is now being presented to the stockholders (Item 2
of the Proxy Card and discussed in more detail on page 11 of this Proxy
Statement) and, if approved, will take effect with the automatic grant
immediately following the Meeting.
In addition to the automatic stock option grants described above, each non-
officer director 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
3
<PAGE>
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 1994, 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 Return on Consolidated Equity for fiscal 1994
in excess of 15%, additional performance based stock options to purchase 1,500
shares of Common Stock. Similarly, immediately after this year's Meeting, each
non-officer director will receive stock options to purchase 2,500 shares of
Common Stock (subject to approval of the amendment discussed above) and,
because the Company achieved a Return on Consolidated Equity for fiscal 1995
in excess of 15%, additional performance based 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.
4
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of August 16, 1995, the beneficial
ownership of the Company's Common Stock for the following persons: (a) all
stockholders known by the Company to beneficially own more than five percent
of the Common Stock, (b) each of the Company's current Directors and nominees
for Director, (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 with the Securities and Exchange Commission. On August 25,
1995, the Company paid a five percent stock dividend to all stockholders of
record as of August 11, 1995 and adjusted by five percent the number of shares
subject to options. Because the numbers below are reported as of August 16,
1995, they do not reflect the effect of the stock dividend and adjustments.
<TABLE>
<CAPTION>
AMOUNT AND NATURE OF APPROXIMATE
NAME BENEFICIAL OWNERSHIP(1) PERCENT
-------- -------------------------------------- ---------------------
<S> <C> <C>
Sidney Harman 3,197,150 (2) 20.10%
Harman International Industries,
Incorporated
1101 Pennsylvania Avenue, N.W.
Suite 1010
Washington, D.C. 20004
Wanger Asset Management, L.P. 770,000 (3) 5.11%
227 West Monroe, Suite 3000
Chicago, Illinois 60606
Bernard A. Girod 59,693 (4) *
Alan J. Patricof 25,901 (5) *
Shirley M. Hufstedler 8,750 *
Edward H. Meyer 7,117 *
Ann McLaughlin 100 *
Gregory P. Stapleton 28,729 (6) *
Thomas Jacoby 11,400 *
Philip Hart 18,100 *
All Directors, nominees and
executive officers
as a group (15 persons) 3,389,023 21.18%
</TABLE>
--------
* Less than one percent
(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 16, 1995 by the following
stockholders in the indicated amounts: Dr. Harman (425,000 shares), Mr.
Girod (18,500 shares), Mr. Patricof (10,450 shares), Ms. Hufstedler (7,450
shares), Mr. Meyer (4,650 shares), Mr. Stapleton (13,000 shares), Mr.
Jacoby (9,500 shares), Mr. Hart (15,900 shares) and all Directors and
executive officers as a group (524,350 shares).
(2) Includes 1,939,150 shares held in a trust for which Dr. Harman has sole
dispositive and sole voting 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; 300,550 shares held by family members
for which Dr. Harman has sole voting power pursuant to 3-year revocable
proxies and for which Dr. Harman disclaims beneficial ownership; and 3,000
shares held by family members for which Dr. Harman has no voting power or
dispositive power and for which Dr. Harman also disclaims beneficial
ownership.
5
<PAGE>
As noted in footnote 1, the number of shares beneficially owned by Dr.
Harman also includes 425,000 shares that may be acquired pursuant to stock
options exercisable within 60 days from August 16, 1995. The 425,000 shares
subject to stock options include a long-term performance incentive option
to purchase 300,000 shares, granted to Dr. Harman on November 9, 1993,
which is subject to cancellation (and any shares issued as a result of the
exercise of the option are subject to repurchase), if the Company does not
meet certain performance criteria by the end of the fiscal year ending June
30, 2001.
(3) Wanger Asset Management, L.P., Wanger Asset Management, Ltd. (the sole
general partner of Wanger Asset Management, L.P.) and Ralph Wanger
(principal stockholder of Wanger Asset Management, Ltd.) have shared
voting power and shared dispositive power over 770,000 shares, of which
570,000 shares are held by Acorn Investment Trust, Series Designated Acorn
Fund for which Wanger Asset Management, L.P. serves as investment adviser.
(4) Includes 1,118 shares held by Mr. Girod in the Company's Section 401(k)
Retirement Savings Plan (the "401(k) Plan").
(5) Includes 2,120 shares beneficially owned by Patricof & Co. Ventures, Inc.,
a corporation controlled by Mr. Patricof, and 50 shares held by Mr.
Patricof's son for which Mr. Patricof has no voting power or dispositive
power and for which Mr. Patricof disclaims beneficial ownership.
(6) Includes 1,529 shares held by Mr. Stapleton in the Company's 401(k) Plan.
Section 16(a) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") requires the Company's Directors, executive officers and
persons who beneficially own more than 10% of the Company's Common Stock to
file with the Commission initial reports of beneficial ownership and reports
of changes in beneficial ownership of such Common Stock. Directors, executive
officers and greater than 10% beneficial owners are required by Commission
rules to furnish the Company with copies of all such reports. To the Company's
knowledge, based solely upon a review of the copies of such reports furnished
to the Company and written representations from the Company's Directors and
executive officers that no other reports were required, all Section 16(a)
filing requirements applicable to the Company's Directors and executive
officers were complied with during the year ended June 30, 1995, except that
options to purchase 1,500 shares of Common Stock were inadvertently omitted
from each of Messrs. Meyer's and Patricof's and Ms. Hufstedler's annual report
of changes in beneficial ownership on Form 5 filed for the fiscal year ended
June 30, 1994 and 200 shares of Common Stock held directly by Frank Meredith,
an executive officer, were inadvertently omitted from his annual report of
changes in beneficial ownership on Form 5 filed for the fiscal year ended June
30, 1994.
6
<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 1995, the Compensation Committee set base salaries for the
top four executive officers in July 1994, based upon competitive pay
information accumulated by the Company's Human Resources Department and upon a
review of the Company's results of operations for the 1994 fiscal year. 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 of base salaries for the
survey group companies, consistent with the Company's competitive pay goals.
The salary changes for fiscal year 1995 reflected changes in the survey group
compensation practices, 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 management and approved by the Board of Directors. Finally,
the bonus award program also contemplates discretionary rewards for exemplary
individual
7
<PAGE>
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 July 1995 based on fiscal
year 1995 performance. Bonus awards for Messrs. Girod, Stapleton, Jacoby and
Hart for the 1995 fiscal year were awarded based upon the extraordinary
performance of the Company and the Automotive OEM, Consumer and Professional
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 plans. 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 May 31, 1995, the Compensation Committee approved
the Chief Executive Officer's recommendations and granted options to purchase
25,000 shares of Common Stock to Mr. Girod and options to purchase 17,500
shares of Common Stock to each of Messrs. Stapleton, Jacoby and Hart, all at
an exercise price of $36.125 per share, the fair market value of the Common
Stock on the date of grant of the options.
FISCAL 1995 COMPENSATION FOR CHAIRMAN AND CHIEF EXECUTIVE OFFICER
SALARY. In July 1994, after reviewing the Company's performance during the
1994 fiscal year, the Compensation Committee awarded Dr. Harman a pay increase
of $150,000 or 30.0% of his July 1993 salary, effective July 1, 1994. 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 the 1994 fiscal year in sales, earnings and
shareholder value which the Compensation Committee attributes largely to the
leadership provided by Dr. Harman. 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). From June 30, 1993 to
June 30, 1994, the value of the Company's stock increased by 20%.
PERFORMANCE BASED COMPENSATION. In August 1994 the Compensation Committee
adopted the Chief Executive Officer Incentive Plan (the "CEO Plan") in order
to provide "performance-based" compensation to the Company's Chief Executive
Officer. The CEO Plan was subsequently approved by the Company's full Board of
Directors and by the Stockholders at last year's annual meeting. Under the
Plan, which became effective for the 1995 fiscal year, an annual cash bonus
will be paid to the Company's Chief Executive Officer only if a targeted
return on shareholder equity goal has been met for the year. The CEO Plan was
adopted to preserve the deductibility for the Company of cash compensation
paid to Dr. Harman in excess of $1 million, consistent with the requirements
of Section 162(m) of the Internal Revenue Code.
At the beginning of each fiscal year, the Compensation Committee must
establish (i) the return on shareholder equity goal for the year and (ii) the
maximum cash award ("the Award Amount"), which is payable to the Company's
Chief Executive Officer if the goal is met. At the end of the year, the
Committee must 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.
Pursuant to the CEO Plan, in August 1994 the Compensation Committee
established a return on shareholder equity goal for fiscal 1995 of 10% and an
Award Amount of up to $1 million. Under the leadership provided by Dr. Harman,
the Company's return on average shareholder equity for fiscal 1995 was 15.8%.
Because the
8
<PAGE>
targeted goal had been met--and exceeded--the Compensation Committee awarded
Dr. Harman a cash bonus of $700,000 for the 1995 fiscal year. This award
amount was based upon achievement of the return on shareholder equity goal, as
well as consideration by the Compensation Committee of other measures of the
Company's strong performance for the 1995 fiscal year. In fiscal 1995, the
Company earned $41.2 million (a 60.3% increase from net income of $25.7
million in fiscal 1994) on sales of $1,170.2 million (a 35.7% increase from
sales of $862.1 million in fiscal 1994).
EQUITY BASED COMPENSATION. On May 31, 1995, the Compensation Committee
granted options to 115 officers and key employees of the Company to purchase
298,250 shares of Common Stock at $36.125 per share. Dr. Harman received an
option to purchase 50,000 shares, or approximately 11% of the total shares
subject to options granted on May 31, 1995. At that time, the Compensation
Committee also authorized the automatic grant to Dr. Harman of options to
purchase 50,000 shares on each of May 31, 1996 and May 31, 1997 at a price per
share equal to the fair market value on the date of grant or the price per
share for options granted to other officers and key employees on that date.
The options to Dr. Harman were granted and authorized based upon both (i) the
strong performance of the Company for the 1995 fiscal year in sales, earnings
and in return on shareholder equity, and (ii) as a long-term performance
incentive.
The base salary, the performance based award and the stock option grant were
each determined by the Compensation Committee to be appropriate based on the
Company's basic compensation performance criteria described above as well as
Dr. Harman's leadership in orchestrating impressive growth in the Company's
earnings over the past three years and in repositioning the Company, through a
successful corporate reorganization and a number of strategic acquisitions, to
take advantage of emerging domestic and international long-term growth
opportunities.
STATUS OF REPORT
The foregoing report on 1995 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 Exchange Act.
Shirley Mount Hufstedler
Edward Meyer
Alan Patricof
9
<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, 1995. This stock price performance graph
assumes that the value of the investment in the Common Stock and each index
was $100 on July 1, 1990. The stock price performance shown on the graph below
is not necessarily indicative of future price performance.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
HARMAN S&P 500 PEER
(Fiscal Year) INTERNATIONAL INDEX GROUP
---------------- ------------------------ ----------- ----------
<S> <C> <C> <C>
1990 $100.00 $100.00 $100.00
1991 $ 85.11 $107.40 $ 75.26
1992 $104.26 $121.80 $ 63.18
1993 $178.72 $138.40 $ 70.48
1994 $213.83 $140.35 $104.73
1995 $346.45 $176.95 $ 81.69
</TABLE>
10
<PAGE>
PROPOSAL TO AMEND THE 1992 INCENTIVE PLAN
(ITEM 2 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, non-officer directors and consultants of the Company
and its subsidiaries. The 1992 Plan, as amended and restated, was adopted by
the Stockholders of the Company at the 1994 Annual Stockholders Meeting.
The Board of Directors believes that the 1992 Plan has assisted the
Corporation and its subsidiaries in attracting and retaining personnel of high
quality and outstanding ability by continuing to provide such persons
incentives and rewards for superior performance. The Board of Directors
therefore believes that it is in the best interests of the Company to continue
the 1992 Plan and recommends that the Stockholders approve an amendment to the
1992 Plan to increase the maximum aggregate number of shares of Common Stock
subject to issuance under the 1992 Plan from 900,000 to 1,200,000 shares. In
addition, based upon the recommendation of an independent compensation
consultant and for the purpose of attracting and retaining persons of
outstanding ability to serve as directors of the Company, the Board of
Directors further recommends that the Stockholders approve an amendment to the
1992 Plan to increase the options to purchase shares of Common Stock granted
annually to each incumbent non-officer director who continues to serve on the
Board of Directors from options to purchase 1,500 shares to options to
purchase 2,500 shares. Approval of this latter amendment by the Stockholders
of the Company will have the effect of each incumbent non-officer director
receiving an option to purchase 2,500 shares immediately following the
Meeting.
PROPOSED AMENDMENTS TO THE 1992 INCENTIVE PLAN
Pursuant to Section 17 of the 1992 Plan, the following amendments to
provisions of the 1992 Plan are to be considered and voted upon by the
Stockholders at the Meeting. All other terms and conditions of the 1992 Plan
shall remain unaffected by these amendments. Approval of the proposed
amendments requires the favorable vote of a majority of shares of Common Stock
voted in person or by proxy at the Meeting.
1. Section 8(c) of the 1992 Plan is amended in its entirety to read as
follows:
"(c) Immediately after each annual meeting following the Effective Date
(excluding the annual meeting held on the Effective Date), an Option Right
to purchase 2,500 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."
2. Section 3 of the 1992 Plan is amended in its entirety to read as follows:
"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 1,200,000 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 1,200,000
Performance Units will be paid in cash under this Plan."
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE AMENDMENTS TO THE
1992 PLAN.
11
<PAGE>
1992 INCENTIVE PLAN SUMMARY
The provisions of the 1992 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 1992 Plan, a copy of which is attached hereto as Exhibit A.
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 Exchange Act.
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 currently granted an option to purchase 1,500 shares
of Common Stock. If the proposal to amend the 1992 Plan is adopted, the option
granted to each incumbent non-officer director would be increased to 2,500
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 is equal to the fair market value of the Common Stock on the
date of grant. 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
Subject to certain adjustments as provided in the 1992 Plan, the number of
shares that may be issued or transferred under the current 1992 Plan shall not
exceed in the aggregate 900,000 shares of Common Stock. Under the proposed
amendment to the 1992 Plan, the number of shares available for issuance under
the Plan would be increased from 900,000 to 1,200,000 shares.
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
12
<PAGE>
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 (as defined below).
ELIGIBILITY
Executive officers (currently 12), employees (approximately 7,930), 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 1995 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 1995 SEPT. 22, 1995
------------------------------ ------------ ---------- --------------------
<S> <C> <C> <C>
Sidney Harman.......................... (1) 50,000 350,000 (2)
Chairman and Chief Executive Officer
Bernard A. Girod....................... (1) 25,000 25,000
President, Chief Operating Officer,
Chief Financial Officer and Secretary
Gregory P. Stapleton................... (1) 17,500 17,500
President--Automotive OEM Group
Thomas Jacoby.......................... (1) 17,500 17,500
President--Consumer Group
Philip Hart............................ (1) -- (3) -- (3)
President--Professional Group
Executive Officer Group................ (1) 138,500 438,500 (2)
Non-Officer Director Group............. (1) 9,000 28,750
Non-Executive Officer Employee Group (1) 25,500 25,500
and Consultants.......................
</TABLE>
--------
(1) 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 15, 1995, the last reported closing price of
the Common Stock on the New York Stock Exchange was $46.50.
(2) Includes a long-term performance incentive option to purchase 300,000
shares of Common Stock which was granted to Dr. Harman on November 9, 1993
and is subject to cancellation (and any shares issued as a result of the
exercise of the option are subject to repurchase) if the Company does not
meet certain performance criteria by the end of the fiscal year ending
June 30, 2001.
(3) Mr. Hart has not been granted stock options under the 1992 Plan, but has,
instead, been granted stock options under the Company's 1987 Executive
Incentive Plan, as listed in the Stock Option Grants Table appearing on
Page 19 of this Proxy Statement.
The number of stock options to be granted in the future under the 1992 Plan
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
13
<PAGE>
Consolidated Equity in any fiscal year. Under the proposed amendment to the
1992 Plan being voted upon by the stockholders, the number of option shares
granted to each non-officer Director in each year he or she continues to serve
as a non-officer Director would be increased to options to purchase 2,500
shares of Common Stock.
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 (i) in cash at the time of exercise, (ii) 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,
(iii) any other legal consideration the Committee may deem appropriate, or
(iv) 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
Compensation Committee may not, however, reduce the option price of any
outstanding option right without the approval of the Stockholders. 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.
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.
14
<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 of the
shares, 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 will also 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
August 1, 1995 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.
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
15
<PAGE>
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, such income meets the test of reasonableness, is an ordinary and
necessary business expense, 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.
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
16
<PAGE>
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, (iii) reduce the option price of any
outstanding option right or reduce the base price of any outstanding
appreciation right, or (iv) otherwise cause Rule 16b-3 promulgated by the
Securities and Exchange Commission pursuant to the 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.
17
<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, 1995:
<TABLE>
<CAPTION>
Annual Compensation Long Term Compensation
------------------------------------------ ------------------------------------
Options
Fiscal Granted All Other
Name and Principal Position Year Salary Bonus Other(1) (shares) Compensation (2)
----------------------------------- ------ ------------ ------------- ------------ ---------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Sidney Harman 1995 $650,000 $700,000(3) $ -- 50,000 $12,733
Chairman of the Board and 1994 500,000 600,000 90,385(4) 325,000 2,747
Chief Executive Officer 1993 425,000 300,000 80,240(5) -- 13,918
Bernard A. Girod 1995 350,000 350,000 -- 25,000 13,514
President, Chief 1994 275,000 250,000 -- 15,000 3,466
Operating Officer, 1993 220,000 127,000 -- -- 9,791
Chief Financial Officer
and Secretary
Gregory P. Stapleton 1995 280,000 230,000 -- 17,500 16,800
President--Automotive 1994 245,000 200,000 -- 10,000 3,229
OEM Group 1993 207,000 125,000 -- -- 16,130
Thomas Jacoby 1995 250,000 165,000 -- 17,500 7,515
President--Consumer Group 1994 200,000 125,000 -- 5,000 3,358
1993 160,000 90,000 -- 10,000 8,870
Philip Hart(6) 1995 239,505 175,395 -- 17,500 23,951
President--Professional Group 1994 169,694 120,000 -- 6,000 16,970
1993 129,352 64,676 -- -- 12,935
</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.
(2) The amounts in All Other Long Term Compensation for Dr. Harman, Messrs.
Girod, Stapleton and Jacoby represent contributions for each such person
into the Company's Retirement Savings Plan. For Mr. Hart, the amounts
shown represent Company contributions to his Personal Pension Scheme, a
defined contribution plan established for Mr. Hart under the laws of the
United Kingdom.
(3) Paid pursuant to the Company's Chief Executive Officer Incentive Plan.
(4) 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.
(5) 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.
(6) Mr. Hart's salary compensation has been converted from British Pounds to
U.S. Dollars using average $/(Pounds) exchange rates for the periods
covering the 1995, 1994 and 1993 fiscal years of 1.5967, 1.4973 and
1.6169, respectively. Mr. Hart's bonus compensation for 1995 and 1993 has
been converted from British Pounds to U.S. Dollars using the $/(Pounds)
exchange rates of 1.5945 and 1.4915, the exchange rates as of June 30,
1995 and June 30, 1993, respectively. Mr. Hart's 1994 bonus compensation
was paid in U.S. Dollars.
18
<PAGE>
STOCK OPTION GRANTS IN LAST FISCAL YEAR
The following table contains information concerning the grant of stock
options under the Company's 1992 Incentive Plan and 1987 Executive Incentive
Plan to the named executive officers during the year ended June 30, 1995.
<TABLE>
<CAPTION>
Individual Grants
--------------------------------------------------------------------
Percent of
Total
Options
Granted to
Number of Employees Exercise
Options in Fiscal Price Expiration Grant Date
Name Granted Year ($/Share) Date Present Value(4)
------- ------------ ----------- ---------- ----------------- ----------------------
<S> <C> <C> <C> <C> <C>
Sidney Harman........... 50,000(1) 10.98% $36.125 May 31, 2005 $492,088
Bernard A. Girod........ 25,000(2) 5.49% $36.125 May 31, 2005 $364,643
Gregory P. Stapleton.... 17,500(2) 3.84% $36.125 May 31, 2005 $255,250
Thomas Jacoby........... 17,500(2) 3.84% $36.125 May 31, 2005 $255,250
Philip Hart............. 17,500(3) 3.84% $36.125 May 31, 2005 $255,250
</TABLE>
--------
(1) Represents stock options granted on May 31, 1995 under the 1992 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 are exercisable
immediately.
(2) Represents stock options granted on May 31, 1995 under the 1992 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) Represents stock options granted on May 31, 1995 under the Company's 1987
Executive Incentive Plan. The exercise price of the options is equal to
the fair market value of the Common Stock on the date of the grant. The
options vest at a rate of 20% annually, commencing one year from the date
of grant.
(4) 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 0.5500%, an estimated risk-free
interest rate of 5.940%, an estimated volatility of 34.42%, and an option
term of 2.64 years, which is the estimated period from time of vesting
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.
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 1995 and the value of
unexercised options as of June 30, 1995.
<TABLE>
<CAPTION>
Number of Unexercised Value of Unexercised In-The-
Number of Options at Fiscal Money Options at Fiscal
Shares Year-End Year-End
Acquired Value -------------------------------- -----------------------------------
On Exercise Realized Exercisable Unexercisable Exercisable Unexercisable
---------------- ------------ ---------------- ------------------- ---------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
Sidney Harman -- -- 428,500 48,000 $5,907,196 $1,312,000
Bernard A. Girod 10,000 $293,750 14,500 48,000 345,125 701,750
Gregory P. Stapleton 24,000 640,925 10,000 30,500 235,000 393,438
Thomas Jacoby -- -- 8,500 27,500 221,055 311,563
Philip Hart -- -- 14,100 25,900 356,475 286,338
</TABLE>
19
<PAGE>
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, and other officers of the Company
and certain subsidiaries have been designated as eligible under the
Supplemental Plan. The Supplemental Plan 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.
20
<PAGE>
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
(as defined in the Supplemental Plan). 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 also indemnifies participants for legal fees and expenses incurred to
enforce the Supplemental Plan following a Change in Control.
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.
21
<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>
Mr. Jacoby is the only executive officer who has fifteen years of service
and has fully vested termination benefits under the Supplemental Plan. Messrs.
Girod and Stapleton have eight years and seven 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.
EMPLOYMENT AGREEMENTS
Mr. Philip Hart, who is employed by the Company in the United Kingdom,
serves the Company pursuant to an employment agreement dated as of January 5,
1988. The agreement provides benefits to Mr. Hart in lieu of his participation
in the Supplemental Plan described above in which U.S. officers of the Company
participate. The agreement provides that the Company will pay annually an
amount equal to 10% of Mr. Hart's annual salary into a Personal Pension Scheme
established for Mr. Hart, which functions similar to a defined contribution
plan or 401k Plan. The agreement also provides for death benefits in the
amount of three times Mr. Hart's annual salary at the date of his death. In
the event of termination of Mr. Hart's employment by the Company other than
for cause, Mr. Hart will receive separation benefits under the terms of the
agreement in the amount of one year's salary plus an additional six months
salary if Mr. Hart has not secured comparable full-time permanent employment
at the end of the 12 months following his end of service with the Company.
INDEPENDENT AUDITORS
KPMG Peat Marwick served as the independent auditors of the Company for the
fiscal year ended June 30, 1995 and has been selected by the Board of
Directors to serve as the Company's independent auditors for the year ending
June 30, 1996. 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 1996 ANNUAL MEETING
Stockholders who wish to submit a proposal for consideration at the 1996
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, 1996 for inclusion in next
year's proxy materials.
22
<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
Officerand Secretary
Washington, D.C.
September 22, 1995
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 1995,
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.
23
<PAGE>
EXHIBIT A
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.
A-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.
Section 3 is proposed to be amended as follows
"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 1,200,000 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 1,200,000
Performance Units will be paid in cash under this 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.
A-2
<PAGE>
(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
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
A-3
<PAGE>
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.
(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
A-4
<PAGE>
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.
(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.
Section 8(c) is proposed to be amended as follows
"(c) Immediately after each annual meeting following the Effective Date
(excluding the annual meeting held on the Effective Date), an Option
Right to purchase 2,500 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."
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(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 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
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<PAGE>
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 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.
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<PAGE>
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) 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. The Committee shall not, without the further approval of the
stockholders of the Corporation, authorize the amendment of any outstanding
Option Right to reduce the option price or authorize the amendment of any
outstanding Appreciation Right to reduce the base price. Furthermore, no
Option Right or Appreciation Right shall be cancelled by agreement between
the Corporation and Eligible Participant and replaced with an award having
a lower option price or base price without the further approval of the
stockholders of the Corporation.
(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.
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<PAGE>
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 November 2, 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.
A-9
<PAGE>
(PROXY CARD)
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
ANNUAL MEETING OF STOCKHOLDERS--NOVEMBER 14, 1995
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Dr. Sidney Harman and F. Gordon Bitter 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 14, 1995 and at any adjournment thereof, as designated
for the items set forth on the reverse side hereof and in the Notice of Annual
Meeting of Stockholders and the Proxy Statement dated September 22, 1995.
IF PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS SPECIFIED BELOW OR, IF NOT
SPECIFIED, WILL BE VOTED FOR THE TWO NOMINEES IN ITEM 1 AND FOR THE PROPOSAL
IN ITEM 2. 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.
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE)
----------------------------------------------------------------------------
FOLD AND DETACH HERE
The Board of Directors recommends a vote FOR the election of the Directors
set forth below and FOR the proposal in Item 2.
1. Election of Bernard A. Girod and Ann McLaughlin as Directors.
FOR both WITHHOLD vote (Instruction: To withhold authority to vote
nominees for both nominees for any individual nominee, strike a line
through the nominee's name.)
[ ] [ ]
2. Proposal to amend the 1992 Incentive Plan.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
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: ________________________, 1995
____________________________________
Signature
____________________________________
Signature (if held jointly)
"PLEASE MARK INSIDE BLUE BOXES SO USING BLUE OR BLACK INK, PLEASE MARK
THAT DATA PROCESSING EQUIPMENT SIGN, AND PROMPTLY RETURN THIS PROXY
WILL RECORD YOUR VOTES" CARD IN THE ENVELOPE PROVIDED
FOLD AND DETACH HERE
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
YOUR VOTE IS IMPORTANT TO THE COMPANY
PLEASE SIGN AND RETURN YOUR PROXY BY
TEARING OFF THE TOP PORTION OF THIS SHEET
AND RETURNING IT IN THE ENCLOSED POSTAGE-PAID ENVELOPE
