1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [ ]
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 Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to sec.240.14a-11(c) or sec.240.14a-12
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
--------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 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 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
------------------------------------------------------------------------
(5) Total fee paid:
------------------------------------------------------------------------
[ ] 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:
------------------------------------------------------------------------
2
[HARMAN INTERNATIONAL LOGO]
HARMAN INTERNATIONAL
INDUSTRIES, INCORPORATED
1101 Pennsylvania Avenue, N.W.,
Suite 1010
Washington, D.C. 20004
September 14, 2001
Dear Harman International Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders to
be held on Monday, November 5, 2001 at 11:00 a.m. at Tavern on the Green, at
Central Park at West 67th Street, New York, New York. Information about the
meeting, the nominees for Director and other action to be taken is presented in
the following Notice of Annual Meeting of Stockholders and Proxy Statement.
In addition to presenting formal items of business at the meeting,
management will report on our Company's operations during fiscal year 2001 and
comment on our outlook for the current fiscal year. The report 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 you hold. To ensure representation of your shares,
please sign, date and return the enclosed proxy card promptly.
We look forward to seeing you on November 5th.
Sincerely,
/s/ Sidney Harman
Sidney Harman
Executive Chairman
3
[HARMAN INTERNATIONAL LOGO]
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
NOVEMBER 5, 2001
------------------------
The 2001 Annual Meeting of Stockholders of Harman International Industries,
Incorporated ("Company") will be held at Tavern on the Green, at Central Park at
West 67th Street, New York, New York on November 5, 2001 at 11:00 a.m. for the
following purposes:
(1) To elect two directors, each to serve for a three-year term expiring
at the 2004 Annual Meeting of Stockholders; and
(2) To transact other business that properly comes before the meeting.
Stockholders of record as of the close of business on September 10, 2001
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 describe your needs on the enclosed
proxy card. Also enclosed is the Company's Annual Report for fiscal year 2001.
By Order of the Board of Directors
/s/ Frank Meredith
Frank Meredith
Secretary
Washington, D.C.
September 14, 2001
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND IN PERSON, PLEASE VOTE BY SIGNING, DATING AND
RETURNING THE ENCLOSED PROXY AS SOON AS POSSIBLE USING THE ENCLOSED POSTAGE
PREPAID ENVELOPE.
4
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
1101 PENNSYLVANIA AVENUE, N.W.
SUITE 1010
WASHINGTON, D.C. 20004
------------------------
PROXY STATEMENT
------------------------
This Proxy Statement provides you with information in connection with the
solicitation of proxies by the Board of Directors ("Board") of Harman
International Industries, Incorporated ("Company") for use at the 2001 Annual
Meeting of Stockholders or any adjournment ("Meeting"). This Proxy Statement
also provides you with information you will need in order to consider and to act
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 14, 2001.
Holders of record of the Company's common stock ("Common Stock"), as of the
close of business on September 10, 2001 are entitled to vote at the Meeting.
Each stockholder of record as of that date is entitled to one vote for each
share of Common Stock held. On September 10, 2001, there were 37,773,747 shares
of Common Stock outstanding.
You cannot vote your shares of Common Stock at the Meeting unless you are
present or represented by proxy. You may revoke your proxy at any time prior to
the vote at the Meeting by (a) delivering a written notice revoking your proxy
to the Company at the above address, (b) delivering a new proxy to the Company
at the above address, or (c) voting in person at the Meeting.
All properly executed proxies, unless revoked in accordance with the
preceding instructions, will be voted at the Meeting in accordance with your
directions on the proxy. With respect to the election of two Directors to serve
until the 2004 Annual Meeting, stockholders voting by proxy may vote in favor of
both nominees, may withhold their vote for both nominees or may withhold their
vote as to a specific nominee.
If no specific instructions for the matters to be acted upon at the Meeting
are given in a properly executed proxy, the shares of Common Stock represented
by the proxy will be voted FOR the election of the two nominees for Director
listed under the caption "Election of Directors."
In order to validly conduct business at the Meeting, a majority of the
outstanding shares of Common Stock must be represented in person or by proxy at
the Meeting. Abstentions are counted as being represented at the Meeting.
5
ELECTION OF DIRECTORS
(ITEM 1 ON PROXY CARD)
Two Directors will be elected at the Meeting. This section contains
information relating to the two nominees for Director and the Directors whose
terms of office continue beyond the Meeting. The nominees for Director, if
elected, will serve for a three-year term expiring at the 2004 Annual Meeting.
The Board expects that the nominees will be available for election at the time
of the Meeting. If, for any reason, a nominee should become unavailable for
election, the shares of Common Stock voted FOR that nominee by proxy will be
voted for a substitute nominee designated by the Board, unless the Board reduces
the number of Directors.
The candidates for Director will be elected by the affirmative vote of a
plurality of the shares of Common Stock actually voted in person or by proxy at
the Meeting. Any action other than a vote FOR a nominee Director will be counted
as a vote against the nominee.
THE BOARD RECOMMENDS A VOTE FOR ELECTION OF BOTH NOMINEES.
NOMINEES TO BE ELECTED AT THE MEETING
BERNARD A. GIROD, age 59, has been Vice Chairman of the Board since July
2000, Chief Executive Officer of the Company since 1998 and a Director of the
Company since 1993. Mr. Girod also served as President of the Company from 1994
to 1998, Chief Operating Officer of the Company from 1993 to 1998, Secretary of
the Company from 1992 to 1998 and Chief Financial Officer of the Company from
1986 to 1995 and from 1996 to 1997.
ANN MCLAUGHLIN KOROLOGOS, age 59, has been a Director of the Company since
1995. She served as Secretary of Labor of the United States from 1987 until
1989. Ms. Korologos is a Director of AMR Corporation (and its subsidiary,
American Airlines), Fannie Mae, Host Marriott Corporation, Kellogg Company,
Microsoft Corporation, and Vulcan Materials Company. She is a Senior Advisor to
Benedetto, Gartland & Company, Inc., Chairman Emeritus of the Aspen Institute,
and a member of the Board of Overseers of the Wharton School of the University
of Pennsylvania.
DIRECTORS WHOSE TERMS EXTEND BEYOND THE MEETING
SIDNEY HARMAN, age 83, has been Executive Chairman of the Board since July
2000 and has served as Chairman of the Board and as a Director of the Company
since the Company's founding in 1980. Dr. Harman also served as Chief Executive
Officer of the Company from 1980 to 1998. Dr. Harman served as Deputy Secretary
of Commerce of the United States from 1977 through 1978. His current term as a
Director expires at the 2002 Annual Meeting.
SHIRLEY MOUNT HUFSTEDLER, age 76, has been a Director of the Company since
September 1986. Ms. Hufstedler has been in private law practice for the past 19
years. Since 1995, she has been with the law firm of Morrison & Foerster, LLP.
From 1981 to 1995, Ms. Hufstedler 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 Director Emeritus of US West, Inc. and Hewlett-Packard
Company. Her current term as a Director expires at the 2002 Annual Meeting.
EDWARD H. MEYER, age 74, has been a Director of the Company since 1990. Mr.
Meyer has been the Chairman of the Board, Chief Executive Officer and President
of Grey Global Group,
2
6
Inc., New York, New York since 1970. Mr. Meyer also serves as a Director for
Ethan Allen Interiors, Inc. His current term as Director expires at the 2003
Annual Meeting.
GREGORY P. STAPLETON, age 55, has been President of the Company since July
2000, Chief Operating Officer of the Company since 1998 and a Director of the
Company since 1997. Mr. Stapleton also served as President of the Company's OEM
Group from 1987 to 1998. Prior to his association with the Company, he was
Senior Vice President of General Electric Venture Capital Corporation from 1986
to 1987 and was General Manager, Industrial Products Section, in the Factory
Automation Products Division of General Electric Corporation from 1982 to 1985.
His current term as Director expires at the 2003 Annual Meeting.
STANLEY A. WEISS, age 74, has been a Director of the Company since 1997.
From 1991 to 1997, Mr. Weiss served as Chairman of American Premier, Inc., a
private mining, refractories, chemicals and mineral processing company. Prior to
that he was Chairman and President of American Minerals. Mr. Weiss is also
founder and Chairman of Business Executives for National Security (BENS). His
current term as Director expires at the 2003 Annual Meeting.
3
7
THE BOARD, ITS COMMITTEES AND ITS COMPENSATION
The Board held four meetings during fiscal year 2001. The Board has three
standing committees: the Executive Committee, the Audit Committee and the
Compensation and Option Committee ("Compensation Committee"). Since the Company
does not have a standing committee on nominations, the full Board nominates
candidates for Director. Each Director attended at least 75% of the meetings of
the Board and the committees on which he or she served.
The Executive Committee, consisting of Dr. Harman and Messrs. Girod and
Stapleton, held five meetings during fiscal year 2001. The Executive Committee
is empowered to exercise all power and authority of the Board in the management
of the business affairs of the Company when the full Board is not in session,
except for matters not permitted to be delegated to it under the Company's
Restated and Amended Certificate of Incorporation or Bylaws.
The Audit Committee, consisting of Ms. Hufstedler, Mr. Weiss, Mr. Meyer and
Ms. Korologos, held three meetings during fiscal year 2001. The Audit Committee,
together with Company management, the internal auditors and the independent
auditors, reviews the financial reports and other financial information provided
by the Company to governmental bodies or to the public; it monitors the
Company's financial reporting process and internal control system; and it
recommends independent auditors for the Board's approval. A report of the Audit
Committee appears later in this Proxy Statement. In addition, a copy of the
current Audit Committee Charter, which was adopted by the Board in March 2000
and reaffirmed by the Board in March 2001, is included as Appendix A to this
Proxy Statement.
The Compensation Committee, consisting of Ms. Hufstedler and Mr. Weiss,
held two meetings during fiscal year 2001. The Compensation Committee
establishes compensation each year for all of the executive officers, and it
reviews these matters with the Executive Chairman and Chief Executive Officer.
The Board has delegated to the Compensation Committee authority to decide
certain matters relating to the Company's Key Executive Officers Incentive Plan,
the Company's 1992 Incentive Plan and the Company's retirement plans.
The Company does not pay fees to Directors who are officers of the Company
or its subsidiaries. Non-officer Directors receive an annual fee of $35,000 plus
$1,500 for each committee meeting attended on a day other than the day of a
Board meeting. The Company reimburses all Directors for expenses incurred for
attending meetings.
The 1992 Incentive Plan provides that each non-officer Director who served
during the prior fiscal year and continues to serve on the Board will receive at
the time of each Annual Meeting an option to purchase 3,000 shares of Common
Stock. Each non-officer Director is eligible for an additional option to
purchase 750 shares of Common Stock if the Company achieves a return on
consolidated equity for the prior fiscal year of at least 9% but less than 13%,
or an additional option to purchase 1,500 shares of Common Stock if the Company
achieves a return on consolidated equity of 13% or more. The exercise price of
the options is the fair market value of the Common Stock on the date of the
grant. Each option vests at a rate of 20% per year and expires ten years from
the date of grant. At the time of the 2000 Annual Meeting, each non-officer
Director (Ms. Hufstedler, Ms. Korologos, Mr. Meyer and Mr. Weiss) received an
option to purchase 3,000 shares of Common Stock and an additional option to
purchase 1,500 shares, because the Company achieved a return on consolidated
equity of 15.2% for fiscal year 2000. At the time of the Meeting, each
non-officer Director will receive an option to purchase 3,000 shares of Common
Stock.
4
8
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee implements the Company's executive compensation
program pursuant to authority delegated by the Board. As part of its
responsibilities, the Compensation Committee establishes the compensation of the
Company's executive officers and administers the Company's stock incentive
awards to executive officers. The Compensation Committee is comprised of Ms.
Hufstedler and Mr. Weiss, neither of whom is an officer or employee of the
Company.
EXECUTIVE COMPENSATION PROGRAM
The Company must attract and retain people who have demonstrated superior
skills and experience and incentivize them by rewarding outstanding individual
performance. The key elements of the Company's executive compensation program
are (a) base salaries determined in light of competitive pay analysis and the
executive's performance during the prior fiscal year; (b) cash bonus awards tied
to either targeted returns on stockholder equity or to Company and individual
performance during the prior fiscal year; and (c) grants of stock options to
align the interests of management with those of the stockholders.
SALARY. Base salaries are established in light of both competitive pay
data and performance review. The Company's competitive pay structure is built by
reference to market data; performance is reviewed at the end of each fiscal
year.
In July 2000, the Compensation Committee reviewed the Company's results of
operations for fiscal year 2000 and competitive pay practices data. Some of the
data were obtained from surveys furnished by outside compensation consulting
firms of compensation practices among companies in the electrical and
electronics industries and companies similar in size to the Company. The survey
group differs from the comparison group used in the Company's stock performance
graph (see "Stock Price Performance Graph") because the Compensation Committee
believes that the survey group offers more reliable information on compensation
practices and better represents competitors for executive officer candidates.
Consistent with the Company's past practice, the Compensation Committee sought
to establish base salaries for fiscal year 2001 at the 50th-75th percentile of
base salaries for the survey group of companies.
BONUS. Cash bonus awards are made pursuant to the Key Executive Officers
Incentive Plan when specific returns on stockholder equity, as determined by the
Compensation Committee for the given fiscal year, are achieved. Amounts awarded
under the Key Executive Officers Incentive Plan are intended to constitute
qualified "performance-based compensation" for tax purposes. The targeted return
on stockholder equity for fiscal year 2001 was 10%.
If no bonus awards are made under the Key Executive Officers Incentive
Plan, discretionary bonuses may be awarded based on the financial and
operational performance of the Company and the executive officer's achievements
as measured against specific performance objectives. Performance objectives vary
from officer to officer but normally include business unit financial objectives
(such as sales growth targets), other non-financial business objectives (such as
timely introduction of new products) and personal development objectives (such
as effective interaction with other business units). The Executive Chairman may
recommend that the Compensation Committee authorize discretionary bonuses based
on performance in these areas. In August 2001, the Compensation Committee
authorized discretionary bonus awards for Dr. Harman and Messrs. Girod,
Stapleton, Meredith and Palin.
5
9
EQUITY BASED COMPENSATION. The Company's stock option program is designed
to increase share value by aligning executive officers' long-term interests with
those of the stockholders. Executive officers and other key employees are
eligible to participate in the program. The Executive Chairman makes
recommendations to the Compensation Committee based upon an assessment of each
officer's performance and a need for further long-term performance incentives.
The Compensation Committee believes that equity incentives for key executive
officers are in the best interests of the Company.
FISCAL YEAR 2001 COMPENSATION FOR THE EXECUTIVE CHAIRMAN AND THE CHIEF EXECUTIVE
OFFICER
SALARY. During fiscal year 2001, Dr. Harman was paid a base salary of
$891,667, and Mr. Girod was paid a base salary of $833,333. These salaries were
based on their leadership in creating the proper corporate environment and
structure for accelerated growth in sales, earnings and share value, and overall
results during fiscal year 2000. These salaries were also based on competitive
pay practices data reviewed by the Compensation Committee during July 2000.
BONUS. In August 2001, the Compensation Committee authorized discretionary
bonus awards of $500,000 for each of Dr. Harman and Mr. Girod, for their success
in achieving performance objectives during fiscal year 2001.
EQUITY BASED COMPENSATION. In August 2000, the Compensation Committee
granted options to each of Dr. Harman and Mr. Girod. Under the grants and after
adjustment for the two-for-one stock split that was implemented September 19,
2000, effective as of August 28, 2000 ("Stock Split"), each of Dr. Harman and
Mr. Girod received options to purchase 100,000 shares of Common Stock at an
exercise price of $31.375 per share, the market value of the Common Stock on
that date. Although not awarded in fiscal year 2001, in August 2001 the
Compensation Committee granted options to each of Dr. Harman and Mr. Girod to
purchase 75,000 shares of Common Stock at an exercise price of $36.89 per share,
the market value of the Common Stock on that date.
OPTION GRANTS TO OTHER KEY EMPLOYEES
In August 2001, the Compensation Committee granted options to purchase
75,000 shares of Common Stock to each of Messrs. Stapleton and Meredith at an
exercise price of $36.89 per share, the market value on the date of the grant of
the options. In March 2001, the Compensation Committee also approved the grant
of options to purchase 10,000 shares of Common Stock to Mr. Palin at an exercise
price of $24.90 per share, the market value of the Common Stock on the date of
the grant.
STATUS OF REPORT
The foregoing report on 2001 Executive Compensation provided by the
Compensation Committee shall not be deemed to be "soliciting material," or to be
"filed" with the Securities and Exchange Commission ("Commission") or subject to
Regulation 14A promulgated by the Commission or Section 18 of the Securities
Exchange Act of 1934, as amended.
Shirley Mount Hufstedler
Stanley A. Weiss
6
10
COMPENSATION OF EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table discloses compensation received by the Company's
Executive Chairman, the Chief Executive Officer and the other three most highly
paid executive officers for the three fiscal years ended June 30, 1999, 2000 and
2001:
ANNUAL COMPENSATION LONG-TERM COMPENSATION
------------------------------------- -----------------------------
OPTIONS
FISCAL OTHER ANNUAL GRANTED ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION(1) (SHARES)(2) COMPENSATION(3)
--------------------------- ------ -------- -------- --------------- ----------- ---------------
Sidney Harman 2001 $891,667 $500,000 $62,356 100,000 $13,750
Executive Chairman of the 2000 850,000 750,000 -- 100,000 12,000
Board 1999 850,000 425,000 -- 0 12,000
Bernard A. Girod 2001 833,333 500,000 -- 100,000 13,750
Vice Chairman of the Board 2000 725,000 750,000 -- 100,000 12,000
and Chief Executive Officer 1999 583,333 425,000 -- 240,000 12,000
Gregory P. Stapleton 2001 729,167 500,000 -- 100,000 13,750
President and 2000 604,166 750,000 -- 100,000 12,000
Chief Operating Officer 1999 498,077 425,000 -- 200,000 12,800
Frank Meredith 2001 533,333 300,000 -- 100,000 13,750
Executive Vice President and 2000 433,333 450,000 -- 100,000 12,000
Chief Financial Officer 1999 341,667 250,000 -- 160,000 12,000
William Palin(4) 2001 263,619 63,689 -- 10,000 25,394
Vice President -- Controller 2000 260,722 91,038 -- 15,000 25,378
1999 246,960 63,092 -- 10,000 24,037
------------
(1) For fiscal year 2001, includes $32,188 relating to Company-owned vehicles
used by Dr. Harman. Perquisites and other personal benefits received by the
Company's executive officers identified above in fiscal years 2001 (other
than for Dr. Harman), 2000, and 1999 are not included in the Summary
Compensation Table because the aggregate amount of such compensation, if
any, did not meet disclosure thresholds established under the Commission's
current regulations.
(2) Share amounts reflect the Stock Split.
(3) For Dr. Harman and Messrs. Girod, Stapleton and Meredith, the amounts shown
for fiscal year 2001 as All Other Compensation include Company contributions
into the Company's Retirement Savings Plan. For Mr. Palin, the amounts shown
for fiscal year 2001 represent Company contributions to his Personal Pension
Scheme, a defined contribution plan established under the laws of the United
Kingdom.
(4) Mr. Palin's salary and other compensation, and contributions to his Personal
Pension Scheme were converted from British Pounds Sterling to U.S. Dollars
using average exchange rates for the periods covered. His bonus compensation
was converted at the exchange rate on the date the bonus was awarded.
7
11
OPTION GRANTS IN LAST FISCAL YEAR
The following table shows grants of stock options under the 1992 Incentive
Plan to the named executive officers during fiscal year 2001.
PERCENT OF
TOTAL OPTIONS
NUMBER OF GRANTED TO PER SHARE GRANT DATE
OPTIONS EMPLOYEES IN EXERCISE PRESENT
NAME GRANTED(1) FISCAL YEAR PRICE(1) EXPIRATION DATE VALUE(2)
---- ---------- ------------- -------------- --------------- ----------
Sidney Harman (3)......... 100,000 11.7% $31.375 8/7/2010 $1,630,824
Bernard A. Girod(3)....... 100,000 11.7% 31.375 8/7/2010 1,630,824
Gregory P. Stapleton(3)... 100,000 11.7% 31.375 8/7/2010 1,630,824
Frank Meredith(3)......... 100,000 11.7% 31.375 8/7/2010 1,630,824
William Palin(4).......... 10,000 1.2% 24.900 3/29/2011 129,426
---------------
(1) The number of options granted and exercise price reflect the Stock Split.
(2) Based on the Black-Scholes option price model, which requires assumptions to
be made about the future changes in the price of the Company's Common Stock.
The Company used the following assumptions to estimate the Grant Date
Present Value: an estimated dividend yield of $0.10 per share; an estimated
risk-free interest rate of 3.875%; an estimated volatility of 56%; and an
option term of 2.25 years representing 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 amount estimated based
upon the Black-Scholes option pricing model.
(3) Represents stock options granted on August 7, 2000 under the 1992 Incentive
Plan, as disclosed in the Compensation and Option Committee Report included
in last year's proxy statement. The exercise price of the option is equal to
the market value of the Common Stock on the date of grant. Commencing one
year from the date of grant, the options vest annually at a rate of 20%.
(4) Represents stock options granted on March 29, 2001 under the 1992 Incentive
Plan. The exercise price of the option is equal to the market value of the
Common Stock on the date of grant. Commencing one year from the date of
grant, the options vest annually at a rate of 20%.
OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR-END OPTION VALUES
For each of the named executive officers, the following table shows stock
options exercised during fiscal year 2001 and the value of unexercised options
as of June 30, 2001.
NUMBER NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OF SHARES OPTIONS AT FISCAL IN-THE-MONEY OPTIONS AT
ACQUIRED YEAR-END FISCAL YEAR-END
ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- --------- -------- ----------- ------------- ----------- -------------
Sidney Harman........ 0 $ 0 1,164,500 180,000 $27,243,167 $1,958,700
Bernard A. Girod..... 6,930 146,726 378,770 224,000 6,795,337 2,710,660
Gregory P.
Stapleton.......... 0 0 345,400 224,000 6,197,036 2,710,660
Frank Meredith....... 4,000 47,000 200,000 191,000 3,575,375 2,146,690
William Palin........ 0 0 25,700 33,600 448,713 499,899
8
12
DEFERRED COMPENSATION PLAN
The Company's Deferred Compensation Plan ("Deferred Compensation Plan")
provides supplemental retirement benefits for executive officers designated by
the Deferred Compensation Plan's administrative committee, the members of which
are appointed by the Board. Prior to the beginning of each fiscal year, each
participant may elect to defer up to 100% of annual base salary and bonus on a
pre-tax basis to a deferral account. These amounts are always fully vested,
subject to a 10% penalty on any unscheduled withdrawals. The Company may decide
to make contributions on a pre-tax basis to a participant's account, subject to
a vesting schedule. In the event of a change in control, all of a participant's
accounts vest immediately and the Company indemnifies the participant for any
expense incurred in enforcing the participant's rights under the Deferred
Compensation Plan.
Participants specify that portions of their accounts are deemed invested in
designated benchmark funds. The Company credits earnings to the accounts based
on the rate of return of the designated funds. Upon retirement or termination of
employment other than due to death, participants may receive their account
balances in the form of a lump sum payment or in annual installments. In the
event of death prior to the commencement of benefits or during payment of
installments, the balances in a participant's vested accounts as of the date of
death are payable to the participant's beneficiaries.
SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN
The Company's Supplemental Executive Retirement Plan ("Supplemental Plan")
provides supplemental retirement, termination and death benefits to key
executive officers designated by the Board. Dr. Harman and Messrs. Girod,
Stapleton and Meredith have been designated as Supplemental Plan participants;
Mr. Palin has not been designated as a participant. Dr. Harman has 21 years, Mr.
Girod 14 years, Mr. Stapleton 13 years and Mr. Meredith 16 years of service
credited under the Supplemental Plan. All Supplemental Plan benefits are subject
to deductions for Social Security and federal, state and local taxes.
RETIREMENT BENEFIT. Retirement benefits are based on the average of the
participant's highest cash compensation (base salary and bonus) during any five
consecutive years ("Average Cash Compensation"). A participant retiring at age
65 or older receives an annual retirement benefit equal to 3 1/3% of Average
Cash Compensation per year of service up to a maximum of 50%. If a participant's
employment is terminated within three years after a change in control, the
participant vests with maximum retirement benefits regardless of age or years of
service and the Company indemnifies the participant for any expense incurred in
enforcing the participant's rights in the retirement benefit under the
Supplemental Plan. Unless another form of payment is approved by the
Supplemental Plan committee appointed by the Board, benefits are payable monthly
in the form of a life annuity. If the participant dies prior to receiving 10
years of benefits, they are paid to the participant's beneficiary for the
remainder of that period.
9
13
The following table sets forth the annual retirement benefits that would be
received under the Supplemental Plan at the specified compensation levels after
the specified years of service:
YEARS OF SERVICE
------------------------------------------------------
REMUNERATION 3 6 9 12 15
------------ -------- -------- -------- -------- ----------
800,000 80,000 160,000 240,000 320,000 400,000
900,000 90,000 180,000 270,000 360,000 450,000
1,000,000 100,000 200,000 300,000 400,000 500,000
1,100,000 110,000 220,000 330,000 440,000 550,000
1,200,000 120,000 240,000 360,000 480,000 600,000
1,300,000 130,000 260,000 390,000 520,000 650,000
1,400,000 140,000 280,000 420,000 560,000 700,000
1,500,000 150,000 300,000 450,000 600,000 750,000
1,600,000 160,000 320,000 480,000 640,000 800,000
1,700,000 170,000 340,000 510,000 680,000 850,000
1,800,000 180,000 360,000 540,000 720,000 900,000
1,900,000 190,000 380,000 570,000 760,000 950,000
2,000,000 200,000 400,000 600,000 800,000 1,000,000
TERMINATION BENEFIT. A participant who retires or whose employment is
terminated prior to age 65 with at least 15 years of service, and who is not
otherwise entitled to benefits under the Supplemental Plan, is entitled to an
annual termination benefit equal to 30% of Average Cash Compensation, increased
by 4% for each year of service over 15 years, up to a maximum of 50%. The
benefit commences upon the later of termination of the participant's employment,
other than due to death, or the participant reaching age 55. Benefits are
payable in the same manner as retirement benefits.
In June 2000, the Compensation Committee modified the termination benefits
for Messrs. Girod and Stapleton. Effective September 24, 1999, Mr. Girod vested
in an annual termination benefit equal to 26% of Average Cash Compensation,
increased by 2% per year for the following two years of service and by 4% per
year of service thereafter, up to a maximum of 50%. Mr. Stapleton vested in an
annual termination benefit equal to 24% of Average Cash Compensation, increased
by 2% per year for the following three years of service and by 4% per year of
service thereafter, up to a maximum of 50%.
10
14
The following table sets forth the annual termination benefits that would
be received under the Supplemental Plan at the specified compensation levels
after the specified years of service:
YEARS OF SERVICE
---------------------------------------------------------------------------------------
REMUNERATION 13 14 15 16 17 18 19 20
------------ -------- -------- -------- -------- -------- -------- -------- ----------
800,000 208,000 224,000 240,000 272,000 304,000 336,000 368,000 400,000
900,000 234,000 252,000 270,000 306,000 342,000 378,000 414,000 450,000
1,000,000 260,000 280,000 300,000 340,000 380,000 420,000 460,000 500,000
1,100,000 286,000 308,000 330,000 374,000 418,000 462,000 506,000 550,000
1,200,000 312,000 336,000 360,000 408,000 456,000 504,000 552,000 600,000
1,300,000 338,000 364,000 390,000 442,000 494,000 546,000 598,000 650,000
1,400,000 364,000 392,000 420,000 476,000 532,000 588,000 644,000 700,000
1,500,000 390,000 420,000 450,000 510,000 570,000 630,000 690,000 750,000
1,600,000 416,000 448,000 480,000 544,000 608,000 672,000 736,000 800,000
1,700,000 442,000 476,000 510,000 578,000 646,000 714,000 782,000 850,000
1,800,000 468,000 504,000 540,000 612,000 684,000 756,000 828,000 900,000
1,900,000 494,000 532,000 570,000 646,000 722,000 798,000 874,000 950,000
2,000,000 520,000 560,000 600,000 680,000 760,000 840,000 920,000 1,000,000
DEATH BENEFIT. A pre-retirement death benefit equal to three times the
highest annual cash compensation achieved by the participant during employment
with the Company is paid to the beneficiaries of a participant who dies prior to
the commencement of benefits under the Supplemental Plan. The benefit is paid to
the participant's designated beneficiary in a single lump sum or, at the request
of the beneficiary and with the consent of the administrative committee, the
benefit may be paid in another form providing the actuarial equivalent of the
lump sum payment. Any death benefit payable to Dr. Harman's designated
beneficiary will be paid in five equal annual installments, providing the
actuarial equivalent of the lump sum payment otherwise due.
SEVERANCE AND EMPLOYMENT AGREEMENTS
The Company entered into Severance Agreements ("Severance Agreements"),
containing materially identical terms and conditions, with each of Dr. Harman
and Messrs. Girod, Stapleton and Meredith as of June 20, 2000. The Severance
Agreements provide that if, within the two years following a change in control,
the executive officer is terminated without cause or under certain circumstances
terminates his own employment, then he is entitled to receive a severance
payment equal to three times the sum of his highest annual base salary (during
any period prior to his termination) and his highest incentive pay (during the
three fiscal years preceding the change in control). The Severance Agreements
also provide that the Company will pay the executive officer an additional
amount for excise taxes, subject to a limitation based on the overall cost of
the Severance Agreements, including any additional payment for excise taxes.
Unless the executive officer or the Company notifies the other by September 30
that it does not wish the agreement to be extended, each Severance Agreement is
automatically extended on the following January 1 for an additional year.
Mr. Palin serves as Vice President-Controller of the Company pursuant to an
employment agreement dated April 4, 2001 which provides for an annual base
salary of GBP185,000 as well as rights under the Company's stock option plans
and UK health and life insurance plans. Under the employment agreement, either
the Company or Mr. Palin may terminate his employment upon 12-months prior
notice, given no earlier than June 30, 2003.
11
15
OPTION REPURCHASES
In 1998, the Board of Directors made special stock option awards to Messrs.
Girod, Stapleton and Meredith. Under the awards and after adjustment for the
Stock Split, Mr. Girod received options to purchase 240,000 shares of Common
Stock, Mr. Stapleton received options to purchase 200,000 shares of Common Stock
and Mr. Meredith received options to purchase 160,000 shares of Common Stock.
The exercise price of the options (as adjusted for the Stock Split) was $19.875
per share, the market price of the Common Stock at the time of the option award.
The options were to become exercisable only upon the achievement of certain
performance targets defined by reference to the 30-day average closing price of
the Common Stock. Adjusted for the Stock Split, one-third of the options would
become exercisable when each of three target prices were achieved: $27.50 per
share, $32.50 per share and $37.50 per share. The target prices represented a
premium of 38.4%, 63.5% and 88.7% over the market price of the Common Stock on
the grant date.
The stock option awards were made to the key executives at a time when
their services were critical to the Company and when many technology companies,
large and small, were attempting to recruit experienced senior executives. The
program has been successful in retaining the services of these key officers,
they have performed as expected, and the stock price has exceeded the prescribed
levels. As a result, the options became fully exercisable.
The Executive Chairman proposed that since each of the executives has
personal financial needs, those needs could be satisfied and the Company's
interests could be well served through the purchase of the options by the
Company from the executives at a price that did not exceed the difference
between the market price of the Common Stock and the exercise price of the
options. The Executive Chairman believed that the purchase of the options at
this price was an opportunity for the Company because it has an ongoing stock
repurchase program and it was unlikely that the Company could purchase 600,000
shares at the current market price. Further, absent the repurchase, the options
would remain exercisable for seven years and the Executive Chairman believes
that in that period the stock price may be substantially higher.
The Board had previously authorized a continuation of the Company's stock
repurchase program for an additional 1,000,000 shares in fiscal year 2002.
Repurchasing the options to purchase 600,000 shares would satisfy more than half
of that objective at a price substantially lower than it would likely cost to
purchase the stock in the open market.
Based on the foregoing analysis, the Executive Chairman recommended to the
Board that the Company purchase 600,000 options from the executives at a price
of $18.125 per option. The price represents the difference between $38, the
approximate trading price of the Common Stock at the beginning of the current
fiscal year, and the $19.875 exercise price of the options. The closing price of
the Common Stock on September 10, 2001 was $39.61. In reaching its decision to
repurchase the options at $18.125, the Board noted that the 30-day average
closing price of the Common Stock was approximately $38 per share.
On September 10, 2001, the Board approved payment for the repurchase of the
options at $18.125 per option. As a result of the option repurchases, the
Company has paid Mr. Girod $4,350,000, Mr. Stapleton $3,625,000, and Mr.
Meredith $2,900,000. The repurchase of the options will have no effect on the
Company's earnings in fiscal year 2002 or thereafter because the impact on
earnings was fully accrued prior to the beginning of the fiscal year 2002.
Following the option repurchase, the four top executives in the Company,
including the Executive Chairman, continue to beneficially own shares of the
Company's Common Stock
12
16
(including vested options to purchase Common Stock) representing approximately
9.7% of the total number of outstanding shares, a strong equity position for top
management.
REPORT OF THE AUDIT COMMITTEE
The Board of Directors adopted the Audit Committee Charter ("Charter") in
March 2000 and reaffirmed the Charter in March 2001. A copy of the Charter is
included as Appendix A to this Proxy Statement. The Audit Committee is currently
composed of four directors who are not officers or employees of the Company or
its subsidiaries. All members of the Audit Committee are "independent" as that
term is defined by the New York Stock Exchange's listing standards.
The Audit Committee reviewed the Company's audited financial statements
("Financial Statements") appearing in the Company's Annual Report on Form 10-K
for fiscal year 2001, and discussed the Financial Statements with the Company's
management and KPMG LLP, the Company's independent auditors. The Audit Committee
also discussed with the Company's independent auditors those matters required to
be discussed under SAS No. 61 and SAS No. 90 (Codification of Statements and
Auditing Standards, Communication with Audit Committees).
The Audit Committee has also received and reviewed the written disclosures
and the letter from KPMG LLP required by Independence Standards Board Standard
No. 1 ("Independence Discussions with Audit Committees"), and has discussed with
KPMG LLP their independence.
Based on the review and discussions referred to above, the Audit Committee
recommended to the Board that the audited financial statements be included in
the Company's Annual Report on Form 10-K for fiscal year 2001, filed with the
Commission.
This report is submitted by the members of the Audit Committee.
Shirley Mount Hufstedler
Stanley A. Weiss
Ann McLaughlin Korologos
Edward H. Meyer
13
17
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows, as of August 1, 2001, the beneficial ownership
of the Company's Common Stock for (a) all stockholders known by the Company to
beneficially own more than 5% of the Common Stock, (b) each of the Company's
current Directors, (c) the Company's Chief Executive Officer and the four other
most highly paid executive officers of the Company and (d) all of the Company's
Directors and executive officers as a group. Some of the information in the
table is based upon information contained in filings made by the beneficial
owner with the Commission.
AMOUNT AND NATURE OF
NAME BENEFICIAL OWNERSHIP(1) APPROXIMATE PERCENT
---- ----------------------- -------------------
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109.............. 3,187,200(2) 9.9 %
T. Rowe Price Associates, Inc. ............ 2,402,300(3) 7.5 %
100 East Pratt Street
Baltimore, Maryland 21202
Reich & Tang Asset Management L.P. ........ 1,678,200(4) 5.2 %
600 Fifth Avenue
New York, New York 10020
Sidney Harman.............................. 2,585,257(5) 7.8 %
Harman International Industries,
Incorporated
1101 Pennsylvania Avenue, N.W
Suite 1010
Washington, D.C. 20004
Bernard A. Girod........................... 555,965(6) 1.7 %
Shirley M. Hufstedler...................... 52,156 *
Ann McLaughlin Korologos................... 20,310 *
Edward H. Meyer............................ 86,704 *
Stanley A. Weiss........................... 18,300 *
Gregory P. Stapleton....................... 470,465(7) 1.4 %
Frank Meredith............................. 277,077(8) *
William Palin.............................. 33,500 *
All Directors and executive officers as a
group (12 persons)....................... 4,168,977(9) 12.1 %
---------------
* Less than 1%
(1) Under the rules of the Commission, a beneficial owner of a security is one
who has or shares the power to vote or direct the voting of the security or
the power to dispose or direct the disposition of the security.
Accordingly, more than one person may be a beneficial owner of the same
securities. A person also beneficially owns any securities to which that
person has the right to acquire beneficial ownership within 60 days.
Accordingly, the table includes shares of Common Stock that may be acquired
pursuant to stock options exercisable within 60 days from August 1, 2001 as
follows: Dr. Harman (1,204,500 shares), Mr. Girod (446,770 shares), Ms.
Hufstedler (49,126 shares), Ms. Korologos (20,100 shares), Mr. Meyer
(39,426 shares), Mr. Weiss (7,400 shares), Mr. Stapleton (413,400 shares),
Mr. Meredith (247,000 shares), Mr. Palin (29,300 shares) and all Directors
and executive officers as a group (2,514,102 shares).
(2) Information in this table and its notes with respect to FMR Corp. is
derived from the Schedule 13G filed on February 14, 2001 with the
Commission by and on behalf of FMR Corp. Edward C. Johnson 3d, Chairman of
FMR Corp. and his wife Abigail P. Johnson, a Director of FMR Corp. are also
deemed to be the beneficial owners of the 3,187,200
14
18
shares of Common Stock reported in the table as beneficially owned by FMR
Corp. by virtue of their positions with and ownership of FMR Corp. Of the
3,187,200 subject shares, 21,100 shares are held in an institutional
account managed by Fidelity Management Trust Company, a wholly-owned
subsidiary of FMR Corp., with respect to which each of FMR Corp. and Edward
C. Johnson 3d has sole dispositive power and sole voting power, and
3,166,100 shares are held by several investment companies for which
Fidelity Management & Research Company, a wholly-owned subsidiary of FMR
Corp., serves as investment adviser and for which each of FMR Corp. and
Edward C. Johnson 3d has sole dispositive power but no voting power.
(3) Information in this table and its notes with respect to T. Rowe Price
Associates, Inc. ("Price Associates") is derived from the Schedule 13G
filed on February 7, 2001 with the Commission by and on behalf of Price
Associates. Price Associates has indicated that these securities are owned
by various individual and institutional investors, for which Price
Associates serves as investment advisor with the power to direct
investments and/or sole power to vote the securities, and for purposes of
the reporting requirements of the Securities Exchange Act of 1934 Price
Associates is therefore deemed to be a beneficial owner of the securities;
however, Price Associates expressly disclaims that it is, in fact, the
beneficial owner of such securities.
(4) Information in this table and its notes with respect to Reich & Tang Asset
Management L.P. ("Reich & Tang") is derived from the Schedule 13G filed on
February 27, 2001 with the Commission by and on behalf of Reich & Tang.
Reich & Tang beneficially owns 1,678,200 shares on behalf of client
investment advisory accounts, with respect to which Reich & Tang holds
shared voting power and shared dispositive power.
(5) This amount includes: 802,646 shares held in a trust for which Dr. Harman
has sole dispositive and sole voting power; 122,994 shares held in two
irrevocable trusts for various family members for which Dr. Harman has sole
voting power but shared dispositive power; 200,000 shares held by the
Sidney Harman Charitable Remainder Trust for which Dr. Harman acts as
co-trustee and for which he has shared dispositive power and shared voting
power; and 186,225 shares held by family members for which Dr. Harman has
sole voting power pursuant to revocable proxies and for which Dr. Harman
disclaims beneficial ownership. As noted in footnote 1, the number of
shares beneficially owned by Dr. Harman also includes 1,204,500 shares that
may be acquired pursuant to stock options exercisable within 60 days from
August 1, 2001. The 1,204,500 shares subject to stock options include a
long-term performance incentive option to purchase 630,000 shares granted
to Dr. Harman on November 9, 1993 (as adjusted to reflect the 5% stock
dividend paid by the Company in August 1995 and the Stock Split). Because
the Company exceeded the performance criteria for each of fiscal years
1995, 1996, 1997, 1998, and 2000 the shares relating to this option are now
fully exercisable.
(6) This amount includes 7,393 shares held by Mr. Girod in the Company's
Section 401(k) Retirement Savings Plan ("401(k) Plan"); this amount does
not reflect the Company's repurchase of stock options from Mr. Girod, as
discussed elsewhere in this Proxy Statement.
(7) This amount includes 12,985 shares held by Mr. Stapleton in the 401(k)
Plan; this amount does not reflect the Company's repurchase of stock
options from Mr. Stapleton, as discussed elsewhere in this Proxy Statement.
(8) This amount includes 8,684 shares held by Mr. Meredith in the 401(k) Plan;
this amount does not reflect the Company's repurchase of stock options from
Mr. Meredith, as discussed elsewhere in this Proxy Statement.
(9) This amount includes 29,535 shares held by all Directors and executive
officers as a group in the 401(k) Plan; this amount does not reflect the
Company's repurchase of stock options from Messrs. Girod, Stapleton and
Meredith, as discussed elsewhere in this Proxy Statement.
15
19
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's Directors and executive officers and persons who beneficially own
more than 10% of the Company's Common Stock to file initial reports of ownership
and reports of changes in ownership with the Commission. Directors, executive
officers, and greater than 10% beneficial owners are required by the Commission
to furnish the Company with copies of all Section 16(a) forms filed by such
persons.
Based solely on a review of the copies of such forms furnished to the
Company and written representations from the Company's Directors and executive
officers, the Company believes that all Section 16(a) filing requirements
applicable to its Directors and executive officers were complied with during
fiscal year 2001.
16
20
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, 2001. This stock price performance
graph assumes that the value of the investment in the Common Stock and each
index was $100 on July 1, 1996. The stock price performance shown on the graph
below is not necessarily indicative of future price performance.
HARMAN INTERNATIONAL S&P 500 INDEX PEER GROUP
-------------------- ------------- ----------
Jun96 100 100 100
Jun97 85.91 134.7 128.06
Jun98 78.86 175.33 121.07
Jun99 90.58 215.22 152.77
Jun00 126.18 230.83 265.05
Jun01 158.03 196.59 186.95
The peer company index was derived using the following peer companies:
Boston Acoustics, Inc., Carver Corp., Emerson Radio, Home Theater Products
International, Inc. (through June 1997 only), Koss Corp., Pioneer Corporation
(ADRs), Polk Audio, Incorporated (through June 1998 only), Sensory Science
Corporation, Sony Corp. (American shares) and Zenith Electronics Corp.
17
21
INDEPENDENT AUDITOR
SELECTION. KPMG LLP served as the Company's independent auditor for fiscal
year 2001 and has been selected by the Board to serve as the Company's
independent auditor for fiscal year 2002. Representatives of KPMG LLP who attend
the Meeting will have an opportunity to make a statement and will be available
to respond to questions.
AUDIT FEES. Fees related to the fiscal year 2001 audit of the Company's
annual financial statements and review of those financial statements included in
the Company's quarterly reports on Form 10-Q totaled $1,021,993, all of which
had been billed as of August 15, 2001.
FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES. The Company
did not engage KPMG LLP to provide advice to the Company regarding financial
information systems design and implementation during fiscal year 2001.
ALL OTHER FEES. Fees billed to the Company by KPMG LLP for all other
non-audit services performed for the Company during fiscal year 2001, including
tax related services, totaled $311,881 as of August 15, 2001. The Audit
Committee considered whether the provision of non-audit services by KPMG LLP is
compatible with maintaining KPMG LLP's independence with respect to the Company.
STOCKHOLDER PROPOSALS FOR 2002 ANNUAL MEETING
In order to be included in the Company's proxy materials for the 2002
Annual Meeting of the Stockholders, a stockholder proposal must be received in
writing by the Company at 1101 Pennsylvania Avenue, N.W., Suite 1010,
Washington, D.C. 20004 by May 17, 2002, and otherwise comply with all
requirements of the Commission for stockholder proposals. In addition, the
Company's By-Laws provide that any stockholder who desires to bring a proposal
before an annual meeting must give timely written notice of the proposal to the
Secretary. To be timely, the notice must be delivered to the above address not
less than 60 days before the first anniversary of the date on which the Company
first mailed its proxy materials for the immediately preceding annual meeting;
stockholder proposals for the 2002 Annual Meeting must be received not later
than July 16, 2002. However, the Company's By-Laws also provide that if an
annual meeting is not publicly announced at least 75 calendar days prior to the
date of the annual meeting, then stockholder proposals for that annual meeting
must be received by the close of business on the 10th calendar day following the
day on which the date of the annual meeting is announced. The notice must also
describe the stockholder proposal in reasonable detail and provide certain other
information required by the By-Laws. A copy of the By-Laws is available upon
request from the Company's Secretary.
18
22
OTHER MATTERS
The Company bears the cost of preparing and mailing the Proxy Statement,
the form of proxy and any other material 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 does not intend to present and knows of no others who intend to
present any matter of business at the Meeting 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
Vice Chairman and
Chief Executive Officer
Washington, D.C.
September 14, 2001
THE COMPANY'S ANNUAL REPORT ON FORM 10-K FOR FISCAL YEAR 2001, AS FILED BY
THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION, IS AVAILABLE WITHOUT
CHARGE TO EACH STOCKHOLDER UPON WRITTEN REQUEST TO SANDRA B. ROBINSON, VICE
PRESIDENT, HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED, 1101 PENNSYLVANIA
AVENUE, N.W., SUITE 1010, WASHINGTON, D.C. 20004.
19
23
APPENDIX A
CHARTER FOR THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS
OF HARMAN INTERNATIONAL INDUSTRIES, INC.
--------------------------------------------------------------------------------
I. PURPOSE
The primary function of the Audit Committee is to assist the Board of
Directors in fulfilling its oversight responsibilities by reviewing: the
financial reports and other financial information provided by the Corporation
to any governmental body or the public; the Corporation's systems of internal
controls regarding finance, accounting, legal compliance and ethics that
management and the Board have established; and the Corporation's auditing,
accounting and financial reporting processes generally. Consistent with this
function, the Audit Committee should encourage continuous improvement of, and
should foster adherence to, the Corporation's policies, procedures and
practices at all levels. The Audit Committee's primary duties and
responsibilities are to:
Serve as an independent and objective party to monitor the
Corporation's financial reporting process and internal control
system.
Review and appraise the audit efforts of the Corporation's
independent accountants and internal auditing department.
Provide an open avenue of communication among the independent
accountants, financial and senior management, the internal auditing
department, and the Board of Directors.
The Audit Committee will primarily fulfill these responsibilities by carrying
out the activities enumerated in Section IV of this Charter.
II. COMPOSITION
The Audit Committee shall be comprised of the four independent directors,
each of whom is free from any relationship that, in the opinion of the
Board, would interfere with the exercise of his or her independent judgment
as a member of the Committee. Each of the independent directors is
financially literate and at least one member of the Committee shall have
financial management experience, as the Board, in its business judgment, has
determined.
The compensation of the Committee (all independent directors) will be
reconfirmed at the annual organizational meeting of the Board. The Chair of
the Committee will be elected by the full Board.
III. MEETINGS
The Committee shall meet at least two times annually. The Committee should
meet at least annually with management and the independent accountants in
separate executive sessions to discuss any matters that the Committee or each
of these groups believe should be discussed privately. In addition, the
Committee or at least its Chair should meet with the independent accountants
and management at least twice annually to review the Corporation's
financials.
i
24
APPENDIX A -- AUDIT COMMITTEE CHARTER
IV. RESPONSIBILITIES AND DUTIES
To fulfill its responsibilities and duties the Audit Committee shall:
DOCUMENTS/REPORTS REVIEW
1. Review and update this Charter periodically, at least annually, as
conditions dictate.
2. Review the Corporation's annual financial statements and any reports or
other financial information submitted to any governmental body, or the
public, including any certification, report, opinion, or review rendered
by internal audit or the independent accountants.
INDEPENDENT ACCOUNTANTS
3. Recommend to the Board of Directors the selection of the independent
accountants, considering independence and effectiveness and approve the
fees and other compensation to be paid to the independent accountants.
4. Obtain on a periodic basis from the independent accountants a written
statement delineating all relationships between the Corporation and the
independent auditor.
5. Review the performance of the independent accountants and approve any
proposed discharge of the independent accountants when circumstances
warrant.
6. Periodically consult with the independent accountants out of the presence
of management about internal controls, effectiveness, and the quality of
the Corporation's financial statements.
FINANCIAL REPORTING PROCESSES
7. In consultation with the independent accountants and the internal
auditors, review the integrity of the Corporation's financial reporting
processes, both internal and external.
PROCESS IMPROVEMENT
8. Following completion of the annual audit, review separately with
management and the independent accountants any significant difficulties
encountered during the course of the audit, including any restrictions on
the scope of work or access to required information.
9. Review any significant disagreement among management and the independent
accountants or the internal auditing department in connection with the
preparation of the financial statements.
ETHICAL AND LEGAL COMPLIANCE
10. Establish, review and update periodically a Code of Ethical Conduct and
ensure that management has established a system to enforce this Code.
11. Review management's monitoring of the Corporation's compliance with the
Corporation's Ethical code, and ensure that management has the proper
review system in place to ensure that Corporation's financial statements,
reports and other financial information disseminated to governmental
organizations, and the public satisfy legal requirements.
12. Review, with the Corporation's counsel, legal compliance matters
including corporate securities trading policies.
ii
25
APPENDIX A -- AUDIT COMMITTEE CHARTER
13. Review, with the Corporation's counsel, any legal matter that could have
a significant impact on the Corporation's financial statements.
14. Perform any other activities consistent with this Charter, the
Corporation's By-laws and governing law, as the Committee or the Board
deems necessary or appropriate.
iii
26
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED
ANNUAL MEETING OF STOCKHOLDERS-- NOVEMBER 5, 2001
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints each of Frank Meredith and Sandra B.
Robinson, with the power to appoint his or her substitute, as Proxy and
authorizes each 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 5, 2001 and at
any adjournment thereof, as specified on the reverse side hereof and in the
Notice of Annual Meeting of Stockholders and the Proxy Statement, each dated
September 14, 2001.
WHEN PROPERLY EXECUTED, THIS PROXY WILL BE VOTED AS SPECIFIED ON THE
REVERSE SIDE HEREOF OR, IF NOT SPECIFIED, WILL BE VOTED FOR BOTH NOMINEES FOR
DIRECTOR SET FORTH IN ITEM 1. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO
VOTE UPON SUCH OTHER BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING OR ANY
ADJOURNMENT THEREOF.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE)
--------------------------------------------------------------------------------
- FOLD AND DETACH HERE -
27
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE DIRECTORS SET
FORTH IN ITEM 1.
Please mark
your votes as X
indicated in
this example.
1. Election of Bernard A. Girod and Ann McLaughlin Korologos as DIRECTORS.
(INSTRUCTION: TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A
LINE THROUGH THAT NOMINEE'S NAME.)
FOR both WITHHOLD vote
nominees for both nominees
[ ] [ ]
PLEASE MARK INSIDE BOXES SO THAT DATA PROCESSING EQUIPMENT WILL RECORD YOUR VOTE
Please date and sign exactly as the name appears to the left 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 , 2001
---------------------------------------------------------------------
--------------------------------------------------------------------------------
Signature
--------------------------------------------------------------------------------
Signature (if held jointly)
USING BLUE OR BLACK INK, PLEASE MARK, SIGN, AND PROMPTLY RETURN THIS PROXY 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