-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, B4p46+a+CX/zajjYJtV8PuRgvW0CNJAd2a5o7t+9NBatWmlNYIRi4hZV3FEyCdqz tTJO2WeMt1o1Qwmmgk9O1Q== 0000800459-96-000006.txt : 19960515 0000800459-96-000006.hdr.sgml : 19960515 ACCESSION NUMBER: 0000800459-96-000006 CONFORMED SUBMISSION TYPE: S-3/A PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 19960514 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: HARMAN INTERNATIONAL INDUSTRIES INC /DE/ CENTRAL INDEX KEY: 0000800459 STANDARD INDUSTRIAL CLASSIFICATION: HOUSEHOLD AUDIO & VIDEO EQUIPMENT [3651] IRS NUMBER: 112534306 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: S-3/A SEC ACT: 1933 Act SEC FILE NUMBER: 333-03189 FILM NUMBER: 96562203 BUSINESS ADDRESS: STREET 1: 1101 PENNSYLVANIA AVENUE N W STREET 2: STE 1010 CITY: WASHINGTON STATE: DC ZIP: 20004 BUSINESS PHONE: 2023931101 MAIL ADDRESS: STREET 1: 1101 PENNSYLVANIA AVENUE NW STREET 2: SUITE 1010 CITY: WASHINGTON STATE: DC ZIP: 20004 S-3/A 1 FORM S-3 AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON MAY 13, 1996 REGISTRATION NO. 333-03189 ============================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ---------------- AMENDMENT NO. 1 TO FORM S-3 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ---------------- HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 11-2534306 (STATE OF INCORPORATION) (I.R.S. EMPLOYER ID. NO.) 1101 PENNSYLVANIA AVENUE, N.W. BERNARD A. GIROD SUITE 1010 HARMAN INTERNATIONAL INDUSTRIES, WASHINGTON, D.C. 20004 INCORPORATED (202) 393-1101 1101 PENNSYLVANIA AVENUE, N.W., SUITE 1010 (ADDRESS AND TELEPHONE NUMBER OF WASHINGTON, D.C. 20004 REGISTRANT'S PRINCIPAL EXECUTIVE (202) 393-1101 OFFICES) (NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE) ---------------- COPIES TO: ROBERT A. PROFUSEK, ESQ. LAURA PALMA, ESQ. JONES, DAY, REAVIS & POGUE SIMPSON THACHER & BARTLETT 599 LEXINGTON AVENUE 425 LEXINGTON AVENUE NEW YORK, NEW YORK 10022 NEW YORK, NEW YORK 10017 (212) 326-3939 (212) 455-2000 APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as practicable after the effective date of this registration statement. If the only securities being registered on this Form are being offered pursuant to dividend or interest reinvestment plans, please check the following box. [_] If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, other than securities offered only in connection with dividend or interest reinvestment plans, check the following box. [_] If this form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If this form is a post effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. [_] If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box. [_] ---------------- THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE. =========================================================================== ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ + INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A+ + REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE+ + SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY+ + OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT+ + BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR+ + THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE+ + SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE+ + UNLAWFUL PRIOR TO THE REGISTRATION OR QUALIFICATION UNDER THE SECURITIES+ + LAWS OF ANY STATE. + ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++ SUBJECT TO COMPLETION, DATED MAY 13, 1996 4,000,000 SHARES [LOGO OF HARMAN INTERNATIONAL HARMAN INTERNATIONAL APPEARS HERE] INDUSTRIES, INCORPORATED COMMON STOCK Of the 4,000,000 shares of Common Stock offered hereby, 2,000,000 shares are being sold by the Company and 2,000,000 shares are being sold by the Selling Stockholders (the "Offering"). See "Selling Stockholders." The Company will not receive any of the proceeds from the sale of shares of Common Stock by the Selling Stockholders. The Common Stock of the Company is traded on the New York Stock Exchange (the "NYSE") under the symbol "HAR." On May 10, 1996, the last reported sale price of the Common Stock on the NYSE was $48.375 per share. See "Price Range for Common Stock." SEE "RISK FACTORS" FOR A DISCUSSION OF CERTAIN FACTORS THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED HEREBY. ----------- THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
============================================================================ Underwriting Price Discounts and Proceeds to Proceeds to to Public Commissions (1) Company(2) Selling Stockholders - -------------------------------------------------------------------------------- Per Share........... $ $ $ $ Total(3)............ $ $ $ $ ============================================================================
(1) See "Underwriting" for information concerning indemnification of the Underwriters and other matters. (2) Before deducting expenses of the Offering, which will be paid by the Company, estimated at $675,000. (3) The Company and certain Selling Stockholders have granted to the Underwriters 30-day options to purchase up to 600,000 additional shares of Common Stock, pro rata, solely to cover over-allotments, if any. If the Underwriters exercise these options in full, Price to Public will total $ , Underwriting Discounts and Commissions will total $ , Proceeds to Company will total $ and Proceeds to Selling Stockholders will total $ . The shares of Common Stock are offered by the several Underwriters named herein, as and if delivered to and accepted by the Underwriters and subject to their right to reject any orders in whole or in part. It is expected that delivery of the certificates representing such shares will be made against payment therefor at the office of Montgomery Securities on or about May , 1996. ----------- MONTGOMERY SECURITIES DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION LEHMAN BROTHERS J.P. MORGAN & CO. May , 1996 The Infinity Compositions Prelude loudspeaker system [ART APPEARS HERE] provides home theatre and musical playback through 4-way, full range front speakers and quadrapole surrounds. JBL's EON is a series of compact, portable professional sound reinforcement systems. The Soundcraft Broadway digitally controlled audio console provides powerful theatre audio production capabilities in a flexible automated desk. The Mark Levinson Reference No. 33 Amplifier features a vertical design to optimize power distribution and operating temperature. IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME. PROSPECTUS SUMMARY The following summary is qualified in its entirety by the more detailed information appearing elsewhere and incorporated by reference in this Prospectus. See "Available Information" and "Incorporation of Certain Information by Reference." References to fiscal years shall mean the fiscal year ended on June 30 of such year. Unless otherwise indicated, the information in this Prospectus assumes no exercise of the Underwriters' over-allotment options and that the Common Stock is offered to the public at $50.00 per share, the closing sale price for the Common Stock on the NYSE on May 3, 1996, the last full day of trading prior to the date of this Prospectus. Except for historical information contained in this Prospectus and in the documents incorporated in this Prospectus by reference, the matters discussed herein and therein contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those suggested in the forward-looking statements, including without limitation, the effect of economic conditions, product demand, competitive products and other risks detailed herein and in the Company's other filings with the Securities and Exchange Commission (the "Commission"). See "Risk Factors." THE COMPANY Harman International Industries, Incorporated (together with its subsidiaries, "Harman" or the "Company") is a worldwide leader in the design, manufacture and marketing of high-quality, high-fidelity audio products targeted primarily at the consumer, professional and original equipment manufacturer ("OEM") markets. For almost 50 years, the Company and its predecessors have been leaders and innovators in creating loudspeaker and electronic products that deliver superior sound. The Company believes that its JBL, Infinity and Harman Kardon brand names are well-known worldwide for premium quality and performance. In order to expand and capitalize upon this reputation, Harman has invested significant management and capital resources over the years in developing an international design, engineering, manufacturing and marketing capability that enables it to respond effectively to customer needs, assure product quality and increase manufacturing efficiency. In the last three years, the Company's operations have been repositioned to provide better customer focus and improved efficiency. The Company's operations are now centered around three primary Groups: the Consumer Group, the Professional Group and the OEM Group. During this same three-year period, the Company completed a number of strategic acquisitions to improve its competitive position in terms of market, product and technology. These acquisitions include AKG Akustische u. Kino-Gerate Gesellschaft m.b.H. ("AKG"), a leading manufacturer of microphones based in Austria; Studer Revox AG ("Studer"), a leading manufacturer of broadcast and recording systems based in Switzerland; Becker GmbH ("Becker"), a high technology manufacturer of automotive head units (radio/cassette deck/CD player units) based in Germany; and Madrigal Audio Laboratories, Inc. ("Madrigal"), the manufacturer of one of the most prestigious brands of consumer electronic products, Mark Levinson, based in Connecticut. Through these acquisitions, the Company believes it has positioned each Group to offer a more complete line of products, thereby enabling the Company to compete more effectively in its markets. STRATEGY AND OPPORTUNITIES The Company's strategy emphasizes utilization of its strengths to establish a strong worldwide market position in the consumer, professional and OEM high- fidelity audio markets. Management believes that significant opportunities exist in market segments where an in-depth knowledge of sound reproduction coupled with strong digital signal processing and manufacturing capabilities give Harman a competitive advantage. 3 CONSUMER GROUP The Company designs, manufactures and markets loudspeakers under the JBL and Infinity brand names for the consumer market. The Company also designs, manufactures and markets a broad range of consumer electronic products. During fiscal 1995, the Company's principal consumer electronics division, Harman Kardon, Incorporated ("Harman Kardon"), achieved record sales, and in the first three quarters of fiscal 1996, sales increased substantially over sales in the same period of fiscal 1995. The Company's principal loudspeaker divisions, JBL Incorporated ("JBL") and Infinity Systems, Inc. ("Infinity"), also achieved record sales in the nine months ended March 31, 1996. The Company continues to capitalize on these strong brand names by targeting growing markets, such as home theater, and by developing new and innovative products. The Company continually seeks to improve its market position in its core loudspeaker business by introducing new products that offer greater efficiency and reduced size. PROFESSIONAL GROUP The Company is a leading manufacturer and marketer of professional audio electronics equipment, including loudspeakers, amplifiers, mixing consoles, signal processing equipment, microphones and effects devices. Such products are marketed on a worldwide basis under various trade names, including JBL, Soundcraft, Allen & Heath, DOD, Lexicon, AKG, dbx, BSS, Turbosound, Orban, Spirit and Studer. The acquisitions of AKG in September 1993 and Studer in March 1994 enable the Professional Group to supply a complete range of professional audio products and turnkey systems to the principal segments of the industry, including broadcast and recording, sound reinforcement and musical instrument support. The Professional Group is developing digital systems that are integrated by means of a proprietary digital architecture that permits all of the components to communicate and allows for a single point of control. The ability to integrate all of the audio components in the system also provides the opportunity for better performance and lower costs. OEM GROUP Automotive Audio Systems. Harman is one of the world's largest manufacturers of premium branded automotive OEM audio systems. During the past few years, the Company has invested heavily to streamline its manufacturing operations and establish relationships with new customers. During fiscal 1995 and the first three quarters of fiscal 1996, the Company's OEM Group recorded significant sales increases due to an increase in the number of automobile models offering the Company's audio systems and higher penetration levels within existing models. The Company's largest automotive OEM customer, Chrysler, offers Infinity branded audio systems as options in thirteen different models. During fiscal 1995, the Company began selling Harman Kardon premium branded systems to Saab, Jaguar and Range Rover. Through the acquisition of Becker in 1995, Mercedes, BMW and Porsche were added as customers. During the first nine months of fiscal 1996, the Company began to sell premium branded Harman Kardon systems to BMW for the 3-Series and Infinity branded systems to Chrysler for the Jeep Grand Cherokee and Minivan in Europe. Other customers include Ford, Mitsubishi and Toyota. The Company believes significant growth opportunities continue to exist in the automotive OEM market through higher penetration levels within existing models, increases in the number of models offering the Company's audio systems and the addition of new automotive OEM customers. Furthermore, the acquisition of Becker permits the OEM Group to offer completely integrated audio systems that include the head unit, amplifiers, loudspeakers and associated electronics for the first time. The Company believes this integrated audio system provides a platform for further expansion into associated automotive electronic products such as communication, security and navigation. Audio for Computers. During the first nine months of fiscal 1996, the Company began to design and manufacture branded audio systems and loudspeakers for manufacturers of personal computers. The Company intends to develop such computer OEM systems in parallel with its automotive OEM business. 4 Through an alliance with Compaq Computer Corporation, the Company has designed a series of audio systems that will be incorporated as standard equipment in Compaq's new Presario line of personal computers. Engineering and design have been in process for more than a year as Harman and Compaq sought to create high-performance audio for computers. The Harman designed and manufactured systems will be badged "JBL-Pro." First production began in a dedicated new facility in Northridge, California in early May 1996. Initial shipments of a complete Harman Kardon surround sound system were made to Gateway 2000 during April 1996. The surround sound system is offered by Gateway as an option on its new product, named Destination. The Destination product is a new generation of "TV computers" that combines familiar personal computer functions with traditional home high fidelity and television reception functions. The software incorporated in Destination, which facilitates reception of detailed television program information, has been developed by the Company's Harman Interactive Group and is branded Harman Smart TV. The Company is in discussions with a number of additional computer makers to whom it hopes to market Harman Smart TV and OEM audio and loudspeaker systems. The Company was incorporated in Delaware in 1980. The Company's principal executive offices are located at 1101 Pennsylvania Avenue, NW, Suite 1010, Washington, DC 20004. The Company's telephone number is (202) 393-1101. RECENT DEVELOPMENTS For the nine months ended March 31, 1996, the Company's sales and operating income increased 19% and 20%, respectively, from the same period in the prior year. The Company reported earnings per share of $2.17 for the nine months ended March 31, 1996, compared to $1.74 for the nine months ended March 31, 1995. These significantly improved earnings were the result of strong sales by all Groups, increased operating leverage and new products. See "Management's Discussion and Analysis of Financial Condition and Results of Operations." 5 THE OFFERING Common Stock offered by the Company................. 2,000,000 shares Common Stock offered by the Selling Stockholders.... 2,000,000 shares Common Stock to be outstanding after the Offering... 18,270,953 shares(1) Use of Proceeds by the Company...................... To repay outstanding indebtedness NYSE Symbol......................................... HAR
SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS ENDED FISCAL YEARS ENDED JUNE 30, MARCH 31, ------------------------------------------------- ----------------- 1991 1992 1993 1994 1995 1995 1996 -------- -------- -------- -------- -------- -------- -------- (UNAUDITED) STATEMENT OF OPERATIONS DATA(2): Net sales.............................. $586,941 $604,454 $664,913 $862,147 $1,170,224 $827,818 $988,482 Gross profit........................... 136,613 164,622 190,563 269,162 364,081 260,598 300,831 Operating income.................. 3,385 27,547 41,255 66,332 87,449 62,031 74,417 Income (loss) before taxes, minority interest and extraordinary items....(20,646) 5,893 18,570 42,686 61,157 41,339 51,612 Net income (loss)...................... (19,764) 3,487 11,246 25,664 41,161 27,466 35,253 Net income (loss) per common share...$(2.15) $.37 $ .99 $ 1.83 $ 2.58 $ 1.74 $ 2.17 Weighted average number of common shares outstanding.................... 9,195 9,371 11,367 14,042 15,980 15,858 16,177 MARCH 31, 1996 ----------------------- ACTUAL AS ADJUSTED(3) -------- -------------- (UNAUDITED) BALANCE SHEET DATA: Working capital..................................................................... $344,363 $344,363 Total assets........................................................................ 985,507 985,507 Short-term debt..................................................................... 34,763 34,763 Long-term debt...................................................................... 354,074 261,869 Shareholders' equity................................................................ 311,715 403,920
- -------- (1) Excludes 1,172,538 shares of Common Stock issuable upon the exercise of outstanding options as of April 30, 1996 with a weighted average exercise price of $25.77 per share granted under the Company's various executive incentive plans. (2) All periods reflect the 5% stock dividend declared in August 1995. (3) Adjusted to reflect the application of the estimated net proceeds from the sale of 2,000,000 shares of Common Stock offered by the Company hereby and the application of the net proceeds therefrom to repay outstanding indebtedness. See "Use of Proceeds" and "Capitalization." 6 RISK FACTORS Prospective purchasers should carefully consider the following risk factors and other information contained in this Prospectus in evaluating an investment in the Common Stock offered hereby. DEPENDENCE ON KEY CUSTOMERS Sales to Chrysler accounted for 10.2% of the Company's consolidated net sales for the nine months ended March 31, 1996. The Company's next largest customers, Mercedes Benz, Circuit City and Ford, accounted for an aggregate of approximately 20% of its consolidated net sales for the nine months ended March 31, 1996. The loss of any one of these significant customers could have a material adverse effect on the Company. DEPENDENCE ON CONSUMER SPENDING The Company's sales are dependent to a substantial extent on discretionary spending by consumers, which may be adversely impacted by economic conditions affecting disposable consumer income and retail sales. In addition, sales of the Company's audio products to the automotive OEM market are dependent on the overall success of the automobile industry, as well as the willingness, in many instances, of automobile purchasers to pay for the option of a premium branded automotive audio system. ACQUISITION STRATEGY A significant element of the Company's growth strategy has been the acquisition of complementary businesses. The Company anticipates that it may continue to make such acquisitions from time to time to the extent they are compatible with the Company's long-term strategy. The integration of newly acquired businesses into the Company presents certain risks in addition to those presented by growth through internal development, including additional demands on management time and attention. In addition, certain of the Company's acquisitions have been of businesses that had suffered losses prior to acquisition by the Company, including AKG in September 1993, Studer in March 1994 and Becker in February 1995. DEPENDENCE ON SUPPLIERS The Company is dependent upon certain unaffiliated domestic and foreign suppliers for various components, parts, raw materials and certain finished products. Some of the Company's suppliers produce products that compete with the Company's products. Although the Company believes that the loss of any one or more of its suppliers would not have a long-term material adverse effect on the Company because other suppliers would be able to fulfill the Company's requirements, the loss of certain of such suppliers could, in the short term, adversely affect the Company's business until alternative suppliers could be activated. The Company has begun using multiple vendors and has thus limited its reliance on any single supplier. Arrangements with foreign suppliers are also subject to the risks of doing business abroad, such as import duties, trade restrictions, work stoppages, foreign currency fluctuations, political instability and other factors which could have an adverse effect on the Company. COMPETITION The high fidelity audio products business is fragmented and highly competitive. Many manufacturers, large and small, domestic and foreign, offer audio systems that vary widely in price and quality and are marketed through a variety of channels, including audio specialty stores, discount stores, department stores and mail order firms. Certain competitors of the Company have financial and other resources greater than those of the Company. There can be no assurance that the Company will continue to compete effectively against existing or new competitors that may enter its markets. 7 CURRENCY EXCHANGE RATES The Company's operations are subject to fluctuations in foreign currency exchange rates. Significant assets and operations of the Company are located in Europe and Asia. In addition, the Company purchases certain foreign-made products. The Company hedges a portion of its foreign currency exposure and, due to the multiple currencies involved in the Company's business, foreign currency positions are partially offsetting and are netted against one another to reduce exposure. ANTI-TAKEOVER PROVISIONS Certain provisions of the Company's Restated Certificate of Incorporation, as amended (the "Certificate"), and its By-Laws, as amended (the "By-Laws"), may make it more difficult for a third party to make, or may discourage a third party from making, an acquisition proposal for the Company or initiating a proxy contest and may thereby inhibit a change in control of the Company or the removal of incumbent management or directors. See "Certain Provisions of the Certificate, the By-Laws and Delaware Law." 8 USE OF PROCEEDS The net proceeds from the sale of 2,000,000 shares of Common Stock offered by the Company, after deducting estimated underwriting discounts and offering expenses, are estimated to be approximately $92,205,000 ($106,137,000 if the Underwriters' over-allotment options are exercised in full) based on the closing price of the Common Stock set forth on the cover page of this Prospectus. The Company will not receive any of the proceeds from the sale of shares of Common Stock by the Selling Stockholders. The Company intends to use its net proceeds to repay a portion of the outstanding indebtedness under its unsecured revolving credit facility due September 2000 ($212.6 million outstanding as of March 31, 1996). As of March 31, 1996, the effective interest rate on the aggregate indebtedness to be repaid with the net proceeds from the Offering was approximately 5.80%. After the repayment of indebtedness described above, the Company will, on a pro forma basis as of March 31, 1996, have an aggregate of $144.6 million of borrowing capacity under its unsecured revolving credit facility and approximately $120.4 million of total borrowings outstanding. In September 1995, the Company incurred $9.8 million of this indebtedness in the acquisition of Madrigal and in March 1996 the Company incurred $7.6 million of this indebtedness as a result of making the final payment for the acquisition of Becker. PRICE RANGE FOR COMMON STOCK The Company's Common Stock is traded on the NYSE under the symbol "HAR." The following table sets forth, for the periods indicated, the high and low sale prices of shares of the Common Stock as reported on the NYSE.
FISCAL YEAR FISCAL QUARTER ENDED HIGH LOW ------------------- ----------------------------------- ------- ------- 1994 September 30, 1993................................ $20.953 $16.548 December 31, 1993................................. 27.858 17.977 March 31, 1994.................................... 32.024 25.953 June 30, 1994..................................... 29.763 23.334 1995 September 30, 1994................................ 33.334 24.048 December 31, 1994................................. 36.191 30.477 March 31, 1995.................................... 40.001 34.048 June 30, 1995..................................... 39.048 32.382 1996 September 30, 1995................................ 49.750 35.596 December 31, 1995................................. 48.875 39.750 March 31, 1996.................................... 41.250 32.000 June 30, 1996 (through May 10, 1996)............... 50.250 37.375
DIVIDEND POLICY No cash dividends were paid on the Company's Common Stock until a cash dividend of $.04 per share was paid for the fourth quarter of fiscal 1994. During fiscal 1995, the Company declared dividends of $.18 per share, with a dividend of $.04 per share declared for each of the first two quarters and a dividend of $.05 per share declared for the third and fourth quarters. During the current fiscal year, dividends of $.05 per share have been declared for each of the first three quarters. The third quarter dividend is to be paid on May 29, 1996 to each stockholder of record as of the close of business on May 15, 1996. In addition, in August 1995 the Company declared a special 5% stock dividend. In deciding whether to pay dividends in the future, the Company's Board of Directors will consider factors it deems relevant, including the Company's earnings and financial condition and its working capital and capital expenditure requirements. Accordingly, past dividend payments are not necessarily indicative of future dividends. In addition, the payment of dividends is subject to certain restrictions contained in the Company's revolving credit facility, indenture notes, senior notes and senior subordinated notes. Management does not believe that such restrictions materially limit the Company's ability to pay future dividends consistent with its dividend history. 9 CAPITALIZATION The following table sets forth the short-term debt and capitalization of the Company at March 31, 1996 and as adjusted to reflect the sale of 2,000,000 shares of Common Stock offered by the Company hereby at an assumed offering price of $48.375 per share and the anticipated application of the estimated net proceeds therefrom. See "Use of Proceeds."
MARCH 31, 1996 --------------------- (UNAUDITED) ACTUAL AS ADJUSTED ----------- ------------------- (IN THOUSANDS, EXCEPT SHARE AMOUNTS) Short-term debt: Notes payable................................................... $ 21,831 $ 21,831 Current portion of long-term debt...................... 12,932 12,932 ---------- ----------------- Total short-term debt...................................... $ 34,763 $ 34,763 ======= ========== Long-term debt: Senior notes...................................................... $ 17,500 $ 17,500 Other senior debt.............................................. 226,774 134,569 Senior subordinated notes................................ 109,800 109,800 --------- --------------- Total long-term debt...................................... 354,074 261,869 Minority interest................................................ 3,896 3,896 Shareholders' equity: Preferred Stock, $.01 par value; 5,000,000 shares au- thorized; none issued and outstanding................ -- -- Common Stock, par value $0.01 per share; 50,000,000 shares authorized; 16,269,503 shares issued and outstanding; 18,269,503 shares issued and outstanding, as adjusted(1)................................................ 160 180 Additional paid-in capital................................ 182,950 275,135 Equity adjustment from foreign currency translation.... (2,621) (2,621) Retained earnings............................................ 131,226 131,226 --------- --------------- Shareholders' equity...................................... 311,715 403,920 --------- --------------- Total capitalization.................................... $669,685 $669,685 ======= ========
- -------- (1) Excludes 1,169,988 shares of Common Stock issuable upon the exercise of outstanding options as of March 31, 1996 with a weighted average exercise price of $25.70 granted under the Company's various executive incentive plans. 10 SELECTED CONSOLIDATED FINANCIAL DATA The selected consolidated financial data presented below as of and for each of the fiscal years in the five-year period ended June 30, 1995 are derived from the consolidated financial statements of the Company, which consolidated financial statements have been audited by KPMG Peat Marwick LLP, independent certified public accountants. The selected consolidated financial data presented below for the nine-month periods ended March 31, 1996 and 1995 and as of March 31, 1996 are derived from the unaudited condensed consolidated financial statements of the Company. In the opinion of the Company's management, such unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the consolidated financial position of the Company and results of operations for the periods presented. The results of operations for the nine-month period ended March 31, 1996 are not necessarily indicative of results to be expected for the fiscal year ending June 30, 1996. The selected consolidated financial data should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations" included elsewhere in this Prospectus and the consolidated financial statements of the Company and its subsidiaries incorporated herein by reference. See "Incorporation of Certain Information by Reference."
NINE MONTHS ENDED FISCAL YEARS ENDED JUNE 30, MARCH 31, -------------------------------------------------- --------------------- 1991 1992 1993 1994 1995 1995 1996 -------- -------- -------- --------- ---------- -------- ----------- (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA) STATEMENT OF OPERATIONS DATA(1): Net sales.............. $586,941 $604,454 $664,913 $ 862,147 $1,170,224 $827,818 $988,482 Cost of sales.......... 450,328 439,832 474,350 592,985 806,143 567,220 687,651 -------- -------- -------- --------- ---------- -------- -------- Gross profit.......... 136,613 164,622 190,563 269,162 364,081 260,598 300,831 Selling, general and administrative expenses.............. 133,228 137,075 149,308 202,830 276,632 198,567 226,414 -------- -------- -------- --------- ---------- -------- -------- Operating income....... 3,385 27,547 41,255 66,332 87,449 62,031 74,417 Interest expense....... 23,917 21,075 23,566 22,110 25,284 19,064 21,682 Other expenses (in- come)................. 114 579 (881) 1,536 1,008 1,628 1,123 -------- -------- -------- --------- ---------- -------- -------- Income (loss) before taxes, minority inter- est and extraordinary item ................. (20,646) 5,893 18,570 42,686 61,157 41,339 51,612 Income tax expense (benefit)............. (882) 2,406 7,324 16,248 19,642 13,466 16,332 Minority interest...... -- -- -- 26 80 133 27 -------- -------- -------- --------- ---------- -------- -------- Income (loss) before extraordinary item.... (19,764) 3,487 11,246 26,412 41,435 27,740 35,253 Extraordinary item, net of income taxes....... -- -- -- (748) (274) (274) -- -------- -------- -------- --------- ---------- -------- -------- Net income (loss)...... $(19,764) $ 3,487 $ 11,246 $ 25,664 $ 41,161 $ 27,466 $ 35,253 ======== ======== ======== ========= ========== ======== ======== Income (loss) per common share before extraordinary item.... $ (2.15) $ .37 $ .99 $ 1.88 $ 2.60 $ 1.76 $ 2.17 ======== ======== ======== ========= ========== ======== ======== Net income (loss) per common share.......... $ (2.15) $ .37 $ .99 $ 1.83 $ 2.58 $ 1.74 $ 2.17 ======== ======== ======== ========= ========== ======== ======== Weighted average number of common shares outstanding........... 9,195 9,371 11,367 14,042 15,980 15,858 16,177 JUNE 30, -------------------------------------------------- MARCH 31, 1991 1992 1993 1994 1995 1996 -------- -------- -------- --------- ---------- ----------- (UNAUDITED) (IN THOUSANDS) BALANCE SHEET DATA: Working capital........ $ 80,649 $102,374 $147,492 $ 215,878 $ 257,564 $344,363 Total assets........... 359,402 415,909 431,726 680,691 886,872 985,507 Short-term debt........ 60,070 69,697 37,762 69,254 40,214 34,763 Long-term debt......... 132,809 132,675 175,583 156,577 266,021 354,074 Shareholders' equity... 80,781 111,241 111,149 232,021 289,490 311,715
- -------- (1) All periods reflect the 5% stock dividend declared in August 1995. 11 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Except for historical information contained in this Prospectus and in the documents incorporated in this Prospectus by reference, the matters discussed herein and therein contain forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those suggested in the forward-looking statements, including without limitation, the effect of economic conditions, product demand, competitive products and other risks detailed herein and in the Company's other filings with the Commission. See "Risk Factors." RESULTS OF OPERATIONS Comparison of the Three-Month and Nine-Month Periods Ended March 31, 1996 and 1995 Net sales for the quarter ended March 31, 1996, totaled $339.3 million, a 9% increase over the comparable period in the prior year. Excluding Becker, sales increased 17%. Becker sales in the quarter were lower than the comparable period in the prior year due to the phase-out of a group of activities that were irrelevant to the Company's business, such as sewing machine circuit boards and air bag sensors. For the first nine months of the year, sales of $988.5 million were 19% above the prior year and 12% higher excluding the sales contribution of Becker from both years (Becker sales were reported for the first time in the third quarter last year). The Consumer Group reported higher sales for the third quarter and the nine months. Harman Kardon sales almost doubled for the quarter as the division gained market share in North America and Europe. Infinity reported vigorous sales growth, especially in Germany. The addition of the Mark Levinson and Proceed lines through the September 1995 acquisition of Madrigal contributed to the sales growth. The Professional Group contributed higher sales for the third quarter and the nine months, with virtually all operations reporting increased sales. JBL Professional sales were enhanced by the international success of its EON line of compact, portable sound reinforcement systems. Studer sales were lower due to several large contracts completed in the prior year. The OEM Group produced higher sales for the third quarter and the nine months. Shipments of high fidelity systems for the Chrysler Minivan, Ford Explorer, Jeep Grand Cherokee and Dodge Ram pickup trucks were excellent. Becker reported lower sales in the quarter due to the phase-out of the non-core businesses referred to above. The Company's gross profit margin for the quarter ended March 31, 1996, was 30.5% ($103.4 million) compared to 30.2% ($93.9 million) in the prior year. The increase in the gross profit margin for the quarter reflects increased operating leverage at the automotive OEM factories in North America and the United Kingdom and improved performance by Harman Kardon. The gross profit margin for the first nine months of fiscal 1996 was 30.4% ($300.8 million) compared to 31.5% ($260.6 million) in the previous year. The decrease in the gross margin percentage in the nine months primarily reflects the inclusion of Becker, which was acquired in the third quarter last year. Operating income as a percentage of sales was 8.2% ($27.7 million) for the third quarter ended March 31, 1996, up from 7.4% ($23.1 million) for the same period in the prior year. The increase results from improved gross margin as discussed above and lower selling, general and administrative expenses as a percentage of sales. For the first nine months, operating income as a percentage of sales was 7.5%, equivalent to the prior year. Interest expense for the three months ended March 31, 1996, of $7.2 million was equal to the third quarter of the prior year. For the nine months ended March 31, 1996, interest expense was $21.7 million, up 12 from $19.1 million for the nine months ended March 31, 1995. Average borrowings outstanding were $379.7 million for the third quarter of fiscal 1996 and $354.6 million for the nine months, up from $287.3 million and $266.2 million, respectively, for the same periods in the prior year. Higher average borrowings in fiscal 1996 result from the Becker and Madrigal acquisitions and the financing of increased working capital requirements. The impact of the increase in average borrowings on interest expense was offset by a substantial reduction in the average interest rate on borrowings. The average interest rate on borrowings was 7.6% for the third quarter and 8.2% for the nine months ended March 31, 1996, down from 10.0% for the third quarter and 9.6% for the nine months ended March 31, 1995. The decrease in average interest rates results from generally lower market interest rates worldwide and the refinancing of unsecured lines of credit with a committed revolving credit facility agreement in September 1994. Interest expense as a percentage of sales was 2.2% for the first nine months of fiscal 1996, down from 2.3% for the comparable period in the previous year. Income before income taxes, minority interest and extraordinary items for the third quarter of fiscal 1996 was $20.3 million, up from $15.7 million in the previous year. For the nine months ended March 31, 1996, income before income taxes, minority interest and extraordinary items increased to $51.6 million, compared with $41.3 million in the prior year period. The effective tax rate for the third quarter of fiscal 1996 was 31.5% compared with 27.4% in the same period a year ago. The effective tax rate for the first nine months of fiscal 1996 was 31.6% compared with 32.6% in the prior year. The effective tax rates are below United States statutory rates due to the restructuring of certain foreign subsidiaries to take advantage of prior years' tax losses. The Company calculates its effective tax rate based upon its current estimate of annual results. Net income for the three months ended March 31, 1996, was $13.9 million, or $0.86 per share, compared with $11.4 million, or $0.72 per share, in the previous year. Net income for the first nine months of fiscal 1996 was $35.3 million, or $2.17 per share, compared with $27.5 million, or $1.74 per share, in the previous year. Prior year earnings per share data have been restated to give effect to the special 5% stock dividend declared and issued in August 1995. FINANCIAL CONDITION Net working capital at March 31, 1996, was $344.4 million, compared with $257.6 million at June 30, 1995. Working capital increased primarily due to the increase in inventories from $236.5 million at June 30, 1995, to $302.6 million at March 31, 1996. Higher inventory levels reflect the support of increased sales volumes, requirements for new product launches in the fourth quarter and the acquisition of Madrigal. Borrowings under the revolving credit facility at March 31, 1996, were $212.6 million, comprised of swing line borrowings of $6.7 million, which are included in notes payable, and competitive advance borrowings and revolving credit borrowings of $205.9 million. Borrowings under the revolving credit facility at June 30, 1995, were $115.9 million, comprised of swing line borrowings of $9.7 million and competitive advance borrowings and revolving credit borrowings of $106.2 million. Increased borrowings reflect the financing of capital expenditures, additional working capital requirements, the Madrigal acquisition and final payments for the Becker acquisition. In the second quarter of fiscal 1996, the revolving credit facility was amended and increased from $220 million to $275 million, and the maturity was extended one year to September 30, 2000. Accrued liabilities decreased $13.1 million, from $164.1 million to $151.0 million, primarily due to the funding of previously announced restructuring programs to enhance the productivity of recent acquisitions. Excess of cost over fair value of assets acquired increased $14.4 million, from $122.5 million to $136.9 million, reflecting final acquisition accounting adjustments for Becker and the acquisition of Madrigal. 13 BUSINESS HISTORY AND DEVELOPMENT Since its formation in 1980, the Company has developed internally and through acquisitions the capacity to design, manufacture and market its products to compete worldwide in the most significant areas of the high-quality, high- fidelity audio markets. While the Company has existed as a separate corporate entity for only 16 years, its significant subsidiaries have been in business for substantially longer periods, some previously as part of the same enterprise and most under their current management. In 1953, Dr. Sidney Harman, Chairman and Chief Executive Officer of the Company, co-founded Harman Kardon to design, manufacture and market high- fidelity consumer electronic audio components. Harman Kardon was the first domestic manufacturer to produce and market a high-fidelity receiver (a combination of tuner, preamplifier and power amplifier in one chassis). In 1962, Harman Kardon was acquired by a predecessor of the Company (the "Predecessor"). The Predecessor expanded its participation in the high-fidelity field in 1969 by acquiring JBL, a domestic manufacturer of high-quality loudspeakers designed for professional and consumer markets, and by forming international subsidiaries to market and distribute its audio products in Europe and Japan. In August 1977, the Predecessor was acquired by Beatrice Foods Co. (now Beatrice Companies, Inc. ("Beatrice")), when Dr. Harman became the Under Secretary of Commerce of the United States. In January 1980, after the conclusion of his service as Under Secretary of Commerce, Dr. Harman organized the Company to acquire from Beatrice the JBL loudspeaker business and the international distribution companies, which together represented approximately 60% of the Predecessor's business. Since 1980, through both internal growth and a series of strategic acquisitions, the Company has (i) expanded its loudspeaker business by adding new product lines and entering new markets, (ii) broadened its consumer and professional customer base through diversification into the consumer and professional audio electronics components business and (iii) increased its manufacturing and distribution capabilities domestically and internationally in conjunction with its strategy to become a vertically-integrated designer, manufacturer and worldwide marketer of high-quality, high-fidelity audio products designed for consumer and professional use. STRATEGY Harman is a leading domestic and international manufacturer and marketer of high-fidelity audio products. The Company's goal is to capitalize on its technical expertise and reputation for creating superior sound and to translate this expertise into increased market share in existing markets and into new product areas wherever an in-depth understanding of sound gives Harman a competitive edge. The key elements of its strategy are: Provide Superior Sound. Harman strives to provide its customers with products that deliver high-quality, high-fidelity sound. The Company and its predecessors have been leaders and innovators in loudspeaker and electronic production and technology for almost 50 years. Management believes the Company's research, development and engineering capabilities are among the most advanced in the audio field. Capitalize on Brand Equity. The Company believes that its brand names are well recognized worldwide for premium quality and performance. Harman believes that this strong brand name recognition has enabled it to expand its product offerings and market share in the consumer, professional and OEM audio markets, and will continue to facilitate such growth in the future. Pursue Market Segment Diversification. The Company has emphasized utilization of its strengths in delivering superior sound beyond the consumer and professional loudspeaker markets. Harman has expanded into the automotive OEM and aftermarket loudspeaker business both domestically and internationally. The Company has also expanded into developing areas in the consumer and professional audio electronics markets where it believes that the integration of electronics and loudspeakers will improve a product's performance 14 or provide a systems solution, focusing most recently on home theater and branded OEM audio systems for personal computers. Integrate Design, Engineering, Manufacturing and Marketing. Harman has invested significant resources in developing sophisticated manufacturing processes and facilities in the United States and Europe. Management believes that its ability to manufacture innovative, high-quality products is attributable to the Company's integrated facilities, coupled with its policy of emphasizing workers' education, training and participation in the decision- making process. The Company seeks to integrate the disciplines of design, engineering, manufacturing and marketing. As distinguished from the traditional separation of these functions, management believes that communication and cooperation among all functional areas significantly reduces development time, generates products which can be more efficiently and competitively produced, and improves the Company's ability to respond to customer needs. Market on a Worldwide Basis. The Company and its Predecessor have been actively marketing products worldwide for almost 50 years. Harman strives to produce products that are responsive to the requirements of different international markets for functionality, appearance and performance. As a result, the Company believes that its major brands are well recognized for high quality in most major markets worldwide. OPPORTUNITIES The Company believes that its well-recognized brand names, its reputation for high quality products and superior sound, and its design and manufacturing capabilities position it well to capitalize on current industry trends. To exploit opportunities created by the industry-wide transition from analog to digital processing, the Company continues to enhance existing product offerings and to develop new proprietary products, including software-driven audio systems with integrated digital architecture that permits communication among all components. Within its Consumer, Professional and OEM Groups, the Company foresees growth opportunities including the following: Existing and Emerging Market Segments. The Company continues to leverage its brand names to broaden its product offerings in existing market segments and enter new segments, including surround sound, home theater and audio systems for personal computers. The Company continually seeks to improve its market position in its important loudspeaker business by introducing new products that offer greater efficiency and reduced size. Further, the Company's advanced technology in loudspeakers and electronics permits it to develop integrated systems which offer substantial improvements in performance. One such example is the recent introduction of Infinity's Compositions line, which incorporates a powered subwoofer that enables the listener to enjoy home theater sound with modest power requirements. Harman offers a complete line of home theater products, including JBL's $50,000 flagship Synthesis I system; the Company believes its breadth of product offerings positions it to capitalize on the high-growth home theater market segment. Finally, the Company intends to pursue opportunities in emerging product categories such as electronic components that offer simplified digital controls, reduced size and high quality sound. Comprehensive, Integrated Product Offerings. Management believes that the ability to offer professional customers complete turnkey systems across its principal market segments, including broadcast and recording, sound reinforcement and musical instrument support, will permit the Company to continue increasing sales in these professional market segments. In addition, the Company believes that advances in motion picture audio and recording technology will spur demand for loudspeakers and electronics in movie theaters and recording studios. Management also expects that emerging markets in Eastern Europe and Asia will increase demand for its professional audio products and recording and broadcast equipment to satisfy infrastructure needs. Fully-Integrated Automotive Audio Systems. The Company believes significant growth opportunities exist within the automotive audio market to increase sales by increasing product penetration in OEM models currently supplied, expanding the number of automobile models offering its systems and adding new OEM 15 customers. The recent Becker acquisition complements the Company's JBL, Infinity and Harman Kardon automotive audio systems and enables the Company to offer fully-integrated automotive audio systems for the first time, allowing for a substantial increase in the unit price of its audio systems. The Company believes that such systems, which incorporate a head unit, amplifiers, loudspeakers and associated electronics, also provide a platform for the Company's expansion into additional automotive electronic products such as communications, security and navigation, thereby providing the opportunity for further increases in system content. Computer OEM Systems. In broadening its OEM business to include personal computers, the Company has developed a series of branded audio systems for Compaq, Gateway and other manufacturers of personal computers. These audio systems provide high quality sound in a small package and substantially enhance the entertainment appeal and capabilities of the personal computer. The Company believes that the number of personal computers equipped with multimedia capabilities will continue to increase at a high rate on a worldwide basis, and that the Company is well positioned to capitalize on this emerging market segment with its JBL, Infinity and Harman Kardon brand names. New Technology. Through the extensive development of digital signal processing capabilities by its electronic engineering organization, the Company is generating a substantial body of intellectual property, including proprietary software titled Harman Smart TV, which enables the personal computer ("PC") to serve as a user-friendly television set. Harman Smart TV is presently bundled in Gateway 2000's new Destination product. The Company has also developed the ability to provide, on a paid subscriber basis, TV Guide(R) information to buyers of PCs equipped with Harman Smart TV. The Company currently is in discussions with other PC makers who have expressed interest in Harman Smart TV. The Company is also in discussions with PC makers who have indicated interest in the Company's proprietary VMAx(TM) software, which generates virtual surround sound images through only two speakers. The Company's 6 Axis(TM) surround sound system employed in the new Harman Kardon Citation Processor is of interest to a number of advanced technology users. The Company is now in discussions with several potential customers to license this technology. These and other technological developments form a body of intellectual property around which the Company believes it can develop new revenue sources. PRODUCTS The Company designs, engineers, manufactures and markets worldwide a broad range of high-quality, high-fidelity audio loudspeakers and electronics for the consumer (both home and automotive aftermarket), professional (broadcast and recording, sound reinforcement, and musical instrument support) and OEM (automotive and personal computer) markets. For the first nine months of fiscal 1996, the Consumer Group accounted for approximately 33% of the Company's sales, the Professional Group contributed approximately 34% of sales and the OEM Group generated approximately 33% of sales. Consumer Group. The Company designs, manufactures and markets loudspeakers for the consumer market principally under the JBL and Infinity brand names. Since its formation in 1948, JBL has designed loudspeakers to appeal to audio enthusiasts who desire superior-quality sound reproduction. JBL loudspeakers sold to the consumer market employ techniques originally developed by the Company for professional use in recording studios, concert halls, theaters, airports and other acoustically-demanding environments. JBL's diverse product line gives customers a wide range of speaker choices: floorstanding, bookshelf, built-in, wireless, powered, transportable and wall or ceiling mountable loudspeakers, in styles and finishes ranging from high gloss piano lacquer to genuine wood veneers. JBL's introduction of wireless technology in the SoundEffects speaker system allows easy home theater and multi-room installation. From its beginning in 1968, Infinity has developed high quality loudspeakers with their own audio character, which is commonly identified as "linear," "symmetrical" or "neutral." These characteristics are expressed in sophisticated acoustic configurations utilizing injection-molded graphite speaker cone material, 16 electro-magnetic induction tweeters and mid-range drivers. Compositions, Infinity's new home theater loudspeakers, has received excellent reviews from the high fidelity audio press for outstanding design and performance. The more expensive JBL and Infinity loudspeakers are housed in high-gloss lacquer or wooden veneer cabinets which complement the quality components they enclose. The Company has made significant investments in its loudspeaker cabinet production facilities in California and in Denmark and believes that they are among the most advanced cabinet production facilities in the world. The Company designs, manufactures and markets a broad range of consumer audio electronics products on a worldwide basis. Both JBL and Infinity also offer premium automotive aftermarket loudspeaker and amplifier products. The Company's consumer electronics products facilitate the marketing of complete systems incorporating the Company's loudspeakers, such as surround sound home theater installations. Founded in 1953, Harman Kardon has been a leading innovator in the development of high-quality audio components which improve the listening experience and reflect a commitment to value and ease-of-use. The realization of these principles is reflected in Harman Kardon's current product offerings, including audio-video stereo receivers featuring Dolby Pro-Logic and AC-3 technology, and front-loading, bit stream compact disc changers. In addition, the Company is a designer and manufacturer of Citation high-end surround sound processors, amplifiers and loudspeakers manufactured in the United States for the growing U.S. and international home theater market. AudioAccess is a leader in the field of in-home, multi-source, multi-zone sound system amplifiers and controls; and Madrigal is the manufacturer of the renowned Mark Levinson and Proceed brand audiophile high-fidelity product lines. Professional Group. The Company designs, manufactures and markets products in all principal segments of the professional market, offering complete systems for professional installations around the world. The Professional Group includes many of the most respected names in the industry including JBL, Soundcraft, Allen & Heath, DOD, Lexicon, AKG, BSS, dbx, Orban, Turbosound, Studer and UREI. Professional installations of Harman products include stadiums, opera houses, concert halls, recording studios, broadcast studios, theaters, cinemas and touring concerts. Sound systems incorporating components manufactured by JBL, Lexicon, AKG, Turbosound, Studer and Soundcraft are in use around the world in such places as the Great Hall of the People in Beijing, China, the Royal Danish Theater in Copenhagen and Abbey Road Studio in England. Performing artists such as Pink Floyd, U2, The Rolling Stones, Oasis and Wynton Marsalis use Harman professional equipment when on tour. The professional market has advanced rapidly and is heavily involved in digital technology. Harman's Professional Group is a leader in this market. The strength of the Professional Group is derived from its ability to share research and development, engineering talent and other substantial digital resources among its divisions. Soundcraft, Lexicon, Studer and DOD each have substantial digital resources and work together to achieve common goals by blending their respective areas of strength and expertise. The Company believes that the Professional Group's loudspeaker products are well-known for high quality and superior sound. The JBL Professional portfolio of products includes studio monitors, loudspeaker systems, power amplifiers, sound reinforcement systems, bi-radial horns, theater systems and surround sound systems as well as industrial loudspeakers. The AKG acquisition has provided the Company with additional professional loudspeaker market strength through the addition of the Turbosound Floodlight and Flashlight loudspeaker lines. OEM Group. Harman is a leading global manufacturer of premium branded automotive OEM audio systems. In its sale of loudspeakers, head units and other audio products to the automotive OEM market, the 17 Company takes advantage of its expertise in the design and manufacture of high- quality loudspeakers, radios and other electronics, as well as the reputation for quality associated with its JBL, Infinity, Harman Kardon and Becker brand names. The Company's expertise in designing and manufacturing transducers utilizing special materials allows the Company to collaborate with automobile manufacturers to design lighter sound systems that contribute to increases in automobile fuel efficiency. The addition of head unit and other electronics expertise through the Becker acquisition now enables the Company to provide complete high-fidelity audio systems solutions to automobile manufacturers. The Company manufactures audiophile OEM sound systems for automobiles, including Infinity systems sold to Chrysler and Mitsubishi in models such as Chrysler's Jeep Grand Cherokee and Mitsubishi's 3000GT, JBL systems sold to Ford in models such as Lincoln's Continental and Ford's Windstar Minivan and Harman Kardon systems sold to BMW (3-series), Jaguar, Saab and Land Rover (Range Rover), as well as a non-branded premium system sold to Toyota for the Avalon. These premium OEM audio systems are engineered individually for each automobile model to maximize acoustic performance. Becker supplies head units and other electronics to Mercedes, BMW and Porsche. The Company manufactures a series of "JBL-Pro" branded audio systems for Compaq's Presario line of personal computers and a higher-powered Harman Kardon system for Gateway's new Destination TV-PC product. Destination also includes Harman's Smart TV. These audio systems provide high-quality sound and thus enhance the appeal and capability of the personal computer as an entertainment device. MANUFACTURING The Company believes that its manufacturing capabilities are essential to maintaining and improving the quality and performance of its products. The Company manufactures most of the loudspeakers and electronics products that it sells other than Harman Kardon electronic components. The Company's manufacturing capabilities with respect to loudspeakers include producing high-gloss lacquer and wooden veneer loudspeaker enclosures, milling wire, winding voice coils and using numerically controlled lathes and other machine tools to produce its many precision components. Particularly with respect to loudspeakers, better quality is often achieved through attention to many relatively small details resulting in the ability to respond quickly to changes in customer demands. The Company believes that its high degree of manufacturing integration permits it to produce more consistently uniform high performance products. Moreover, the Company has been able to apply technology and materials developed for one line of products to other product lines. The Company uses common manufacturing facilities to achieve economies of scale, while maintaining competition among its subsidiaries in engineering, product development and marketing. The Company's principal domestic manufacturing facility is located in Northridge, California, where it manufactures JBL and Infinity loudspeakers, including cabinets, as appropriate, for consumer, professional, automotive aftermarket and personal computer markets and amplifiers for the automotive OEM market and the automotive aftermarket. The Company manufactures loudspeakers and assembles sound systems for the OEM automotive market in Martinsville, Indiana. DOD manufactures its professional electronic products at its facility in Sandy, Utah. Lexicon manufactures its professional electronic products predominantly at its Waltham, Massachusetts facility. Many of the Company's manufacturing facilities are certified as conforming to the requirements of ISO 9000 for manufacturing, engineering and service, and Harman Motive enjoys a Q-1 certified supplier rating from Ford and holds the Q-E certification from Chrysler. In addition to the Company's U.S. manufacturing capacity, the Company has established a strong manufacturing presence in Europe to better respond to customer demands in that market. Audax Industries SNC ("Audax"), a manufacturer of high-quality, high-performance tweeters, manufactures speakers in 18 France, and the Company's Lydig of Scandinavia A/S ("Lydig") subsidiary manufactures cabinet enclosures and assembles complete JBL and Infinity loudspeakers in Denmark. The Company's international speaker manufacturing facilities enable the Company to compete more effectively in Europe. Harman manufactures automotive OEM loudspeakers and Soundcraft manufactures mixing boards at their respective facilities in the United Kingdom. In Germany, Becker manufacturers high quality head units for Mercedes Benz and other leading European auto makers. Studer and AKG have professional electronics manufacturing operations in Switzerland and Austria. MARKETING AND DISTRIBUTION The Company's products are sold domestically and internationally in the consumer, OEM and professional markets. The consumer market for audio entertainment systems consists of home and automotive aftermarket. The OEM market includes automobile manufacturers who purchase components and systems on either a branded or generic basis and manufacturers of personal computers. The Company's professional market includes a wide range of professional uses, from musical performances to commercial and public installations. The Company primarily markets its consumer audio products through audio and audio-video specialty stores and certain audio-video chain stores, such as Circuit City in North America and MediaMarkt in Germany. The Company enjoys broad distribution of its products and particularly seeks dealers who emphasize high-quality audio systems and who are knowledgeable about the characteristics of audio products. The Company's sales and marketing activities include dealer education programs and comprehensive product literature. The Company's dealers typically stock a number of home audio equipment lines including competing products (sometimes both JBL and Infinity loudspeakers) and may also carry automobile audio systems and other consumer-oriented electronics products. The Company's professional audio products are marketed worldwide through professional sound equipment dealers, including engineered-sound contractors which directly assist major users. The Company's sales and marketing group for its professional products is separate and independent from its consumer products sales and marketing group. The Company markets its branded OEM audio products to automobile and personal computer manufacturers. OEM customers include Chrysler, Mercedes Benz, Ford, Range Rover, Mitsubishi, BMW, Toyota, Porsche, Jaguar and Saab in the automotive segment and Compaq and Gateway in the personal computer segment. GEOGRAPHIC BUSINESS DATA The Company's predominant business is the design, manufacture and worldwide distribution of high-fidelity audio products. The following table shows net sales by geographic segment for each of the fiscal years in the three-year period ended June 30, 1995, and for the nine-month periods ended March 31, 1995 and 1996.
NINE MONTHS ENDED FISCAL YEAR ENDED JUNE 30, MARCH 31, ---------------------------------- ------------------- 1993 1994 1995 1995 1996 -------- -------- ----------- -------- --------- (IN THOUSANDS) (UNAUDITED) Net sales: U.S.................................... $449,254 $673,305 $ 784,989 $559,387 $ 647,474 International...................... 228,052 282,191 502,809 355,206 479,184 Intercompany/interregion.. (62,393) (93,349) (117,574) (86,775) (138,176) ----------- ---------- ------------- ----------- ------------ Total............................... $664,913 $862,147 $1,170,224 $827,818 $ 988,482 ======= ====== ======== ====== =======
19 MANAGEMENT The following table sets forth the names, ages and positions of the Directors and Executive Officers of the Company as of April 30, 1996.
NAME AGE POSITION ---- --- -------- Sidney Harman............................. 77 Chairman of the Board of Directors and Chief Executive Officer Bernard A. Girod.......................... 54 President, Chief Operating Officer, Chief Financial Officer, Secretary and Director Shirley Mount Hufstedler.................. 70 Director Ann McLaughlin............................ 54 Director Edward H. Meyer........................... 69 Director Thomas Jacoby............................. 41 President-Harman Consumer Group Philip Hart............................... 51 President-Harman Professional Group Gregory P. Stapleton...................... 49 President-Harman OEM Group Jerome H. Feingold........................ 54 Vice President-Quality Frank Meredith............................ 38 Vice President, General Counsel and Assistant Secretary Sandra B. Robinson........................ 36 Vice President-Financial Operations Floyd E. Toole............................ 57 Vice President-Engineering William S. Palin.......................... 53 Vice President-International Controller
The principal occupation of each Director and Executive Officer for at least the last five years is set forth below. Sidney Harman, Ph.D., the Company's founder, has been Chairman of the Board and Chief Executive Officer since the Company's formation in 1980. Dr. Harman served as Under Secretary of Commerce of the United States from 1977 through 1978. Bernard A. Girod has been President of the Company since March 1994, Chief Operating Officer of the Company since March 1993, Chief Financial Officer of the Company since September 1986, Secretary of the Company since November 1992 and a Director of the Company since 1993. From September 1979 to September 1986, Mr. Girod was the Vice President and General Manager of Permacel, a subsidiary of Avery International and Vice President of Planning and Business Development for Avery International. From 1977 to 1979, Mr. Girod was the Chief Financial Officer of the Predecessor of the Company. Shirley Mount Hufstedler has been a Director of the Company since September 1986. Ms. Hufstedler is and has been for the past fifteen years in private law practice. 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 U S WEST, Inc. and Director Emeritus of Hewlett-Packard Company. 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. Ann McLaughlin has been a Director of the Company since November 14, 1995. She served as Secretary of Labor of the United States under President Reagan from 1987 until 1989. Ms. McLaughlin is a director of AMR, General Motors Corporation, Kellogg Company and Nordstrom, Inc. She is a member of the Board of Overseers of the Wharton School of the University of Pennsylvania and a member of the Board of the Nixon Center for Peace and Freedom. 20 Edward H. Meyer, who was elected a Director of the Company in July 1990, 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. Thomas Jacoby has been President of the Harman Consumer Group since February 1993. Prior to that time, Mr. Jacoby served as President of JBL Consumer since August 1990. From July 1988 to August 1990, Mr. Jacoby served as Executive Vice President of Harman Kardon. Philip J. Hart has been President of the Harman Professional Group since November 1993. Prior to that time, Mr. Hart served as President of Soundcraft since Harman's 1988 acquisition. Gregory P. Stapleton has been President of the Harman OEM Group since October 1987. Prior to his association with the Company, he was Senior Vice President of General Electric Venture Capital Corporation from January 1986 to September 1987, and was General Manager, Industrial Products Section, Factory Automation Products Division of General Electric Corporation from October 1982 through December 1985. Jerome H. Feingold has been the Vice President-Quality of the Company since January 1992. Prior to that time, Mr. Feingold served as President of Harman Speaker Manufacturing since July 1985. Prior to 1985, Mr. Feingold held various management positions within the manufacturing division of the Company. Frank Meredith has been the Vice President, General Counsel and Assistant Secretary of the Company since July 1992. Prior to that time, Mr. Meredith held other positions within the Company since May 1985. Sandra B. Robinson has been Vice President-Financial Operations since November 1992. Prior to that time, Ms. Robinson was Director of Corporate Accounting and has been employed by the Company since December 1984. Floyd E. Toole, Ph.D., joined the Company as Vice President-Acoustic Research in November 1991. Prior to joining the Company, Dr. Toole spent 25 years, most recently as Senior Research Officer, with the National Research Council of Canada's Acoustics and Signal Processing Group. At the National Research Council, Dr. Toole worked to develop psychoacoustic-optimized adaptive digital techniques for improving the performance of loudspeakers in rooms. William S. Palin has been Vice President-International Controller of the Company since March 1994. Prior to joining the Company, Mr. Palin was a partner of MacHardy Palin & Co. from July 1978 to March 1994. From July 1978 to January 1982, Mr. Palin served as an officer of two of the Company's international subsidiaries. 21 SELLING STOCKHOLDERS Sidney Harman, who has been the Chairman of the Board and Chief Executive Officer of the Company since its founding in 1980, and the family members and family-related entities set forth below (collectively, the "Selling Stockholders"), are offering shares pursuant to this Prospectus. The table below sets forth certain information regarding the beneficial ownership of Common Stock, as of April 30, 1996, by the Selling Stockholders both before and after giving effect to the Offering.
Shares Beneficially Owned Shares Beneficially Owned Before the Offering After the Offering -------------------------- ------------------------ Name and Address of Shares to be Sold Selling Stockholders Number Percentage in the Offering Number Percentage - ------------------------- -------- ------------- ----------------- --------- ------------- Sidney Harman .......... 2,816,706(1) 16.83% 1,450,000(2) 1,366,706(3)(4) 7.30%(4) 1101 Pennsylvania Ave., N.W., Suite 1010 Washington, D.C. 20004 The Sidney Harman Charitable Remainder Trust ......................... 500,000 3.07% 500,000 0 0.00% c/o William Zabel, Trustee Schulte, Roth & Zabel 900 Third Avenue New York, NY 10022 The Harman Family Foundation .............. 50,000 0.31% 50,000 0 0.00% 1101 Pennsylvania Ave., N.W., Suite 1010 Washington, D.C. 20004
- -------- (1) Includes 124,987 shares of Common Stock with respect to which Dr. Harman has sole voting and investment power; 460,950 shares of Common Stock subject to stock options exercisable as of April 30, 1996 or within 60 days thereof; 1,486,107 shares held in a trust with respect to which Dr. Harman has sole dispositive and sole voting power; 428,934 shares held in two irrevocable trusts for various family members with respect to which Dr. Harman has sole voting power but shared dispositive power; 312,578 shares held by family members of which Dr. Harman has sole voting power pursuant to 3-year revocable proxies and for which Dr. Harman disclaims beneficial ownership; and 3,150 shares held by family members with respect to which Dr. Harman has no voting power or dispositive power and also disclaims beneficial ownership. The 460,950 shares of Common Stock subject to stock options described above include a premium/performance option to purchase 315,000 shares of Common Stock (the "Option"), which was granted to Dr. Harman on November 9, 1993. (2) The 1,450,000 shares to be sold by Dr. Harman in the Offering will include; all of the 124,987 shares of Common Stock with respect to which Dr. Harman has sole voting and investment power; 784,679 shares held in the Sidney Harman 1987 Revocable Trust with respect to which Dr. Harman has sole dispositive power and sole voting power; 367,437 shares held in two irrevocable trusts for various family members with respect to which Dr. Harman has sole voting power but shared dispositive power with his spouse, The Honorable Jane Harman; 171,847 shares held by family members (51,900 shares held by Barbara Harman, 40,000 shares held by Paul Harman, 33,947 shares held by Lynn Harman, and 46,000 shares held by Gina Harman) for which Dr. Harman has sole voting power pursuant to 3-year revocable proxies and for which Dr. Harman disclaims beneficial ownership; and 1,050 shares held by The Honorable Jane Harman with respect to which Dr. Harman has no voting power or dispositive power and also disclaims beneficial ownership. Certain Selling Stockholders have granted to the Underwriters 30-day options to purchase, in the aggregate, up to 300,000 additional shares of Common Stock, solely to cover over-allotments, if any. If these over-allotment options are exercised, the Sidney Harman 1987 Revocable Trust will sell an additional 300,000 shares of Common Stock. (3) Includes 460,950 shares of Common Stock subject to stock options exercisable as of April 30, 1996 or with 60 days thereof; 685,717 shares held in trust with respect to which Dr. Harman has sole dispositive power and sole voting power; 77,208 shares held in two irrevocable trusts for various family members with respect to which Dr. Harman has sole voting power but shared dispositive power; 140,731 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 2,100 shares held by family members with respect to which Dr. Harman has no voting power or dispositive power and also disclaims beneficial ownership. (4) If the over-allotment options granted by certain Selling Stockholders are exercised in full, such Selling Stockholders would beneficially own 1,066,706 (5.60% of the outstanding Common Stock) after completion of the Offering. 22 DESCRIPTION OF CAPITAL STOCK The authorized capital stock of the Company consists of 50,000,000 shares of Common Stock and 5,000,000 shares of Preferred Stock, par value $0.01 per share (the "Preferred Stock"). As of April 30, 1996, 16,270,953 shares of Common Stock were outstanding, held by approximately 222 holders of record and 1,172,538 shares of Common Stock were reserved for issuance upon the exercise of outstanding stock options. Following the Offering the Company will have 30,556,509 authorized but unissued and unreserved shares of Common Stock (30,256,509 assuming exercise of the Underwriters' over-allotment options in full). As of the date of this Prospectus, the Company has no outstanding Preferred Stock. The Common Stock has no conversion, redemption, cumulative voting or preemptive rights. The following description of the Company's capital stock is a summary and is qualified in its entirety by reference to the documents incorporated by reference and to the Certificate and the By-Laws. COMMON STOCK The holders of Common Stock are entitled to one vote per share on all matters voted on by stockholders, including elections of directors. Except as otherwise required by law or provided in any resolution adopted by the Board of Directors of the Company with respect to any series of the Preferred Stock, the holders of such shares exclusively possess all voting power. The Certificate does not provide for cumulative voting in the election of directors. Holders of Common Stock are entitled to receive such dividends as may be declared from time to time by the Board of Directors out of funds legally available for such purpose, after payment of dividends required to be paid on outstanding Preferred Stock, if any. In the event of the liquidation, dissolution or winding up of the Company, the holders of Common Stock are entitled to share ratably in all assets remaining after payment of liabilities, subject to the rights of the holders of any Preferred Stock then outstanding. All outstanding shares of Common Stock are, and upon issuance the shares offered by the Company hereby will be, fully paid and nonassessable. The transfer agent and registrar for the Common Stock is Chemical Mellon Shareholder Services, Encino, California. PREFERRED STOCK The Board of Directors has authority, without any further vote or action by the stockholders, to issue Preferred Stock in one or more series and to fix the rights, preferences, privileges and restrictions thereof, including the voting rights, dividend rate, conversion rights, terms of redemption (including sinking fund provisions), redemption price or prices, amounts payable upon liquidation, and the number of shares constituting any series or the designation of such series. The Company has no current plan to issue or sell any of the Preferred Stock, but reserves the right to do so in the future. CERTAIN PROVISIONS OF THE CERTIFICATE, THE BY-LAWS AND DELAWARE LAW The Certificate and the By-Laws contain certain provisions that could make more difficult the acquisition of the Company by means of a tender offer, a proxy contest or otherwise. These provisions are expected to discourage certain types of coercive takeover practices and inadequate takeover bids and to encourage persons seeking to acquire control of the Company first to negotiate with the Company. The description set forth below is intended as a summary only and is qualified in its entirety by reference to the Certificate and the By- Laws. FAIR PRICE PROVISIONS The Certificate contains provisions (the "Fair Price Provisions") that raise the affirmative vote required to approve certain "Business Combinations" (as defined below) involving an "Interested Stockholder" (as defined below) to at least 66 2/3% of the votes of the outstanding capital stock of the Company entitled to 23 vote generally in the election of directors (the "Voting Stock"), unless the transaction is approved by a majority of disinterested directors or unless specified price criteria described below and procedural requirements are satisfied. A "Business Combination" is defined by the Certificate to include any of the following transactions with, or proposed by, an Interested Stockholder or affiliate: a merger or consolidation; a sale, lease or other disposition of the Company's assets having an aggregate fair market value of $10 million or more; the issuance or transfer by the Company of securities of the Company having an aggregate fair market value of $10 million or more; a plan of dissolution proposed by an Interested Stockholder; or a reclassification of securities or recapitalization of the Company disproportionately favorable to an Interested Stockholder. An "Interested Stockholder" is defined by the Certificate to include any person or entity, other than the Company or any subsidiary or employee benefit plan thereof, which owns beneficially or controls directly or indirectly 20% or more of the shares of the Voting Stock. The 66 2/3% voting requirement is not applicable if certain procedural requirements are met and if, in the case of a Business Combination involving payments to holders of Common Stock, the fair market value per share of such payments is equal to the greater of (i) the highest per share price paid by the Interested Stockholder to purchase shares of Common Stock in the two-year period prior to the first public announcement of the proposed Business Combination (the "Announcement Date") or in the transaction in which it became an Interested Stockholder (whichever is greater), and (ii) the fair market value per share of Common Stock on the Announcement Date or on the date on which the Interested Stockholder became an Interested Stockholder (whichever is greater). In addition, the consideration to be paid to the Company's stockholders must be either cash or the same consideration used by the Interested Stockholder in acquiring the largest part of its Voting Stock prior to the Announcement Date. SUPERMAJORITY VOTE REQUIREMENTS The Certificate provides that a vote of the holders of 66 2/3% or more of the voting power of the Voting Stock is required to amend, alter or repeal, or to adopt any provision inconsistent with, the Fair Price Provisions or the provisions relating to the classified board of directors and ancillary matters. The Certificate also provides that the stockholders may take action only at meetings and that directors may only be removed for cause and by a 66 2/3% vote. ANTI-TAKEOVER STATUTE Section 203 of the Delaware General Corporation Law ("DGCL") is applicable to corporate takeovers in Delaware. Subject to certain exceptions set forth herein, Section 203 of the DGCL provides that a corporation may not engage in any business combination with any "interested stockholder" for a three-year period following the time that such stockholder becomes an interested stockholder unless: (i) prior to such time, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; (ii) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding certain shares); or (iii) subsequent to such time, the business combination is approved by the board of directors of the corporation and by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder. Except as specified therein, an interested stockholder is defined to include any person that is the owner of 15% or more of the outstanding voting stock of the corporation, or is an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation, at any time within three years immediately prior to the relevant date, and the affiliates and associates of such person. Under certain circumstances, Section 203 of the DGCL makes it more difficult for an "interested stockholder" to effect various business combinations with a corporation for a three-year period. 24 UNDERWRITING Montgomery Securities, Donaldson, Lufkin & Jenrette Securities Corporation, Lehman Brothers Inc. and J.P. Morgan Securities Inc. (the "Underwriters") have severally agreed, subject to the terms and conditions set forth in the Underwriting Agreement, to purchase from the Company and the Selling Stockholders the number of shares of Common Stock indicated below opposite their respective names at the public offering price less the underwriting discount set forth on the cover page of this Prospectus. The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent and that the Underwriters are committed to purchase all of the shares if they purchase any.
NUMBER OF UNDERWRITER SHARES --------------------- --------- Montgomery Securities................................................... Donaldson, Lufkin & Jenrette Securities Corporation.... Lehman Brothers Inc....................................................... J.P. Morgan Securities Inc. ............................................ --------- Total........................................................................... 4,000,000 ========
The Underwriters have advised the Company and certain Selling Stockholders that they propose initially to offer the Common Stock to the public on the terms set forth on the cover page of this Prospectus. The Underwriters may allow to selected dealers a concession of not more than $ per share; and the Underwriters may allow, and such dealers may reallow, a concession of not more than $ per share to certain other dealers. After the Offering, the offering price and other selling terms may be changed by the Underwriters. The Common Stock is offered subject to receipt and acceptance by the Underwriters and to certain other conditions, including the right to reject orders in whole or in part. The Company and the Selling Stockholders have granted options to the Underwriters, exercisable during the 30-day period after the date of this Prospectus, to purchase up to a maximum of 300,000 additional shares of Common Stock from the Company and 300,000 shares from such Selling Stockholders to cover over-allotments, if any, at the same price per share as the initial shares to be purchased by the Underwriters. Such options granted by the Company and such Selling Stockholders must be exercised pro rata. To the extent that the Underwriters exercise these options, each of the Underwriters will be committed, subject to certain conditions, to purchase such additional shares in approximately the same proportion as set forth in the table above. The Underwriters may purchase such shares only to cover over-allotments made in connection with this Offering. The Underwriting Agreement provides that the Company and the Selling Stockholders will indemnify the Underwriters against certain liabilities, including civil liabilities under the Securities Act of 1933, as amended (the "Securities Act"), or will contribute to payments the Underwriters may be required to make in respect thereof. Sidney Harman has agreed not to offer, sell or otherwise dispose of any shares of Common Stock for a period of 90 days after the date of this Prospectus without the prior written consent of Montgomery Securities, subject to certain exceptions. The Company has also agreed not to offer, sell, contract to sell or otherwise dispose of any shares of the Common Stock for a period of 90 days after the date of this Prospectus, without the prior written consent of Montgomery Securities, subject to certain limited exceptions. 25 EXPERTS The consolidated financial statements and schedule of Harman International Industries, Incorporated and subsidiaries as of June 30, 1995 and 1994 and for each of the years in the three-year period ended June 30, 1995, incorporated herein by reference, have been incorporated in this Prospectus in reliance upon the report of KPMG Peat Marwick LLP, independent certified public accountants, incorporated by reference, and upon the authority of said firm as experts in accounting and auditing. LEGAL MATTERS The validity of the shares of Common Stock offered hereby will be passed upon for the Company by Jones, Day, Reavis & Pogue, Washington, D.C. and New York, New York. Certain legal matters in connection with the Offering will be passed upon for the Underwriters by Simpson Thacher & Bartlett (a partnership which includes professional corporations), New York, New York. AVAILABLE INFORMATION The Company has filed with the Commission a Registration Statement on Form S- 3 (herein, together with all amendments and exhibits, referred to as the "Registration Statement") under the Securities Act with respect to the shares of Common Stock offered hereby. This Prospectus does not contain all of the information set forth in the Registration Statement, certain parts of which have been omitted in accordance with the rules and regulations of the Commission. Statements made in this Prospectus as to the contents of any contract, agreement or other document referred to herein are not necessarily complete; with respect to each such contract, agreement or other document filed as an exhibit to the Registration Statement, reference is made to such exhibit for a more complete description of the matter involved, and each such statement shall be deemed qualified in its entirety by such reference. Copies of the Registration Statement and the exhibits may be inspected, without charge, at the offices of the Commission, or obtained at prescribed rates from the Public Reference Section of the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549. The Company's Common Stock is listed on the NYSE. The Company is subject to the informational requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance therewith files reports, proxy statements and other information with the Commission which may be inspected and copied at the public reference facilities maintained by the Commission at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at certain Regional Offices of the Commission: 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such material may be obtained from the Public Reference Section of the Commission, at prescribed rates. In addition, such reports, proxy statements and other information may be inspected at the offices of the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005. 26 INCORPORATION OF CERTAIN INFORMATION BY REFERENCE The following documents filed with the Commission by the Company are incorporated in this Prospectus by reference: 1. The Company's Annual Report on Form 10-K for the year ended June 30, 1995; 2. The Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995; 3. The Company's Quarterly Report on Form 10-Q for the quarter ended December 31, 1995; 4. The Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1996; 5. The Company's Current Report on Form 8-K filed on May 6, 1996; and 6. The Company's Form 8, Amendment No. 1, dated November 13, 1986, to its Form 8-A Registration Statement. All documents filed by the Company pursuant to Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act subsequent to the date of this Prospectus and prior to the termination of this Offering shall be deemed to be incorporated by reference in this Prospectus and to be part hereof from the date of filing of such documents. Any statement contained in a document incorporated by reference herein shall be deemed to be modified or superseded for purposes of this Prospectus to the extent that a statement contained herein or in any other subsequently filed document which is also incorporated by reference herein modifies or supersedes such statement. Any such statement so modified or superseded shall not be deemed, except as so modified or superseded, to constitute a part of this Prospectus. The Company will provide without charge to each person to whom this Prospectus is delivered, upon the written or oral request of such person, a copy of the documents incorporated by reference in this Prospectus (other than exhibits to such documents unless such exhibits are specifically incorporated by reference into such documents). Such requests should be directed to Harman International Industries, Incorporated, 1101 Pennsylvania Avenue, N.W., Suite 1010, Washington, D.C. 20004 (telephone number (202) 393-1101), Attention: Bernard A. Girod, President. 27 Harman worldwide [MAP APPEARS HERE] Europe 34% Asia 16% Mid-East Mediterranean 1% Africa 1% Pacific Rim 1% North America 46% South America, Central America, Caribbean 1%
Fiscal 1995 Sales Revenue This map has been drawn to suggest the relative proportion of the Company's fiscal 1995 sales in world markets where we are active. ============================================================================ No dealer, sales representative, or any other person has been authorized to give any information or to make any representations in connection with this Offering other than those contained in this Prospectus, and, if given or made, such information or representations must not be relied upon as having been authorized by the Company, the Selling Stockholders or any of the Underwriters. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the shares of Common Stock to which it relates or an offer to, or a solicitation of, any person in any jurisdiction where such an offer or solicitation would be unlawful. Neither the delivery of this Prospectus nor any sale made hereunder shall, under any circumstances, create an implication that there has been no change in the affairs of the Company or that information contained herein is correct as of any time subsequent to the date hereof. ------------------- TABLE OF CONTENTS -------------------
Page ---- Prospectus Summary................................................................................ 3 Risk Factors.............................................................................................. 7 Use of Proceeds........................................................................................ 9 Price Range for Common Stock............................................................... 9 Dividend Policy........................................................................................ 9 Capitalization........................................................................................... 10 Selected Consolidated Financial Data...................................................... 11 Management's Discussion and Analysis of Financial Condition and Results of Operations.............................................................................. 12 Business................................................................................................... 14 Management............................................................................................ 20 Selling Stockholders................................................................................ 22 Description of Capital Stock................................................................... 23 Certain Provisions of the Certificate, the By-Laws and Delaware Law.................................................................. 23 Underwriting........................................................................................... 25 Experts.................................................................................................... 26 Legal Matters.......................................................................................... 26 Available Information............................................................................ 26 Incorporation of Certain Information by Reference............................... 27
============================================================================ ============================================================================ 4,000,000 SHARES HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED [LOGO OF HARMAN INTERNATIONAL APPEARS HERE] COMMON STOCK ---------------- PROSPECTUS ---------------- MONTGOMERY SECURITIES DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION LEHMAN BROTHERS J.P. MORGAN & CO. May , 1996 ============================================================================ PART II INFORMATION NOT REQUIRED IN PROSPECTUS ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION Estimated expenses of the Company in connection with the issuance and distribution of the securities to be registered, other than underwriting discounts and commissions, are as follows:
ITEM AMOUNT ---- -------- S.E.C. Registration Fee............................................ $ 75,444 NYSE Initial Listing Fee.......................................... 29,500 NASD Filing Fee...................................................... 22,379 Printing and Engraving Expenses............................. 200,000 Legal Fees and Expenses.......................................... 250,000 Accounting Fees and Expenses................................. 60,000 Blue Sky Fees and Expenses..................................... 15,000 Transfer Agent Fees and Expenses........................... 5,000 Miscellaneous............................................................ 17,677 -------- Total........................................................................ $675,000 ========
None of these expenses will be borne by the Selling Stockholders. ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS Set forth below is a description of certain provisions of the Certificate, the By-Laws and the DGCL, as such provisions relate to the indemnification of the directors and officers of the Company. This description is intended only as a summary and is qualified in its entirety by reference to the Certificate, the By-Laws and the DGCL. ELIMINATION OF LIABILITY IN CERTAIN CIRCUMSTANCES Article Tenth of the Certificate provides directors of the Company, to the fullest extent permitted by law, insulation from personal liability to the Company or to its stockholders or with respect to any acts or omissions in the performance of the director's duties as a director of the Company. Section 102(b)(7) of the DGCL permits corporations to eliminate or limit the personal liability of their directors by adding to the certificate of incorporation: A provision eliminating or limiting the personal liability of a director to the corporation or its stockholders for monetary damages for breach of fiduciary duty as a director, provided that such provision shall not eliminate or limit the liability of a director: (i) For any breach of the director's duty of loyalty to the corporation or its stockholders; (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) for [paying a dividend or approving a stock purchase that is a violation] under section 174 of [the DGCL], or (iv) for any transaction from which the director derived an improper personal benefit. No such provision shall eliminate or limit the liability of a director for any act or omission occurring prior to the date when such provision becomes effective. All references in this paragraph to a director shall also be deemed to refer (x) to a member of the governing body of a corporation which is not authorized to issue capital stock, and (y) to such other person or persons, if any, who, pursuant to a provision of the certificate of incorporation in accordance with (S) 141(a) of [the DGCL], exercise or perform any of the powers or duties otherwise conferred or imposed upon the board of directors by this title. While Article Tenth of the Certificate provides directors with protection from awards for monetary damages for breaches of the duty of care, it does not eliminate the directors' duty of care. Accordingly, the Certificate will have no effect on the availability of equitable remedies such as an injunction or rescission based on a director's breach of the duty of care. The provisions of Article Tenth as described above apply to II-1 officers of the Company only if they are directors of the Company and are acting in their capacity as directors, and does not apply to officers of the Company who are not directors. INDEMNIFICATION AND INSURANCE Section 145 of the DGCL sets forth provisions which define the extent to which a corporation organized under the laws of Delaware may indemnify directors, officers and employees. Those provisions have been incorporated by reference by the Company in Article VIII of the By-Laws. Section 145 provides in pertinent part as follows: (a) A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. (b) A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit if he acted in good faith and in a manner he reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or such other court shall deem proper. (c) To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in subsections (a) and (b) of this section, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith. (d) Any indemnification under subsections (a) and (b) of this section (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in subsections (a) and (b) of this section. Such determination shall be made (1) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or (2) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (3) by the stockholders. (e) Expenses (including attorneys' fees) incurred by an officer or director in defending a civil, criminal, administrative or investigative action, suit or proceeding may be paid by the corporation in II-2 advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of such director or officer to repay such amount if it shall ultimately be determined that he is not entitled to be indemnified by the corporation as authorized in this section. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate. (f) The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this section shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office. (g) A corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such, whether or not the corporation would have the power to indemnify him against such liability under this section. (h) For purposes of this section, references to "the corporation' shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this section with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation if its separate existence had continued. (i) For purposes of this section, references to "other enterprises' shall include employee benefit plans; references to "fines' shall include any excise taxes assessed on a person with respect to any employee benefit plan; and references to "serving at the request of the corporation' shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation' as referred to in this section. (j) The indemnification and advancement of expenses provided by, or granted pursuant to, this section shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. (k) The Court of Chancery is hereby vested with exclusive jurisdiction to hear and determine all actions for advancement of expenses or indemnification brought under this section or under any bylaw, agreement, vote of stockholders or disinterested directors, or otherwise. The Court of Chancery may summarily determine a corporation's obligation to advance expenses (including attorneys' fees). ITEM 16. EXHIBITS. EXHIBITS The following exhibits are to be filed as a part of this Registration Statement. Where such filing is made by incorporation by reference (IBR) to a previously filed statement or report, such statement or report is identified in parenthesis. II-3
SEQUENTIAL EXHIBIT NO. DESCRIPTION PAGE NO. ----------- ----------- ---------- 1.1 Form of Underwriting Agreement 4.1 Restated Certificate of Incorporation filed with the IBR Delaware Secretary of State on October 7, 1986, as amended by the Certificates of Amendment filed with the Delaware Secretary of State on November 13, 1986 and on November 9, 1993. (Filed as Exhibit 4.1 to Amendment 1 to the Company's Registration Statement on Form S-3 dated November 15, 1993 (File No. 1- 9764) and hereby incorporated by reference.) 4.2 Amended By-Laws of Harman International Industries, IBR Incorporated. (Filed as Exhibit 4.5 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 1992 (File No. 0-15147) and hereby incorporated by reference.) 5.1 Opinion of Jones, Day, Reavis & Pogue 23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors 23.2 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1) 24.1 * Power of Attorney (included on page II-5) * Previously filed.
ITEM 17. UNDERTAKINGS The undersigned Registrant hereby undertakes: For purposes of determining any liability under the Securities Act of 1933, each filing of the registrant's annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing of an employee benefit plan's annual report pursuant to Section 15(d) of the Securities Exchange Act of 1934) that is incorporated by reference in the registration statement shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. Insofar as indemnification for liabilities arising under the Securities Act of 1933 may be permitted to directors, officers, and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the registrant has been advised that in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. For purposes of determining any liability under the Securities Act of 1933, the information omitted from the form of prospectus filed as part of this registration statement in reliance upon Rule 430A and contained in a form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act shall be deemed to be part of this registration statement as of the time it was declared effective. For the purpose of determining any liability under the Securities Act of 1933, each post-effective amendment that contains a form of prospectus shall be deemed to be a new registration statement relating to the securities offered therein, and the offering of such securities at that time shall be deemed to be the initial bona fide offering thereof. II-4 SIGNATURES PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THE REGISTRANT HAS DULY CAUSED THIS AMENDMENT NO. 1 TO THE REGISTRATION STATEMENT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED, IN THE CITY OF LOS ANGELES, STATE OF CALIFORNIA ON MAY 13, 1996. Harman International Industries, Incorporated By: /s/ Bernard A. Girod -------------------------------------- BERNARD A. GIROD PRESIDENT, CHIEF OPERATING OFFICER, CHIEF FINANCIAL OFFICER AND SECRETARY PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE CAPACITIES INDICATED.
SIGNATURES TITLE DATE ------------------ ------- ------- * Chairman of the May 13, 1996 - ------------------------------------- Board of Directors SIDNEY HARMAN and Chief Executive Officer (Principal Executive Officer) /s/ Bernard A. Girod President, Chief May 13, 1996 - ------------------------------------- Operating Officer, BERNARD A. GIROD Chief Financial Officer, Secretary and Director (Principal Financial and Accounting Officer) * Director May 13, 1996 - ------------------------------------------- SHIRLEY M. HUFSTEDLER * Director May 13, 1996 - ---------------------------------------- EDWARD H. MEYER * Director May 13, 1996 - ------------------------------------- ANN MCLAUGHLIN * The undersigned by signing his name hereto does sign and execute this Amendment No. 1 to the Registration Statement on Form S-3 on the date indicated below pursuant to the Powers of Attorney executed on behalf of the above-named directors and previously filed with the Securities and Exchange Commission. /s/ Bernard A. Girod -------------------------------- BERNARD A. GIROD Attorney-in-Fact May 13, 1996
II-5 EXHIBIT INDEX
SEQUENTIAL EXHIBIT NO. DESCRIPTION PAGE NO. ----------- ------------------- ---------- 1.1 Form of Underwriting Agreement 4.1 Restated Certificate of Incorporation filed with the IBR Delaware Secretary of State on October 7, 1986, as amended by the Certificates of Amendment filed with the Delaware Secretary of State on November 13, 1986 and on November 9, 1993. (Filed as Exhibit 4.1 to Amendment 1 to the Company's Registration Statement on Form S-3 dated November 15, 1993 (File No. 1-9764) and hereby incorporated by reference.) 4.2 Amended By-Laws of Harman International Industries, IBR Incorporated. (Filed as Exhibit 4.5 to the Quarterly Report on Form 10-Q for the quarter ended March 31, 1992 (File No. 0-15147) and hereby incorporated by reference.) 5.1 Opinion of Jones, Day, Reavis & Pogue 23.1 Consent of KPMG Peat Marwick LLP, Independent Auditors 23.2 Consent of Jones, Day, Reavis & Pogue (included in Exhibit 5.1) 24.1* Power of Attorney (included on page II-5) * Previously filed
1 EX-1 2 EXHIBIT 1.1 4,000,000 Shares HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED Common Stock UNDERWRITING AGREEMENT May __, 1996 MONTGOMERY SECURITIES DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION LEHMAN BROTHERS INC. J.P. MORGAN SECURITIES INC. c/o MONTGOMERY SECURITIES 600 Montgomery Street San Francisco, California 94111 Dear Sirs: SECTION 1. Introductory. Harman International Industries, Incorporated, a Delaware corporation (the "Company"), proposes to issue and sell 2,000,000 shares of its authorized but unissued Common Stock (the "Common Stock") and certain stockholders of the Company named in Schedule B annexed hereto (the "Selling Stockholders") propose to sell an aggregate of 2,000,000 shares of the Company's issued and outstanding Common Stock to you (the "Underwriters"). Said aggregate of 4,000,000 shares are herein called the "Firm Common Shares." In addition, the Company proposes to grant to the Underwriters an option to purchase up to 300,000 additional shares of Common Stock and the Sidney Harman 1987 Revocable Trust, a Selling Stockholder, proposes to grant to the Underwriters an option to purchase up to 300,000 additional shares of Common Stock (such 600,000 additional shares of Common Stock, the "Optional Common Shares"), as provided in Section 5 hereof. The Firm Common Shares and, to the extent such options are exercised, the Optional Common Shares are hereinafter collectively referred to as the "Common Shares." You have advised the Company and the Selling Stockholders that the Underwriters propose to make a public offering of their respective portions of the Common Shares on the effective date of the registration statement hereinafter referred to, or as soon thereafter as in your judgment is advisable. The Company and each of the Selling Stockholders hereby confirm their respective agreements with respect to the purchase of the Common Shares by the Underwriters as follows: 2 SECTION 2. Representations and Warranties of the Company and certain Selling Stockholders. The Company represents and warrants, and, in the case of the representations and warranties contained in paragraph (b) below, the Company, Sidney Harman, a Selling Stockholder (the "Principal Selling Stockholder") and the Sidney Harman 1987 Revocable Trust, jointly and severally, represent and warrant (provided that in the case of the Principal Selling Stockholder and the Sidney Harman 1987 Revocable Trust, such representation and warranty is made to the best knowledge of the Principal Selling Stockholder and the Sidney Harman 1987 Revocable Trust), to the several Underwriters that: (a) A registration statement on Form S-3 (File No. 333-03189) with respect to the Common Shares has been prepared by the Company in conformity with the requirements of the Securities Act of 1933, as amended (the "Act"), and the rules and regulations (the "Rules and Regulations") of the Securities and Exchange Commission (the "Commission") thereunder, and has been filed with the Commission. The Company has prepared and has filed or proposes to file prior to the effective date of such registration statement an amendment or amendments to such registration statement, which amendment or amendments have been or will be similarly prepared. There have been delivered to you two signed copies of such registration statement and amendments, together with two copies of each exhibit filed therewith. Conformed copies of such registration statement and amendments (but without exhibits) and of the related preliminary prospectus have been delivered to you in such reasonable quantities as you have requested. The Company will next file with the Commission one of the following: (i) prior to effectiveness of such registration statement, a further amendment thereto, including the form of final prospectus or (ii) a final prospectus in accordance with Rules 430A and 424(b) of the Rules and Regulations. As filed, the final prospectus shall include all Rule 430A Information and, except to the extent that you shall agree in writing to a modification, shall be in all substantive respects in the form furnished to you prior to the date and time that this Agreement was executed and delivered by the parties hereto, or, to the extent not completed at such date and time, shall contain only such specific additional information and other changes (beyond that contained in the latest Preliminary Prospectus) as the Company shall have previously advised you in writing would be included or made therein. The term "Registration Statement" as used in this Agreement shall mean such registration statement at the time such registration statement becomes effective and, in the event any post-effective amendment thereto becomes effective prior to the First Closing Date (as hereinafter defined), shall also mean such registration statement as so amended; provided, however, that such term shall also include all Rule 430A Information deemed to be included in such registration statement at the time such registration statement becomes effective as provided by Rule 430A of the Rules and Regulations. The term "Preliminary Prospectus" 3 shall mean any preliminary prospectus referred to in the preceding paragraph and any preliminary prospectus included in the Registration Statement at the time it becomes effective that omits Rule 430A Information. The term "Prospectus" as used in this Agreement shall mean either the prospectus relating to the Common Shares in the form in which it is first filed with the Commission pursuant to Rule 424(b) of the Rules and Regulations or, if no filing pursuant to Rule 424(b) of the Rules and Regulations is required, shall mean the form of final prospectus included in the Registration Statement at the time such registration statement becomes effective. The term "Rule 430A Information" means information with respect to the Common Shares and the offering thereof permitted to be omitted from the Registration Statement when it becomes effective pursuant to Rule 430A of the Rules and Regulations. Any reference herein to any Preliminary Prospectus, the Prospectus or the Registration Statement shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Form S-3 under the Act, as of the date of such Preliminary Prospectus, Prospectus or Registration Statement, as the case may be. (b) The Commission has not issued any order preventing or suspending the use of any Preliminary Prospectus, and each Preliminary Prospectus has conformed in all material respects to the requirements of the Act and the Rules and Regulations and, as of its date, has not included any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and at the time the Registration Statement becomes effective, and at all times subsequent thereto up to and including each Closing Date hereinafter mentioned, the Registration Statement and the Prospectus, and any amendments or supplements thereto will contain all material statements and information required to be included therein by the Act and the Rules and Regulations and will in all material respects conform to the requirements of the Act and the Rules and Regulations, and neither the Registration Statement, nor any amendment or supplement thereto, will include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading, and neither the Prospectus nor any amendment or supplement thereto, will include any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided, however, no representation or warranty contained in this subsection 2(b) shall be applicable to information contained in or omitted from any Preliminary Prospectus, the Registration Statement, the Prospectus or any such amendment or supplement in reliance upon and in 4 conformity with written information furnished to the Company by or on behalf of any Underwriter specifically for use in the preparation thereof. The documents incorporated by reference in the Prospectus, when they were filed with the Commission, conformed in all material respects to the requirements of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of the Commission thereunder, and none of such documents, when they were filed with the Commission, contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (c) Except as set forth on Schedule E hereto, the Company does not own or control, directly or indirectly, any corporation, association or other entity other than the subsidiaries listed in Exhibit 21 to the Annual Report on Form 10-K for the Company's most recent fiscal year. The Company and each of its material subsidiaries have been duly incorporated and are validly existing as corporations in good standing under the laws of their respective jurisdictions of incorporation, with full power and authority (corporate and other) to own and lease their properties and conduct their respective businesses as described in the Prospectus; the Company owns beneficially, directly or indirectly, all of the outstanding capital stock of its subsidiaries free and clear of all claims, liens, charges and encumbrances; the Company and each of its subsidiaries are in possession of and operating in compliance with all authorizations, licenses, permits, consents, certificates and orders material to the conduct of their respective businesses, all of which are valid and in full force and effect; the Company and each of its subsidiaries are duly qualified to do business and in good standing as foreign corporations in each jurisdiction in which the ownership or leasing of properties or the conduct of their respective businesses requires such qualification, except for jurisdictions in which the failure to so qualify would not have a material adverse effect upon the Company and its subsidiaries taken as a whole; and no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power and authority or qualification. (d) The Company has an authorized and outstanding capital stock as set forth under the heading "Capitalization" in the Prospectus; the issued and outstanding shares of Common Stock have been duly authorized and validly issued, are fully paid and nonassessable, are duly listed on the New York Stock Exchange, have been issued in compliance with all federal and state securities laws, were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities, and conform to the description thereof contained 5 in the Prospectus. All issued and outstanding shares of capital stock of each subsidiary of the Company have been duly authorized and validly issued and are fully paid and nonassessable. Except as disclosed in or contemplated by the Prospectus and the financial statements of the Company, and the related notes thereto, included in the Prospectus, neither the Company nor any subsidiary has outstanding any options to purchase, or any preemptive rights or other rights to subscribe for or to purchase, any securities or obligations convertible into, or any contracts or commitments to issue or sell, shares of its capital stock or any such options, rights, convertible securities or obligations. The description of the Company's stock option, stock bonus and other stock plans or arrangements, and the options or other rights granted and exercised thereunder, set forth in the Prospectus accurately and fairly presents the information required to be shown with respect to such plans, arrangements, options and rights. (e) The Common Shares to be sold by the Company have been duly authorized and, when issued, delivered and paid for in the manner set forth in this Agreement, will be duly authorized, validly issued, fully paid and nonassessable, and will conform to the description thereof contained in the Prospectus. No preemptive rights or other rights to subscribe for or purchase exist with respect to the issuance and sale of the Common Shares by the Company pursuant to this Agreement. No holder of securities of the Company has any right which has not been waived to require the Company to register the sale of any shares owned by such holder under the Act in the public offering contemplated by this Agreement. No further approval or authority of the stockholders or the Board of Directors of the Company will be required for the issuance and sale of the Common Shares to be sold by the Company as contemplated herein. (f) The Company has full legal right, power and authority to enter into this Agreement and perform the transactions contemplated hereby. This Agreement has been duly authorized, executed and delivered by the Company and constitutes a valid and binding obligation of the Company in accordance with its terms. The making and performance of this Agreement by the Company and the consummation of the transactions herein contemplated will not violate any provisions of the certificate of incorporation or bylaws, or other organizational documents, of the Company or any of its subsidiaries, and will not conflict with, result in the breach or violation of, or constitute, either by itself or upon notice or the passage of time or both, a default under any agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which the Company or any of its subsidiaries is a party or by which the Company or any of its subsidiaries or any of its respective properties may be bound or affected, any statute 6 or any authorization, judgment, decree, order, rule or regulation of any court or any regulatory body, administrative agency or other governmental body applicable to the Company or any of its subsidiaries or any of their respective properties. No consent, approval, authorization or other order of any court, regulatory body, administrative agency or other governmental body is required for the execution and delivery of this Agreement or the consummation of the transactions contemplated by this Agreement, except for compliance with the Act, the Blue Sky laws applicable to the public offering of the Common Shares by the several Underwriters, the approval by The New York Stock Exchange, Inc. of the listing of the Common Shares and the clearance of such offering with the National Association of Securities Dealers, Inc. (the "NASD"). (g) To the best of the Company's knowledge, KPMG Peat Marwick LLP, who have expressed their opinion with respect to the financial statements and schedules filed with the Commission as a part of the Registration Statement and included in the Prospectus and in the Registration Statement, are independent accountants as required by the Act and the Rules and Regulations. (h) The consolidated financial statements and schedules of the Company and its subsidiaries, and the related notes thereto, included in the Registration Statement and the Prospectus present fairly the financial position of the Company and its subsidiaries as of the respective dates of such financial statements and schedules, and the results of operations and cash flows of the Company and its subsidiaries for the respective periods covered thereby. Such statements, schedules and related notes have been prepared in accordance with generally accepted accounting principles applied on a consistent basis as certified by the independent accountants named in subsection 2(g). No other financial statements or schedules are required to be included in the Registration Statement. The selected financial data set forth in the Prospectus under the captions "Capitalization" and "Selected Consolidated Financial Data" fairly present the information set forth therein on the basis stated in the Registration Statement. (i) Except as disclosed in the Prospectus, and except as to any breaches, violations or defaults which individually or in the aggregate would not be material to the Company and its subsidiaries taken as a whole, neither the Company nor any of its subsidiaries is in violation or default of any provision of its certificate of incorporation or bylaws, or other organizational documents, or is in breach of or default with respect to any provision of any agreement, judgment, decree, order, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument to which it is a party or by which it or any of 7 its properties are bound; and there does not exist any state of facts which constitutes an event of default on the part of the Company or any such subsidiary as defined in such documents or which, with notice or lapse of time or both, would constitute such an event of default, except where any such event or default would not individually or in the aggregate have a material adverse effect on the condition (financial or otherwise), business, results of operations or prospects of the Company and its subsidiaries taken as a whole. (j) There are no contracts or other documents required to be described in the Registration Statement or to be filed as exhibits to the Registration Statement by the Act or by the Rules and Regulations which have not been described or filed as required. The contracts described in the Prospectus are in full force and effect on the date hereof; and neither the Company nor any of its subsidiaries, nor to the best of the Company's knowledge, any other party is in breach of or default under any of such contracts which, in the case of any such breach or default by a third party, would give rise to rights of the Company or any of its subsidiaries under any such document. (k) Except as disclosed in the Prospectus, there are no legal or governmental actions, suits or proceedings pending or, to the best of the Company's knowledge, threatened to which the Company or any of its subsidiaries is or may be a party or of which property owned or leased by the Company or any of its subsidiaries is or may be the subject, or related to environmental or discrimination matters, which actions, suits or proceedings might, individually or in the aggregate, prevent or adversely affect the transactions contemplated by this Agreement or result in a material adverse change in the condition (financial or otherwise), properties, business, results of operations or prospects of the Company and its subsidiaries; and no labor disturbance by the employees of the Company or any of its subsidiaries exists or is imminent which is likely to affect materially and adversely such condition, properties, business, results of operations or prospects. Neither the Company nor any of its subsidiaries is a party or subject to the provisions of any material injunction, judgment, decree or order of any court, regulatory body, administrative agency or other governmental body which has had or could reasonably be expected to have a material adverse effect on its condition (financial or otherwise), properties, business, results of operations or prospects. (l) The Company or the applicable subsidiary has good and marketable title to all the properties and assets reflected as owned in the financial statements hereinabove described (or elsewhere in the Prospectus), subject to no lien, mortgage, pledge, charge or encumbrance of any kind 8 except (i) those, if any, reflected in such financial statements (or elsewhere in the Prospectus), or (ii) those which are not material in amount and do not adversely affect the use made and proposed to be made of such property by the Company and its subsidiaries. The Company or the applicable subsidiary holds its leased properties under valid and binding leases, with such exceptions as are not materially significant in relation to the business of the Company. Except as disclosed in the Prospectus, the Company owns or leases all such properties as are necessary to its operations as now conducted or as proposed to be conducted. (m) Since the respective dates as of which information is given in the Registration Statement and Prospectus, and except as described in or specifically contemplated by the Prospectus: (i) the Company and its subsidiaries have not incurred any material liabilities or obligations, indirect, direct or contingent, or entered into any material verbal or written agreement or other transaction which is not in the ordinary course of business or which could result in a material reduction in the future earnings of the Company and its subsidiaries; (ii) the Company and its subsidiaries have not sustained any material loss or interference with their respective businesses or properties from fire, flood, windstorm, accident or other calamity, whether or not covered by insurance; (iii) the Company has not paid or declared any dividends or other distributions with respect to its capital stock and the Company and its subsidiaries are not in default in the payment of principal or interest on any outstanding debt obligations; (iv) there has not been any change in the capital stock (other than (A) upon the sale of the Common Shares hereunder and (B) upon the exercise of options described in the Registration Statement) or indebtedness material to the Company and its subsidiaries (other than in the ordinary course of business); and (v) there has not been any material adverse change in the condition (financial or otherwise), business, properties, results of operations or prospects of the Company and its subsidiaries taken as a whole. (n) Except as disclosed in or specifically contemplated by the Prospectus, the Company and its subsidiaries have sufficient trademarks, trade names, patent rights, mask works, copyrights, licenses, approvals and governmental authorizations to conduct their businesses as described in the Prospectus; the expiration of any trademarks, trade names, patent rights, mask works, copyrights, licenses, approvals or governmental authorizations would not have a material adverse effect on the condition (financial or otherwise), business, results of operations or prospects of the Company and its subsidiaries taken as a whole; and the Company has no knowledge of any material infringement by it or its subsidiaries of trademark, trade name rights, patent rights, mask works, 9 copyrights, licenses, trade secret or other similar rights of others, and there is no claim being made against the Company or its subsidiaries regarding trademark, trade name, patent, mask work, copyright, license, trade secret or other infringement which could have a material adverse effect on the condition (financial or otherwise), business, results of operations or prospects of the Company and its subsidiaries taken as a whole. (o) The Company has not been advised, and has no reason to believe, that either it or any of its subsidiaries is not conducting business in compliance with all applicable laws, rules and regulations of the jurisdictions in which it is conducting business, including, without limitation, all applicable local, state and federal environmental laws and regulations; except where failure to be so in compliance would not materially adversely affect the condition (financial or otherwise), business, results of operations or prospects of the Company and its subsidiaries taken as a whole. (p) The Company and its subsidiaries have filed all necessary federal, state and foreign income and franchise tax returns and have paid all taxes shown as due thereon; and the Company has no knowledge of any tax deficiency which has been or might be asserted or threatened against the Company or its subsidiaries which could materially and adversely affect the business, operations or properties of the Company and its subsidiaries taken as a whole. (q) The Company is not an "investment company" within the meaning of the Investment Company Act of 1940, as amended. (r) The Company has not distributed and will not distribute prior to the First Closing Date any offering material in connection with the offering and sale of the Common Shares other than the Preliminary Prospectus, the Prospectus, the Registration Statement and the other materials permitted by the Act. (s) Each of the Company and its subsidiaries maintains insurance of the types and in the amounts generally deemed adequate for its business, including, but not limited to, insurance covering real and personal property owned or leased by the Company and its subsidiaries against theft, damage, destruction, acts of vandalism and all other risks customarily insured against, all of which insurance is in full force and effect. (t) Neither the Company nor any of its subsidiaries has at any time during the last five years (i) made any unlawful contribution to any candidate for foreign office, or failed to disclose fully any contribution in violation of 10 law, or (ii) made any payment to any federal or state, governmental officer or official, or other person charged with similar public or quasi-public duties, other than payments required or permitted by the laws of the United States or any jurisdiction thereof. (u) The Company has not taken and will not take, directly or indirectly, any action designed to or that might be reasonably expected to cause or result in stabilization or manipulation of the price of the Common Stock to facilitate the sale or resale of the Common Shares. (v) The Company is eligible to use a Registration Statement on Form S-3 under the Act and the Rules and Regulations thereunder for purposes of registering the Common Shares under the Act. SECTION 3. Representations, Warranties and Covenants of the Selling Stockholders. (a) Each of the Selling Stockholders, severally and not jointly, represents and warrants to, and agrees with, the several Underwriters that: (i) Such Selling Stockholder has, and on the First Closing Date and the Second Closing Date (if applicable) hereinafter mentioned will have, good and valid title to the Common Shares proposed to be sold by such Selling Stockholder hereunder on such Closing Date and full right, power and authority to enter into this Agreement and to sell, assign, transfer and deliver such Common Shares hereunder, free and clear of all voting trust arrangements, liens, encumbrances, equities, security interests, restrictions and claims whatsoever; and upon delivery of and payment for such Common Shares hereunder, the Underwriters will acquire good and valid title thereto, free and clear of all liens, encumbrances, equities, claims, restrictions, security interests, voting trusts or other defects of title whatsoever. (ii) Such Selling Stockholder has executed and delivered a Power of Attorney and caused to be executed and delivered on his behalf a Custody Agreement (hereinafter collectively referred to as the "Stockholders Agreement") and in connection herewith such Selling Stockholder further represents, warrants and agrees that such Selling Stockholder has deposited in custody, under the Stockholders Agreement, with the agent named therein (the "Agent") as custodian, certificates in negotiable form for the Common Shares to be sold hereunder by such Selling Stockholder, for the purpose of further delivery pursuant to this Agreement. Such Selling Stockholder agrees that the 11 Common Shares to be sold by such Selling Stockholder on deposit with the Agent are subject to the interests of the Company and the Underwriters, that the arrangements made for such custody are to that extent irrevocable, and that the obligations of such Selling Stockholder hereunder shall not be terminated, except as provided in this Agreement or in the Stockholders Agreement, by any act of such Selling Stockholder, by operation of law, by the death or incapacity of such Selling Stockholder or by the occurrence of any other event. If the Selling Stockholder should die or become incapacitated, or if any other event should occur, before the delivery of the Common Shares hereunder, the documents evidencing Common Shares then on deposit with the Agent shall be delivered by the Agent in accordance with the terms and conditions of this Agreement as if such death, incapacity or other event had not occurred, regardless of whether or not the Agent shall have received notice thereof. The Agreement and the Stockholders Agreement have been duly executed and delivered by or on behalf of such Selling Stockholder and the form of such Stockholders Agreement has been delivered to you. (iii) The performance of this Agreement and the Stockholders Agreement and the consummation of the transactions contemplated hereby and by the Stockholders Agreement will not result in a breach or violation by such Selling Stockholder of any of the terms or provisions of, or constitute a default by such Selling Stockholder under, any indenture, mortgage, deed of trust, trust (constructive or other), loan agreement, lease, franchise, license or other agreement or instrument to which such Selling Stockholder is a party or by which such Selling Stockholder or any of its properties is bound, any statute, or any judgment, decree, order, rule or regulation of any court or governmental agency or body applicable to such Selling Stockholder or any of its properties. (iv) Such Selling Stockholder has not taken and will not take, directly or indirectly, any action designed to or which has constituted or which might reasonably be expected to cause or result in stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Common Shares. (v) Each Preliminary Prospectus and the Prospectus, to the extent any statements or omissions have been made therein in reliance upon and in conformity with information furnished to the Company by such Selling Stockholder specifically for use therein, has conformed in all material respects to the 12 requirements of the Act and the Rules and Regulations and has not included any untrue statement of a material fact or omitted to state a material fact necessary to make the statements therein not misleading in light of the circumstances under which they were made; and neither the Registration Statement nor any amendment or supplement thereto, to the extent any statements or omissions have been made therein in reliance upon and in conformity with information furnished to the Company by such Selling Stockholder specifically for use therein, will include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading and neither the Prospectus, nor any amendment or supplement thereto, to the extent any statements or omissions have been made therein in reliance upon and in conformity with information furnished to the Company by such Selling Stockholder specifically for use therein, will include any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. (b) The Principal Selling Stockholder agrees with the Company and the Underwriters not to offer to sell, sell or contract to sell or otherwise dispose of any shares of Common Stock or securities convertible into or exchangeable for any shares of Common Stock owned by the Principal Selling Stockholder or as to which the Principal Selling Stockholder has or shares dispositive power, for a period of 90 days after the first date that any of the Common Shares are released by you for sale to the public, without the prior written consent of Montgomery Securities; provided that the Principal Selling Stockholder shall not be prohibited from exercising options to purchase Common Stock granted to the Principal Selling Stockholder pursuant to stock options or plans described in the Prospectus or from transferring shares of Common Stock by gift provided that the recipient of such gift shall agree not to further transfer such shares during the remainder of such 90-day period. SECTION 4. Representations and Warranties of the Underwriters. The Underwriters represent and warrant to the Company and to the Selling Stockholders that the information set forth (i) on the cover page of the Prospectus with respect to price, underwriting discounts and commissions and terms of offering and (ii) under "Underwriting" in the Prospectus was furnished to the Company by and on behalf of the Underwriters for use in connection with the preparation of the Registration Statement and the Prospectus and is correct in all material respects. 13 SECTION 5. Purchase, Sale and Delivery of Common Shares. On the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, (i) the Company agrees to issue and sell to the Underwriters 2,000,000 of the Firm Common Shares, and (ii) the Selling Stockholders agree, severally and not jointly, to sell to the Underwriters in the respective amounts set forth in Schedule B hereto, an aggregate of 2,000,000 of the Firm Common Shares. The Underwriters agree, severally and not jointly, to purchase from the Company and the Selling Stockholders, respectively, the number of Firm Common Shares set forth opposite such Underwriters' names in Schedule B hereto. The purchase price per share to be paid by the several Underwriters to the Company and to the Selling Stockholders, respectively, shall be $_____ per share. The obligation of each Underwriter to the Company shall be to purchase from the Company that number of full shares set forth opposite the name of such Underwriter in Schedule A hereto. The obligation of each Underwriter to the Selling Stockholders shall be to purchase from the Selling Stockholders that number of full shares set forth opposite the name of such Underwriter in Schedule B hereto. Delivery of certificates for the Firm Common Shares to be purchased by the Underwriters and payment therefor shall be made at the offices of Montgomery Securities, 600 Montgomery Street, San Francisco, California (or such other place as may be agreed upon by the Company and the Underwriters) at such time and date, not later than the third (or, if the Firm Common Shares are priced, as contemplated by Rule 15c6-1(c) under the Exchange Act, after 4:30 P.M. Washington D.C. time, the fourth) full business day following the first date that any of the Common Shares are released by you for sale to the public, as you shall designate by at least 48 hours prior notice to the Company (or at such other time and date, not later than one week after such third (or fourth) full business day as may be agreed upon by the Company and the Underwriters (the "First Closing Date"). Delivery of certificates for the Firm Common Shares shall be made by or on behalf of the Company and the Selling Stockholders to you with respect to the Firm Common Shares to be sold by the Company and by the Selling Stockholders against payment by you of the purchase price therefor by a wire transfer of federal funds to an account designated by the Company and of the Agent in proportion to the number of Firm Common Shares to be sold by the Company and the Selling Stockholders, respectively. The certificates for the Firm Common Shares shall be registered in such names and denominations as you shall have requested at least two full business days prior to the First Closing Date, and shall be made available for checking and packaging on the business day preceding the First Closing Date at a location in New York, New York, as may be designated by you. Time shall be of the essence, 14 and delivery at the time and place specified in this Agreement is a further condition to the obligations of the Underwriters. In addition, on the basis of the representations, warranties and agreements herein contained, but subject to the terms and conditions herein set forth, the Company hereby grants an option to the several Underwriters to purchase, severally and not jointly, up to an aggregate of 300,000 Optional Common Shares and the Sidney Harman 1987 Revocable Trust hereby grants to the several Underwriters an option to purchase, severally and not jointly, up to an aggregate of 300,000 Optional Common Shares, in each case at the purchase price per share to be paid for the Firm Common Shares and for use solely in covering any over-allotments made by you in the sale and distribution of the Firm Common Shares. The options granted hereunder may be exercised at any time (but not more than once) within 30 days after the first date that any of the Common Shares are released by you for sale to the public, upon notice by you to the Company and the Sidney Harman 1987 Revocable Trust setting forth the aggregate number of Optional Common Shares as to which the Underwriters are exercising the options, the names and denominations in which the certificates for such shares are to be registered and the time and place at which such certificates will be delivered. Any such exercise by the Underwriters shall be for an equal number of Optional Common Shares subject to the respective options granted by the Company and the Sidney Harman 1987 Revocable Trust. Such time of delivery (which may not be earlier than the First Closing Date), being herein referred to as the "Second Closing Date," shall be determined by you, but if at any time other than the First Closing Date shall not be earlier than three nor later than five full business days after delivery of such notice of exercise. The number of Optional Common Shares to be purchased by each Underwriter shall be determined by multiplying the number of Optional Common Shares to be sold by the Company and the Sidney Harman 1987 Revocable Trust pursuant to such notice of exercise by a fraction, the numerator of which is the number of Firm Common Shares to be purchased by such Underwriter as set forth opposite its name in Schedule A and the denominator of which is 2,000,000 (subject to such adjustments to eliminate any fractional share purchases as you in your discretion may make). Certificates for the Optional Common Shares will be made available for checking and packaging on the business day preceding the Second Closing Date at a location in New York, New York, as may be designated by you. The manner of payment for and delivery of the Optional Common Shares shall be the same as for the Firm Common Shares purchased from the Company and the Selling Stockholders as specified in the two preceding paragraphs. At any time before lapse of the options, you may cancel such options by giving written notice of such cancellation to the Company and the Sidney Harman 1987 Revocable Trust. If the options are cancelled or expire unexercised in whole or in part, the Company will deregister under the Act the number of Option Shares as to which the option has not been exercised. 15 Subject to the provisions of Section 12 hereof, you may (but shall not be obligated to) make payment for any Common Shares to be purchased by any Underwriter whose funds shall not have been received by you by the First Closing Date or the Second Closing Date, as the case may be, for the account of such Underwriter, but any such payment shall not relieve such Underwriter from any of its obligations under this Agreement. Subject to the terms and conditions hereof, the Underwriters propose to make a public offering of their respective portions of the Firm Common Shares as soon after the effective date of the Registration Statement as in your judgment is advisable and at the public offering price set forth on the cover page of and on the terms set forth in the Prospectus. SECTION 6. Covenants of the Company. The Company covenants and agrees that: (a) The Company will use its best efforts to cause the Registration Statement and any amendment thereof, if not effective at the time and date that this Agreement is executed and delivered by the parties hereto, to become effective. If the Registration Statement has become or becomes effective pursuant to Rule 430A of the Rules and Regulations, or the filing of the Prospectus is otherwise required under Rule 424(b) of the Rules and Regulations, the Company will file the Prospectus, properly completed, pursuant to the applicable paragraph of Rule 424(b) of the Rules and Regulations within the time period prescribed and will provide evidence satisfactory to you of such timely filing. The Company will promptly advise you in writing (i) of the receipt of any comments of the Commission, (ii) of any request of the Commission for amendment of or supplement to the Registration Statement (either before or after it becomes effective), any Preliminary Prospectus or the Prospectus or for additional information, (iii) when the Registration Statement shall have become effective, and (iv) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or of the institution of any proceedings for that purpose. If the Commission shall enter any such stop order at any time, the Company will use its best efforts to obtain the lifting of such order at the earliest possible moment. The Company will not file any amendment or supplement to the Registration Statement (either before or after it becomes effective), any Preliminary Prospectus or the Prospectus of which you have not been furnished with a copy a reasonable time prior to such filing or to which you reasonably object or which is not in compliance with the Act and the Rules and Regulations. (b) The Company will prepare and file with the Commission, promptly upon your request, any amendments or supplements to the Registration Statement or the Prospectus 16 which in your judgment may be necessary or advisable to enable the several Underwriters to continue the distribution of the Common Shares and will use its best efforts to cause the same to become effective as promptly as possible. The Company will fully and completely comply with the provisions of Rule 430A of the Rules and Regulations, if applicable, with respect to information omitted from the Registration Statement in reliance upon such Rule. (c) If at any time during the period in which a prospectus relating to the Common Shares is required to be delivered under the Act any event occurs, as a result of which the Prospectus, including any amendments or supplements, would include an untrue statement of a material fact, or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, or if it is necessary at any time to amend the Prospectus, including any amendments or supplements, to comply with the Act or the Rules and Regulations, the Company will promptly advise you thereof and will promptly prepare and file with the Commission, at its own expense, an amendment or supplement which will correct such statement or omission or an amendment or supplement which will effect such compliance and will use its best efforts to cause the same to become effective as soon as possible; and, in case any Underwriter is required to deliver a prospectus after such period, the Company upon request, but at the expense of such Underwriter, will promptly prepare such amendment or amendments to the Registration Statement and such Prospectus or Prospectuses as may be necessary to permit compliance with the requirements of Section 10(a)(3) of the Act. (d) As soon as practicable, but not later than 45 days after the end of the first quarter ending after one year following the "effective date of the Registration Statement" (as defined in Rule 158(c) of the Rules and Regulations), the Company will make generally available to its security holders an earnings statement (which need not be audited) covering a period of 12 consecutive months beginning after the effective date of the Registration Statement which will satisfy the provisions of the last paragraph of Section 11(a) of the Act. (e) During such period as a prospectus is required by law to be delivered in connection with sales by an Underwriter or dealer, the Company, at its expense, but only for the nine-month period after the effective date of the Registration Statement, will furnish to you or mail to your order copies of the Registration Statement, the Prospectus, the Preliminary Prospectus and all amendments and supplements to any such documents in each case as soon as available and in such quantities as you may request, for the purposes contemplated by the Act. 17 (f) The Company shall cooperate with you and your counsel in order to qualify or register the Common Shares for sale under (or obtain exemptions from the application of) the Blue Sky laws of such jurisdictions as you designate, will comply with such laws and will continue such qualifications, registrations and exemptions in effect so long as reasonably required for the distribution of the Common Shares. The Company shall not be required to qualify as a foreign corporation or to file a general consent to service of process in any such jurisdiction where it is not presently qualified. The Company will advise you promptly of the suspension of the qualification or registration of (or any such exemption relating to) the Common Shares for offering, sale or trading in any jurisdiction or any initiation or threat of any proceeding for any such purpose, and in the event of the issuance of any order suspending such qualification, registration or exemption, the Company, with your cooperation, will use its best efforts to obtain the withdrawal thereof. (g) During the shorter of the period of five years hereafter or the period in which the Common Stock is registered under the Exchange Act, the Company will furnish to the Underwriters: (i) as soon as practicable after the end of each fiscal year, copies of the Annual Report of the Company containing the balance sheet of the Company as of the close of such fiscal year and statements of income, stockholders' equity and cash flows for the year then ended and the opinion thereon of the Company's independent public accountants; (ii) as soon as practicable after the filing thereof, copies of each proxy statement, Annual Report on Form 10-K, Quarterly Report on Form 10-Q, Current Report on Form 8-K or other report filed by the Company with the Commission, the NASD or any securities exchange; and (iii) as soon as available, copies of any report or communication of the Company mailed generally to holders of its Common Stock. (h) During the period of 90 days after the first date that any of the Common Shares are released by you for sale to the public, without the prior written consent of Montgomery Securities, the Company will not other than pursuant to outstanding stock options and warrants disclosed in the Prospectus issue, offer, sell, grant options to purchase or otherwise dispose of any of the Company's equity securities or any other securities convertible into or exchangeable with its Common Stock or other equity security (other than (i) the sale of the Common Shares to the Underwriters hereunder and (ii) as a result of the granting or exercise of options to acquire shares of Common Stock pursuant to stock options or plans described in the Prospectus). 18 (i) The Company will apply the net proceeds of the sale of the Common Shares sold by it substantially in accordance with its statements under the caption "Use of Proceeds" in the Prospectus. (j) The Company will use its best efforts to qualify or register its Common Stock for sale in non-issuer transactions under (or obtain exemptions from the application of) the Blue Sky laws of the State of California (and thereby permit market making transactions and secondary trading in the Company's Common Stock in California), will comply with such Blue Sky laws and will continue such qualifications, registrations and exemptions in effect for a period of five years after the date hereof. (k) The Company will use its best efforts to list, subject to official notice of issuance, on the New York Stock Exchange, the Common Stock to be issued and sold by the Company. You may, in your sole discretion, waive in writing the performance by the Company of any one or more of the foregoing covenants or extend the time for their performance. SECTION 7. Payment of Expenses. Whether or not the transactions contemplated hereunder are consummated or this Agreement becomes effective or is terminated, the Company agrees to pay all costs, fees and expenses incurred in connection with the performance of the obligations of the Company and the Selling Stockholders hereunder and in connection with the transactions contemplated hereby, including without limiting the generality of the foregoing, (i) all expenses incident to the issuance and delivery of the Common Shares (including all printing and engraving costs), (ii) all fees and expenses of the registrar and transfer agent of the Common Stock, (iii) all necessary issue, transfer and other stamp taxes in connection with the issuance and sale of the Common Shares to the Underwriters, (iv) all fees and expenses of the Company's counsel, the Selling Stockholders' counsel and the Company's independent accountants, (v) all costs and expenses incurred in connection with the preparation, printing, filing, shipping and distribution of the Registration Statement, each Preliminary Prospectus and the Prospectus (including all exhibits and financial statements) and all amendments and supplements provided for herein, this Agreement, the Agreement Among Underwriters, the Selected Dealers Agreement, the Underwriters' Questionnaire, the Underwriters' Power of Attorney and the Blue Sky memorandum, (vi) all filing fees, attorneys' fees and expenses incurred by the Company or the Underwriters in connection with qualifying or registering (or obtaining exemptions from the qualification or registration of) all or any part of the Common Shares for offer and sale under the Blue Sky laws, (vii) the filing fee of the NASD, and (viii) all other fees, costs and expenses referred to in Item 14 of the Registration Statement. Except as provided in this Section 7, 19 Section 9 and Section 11 hereof, the Underwriters shall pay all of their own expenses, including the fees and disbursements of their counsel (excluding those relating to qualification, registration or exemption under the Blue Sky laws and the Blue Sky memorandum referred to above). This Section 7 shall not affect any agreements relating to the payment of expenses between the Company and the Selling Stockholders. SECTION 8. Conditions of the Obligations of the Underwriters. The obligations of the several Underwriters to purchase and pay for the Firm Common Shares on the First Closing Date and the Optional Common Shares on the Second Closing Date shall be subject to the accuracy of the representations and warranties on the part of the Company and the Selling Stockholders herein set forth as of the date hereof and as of the First Closing Date or the Second Closing Date, as the case may be, to the accuracy of the statements of Company officers and the Selling Stockholders made pursuant to the provisions hereof, to the performance by the Company and the Selling Stockholders of their respective obligations hereunder, and to the following additional conditions: (a) The Registration Statement shall have become effective not later than 5:30 P.M., Washington, D.C. time on the date of this Agreement, or at such later time as shall have been consented to by you; if the filing of the Prospectus, or any supplement thereto, is required pursuant to Rule 424(b) of the Rules and Regulations, the Prospectus shall have been filed in the manner and within the time period required by Rule 424(b) of the Rules and Regulations; and prior to such Closing Date, no stop order suspending the effectiveness of the Registration Statement shall have been issued and no proceedings for that purpose shall have been instituted or shall be pending or, to the knowledge of the Company, the Selling Stockholders or you, shall be contemplated by the Commission; and any request of the Commission for inclusion of additional information in the Registration Statement, or otherwise, shall have been complied with to your satisfaction. (b) You shall be satisfied that since the respective dates as of which information is given in the Registration Statement and Prospectus, (i) there shall not have been any change in the capital stock, other than pursuant to the exercise of outstanding options disclosed in the Prospectus, of the Company or any of its subsidiaries or any material change in the indebtedness (other than in the ordinary course of business) of the Company or any of its subsidiaries, (ii) except as set forth in or contemplated by the Registration Statement or the Prospectus, no material verbal or written agreement or other transaction shall have been entered into by the Company or any of its subsidiaries, which is not in the ordinary course of business or which could result in a material reduction in the future earnings 20 of the Company and its subsidiaries taken as a whole, (iii) no loss or damage (whether or not insured) to the property of the Company or any of its subsidiaries shall have been sustained which materially and adversely affects the condition (financial or otherwise), business, results of operations or prospects of the Company and its subsidiaries taken as a whole, (iv) no legal or governmental action, suit or proceeding affecting the Company or any of its subsidiaries which is material to the Company and its subsidiaries taken as a whole or which affects or may affect the transactions contemplated by this Agreement or which, individually or in the aggregate, if adversely determined, would have a material adverse effect on the condition (financial or otherwise), business, results of operations or prospects of the Company and its subsidiaries shall have been instituted or threatened, and (v) there shall not have been any material change in the condition (financial or otherwise), business, senior management, results of operations or prospects of the Company and its subsidiaries which makes it impracticable or inadvisable in your judgment to proceed with the public offering or purchase the Common Shares as contemplated hereby. (c) There shall have been furnished to you on each Closing Date, in form and substance satisfactory to you, except as otherwise expressly provided below: (i) An opinion of Jones, Day Reavis & Pogue, counsel for the Company and the Principal Selling Stockholder, addressed to the Underwriters and dated the First Closing Date, or the Second Closing Date, as the case may be, in the form attached hereto as Schedule C. (ii) An opinion of Schulte Roth & Zabel, counsel for the Selling Stockholders, other than the Principal Selling Stockholder, addressed to the Underwriters and dated the First Closing Date, or the Second Closing Date, as the case may be, in the form attached hereto as Schedule E. (iii) An opinion of Barnes & Thornburg, Indiana counsel for the Company, addressed to the Underwriters and dated the First Closing Date, or the Second Closing Date, as the case may be, covering the matters set forth in Schedule D. (iv) An opinion of Van Cott, Bagley, Cornwall & McCarthy, Utah counsel for the Company, addressed to the Underwriters and dated the First Closing Date, or the Second Closing Date, as the case may be, covering the matters set forth in Schedule D. 21 (v) An opinion of Connecticut counsel for the Company, addressed to the Underwriters and dated the First Closing Date, or the Second Closing Date, as the case may be, covering the matters set forth in Schedule D. (vi) An opinion of Denton, Hall, Burgin & Warrens, English counsel for the Company, addressed to the Underwriters and dated the First Closing Date, or the Second Closing Date, as the case may be, covering the matters set forth in Schedule D. (vii) An opinion of Jones, Day, Reavis & Pogue, German counsel for the Company, addressed to the Underwriters and dated the First Closing Date, or the Second Closing Date, as the case may be, covering the matters set forth in Schedule D. (viii) An opinion of Austrian counsel for the Company, addressed to the Underwriters and dated the First Closing Date, or the Second Closing Date, as the case may be, covering the matters set forth in Schedule D. (ix) An opinion of Swiss counsel for the Company, addressed to the Underwriters and dated the First Closing Date, or the Second Closing Date, as the case may be, covering the matters set forth in Schedule D. (x) An opinion of Frank Meredith, Esquire, Tax/Legal Counsel for the Company, addressed to the Underwriters and dated the First Closing Date, or the Second Closing Date, as the case may be, to the effect that: (1) Except as disclosed in or specifically contemplated by the Prospectus, to the best of such counsel's knowledge, there are no outstanding options, warrants or other rights calling for the issuance of, and no commitments, plans or arrangements to issue, any, shares of capital stock of the Company or any security convertible into or exchangeable for capital stock of the Company; (2) Neither the Company nor any subsidiary is in violation of its certificate of incorporation or bylaws, or other organizational documents or to the best of such counsel's knowledge, in breach of or default with respect to any provision of any agreement, mortgage, deed of trust, lease, franchise, license, indenture, permit or other instrument known to such counsel 22 to which the Company or any such subsidiary is a party or by which it or any of its properties may be bound or affected, except where such default would not materially adversely affect the Company and its subsidiaries; and, to the best of such counsel's knowledge, the Company and its subsidiaries are in compliance with all laws, rules, regulations, judgments, decrees, orders and statutes of any court or jurisdiction to which they are subject, except where noncompliance would not materially adversely affect the Company and its subsidiaries taken as a whole; (3) To the best of such counsel's knowledge, no holders of securities of the Company have rights (which rights have not been waived) to require the Company to register any shares of Common Stock or other securities, because of the filing of the Registration Statement by the Company or the offering contemplated hereby; In rendering such opinions, such counsel may rely as to matters of local law, on opinions of local counsel, and as to matters of fact, on certificates of officers of the Company and of governmental officials, in which case their opinions are to state that they are so doing and that the Underwriters are justified in relying on such opinions or certificates and copies of said opinions or certificates are to be attached to the opinion. Such counsel shall also include a statement to the effect that nothing has come to such counsel's attention that would lead such counsel to believe that either at the effective date of the Registration Statement or at the applicable Closing Date, the Registration Statement, the Prospectus or any amendment or supplement thereto, contains any untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (xi) Such opinion or opinions of Simpson Thacher & Bartlett, counsel for the Underwriters dated the First Closing Date or the Second Closing Date, as the case may be, with respect to the incorporation of the Company, the sufficiency of all corporate proceedings and other legal matters relating to this Agreement, the validity of the Common Shares, the Registration Statement and the Prospectus and other related matters as you may reasonably require, and the Company and the Selling Stockholders shall have furnished to such counsel such documents and shall have exhibited to them such papers and records as they may reasonably request 23 for the purpose of enabling them to pass upon such matters. In connection with such opinions, such counsel may rely on representations or certificates of officers of the Company and governmental officials. (xii) A certificate of the Company executed by the Chairman of the Board and the chief financial or accounting officer of the Company, dated the First Closing Date or the Second Closing Date, as the case may be, to the effect that: (1) The representations and warranties of the Company set forth in Section 2 of this Agreement are true and correct as of the date of this Agreement and as of the First Closing Date or the Second Closing Date, as the case may be, and the Company has complied with all the agreements and satisfied all the conditions on its part to be performed or satisfied on or prior to such Closing Date; (2) The Commission has not issued any order preventing or suspending the use of the Prospectus or any Preliminary Prospectus filed as a part of the Registration Statement or any amendment thereto; no stop order suspending the effectiveness of the Registration Statement has been issued; and to the best of the knowledge of the respective signers, no proceedings for that purpose have been instituted or are pending or contemplated under the Act; (3) Each of the respective signers of the certificate has carefully examined the Registration Statement and the Prospectus; in his opinion and to the best of his knowledge, the Registration Statement and the Prospectus and any amendments or supplements thereto contain all statements required to be stated therein regarding the Company and its subsidiaries; and neither the Registration Statement nor the Prospectus nor any amendment or supplement thereto includes any untrue statement of a material fact or omits to state any material fact required to be stated therein or necessary to make the statements therein not misleading; (4) Since the initial date on which the Registration Statement was filed, no agreement, written or oral, transaction or event has occurred which should have been set forth in an amendment to the Registration Statement or in a supplement to or amendment of any prospectus which has not been disclosed in such a supplement or amendment; 24 (5) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, and except as disclosed in or contemplated by the Prospectus, (i) there has not been any material adverse change or a development involving a material adverse change in the condition (financial or otherwise), business, properties, results of operations, management or prospects of the Company and its subsidiaries taken as a whole; (ii) no legal or governmental action, suit or proceeding is pending or threatened against the Company or any of its subsidiaries which is material to the Company and its subsidiaries taken as a whole, whether or not arising from transactions in the ordinary course of business, or which may adversely affect the transactions contemplated by this Agreement; (iii) since such dates and except as so disclosed, neither the Company nor any of its subsidiaries has entered into any verbal or written agreement or other transaction which is not in the ordinary course of business or which could result in a material reduction in the future earnings of the Company or incurred any material liability or obligation, direct, contingent or indirect, made any change in its capital stock, made any material change in its short-term debt or funded debt or repurchased or otherwise acquired any of the Company's capital stock; and (iv) the Company has not declared or paid any dividend, or made any other distribution, upon its outstanding capital stock payable to stockholders of record on a date prior to the First Closing Date or Second Closing Date; and (6) Since the respective dates as of which information is given in the Registration Statement and the Prospectus and except as disclosed in or contemplated by the Prospectus, the Company and its subsidiaries taken as a whole have not sustained a material loss or damage by strike, fire, flood, windstorm, accident or other calamity (whether or not insured). (xiii) On the First Closing Date or the Second Closing Date, as the case may be, a certificate, dated such Closing Date and addressed to you, signed by or on behalf of each of the Selling Stockholders to the effect that the representations and warranties of such Selling Stockholder in this Agreement are true and correct, as if made at and as of the First Closing Date or the Second Closing Date, as the case may be, and such Selling Stockholder has complied with all the agreements and satisfied all the conditions on his part 25 to be performed or satisfied prior to the First Closing Date or the Second Closing Date, as the case may be. (xiv) On the date before this Agreement is executed and also on the First Closing Date and the Second Closing Date a letter addressed to you from KPMG Peat Marwick LLP, independent accountants, the first one to be dated the day before the date of this Agreement, the second one to be dated the First Closing Date and the third one (in the event of a Second Closing) to be dated the Second Closing Date, in form and substance satisfactory to you. (xv) On or before the First Closing Date, a letter from the Principal Selling Stockholder, in form and substance satisfactory to you, confirming that for a period of 90 days after the first date that any of the Common Shares are released by you for sale to the public, such person will not directly or indirectly sell or offer to sell or otherwise dispose of any shares of Common Stock owned by the Principal Selling Stockholder or as to which the Principal Selling Stockholder has or shares dispositive power, or any right to acquire any such shares or any securities convertible into or exchangeable for such shares of Common Stock, without the prior written consent of Montgomery Securities; provided that such agreement shall not prohibit the Principal Selling Stockholder from exercising options to purchase Common Stock granted to the Principal Selling Stockholder pursuant to stock options or plans described in the Prospectus or from transferring shares of Common Stock by gift provided that the recipient of such gift shall agree not to further transfer such shares during the remainder of such 90-day period. All such opinions, certificates, letters and documents shall be in compliance with the provisions hereof only if they are reasonably satisfactory to you and to Simpson Thacher & Bartlett, counsel for the Underwriters. The Company shall furnish you with such manually signed or conformed copies of such opinions, certificates, letters and documents as you reasonably request. Any certificate signed by any officer of the Company and delivered to you or to counsel for the Underwriters shall be deemed to be a representation and warranty by the Company to the Underwriters as to the statements made therein. If any condition to the Underwriters' obligations hereunder to be satisfied prior to or at the First Closing Date is not so satisfied, this Agreement at your election will terminate upon notification by you to the Company and the Selling Stockholders without liability on the part of any Underwriter, the Company or the Selling Stockholders except for the expenses to be paid or 26 reimbursed by the Company pursuant to Sections 7 and 9 hereof and except to the extent provided in Section 11 hereof. SECTION 9. Reimbursement of Underwriters' Expenses. Notwithstanding any other provisions hereof, if this Agreement shall be terminated by you pursuant to Section 8, or if the sale to the Underwriters of the Common Shares at the First Closing is not consummated because of any refusal, inability or failure on the part of the Company or the Selling Stockholders to perform any agreement herein or to comply with any provision hereof, the Company agrees to reimburse you upon demand for all out-of-pocket expenses that shall have been reasonably incurred by you in connection with the proposed purchase and the sale of the Common Shares, including but not limited to fees and disbursements of counsel, printing expenses, travel expenses, postage, telegraph charges and telephone charges relating directly to the offering contemplated by the Prospectus. Any such termination shall be without liability of any party to any other party except that the provisions of this Section, Section 7 and Section 11 shall at all times be effective and shall apply. SECTION 10. Effectiveness of Registration Statement. You, the Company and the Selling Stockholders will use your, its and their best efforts to cause the Registration Statement to become effective, to prevent the issuance of any stop order suspending the effectiveness of the Registration Statement and, if such stop order be issued, to obtain as soon as possible the lifting thereof. SECTION 11. Indemnification. (a) The Company, the Principal Selling Stockholder and the Sidney Harman 1987 Revocable Trust, jointly and severally, agree to indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of the Act against any losses, claims, damages, liabilities or expenses, joint or several, to which such Underwriter or such controlling person may become subject, under the Act, the Exchange Act, or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of the Company), insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon any untrue statement or alleged untrue statement of any material fact contained in the Registration Statement, any Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state in any of them a material fact required to be stated therein or necessary to make the statements in any of them not misleading, or arise out of or are based in whole or in part on any inaccuracy in the representations and warranties of the Company, the Principal Selling Stockholder or the Sidney Harman 1987 Revocable Trust contained herein or any failure of the Company, the Principal Selling Stockholder or the Sidney Harman 1987 Revocable Trust to 27 perform their respective obligations hereunder or under law; and will reimburse each Underwriter and each such controlling person for any legal and other expenses as such expenses are reasonably incurred by such Underwriter or such controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action; provided, however, that neither the Company, the Principal Selling Stockholder nor the Sidney Harman 1987 Revocable Trust will be liable in any such case to the extent that any such loss, claim, damage, liability or expense arises out of or is based upon an untrue statement or alleged untrue statement or omission or alleged omission made in the Registration Statement, any Preliminary Prospectus, the Prospectus or any amendment or supplement thereto in reliance upon and in conformity with the information furnished to the Company pursuant to Section 4 hereof; further provided, however, that the indemnification contained in this paragraph (a) with respect to any Preliminary Prospectus shall not inure to the benefit of any Underwriter (or to the benefit of any person controlling such Underwriter) on account of any such loss, claim, damage, liability or expense arising from the sale of the Common Shares by such Underwriter to any person if a copy of the Prospectus shall not have been delivered or sent to such person within the time required by the Act and the Rules and Regulations, and the untrue statement or alleged untrue statement or omission or alleged omission of a material fact contained in such Preliminary Prospectus was corrected in the Prospectus, provided that the Company has delivered the Prospectus to the several Underwriters in requisite quantity on a timely basis to permit such delivery or sending. The Company, the Principal Selling Stockholder and the Sidney Harman 1987 Revocable Trust may agree, as among themselves and without limiting the rights of the Underwriters under this Agreement, as to the respective amounts of such liability for which they each shall be responsible. In addition to its other obligations under this Section 11(a), the Company, the Principal Selling Stockholder and the Sidney Harman 1987 Revocable Trust agree that, as an interim measure during the pendency of any claim, action, investigation, inquiry or other proceeding arising out of or based upon any statement or omission, or any alleged statement or omission, or any inaccuracy in the representations and warranties of the Company, the Principal Selling Stockholder or the Sidney Harman 1987 Revocable Trust herein or failure to perform its obligations hereunder, all as described in this Section 11(a), they will reimburse each Underwriter on a quarterly basis for all reasonable legal or other expenses incurred in connection with investigating or defending any such claim, action, investigation, inquiry or other proceeding, notwithstanding the absence of a judicial determination as to the propriety and enforceability of their obligations to reimburse each Underwriter for such expenses and the possibility that such payments might later be held to have been improper by a court of competent jurisdiction. To the extent that any such interim reimbursement payment is so held to have been improper, each Underwriter shall promptly return it to 28 the Company, the Principal Selling Stockholder or the Sidney Harman 1987 Revocable Trust, as the case may be, together with interest, compounded daily, determined on the basis of the prime rate (or other commercial lending rate for borrowers of the highest credit standing) announced from time to time by Bank of America NT&SA, San Francisco, California (the "Prime Rate"). Any such interim reimbursement payments which are not made to an Underwriter within 30 days of a request for reimbursement shall bear interest at the Prime Rate from the date of such request. Notwithstanding the foregoing provisions of this Section 11(a), (i) the liability of the Principal Selling Stockholder and the Sidney Harman 1987 Revocable Trust pursuant to this Section 11(a) shall be limited to an amount equal to the aggregate net proceeds received by the Principal Selling Stockholder and the Sidney Harman 1987 Revocable Trust from their sale of Common Shares hereunder and (ii) no Underwriter or person who controls any Underwriter shall exercise its rights to receive indemnification from the Principal Selling Stockholder or the Sidney Harman 1987 Revocable Trust pursuant to this Section 11(a) unless (A) demand for indemnification has been made against the Company in accordance with the provisions of this Section 11 and (B) the Company shall not have satisfied its indemnification obligations in full on the 120th day after receipt of such demand. This indemnity agreement will be in addition to any liability which the Company, the Principal Selling Stockholder or the Sidney Harman 1987 Revocable Trust may otherwise have. (b) Each Selling Stockholder, other than the Principal Selling Stockholder and the Sidney Harman 1987 Revocable Trust (such stockholders, the "Other Selling Stockholders"), will severally and not jointly indemnify and hold harmless each Underwriter and each person, if any, who controls any Underwriter within the meaning of the Act against any losses, claims, damages, liabilities or expenses, joint or several, to which such Underwriter or such controlling person may become subject, under the Act, the Exchange Act, or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of such Underwriter), insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon any untrue or alleged untrue statement of any material fact contained in the Registration Statement, any Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, any Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with information furnished to the Company by such Other Selling Stockholder specifically for inclusion therein, or arise out of or are based 29 in whole or in part on any inaccuracy in the representations and warranties of such Other Selling Stockholder contained herein or any failure of such Other Selling Stockholder to perform its obligations hereunder or under law; and will reimburse the Underwriters or controlling persons for any legal and other expense reasonably incurred by the Underwriters or controlling persons in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action. In addition to its other obligations under this Section 11(b), each Other Selling Stockholder severally agrees that, as an interim measure during the pendency of any claim, action, investigation, inquiry or other proceeding arising out of or based upon any statement or omission, or any alleged statement or omission, or any inaccuracy in the representations and warranties of such Other Selling Stockholder herein or failure to perform its obligations hereunder, all as described in this Section 11(b), it will reimburse each Underwriter on a quarterly basis for all reasonable legal or other expenses incurred in connection with investigating or defending any such claim, action, investigation, inquiry or other proceeding, notwithstanding the absence of a judicial determination as to the propriety and enforceability of their obligations to reimburse each Underwriter for such expenses and the possibility that such payments might later be held to have been improper by a court of competent jurisdiction. To the extent that any such interim reimbursement payment is so held to have been improper, each Underwriter shall promptly return it to such Other Selling Stockholder, together with interest, compounded daily, determined on the basis of the Prime Rate. Any such interim reimbursement payments which are not made to an Underwriter within 30 days of a request for reimbursement, shall bear interest at the Prime Rate from the date of such request. Notwithstanding the foregoing provisions of this Section 11(b), the liability of each Other Selling Stockholder pursuant to this Section 11(b) shall be limited to an amount equal to the aggregate net proceeds received by such Selling Stockholder from its sale of Common Shares hereunder. This indemnity agreement will be in addition to any liability which the Other Selling Stockholders may otherwise have. (c) Each Underwriter will severally indemnify and hold harmless the Company, each of its directors, each of its officers who signed the Registration Statement, the Selling Stockholders and each person, if any, who controls the Company or any Selling Stockholder within the meaning of the Act, against any losses, claims, damages, liabilities or expenses to which the Company, or any such director, officer, Selling Stockholder or controlling person may become subject, under the Act, the Exchange Act, or other federal or state statutory law or regulation, or at common law or otherwise (including in settlement of any litigation, if such settlement is effected with the written consent of such Underwriter), insofar as such losses, claims, damages, liabilities or expenses (or actions in respect thereof as contemplated below) arise out of or are based upon any untrue or 30 alleged untrue statement of any material fact contained in the Registration Statement, any Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto, or arise out of or are based upon the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, in each case to the extent, but only to the extent, that such untrue statement or alleged untrue statement or omission or alleged omission was made in the Registration Statement, any Preliminary Prospectus, the Prospectus, or any amendment or supplement thereto, in reliance upon and in conformity with the information furnished to the Company pursuant to Section 4 hereof, or arise out of or are based in whole or in part on any inaccuracy in the representations and warranties of the Underwriters contained herein or any failure of the Underwriters to perform their obligations hereunder or under law; and will reimburse the Company, or any such director, officer, Selling Stockholder or controlling person for any legal and other expense reasonably incurred by the Company, or any such director, officer, Selling Stockholder or controlling person in connection with investigating, defending, settling, compromising or paying any such loss, claim, damage, liability, expense or action. In addition to its other obligations under this Section 11(c), each Underwriter severally agrees that, as an interim measure during the pendency of any claim, action, investigation, inquiry or other proceeding arising out of or based upon any statement or omission, or any alleged statement or omission, described in this Section 11(c) which relates to information furnished to the Company pursuant to Section 4 hereof, it will reimburse the Company (and, to the extent applicable, each officer, director, controlling person or Selling Stockholder) on a quarterly basis for all reasonable legal or other expenses incurred in connection with investigating or defending any such claim, action, investigation, inquiry or other proceeding, notwithstanding the absence of a judicial determination as to the propriety and enforceability of the Underwriters' obligation to reimburse the Company (and, to the extent applicable, each officer, director, controlling person or Selling Stockholder) for such expenses and the possibility that such payments might later be held to have been improper by a court of competent jurisdiction. To the extent that any such interim reimbursement payment is so held to have been improper, the Company (and, to the extent applicable, each officer, director, controlling person or Selling Stockholder) shall promptly return it to the Underwriters together with interest, compounded daily, determined on the basis of the Prime Rate. Any such interim reimbursement payments which are not made to the Company within 30 days of a request for reimbursement, shall bear interest at the Prime Rate from the date of such request. This indemnity agreement will be in addition to any liability which such Underwriter may otherwise have. (d) Promptly after receipt by an indemnified party under this Section of notice of the commencement of any action, 31 such indemnified party will, if a claim in respect thereof is to be made against an indemnifying party under this Section, notify the indemnifying party in writing of the commencement thereof; but the omission so to notify the indemnifying party will not relieve it from any liability which it may have to any indemnified party for contribution or otherwise than under the indemnity agreement contained in this Section or to the extent it is not prejudiced as a proximate result of such failure. In case any such action is brought against any indemnified party and such indemnified party seeks or intends to seek indemnity from an indemnifying party, the indemnifying party will be entitled to participate in, and, to the extent that it may wish, jointly with all other indemnifying parties similarly notified, to assume the defense thereof with counsel reasonably satisfactory to such indemnified party; provided, however, if the defendants in any such action include both the indemnified party and the indemnifying party and the indemnified party shall have reasonably concluded, upon consultation with counsel, that there may be a conflict between the positions of the indemnifying party and the indemnified party in conducting the defense of any such action or that there may be legal defenses available to it and/or other indemnified parties which are different from or additional to those available to the indemnifying party, the indemnified party or parties shall have the right to select separate counsel to assume such legal defenses and to otherwise participate in the defense of such action on behalf of such indemnified party or parties. Upon receipt of notice from the indemnifying party to such indemnified party of its election so to assume the defense of such action and approval by the indemnified party of counsel, the indemnifying party will not be liable to such indemnified party under this Section for any legal or other expenses subsequently incurred by such indemnified party in connection with the defense thereof unless (i) the indemnified party shall have employed such counsel in connection with the assumption of legal defenses in accordance with the proviso to the next preceding sentence (it being understood, however, that the indemnifying party shall not be liable for the expenses of more than one separate counsel, approved by the Underwriters in the case of paragraph (a) or (b), representing the indemnified parties who are parties to such action) or (ii) the indemnifying party shall not have employed counsel reasonably satisfactory to the indemnified party to represent the indemnified party within a reasonable time after notice of commencement of the action, in each of which cases the fees and expenses of counsel shall be at the expense of the indemnifying party. (e) If the indemnification provided for in this Section 11 is required by its terms but is for any reason held to be unavailable to or otherwise insufficient to hold harmless an indemnified party under paragraphs (a) through (d) in respect of any losses, claims, damages, liabilities or expenses referred to herein, then each applicable indemnifying party shall contribute to the amount paid or payable by such indemnified party as a result of any losses, claims, damages, liabilities or expenses 32 referred to herein (i) in such proportion as is appropriate to reflect the relative benefits received by the Company, the Selling Stockholders and the Underwriters from the offering of the Common Shares or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company, the Selling Stockholders and the Underwriters in connection with the statements or omissions or inaccuracies in the representations and warranties herein which resulted in such losses, claims, damages, liabilities or expenses, as well as any other relevant equitable considerations. The respective relative benefits received by the Company, the Selling Stockholders and the Underwriters shall be deemed to be in the same proportion, in the case of the Company and the Selling Stockholders as the total price paid to the Company and to the Selling Stockholders, respectively, for the Common Shares sold by them to the Underwriters (net of underwriting commissions but before deducting expenses) bears to the total price to the public set forth on the cover of the Prospectus, and in the case of the Underwriters as the underwriting commissions received by them bears to the total price to the public set forth on the cover of the Prospectus. The relative fault of the Company, the Selling Stockholders and the Underwriters shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact or the inaccurate or the alleged inaccurate representation and/or warranty relates to information supplied by the Company, the Selling Stockholders or the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. The amount paid or payable by a party as a result of the losses, claims, damages, liabilities and expenses referred to above shall be deemed to include, subject to the limitations set forth in subparagraph (d) of this Section 11, any legal or other fees or expenses reasonably incurred by such party in connection with investigating or defending any action or claim. The provisions set forth in subparagraph (d) of this Section 11 with respect to notice of commencement of any action shall apply if a claim for contribution is to be made under this subparagraph (e); provided, however, that no additional notice shall be required with respect to any action for which notice has been given under subparagraph (d) for purposes of indemnification. The Company, the Selling Stockholders and the Underwriters agree that it would not be just and equitable if contribution pursuant to this Section 11 were determined solely by pro rata allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation which does not take account of the equitable considerations referred to in the immediately preceding paragraph. Notwithstanding the provisions of this Section 11, no Underwriter shall be required to contribute any amount in excess of the amount of the total underwriting commissions received by such Underwriter in connection with the Common Shares underwritten by 33 it and distributed to the public and no Selling Stockholder shall be required to contribute any amount in excess of the amount of the aggregate net proceeds received by such Selling Stockholder in connection with the sale of Common Shares by such Selling Stockholder hereunder. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute pursuant to this Section 11 are several in proportion to their respective underwriting commitments and not joint. (e) It is agreed that any controversy arising out of the operation of the interim reimbursement arrangements set forth in Sections 11(a), (b) and (c) hereof, including the amounts of any requested reimbursement payments and the method of determining such amounts, shall be settled by arbitration conducted under the provisions of the Constitution and Rules of the Board of Governors of The New York Stock Exchange, Inc. or pursuant to the Code of Arbitration Procedure of the NASD. Any such arbitration must be commenced by service of a written demand for arbitration or written notice of intention to arbitrate, therein electing the arbitration tribunal. In the event the party demanding arbitration does not make such designation of an arbitration tribunal in such demand or notice, then the party responding to said demand or notice is authorized to do so. Such an arbitration would be limited to the operation of the interim reimbursement provisions contained in Sections 11(a), (b) and (c) hereof and would not resolve the ultimate propriety or enforceability of the obligation to reimburse expenses which is created by the provisions of such Sections 11(a), (b) or (c) hereof. SECTION 12. Default of Underwriters. It shall be a condition to this Agreement and the obligation of the Company and the Selling Stockholders to sell and deliver the Common Shares hereunder, and of each Underwriter to purchase the Common Shares in the manner as described herein, that, except as hereinafter in this paragraph provided, each of the Underwriters shall purchase and pay for all the Common Shares agreed to be purchased by such Underwriter hereunder upon tender to the Underwriters of all such shares in accordance with the terms hereof. If any Underwriter or Underwriters default in their obligations to purchase Common Shares hereunder on either the First or Second Closing Date and the aggregate number of Common Shares which such defaulting Underwriter or Underwriters agreed but failed to purchase on such Closing Date does not exceed 10% of the total number of Common Shares which the Underwriters are obligated to purchase on such Closing Date, the non-defaulting Underwriters shall be obligated severally, in proportion to their respective commitments hereunder, to purchase the Common Shares which such defaulting Underwriters agreed but failed to purchase on such Closing Date. If any Underwriter or Underwriters so default and the aggregate number of Common Shares with respect to which such default occurs 34 is more than the above percentage and arrangements satisfactory to the non-defaulting Underwriters and the Company for the purchase of such Common Shares by other persons are not made within 48 hours after such default, this Agreement will terminate without liability on the party of any non-defaulting Underwriter or the Company or the Selling Stockholders except for the expenses to be paid by the Company pursuant to Section 7 hereof and except to the extent provided in Section 11 hereof. In the event that Common Shares to which a default relates are to be purchased by the non-defaulting Underwriters or by another party or parties, the non-defaulting Underwriters or the Company shall have the right to postpone the First or Second Closing Date, as the case may be, for not more than five business days in order that the necessary changes in the Registration Statement, Prospectus and any other documents, as well as any other arrangements, may be effected. As used in this Agreement, the term "Underwriter" includes any person substituted for an Underwriter under this Section. Nothing herein will relieve a defaulting Underwriter from liability for its default. SECTION 13. Effective Date. This Agreement shall become effective immediately as to Sections 7, 9, 11, 14 and 16 and, as to all other provisions, (i) if at the time of execution of this Agreement the Registration Statement has not become effective, at 2:00 P.M., California time, on the first full business day following the effectiveness of the Registration Statement (provided that this Agreement shall nevertheless become effective at such earlier time after the Registration Statement becomes effective as you may determine on and by notice to the Company or by release of any of the Common Shares for sale to the public) or (ii) if at the time of execution of this Agreement the Registration Statement has been declared effective, upon execution and delivery of this Agreement by the parties hereto. For the purposes of this Section 13, the Common Shares shall be deemed to have been released upon the release for publication of any newspaper advertisement relating to the Common Shares or upon the release by you of telegrams (i) advising Underwriters that the Common Shares are released for public offering, or (ii) offering the Common Shares for sale to securities dealers, whichever may occur first. SECTION 14. Termination. Without limiting the right to terminate this Agreement pursuant to any other provision hereof. (a) This Agreement may be terminated by the Company by notice to you and the Selling Stockholders or by you by notice to the Company and the Selling Stockholders at any time prior to the time this Agreement shall become effective as to all its provisions, and any such termination shall be without liability on the part of the Company or the Selling Stockholders to any Underwriter (except for the expenses to be paid or reimbursed by the Company pursuant to Sections 7 35 and 9 hereof and except to the extent provided in Section 11 hereof) or of any Underwriter to the Company or the Selling Stockholders (except to the extent provided in Section 11 hereof). (b) This Agreement may also be terminated by you prior to the First Closing Date by notice to the Company and the Selling Stockholders (i) if additional material governmental restrictions, not in force and effect on the date hereof, shall have been imposed upon trading in securities generally or minimum or maximum prices shall have been generally established on the New York Stock Exchange or on the American Stock Exchange or in the over the counter market by the NASD, or trading in securities generally shall have been suspended on either such Exchange or in the over the counter market by the NASD, or a general banking moratorium shall have been established by federal, New York or California authorities, (ii) if an outbreak of major hostilities or other national or international calamity or any substantial change in political, financial or economic conditions shall have occurred or shall have accelerated or escalated to such an extent, as, in the judgment of the Underwriters, to affect adversely the marketability of the Common Shares, (iii) if any adverse event shall have occurred or shall exist which makes untrue or incorrect in any material respect any statement or information contained in the Registration Statement or Prospectus or which is not reflected in the Registration Statement or Prospectus but should be reflected therein in order to make the statements or information contained therein not misleading in any material respect, or (iv) if there shall be any action, suit or proceeding pending or threatened, or there shall have been any development or prospective development involving particularly the business or properties or securities of the Company or any of its subsidiaries or the transactions contemplated by this Agreement, which, in the reasonable judgment of the Underwriters, may materially and adversely affect the Company's business or earnings and makes it impracticable or inadvisable to offer or sell the Common Shares. Any termination pursuant to this subsection (b) shall be without liability on the part of any Underwriter to the Company or the Selling Stockholders or on the part of the Company or the Selling Stockholders to any Underwriter (except for expenses to be paid or reimbursed by the Company pursuant to Sections 7 and 9 hereof and except to the extent provided in Section 11 hereof). (c) This Agreement shall also terminate at 5:00 P.M., California time, on the tenth full business day after the Registration Statement shall have become effective if the initial public offering price of the Common Shares shall not then as yet have been determined as provided in Section 5 hereof. Any termination pursuant to this subsection (c) shall be without liability on the part of any Underwriter to 36 the Company or the Selling Stockholders or on the part of the Company or the Selling Stockholders to any Underwriter (except for expenses to be paid or reimbursed by the Company pursuant to Sections 7 and 9 hereof and except to the extent provided in Section 11 hereof). SECTION 15. Failure of the Selling Stockholders to Sell and Deliver. If one or more of the Selling Stockholders shall fail to sell and deliver to the Underwriters the Common Shares to be sold and delivered by such Selling Stockholders at the First Closing Date under the terms of this Agreement, then the Underwriters may at their option, by written notice from you to the Company and the Selling Stockholders, either (i) terminate this Agreement without any liability on the part of any Underwriter or, except as provided in Sections 7, 9 and 11 hereof, the Company or the Selling Stockholders, or (ii) purchase the shares which the Company and other Selling Stockholders have agreed to sell and deliver in accordance with the terms hereof. In the event of a failure by one or more of the Selling Stockholders to sell and deliver as referred to in this Section, either you or the Company shall have the right to postpone the Closing Date for a period not exceeding seven business days in order that the necessary changes in the Registration Statement, Prospectus and any other documents, as well as any other arrangements, may be effected. SECTION 16. Representations and Indemnities to Survive Delivery. The respective indemnities, agreements, representations, warranties and other statements of the Company, of its officers, of the Selling Stockholders and of the several Underwriters set forth in or made pursuant to this Agreement will remain in full force and effect, regardless of any investigation made by or on behalf of any Underwriter or the Company or any of its or their partners, officers or directors or any controlling person, or the Selling Stockholders, as the case may be, and will survive delivery of and payment for the Common Shares sold hereunder and any termination of this Agreement. SECTION 17. Notices. All communications hereunder shall be in writing and, if sent to you shall be mailed, delivered or telegraphed and confirmed to you at 600 Montgomery Street, San Francisco, California 94111, Attention: John Berg, with a copy to Simpson Thacher & Bartlett, 425 Lexington Avenue, New York, New York 10017, Attention: Laura Palma, Esq.; and if sent to the Company or the Selling Stockholders shall be mailed, delivered or telegraphed and confirmed to the Company or such Selling Stockholder at Harman International Industries, 8500 Balboa Boulevard, Northridge, California 91329, Attention: Dr. Sidney Harman and Frank Meredith, Esq., with a copy to Jones, Day, Reavis & Pogue, 599 Lexington Avenue, New York, New York 10022, Attention: Robert A. Profusek, Esq. and a copy to Schulte Roth & Zabel, 900 Third Avenue, New York, New York 10022, Attention: William Zabel, Esq. The Company, the Selling Stockholders 37 or you may change the address for receipt of communications hereunder by giving notice to the others. SECTION 18. Successors. This Agreement will inure to the benefit of and be binding upon the parties hereto, including any substitute Underwriters pursuant to Section 12 hereof, and to the benefit of the officers and directors and controlling persons referred to in Section 11, and in each case their respective successors, personal representatives and assigns, and no other person will have any right or obligation hereunder. No such assignment shall relieve any party of its obligations hereunder. The term "successors" shall not include any purchaser of the Common Shares as such from any of the Underwriters merely by reason of such purchase. SECTION 19. Partial Unenforceability. The invalidity or unenforceability of any Section, paragraph or provision of this Agreement shall not affect the validity or enforceability of any other Section, paragraph or provision hereof. If any Section, paragraph or provision of this Agreement is for any reason determined to be invalid or unenforceable, there shall be deemed to be made such minor changes (and only such minor changes) as are necessary to make it valid and enforceable. SECTION 20. Applicable Law. This Agreement shall be governed by and construed in accordance with the internal laws (and not the laws pertaining to conflicts of laws) of the State of California. SECTION 21. General. This Agreement constitutes the entire agreement of the parties to this Agreement and supersedes all prior written or oral and all contemporaneous oral agreements, understandings and negotiations with respect to the subject matter hereof. This Agreement may be executed in several counterparts, each one of which shall be an original, and all of which shall constitute one and the same document. In this Agreement, the masculine, feminine and neuter genders and the singular and the plural include one another. The section headings in this Agreement are for the convenience of the parties only and will not affect the construction or interpretation of this Agreement. This Agreement may be amended or modified, and the observance of any term of this Agreement may be waived, only by a writing signed by the Company, the Selling Stockholders and you. Any person executing and delivering this Agreement as Attorney-in-fact for a Selling Stockholder represents by so doing that he has been duly appointed as Attorney-in-fact by such Selling Stockholder pursuant to a validly existing and binding Power of Attorney which authorizes such Attorney-in-fact to take such action. Any action taken under this Agreement by any of the Attorneys-in-fact will be binding on all the Selling Stockholders. 38 If the foregoing is in accordance with your understanding of our agreement, kindly sign and return to us the enclosed copies hereof, whereupon it will become a binding agreement among the Company, the Selling Stockholders and the several Underwriters, all in accordance with its terms. Very truly yours, HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED By:___________________________ Title: [INSERT EACH SELLING STOCKHOLDER NAME] By:___________________________ (Attorney-in-fact) SIDNEY HARMAN 1987 REVOCABLE TRUST By:___________________________ (Attorney-in-fact) SIDNEY HARMAN CHARITABLE REMAINDER TRUST By:___________________________ (Attorney-in-fact) HARMAN FAMILY FOUNDATION By:___________________________ (Attorney-in-fact) The foregoing Underwriting Agreement is hereby confirmed and accepted by us in San Francisco, California as of the date first above written. MONTGOMERY SECURITIES By:___________________________ Managing Director 39 DONALDSON, LUFKIN & JENRETTE SECURITIES CORPORATION By:____________________________ Managing Director LEHMAN BROTHERS INC. By:____________________________ Managing Director J.P. MORGAN SECURITIES INC. By:____________________________ Managing Director SCHEDULE A Number of Firm Common Shares to be Purchased Name of Underwriter from Company - -------------------------- -------------------------------- Montgomery Securities............... Donaldson, Lufkin & Jenrette Securities Corporation............. Lehman Brothers Inc................... J.P. Morgan Securities Inc........................................... TOTAL.............. ______________ ______________
SCHEDULE B Number of Firm Common Shares to be Sold by Name of Underwriter [Name Selling Stockholder] - -------------------------- -------------------------------- Montgomery Securities............... Donaldson, Lufkin & Jenrette Securities Corporation............. Lehman Brothers Inc................... J.P. Morgan Securities Inc...........................................
Number of Firm Common Shares to be Sold by Name of Underwriter [Name Selling Stockholder] - -------------------------- -------------------------------- Montgomery Securities............... Donaldson, Lufkin & Jenrette Securities Corporation............. Lehman Brothers Inc................... J.P. Morgan Securities Inc...........................................
Number of Firm Common Shares to be Sold by Sidney Harman Charitable Name of Underwriter Remainder Trust - -------------------------- -------------------------------- Montgomery Securities............... Donaldson, Lufkin & Jenrette Securities Corporation............. Lehman Brothers Inc................... J.P. Morgan Securities Inc........................................... TOTAL.............. ______________ ______________
Number of Firm Common Shares to be Sold by Name of Underwriter Harman Family Foundation - -------------------------- --------------------------------- Montgomery Securities............... Donaldson, Lufkin & Jenrette Securities Corporation............. Lehman Brothers Inc................... J.P. Morgan Securities Inc........................................... TOTAL.............. ______________
43 SCHEDULE C [FORM OF COMPANY COUNSEL'S OPINION] ________ __, 1996 Montgomery Securities Donaldson, Lufkin & Jenrette Securities Corporation Lehman Brothers Inc. J.P. Morgan Securities Inc. c/o Montgomery Securities 600 Montgomery Street San Francisco, California Re: Underwritten Public Offering of 4,000,000 Shares of Common Stock, par value $0.01 per share, of Harman International Industries, Incorporated Ladies and Gentlemen: We have acted as counsel to Harman International Industries, Incorporated, a Delaware corporation (the "Company"), and Dr. Sidney Harman (the "Stockholder"), in connection with the issuance and sale by the Company of 2,000,000 shares, and the sale by the Stockholder of ___________ shares, of Common Stock, par value $0.01 per share, of the Company (such _________ shares, collectively, the "Shares"), pursuant to the Underwriting Agreement, dated May __, 1996 (the "Underwriting Agreement"), by and among Montgomery Securities, Donaldson, Lufkin & Jenrette Securities Corporation, Lehman Brothers Inc. and J.P. Morgan Securities Inc. (the "Underwriters"), the Selling Stockholders named therein and the Company. This opinion is being furnished to you pursuant to Section 8(c)(i) of the Underwriting Agreement. Unless otherwise defined herein, terms used in this opinion that are defined in the Underwriting Agreement are used herein as so defined. For purposes of this opinion (i) Domestic Subsidiaries shall mean Harman Investment Company, a Delaware corporation, Harman-Kardon Incorporated, a Delaware corporation, JBL Incorporated, a Delaware corporation, Fosgate Inc., a Delaware corporation, Harman Motive, Inc., a Delaware corporation, Orban, Inc., a Delaware corporation and Infinity Systems, Inc., a California corporation and (ii) Subsidiaries shall mean the Domestic Subsidiaries and all other direct and indirect subsidiaries of the Company. 44 We have examined such documents, records and matters of law as we have deemed necessary for purposes of this opinion. In rendering the opinions herein, we are expressing no opinion as to the laws of any jurisdiction other than the United States, the District of Columbia and the States of Delaware and California. Based upon the foregoing, and subject to the qualifications, assumptions and limitations set forth herein, we are of the opinion that: 1. The Company is duly organized, validly existing and in good standing under the laws of the State of Delaware and is duly qualified to transact business as a foreign corporation and is in good standing in the District of Columbia and the States of California and New York, and has full corporate power and authority to own its properties and conduct its business as described in the Registration Statement. 2. Each Domestic Subsidiary is a corporation duly organized, validly existing and in good standing under the laws of the state of its incorporation, as set forth opposite its name in Schedule A attached hereto, is duly qualified to transact business as a foreign corporation and is in good standing in the states set forth opposite its name on Schedule A attached hereto, and has full corporate power and authority to own its properties and conduct its business as described in the Registration Statement. 3. The authorized capital stock of the Company is as set forth under the caption "Capitalization" in the Prospectus, and all of the outstanding shares of capital stock of the Company that were issued in the Company's initial public offering or at any time thereafter have been duly authorized and validly issued and are fully paid and nonassessable. All of the issued and outstanding shares of Common Stock that were issued in the Company's initial public offering or at any time thereafter have been issued in compliance with federal securities laws and were not issued in violation of or subject to any preemptive rights or, to our knowledge, other rights to subscribe for or purchase any securities. 4. All of the issued and outstanding shares of capital stock of each Domestic Subsidiary have been duly authorized and validly issued and are fully paid and nonassessable. To our knowledge, all of the issued and outstanding shares of each Domestic Subsidiary are owned directly or indirectly by the Company, free and clear of all liens, encumbrances, security interests, voting trusts or claims. 5. The certificates evidencing the Shares to be delivered by the Company under the Underwriting Agreement are in due and proper form under Delaware law, and when duly countersigned by the Company's transfer agent and registrar, and delivered to you or upon your order against payment of the agreed 45 consideration therefor in accordance with the provisions of the Underwriting Agreement, the Shares represented thereby will be duly authorized and validly issued, fully paid and nonassessable, and will not have been issued in violation of or subject to any preemptive rights, or to our knowledge other rights to subscribe for or purchase securities of the Company. 6. The Company has the corporate power and authority to enter into the Underwriting Agreement and to sell and deliver the Shares to be sold by it to the Underwriters. The Underwriting Agreement has been duly authorized, executed and delivered by the Company. 7. No approval, authorization, order, consent, registration, filing or qualification of or with any court or governmental agency is required for the execution and delivery of the Underwriting Agreement by the Company or the consummation of the transactions contemplated therein, except registration under the Act, and such as may be required under applicable state securities or Blue Sky laws in connection with the purchase and distribution of the Shares by the Underwriters, the approval by The New York Stock Exchange, Inc. of the listing of the Shares and the clearance of such offering by the NASD. 8. Neither the execution and delivery of the Underwriting Agreement by the Company nor the performance by the Company of the transactions therein contemplated will (a) result in a breach or violation by the Company, or constitute a default by the Company under, any indenture, mortgage, deed of trust, loan agreement or other agreement or instrument that is material to the Company and the Subsidiaries taken as a whole and known to us to which the Company or any Subsidiary or any of their respective property is bound, or will conflict with the Restated Certificate of Incorporation or By-Laws of the Company, each as amended, or (b) assuming the Shares have been duly registered under such state securities and Blue Sky laws as may be required in connection with the purchase and distribution of the Shares by the Underwriters, result in the violation of (i) any statute or regulation of the United States, California, Delaware or the District of Columbia applicable to the Company or any of its Subsidiaries or any of their respective properties or (ii) any order or decree known to us of any court or governmental authority binding on the Company or any of its Subsidiaries or any of their properties. 9. Except as disclosed on Schedule B attached hereto, we are not acting as counsel for the Company or any Subsidiary in any pending litigation in which the Company or any Subsidiary is a party involving a loss contingency in excess of $250,000, and we have not had referred to us by the Company or any Subsidiary for legal advice or legal representation any litigation matter or other matter that we believe might be deemed to be overtly threatened litigation in which the Company or any Subsidiary may become a party involving a loss contingency in excess of 46 $250,000. The statement set forth in the preceding sentence is limited to those matters that the Company or any Subsidiary has referred to us for legal representation or about which the Company or any Subsidiary has consulted us as counsel and with respect to which we have given substantive attention subsequent to June 30, 1995. We have identified those matters by making inquiry of lawyers currently in our firm who, according to our records, have been engaged in legal services on behalf of the Company or any Subsidiary during that period, and by examining certain current records that we maintain for our internal operations. In that process, we have not undertaken any independent review of documents or records that are in our possession concerning the Company or any Subsidiary. 10. The Company is not an investment company as that term is defined in the Investment Company Act of 1940, as amended. 11. The Underwriting Agreement and the Stockholders Agreement have been duly executed and delivered by or on behalf of the Stockholder; the Agent has been duly and validly authorized to act as the custodian of the Shares to be sold by the Stockholder; and the performance by the Stockholder of the Underwriting Agreement and the Stockholders Agreement and the consummation by the Stockholder of the transactions contemplated thereby will not result in a breach of, or constitute a default under, any material indenture, material mortgage, material deed of trust, material trust, material loan agreement, material lease or other material agreement or material instrument known to us to which the Stockholder is a party or by which he or his property is bound, or violate any statute, judgment, decree, order or rule known to us of any court or governmental body having jurisdiction over the Stockholder or any of his properties. To the best of our knowledge, no consent of any court, administrative agency or other governmental body is required for the execution and delivery of the Underwriting Agreement or the Stockholders Agreement or the consummation by the Stockholder of the transactions contemplated by the Underwriting Agreement, except such as have been obtained and are in full force and effect under the Act and such as may be required under the rules of the NASD and applicable Blue Sky laws. 12. The Stockholder has full right and power to enter into the Underwriting Agreement and the Stockholders Agreement and to sell, transfer, and deliver the Shares to be sold on the date hereof by the Stockholder under the Underwriting Agreement and, to our knowledge, good and marketable title to such Shares so sold, free and clear of all liens, encumbrances, equities, claims, restrictions, security interests, voting trusts, or other defects of title, has been transferred to the Underwriters (whom we assume to be bona fide purchasers) under the Underwriting Agreement. 47 13. The Stockholders Agreement is the valid and binding agreement of the Stockholder enforceable in accordance with its terms, except as enforceability may be limited by general equitable principles, bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally. 14. No transfer taxes are required to be paid in connection with the sale and delivery of the Shares to the Underwriters under the Underwriting Agreement. We are of the opinion that the Registration Statement and the Prospectus (except for the operating statistics, financial statements, financial schedules and other financial data included therein and except for the information referred to under the caption "Experts" as having been included in the Registration Statement and the Prospectus on the authority of KPMG Peat Marwick LLP as experts, as to which we express no view) comply as to form in all material respects with the Act and the Rules and Regulations. We do not know of any contracts or other documents of a character required to be filed as exhibits to the Registration Statement that are not filed as required. We have not independently verified and are not passing upon, and do not assume any responsibility for, the accuracy, completeness or fairness (except as set forth in the preceding paragraph) of the information contained in the Registration Statement and the Prospectus. We have participated in the preparation of the Registration Statement and the Prospectus. From time to time we have had discussions with officers, directors and employees of the Company, KPMG Peat Marwick LLP, the independent certified public accountants who examined the consolidated financial statements of the Company and its Subsidiaries incorporated by reference in the Registration Statement and the Prospectus, and representatives of the Underwriters concerning the information contained in the Registration Statement and the Prospectus and proposed responses to various items in Form S-3 under the Act. Based thereon, no facts have come to our attention that cause us to believe that the Registration Statement (except for operating statistics, financial statements, financial schedules and other financial data included therein and except for the information referred to under the caption "Experts" as having been included in the Registration Statement and the Prospectus on the authority of KPMG Peat Marwick LLP as experts, as to which we express no view), at the time it became effective and at the date hereof, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein not misleading, or that the Prospectus (except for the operating statistics, financial statements, financial schedules and other financial data included therein and except for the information referred to under the caption "Experts" as having been included in the Registration Statement and the Prospectus on the authority of KPMG Peat 48 Marwick LLP as experts, as to which we express no view) at the time it became effective and at the date hereof contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The Registration Statement has become effective under the Act and to the best of our knowledge no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that purpose are pending or threatened by the Commission. The opinions set forth herein are subject to the following assumptions, qualifications and limitation: a. We have assumed, with your permission and without independent investigation: (i) that the signatures on all documents examined by us are genuine and that where any such signature purports to have been made in a corporate, governmental, fiduciary or other capacity, the person who affixed such signature to such documents had authority to do so (other than if such person is an officer of the Company or its Subsidiaries), (ii) the authenticity of documents submitted to us as originals, and the conformity to authentic original documents of all documents submitted to us as certified, conformed or photostatic copies, and (iii) the correctness of public files, records and certificates of, or furnished by, governmental or regulatory agencies or authorities. b. We have assumed, with your permission and without independent investigation, that the Underwriting Agreement has been duly authorized, executed and delivered by each of the parties thereto (other than the Company) and constitutes the valid and binding obligation of such parties, enforceable against such parties in accordance with its terms. c. In rendering the opinions set forth in paragraph 1 as to the good standing of the Company and each of the Domestic Subsidiaries under the laws of the jurisdiction of its incorporation or formation and the good standing of the Company and the Domestic Subsidiaries as foreign corporations in the specific jurisdictions, we have relied exclusively on certificates of public officials, all of which have been furnished to you. d. In rendering the opinions set forth in paragraph 3 hereof concerning the Company's compliance with federal securities laws with regard to the issuance of shares of Common Stock in the initial public offering or at any time thereafter: our opinion with respect to 49 compliance with federal securities laws is limited to compliance with the registration requirements of the Act. e. In rendering the opinions set forth in paragraphs 4 and 5, as to the matters set forth in the certificates of officers of the Company and its Domestic Subsidiaries, copies of which have been furnished to you previously today or are attached hereto, we have assumed the correctness of, and are relying solely upon, the statements set forth in such certificates without making any independent investigation or inquiry whatsoever with respect to the accuracy of such statements, other than a review of the relevant minute books and stock transfer records (excluding the stock certificates for the Domestic Subsidiaries, which were not available for our review). f. In rendering the opinion set forth in paragraph 4 hereof with respect to the ownership of shares of capital stock of each Domestic Subsidiary, we have relied exclusively upon a review of the relevant stock transfer records of each of the Domestic Subsidiaries which records have been certified to us as correct by an officer of each such Domestic Subsidiary, without making any independent investigation with respect to the completeness and accuracy of such records. g. In rendering the opinions set forth in paragraphs 8 and 11 hereof as to material agreements and other material instruments of the Company, its Subsidiaries and the Stockholder, we have assumed the completeness and accuracy of, and are relying solely upon, the statements in the certificates of officers of the Company and the Subsidiaries and of the Stockholder, copies of which have been furnished to you, identifying all of the material agreements and other material instruments to which the Company, any Subsidiary and the Stockholder is a party or by which the Company, any Subsidiary or the Stockholder is bound, without making any independent investigation with respect to the completeness and accuracy of the statements contained therein and, based solely upon our review of the reports filed by the Company prior to the date hereof pursuant to the Exchange Act, we have no knowledge of any other material agreements or material instruments to which the Company or any Subsidiary is a party or by which the Company or any Subsidiary is bound. h. Until December 31, 1992, Jane Harman was of Counsel to our firm and an officer and director of the Company, and she is presently a beneficial owner of shares of Common Stock of the Company and the wife of the Stockholder. For purposes of this opinion, any 50 knowledge of or information known by Jane Harman that is not known by any other lawyer in our firm shall not be deemed to be knowledge of or information known by our firm. i. As to matters of fact, we have relied solely upon certificates of executive officers of the Company and the Stockholder, copies of which have been delivered to you. This opinion is furnished by us, as counsel for the Company and the Stockholder, to you solely for your benefit and solely with respect to the purchase of the Shares from the Company and the Stockholder by you, upon the understanding that we are not hereby assuming any professional responsibility to any other person whatsoever. Very truly yours, Jones, Day, Reavis & Pogue SCHEDULE D [FORM OF FOREIGN SUBSIDIARY OPINION] ________ __, 1996 Montgomery Securities Donaldson, Lufkin & Jenrette Securities Corporation Lehman Brothers Inc. J.P. Morgan Securities Inc. c/o Montgomery Securities 600 Montgomery Street San Francisco, California Re: Underwritten Public Offering of 4,000,000 Shares of Common Stock, par value $0.01 per share, of Harman International Industries, Incorporated Ladies and Gentlemen: We have acted as counsel to [company], a corporation organized and existing under the laws of [country] (the "Company"). We have examined such documents, records and matters of law as we have deemed necessary for purposes of this opinion. In rendering the opinions herein, we are expressing no opinion as to the laws of any jurisdiction other than the laws of [country]. Based upon the foregoing, and subject to the qualifications, assumptions and limitations set forth herein, we are of the opinion that: 1. The Company is duly organized, validly existing and in good standing under the laws of [country] and is duly qualified to do business as a [country] corporation. 2. To the best of our knowledge, all of the issued and outstanding shares of the Company have been duly authorized and validly issued and are fully paid and nonassessable. To the best of our knowledge, all of the issued and outstanding shares of the Company are owned directly or indirectly by Harman International Industries, Incorporated, free and clear of all liens, encumbrances, security interests, voting trusts or claims. 3. [Except as disclosed on Schedule A attached hereto,] to the best of our knowledge, there are no legal or governmental actions, suits or proceedings pending or threatened against the Company. 52 This opinion is furnished by us, as counsel for the Company, to you solely for your benefit and solely with respect to the purchase by your of the Shares referred to above, upon the understanding that we are not hereby assuming any professional responsibility to any other person whatsoever. Very truly yours, 53 SCHEDULE E [FORM OF OPINION OF COUNSEL TO SELLING STOCKHOLDERS] ________ __, 1996 Montgomery Securities Donaldson, Lufkin & Jenrette Securities Corporation Lehman Brothers Inc. J.P. Morgan Securities Inc. c/o Montgomery Securities 600 Montgomery Street San Francisco, California Re: Underwritten Public Offering of 4,000,000 Shares of Common Stock, par value $0.01 per share, of Harman International Industries, Incorporated Ladies and Gentlemen: We have acted as counsel to the Sidney Harman 1987 Revocable Trust, the Harman Family Foundation and the Sidney Harman Charitable Remainder Trust (collectively, the "Selling Stockholders"), in connection with the sale by the Selling Stockholders of _________ shares of Common Stock, par value $0.01 per share (the "Shares"), of Harman International Industries, Incorporated (the "Company"), pursuant to the Underwriting Agreement, dated May __, 1996 (the "Underwriting Agreement"), by and among Montgomery Securities, Donaldson, Lufkin & Jenrette Securities Corporation, Lehman Brothers Inc. and J.P. Morgan Securities Inc. (the "Underwriters"), Dr. Sidney Harman, the Selling Stockholders and the Company. This opinion is being furnished to you pursuant to Section 8(c)(ii) of the Underwriting Agreement. Unless otherwise defined herein, terms used in this opinion that are defined in the Underwriting Agreement are used herein as so defined. We have examined such documents, records and matters of law as we have deemed necessary for purposes of this opinion. In rendering the opinions herein, we are expressing no opinion as to the laws of any jurisdiction other than the United States and the States of _____________. Based upon the foregoing, and subject to the qualifications, assumptions and limitations set forth herein, we are of the opinion that: 1. The Underwriting Agreement and the Stockholders Agreement have been duly authorized, executed and delivered by or on behalf of each of the Selling Stockholders; the Agent has been 54 duly and validly authorized to act as the custodian of the Shares to be sold by the Selling Stockholders; and the performance by the Stockholder of the Underwriting Agreement and the Stockholders Agreement and the consummation by the Stockholder of the transactions contemplated thereby will not result in a breach of, or constitute a default under, any material indenture, material mortgage, material deed of trust, material trust, material loan agreement, material lease or other material agreement or material instrument of which we have knowledge to which any Selling Stockholder is a party or by which it or its property is bound, or violate any statute, judgment, decree, order or rule known to us of any court or governmental body having jurisdiction over any Selling Stockholder or any of its properties; and to the best of such counsel's knowledge, no consent of any court, regulatory body, administrative agency or other governmental body is required for the execution and delivery of the Underwriting Agreement or the Stockholders Agreement or the consummation by the Selling Stockholders of the transactions contemplated by the Underwriting Agreement, except such as have been obtained and are in full force and effect under the Act and such as may be required under the rules of the NASD and applicable Blue Sky laws. 2. Each Selling Stockholder has full right, power and authority to enter into the Underwriting Agreement and the Stockholders Agreement and to sell, transfer, and deliver the Shares to be sold on the date hereof by such Selling Stockholder under the Underwriting Agreement and, assuming each of the several Underwriters who purchases Shares acquires them in good faith and without notice of any adverse claim (as such term is defined in Section 8-302 of the Uniform Commercial Code), upon delivery of such Shares and payment therefor in accordance with the Underwriting Agreement, such Underwriters will have acquired good and valid title to such Shares, free and clear of any pledges, liens, claims, encumbrances, security interests and other adverse claims other than those created by the action or inaction of any Underwriter. 3. The Stockholders Agreement is the valid and binding agreement of each Selling Stockholder enforceable in accordance with its terms, except as enforceability may be limited by general equitable principles, bankruptcy, insolvency, reorganization, moratorium or other similar laws affecting creditors' rights generally. 4. No transfer taxes are required to be paid in connection with the sale and delivery by the Selling Stockholders of the Shares to the Underwriters under the Underwriting Agreement. 55 This opinion is furnished by us, as counsel for the Selling Stockholders, to you solely for your benefit and solely with respect to the purchase of the Shares from the Selling Stockholders by you, upon the understanding that we are not hereby assuming any professional responsibility to any other person whatsoever. Very truly yours, Schulte Roth & Zabel EX-5 3 OPINION AND CONSENT OF JONES, DAY, REAVIS & POGUE Exhibit 5.1 May 13, 1996 Harman International Industries, Incorporated 1101 Pennsylvania Avenue, N.W. Suite 1010 Washington, D.C. 20004 Ladies and Gentlemen: We have acted as counsel to Harman International Industries, Incorporated, a Delaware corporation (the "Company"), in connection with the preparation and filing by the Company of a Registration Statement on Form S-3, Registration No. 333-03189 (the "Registration Statement"), under the Securities Act of 1933, as amended, with respect to the registration of (i) 4,000,000 shares of Common Stock of the Company (2,000,000 to be offered and sold by the Company and 2,000,000 shares to be offered and sold by certain Selling Stockholders) and (ii) 600,000 shares of Common Stock of the Company reserved for over-allotment options granted to the Underwriters (defined below) (300,000 shares reserved for over-allotment option granted by the Company and 300,000 shares reserved for over-allotment option granted by certain Selling Stockholders) (collectively, such 4,600,000 shares of Common Stock are referred to herein as the "Shares"). The Shares will be sold pursuant to an Underwriting Agreement (the "Underwriting Agreement") by and among the Company, the Selling Stockholders named therein and Montgomery Securities, Donaldson, Lufkin & Jenrette Securities Corporation, Lehman Brothers Inc., and J.P. Morgan & Co. (the "Underwriters"). We have examined such documents, records and matters of law as we have deemed necessary for the purposes of this opinion, and based thereupon we are of the opinion that: The Shares have been duly authorized and, when issued by the Company or sold by the Selling Stockholders and delivered to the Underwriters pursuant to the Underwriting Agreement against payment of the consideration therefor as provided therein, will be validly issued, fully paid and nonassessable. We hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration Statement and to the reference to our firm in the Registration Statement under the caption "Legal Matters." Very truly yours, /s/ Jones, Day, Reavis & Pogue --------------------------------------- Jones, Day, Reavis & Pogue EX-23 4 CONSENT OF KPMG PEAT MARWICK LLP EXHIBIT 23.1 CONSENT OF INDEPENDENT AUDITORS The Board of Directors Harman International Industries, Incorporated: We consent to the use of our reports incorporated herein by reference and to the reference to our firm under the headings of "Selected Consolidated Financial Data" and "Experts" in the prospectus. /s/ KPMG Peat Marwick LLP ------------------------------------ KPMG Peat Marwick LLP Los Angeles, California May 13, 1996 -----END PRIVACY-ENHANCED MESSAGE-----