def14a
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
PROXY STATEMENT PURSUANT TO SECTION 14(a)
OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant þ
Filed by a Party other than the Registrant o
Check the appropriate box:
|
|
|
o
|
|
Preliminary Proxy Statement |
o
|
|
Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
þ
|
|
Definitive Proxy Statement |
o
|
|
Definitive Additional Materials |
o
|
|
Soliciting Material Pursuant to § 240.14a-12 |
Harman International Industries, Incorporated
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
|
|
|
|
|
|
|
Payment of Filing Fee (Check the appropriate box): |
|
|
|
|
|
|
|
þ |
|
No fee required. |
o |
|
Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. |
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
Title of each class of securities to which transaction applies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
Aggregate number of securities to which transaction applies: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
Per unit price or other underlying value of transaction computed pursuant to
Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and
state how it was determined): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
Proposed maximum aggregate value of transaction: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5 |
) |
|
Total fee paid: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
o |
|
Fee paid previously with preliminary materials. |
|
|
|
|
|
|
|
o |
|
Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the
offsetting fee was paid previously. Identify the previous filing
by registration statement number, or the Form or Schedule and the
date of its filing. |
|
|
|
|
(1 |
) |
|
Amount Previously Paid: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
Form, Schedule or Registration Statement No.: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3 |
) |
|
Filing Party: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(4 |
) |
|
Date Filed: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
HARMAN INTERNATIONAL
INDUSTRIES, INCORPORATED
1101 Pennsylvania
Avenue, N.W., Suite 1010
Washington, D.C. 20004
|
|
|
|
|
|
October 29, 2007
|
Dear Harman International Stockholder:
You are cordially invited to attend the 2007 Annual Meeting of
Stockholders of Harman International Industries, Incorporated.
The meeting will be held on Monday, December 17, 2007,
beginning at 11:00 a.m. at the JPMorgan Chase Building, 270
Park Avenue, New York, New York. Information about the meeting,
the nominees for election as directors and other action to be
taken is presented in the following Notice of Annual Meeting of
Stockholders and Proxy Statement.
At the meeting, management will also report on the
Companys operations during fiscal 2007 and comment on the
Companys outlook for the current fiscal year. The report
will be followed by a question and answer period.
It is important that your shares be represented at the meeting.
To ensure representation of your shares, please sign, date and
promptly return the enclosed proxy card or use the telephone or
Internet voting procedures described on the proxy card.
We look forward to seeing you on December 17th.
Sincerely,
Sidney Harman
Executive Chairman
|
|
|
|
|
HARMAN INTERNATIONAL
INDUSTRIES, INCORPORATED
|
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To be held on December 17, 2007
The 2007 Annual Meeting of Stockholders of Harman International
Industries, Incorporated (the Company) will be held
at the JPMorgan Chase Building, 270 Park Avenue, New York, New
York, on December 17, 2007, beginning at
11:00 a.m. The meeting will be held for the following
purposes:
|
|
|
|
(1)
|
to elect two directors to serve until the 2010 Annual Meeting of
Stockholders;
|
|
|
(2)
|
to consider and take action upon a proposal to approve the 2007
Key Executive Officers Bonus Plan; and
|
(3) to transact other business that properly comes before
the meeting.
Information concerning the matters to be acted upon at the
meeting is set forth in the accompanying Proxy Statement.
Stockholders of record as of the close of business on
October 25, 2007 are entitled to notice of, and to vote at,
the meeting.
If you plan to attend the meeting and will need special
assistance or accommodation due to a disability, please describe
your needs on the enclosed proxy card. Also enclosed is the
Companys Annual Report for fiscal 2007.
By Order of the Board of Directors,
Edwin C. Summers
Secretary
Washington, D.C.
October 29, 2007
IMPORTANT
Whether or not you plan to attend the meeting in person,
please vote by signing, dating and promptly returning the proxy
card in the enclosed postage prepaid envelope or by using the
telephone or Internet voting procedures described on the proxy
card.
HARMAN
INTERNATIONAL INDUSTRIES, INCORPORATED
1101 Pennsylvania Avenue,
N.W.
Suite 1010
Washington, D.C.
20004
PROXY
STATEMENT
This Proxy Statement provides information in connection with the
solicitation of proxies by the Board of Directors (the
Board) of Harman International Industries,
Incorporated (the Company) for use at the
Companys 2007 Annual Meeting of Stockholders or any
postponement or adjournment thereof (the Meeting).
This Proxy Statement also provides information you will need in
order to consider and to act upon the matters specified in the
accompanying Notice of Annual Meeting of Stockholders. This
Proxy Statement and the enclosed proxy card are being mailed to
stockholders on or about October 31, 2007.
Holders of record of the Companys common stock
(Common Stock) as of the close of business on
October 25, 2007 are entitled to vote at the Meeting. Each
stockholder of record as of that date is entitled to one vote
for each share of Common Stock held. On October 25, 2007,
there were 65,250,651 shares of Common Stock outstanding.
You cannot vote your shares of Common Stock unless you are
present at the Meeting or you have previously given your proxy.
You can vote by proxy in one of three convenient ways:
|
|
|
|
|
in writing: sign, date and return the proxy card in the enclosed
envelope;
|
|
|
|
by telephone: within the U.S. or Canada, call the toll-free
telephone number shown on your proxy card and follow the
instructions; or
|
|
|
|
by Internet: visit the website shown on your proxy card and
follow the instructions.
|
You may revoke your proxy at any time prior to the vote at the
Meeting by:
|
|
|
|
|
delivering a written notice revoking your proxy to the
Companys Secretary at the address above;
|
|
|
|
delivering a new proxy bearing a date after the date of the
proxy being revoked; or
|
|
|
|
voting in person at the Meeting.
|
All properly executed proxies, unless revoked as described
above, will be voted at the Meeting in accordance with your
directions on the proxy. With respect to the election of
directors, you may vote for both nominees, withhold your vote
for both nominees, or withhold your vote as to a specific
nominee. If a properly executed proxy does not provide
instructions, the shares of Common Stock represented by your
proxy will be voted:
|
|
|
|
|
FOR the election of each of the two director nominees to serve
until the Companys 2010 Annual Meeting of Stockholders;
|
|
|
|
FOR approval of the 2007 Key Executive Officers Bonus
Plan; and
|
|
|
|
at the discretion of the proxy holders with regard to any other
matter that is properly presented at the Meeting.
|
A majority of the outstanding shares of Common Stock must be
present, in person or by proxy, to constitute a quorum at the
Meeting.
The Companys majority voting policy requires any director
nominee in an uncontested election who receives a greater number
of votes withheld than votes for his or
her election to tender his or her resignation promptly following
the certification of the election results. The Nominating and
Governance Committee of the Board will consider all of the
relevant facts and circumstances and make a recommendation to
the Board with respect to whether to accept the resignation.
Within 90 days, the Board is required to take action with
respect to the recommendation and to publicly disclose its
decision by issuing a press release. The majority voting policy
is more fully described in The Board, Its Committees and
Its Compensation Majority Voting Policy.
Those who fail to return a proxy or attend the Meeting will not
count towards determining any required vote or quorum.
Stockholders and brokers returning proxies or attending the
Meeting who abstain from voting on the election of our directors
will count towards determining a quorum. Brokers holding shares
of record for customers generally are not entitled to vote on
certain matters unless they receive voting instructions from
their customers. In the event that a broker does not receive
voting instructions for these matters from its customers, a
broker may notify us that it lacks voting authority to vote
those shares. These broker non-votes refer to votes that could
have been cast on the matter in question by brokers with respect
to uninstructed shares if the brokers had received their
customers instructions. These broker non-votes will be
included in determining whether a quorum exists, but will have
no effect on the outcome of the election of our directors. To be
sure your shares are voted in the manner you desire, you should
instruct your broker how to vote your shares.
The Company is soliciting your proxy and will pay the cost of
preparing and mailing this Proxy Statement and the enclosed
proxy card. The Company has retained Mellon Investor Services
LLC to assist in the solicitation of proxies for the Meeting.
For these services, the Company will pay Mellon $8,500 and will
reimburse Mellon for out-of-pocket expenses. Additionally,
employees of the Company may solicit proxies personally and by
telephone. The Companys employees will receive no
compensation for soliciting proxies other than their regular
salaries. The Company may request banks, brokers and other
custodians, nominees and fiduciaries to forward copies of these
proxy materials to their principals and to request authority for
the execution of proxies. The Company may reimburse such persons
for their expenses in so doing.
2
PROPOSAL NO. 1
ELECTION OF DIRECTORS
At the Meeting, two directors will be elected to serve
three-year terms expiring at the 2010 Annual Meeting of
Stockholders. This section contains information relating to the
two director nominees and the directors whose terms of office
extend beyond the Meeting. The nominees for election are Ann
McLaughlin Korologos and Dr. Harald Einsmann, each of whom
is currently a director. Dr. Einsmann was appointed a
director of the Company on October 26, 2007. He was
recommended to the Nominating and Governance Committee by Edward
H. Meyer, a director of the Company.
The Board expects that the nominees will be available for
election at the time of the Meeting. If, for any reason, a
nominee should become unavailable for election, the shares of
Common Stock voted FOR that nominee by proxy will be voted for a
substitute nominee designated by the Board, unless the Board
reduces the number of directors or allows that nominees
director position to remain vacant until a qualified nominee is
identified.
Under Delaware law and our Bylaws, a plurality of the votes cast
is required for the election of Directors. This means that the
Director nominee with the most votes for a particular Board
position is elected for that position. You may vote
for or withheld with respect to the
election of directors. Only votes for or
withheld are counted in determining whether a
plurality has been cast in favor of a Director. Abstentions are
not counted for purposes of the election of Directors.
Our majority voting policy requires, in an uncontested election,
any nominee for Director who receives a greater number of votes
withheld from his or her election than votes
for to promptly tender his or her resignation
following certification of the election results. The Nominating
and Governance Committee will promptly consider the resignation
and a range of possible responses based on the circumstances
that led stockholders to withhold votes, if known, and make a
recommendation to the Board. The Board will act on the
Committees recommendation within 90 days following
certification of the results of the election.
The
Board recommends a vote FOR election of each of the
nominees.
Nominees
to be Elected at the Meeting
Ann McLaughlin Korologos, age 65, has been a
director of the Company since 1995. She served as Secretary of
Labor of the United States from 1987 until 1989.
Ms. Korologos is a director of AMR Corporation (and its
subsidiary, American Airlines, Inc.), Host Hotels &
Resorts, Inc., Kellogg Company and Vulcan Materials Company, a
provider of construction aggregates. In April 2004,
Ms. Korologos was elected Chairman of the RAND Corporation
Board of Trustees. She is also a Chairman Emeritus of the Aspen
Institute and previously served as a Senior Advisor to
Benedetto, Gartland & Company, Inc. from 1996 to 2005.
Dr. Harald Einsmann, age 73, was appointed a
director of the Company on October 26, 2007.
Dr. Einsmann currently serves as a director of Tesco Plc,
the Carlson Group, a provider of business and leisure travel,
hotel, restaurant, cruise and marketing services, Checkpoint
Systems, Inc., a provider of integrated system solutions for
retail security, labeling, and merchandising, and Rezidor Hotel
Group in Scandinavia. From 2000 to 2006, Dr. Einsmann
served as an Operating Partner and a member of the Board of
Directors/Investment Committee of EQT, a leading European
Private Equity Group sponsored by the Wallenberg group of
Scandinavia. Prior to joining EQT, Dr. Einsmann held senior
management positions, as well as a seat on the Worldwide Board
at The Procter & Gamble Company.
3
Directors
Whose Terms Extend Beyond the Meeting
Sidney Harman, age 89, has been Executive Chairman
of the Company since July 2000 and has served as Chairman of the
Board and as a director of the Company since the Companys
founding in 1980. Dr. Harman has informed the Board that he
will forego the title of Executive Chairman effective as of the
Meeting. He will continue as the Chairman of the Board.
Dr. Harman served as Chief Executive Officer of the Company
from 1980 to 1998 and from January 1, 2007 to June 30,
2007. Dr. Harman served as Deputy Secretary of Commerce of
the United States from 1977 through 1978. His current term as a
director expires at the 2008 Annual Meeting of Stockholders.
Shirley Mount Hufstedler, age 82, has been a
director of the Company since September 1986.
Ms. Hufstedler has been in private law practice for more
than 25 years. Since 1995, she has been with the law firm
of Morrison & Foerster LLP. From 1981 to 1995,
Ms. Hufstedler was with the firm of Hufstedler &
Kaus. She served as Secretary of Education of the United States
from 1979 to 1981 and as a judge on the United States Court of
Appeals for the Ninth Circuit from 1968 to 1979.
Ms. Hufstedler is Director Emeritus of Hewlett-Packard
Company. Her current term as a director expires at the 2008
Annual Meeting of Stockholders.
Edward H. Meyer, age 80, has been a director of the
Company since 1990. Mr. Meyer has served as Chairman, Chief
Executive Officer and Chief Investment Officer of Ocean Road
Advisors, Inc., an investment management company, since January
2007. Mr. Meyer also served as Chairman, Chief Executive
Officer and President of Grey Global Group, Inc., from 1970 to
2006. Mr. Meyer also serves as a director of Ethan Allen
Interiors Inc, NRDC Acquisition Corp., and National CineMedia,
Inc. His current term as a director expires at the 2009 Annual
Meeting of Stockholders.
Dinesh Paliwal, age 49, was elected as a director of
the Company on August 13, 2007. He began serving as
President, Chief Executive Officer and Vice Chairman on
July 1, 2007. Prior to joining the Company,
Mr. Paliwal served as President of Global Markets and
Technology of ABB Ltd from January 2006 until June 2007 and he
served as President and CEO of ABB North America from January
2004 until June 2007. He was President and CEO of ABB Automation
from October 2002 to December 2005. Mr. Paliwal is a
director of Embarq Corporation, a provider of communication
services. His current term as a director expires at the 2009
Annual Meeting of Stockholders.
Mr. Brian F. Carroll, age 36, was appointed a
director of the Company on October 26, 2007.
Mr. Carroll has been a member of Kohlberg Kravis
Roberts & Co. L.P. (KKR) since
January 2006 and before that, an executive of KKR since
July 1999. In addition, Mr. Carroll was an executive at KKR
from 1995 to 1997, at which time he left KKR to attend business
school at Stanford University. Prior to joining KKR in 1995,
Mr. Carroll was with Donaldson, Lufkin &
Jenrette. Mr. Carroll is also a member of the board of
directors of Rockwood Specialties Group, Inc. and Sealy
Corporation. His current term as a director expires at the 2008
Annual Meeting of Stockholders.
4
PROPOSAL NO. 2
APPROVAL OF THE 2007 KEY EXECUTIVE OFFICERS BONUS PLAN
The Board believes that the Companys ability to attract
and retain key executives is significantly strengthened by its
ability to offer an incentive bonus plan. In November 2002, the
stockholders approved the Companys 2002 Key Executive
Officers Bonus Plan (2002 Plan), which expires on
November 8, 2007. In October 2007, the Board approved the
Companys 2007 Key Executive Officers Bonus Plan
(2007 Plan) that amends and restates the 2002 Plan.
The Board adopted the 2007 Plan upon the recommendation of the
Compensation and Option Committee, subject to stockholder
approval.
You are being asked to approve the 2007 Plan. You should read
and understand the terms of the 2007 Plan before you vote. A
summary of the 2007 Plan appears below and the full text of the
2007 Plan is attached to this Proxy Statement as
Appendix A. The affirmative vote of the holders of a
majority of the outstanding shares of Common Stock present in
person or by proxy at the Meeting will be required to approve
the 2007 Plan.
The
Board Recommends a Vote FOR Approval of the 2007
Plan.
2007 Plan
Summary
This summary of the 2007 Plan does not purport to be exhaustive
and is expressly qualified in its entirety by reference to the
full text of the 2007 Plan, which is attached to this Proxy
Statement as Appendix A.
Administration. The 2007 Plan will be
administered by a committee with full authority to interpret and
oversee the operation of the 2007 Plan. The plan committee will
be the Compensation and Option Committee or any other committee
appointed by the Board. The plan committee will in any event be
comprised of not fewer than two directors, each of whom
qualifies as an outside director for purposes of
Section 162(m) of the Internal Revenue Code and the
applicable Treasury regulations.
Eligibility. The Companys Chief
Executive Officer and any other officer of the Company
designated by the plan committee will be eligible to receive an
award under the 2007 Plan. Currently, there are four individuals
who are designated as eligible to receive awards under the 2007
Plan.
Goals and Awards. No later than
September 28 of each fiscal year, the plan committee will meet
to establish a return on stockholder equity goal for the fiscal
year and the maximum cash award payable to each plan participant
if that goal is met. Cash awards paid under the 2007 Plan to a
plan participant shall not exceed $3,000,000 during any fiscal
year.
After the end of each fiscal year, the plan committee will meet
to determine whether the return on stockholder equity goal for
the fiscal year was met. If the goal was met, the plan committee
will establish the amount of the cash award to be paid to each
plan participant, exercising discretion only to decrease the
award amount.
All awards under the 2007 Plan shall be null and void if the
2007 Plan is not approved by the Companys stockholders.
Change in Control. In the event of a
change in control of the Company, each plan participant shall be
entitled to the award amount for that fiscal year without
proration or any other reduction, provided that he or she is
employed by the Company at the time of the change in control or,
if the
5
plan participant is no longer employed by the Company, the plan
participants employment is terminated after commencement
of discussions that resulted in a change of control of the
Company but within 180 days prior to the change in control.
Term. If the stockholders approve the
2007 Plan, it will become effective as of July 1, 2007 and
shall remain effective until five years after the date approved
by the stockholders.
Tax Deductibility of Awards. The
Company intends for awards made under the 2007 Plan to
constitute performance-based compensation as defined
in Section 162(m) of the Internal Revenue Code.
Section 162(m) generally disallows a tax deduction to
public companies for compensation over $1,000,000 paid to a
corporations top executives, but does not include
performance-based compensation in determining whether the
$1,000,000 threshold has been exceeded.
2007 Plan
Benefits
Under the 2007 Plan, the plan committee will establish a return
on stockholder equity goal at the beginning of each fiscal year
and the maximum amount of a cash award that is payable to each
plan participant if the goal is met. At the end of each fiscal
year, the plan committee will determine whether the goal was met
and, if so, the amount of the cash award to be paid to each plan
participant. Therefore, the dollar value of awards under the
2007 Plan that will be received by or allocated to any person or
group, or in the aggregate, is not determinable.
6
THE
BOARD, ITS COMMITTEES AND ITS COMPENSATION
The Board
of Directors
The Board currently consists of seven directors. Five of the
directors are independent directors and two directors are
members of the Companys senior management. Each of the
Companys
non-management
directors meets the qualifications for independence under the
listing standards of the New York Stock Exchange.
Director
Compensation
Cash
Compensation
For services rendered during fiscal 2007, non-management
directors received an annual retainer fee of $60,000, plus
$1,500 for each committee meeting attended on a day other than
the day of a Board meeting. We do not pay fees to directors who
are officers of the Company or its subsidiaries. The Company
reimburses all directors for expenses incurred in attending
Board and committee meetings.
Equity-Based
Compensation
Under the 2002 Stock Option and Incentive Plan, each
non-management director received an option to purchase
5,000 shares of Common Stock on the date of our 2006 Annual
Meeting of Stockholders. The exercise price of the options was
the fair market value of the shares of Common Stock on the date
of grant. Each option vests at a rate of 20% per year and
expires 10 years after the date of grant.
The following table sets forth compensation earned by each of
our non-management directors for his or her service as a
director during fiscal 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fees Earned or
|
|
|
Option
|
|
|
|
|
Name
|
|
Paid in Cash(1)
|
|
|
Awards(2)
|
|
|
Total
|
|
|
Shirley M. Hufstedler
|
|
$
|
188,000
|
|
|
$
|
336,622
|
|
|
$
|
524,622
|
|
Ann M. Korologos
|
|
|
194,000
|
|
|
|
336,622
|
|
|
|
530,622
|
|
Edward H. Meyer
|
|
|
219,000
|
|
|
|
336,622
|
|
|
|
555,622
|
|
Stanley Weiss
|
|
|
21,500
|
|
|
|
276,608
|
|
|
|
298,108
|
|
|
|
|
(1) |
|
Includes annual retainer and meeting attendance fees paid to
each non-management director for his or her service as a
director during fiscal 2007. Our Board established a special
committee of independent directors to consider, negotiate and
take other actions it deemed appropriate with respect to a
potential transaction with Kohlberg Kravis Roberts &
Co. L.P. or a third party. Includes fees our non-management
directors will receive for their service on this special
committee as follows: Mr. Meyer ($150,000),
Ms. Hufstedler ($125,000) and Ms. Korologos ($125,000). |
|
(2) |
|
On November 2, 2006, each non-management director, other
than Mr. Weiss, was granted 5,000 stock options. The grant
date fair value of each award, calculated in accordance with
FAS 123R, was $221,214. The amounts shown represent the
expense recognized for financial statement purposes for the
fiscal year ended June 30, 2007, in accordance with
FAS 123R, with respect to stock options awarded to our
non-management directors. Pursuant to Securities and Exchange
Commission rules, the amounts shown exclude the impact of
estimated forfeitures related to service-based conditions. See
Note 11, Stock Option and Incentive Plan, to our
consolidated financial statements for information regarding the
assumptions made in determining these values. As of
June 30, 2007, the number of outstanding options held by
each of our then-current non-management directors was as
follows: Ms. Hufstedler (94,000 shares),
Ms. Korologos (83,600 shares) and Mr. Meyer
(94,000 shares). |
7
Corporate
Governance
The Board and senior management believe that one of their
primary responsibilities is to promote a culture of ethical
behavior throughout the Company by setting examples and by
displaying a sustained commitment to instilling and maintaining
deeply ingrained principles of honesty and decency. Consistent
with these principles the Company has, among other things,
adopted:
|
|
|
|
|
written charters for our Audit Committee, Compensation and
Option Committee and Nominating and Governance Committee;
|
|
|
|
Corporate Governance Guidelines that describe the principles
under which the Board operates;
|
|
|
|
a Code of Ethics for Senior Executive and Financial Officers and
Directors and a Code of Business Conduct applicable to all
employees; and
|
|
|
|
a Board Policy that requires directors to submit their
resignation if they do not receive a majority of votes
for their election.
|
The committee charters, corporate governance guidelines, ethics
codes and majority voting policy are available on the
Companys website (www.harman.com) in the Corporate
Governance section of the Investor Information page. Copies of
these documents are also available upon written request to the
Companys Secretary. The Company will post information
regarding any amendment to, or waiver from, its Code of Ethics
for Senior Executive and Financial Officers and Directors on its
website under the Corporate Governance section of the Investor
Information page.
The Board periodically reviews its corporate governance policies
and practices. Based on these reviews, the Board expects to
adopt changes to policies and practices that are in the best
interests of the Company and as appropriate to comply with any
new requirements of the Securities and Exchange Commission (the
Commission) or the New York Stock Exchange.
Director
Independence
As part of the Companys Corporate Governance Guidelines,
the Board has established a policy requiring a majority of the
members of the Board to be independent. The Board has also
adopted a policy establishing independence standards to assist
the Board in determining the independence of the non-management
directors. Those standards reflect, among other things, the
requirements under the listing standards of the New York Stock
Exchange. The independence standards for non-management
directors are attached to this proxy statement as
Appendix B.
The Board has determined that each of the current non-management
directors, Mr. Carroll, Dr. Einsmann,
Ms. Hufstedler, Ms. Korologos and Mr. Meyer,
is independent of the Company and its management within the
meaning of the New York Stock Exchange listing standards and
satisfies the Companys independence standards.
Majority
Voting Policy
Under our majority voting policy, in an uncontested election of
directors, any nominee who receives a greater number of votes
withheld than votes for his or her
election will, promptly following the certification of the
stockholder vote, tender his or her written resignation to the
Board for consideration by the Nominating and Governance
Committee. The Nominating and Governance Committee will consider
the resignation and will make a recommendation to the Board
concerning whether to accept or reject it.
8
In determining its recommendation to the Board, the Nominating
and Governance Committee will consider all factors it considers
relevant, which may include:
|
|
|
|
|
the stated reason or reasons why stockholders who cast withhold
votes for the director did so;
|
|
|
|
the qualifications of the director (including, for example,
whether the director serves on the Audit Committee of the Board
as an audit committee financial expert and whether
there are one or more other directors qualified, eligible and
available to serve on the Audit Committee in such
capacity); and
|
|
|
|
whether the directors resignation from the Board would be
in the Companys best interests and the best interests of
the stockholders.
|
The Nominating and Governance Committee also will consider a
range of possible alternatives concerning the directors
tendered resignation as it deems appropriate, which may include:
|
|
|
|
|
acceptance of the resignation;
|
|
|
|
rejection of the resignation; or
|
|
|
|
rejection of the resignation coupled with a commitment to seek
to address and cure the underlying reasons reasonably believed
by the Nominating and Governance Committee to have substantially
resulted in the withheld votes.
|
Under our majority voting policy, the Board will take formal
action on the recommendation no later than 90 days
following the certification of the results of the
stockholders meeting. In considering the recommendation,
the Board will consider the information, factors and
alternatives considered by the Nominating and Governance
Committee and any additional information that the Board
considers relevant. The Company will publicly disclose the
Boards decision promptly after the decision is made in a
press release. If applicable, the Board will also disclose the
reason or reasons for rejecting the tendered resignation.
Communications
with the Board
Stockholders and other interested parties may communicate with
the Board, the non-management directors or specific directors by
mail addressed to: Board of Directors,
c/o Harman
International Industries, Incorporated, 8500 Balboa Boulevard,
Northridge, California 91329, Attn: General Counsel. The mailing
envelope should also clearly indicate whether the communication
is intended for the Board, the non-management directors or a
specific director. The General Counsel or the Internal Auditor
will review all these communications and will, within a
reasonable period of time after receiving the communications,
forward all communications to the appropriate director or
directors, other than those communications that are merely
solicitations for products or services or relate to matters that
are of a type that are clearly improper or irrelevant to the
functioning of the Board or the business and affairs of the
Company.
Board
Meetings
The Board held eleven meetings during fiscal 2007. Each director
attended at least 75% of the Board meetings held during the
period he or she was a director in fiscal 2007, other than
Mr. Weiss who attended one of two Board meetings before his
retirement as a director in November 2006 and
Ms. Hufstedler who attended eight of eleven meetings. Each
director attended at least 75% of the meetings of the committees
on which he or she served held during the period he or she was a
director in fiscal 2007, other than Mr. Weiss who attended
one of two meetings held by the Nominating and Governance
Committee and two of three meetings held by the Audit Committee
9
before his retirement as a director in November 2006;
Ms. Hufstedler who attended five of seven meetings held by
the Audit Committee and two of six meetings held by the
Compensation and Option Committee; and Mr. Meyer who
attended one of two meetings held by the Nominating and
Governance Committee.
The Board has established a policy that the non-management
directors meet in executive session, without members of the
Companys management present, at each regularly scheduled
meeting of the full Board. These executive sessions are chaired
by the non-management directors on a rotating basis.
Annual
Meetings of Stockholders
As part of the Companys Corporate Governance Guidelines,
the Board has adopted a policy that each director is expected to
make reasonable efforts to attend stockholders meetings. All
Board members who were directors at the time of the meeting,
other than Mr. Meyer, attended the Companys 2006
Annual Meeting of Stockholders.
Audit
Committee
The Audit Committee currently consists of Ms. Hufstedler
(Chairwoman), Ms. Korologos and Mr. Meyer. During
fiscal 2007, the Audit Committee held seven meetings. The Board
has determined that each of the members of the Audit Committee
is independent under the New York Stock Exchange listing
standards and each is financially literate and experienced in
financial matters. The Board has also determined that
Ms. Hufstedler is an audit committee financial
expert within the meaning of applicable Commission
regulations. In making its determination, the Board considered
Ms. Hufstedlers knowledge of, and experience with,
financial and accounting matters gained through serving as Chair
of the Companys Audit Committee and as a member of boards
and audit committees of other public companies, as well as her
experience in such matters as a practicing attorney, as a judge
in both California state courts and the U.S. Court of
Appeals, and as Secretary of Education.
The Audit Committee assists the Board in its oversight of the
Companys financial reporting, focusing on the integrity of
the Companys financial statements, the Companys
compliance with legal and regulatory requirements, the
qualifications and independence of the Companys
independent auditor and the performance of the Companys
internal audit function and independent auditor. The Audit
Committees primary responsibilities include:
|
|
|
|
|
acting as the direct contact with the Companys independent
auditor, who is ultimately accountable to the Audit Committee
and the Board;
|
|
|
|
appointing the independent auditor, setting the terms of
compensation and retention for the independent auditor and
overseeing the work of the independent auditor;
|
|
|
|
pre-approving all audit and non-audit services provided to the
Company by the independent auditor, except for items exempt from
pre-approval requirements under applicable law; and
|
|
|
|
acting in respect of all other matters as to which Audit
Committee action is required by law or New York Stock Exchange
listing standards.
|
The Audit Committees responsibilities and key practices
are more fully described in its written charter. A report of the
Audit Committee appears on page 41 of this Proxy Statement.
Compensation
and Option Committee
The Compensation and Option Committee currently consists of
Mr. Meyer (Chairman), Ms. Hufstedler and
Ms. Korologos. During fiscal 2007, the Compensation and
Option Committee held six meetings. Each of the members of the
Compensation and Option Committee is independent under the New
York Stock Exchange listing standards.
10
The Compensation and Option Committee assists the Board in
overseeing executive compensation and administers the
Companys executive bonus, option and incentive, deferred
compensation and retirement plans. The Compensation and Option
Committees primary responsibilities include:
|
|
|
|
|
evaluating the performance of and establishing compensation for
the Companys Executive Chairman and Chief Executive
Officer;
|
|
|
|
establishing compensation levels for the Companys
directors and executive officers and reviewing executive
compensation matters generally;
|
|
|
|
making recommendations to the Board with respect to approval and
adoption of all cash and equity based incentive plans;
|
|
|
|
reviewing and approving the Compensation Discussion and Analysis
to be included in the annual proxy statement; and
|
|
|
|
approving awards of options, restricted stock, restricted stock
units and other equity rights to executive officers.
|
The Compensation and Option Committees responsibilities
and key practices are discussed more fully in its charter. A
report of the Compensation and Option Committee appears on page
41 of this Proxy Statement.
Nominating
and Governance Committee
The Nominating and Governance Committee currently consists of
Ms. Korologos (Chairwoman), Ms. Hufstedler and
Mr. Meyer. During fiscal 2007, the Nominating and
Governance Committee held two meetings. Each of the members of
the Nominating and Governance Committee is independent under the
New York Stock Exchange listing standards.
The Nominating and Governance Committee assists the Board in
carrying out its oversight responsibilities relating to the
composition of the Board and certain corporate governance
matters. The Nominating and Governance Committees primary
responsibilities include considering and making recommendations
to the Board with respect to:
|
|
|
|
|
nominees for election to the Board consistent with criteria
approved by the Board or the Nominating and Governance
Committee, including director candidates submitted by the
Companys stockholders; and
|
|
|
|
the Companys codes of conduct and corporate governance
policies, and overseeing the evaluation of the performance of
the Board and the Companys management against these
policies.
|
The Nominating and Governance Committees responsibilities
and key practices are more fully described in its charter.
Director Nominees. The Nominating and
Governance Committee utilizes a variety of methods for
identifying and evaluating director nominees. The Committee may
consider candidates recommended by the Companys directors,
members of management, professional search firms or
stockholders. These candidates may be considered at any point
during the year.
Qualifications. In evaluating nominees
for election as a director, the Nominating and Governance
Committee considers a number of factors, including the following:
|
|
|
|
|
personal and professional qualities, characteristics,
attributes, accomplishments and reputation in the business
community and otherwise;
|
|
|
|
reputation in a particular field or area of expertise;
|
11
|
|
|
|
|
current knowledge and contacts in the markets in which the
Company does business and in the Companys industry and
other industries relevant to the Companys business;
|
|
|
|
the ability and willingness to participate fully in board
activities, including attendance at, and active participation
in, meetings of the board and its committees;
|
|
|
|
the skills and personality of the nominee and how the Nominating
and Governance Committee perceives the nominee will fit with the
existing directors and other nominees in maintaining a Board
that is collegial and responsive to the needs of the Company and
its stockholders;
|
|
|
|
the willingness to represent the best interests of all of the
Companys stockholders and not just one particular
constituency; and
|
|
|
|
diversity of viewpoints, background and experience, compared to
those of existing directors and other nominees.
|
The Nominating and Governance Committee will also consider other
criteria for director candidates included in the Companys
Corporate Governance Guidelines or as may be established from
time to time by the Board.
Stockholder Recommendations. The
Nominating and Governance Committee will evaluate director
candidates recommended by a stockholder in the same manner as
candidates otherwise identified by the Nominating and Governance
Committee. The Company has never received any recommendations
for director candidates from stockholders. In considering
director candidates recommended by stockholders, the Nominating
and Governance Committee will also take into account such
factors as it considers relevant, including the length of time
that the submitting stockholder has been a stockholder of the
Company and the aggregate amount of the submitting
stockholders investment in the Company.
Stockholders may recommend candidates at any time, but to be
considered by the Nominating and Governance Committee for
inclusion in the Companys proxy statement for the next
annual meeting of stockholders, recommendations must be
submitted in writing no later than 120 days before the
first anniversary of the date of the proxy statement mailed to
stockholders in connection with the previous years annual
meeting. A stockholders notice must contain the following:
|
|
|
|
|
the name of the director candidate, the name of the stockholder
recommending the director candidate for consideration, and the
written consent of the director candidate and stockholder to be
publicly identified;
|
|
|
|
a written statement by the director candidate agreeing to be
named in the Companys proxy materials and serve as a
member of the Board if nominated and elected;
|
|
|
|
a written statement by the director candidate and the
recommending stockholder agreeing to make available to the
Nominating and Governance Committee all information reasonably
requested in connection with the Nominating and Governance
Committees consideration of the director
candidate; and
|
|
|
|
the director candidates name, age, business and
residential address, principal occupation or employment, number
of shares of Common Stock and other securities beneficially
owned, a resume or similar document detailing personal and
professional experiences and accomplishments, and all other
information relating to the director candidate that would be
required to be disclosed in a proxy statement or other filing
made in connection with the solicitation of proxies for the
election of directors, the Commission regulations and the New
York Stock Exchange listing standards.
|
12
The stockholders notice must be signed by the stockholder
recommending the director candidate for consideration and sent
to the following address: Harman International Industries,
Incorporated, 8500 Balboa Boulevard, Northridge, California
91329, Attn: Corporate Secretary (Nominating and Governance
Committee Communication / Director Candidate
Recommendation).
13
COMPENSATION
DISCUSSION AND ANALYSIS
Executive
Compensation Program Objectives
The Companys executive compensation program is intended to
attract, retain and motivate the key people necessary to lead
the Company to achieve its strategic objective of increased
stockholder value over the long term, reflecting the
Compensation and Option Committees belief that executive
compensation should seek to align the interests of the
Companys executives with those of our stockholders. In
establishing compensation, the committee seeks to provide our
executive officers with a competitive total compensation package.
Compensation
and Option Committee
Our executive compensation program is designed and implemented
under the direction of our Compensation and Option Committee,
which is comprised solely of independent directors. The
committee is authorized to retain advisors with respect to
compensation matters. The committee periodically consults with
outside advisors, and uses survey data provided by compensation
consultants, in connection with its decisions with respect to
executive compensation matters.
Executive
Compensation Programs and Policies
The components of our executive compensation program provide for
a combination of fixed and variable compensation. As described
in more detail below, these components are:
|
|
|
|
|
base salary;
|
|
|
|
annual incentive compensation;
|
|
|
|
long-term equity incentive compensation;
|
|
|
|
severance and
change-in-control
arrangements; and
|
|
|
|
employee benefits and other perquisites.
|
Base
Salary
The base salary for each of our executive officers represents
the fixed portion of their total compensation. Base salaries are
determined on the basis of management responsibilities, level of
experience and tenure with our Company, as well as internal and
market comparisons, including surveys furnished from time to
time by outside compensation consulting firms concerning
practices of other companies, primarily companies engaged in
electronics and manufacturing industries, with revenues
comparable to the Company. In setting base salaries for
executive officers, the committee seeks to provide a reasonable
level of fixed compensation that is competitive with base
salaries for comparable positions at similar companies.
At the request of the committee, Dr. Sidney Harman, our
Executive Chairman, makes annual recommendations with respect to
changes in base salary for our executive officers. Neither
Dr. Harman nor any other executive officer participates in
the committees decisions regarding the base salaries of
our executive officers.
14
Annual
Incentive Compensation
The Company maintains annual incentive compensation programs for
its executive officers and other key employees that provide for
awards in the form of cash bonuses.
The Companys 2002 Key Executive Officers Bonus Plan, or
the 2002 Plan, is the companys annual incentive program
for its most senior executive officers. The 2002 Plan was
approved by the Companys stockholders at its annual
meeting in 2002. Awards payable under the 2002 Plan are intended
to qualify as performance-based compensation for
federal income tax purposes. The 2002 Plan will expire on
November 8, 2007. You are being asked to approve the 2007
Plan that amends and restates the 2002 Plan. If the 2007 Plan is
not approved, annual incentive compensation awards for senior
executives will not qualify as performance-based compensation
for federal income tax purposes.
Under the 2002 Plan, the Companys Executive Chairman,
Chief Executive Officer, Chief Financial Officer and any other
executive officer designated by the committee are eligible to
receive awards. Under this plan, each year the committee
establishes a return on stockholder equity goal for the fiscal
year and a maximum cash award payable to each plan participant
if that goal is met. Annual cash awards payable to any plan
participant under the 2002 Plan cannot exceed $2 million.
The compensation committee maintains discretion under the 2002
Plan to decrease the amount paid to any participant in the 2002
Plan.
The Company also maintains a separate annual incentive program
for executive officers, as well as other key employees, that do
not participate in the 2002 Plan. Under this management
incentive program, or MIP, executive officers are eligible to
receive a cash bonus expressed as a percentage of base salary,
generally 25% to 45%. In order to receive an award under the
MIP, the executives business unit must achieve
preestablished performance targets for operating income and
working capital. These targets are established by reference to
the Companys internal business plan. In addition, plan
participants are evaluated based upon performance against
individual objectives. Performance against these objectives is a
multiplier of the award, ranging from zero to 120%. The bonus
award payable to any MIP participant cannot exceed 150% of the
plan participants target bonus. The committee retains the
authority to award discretionary cash bonuses to executives that
participate in the MIP under circumstances in which the
performance targets are not met in a fiscal year.
The Compensation and Option Committee believes annual incentive
compensation is a key element of the total compensation of each
executive officer. The committee also believes that as an
executive progresses to greater levels of responsibility within
the Company, the annual incentive award opportunity should
represent an increasing portion of the executives
potential annual compensation. Further, the committee believes
that placing a significant portion of executive compensation at
risk each year, subject to the Companys results and
individual performance, appropriately motivates executives to
achieve the Companys financial and other objectives
thereby enhancing stockholder value, and also assists the
Company in attracting and retaining executive officers and other
key employees.
The committee has not adopted a formal policy regarding recovery
of incentive awards for fiscal years for which financial results
are later restated. While not anticipated, the committee would
expect to consider any restatement in establishing incentive and
other compensation awards for executives in future periods.
15
Long-Term
Equity Incentive Compensation
The Companys equity incentive plans are administered by
the Compensation and Option Committee and are designed to
provide incentive compensation to executive officers and other
key employees, principally in the form of stock options, and to
a lesser extent, restricted stock and restricted stock units.
The grants are designed to align the interests of management
with those of our stockholders and are intended as a long-term
incentive for future performance.
In general, the committee considers equity awards for the
Companys most senior executive officers annually. Equity
awards to other executive officers and key employees are
generally considered every 18 months. All stock option
awards under these equity incentive plans are granted at an
exercise price equal to the market price of the Common Stock on
the date of grant. The option awards generally vest over five
years commencing one year from the date of grant and expire
after ten years. A substantial majority of the option grants
that have been awarded to executive officers under the
Companys equity incentive plans are
non-qualified stock options, thereby providing the
Company with the ability to realize tax benefits upon the
exercise of these option awards. Awards of restricted stock and
restricted stock units granted under the plans are subject to
forfeiture for a period of at least three years. The committee
views awards under the equity incentive plans as an additional
means to encourage management retention.
When making equity-based incentive awards, the committee takes
into consideration the dates on which the Company expects to
make public announcements regarding earnings as well as other
events or circumstances that have not been publicly announced
that may be deemed material to the Company, our stockholders and
other investors.
The committee intends to make appropriate executive compensation
decisions so that our executives receive a total compensation
package that is competitive and has a significant component that
is at risk. The increase in the value of equity awards is
directly linked to an increase in stockholder return, subject to
continued employment by the executives with respect to unvested
equity awards. The committee believes, as a general matter, that
this positive result should not negatively impact future
compensation decisions.
Severance
and
Change-in-Control
Arrangements
Under the terms of the Companys equity incentive plans and
the related award agreements, unvested stock options and
restricted stock and restricted stock unit awards become fully
vested upon a change of control of the Company.
The Company has severance agreements with Dr. Harman, the
Companys Executive Chairman, and Kevin Brown, the
Companys Chief Financial Officer. These agreements provide
for severance benefits in the event of a termination of
employment under specified circumstances following a change in
control of the Company. These agreements provide for additional
gross up payments to these executives for excise
taxes, if applicable. The excise tax gross up payments are
intended to make these executives whole for any adverse tax
consequences they may become subject to under the federal tax
laws and to preserve the level of severance deemed to be
appropriate under the terms of these agreements and the
Companys other compensation programs. The Company believes
that these provisions are a reasonable part of the compensation
package for these executives and consistent with the practice of
many other public companies.
The Company also has employment agreements with Dr. Erich
A. Geiger and Helmut Schinagel. Before Dr. Geiger assumed
his current position with the Company, he was the chief
executive officer of our automotive group, based in Germany.
Mr. Schinagel currently holds that position. Employment
agreements with executives are customary in Germany and many
other
16
countries outside the United States. Among other things, these
agreements provide for severance benefits upon termination of
employment under certain circumstances.
These agreements are described in more detail under the caption
Severance and Employment Agreements on page 23
of this Proxy Statement. The committee believes that these
benefits are necessary and appropriate in order to attract and
retain qualified senior executives.
Employee
Benefits
The Company provides each of our current executive officers
(other than Dr. Geiger and Mr. Schinagel) with
supplemental retirement, termination and death benefits under
the Companys Supplemental Executive Retirement Plan.
Dr. Geiger and Mr. Schinagel are entitled to pension
and related benefits under the terms of their employment
agreements. As described above, these differences in retirement
benefits derive from the present or prior employment of these
executives in Germany, where substantially all of the
Companys employees participate in a defined benefit
pension program. The Company also provides its executive
officers employed in the United States with the opportunity to
participate in a deferred compensation plan. These plans are
described under the captions Pension Benefits
Supplemental Executive Retirement Plan and
Nonqualified Deferred Compensation on pages 26
and 27 of this Proxy Statement.
The Companys executive officers are also eligible to
participate in other company-sponsored benefit plans available
to employees generally, including medical and life insurance.
Employees, including executive officers, that are employed in
the United States are eligible to participate in a
company-sponsored 401(k) defined contribution plan.
The Compensation and Option Committee believes that these
benefits are necessary and appropriate in order to attract and
retain qualified executive officers insofar as these benefits
are generally made available by similarly situated companies.
Executive
Perquisites
The Company provides executive officers with certain perquisites
that have historically been provided and that the committee
believes enhance our ability to attract and retain qualified
executives. These perquisites include the use of company owned
or leased cars and reimbursement of car-related expenses. These
cars use infotainment systems and other products designed and
manufactured by the company and permit these executives to
experience and evaluate these products. Other executive
perquisites include the personal use of company provided tickets
to concerts and other music events when those tickets are not
otherwise being used for business purposes. In addition, on
occasion, the spouses of our executives travel with them to
attend business-related functions.
The Company leases corporate aircraft for use by management for
business purposes. The committee believes that the use of
corporate aircraft enables executives to devote maximum time and
attention to the Companys business and enhances their
productivity and availability while traveling. The Board has
authorized the use of this aircraft for non-business use by the
Companys Executive Chairman. The Company considers the
incremental cost to the Company to be negligible as these
flights were otherwise being made for business purposes. The
Company believes that the personal use of corporate aircraft by
the Executive Chairman is appropriate considering the
significant obligations required by his position with the
Company.
17
The Company provides Dr. Harman with an assistant, who also
provides him with non-business related services. The Company
estimates the portion of those services that are not directly
related to company business and reports that portion of this
employees salary and benefits as compensation to the
Executive Chairman.
Dr. Geiger is entitled to receive certain life insurance
benefits under the terms of his employment agreement, and
receives additional cash payments to reimburse him for German
taxes related to these insurance benefits and his company car.
The committee has determined it is appropriate to provide these
perquisites in order to attract and retain our executive
officers by offering compensation opportunities that are
competitive with those offered by similarly situated public
companies. In determining the total compensation payable to our
executive officers, the committee considers perquisites in the
context of the total compensation which our executive officers
are eligible to receive. However, given the fact that
perquisites represent a relatively small portion of the
executives total compensation, the availability of these
perquisites does not materially influence the decisions made by
the committee with respect to other elements of the total
compensation to which the Companys executive officers are
entitled or awarded. For a description of the perquisites
received by our named executive officers during fiscal 2007, see
the information under the caption All Other
Compensation on page 22 of this Proxy Statement.
Stock
Ownership Guidelines
The committee encourages ownership of Common Stock by our
executive officers and other key employees, including through
awards under our equity incentive compensation plans. However,
the Company does not currently have a policy that requires our
executives to own a specific number of shares, or dollar amount,
of Common Stock, nor do we require our executives to retain any
specific percentage of shares received upon exercise of options
or upon vesting of any restricted stock award.
Internal
Revenue Code Section 162(m)
Section 162(m) of the Internal Revenue Code provides that
compensation in excess of $1 million paid to the chief
executive officer or to any of the other four most highly
compensated executive officers of a public company is not
deductible for federal income tax purposes unless the
compensation qualifies as performance based
compensation under Section 162(m). Bonus awards under
our 2002 Plan and option grants under our equity incentive plans
are intended to qualify for deduction under Section 162(m).
As described above, the 2002 Plan will expire on
November 8, 2007, and unless the 2007 Plan is approved by
the Companys stockholders, annual incentive awards to some
of the Companys executive officers may not qualify for
deduction under Section 162(m). The committee reviews on an
annual basis the potential impact of this deduction limitation
on executive compensation. The committee intends to continue to
evaluate the Companys potential exposure to this deduction
limitation.
18
Fiscal
2006 and Fiscal 2007 Compensation
Base
Salary
In September 2006, the Compensation and Option Committee
considered changes to the base salaries for our executive
officers for fiscal 2007.
Dr. Harman recommended to the committee that his base
salary, and Mr. Girods base salary, remain unchanged.
The committee accepted this recommendation.
Dr. Harmans base salary has not changed since
September 2004, and Mr. Girods base salary did not
change from September 2004 until his retirement.
The base salaries for Dr. Geiger and Mr. Schinagel for
fiscal 2007 were established by the terms of their respective
employment agreements with the Company.
In September 2006, the committee also considered changes to the
base salary of the Companys other executive officers,
including Kevin Brown, our Chief Financial Officer. Based on the
committees evaluation of Mr. Browns
responsibilities and performance, the committee approved an
increase in his annual base salary from the $400,000 provided
for in his employment agreement to $500,000 (a 25% increase).
Gina Harman was not designated by the Board as an executive
officer until November 2006, and therefore her base salary for
fiscal 2007 was not established by the committee.
Fiscal
2007 Annual Incentive Compensation Awards
For fiscal 2007, the committee designated Dr. Harman,
Mr. Brown and Dr. Geiger as participants in the 2002
Plan, set the return on stockholder equity goal at 10% and set
the maximum award for each participant at $2 million.
At its meeting in August 2007, the committee approved bonus
awards for Gina Harman and the other executive officers that do
not participate in the 2002 Plan. Ms. Harmans award
was discretionary, as the performance targets set for the
Companys Consumer business unit were not met. The
committee determined that Ms. Harman should receive a cash
award for fiscal 2007 due to her extraordinary efforts despite a
very difficult market for her business units products.
Awards to the other executive officers were also discretionary,
and were generally made with a view to achievement of the
Companys financial objectives under the 2002 Plan.
At its meeting in September 2007, the committee determined that
the return on stockholder equity goal had been met. Using its
discretion to decrease the awards payable under the 2002 Plan,
the committee approved awards to these three executive officers
shown under the column
Non-Equity
Incentive Plan Compensation under the caption
Summary Compensation Table on page 21 of this
Proxy Statement.
In addition, in fiscal 2007, Dr. Geiger received a one-time
cash bonus of $250,000 in connection with an amendment to his
employment agreement in September 2006.
Mr. Schinagel is entitled to receive a cash bonus of
455,000 ($613,113) for fiscal 2007. This amount represents
a guaranteed bonus for fiscal 2007 under the terms of his
employment agreement entered into in August 2006 in connection
with his joining the Company.
Mr. Girod retired on December 31, 2006, and
Mr. Pertz resigned in August 2006. As a result, neither of
these individuals was eligible to receive an annual incentive
award for fiscal 2007.
19
Fiscal
2007 Equity Awards
The committee approved stock option grants to Dr. Harman,
Mr. Brown and Dr. Geiger in August 2006. In addition,
at this meeting, the committee approved stock option and
restricted stock unit awards to Mr. Schinagel in connection
with his joining the Company as Chief Executive Officer of the
Companys Automotive business unit. The grant date of
Mr. Schinagels awards was October 2, 2006, the
first trading day after his first day of employment with the
Company.
The committee approved stock option awards to each of the other
then-executive officers in May 2007. These awards had originally
been scheduled to be considered by the committee at its
regularly scheduled meeting in April 2007, consistent with the
companys historical practice of granting awards to these
individuals on an
18-month
cycle. However, due to the ongoing discussions that led to the
public announcement on April 26, 2007, of the then-proposed
merger with KHI Parent Inc., a company formed by affiliates of
Kohlberg Kravis Roberts & Co. L.P. and GS Capital
Partners VI Fund, L.P., the committee deferred taking action
with respect to the awards until May 1, 2007.
The awards made to our named executive officers are described in
more detail under the captions Grants of Plan-Based
Awards and Outstanding Equity Awards at Fiscal
Year-End on pages 23 and 25 of this Proxy Statement.
For additional information regarding the compensation received
by our named executive officers in fiscal 2007, see the
information under the caption Summary Compensation
Table on page 21 of this Proxy Statement.
New Chief
Executive Officer
On July 1, 2007, Dinesh Paliwal joined the Company as
President, Chief Executive Officer and Vice Chairman pursuant to
an employment agreement approved by the Board and the committee
in May 2007. In connection with his joining the Company,
Mr. Paliwal was granted 100,000 stock options,
64,579 shares of restricted stock and 32,291 restricted
stock units. The grant date of these awards was July 2,
2007, the first trading day after his first day of employment
with the Company. In addition, the Company entered into a
severance agreement with Mr. Paliwal, on terms
substantially similar to the Companys severance agreements
with Dr. Harman and Mr. Brown described under the
caption Severance and
Change-in-Control
Arrangements on page 16 of this Proxy Statement. The
committee also granted Mr. Paliwal 100,000 options on
October 18, 2007.
The committee is in active discussions with Mr. Paliwal
relating to amending his compensation arrangements. These new
arrangements would provide Mr. Paliwal with, among other
things, a long-term incentive award if the enterprise value of
the Company increases significantly during the next five years.
The proposed arrangements would also provide Mr. Paliwal
with annual equity grants and certain additional payments. These
proposed compensation arrangements have not been finalized and
are subject to the execution of definitive agreements relating
to the terms of these arrangements.
20
EXECUTIVE
COMPENSATION
Summary
Compensation Table
The following table discloses all compensation earned by our
Executive Chairman, the individuals who served as our Chief
Executive Officer during fiscal 2007, our Chief Financial
Officer and our three other most highly paid executive officers
for fiscal 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pension and
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-Equity
|
|
|
Nonqualified
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Incentive
|
|
|
Deferred
|
|
|
|
|
|
|
|
Name and
|
|
|
|
|
|
|
|
|
|
|
Stock
|
|
|
Option
|
|
|
Plan
|
|
|
Compensation
|
|
|
All Other
|
|
|
|
|
Principal Position
|
|
Year
|
|
|
Salary
|
|
|
Bonus
|
|
|
Awards(1)
|
|
|
Awards(1)
|
|
|
Compensation(2)
|
|
|
Earnings
|
|
|
Compensation(3)
|
|
|
Total
|
|
|
Sidney Harman(4)
|
|
|
2007
|
|
|
$
|
1,050,000
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
2,436,681
|
|
|
$
|
1,050,000
|
|
|
$
|
534,263
|
|
|
$
|
281,591
|
|
|
$
|
5,352,535
|
|
Executive Chairman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin Brown
|
|
|
2007
|
|
|
|
490,384
|
|
|
|
0
|
|
|
|
0
|
|
|
|
885,194
|
|
|
|
325,000
|
|
|
|
148,568
|
|
|
|
42,437
|
|
|
|
1,891,583
|
|
Executive Vice President and Chief Financial Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Erich A. Geiger(5)
|
|
|
2007
|
|
|
|
1,000,000
|
|
|
|
250,000
|
|
|
|
327,701
|
|
|
|
3,141,255
|
|
|
|
1,000,000
|
|
|
|
5,096,670
|
|
|
|
147,065
|
|
|
|
10,962,691
|
|
Executive Vice President, Chief Strategy Officer and Chief
Technology Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Helmut Schinagel(6)
|
|
|
2007
|
|
|
|
509,995
|
|
|
|
613,113
|
|
|
|
517,212
|
|
|
|
583,438
|
|
|
|
0
|
|
|
|
862,374
|
|
|
|
52,962
|
|
|
|
3,139,094
|
|
Chief Executive Officer of the Automotive Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gina Harman
|
|
|
2007
|
|
|
|
490,384
|
|
|
|
150,000
|
|
|
|
0
|
|
|
|
347,526
|
|
|
|
0
|
|
|
|
225,904
|
|
|
|
34,123
|
|
|
|
1,247,937
|
|
President of Consumer Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bernard A. Girod(7)
|
|
|
2007
|
|
|
|
510,000
|
|
|
|
0
|
|
|
|
0
|
|
|
|
655,383
|
|
|
|
0
|
|
|
|
1,485,510
|
|
|
|
35,530
|
|
|
|
2,686,423
|
|
Former Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Douglas A. Pertz(8)
|
|
|
2007
|
|
|
|
152,586
|
|
|
|
0
|
|
|
|
0
|
|
|
|
1,188,573
|
|
|
|
0
|
|
|
|
|
|
|
|
3,830,383
|
|
|
|
5,171,542
|
|
Former Chief Executive Officer
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Represents the expense recognized for financial statement
reporting purposes for the year ended June 30, 2007, in
accordance with Financial Accounting Standards Board Statement
No. 123(R) (revised 2004), Share-Based Payment
(FAS 123R), with respect to (a) shares of
restricted stock and restricted stock units (under the column
titled Stock Awards), and (b) stock options (under the
column titled Option Awards) awarded to our executive officers
listed above. Pursuant to the Commissions rules, the
amounts shown exclude the impact of estimated forfeitures
related to service-based vesting conditions. See Note 11,
Stock Option and Incentive Plan, to our consolidated
financial statements for information regarding the assumptions
made in determining these values. |
|
(2) |
|
Represents awards granted to Dr. Harman, Mr. Brown and
Dr. Geiger under our 2002 Key Executive Officers Bonus Plan. |
|
(3) |
|
Includes compensation as described under the caption All
Other Compensation below. |
|
(4) |
|
Dr. Harman also served as chief executive officer of the
company from January 1, 2007 through June 30, 2007. |
|
(5) |
|
A portion of Dr. Geigers compensation was paid in
Euros and has been translated into U.S. dollars at the average
exchange rate for the 12 months ended June 30, 2007. |
|
(6) |
|
Mr. Schinagel joined the Company in October 2006. His
compensation is paid in Euros and has been translated into U.S.
dollars at the exchange rate in effect on June 30, 2007 in
the case of |
21
|
|
|
|
|
bonus payments, and at the average exchange rate for the
12 months ended June 30, 2007, as applicable, in the
case of salary and other amounts. |
|
(7) |
|
Mr. Girod served as Chief Executive Officer of the Company
from August 22, 2006 through December 31, 2006, the
date he retired from the Company. |
|
(8) |
|
Mr. Pertz served as Chief Executive Officer of the Company
from May 1, 2006 through August 21, 2006. Upon his
resignation, Mr. Pertz held 25,000 shares of
restricted stock that were forfeited and 75,000 options that
were terminated. |
All
Other Compensation
The following table provides information regarding each
component of compensation included in the All Other Compensation
column in the Summary Compensation Table.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Value of
|
|
|
Personal
|
|
|
Automobile
|
|
|
|
|
|
|
|
|
|
Company 401(k)
|
|
|
Insurance
|
|
|
Use of
|
|
|
Related
|
|
|
|
|
|
|
|
Name
|
|
Contributions(1)
|
|
|
Premiums(2)
|
|
|
Aircraft(3)
|
|
|
Expenses(4)
|
|
|
Other (5)(6)(7)
|
|
|
Total
|
|
|
Sidney Harman
|
|
$
|
18,850
|
|
|
$
|
227
|
|
|
$
|
173,273
|
|
|
$
|
56,103
|
|
|
$
|
33,138
|
|
|
$
|
281,591
|
|
Kevin Brown
|
|
|
19,416
|
|
|
|
873
|
|
|
|
0
|
|
|
|
22,148
|
|
|
|
0
|
|
|
|
42,437
|
|
Erich A. Geiger
|
|
|
18,850
|
|
|
|
32,890
|
|
|
|
0
|
|
|
|
51,894
|
|
|
|
43,431
|
|
|
|
147,065
|
|
Helmut Schinagel
|
|
|
0
|
|
|
|
13,888
|
|
|
|
0
|
|
|
|
39,074
|
|
|
|
0
|
|
|
|
52,962
|
|
Gina Harman
|
|
|
18,850
|
|
|
|
873
|
|
|
|
0
|
|
|
|
14,400
|
|
|
|
0
|
|
|
|
34,123
|
|
Bernard A. Girod
|
|
|
12,100
|
|
|
|
873
|
|
|
|
0
|
|
|
|
11,511
|
|
|
|
11,046
|
|
|
|
35,530
|
|
Douglas A. Pertz
|
|
|
0
|
|
|
|
873
|
|
|
|
0
|
|
|
|
0
|
|
|
|
3,829,510
|
|
|
|
3,830,383
|
|
|
|
|
(1) |
|
Represents company contributions to our Retirement Savings Plan. |
|
(2) |
|
For Dr. Harman, Mr. Brown, Dr. Geiger,
Ms. Harman and Mr. Pertz, represents life insurance
premiums paid by the Company. For Mr. Schinagel, represents
premiums paid by the Company for an accidental death and
dismemberment insurance policy. |
|
(3) |
|
Represents the incremental cost incurred by the Company for the
named executive officers personal use of aircraft leased
by the Company. The incremental cost includes all variable costs
incurred by the Company for personal flights. Excludes fixed
lease payments paid by the Company for use of the aircraft. |
|
(4) |
|
Includes reimbursement of car payments or lease value of car
provided to the named executive officer, as follows:
Dr. Harman ($38,943), Mr. Brown ($15,386),
Dr. Geiger ($51,781), Mr. Schinagel ($39,074),
Ms. Harman ($14,400) and Mr. Girod ($8,625). Also
includes reimbursement of gasoline, repair and maintenance costs
and parking, none of which individually exceeded $25,000 or 10%
of the total amount of perquisites and personal benefits
provided to the named executive officer. |
|
(5) |
|
For Mr. Girod and Mr. Pertz, includes cost of tickets
to concerts and other music events that were provided to the
named executive officer when those tickets were not being used
for business purposes. |
|
(6) |
|
For Mr. Pertz, includes a severance payment equal to two
times his annual salary and target bonus plus the prorated value
of his unvested shares of restricted stock, or $3,829,200 in the
aggregate. For Dr. Harman, includes $32,588 for a personal
assistant. For Mr. Girod and Dr. Geiger, includes the
cost of airfare paid for by the Company for the named executive
officers spouse to accompany him on business travel. For
Dr. Harman and Mr. Pertz, includes the cost of membership
fees. |
|
(7) |
|
For Dr. Geiger, includes (1) $32,900 of tax
gross-up
payments made by the company to cover taxes required to be paid
in Germany attributable to life insurance and a company car and
(2) $10,303 of contributions by the Company to pension and
unemployment insurance programs on behalf of Dr. Geiger. |
22
Grants of
Plan-Based Awards
The following table shows all plan-based awards granted to the
named executive officers in fiscal 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All Other
|
|
|
Option
|
|
|
|
|
|
Grant
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Stock Awards:
|
|
|
Awards:
|
|
|
Exercise or
|
|
|
Date Fair
|
|
|
|
|
|
|
Date of
|
|
|
Estimated Future Payouts
|
|
|
Number of
|
|
|
Number of
|
|
|
Base
|
|
|
Value of
|
|
|
|
|
|
|
Board or
|
|
|
Under Non-Equity
|
|
|
Shares
|
|
|
Securities
|
|
|
Price of
|
|
|
Stock
|
|
|
|
Grant
|
|
|
Committee
|
|
|
Incentive Plan Awards(2)
|
|
|
of Stock
|
|
|
Underlying
|
|
|
Option
|
|
|
Option
|
|
Name(1)
|
|
Date
|
|
|
Action
|
|
|
Threshold
|
|
|
Target
|
|
|
Maximum
|
|
|
or Units(3)
|
|
|
Options(4)
|
|
|
Awards
|
|
|
Awards(5)
|
|
|
Sidney Harman
|
|
|
08/10/2006
|
|
|
|
08/10/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
$
|
78.00
|
|
|
$
|
3,454,504
|
|
|
|
|
09/08/2006
|
|
|
|
09/08/2006
|
|
|
|
|
|
|
|
|
|
|
|
2,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin Brown
|
|
|
08/10/2006
|
|
|
|
08/10/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
78.00
|
|
|
|
1,727,252
|
|
|
|
|
09/08/2006
|
|
|
|
09/08/2006
|
|
|
|
|
|
|
|
|
|
|
|
2,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Erich A. Geiger
|
|
|
08/10/2006
|
|
|
|
08/10/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
100,000
|
|
|
|
78.00
|
|
|
|
3,454,504
|
|
|
|
|
09/08/2006
|
|
|
|
09/08/2006
|
|
|
|
|
|
|
|
|
|
|
|
2,000,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Helmut Schinagel
|
|
|
10/02/2006
|
|
|
|
08/10/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
|
|
|
|
|
|
|
|
2,091,750
|
|
|
|
|
10/02/2006
|
|
|
|
08/10/2006
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
50,000
|
|
|
|
83.67
|
|
|
|
1,757,305
|
|
|
|
|
05/01/2007
|
|
|
|
05/01/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
120.83
|
|
|
|
729,791
|
|
Gina Harman
|
|
|
05/01/2007
|
|
|
|
05/01/2007
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
120.83
|
|
|
|
729,791
|
|
|
|
|
(1) |
|
Neither Mr. Girod nor Mr. Pertz were granted
plan-based awards in fiscal 2007. |
|
(2) |
|
For Dr. Harman, Mr. Brown and Dr. Geiger,
represents awards payable under the 2002 Key Executive Officers
Bonus Plan. The maximum amounts represent the amount payable to
the named executive officer if a predetermined return on
stockholder equity goal established by the Compensation and
Option Committee was met for fiscal 2007. The return on
stockholder equity goal for fiscal 2007 was 10%, which the
Company achieved. However, pursuant to its authority under the
plan, the Compensation and Option Committee reduced the award
amounts. Actual amounts payable to Dr. Harman,
Mr. Brown and Dr. Geiger for fiscal 2007 under this
plan are reported under the Non-Equity Incentive Plan
Compensation column under the caption Summary
Compensation Table on page 21 of this Proxy Statement. |
|
(3) |
|
The restricted stock units held by Mr. Schinagel vest on
October 2, 2009. |
|
(4) |
|
The stock options vest annually at a rate of 20% commencing on
the first anniversary of the date of grant. |
|
(5) |
|
Represents the grant date value in accordance with FAS 123R
of the restricted stock units and stock options granted to our
named executive officers in fiscal 2007. |
Severance
and Employment Agreements
We have entered into severance agreements with each of
Dr. Harman and Mr. Brown. The severance agreements
provide that if, within the two years following a change in
control of the Company, the executive officer is terminated
without cause or under certain circumstances terminates his own
employment, he is entitled to receive a severance payment equal
to three times the sum of his highest annual base salary during
any period prior to his termination and his highest incentive
pay during the three fiscal years preceding the change in
control. The severance agreements also provide that the Company
will pay the executive officer an additional amount for excise
taxes, subject to a limitation based on the overall cost of the
severance agreements, including any additional payment for
excise taxes. Unless the executive officer or the Company
notifies the other by September 30 that it does not wish the
agreement to be extended, each severance agreement is
automatically extended on the following January 1 for an
additional year.
Mr. Brown serves as Executive Vice President and Chief
Financial Officer pursuant to a letter agreement with the
Company. Under the terms of his letter agreement, Mr. Brown
is entitled to an
23
annual base salary of $400,000. Mr. Brown also participates
in incentive compensation and some of our other benefit plans
and programs. If we terminate Mr. Browns employment
before June 30, 2008 for any reason, except for job-related
illegal misconduct or under circumstances for which
Mr. Brown would be entitled to compensation under his
severance agreement, he will continue to receive salary and
benefit payments for a period of one year or until he accepts
other employment.
Dr. Geiger serves as Executive Vice President, Chief
Strategy Officer and Chief Technology Officer pursuant to an
employment agreement with the Company. The agreement provides
for an annual base salary of $1,000,000. Dr. Geiger is
eligible to receive a target bonus of 100% of his salary based
on certain performance parameters established annually by us. In
addition, Dr. Geiger received a one-time cash bonus of
$250,000 in fiscal 2007 pursuant to the agreement. The agreement
also provides that Dr. Geiger is eligible to participate in
our Deferred Compensation Plan and that we will maintain
Dr. Geigers life insurance policy and provide
disability and death benefits to him. Dr. Geiger is
entitled to an annual pension benefit equal to the greater of
$988,755 or 50% of the average of his highest five consecutive
years of eligible salary and incentive compensation plan bonus
(after taking into consideration pension benefits he has earned
under a prior employment agreement with a subsidiary of the
Company). The employment agreement terminates on August 31,
2008. On January 15, 2007, we entered into a consulting
agreement with Dr. Geiger which becomes effective upon his
retirement or other termination of his employment and terminates
in August 2011. Under this agreement, Dr. Geiger will be
entitled to $40,000 for each month he provides consulting
services to us.
Mr. Schinagel serves as Chief Executive Officer of our
Automotive business unit pursuant to an employment agreement
with the Company. The agreement provides for an annual base
salary of 650,000. Additionally, Mr. Schinagel is
eligible to earn a target bonus equal to 70% of his base salary
(which was guaranteed at that level for fiscal 2007) and a
maximum bonus of 105% of his base salary. Mr. Schinagel is
also entitled to a retirement benefit of annual pension payments
equal to 12.5% of his average base salary while working for us,
subject to a 2.5% annual increase for each year of service
Mr. Schinagel has been with us beyond five years, up to a
maximum of 30% of his base salary. The pension benefit
Mr. Schinagel is entitled to under his employment agreement
will be reduced by any pension benefit he is entitled to from
previous employers. The employment agreement may be terminated
by us or Mr. Schinagel for any reason upon six months
notice. However, any termination without cause will not be
effective until September 30, 2011 and Mr. Schinagel
would remain entitled to his base salary and benefits until such
time.
24
Outstanding
Equity Awards at Fiscal Year-End
The following table provides information regarding stock
options, shares of restricted stock and restricted stock units
held by the named executive officers that were outstanding at
June 30, 2007.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
Stock Awards
|
|
|
|
Number of
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Securities
|
|
|
Securities
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
Underlying
|
|
|
Underlying
|
|
|
|
|
|
|
|
|
Shares or
|
|
|
Market Value
|
|
|
|
Unexercised
|
|
|
Unexercised
|
|
|
Option
|
|
|
Option
|
|
|
Units of Stock
|
|
|
of Shares or Units
|
|
|
|
Option
|
|
|
Option
|
|
|
Exercise
|
|
|
Expiration
|
|
|
That Have
|
|
|
of Stock That Have
|
|
Name(1)
|
|
Exercisable
|
|
|
Unexercisable(2)
|
|
|
Price
|
|
|
Date
|
|
|
Not Vested(3)
|
|
|
Not Vested(4)
|
|
Sidney Harman
|
|
|
200,000
|
|
|
|
0
|
|
|
$
|
11.00
|
|
|
|
07/30/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
200,000
|
|
|
|
0
|
|
|
|
15.69
|
|
|
|
08/07/2010
|
|
|
|
|
|
|
|
|
|
|
|
|
150,000
|
|
|
|
0
|
|
|
|
18.45
|
|
|
|
08/07/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
120,000
|
|
|
|
30,000
|
|
|
|
24.12
|
|
|
|
09/24/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
60,000
|
|
|
|
40,000
|
|
|
|
50.03
|
|
|
|
09/23/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
60,000
|
|
|
|
98.62
|
|
|
|
09/03/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
100,000
|
|
|
|
78.00
|
|
|
|
08/10/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Kevin Brown
|
|
|
4,000
|
|
|
|
4,000
|
|
|
|
41.40
|
|
|
|
08/01/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
3,000
|
|
|
|
2,000
|
|
|
|
75.22
|
|
|
|
03/24/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
20,000
|
|
|
|
82.00
|
|
|
|
08/16/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
50,000
|
|
|
|
78.00
|
|
|
|
08/10/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Erich A. Geiger
|
|
|
10,000
|
|
|
|
0
|
|
|
|
12.45
|
|
|
|
03/29/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
16,000
|
|
|
|
16,000
|
|
|
|
24.12
|
|
|
|
09/24/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
28,000
|
|
|
|
50.03
|
|
|
|
09/23/2013
|
|
|
|
|
|
|
|
|
|
|
|
|
40,000
|
|
|
|
60,000
|
|
|
|
98.62
|
|
|
|
09/03/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
20,000
|
|
|
|
80,000
|
|
|
|
82.00
|
|
|
|
08/16/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
100,000
|
|
|
|
78.00
|
|
|
|
08/10/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,000
|
|
|
$
|
1,401,600
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Helmut Schinagel
|
|
|
0
|
|
|
|
50,000
|
|
|
|
83.67
|
|
|
|
10/02/2016
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
25,000
|
|
|
|
120.83
|
|
|
|
05/01/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
25,000
|
|
|
|
2,920,000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gina Harman
|
|
|
19,524
|
|
|
|
0
|
|
|
|
11.00
|
|
|
|
11/10/2008
|
|
|
|
|
|
|
|
|
|
|
|
|
16,000
|
|
|
|
0
|
|
|
|
11.72
|
|
|
|
11/09/2009
|
|
|
|
|
|
|
|
|
|
|
|
|
24,000
|
|
|
|
0
|
|
|
|
12.45
|
|
|
|
03/29/2011
|
|
|
|
|
|
|
|
|
|
|
|
|
24,000
|
|
|
|
6,000
|
|
|
|
24.12
|
|
|
|
09/24/2012
|
|
|
|
|
|
|
|
|
|
|
|
|
9,000
|
|
|
|
6,000
|
|
|
|
75.22
|
|
|
|
03/24/2014
|
|
|
|
|
|
|
|
|
|
|
|
|
5,000
|
|
|
|
20,000
|
|
|
|
82.00
|
|
|
|
08/16/2015
|
|
|
|
|
|
|
|
|
|
|
|
|
0
|
|
|
|
25,000
|
|
|
|
120.83
|
|
|
|
05/01/2017
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) |
|
Neither Mr. Girod nor Mr. Pertz were employed by the
Company on June 30, 2007, and neither held outstanding
equity awards at that time. |
|
(2) |
|
The stock options vest annually at a rate of 20% commencing on
the first anniversary of the date of grant. |
|
(3) |
|
Shares of restricted stock held by Dr. Geiger will vest on
August 16, 2008. The restricted stock units held by
Mr. Schinagel will vest on October 2, 2009. |
|
(4) |
|
Based upon a market value per share of $116.80, the closing
market price of the Companys Common Stock on June 29,
2007. |
25
Option
Exercises and Stock Vested
The following table provides information regarding the
acquisition of Common Stock by the named executive officers upon
the exercise of stock options during fiscal 2007. None of the
shares of restricted stock or restricted stock units held by our
named executive officers vested during fiscal 2007.
|
|
|
|
|
|
|
|
|
|
|
Option Awards
|
|
|
|
Number of Shares
|
|
|
Value Realized
|
|
Name
|
|
Acquired on Exercise
|
|
|
Upon Exercise(1)
|
|
|
Sidney Harman
|
|
|
0
|
|
|
$
|
0
|
|
Kevin Brown
|
|
|
0
|
|
|
|
0
|
|
Erich A. Geiger
|
|
|
10,000
|
|
|
|
875,500
|
|
Helmut Schinagel
|
|
|
0
|
|
|
|
0
|
|
Gina Harman
|
|
|
0
|
|
|
|
0
|
|
Bernard A. Girod
|
|
|
230,000
|
|
|
|
9,025,192
|
|
Douglas A. Pertz
|
|
|
0
|
|
|
|
0
|
|
|
|
|
(1) |
|
Based on the difference between the market price of the
Companys Common Stock on the date of exercise and the
relevant exercise price. |
Pension
Benefits
The following table provides information regarding the present
value of benefits and payments during fiscal 2007 under our
Supplemental Executive Retirement Plan (Supplemental
Plan), and employment agreements with Dr. Geiger and
Mr. Schinagel.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Present Value
|
|
|
Payments
|
|
|
|
|
|
Number of Years
|
|
|
of Accumulated
|
|
|
During Last
|
|
Name
|
|
Plan Name
|
|
Credited Service
|
|
|
Benefit(1)
|
|
|
Fiscal Year
|
|
|
Sidney Harman
|
|
Supplemental Plan
|
|
|
43.000
|
|
|
$
|
9,535,509
|
|
|
$
|
0
|
|
Kevin Brown
|
|
Supplemental Plan
|
|
|
3.000
|
|
|
|
194,505
|
|
|
|
0
|
|
Erich A. Geiger
|
|
Employment Agreement
|
|
|
14.000
|
|
|
|
10,699,469
|
|
|
|
0
|
|
Helmut Schinagel
|
|
Employment Agreement
|
|
|
0.745
|
|
|
|
862,374
|
|
|
|
0
|
|
Gina Harman
|
|
Supplemental Plan
|
|
|
21.000
|
|
|
|
2,420,168
|
|
|
|
0
|
|
Bernard A. Girod(2)
|
|
Supplemental Plan
|
|
|
20.000
|
|
|
|
12,698,494
|
|
|
|
596,250
|
|
|
|
|
(1) |
|
See Note 12, Retirement Benefits, to our
consolidated financial statements for information regarding the
assumptions made in determining these values. |
|
(2) |
|
Mr. Girod retired on December 31, 2006. |
Supplemental
Executive Retirement Plan
The Supplemental Plan provides supplemental retirement,
termination and death benefits to certain executive officers and
key employees designated by the Board. Benefits under the
Supplemental Plan payable upon termination or death are
described under the caption Severance and Change in
Control Benefits Supplemental Executive Retirement
Plan on page 29 of this Proxy Statement. The Compensation
and Option Committee administers the Supplemental Plan. Each of
the named executive officers who are currently employed by the
Company, other than Dr. Geiger and Mr. Schinagel, has
been designated as a participant. All Supplemental Plan benefits
are subject to deductions for Social Security and federal, state
and local taxes.
26
Retirement benefits are based on the average of the
participants highest cash compensation (base salary and
bonus) during any five consecutive years of employment by the
Company (Average Cash Compensation). Participants
retiring at age 65 or older receive an annual retirement
benefit equal to either
(a) 31/3%
of Average Cash Compensation per year of service up to a maximum
of 50%, or (b) 2% of Average Cash Compensation per year of
service up to a maximum of 30%, as designated by the Company.
Each of Dr. Harman and Mr. Brown has been designated
as a participant entitled to receive an annual retirement
benefit of up to 50% of Average Cash Compensation, and
Ms. Harman has been designated as a participant entitled to
receive an annual retirement benefit of up to 30% of Average
Cash Compensation. Unless another form of payment is approved by
the administrative committee for the Supplemental Plan, benefits
are payable monthly in the form of a life annuity. If the
participant dies after benefits have commenced but prior to
receiving 10 years of benefits, they are paid to the
participants beneficiary for the remainder of that period.
Other
Retirement Benefits
Dr. Geiger is entitled to receive an annual pension benefit
under an employment agreement with the Company equal to the
greater of $988,755 or 50% of the average of his highest five
consecutive years of eligible salary and incentive compensation
plan bonus (after taking into consideration pension benefits he
has earned under a prior employment agreement with a subsidiary
of the Company).
Mr. Schinagel is entitled to receive an annual pension
benefit pursuant to his employment agreement with the Company
equal to 12.5% of his average base salary during his time of
service with the Company. This benefit will be increased by 2.5%
for each year Mr. Schinagel is employed by the Company
beyond five years, up to a maximum of 30%. Mr. Schinagel is
entitled to this pension benefit once he reaches age 60 and
is no longer employed by the Company; provided, however, that if
Mr. Schinagel is terminated for good cause as determined by
the German Civil Code on or before October 2, 2011, he will
not be entitled to any pension benefit from the Company.
Mr. Schinagels annual pension benefit will be reduced
by any other pension benefits he is entitled to from previous
employers.
Nonqualified
Deferred Compensation
Our Deferred Compensation Plan provides supplemental retirement
benefits for executive officers designated by the Compensation
and Option Committee. Prior to the beginning of each fiscal
year, each plan participant may elect to defer up to 100% of his
or her annual base salary and bonus on a pre-tax basis to a
deferral account. These amounts are always fully vested and
subject to a 10% penalty on any unscheduled withdrawals. We may
decide to make contributions on a pre-tax basis to a plan
participants account, subject to a vesting schedule. In
the event of a change in control of the Company, any unvested
amounts vest immediately and the Company indemnifies the plan
participant for any expense incurred in enforcing his or her
rights under the Deferred Compensation Plan.
Plan participants specify that portion of their accounts to be
deemed invested in designated benchmark funds. This may be
changed once in any calendar month by the plan participant. The
Company credits earnings to the accounts based on the rate of
return of the designated funds. For fiscal 2007, the designated
funds produced returns ranging from 5.3% to 28.4%. Upon
retirement or termination of employment other than due to death,
plan participants may receive their account balances in the form
of a lump-sum payment or in annual installments. In the event of
death prior to the commencement of benefits or during payment of
installments, the balances in a plan participants vested
accounts as of the date of death are payable to the plan
participants beneficiaries.
27
The following table provides information for the named executive
officers regarding contributions, earnings and balances for our
Deferred Compensation Plan.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Executive
|
|
|
Aggregate Earnings
|
|
|
Aggregate
|
|
|
|
|
|
|
Contributions in
|
|
|
in
|
|
|
Withdrawals/
|
|
|
Aggregate Balance
|
|
Name
|
|
Last FY(1)
|
|
|
Last FY(2)
|
|
|
Distributions
|
|
|
at Last FYE(3)
|
|
|
Sidney Harman
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Kevin Brown
|
|
|
25,962
|
|
|
|
15,546
|
|
|
|
0
|
|
|
|
117,416
|
|
Erich A. Geiger
|
|
|
0
|
|
|
|
338,608
|
|
|
|
0
|
|
|
|
5,274,060
|
|
Helmut Schinagel
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Gina Harman
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Bernard A. Girod(4)
|
|
|
0
|
|
|
|
59,326
|
|
|
|
75,695
|
|
|
|
318,893
|
|
|
|
|
(1) |
|
Mr. Browns contribution to the Deferred Compensation
Plan was reported as compensation for fiscal 2007 under the
caption Summary Compensation Table on page 21
of this Proxy Statement. |
|
(2) |
|
None of the aggregate earnings in fiscal 2007 were reported as
compensation for the named executive officers for fiscal 2007
under the caption Summary Compensation Table on
page 21 of this Proxy Statement. |
|
(3) |
|
Includes amount reported as compensation to the named executive
officers in the Companys proxy statements for prior years
as follows: Mr. Brown ($62,331), Dr. Geiger
($3,502,762) and Mr. Girod ($287,824). |
|
(4) |
|
Mr. Girod retired on December 31, 2006. He will
receive his entire account balance in five annual installments,
the first of which was paid in January 2007. |
Severance
and Change in Control Benefits
We provide benefits to each of the named executive officers in
the event his or her employment is terminated. We provide these
benefits through our Supplemental Plan and 2002 Key Executive
Officers Bonus Plan and employment and severance agreements we
have entered into with some of the named executive officers.
Severance
Agreements
We have entered into severance agreements with Dr. Harman
and Mr. Brown. These agreements provide that if, within two
years following a change in control of the Company, the
executive officer is terminated without cause or under certain
circumstances terminates his own employment, he is entitled to
receive a severance payment equal to three times the sum of his
highest annual base salary during any period prior to his
termination plus his highest incentive pay during the three
fiscal years preceding the change in control.
An executive officer is deemed to have been terminated without
cause if he is terminated by us for any reason other than:
|
|
|
|
|
conviction of a criminal violation involving fraud, embezzlement
or theft in connection with his duties;
|
|
|
|
intentional wrongful damage to property of the Company or its
subsidiaries;
|
|
|
|
intentional wrongful disclosure of secret processes or
confidential information of the Company or its
subsidiaries; or
|
|
|
|
intentional wrongful engagement in any competitive activity.
|
28
An executive officer is entitled to severance compensation if he
terminates his employment with us within two years following a
change in control under the following circumstances:
|
|
|
|
|
failure to maintain his office (or one substantially equivalent)
with the Company;
|
|
|
|
significant adverse change in authority, function,
responsibilities or duties;
|
|
|
|
reduction in base salary and bonus;
|
|
|
|
termination or reduction in employee benefits;
|
|
|
|
liquidation, dissolution, merger, consolidation or
reorganization of the Company or a transfer of all or
substantially all of the Companys assets unless the
successor company assumes all of the companys duties and
obligations under the severance agreement; or
|
|
|
|
relocation of his principal place of work (a) of more than
50 miles from the Companys principal executive
offices immediately prior to the change in control or
(b) that requires him to travel away from his office 20% or
more than was required in any of the three years immediately
prior to the change in control, in either case, without his
consent.
|
A change of control is defined as:
|
|
|
|
|
the acquisition by any person, entity or group of 25% or more of
our voting stock, other than the Company or its subsidiaries or
a company benefit plan, other than in a transaction that is not
deemed a change in control as defined in the next bullet;
|
|
|
|
a reorganization, merger, consolidation, sale or other
disposition of all or substantially all of our assets, or any
other transaction having a similar effect unless:
|
|
|
|
|
|
the holders of our voting stock immediately prior to the
transaction beneficially own more than 50% of the combined
voting power of the surviving entity;
|
|
|
|
no person, entity or group beneficially owns 25% or more of the
combined voting power of the surviving entity; and
|
|
|
|
a majority of the directors of the surviving entity were
directors of the Company prior to the transaction;
|
|
|
|
|
|
when a majority of our directors (a) have not been approved
by two-thirds of our then directors or (b) were elected or
appointed as a result of an actual or threatened election
contest; or
|
|
|
|
approval by our stockholders of a complete liquidation or
dissolution of the company.
|
The severance agreements also provide that we will pay the
executive officer an additional amount for excise taxes, subject
to a limitation based on the overall cost of the severance
agreements, including any additional payment for excise taxes.
Additionally, the agreements provide that the executive officer
shall not engage in any competitive activity, as defined in the
agreement, without our written consent, during the term of the
agreement and for a period of one year after his employment is
terminated.
Supplemental
Executive Retirement Plan
Dr. Harman, Mr. Brown and Ms. Harman are
participants in the Supplemental Plan. Benefits payable under
the Supplemental Plan are based on the average of the
participants highest cash compensation (base salary and
bonus) during any five consecutive years of employment by the
company (Average Cash Compensation).
29
A participant whose employment is terminated prior to
age 65 with at least 15 years of service, and who is
not otherwise entitled to retirement benefits under the
Supplemental Plan, is entitled to an annual termination benefit
equal to either (a) 30% of Average Cash Compensation,
increased by 4% for each year of service over 15 years, up
to a maximum of 50%, or (b) 15% of Average Cash
Compensation, increased by 3% for each year of service over
15 years, up to a maximum of 30%, as designated by the
Company. The termination benefit commences upon the later of
termination of the participants employment, other than due
to death, or the participant reaching age 55.
Dr. Harman and Mr. Brown have each been designated as
a participant entitled to receive an annual termination benefit
of up to 50% of Average Cash Compensation and Ms. Harman
has been designated as a participant entitled to receive an
annual termination benefit of up to 30%.
Additionally, if a participants employment is terminated
for any reason other than death within three years after a
change in control of the Company, the participant vests with the
maximum designated retirement benefit regardless of age or years
of service and the company indemnifies the participant for any
expense incurred in enforcing the participants rights in
the retirement benefit under the Supplemental Plan. Under the
Supplemental Plan, a change in control is defined in the same
manner as under Dr. Harmans and Mr. Browns
severance agreements, as described above.
A pre-retirement death benefit equal to two or three times the
highest annual cash compensation achieved by a participant
during his or her employment with the Company is paid to the
beneficiaries of a participant who dies prior to the
commencement of benefits under the Supplemental Plan.
Dr. Harman and Mr. Brown have each been designated as
a participant entitled to receive a death benefit equal to three
times his highest annual cash compensation, and Ms. Harman
has been designated as a participant entitled to receive a death
benefit equal to two times her highest annual cash compensation.
The benefit is paid to the participants designated
beneficiary in a single lump sum or, at the request of the
beneficiary and with the consent of the administrative
committee, the benefit may be paid in another form providing the
actuarial equivalent of the lump-sum payment.
2002
Key Executive Officers Bonus Plan
In the event of a change in control of the Company, each
participant in the 2002 Key Executive Officers Bonus Plan is
entitled to the award amount for that fiscal year without
proration or any other deduction, provided that he or she is
employed by us at the time of the change in control or, if the
plan participant is no longer employed by us, the
participants employment is terminated after commencement
of discussions that resulted in a change in control of the
Company but within 180 days prior to the change in control.
Under this plan, a change in control is defined in the same
manner as under Dr. Harmans and Mr. Browns
severance agreements, as described above.
Summary
of Benefits
The following tables quantify potential compensation that would
become payable to each of our named executive officers under the
agreements and company plans and policies discussed above if
their employment had terminated on June 29, 2007 (the last
business day of fiscal 2007), given the named executive
officers base salary as of that date, and, if applicable,
the closing price of the Companys Common Stock on
June 29, 2007.
Due to the factors that may affect the amount of any benefits
provided upon the events described below, any actual amounts
paid or payable may be different than those shown in this table.
Factors that could affect these amounts include the date the
termination event occurs, the base salary of an executive
officer on the date of termination of employment and the price
of our common stock when the termination event occurs.
30
Sidney
Harman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
Acceleration
|
|
|
|
|
|
Continued
|
|
|
|
|
|
|
Severance
|
|
|
of Equity
|
|
|
Pension
|
|
|
Benefits/
|
|
|
|
|
|
|
Payments
|
|
|
Awards
|
|
|
Benefits(1)
|
|
|
Perquisites
|
|
|
Total
|
|
|
Voluntary Termination
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
9,535,509
|
|
|
$
|
0
|
|
|
$
|
9,535,509
|
|
Termination With Cause
|
|
|
0
|
|
|
|
0
|
|
|
|
9,535,509
|
|
|
|
0
|
|
|
|
9,535,509
|
|
Termination Without Cause
|
|
|
0
|
|
|
|
0
|
|
|
|
9,535,509
|
|
|
|
0
|
|
|
|
9,535,509
|
|
Death
|
|
|
0
|
|
|
|
0
|
|
|
|
9,150,000
|
|
|
|
0
|
|
|
|
9,150,000
|
|
Disability
|
|
|
0
|
|
|
|
0
|
|
|
|
9,535,509
|
|
|
|
0
|
|
|
|
9,535,509
|
|
Retirement
|
|
|
0
|
|
|
|
0
|
|
|
|
9,535,509
|
|
|
|
0
|
|
|
|
9,535,509
|
|
Change in Control
|
|
|
11,150,000
|
(2)(3)
|
|
|
2,563,561
|
(4)
|
|
|
9,535,509
|
|
|
|
236,814
|
(2)
|
|
|
23,485,884
|
|
|
|
|
(1)
|
|
Represents the death benefit or the
present value of accumulated retirement benefits, as applicable,
that Dr. Harman would be entitled to under our Supplemental
Plan.
|
|
(2)
|
|
Includes amount payable under
Dr. Harmans severance agreement.
|
|
(3)
|
|
Includes award for fiscal 2007 that
the executive officer is entitled to under the 2002 Key
Executive Officers Bonus Plan upon a change in control of the
Company.
|
|
(4)
|
|
Under the terms of
Dr. Harmans agreement representing awards of stock
options, any unvested awards become vested upon a change in
control, as defined in the award agreement. Represents the value
of unvested stock options on June 29, 2007, at $116.80 per
share, the closing price of the Companys Common Stock on
that date.
|
Kevin
Brown
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
|
|
|
Acceleration
|
|
|
|
|
|
Compensation
|
|
|
Continued
|
|
|
Tax
|
|
|
|
|
|
|
Severance
|
|
|
of Equity
|
|
|
Pension
|
|
|
Plan
|
|
|
Benefits/
|
|
|
Gross
|
|
|
|
|
|
|
Payments
|
|
|
Awards
|
|
|
Benefits
|
|
|
Benefits(1)
|
|
|
Perquisites
|
|
|
Ups
|
|
|
Total
|
|
|
Voluntary Termination
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
117,416
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
117,416
|
|
Termination With Cause
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
117,416
|
|
|
|
0
|
|
|
|
0
|
|
|
|
117,416
|
|
Termination Without Cause
|
|
|
500,000
|
(2)
|
|
|
0
|
|
|
|
0
|
|
|
|
117,416
|
|
|
|
0
|
|
|
|
0
|
|
|
|
617,416
|
|
Death
|
|
|
0
|
|
|
|
0
|
|
|
|
2,475,000
|
(3)
|
|
|
117,416
|
|
|
|
0
|
|
|
|
0
|
|
|
|
2,529,416
|
|
Disability
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
117,416
|
|
|
|
0
|
|
|
|
0
|
|
|
|
117,416
|
|
Retirement
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
117,416
|
|
|
|
0
|
|
|
|
0
|
|
|
|
117,416
|
|
Change in Control
|
|
|
4,475,000
|
(4)(5)
|
|
|
1,278,155 (6
|
)
|
|
|
1,426,304
|
(7)
|
|
|
117,416
|
|
|
|
138,657
|
(4)
|
|
|
2,943,541
|
(4)
|
|
|
10,379,073
|
|
|
|
|
(1)
|
|
Represents Mr. Browns
aggregate balance under our Deferred Compensation Plan at
June 30, 2007, as reported in the Nonqualified Deferred
Compensation table.
|
|
(2)
|
|
Represents continued salary and
benefits payable under Mr. Browns employment
agreement for one year following termination of his employment.
|
|
(3)
|
|
Represents the death benefit that
Mr. Brown is entitled to under our Supplemental Plan.
|
|
(4)
|
|
Includes amount payable under
Mr. Browns severance agreement.
|
|
(5)
|
|
Includes award for fiscal 2007 that
Mr. Brown is entitled to under the 2002 Key Executive
Officers Bonus Plan upon a change in control of the Company.
|
|
(6)
|
|
Under the terms of
Mr. Browns agreement representing awards of stock
options, any unvested awards become vested upon a change in
control, as defined in the award agreement. The amounts shown
represent the value of unvested stock options on June 29,
2007, at $116.80 per share, the closing price of the
Companys Common Stock on that date.
|
|
(7)
|
|
Represents the present value of
retirement benefits that Mr. Brown would be entitled to
under our Supplemental Plan due to accelerated vesting of his
benefit.
|
31
Erich
A. Geiger
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
|
|
|
Acceleration
|
|
|
|
|
|
Compensation
|
|
|
|
|
|
|
Cash Severance
|
|
|
of Equity
|
|
|
Pension
|
|
|
Plan
|
|
|
|
|
|
|
Payments
|
|
|
Awards
|
|
|
Benefits(1)
|
|
|
Benefits(2)
|
|
|
Total
|
|
|
Voluntary Termination
|
|
$
|
0
|
(3)
|
|
$
|
0
|
|
|
$
|
10,699,469
|
|
|
$
|
5,274,060
|
|
|
$
|
15,973,529
|
|
Termination With Cause
|
|
|
0
|
|
|
|
0
|
|
|
|
10,699,469
|
|
|
|
5,274,060
|
|
|
|
15,973,529
|
|
Termination Without Cause
|
|
|
2,606,667
|
(4)
|
|
|
0
|
|
|
|
10,699,469
|
|
|
|
5,274,060
|
|
|
|
18,580,196
|
|
Death
|
|
|
333,333
|
|
|
|
0
|
|
|
|
5,932,530
|
|
|
|
5,274,060
|
|
|
|
11,539,923
|
|
Disability
|
|
|
875,000
|
|
|
|
0
|
|
|
|
10,699,469
|
|
|
|
5,274,060
|
|
|
|
16,848,529
|
|
Retirement
|
|
|
2,606,667
|
(4)
|
|
|
0
|
|
|
|
10,699,469
|
|
|
|
5,274,060
|
|
|
|
18,580,196
|
|
Change in Control
|
|
|
4,606,667
|
(4)(5)
|
|
|
1,263,654
|
(6)
|
|
|
10,699,469
|
|
|
|
5,274,060
|
|
|
|
21,843,850
|
|
|
|
|
(1)
|
|
Represents the death benefit or the
present value of accumulated retirement benefits, as applicable,
that Dr. Geiger would be entitled to under his employment
agreement.
|
|
(2)
|
|
Represents Dr. Geigers
aggregate balance under our Deferred Compensation Plan at
June 30, 2007, as reported in the Nonqualified Deferred
Compensation table.
|
|
(3)
|
|
On January 15, 2007,
Dr. Geiger entered into an agreement to provide consulting
services to our company on an exclusive basis. This consulting
agreement is effective upon his retirement or other termination
of his employment and has a term that expires in August 2011.
Dr. Geiger is entitled to $40,000 for each month he
provides consulting services to the Company under this agreement.
|
|
(4)
|
|
Includes salary payable to
Dr. Geiger under his employment agreement through
August 31, 2008, the earliest date his employment can be
terminated by us without cause. In addition, includes the
maximum amount payable to Dr. Geiger under his consulting
agreement described above.
|
|
(5)
|
|
Includes award for fiscal 2007 that
Dr. Geiger is entitled to under the 2002 Key Executive
Officers Bonus Plan upon a change in control of the Company.
|
|
(6)
|
|
Under the terms of
Dr. Geigers agreements representing awards of stock
options and restricted stock, any unvested awards become vested
upon a change in control, as defined in the award agreements.
The amounts shown represent the value of unvested stock options
and restricted stock on June 29, 2007, at $116.80 per
share, the closing price of the Companys Common Stock on
that date.
|
32
Helmut
Schinagel
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration
|
|
|
|
|
|
|
|
|
|
Cash Severance
|
|
|
of Equity
|
|
|
Pension
|
|
|
|
|
|
|
Payments(1)
|
|
|
Awards
|
|
|
Benefits(2)
|
|
|
Total
|
|
|
Voluntary Termination
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
862,374
|
|
|
$
|
862,374
|
|
Termination With Cause
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Termination Without Cause
|
|
|
4,196,270
|
(3)
|
|
|
0
|
|
|
|
862,374
|
|
|
|
5,058,644
|
|
Death
|
|
|
6,760,000
|
(4)
|
|
|
0
|
|
|
|
0
|
|
|
|
6,760,000
|
|
Disability
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Retirement
|
|
|
0
|
|
|
|
0
|
|
|
|
862,374
|
|
|
|
862,374
|
|
Change in Control
|
|
|
4,196,270
|
(3)
|
|
|
226,000
|
(5)
|
|
|
862,374
|
|
|
|
5,284,644
|
|
|
|
|
(1)
|
|
Mr. Schinagels
compensation is paid in Euros and has been translated into U.S.
dollars at the exchange rate in effect on June 29, 2007.
|
|
(2)
|
|
Represents the present value of
accumulated retirement benefits that Mr. Schinagel would be
entitled to under his employment agreement.
|
|
(3)
|
|
Includes salary payable to
Mr. Schinagel under his employment agreement through
September 30, 2011, the earliest date his employment can be
terminated by us without cause. Also includes cash bonus for
fiscal 2007 guaranteed under his employment agreement.
|
|
(4)
|
|
Represents a lump-sum death benefit
payable by the company under Mr. Schinagels
employment agreement. In the event of Mr. Schinagels
accidental death, the benefit is paid under an insurance policy
for which premiums are paid by the Company.
|
|
(5)
|
|
Under the terms of
Mr. Schinagels agreements representing awards of
stock options and restricted stock units, any unvested awards
become vested upon a change in control, as defined in the award
agreements. The amounts shown represent the value of unvested
stock options and restricted stock units on June 29, 2007,
at $116.80 per share, the closing price of the Companys
Common Stock on that date.
|
Gina
Harman
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration
|
|
|
|
|
|
|
|
|
|
of Equity
|
|
|
Pension
|
|
|
|
|
|
|
Awards
|
|
|
Benefits(1)
|
|
|
Total
|
|
|
Voluntary Termination
|
|
$
|
0
|
|
|
$
|
2,420,168
|
|
|
$
|
2,420,168
|
|
Termination With Cause
|
|
|
0
|
|
|
|
2,420,168
|
|
|
|
2,420,168
|
|
Termination Without Cause
|
|
|
0
|
|
|
|
2,420,168
|
|
|
|
2,420,168
|
|
Death
|
|
|
0
|
|
|
|
1,583,334
|
|
|
|
1,583,334
|
|
Disability
|
|
|
0
|
|
|
|
2,420,168
|
|
|
|
2,420,168
|
|
Retirement
|
|
|
0
|
|
|
|
2,420,168
|
|
|
|
2,420,168
|
|
Change in Control
|
|
|
274,000
|
(2)
|
|
|
2,420,168
|
|
|
|
2,694,168
|
|
|
|
|
(1)
|
|
Represents the death benefit or the
present value of accumulated retirement benefits, as applicable,
that Ms. Harman would be entitled to under our Supplemental
Plan.
|
|
(2)
|
|
Under the terms of
Ms. Harmans agreement representing awards of stock
options, any unvested awards become vested upon a change in
control, as defined in the award agreement. The amounts shown
represent the value of unvested stock options on June 29,
2007, at $116.80 per share, the closing price of the
Companys Common Stock on that date.
|
33
Former
Officers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Acceleration
|
|
|
|
|
|
Deferred
|
|
|
|
|
|
|
Cash Severance
|
|
|
of Equity
|
|
|
Pension
|
|
|
Compensation
|
|
|
|
|
|
|
Payments
|
|
|
Awards
|
|
|
Benefits
|
|
|
Plan Benefits
|
|
|
Total
|
|
|
Bernard A. Girod
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Retirement
|
|
$
|
0
|
|
|
$
|
4,533,100
|
(1)
|
|
$
|
12,830,000
|
(2)
|
|
$
|
378,477
|
(3)
|
|
$
|
17,741,477
|
|
Douglas A. Pertz
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mutual Resignation(4)
|
|
$
|
3,829,200
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
0
|
|
|
$
|
3,829,200
|
|
|
|
|
(1)
|
|
In connection with his retirement,
on November 2, 2006, the Board accelerated the vesting of
all unvested stock options held by Mr. Girod. As of that
date, Mr. Girod held unvested options to purchase
130,000 shares of Common Stock with a weighted average
exercise price of $66.47 per share. The amount shown is based on
a market value per share of $101.34, the closing market price of
the Companys Common Stock on November 2, 2006.
|
|
(2)
|
|
For Mr. Girod, represents the
present value of accumulated retirement benefits under our
Supplemental Plan at December 31, 2006, the date he retired
from the Company.
|
|
(3)
|
|
For Mr. Girod, represents his
aggregate balance under our Deferred Compensation Plan at
December 31, 2006, the date he retired from the Company.
|
|
(4)
|
|
Mr. Pertz served as Chief
Executive Officer of the Company from May 1, 2006 through
August 21, 2006. The restricted stock and stock options
were cancelled upon his resignation as Chief Executive Officer.
Pursuant to his agreement with the Company, Mr. Pertz
received a severance payment equal to two times his annual
salary and target bonus and the prorated value of the shares of
restricted stock, or $3,829,200 in the aggregate.
|
34
CERTAIN
RELATIONSHIPS AND RELATED TRANSACTIONS
Company
Policies Regarding Related Party Transactions
The Board has not adopted a formal written policy regarding a
transaction or series of transactions involving the Company and
a related party. A related party is one of our executive
officers, directors, a person owning more than 5% of any class
of our securities, an entity in which any of such persons is
employed or is a partner or principal, or an immediate family
member of such a person. The Board may consider the desirability
of adopting a formal written policy during fiscal 2008. However,
given our history and past practice, the Board may decide that
such action is unnecessary.
While the Board has not adopted a formal written policy,
directors are typically made aware of any transaction or
transactions involving the Company and a related party. On an
annual basis, we request that each of our directors and
executive officers identify potential related party transactions
involving the director or executive officer and his or her
family. In addition, our Code of Business Conduct provides that
employees are to avoid situations or activities where their
personal interests are, or may appear to be, in competition with
or in opposition to the Companys interests.
Certain
Family Relationships
Two of Dr. Harmans adult children, Gina Harman and
Lynn Harman, are employed by the Company. Gina Harman serves as
President of Harman Consumer Group and Lynn Harman serves as
corporate counsel. For services rendered during fiscal 2007,
Lynn Harman was paid salary and bonus of $209,993. Gina
Harmans compensation for fiscal 2007 is disclosed under
the caption Summary Compensation Table on
page 21 of this Proxy Statement.
Gina Harman and Lynn Harman have been employed by the Company
for 22 years and 12 years, respectively. Over this
period, the directors have been made aware of their employment
and have approved elements of their compensation arrangements.
As an executive officer, Gina Harmans compensation is
approved annually by the Compensation and Option Committee which
is comprised of our non-management directors.
Certain
KKR Relationships
Brian F. Carroll, one of our directors, is a member of
KKR & Co. LLC, which serves as a general partner of
KKR.
On October 22, 2007, the Company entered into an agreement
terminating its merger agreement with companies formed by
investment funds affiliated with KKR and GS Capital Partners VI
Fund, L.P. and its related funds (GSCP), which are
sponsored by Goldman, Sachs & Co. Under this
termination agreement, the Company, KKR, affiliates of KKR and
GSCP agreed to release each other from all claims and actions
arising out of or related to the merger agreement and the
related transactions. In connection with this termination
agreement, the Company issued $400.0 million of its
1.25% Convertible Senior Notes due 2012, of which
$342.8 million was either purchased by an affiliate of KKR
or for which KKR has substantial economic benefit and risk. The
Company also agreed to provide KKR registration rights with
respect to the notes purchased in the transaction and the
Companys Common Stock into which the notes may be
converted.
Further, in connection with the note purchase, KKR has the right
to designate a nominee to the Companys Board of Directors,
for the Boards consideration, which designee must be
qualified and suitable to serve under all applicable Company
policies and guidelines and other regulatory requirements, meet
the independence requirements of the New York Stock Exchange and
otherwise be acceptable to the Board in its good faith
discretion. For so long as KKR continues to have
35
ownership rights as to at least $200.0 million principal
amount of the notes or until the occurrence of other specified
events, KKR will have the right to select a successor designee
in the event the designee ceases to serve on the Board, provided
the membership requirements are met. Mr. Carroll was
KKRs nominee. Based upon the recommendation of the
Nominating and Governance Committee, the Board appointed
Mr. Carroll as a director to serve for a term expiring at
the 2008 Annual Meeting of Stockholders.
36
EQUITY
COMPENSATION PLAN INFORMATION
As of June 30, 2007, the 1992 Incentive Plan and the 2002
Stock Option and Incentive Plan were the only compensation plans
under which securities of the Company were authorized for
issuance. These plans, including amendments to the 1992
Incentive Plan, were approved by our stockholders. The table
provides information as of June 30, 2007:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of
|
|
|
|
|
|
|
|
|
|
securities to be
|
|
|
Weighted-average
|
|
|
Number of securities
|
|
|
|
issued upon exercise
|
|
|
exercise price of
|
|
|
remaining available for
|
|
|
|
of outstanding
|
|
|
outstanding
|
|
|
future issuance under
|
|
|
|
options, warrants
|
|
|
options, warrants
|
|
|
existing equity
|
|
Plan category
|
|
and rights(1)
|
|
|
and rights
|
|
|
compensation plans(2)
|
|
|
Equity compensation plans approved by security holders
|
|
|
3,239,238
|
|
|
$
|
61.11
|
|
|
|
3,556,023
|
|
Equity compensation plans not approved by security holders
|
|
|
0
|
|
|
|
0
|
|
|
|
0
|
|
Total
|
|
|
3,239,238
|
|
|
$
|
61.11
|
|
|
|
3,556,023
|
|
|
|
|
(1)
|
|
Includes 25,000 restricted share
units issued under the 2002 Stock Option and Incentive Plan.
|
|
(2)
|
|
Represents 3,556,023 shares of
Common Stock available for issuance under the 2002 Stock Option
and Incentive Plan. No further awards may be made under the 1992
Incentive Plan.
|
37
SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table shows, as of October 25, 2007, the
beneficial ownership of shares of the Companys Common
Stock for (a) all stockholders known by us to beneficially
own more than 5% of the shares of Common Stock, (b) each of
our current directors, (c) our named executive officers and
(d) all of our directors and executive officers as a group.
Unless otherwise noted, these persons have sole voting and
investment power over the shares listed below. Some of the
information in the table is based on information included in
filings made by the beneficial owners with the Commission.
|
|
|
|
|
|
|
|
|
|
|
Amount and Nature of
|
|
|
|
|
Name
|
|
Beneficial Ownership(1)
|
|
|
Percentage(2)
|
|
|
T. Rowe Price Associates, Inc.
|
|
|
9,077,457
|
(3)
|
|
|
13.9
|
%
|
Capital Research and Management Company
|
|
|
8,291,750
|
(4)
|
|
|
12.7
|
%
|
FMR Corp.
|
|
|
6,918,877
|
(5)
|
|
|
10.6
|
%
|
The Growth Fund of America
|
|
|
3,687,249
|
(4)
|
|
|
5.6
|
%
|
Sidney Harman
|
|
|
3,537,408
|
(6)
|
|
|
5.4
|
%
|
Gina Harman
|
|
|
262,864
|
|
|
|
|
*
|
Erich A. Geiger
|
|
|
213,000
|
(7)
|
|
|
|
*
|
Shirley M. Hufstedler
|
|
|
155,387
|
(8)
|
|
|
|
*
|
Edward H. Meyer
|
|
|
91,536
|
|
|
|
|
*
|
Ann M. Korologos
|
|
|
75,220
|
|
|
|
|
*
|
Dinesh Paliwal
|
|
|
64,579
|
(9)
|
|
|
|
*
|
Kevin Brown
|
|
|
29,000
|
|
|
|
|
*
|
Brian F. Carroll
|
|
|
0
|
(10)
|
|
|
|
*
|
Harald Einsmann
|
|
|
0
|
|
|
|
|
*
|
All directors and executive officers as a group (14 persons)
|
|
|
4,581,871
|
|
|
|
7.0
|
%
|
|
|
|
* |
|
Less than 1% |
|
(1) |
|
As required by the rules of the Commission, the table includes
shares of common stock that may be acquired pursuant to stock
options exercisable within 60 days from October 25,
2007 as follows: Dr. Harman (860,000 shares),
Ms. Harman (108,524 shares), Ms. Hufstedler
(79,200 shares), Dr. Geiger (201,000 shares),
Mr. Meyer (79,200 shares), Ms. Korologos
(68,800 shares), Mr. Brown (29,000 shares) and
all directors and executive officers as a group
(1,483,624 shares). The table also includes shares of
common stock held in the Retirement Savings Plan by all
directors and executive officers as a group (614 shares).
The table does not reflect acquisitions or dispositions of
shares of common stock, including grants or exercises of stock
options, after October 25, 2007. |
|
(2) |
|
Based on 65,250,651 shares of common stock outstanding as
of October 25, 2007. |
|
(3) |
|
Information with respect to T. Rowe Price Associates, Inc.
(T. Rowe) is based on the Schedule 13G/A filed
with the Commission on February 13, 2007 by T. Rowe. T.
Rowe has sole dispositive power with respect to
9,031,557 shares of common stock and sole voting power with
respect to 2,574,535 shares of common stock as of
December 31, 2006. The address of T. Rowe is
100 E. Pratt Street, Baltimore, Maryland 21202. |
|
(4) |
|
Information with respect to Capital Research and Management
Company (CRMC) and the Growth Fund of America, Inc.
(GFA) is based on the Schedule 13G/A filed
jointly by CRMC |
38
|
|
|
|
|
and GFA with the Commission on October 10, 2007. CRMC has
sole dispositive power with respect to 8,291,750 shares of
common stock and sole voting power with respect to
3,304,500 shares of common stock as of September 28,
2007. GFA has sole voting power with respect to
3,687,249 shares of common stock as of September 28,
2007. The address of CRMC is 333 South Hope Street, Los Angeles,
California 90071 and the address for GFA is One Market, Steuart
Tower, Suite 1800, San Francisco, California 94105. |
|
(5) |
|
Information with respect to FMR Corp. is based on the
Schedule 13G/A filed with the Commission on
February 14, 2007 by FMR Corp. FMR Corp. had sole
dispositive power with respect to 6,918,877 shares of
common stock and sole voting power with respect to
1,867,934 shares of common stock as of December 31,
2006. Edward C. Johnson III, Chairman of FMR Corp. is also
deemed to be the beneficial owner of 6,685,814 of the
6,918,877 shares of common stock beneficially owned by FMR
Corp. by virtue of his position with and ownership of FMR Corp.
The address for FMR Corp. is 82 Devonshire Street, Boston,
Massachusetts 02109. |
|
(6) |
|
Includes 1,514,860 shares held in a trust for which
Dr. Harman has sole dispositive and sole voting power;
154,416 shares held in an irrevocable trust for various
family members for which Dr. Harman has sole voting power
but shared dispositive power; 171,164 shares held by the
Sidney Harman Charitable Remainder Trust for which
Dr. Harman has sole dispositive power and sole voting
power; and 427,522 shares held by family members for which
Dr. Harman has sole voting power pursuant to revocable
proxies. Also includes 409,446 shares held in trust for
which Dr. Harmans spouse has sole dispositive and
sole voting power. Dr. Harmans address is
c/o Harman
International Industries, Incorporated, 1101 Pennsylvania
Avenue, N.W., Suite 1010, Washington, D.C. 20004. |
|
(7) |
|
Includes 12,000 unvested shares of restricted stock for which
Dr. Geiger has sole voting power but no dispositive power. |
|
(8) |
|
Includes 71,987 shares held by the Hufstedler Family Trust
for which Ms. Hufstedler acts as co-trustee and for which
she has shared dispositive power and shared voting power. |
|
(9) |
|
Represents 64,579 unvested shares of restricted stock for which
Mr. Paliwal has sole voting power but no dispositive power. |
|
(10) |
|
Mr. Carroll is a member of KKR, which holds or has
substantial economic benefit and risk with respect to
$342.8 million aggregate principal amount of the
Companys 1.25% Convertible Senior Notes due 2012
(Notes) as described under the caption Certain
KKR Relationships on page 35 of this Proxy Statement.
Mr. Carroll disclaims beneficial ownership of any Notes. |
39
INDEPENDENT
AUDITOR
Selection. KPMG LLP served as the
Companys independent auditor for fiscal 2007 and has been
selected by the Audit Committee to serve as the Companys
independent auditor for fiscal 2008. Representatives of KPMG LLP
will attend the Meeting, will have an opportunity to make a
statement and will be available to respond to questions.
Audit and Non-Audit Fees. The following
table presents fees for professional audit services rendered by
KPMG LLP for the audit of our annual financial statements for
fiscal 2007 and fiscal 2006, and fees billed for other services
rendered by KPMG LLP.
|
|
|
|
|
|
|
|
|
|
|
2007
|
|
|
2006
|
|
|
Audit fees(1)
|
|
$
|
3,266,000
|
|
|
$
|
3,274,000
|
|
Audit-related fees(2)
|
|
$
|
56,000
|
|
|
$
|
62,000
|
|
Tax fees(3)
|
|
$
|
733,000
|
|
|
$
|
717,000
|
|
All other fees(4)
|
|
$
|
263,000
|
|
|
$
|
259,000
|
|
|
|
|
(1) |
|
Audit fees consist principally of fees for the audit of our
annual financial statements, including the audit of our internal
controls over financial reporting, review of our financial
statements included in our quarterly reports on
Form 10-Q
for those years and foreign statutory audits. |
|
(2) |
|
Audit related fees consist principally of the audit of our
retirement savings plan and pension schemes. |
|
(3) |
|
Tax fees consist principally of fees for tax compliance and
preparation, tax advice and tax planning. |
|
(4) |
|
All other fees consist principally of fees for consulting on
various accounting matters and the preparation and audit of
foreign export and import documents. |
The Audit Committees policy is to pre-approve all audit
and non audit services provided to the Company by the
independent auditors (except for items exempt from pre approval
requirements under applicable laws and rules). The Audit
Committee has pre-approved certain services that KPMG is to
provide to the Company in fiscal 2008, including quarterly
review of financial statements, tax compliance and tax
consultation services related to income tax and the filing of
income tax and VAT returns, consultations on the Companys
compliance with Section 404 of the Sarbanes Oxley Act of
2002, and consulting related to acquisitions.
40
COMPENSATION
AND OPTION COMMITTEE REPORT
The Compensation and Option Committee has reviewed and discussed
with management the Compensation Discussion and Analysis. Based
on that review and discussion, the Compensation and Option
Committee recommended to the Board of Directors of the Company
that the Compensation Discussion and Analysis be included in
this Proxy Statement.
This report is submitted by the members of the Compensation and
Option Committee.
Members of the Compensation Committee
Edward H. Meyer (Chair)
Shirley Mount Hufstedler
Ann McLaughlin Korologos
AUDIT
COMMITTEE REPORT
The Audit Committee is currently composed of three directors who
are neither officers nor employees of the Company. All members
of the Committee are independent as that term is
defined by the New York Stock Exchange listing standards. The
Committee operates under a written charter approved by the Board.
In connection with its review of the audited financial
statements appearing in the Companys Annual Report on
Form 10-K
for fiscal 2007, the Committee:
|
|
|
|
|
discussed these financial statements with the Companys
management and KPMG LLP, the Companys independent auditors;
|
|
|
|
discussed with KPMG LLP those matters required to be discussed
under Statement on Auditing Standards No. 61 (Codification
of Statements on Auditing Standards, AU
§ 380) and SAS No. 90 (Audit Committee
Communications); and
|
|
|
|
received and reviewed the written disclosures and the letter
from KPMG LLP required by Independence Standards Board Standard
No. 1 (Independence Discussions with Audit Committees), and
has discussed with KPMG LLP their independence.
|
Based on the review and discussions referred to above, the
Committee recommended to the Board that the audited financial
statements be included in the Companys Annual Report on
Form 10-K
for fiscal 2007, as filed with the Commission.
The Committee has selected and engaged KPMG LLP as the
Companys independent auditor to audit and report to the
Companys stockholders on the Companys financial
statements for fiscal 2008.
This report is submitted by the members of the Audit Committee.
Members of the Audit Committee
Shirley Mount Hufstedler (Chair)
Ann McLaughlin Korologos
Edward H. Meyer
41
SECTION 16(a)
BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires our directors and executive officers and
persons who beneficially own more than 10% of the Companys
Common Stock to file initial reports of ownership and reports of
changes in ownership with the Securities and Exchange
Commission. Based solely on a review of the copies of such forms
furnished to us and written representations from our directors
and executive officers, we believe that all Section 16(a)
filing requirements applicable to our directors and executive
officers were complied with during fiscal 2007, except that each
of Dr. Harman, Mr. Brown and Dr. Geiger
inadvertently filed one late Form 4 related to an option
grant on August 10, 2006; Mr. Schinagel filed one late
Form 3 related to his appointment as an executive officer,
on October 1, 2006, and one late Form 4 related to a
grant of options and restricted share units on October 2,
2006; and Blake Augsburger inadvertently filed one late
Form 3 related to his appointment as an executive officer
on November 2, 2006.
STOCKHOLDER
PROPOSALS FOR 2008 ANNUAL MEETING OF STOCKHOLDERS
In order to be included in the Companys proxy materials
for the 2008 Annual Meeting of Stockholders, a stockholder
proposal must be received in writing by the Company at 1101
Pennsylvania Avenue, N.W., Suite 1010,
Washington, D.C. 20004 by July 3, 2008, and otherwise
comply with all requirements of the Commission for stockholder
proposals.
The Companys Bylaws provide that any stockholder who
desires to bring a proposal before an annual meeting must give
timely written notice of the proposal to the Companys
Secretary. To be timely, the notice must be delivered to the
above address not less than 60 nor more than 90 days before
the first anniversary of the date on which the Company first
mailed its proxy materials for the immediately preceding annual
meeting. Stockholder proposals for the 2008 Annual Meeting of
Stockholders must be received not later than September 1,
2008. However, the Companys Bylaws also provide that if an
annual meeting is called for a date that is not within
30 days before or after the anniversary of the prior
years annual meeting, then stockholder proposals for that
annual meeting must be received no later than the close of
business on the 10th day following the day on which public
announcement is first made of the date of the upcoming annual
meeting. The notice must also describe the stockholder proposal
in reasonable detail and provide certain other information
required by the Bylaws. A copy of the Bylaws is available upon
request from the Companys Secretary.
The Companys Bylaws provide that notice of a
stockholders intent to make a nomination for director at
the 2008 Annual Meeting of Stockholders must be received by the
Secretary of the Company 90 days in advance of the annual
meeting. The notice must include certain information regarding
the nominees as required by the Bylaws. Stockholders may also
submit recommendations for director candidates to the Nominating
and Governance Committee by following the procedures described
on page 12 of this Proxy Statement.
42
OTHER
MATTERS
The Board does not intend to present any other matter of
business at the Meeting. However, if any other matter is
properly presented at the Meeting, the shares represented by
your proxy will be voted in accordance with the best judgment of
the proxy holders.
By Order of the Board of Directors,
Sidney Harman
Executive Chairman
Washington, D.C.
October 29, 2007
43
Appendix A
HARMAN
INTERNATIONAL INDUSTRIES, INCORPORATED
2007 KEY
EXECUTIVE OFFICERS BONUS PLAN
1. PURPOSE. The purpose of the 2007 Key Executive Officers
Bonus Plan (this Plan) is to attract and retain key
executives for Harman International Industries, Incorporated, a
Delaware corporation (the Company), and its
Subsidiaries and to provide such persons with incentives for
superior performance. Award Amounts payable under this Plan are
intended to constitute qualified performance-based
compensation for purposes of Section 162(m) of the
Internal Revenue Code of 1986, as amended (the Code)
and to comply with the requirements of Section 409A of the
Code (and any successor provision to either), and this Plan
shall be construed consistently with such intention.
2. DEFINITIONS. As used in this Plan,
Award Amount means, for each Eligible Executive, the
maximum cash award payable pursuant to Section 5 of this
Plan.
Board means the Board of Directors of the Company.
Change in Control means the occurrence of any of the
following events:
(a) the acquisition by any individual, entity or group
(within the meaning of Section 13(d)(3) or 14(d)(2) of the
Exchange Act) (a Person) of beneficial ownership
(within the meaning of
Rule 13d-3
promulgated under the Exchange Act) of 25% or more of the
combined voting power of the then outstanding Voting Stock of
the Company; provided, however, that for purposes of this
definition, the following acquisitions shall not constitute a
Change in Control: (i) any issuance of Voting Stock of the
Company directly from the Company that is approved by the
Incumbent Board (as defined below), (ii) any acquisition by
the Company or a Subsidiary of Voting Stock of the Company,
(iii) any acquisition of Voting Stock of the Company by any
employee benefit plan (or related trust) sponsored or maintained
by the Company or any Subsidiary, or (iv) any acquisition
of Voting Stock of the Company by any Person pursuant to a
Business Combination (as defined below) that complies with
clauses (i), (ii) and (iii) of subsection (c)
below;
(b) individuals who, as of the date hereof, constitute the
Board (the Incumbent Board) cease for any reason to
constitute at least a majority of the Board; provided, however,
that any individual becoming a director after the date hereof
whose election, or nomination for election by the Companys
stockholders, was approved by a vote of at least two-thirds of
the directors then comprising the Incumbent Board (either by a
specific vote or by approval of the proxy statement of the
Company in which such person is named as a nominee for director,
without objection to such nomination) shall be deemed to have
been a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest
(within the meaning of
Rule 14a-11
of the Exchange Act) with respect to the election or removal of
directors or other actual or threatened solicitation of proxies
or consents by or on behalf of a Person other than the Board;
(c) consummation of a reorganization, merger or
consolidation, a sale or other disposition of all or
substantially all of the assets of the Company, or other
transaction (each, a Business Combination), unless,
in each case, immediately following such Business Combination,
(i) all or substantially all of the individuals and
entities who were the beneficial owners of Voting
A-1
Stock of the Company immediately prior to such Business
Combination beneficially own, directly or indirectly, more than
50% of the combined voting power of the then outstanding shares
of Voting Stock of the entity resulting from such Business
Combination (including, without limitation, an entity which as a
result of such transaction owns the Company or all or
substantially all of the Companys assets either directly
or through one or more subsidiaries), (ii) no Person (other
than the Company, such entity resulting from such Business
Combination, or any employee benefit plan (or related trust)
sponsored or maintained by the Company, any Subsidiary or such
entity resulting from such Business Combination) beneficially
owns, directly or indirectly, 25% or more of the combined voting
power of the then outstanding shares of Voting Stock of the
entity resulting from such Business Combination, and
(iii) at least a majority of the members of the Board of
Directors of the entity resulting from such Business Combination
were members of the Incumbent Board at the time of the execution
of the initial agreement or of the action of the Board providing
for such Business Combination; or
(d) approval by the stockholders of the Company of a
complete liquidation or dissolution of the Company, except
pursuant to a Business Combination that complies with clauses
(i), (ii) and (iii) of subsection (c) above.
Committee means the Compensation and Option
Committee of the Board or any other committee appointed by the
Board to administer this Plan; provided, however, that in any
event the Committee shall be comprised of not less than two
directors of the Company, each of whom shall qualify as an
outside director for purposes of Section 162(m)
of the Code (or any successor provision thereto).
Eligible Executive means the Companys Chief
Executive Officer and any other executive officer of the Company
that the Committee designates as an Eligible Executive under
this Plan.
Exchange Act means the Securities Exchange Act of
1934, as amended from time to time.
Return on Shareholder Equity Goal means the targeted
return on shareholder equity goal for the year determined by the
Committee pursuant to Section 5 of this Plan.
Subsidiary means a corporation, partnership, joint
venture, unincorporated association or other entity in which the
Company has a direct or indirect ownership or other equity
interest.
Voting Stock means securities entitled to vote
generally in the election of directors.
3. ADMINISTRATION OF THIS PLAN. This Plan shall be
administered by the Committee, which shall have full power and
authority to construe, interpret and administer this Plan and
shall have the exclusive right to establish the Return on
Shareholder Equity Goals and the Award Amount payable to each
Eligible Executive upon the achievement of the Return on
Shareholder Equity Goals.
4. ELIGIBILITY. Eligibility under this Plan is limited to
Eligible Executives.
5. AWARDS.
(a) No later than September 28 of each fiscal year, the
Committee shall meet in order to establish (i) the Return
on Shareholder Equity Goal for the fiscal year and (ii) the
Award Amount payable to each Eligible Executive if the Return on
Shareholder Equity Goal for the fiscal year is met. Return
on shareholder equity shall mean net income for the fiscal
year determined in accordance with generally accepted accounting
principles as reported in the Companys annual report
divided by the average shareholder equity for such year.
Average shareholder equity shall mean the sum of the
shareholder equity at the beginning of the year and the
shareholder equity at the end of the year, with such sum divided
by two. In connection with establishing the Return on
A-2
Shareholder Equity Goal for the fiscal year, the Committee shall
express whether the Return on Shareholder Equity Goal for such
year shall be applied before or after the application of
extraordinary items (as determined in accordance
with generally accepted accounting principles).
(b) After the end of each fiscal year, the Committee shall
meet to determine and certify whether the Return on Shareholder
Equity Goal for the fiscal year has been met. In the event that
the goal has been met, the Committee shall establish the Award
Amount for each Eligible Executive for the fiscal year,
exercising discretion only to reduce the amount of the maximum
cash award if in its judgment such a reduction is appropriate.
(c) Notwithstanding any other provision of this Plan to the
contrary, in no event shall the Award Amount paid to an Eligible
Executive under this Plan for a fiscal year exceed $3,000,000.
6. COMMITTEE CERTIFICATION. As soon as reasonably
practicable after the end of each fiscal year of the Company,
the Committee shall determine whether the Return on Shareholder
Equity Goal has been achieved and the amount of the Award Amount
to be paid to each Eligible Executive for such fiscal year and
shall certify such determinations in writing.
7. PAYMENT OF AWARD AMOUNTS. Subject to a valid election
made by an Eligible Executive with respect to the deferral of
all or a portion of his or her Award Amount in compliance with
Section 409A of the Code, Award Amounts shall be paid
within 30 days after written certification pursuant to
Section 6 of this Plan, but in no event later than the end
of the calendar year in which the Companys fiscal year has
terminated.
8. CHANGE IN CONTROL. In the event of a Change in Control,
each Eligible Executive shall be entitled to the Award Amount
for the year (without proration or any other reduction),
provided that the Eligible Executive is (a) employed by the
Company at the time of the Change in Control or (b) if the
Eligible Executive has been terminated or removed from his or
her office or position with the Company, such action occurred
(i) not more than 180 days prior to the date on which
a Change in Control occurs, and (ii) following the
commencement of any discussion with a third person that
ultimately results in a Change in Control. Any payment under
this Section 8 shall be made no later than 30 days
after the effective date of the Change in Control and shall
constitute payment in full of all obligations of the Company
under this Plan for such year.
9. NO RIGHT TO BONUS OR CONTINUED EMPLOYMENT. Neither the
establishment of this Plan, the provision for or payment of any
amounts hereunder nor any action of the Company, the Board or
the Committee with respect to this Plan shall be held or
construed to confer upon any person (a) any legal right to
receive, or any interest in, an Award Amount or any other
benefit under this Plan or (b) any legal right to continue
to serve as an officer or employee of the Company or any
Subsidiary of the Company.
10. WITHHOLDING. The Company shall have the right to
withhold, or require an Eligible Executive to remit to the
Company, an amount sufficient to satisfy any applicable federal,
state, local or foreign withholding tax requirements imposed
with respect to the payment of any Award Amount.
11. NONTRANSFERABILITY. Except as expressly provided by the
Committee, the rights and benefits under this Plan shall not be
transferable or assignable other than by will or the laws of
descent and distribution.
12. AMENDMENT. The Committee may amend the Plan from time
to time, provided that any such amendment complies with the
requirements of Sections 162(m) and 409A of the Code (or
any successor provision to either).
A-3
13. EFFECTIVE DATE. Subject to approval by the stockholders
of the Company, this Plan shall become effective as of
July 1, 2007, and shall remain effective until the fifth
anniversary of the date of such approval, subject to any further
stockholder approvals (or reapprovals) mandated for
performance-based compensation under Section 162(m) of the
Code (or any successor provision thereto), and subject to the
right of the Board to terminate this Plan, on a prospective
basis only, at any time. All awards under this Plan shall be
null and void if this Plan is not approved by the stockholders
of the Company.
14. AMENDMENT AND RESTATEMENT OF 2002 PLAN. This Plan is an
amendment and restatement of the Companys 2002 Key
Executive Officers Bonus Plan.
A-4
Appendix B
HARMAN
INTERNATIONAL INDUSTRIES, INCORPORATED
CATEGORICAL
INDEPENDENCE STANDARDS FOR DIRECTORS
(AMENDED
AND RESTATED AS OF AUGUST 16, 2005)
A director of the Company who satisfies each of the following
criteria will be presumed to be an independent director of the
Company:
|
|
|
|
|
he or she is not, nor has been within three years preceding the
date of any determination, an employee of the Company, and none
of his or her immediate family members is, or has been within
three years preceding the date of any determination, an
executive officer of the Company;
|
|
|
|
he or she has not received, and none of his or her immediate
family members has received, during any twelve-month period
within the three years preceding the date of any determination,
more than $100,000 in direct compensation from the Company,
excluding (a) director and committee fees and pension or
other forms of deferred compensation for prior service (provided
such compensation is not contingent in any way on continued
service), (b) compensation received by a director for
former service as an Interim Chairman or CEO or other executive
officer of the Company and, (c) compensation received by an
immediate family member for service as an employee (other than
an executive officer) of the Company;
|
|
|
|
he or she is not a current partner or employee, and none of his
or her immediate family members is a current partner, of a firm
that is the Companys internal or external auditor;
|
|
|
|
he or she does not have an immediate family member who is a
current employee of a firm that is the Companys internal
or external auditor and who participates in the firms
audit, assurance or tax compliance (but not tax planning)
practice;
|
|
|
|
he or she was not, and none of his or her immediate family
members was, within the three years preceding the date of any
determination (but is no longer) a partner or employee of a firm
that is the Companys internal or external auditor and
personally worked on the Companys audit within that time;
|
|
|
|
he or she is not nor has been, and none of his or her immediate
family members is or has been, within the three years preceding
the date of any determination, employed as an executive officer
of another company where any of the Companys present
executive officers at the same time serves or served on that
companys compensation committee; and
|
|
|
|
he or she is not a current employee, and none of his or her
immediate family members is a current executive officer, of a
company (other than a tax exempt organization) that has made
payments to, or received payments from, the Company for property
or services in an amount which, in any of the three fiscal years
preceding the date of any determination, exceeds the greater of
$1 million or 2% of such other companys consolidated
gross revenues.
|
As used in these Standards, an immediate family
member means a persons spouse, parents, children,
siblings, mothers and
fathers-in-law,
sons and
daughters-in-law,
brothers and
sisters-in-law,
and anyone (other than domestic employees) who shares such
persons home.
As used in these Standards, an executive officer
means the Companys president, principal accounting officer
(or, if there is no such accounting officer, the controller),
any vice president in
B-1
charge of a principal business unit, division or function (such
as sales, administration or finance), and any other officer or
individual who performs policy-making functions for the Company.
In making a determination regarding a directors
independence, the Board of Directors of the Company will
endeavor to ascertain all relevant facts and circumstances, and
will consider all relevant facts and circumstances that become
known to the Board, including the directors banking,
consulting, legal, accounting, other professional, commercial,
industrial, tax exempt and familial relationships. Each member
of the Companys Board of Directors shall, in good faith,
disclose to the Board all facts and circumstances he or she
reasonably believes necessary or appropriate in order to permit
the Board to make a determination regarding whether the director
meets the criteria set forth in these Standards.
In making a determination regarding a directors
independence, any interest or relationship of a director of a
type described in Item 404 of
Regulation S-K
promulgated by the Securities and Exchange Commission that is
not required to be disclosed pursuant to Item 404 shall be
presumed not to be inconsistent with the independence of such
director, except to the extent otherwise expressly provided with
respect to a particular interest or relationship in the rules
established by the New York Stock Exchange.
B-2
HARMAN INTERNATIONAL INDUSTRIES, INCORPORATED Annual Meeting of Stockholders December 17,
2007 This Proxy is Solicited on Behalf of the Board of Directors The undersigned hereby appoints
each of Edwin C. Summers and Sandra B. Robinson, with the power to appoint his or her substitute,
as proxy and authorizes each to represent and vote all the shares of Common Stock of Harman
International Industries, Incorporated that the undersigned may be entitled to vote at the Annual
Meeting of Stockholders to be held on December 17, 2007 and at any adjournment thereof, as
specified on the reverse side hereof and in the Notice of Annual Meeting of Stockholders and the
Proxy Statement, each dated October 29, 2007. When properly executed, this proxy will be voted as
specified on the reverse side hereof or, if not specified, will be voted FOR each of the nominees
set forth in the proposal for the election of directors and FOR approval of the 2007 Key Executive
Officers Bonus Plan. In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the meeting or any adjournment thereof. (Continued and to be
signed on reverse side.) Address Change/Comments (Mark the corresponding box on the reverse side.)
? FOLD AND DETACH HERE ? |
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES SET FORTH IN PROPOSAL
NO. 1 Please Mark Here for Address AND FOR APPROVAL OF THE 2007 KEY EXECUTIVE OFFICERS BONUS
PLAN SET FORTH IN PROPOSAL NO. 2. Change or Comments SEE REVERSE SIDE FOR WITHHOLD
VOTE BOTH FOR BOTH FOR AGAINST ABSTAIN NOMINEES NOMINEES 1. PROPOSAL FOR
ELECTION 2. APPROVAL OF THE 2007 KEY OF DIRECTOR NOMINEES: EXECUTIVE OFFICERS BONUS
PLAN 01 Ann McLaughlin Korologos 02 Dr. Harald Einsmann To withhold authority to vote for any
individual Using blue or black ink, please mark, sign, date and promptly return this proxy card
nominee, strike a line through that nominees name. in the enclosed envelope. In the case of a
corporation, partnership or other legal entity, the full name of the organization should be used
and the signature should be that of a duly authorized officer, partner or other person. Signature
Signature Date NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give full title as such.
? FOLD AND DETACH HERE ? Vote by Internet or Telephone or Mail 24 Hours a Day, 7 Days a Week
Internet and telephone voting are available through 11:59 PM Eastern Time the day prior to annual
meeting day. Your Internet or telephone vote authorizes the named proxies to vote your shares in
the same manner as if you marked, signed and returned your proxy card. Internet Telephone Mail
http://www.proxyvoting.com/har 1-866-540-5760 Mark, sign and date Use the Internet to vote your
proxy. Use any touch-tone telephone to vote your proxy card and Have your proxy card in hand when
your proxy. Have your proxy card in return it in the you access the website. OR hand when you
call. OR enclosed postage-paid envelope. If you vote your proxy by Internet or by telephone, you do
NOT need to mail back your proxy card. |