Harman Kardon 2007 Annual Report Download - page 15

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Our Professional segment designs, manufactures and markets loudspeakers and electronic systems used
by audio professionals in concert halls, stadiums, airports, houses of worship and other public spaces. We
also design products for recording, broadcast, cinema and music reproduction applications, and we
provide high-quality products to the sound reinforcement, music instrument support and broadcast and
recording segments of the professional audio market. Our Professional products are marketed worldwide
under brand names including JBL Professional, AKG, Crown, Soundcraft, Lexicon, DigiTech, dbx and
Studer.
We offer complete systems solutions for professional installations and users around the world. Our
products can be linked by our HiQnet
TM
network protocol providing a central digital network for audio
professionals to control different aspects of a complex system. We believe that we are uniquely equipped
to provide turnkey systems solutions for professional audio applications that offer the customer improved
performance, reliability, ease of installation and reduced cost.
Our results of operations depend on our sales of audio products and electronic systems in the automotive,
consumer and professional markets. Our products are sold worldwide, with the largest markets being the
United States and Germany. A significant portion of our revenues is Euro denominated.
We believe significant growth opportunities continue to exist with automotive manufacturers through an
increase in the number of models offering our audio, navigation and infotainment systems, supply
agreements with additional automakers, increases in per-vehicle content through the provision of
integrated infotainment systems with premium branded audio systems, higher penetration levels of audio
and infotainment systems within existing models and providing systems that will include additional
functionality such as driver assist safety measures. We believe significant growth opportunities exist in
the consumer electronics market as the home and multimedia technologies continue to converge. We also
believe growth opportunities exist in the professional markets as we expect our HiQnet system protocol to
allow us to capitalize on these opportunities as this technology simplifies the interaction of our products
and provides users with an incentive to purchase complete HiQnet compatible systems.
Proposed Agreement and Plan of Merger
On April 26, 2007, we entered into an Agreement and Plan of Merger with KHI Parent Inc., a company
formed by investment funds affiliated with KKR and GSCP. The merger agreement provides for the
merger of KHI Merger Sub Inc. with and into our company, with our company surviving the merger as a
wholly owned subsidiary of Parent. KHI Merger Sub and Parent were formed to acquire our company.
If the merger agreement is adopted by our stockholders and the merger is completed, our stockholders
will be entitled to receive $120.00 in cash, without interest, for each share of Harman common stock
owned at the completion of the merger. As an alternative to receiving the $120.00 per share, our
stockholders have the opportunity to elect, on a purely voluntary basis, to exchange some or all of their
shares of Harman common stock, on a one-for-one basis, for shares of common stock of Parent. The right
to elect to receive shares of Parent common stock is available to all Harman stockholders and option
holders. However, the number of Parent shares our stockholders and option holders will receive may be
less than they request in the event that elections to receive shares of Parent common stock would require
Parent to issue more than 8,333,333 shares of Parent common stock. This number of Parent shares
represents approximately 27% of the equity interests in Parent that will be outstanding immediately