Harman Kardon 2008 Annual Report Download - page 31

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Covenants in our existing debt agreements could restrict our operations.
Our existing revolving credit facility and the indenture for our convertible senior notes contain provisions
that could restrict our operating and financing activities. Together, they restrict our ability to, among other
things:
• incur debt;
• create or assume liens;
• enter into sale-leaseback transactions; and
• engage in mergers or consolidations.
Because of the restrictions on our ability to create or assume liens, we may have difficulty securing
additional financing in the form of additional indebtedness. In addition, our revolving credit facility
contains other and more restrictive covenants, including financial covenants that will require us to achieve
specified financial and operating results and maintain compliance with specified financial ratios. We may
have to curtail some of our operations to maintain compliance with these covenants.
If we fail to comply with the covenants contained in our existing debt agreements, the related debt
incurred under those agreements could be declared immediately due and payable, which could also
trigger a default under other agreements.
Our ability to meet the covenants or requirements in our credit facilities and the indenture for our
convertible senior notes may be affected by events beyond our control, and we cannot assure you that we
will satisfy these covenants and requirements. A breach of these covenants or our inability to comply with
the financial ratios, tests or other restrictions could result in an event of default under the applicable
agreement. Upon the occurrence of an event of default under the applicable agreement, the lenders could
elect to declare all amounts outstanding under the applicable agreement, together with accrued interest, to
be immediately due and payable. If the payment of our indebtedness is accelerated, we cannot assure you
that we will be able to make those payments or borrow sufficient funds from alternative sources to make
those payments. Even if we were to obtain additional financing, that financing may be on unfavorable
terms.
We are engaged in ongoing litigation and may be the subject of additional litigation that may result in
payments to third parties, which could harm our business and financial results.
As more fully described in Part II, Item 3 “Legal Proceedings,” of this report, we are currently involved in
litigation arising out of or relating to the events leading up to the termination of the proposed acquisition
of the Company in October 2007 or any earnings guidance provided by the Company. In addition, similar
litigation has been and may be initiated against us and others based on the alleged activities and
disclosures at issue in the pending litigation. We cannot predict the outcome of any such proceeding or
the likelihood that further proceedings will be instituted against us. In the event that there is an adverse
ruling in any legal proceeding, we may be required to make payments to third parties that could harm our
business or financial results. Furthermore, regardless of the merits of any claim, the continued