Harman International Buyout

Harman International (HAR)
KKR - GS Capital
$8.0B Buyout - Terminated Deal

Summary

Buyout of audio products company

Harman Kardon, JBL, Mark Levinson and Infinity
At $120 per share; $8.0B total
Background of the merger
HAR news - stock chart
Deal includes stub equity option - see below

Announced 4.26.07

Deal was terminated after sponsors invoked material adverse change clause

See Deal Terminated immediately below

Deal Terminated

Deal terminated 10.22.07

Settled with KKR and Goldman buying $400mm of HAR convertible debt, rather than contesting payment of the $225mm breakup fee
Form 8-K
Termination agreement
Note purchase agreement
Registration rights agreement
Indenture

Sponsors invoke material adverse change clause

HAR press release 9.21.07
See Material Adverse Change

Club Deal

Kohlberg Kravis Roberts (KKR)

GS Capital Partners (Goldman Sachs)

Advisors

Financial

Sponsors: Bank of America / Credit Suisse /
Goldman Sachs / Lehman Brothers
HAR: Bear Stearns

Legal

Sponsors: Simpson Thacher
Special Committee: Wachtell Lipton
HAR: Jones Day

Merger Agreement

General

EDGAR filing
Hyperlinked version
Detailed hyperlinked index follows
Proxy statement summary

Article I The Merger

1.01 The Merger
1.02 Closing
1.03 Effective Time
1.04 Effects of the Merger
1.05 Company Charter and By-laws of the Surviving
Corporation
1.06 Directors
1.07 Officers
1.08 Further Assurances

Article II Conversion of Shares; Exchange of Certificates

2.01 Effect on Capital Stock
2.02 Election Procedures
2.03 Proration
2.04 Exchange of Shares for Merger Consideration
2.05 Effect of the Merger on Company Stock Options,
Company Restricted Shares and RSUs

Article III Company Reps

3.01 Qualification, Organization, Subsidiaries, Etc
3.02 Capital Stock
3.03 Subsidiaries
3.04 Corporate Authority Relative to this Agreement; No
Violation
3.05 Reports and Financial Statements
3.06 No Undisclosed Liabilities
3.07 Compliance with Law; Permits
3.08 Environmental Laws and Regulations
3.09 Employee Benefit Plans
3.10 Interested Party Transactions
3.11 Absence of Certain Changes or Events
3.12 Investigations; Litigation
3.13 Proxy Statement; Other Information
3.14 Tax Matters
3.15 Labor Matters
3.16 Intellectual Property
3.17 Property
3.18 Required Vote of the Company Stockholders
3.19 Material Contracts
3.20 Finders or Brokers
3.21 Fairness Opinion
3.22 State Takeover Statutes; Charter Provisions;
Company Rights Agreement
3.23 No Other Representations

Article IV Parent and Merger Sub Reps

4.01 Qualification; Organization
4.02 Corporate Authority Relative to this Agreement; No
Violation
4.03 Proxy Statement; Other Information
4.04 Financing
4.05 Ownership and Operations of Merger Sub; Issuance of
Parent Common Stock
4.06 Finders or Brokers
4.07 Certain Arrangements
4.08 Investigations; Litigation
4.09 Guarantees
4.10 Solvency
4.11 Access to Information; Disclaimer
4.12 Investments

Article V Covenants and Agreements

5.01 Conduct of Business
5.02 Acquisition Proposals
5.03 Company Meeting; Preparation of Form S-4 and Proxy
Statement
5.04 Employee Matters
5.05 Reasonable Best Efforts
5.06 Takeover Statute
5.07 Public Announcements
5.08 Indemnification and Insurance
5.09 Financing
5.10 Access; Confidentiality
5.11 Notification of Certain Matters
5.12 Rule 16b-3
5.13 Affiliate Letters
5.14 Control of Operations
5.15 Certain Transfer Taxes
5.16 Obligations of Merger Sub
5.17 Resignation of Directors
5.18 Tax Free Qualification for Parent Stock Election

Article VI Conditions to the Merger

6.01 Each Party
6.02 Company to Effect the Merger
6.03 Parent and Merger Sub to Effect the Merger
6.04 Frustration of Closing Conditions

Article VII Termination

7.01 Termination or Abandonment
7.02 Termination Fees

Article VIII Miscellaneous

8.01 No Survival of Representations and Warranties
8.02 Expenses
8.03 Counterparts; Effectiveness
8.04 Governing Law
8.05 Jurisdiction; Enforcement
8.06 Waiver of Jury Trial
8.07 Notices
8.08 Assignment; Binding Effect
8.09 Severability
8.10 Entire Agreement; No Third-party Beneficiaries
8.11 Amendments; Waivers
8.12 Headings
8.13 Interpretation
8.14 No Recourse
8.15 Certain Definitions

Proxy Solicitation

Special meeting postponed

Not yet scheduled

Proxy statement filings

Preliminary 6.20.07

Equity Rollover Option - Stub Equity

Public stockholders can elect not to cash out

Can exchange some or all of their HAR shares for shares in the newly incorporated acquisition company

For up to 27% of post-merger equity,
subject to proration
Up to 8.3mm shares representing $1B of post-merger equity (when valued at $120 per share)

See Stub Equity

Company founder to take 50% cash / 50% roll-over

Merger agreement provisions

Section 2.01(a) Merger consideration
Section 2.02 Election procedures
Section 2.03 Proration

Proxy statement disclosures

Deal Protection

No shop covenant

Merger agreement §5.2
Proxy statement summary

Break-up fee

$225mm, plus out-of-pocket expenses
Agreement §7.2
Proxy statement summary

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