UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the period ended: May 4, 1997
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from ---------------- to ------------------
Commission File Number 0-5411
HERLEY INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE #23-2413500
- -------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
10 Industry Drive, Lancaster, Pennsylvania 17603
- ------------------------------------------ --------
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (717) 397-2777
- --------------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report.)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
[X] Yes [ ] No
APPLICABLE ONLY TO ISSUERS INVOLVED
IN BANKRUPTCY PROCEEDINGS DURING
THE PRECEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13, or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.
[ ] Yes [ ] No
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
As of June 3, 1997 - 3,019,225 shares of Common Stock.
<PAGE>
HERLEY INDUSTRIES, INC
AND SUBSIDIARIES
INDEX TO FORM 10-Q
PART I - FINANCIAL INFORMATION PAGE
Item 1 - Financial Statements:
Consolidated Balance Sheets -
May 4, 1997 and July 28, 1996 2
Consolidated Statements of Operations -
For the thirteen and forty weeks ended
May 4, 1997, and the thirteen and
thirty-nine weeks ended April 28, 1996 3
Consolidated Statements of Cash Flows -
For the thirteen and forty weeks ended
May 4, 1997, and the thirteen and
thirty-nine weeks ended April 28, 1996 4
Notes to Consolidated Financial Statements 5
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations 7
PART II -OTHER INFORMATION 8
Signatures 10
Computation of per share earnings 11
<PAGE>
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
May 4, July 28,
1997 1996
----------- -----------
(Unaudited) (Audited)
ASSETS
Current Assets:
Cash and cash equivalents $ 627,276 $ 1,104,445
Accounts receivable 5,734,080 3,249,225
Notes receivable-officers 2,066,009 2,083,543
Other receivables 133,882 124,992
Inventories 9,107,668 8,010,687
Deferred taxes and other 1,949,436 1,689,988
---------- -----------
Total Current Assets 19,618,351 16,262,880
Property, Plant and Equipment, net 11,813,751 12,579,044
Intangibles, net of amortization 4,376,161 4,580,236
Available-for-sale Securities - 4,912,387
Other Investments 1,000,000 3,000,000
Other Assets 1,509,993 1,174,395
========== ===========
$ 38,318,256 $ 42,508,942
========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Current portion of long-term debt $ 1,146,000 $ 300,000
Accounts payable and accrued expenses 4,413,044 5,123,868
Billings in excess of costs and earnings
on contracts in process 108,865 -
Income taxes payable 229,226 166,295
Reserve for contract losses 268,350 489,110
Advance payments on contracts 2,559,059 1,480,033
---------- ----------
Total Current Liabilities 8,724,544 7,559,306
---------- ----------
Long-term Debt 3,225,000 11,021,000
Deferred Income Taxes 2,090,975 1,923,058
Excess of fair value of net assets of business
acquired over cost, net of amortization 608,542 973,667
---------- ----------
14,649,061 21,477,031
---------- ----------
Commitments and Contingencies
Shareholders' Equity:
Common stock, $.10 par value;
authorized 10,000,000 shares;
issued 3,102,878 at May 4, 1997
and 2,936,122 at July 28, 1996 310,288 293,612
Additional paid-in capital 10,967,561 11,448,827
Retained earnings 12,391,346 9,289,472
---------- ----------
Total Shareholders' Equity 23,669,195 21,031,911
========== ==========
$ 38,318,256 $ 42,508,942
========== ==========
The accompanying notes are an integral part of these financial
statements.
2
<PAGE>
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
Thirteen weeks ended
-------------------- 40 weeks ended 39 weeks ended
May 4, April 28, May 4, April 28,
1997 1996 1997 1996
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Net sales $ 8,426,047 $ 7,236,163 $ 23,080,159 $ 21,496,209
------------ ------------ ------------ ------------
Cost and expenses:
Cost of products sold 5,278,289 4,929,063 15,365,629 14,845,965
Selling and administrative expenses 1,531,622 1,356,834 4,282,832 4,312,740
------------ ------------ ------------ ------------
6,809,911 6,285,897 19,648,461 19,158,705
------------ ------------ ------------ ------------
Operating income 1,616,136 950,266 3,431,698 2,337,504
------------ ------------ ------------ ------------
Other income (expense):
Gain (loss) on sale of available-for-sale
securities and other investments 80,630 (131,211 95,897 1,033,786
Dividend and interest income 62,156 126,322 200,041 288,716
Interest expense (125,955) (167,900 (443,362) (613,449
------------ ------------ ------------ ------------
16,831 (172,789 (147,424) 709,053
------------ ------------ ------------ ------------
Income before income taxes 1,632,967 777,477 3,284,274 3,046,557
Provision for income taxes 182,400 -- 182,400 216,100
------------ ------------ ------------ ------------
Net income $ 1,450,567 $ 777,477 $ 3,101,874 $ 2,830,457
============ ============ ============ ============
Earnings per common and common
equivalent share $ .41 $ .26 $ .88 $ .86
============ ============ ============ ============
Earnings per common share -
assuming full dilution $ .41 $ .25 $ .88 $ .83
============ ============ ============ ============
Weighted average number of common and
common equivalent shares outstanding 3,513,084 3,019,108 3,535,588 3,367,704
============ ============ ============ ============
Weighted average number of common shares
outstanding - assuming full dilution 3,513,084 3,156,902 3,535,588 3,421,271
============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
HERLEY INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
40 weeks ended 39 weeks ended
May 4, April 28,
1997 1996
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 3,101,874 $ 2,830,457
----------- -----------
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 1,159,504 1,165,013
Gain on sale of available-for-sale
securities and other investments (96,070) (1,033,786)
Decrease in deferred tax assets -- 123,555
Increase in deferred tax liabilities 167,917 130,855
Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable (2,484,855) 326,197
Decrease (increase) in notes receivable-officers 17,534 (2,052,284)
(Increase) in other receivables (8,890) (9,173)
Decrease (increase) in inventories (1,096,981) 1,045,484
(Increase) in deferred taxes and other (259,448) (314,782)
(Decrease) in accounts payable and accrued expenses (710,824) (540,959)
Increase in billings in excess of costs and earnings
on contracts in process 108,865 --
Increase in income taxes payable 62,931 268,127
Increase (decrease) in reserve for contract losses (220,760) 4,210
Increase in advance payments on contracts 1,079,026 771,244
Other, net (356,365) (53,999)
----------- -----------
Total adjustments (2,638,416) (170,298)
----------- -----------
Net cash provided by operating activities 463,458 2,660,159
----------- -----------
Cash flows from investing activities:
Purchase of available-for-sale securities (159,364) (8,500,471)
Purchase of other investment -- (2,000,000)
Proceeds from sale of available-for-sale securities 5,083,908 7,536,619
Proceeds from sale of other investments 2,080,630 3,823,233
Proceeds from sale of fixed assets 9,392 --
Capital expenditures (540,603) (415,334)
----------- -----------
Net cash provided by investing activities 6,473,963 444,047
----------- -----------
Cash flows from financing activities:
Borrowings under bank line of credit 2,325,000 7,875,000
Proceeds from exercise of stock options 214,063 77,070
Payments under lines of credit (9,275,000) (9,225,000)
Payments of long-term debt -- (35,264)
Purchase of treasury stock (678,653) (1,490,861)
----------- -----------
Net cash (used in) financing activities (7,414,590) (2,799,055)
----------- -----------
Net increase (decrease) in cash and cash equivalents (477,169) 305,151
Cash and cash equivalents at beginning of period 1,104,445 272,755
----------- -----------
Cash and cash equivalents at end of period $ 627,276 $ 577,906
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
Herley Industries, Inc. and Subsidiaries
Notes to Consolidated Financial Statements - (Unaudited)
1. The consolidated financial statements include the accounts of Herley
Industries, Inc. and its subsidiaries, all of which are wholly-owned. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
In the opinion of the Company, the accompanying consolidated financial
statements reflect all adjustments (which include only normal recurring
adjustments) necessary to present fairly the results of operations and cash
flows for the periods presented. These financial statements (except for the
balance sheet presented at July 28, 1996) are unaudited and have not been
reported on by independent public accountants.
Results of operations for interim periods are not necessarily indicative of
the results of operations for a full year due to external factors which are
beyond the control of the Company.
2. Inventories at May 4, 1997 and July 28,1996 are summarized as follows:
May 4, 1997 July 28,1996
----------- ------------
Purchased parts and raw materials $ 4,258,122 $ 3,358,256
Work in process 4,707,589 4,580,538
Finished products 141,957 71,893
---------- -----------
$ 9,107,668 $ 8,010,687
========= =========
3. The following is a summary of available-for-sale securities at July 28,
1996:
Gross Gross Estimated
Unrealized Unrealized Fair
Cost Gains Losses Value
----------- ----------- ---------- -----------
Government bonds $ 3,783,402 $ - $ - $ 3,783,402
Other 1,125,700 - - 1,125,700
--------- ---------- --------- ---------
Total debt
securities 4,909,102 - - 4,909,102
Equity securities 3,285 - - 3,285
---------- ---------- --------- ---------
$ 4,912,387 $ - $ - $ 4,912,387
========= ========== ========= =========
The Company liquidated all of its available-for-sale securities during the
first quarter and used the proceeds to pay down its bank debt.
4. In January 1997, the Company renewed its revolving credit agreement with a
bank that provides for the extension of credit in the aggregate principal
amount of $11,000,000 and may be used for general corporate purposes,
including business acquisitions. The facility requires the payment of
interest only on a monthly basis and payment of the outstanding principal
balance on January 31, 1999. Interest is at 1% over the FOMC Target Rate
applied to outstanding balances up to 80% of the net equity value of
available-for-sale securities, and at the bank's Base Rate for outstanding
balances in excess of this limit. Their were no borrowings outstanding at
May 4, 1997. The premium rate portion of the facility would be secured by
any available-for-sale securities. The credit facility also provides for
the issuance of stand-by letters of credit with a fee of 1.0% per annum of
the amounts outstanding under the facility. At May 4, 1997, stand-by
letters of credit aggregating $2,904,492 were outstanding.
5
<PAGE>
The agreement contains various financial covenants, including, among other
matters, the maintenance of working capital, tangible net worth, and
restrictions on cash dividends.
5. The 1997 income tax provision reflects the utilization of prior year net
operating loss carryforwards and elimination of the valuation allowance for
net operating loss carryforwards expected to be realized.
6. Supplemental cash flow information is as follows:
40 weeks ended 39 weeks ended
May 4, April 28,
1997 1996
------------ ------------
Cash paid during the period for:
Interest $ 382,225 $ 562,048
Income Taxes 156,027 16,931
Cashless exercise of stock options $ 1,884,708 $ -
6
<PAGE>
Item 2: Management's Discussion and Analysis of Financial Condition and Results
of Operations
Liquidity and Capital Resources
As of May 4, 1997 and July 28, 1996, working capital was approximately
$10,894,000 and $8,704,000, respectively, and the ratio of current assets to
current liabilities was 2.25 to 1 and 2.15 to 1, respectively.
As is customary in the defense industry, inventory is partially financed by
progress payments. The unliquidated balance of these advanced payments was
approximately $2,559,000 at May 4, 1997, and $1,480,000 at July 28, 1996, an
increase of $1,079,000 during the period.
Net cash provided by operations during the quarter was approximately $463,000.
Net cash provided from investing activities of approximately $6,474,000 during
the period results primarily from the liquidation of all of the
available-for-sale securities and the sale of the Company's limited partnership
interest in M.D. SASS RE/ENTERPRISE II, L.P. The Company used the proceeds to
pay off its long term bank debt.
The Company maintains a revolving credit facility with a bank for an aggregate
of $11,000,000 which expires January 31, 1999. As of July 28, 1996, the Company
had borrowings outstanding of $6,950,000. There were no amounts outstanding at
May 4, 1997.
At May 4, 1997, the Company had cash and cash equivalents of approximately
$627,000.
The Company believes that presently anticipated future cash requirements will be
provided by internally generated funds, and existing credit facilities.
The Board of Directors has authorized the purchase of up to an aggregate of
300,000 shares of the Company's common stock from time to time, at prevailing
market prices, in the open market or in private transactions. The Company
purchased 68,900 shares during the quarter ended May 4, 1997 at an aggregate
cost of $678,653.
Results of Operations
Thirteen weeks ended May 4, 1997 and April 28, 1996
Net sales for the thirteen weeks ended May 4, 1997 were $8,426,000 as
compared to $7,236,000 (an increase of 16%) in the comparable period of the
prior year.
Cost of products sold for the thirteen weeks ended May 4, 1997 decreased as
a percentage of net sales from 68% in 1996 to 63% in 1997. This decrease is
attributable to more aggressive pricing and higher absorption of overhead due to
the higher sales volume, as well as control of variable costs.
Selling and administrative expenses for the thirteen weeks ended May 4,
1997 increased by $175,000 as compared to the prior year third quarter. The
increase is attributable primarily to a provision for settlement costs,
including legal fees, of approximately $150,000 in connection with a legal
action.
Other income for the thirteen weeks ended May 4, 1997 increased $190,000
over the prior year due to net gains on the sale of a partnership interest in M.
D. SASS RE/ENTERPRISE II, L.P., and a decrease in interest expense of $42,000;
offset by a reduction in investment income of $64,000.
The 1997 income tax provision recorded in the thirteen weeks ended May 4,
1997 reflects the utilization
7
<PAGE>
of prior year net operating loss carryforwards and elimination of the valuation
allowance for net operating loss carryforwards expected to be realized.
Forty weeks ended May 4, 1997 and thirty-nine weeks ended April 28, 1996
Net sales for the forty weeks ended May 4, 1997 increased by approximately
$1,584,000 or 7%.
Cost of products sold for the forty weeks ended May 4, 1997 decreased as a
percentage of net sales from 69% in 1996 to 67% in 1997. This decrease is
attributable to higher margins due to more aggressive pricing, and higher
absorption of overhead due to the sales volume, as well as control of variable
costs.
Selling and administrative expenses for the forty weeks ended May 4, 1997
decreased approximately $30,000 as compared to the prior year. The net decrease
is attributable to the reduction in representation fees and commissions of
approximately $400,000; offset by a provision for settlement costs, including
legal fees, of approximately $260,000 in connection with a legal action, and
increased consulting services of approximately $80,000.
Other (expense) for the forty weeks ended May 4, 1997 increased
approximately $856,000 from the prior year period due to net gains on the sale
of a partnership interest in M. D. SASS RE/ENTERPRISE PARTNERS, L.P. and other
marketable securities of approximately $1,165,000 in 1996 and an $89,000
decrease in investment income in 1997; offset by a decrease in interest expense
of $170,000, and a gain of $81,000 from the sale of a partnership interest in
M.D. SASS RE/ENTERPRISE II, L.P. in the third quarter of 1997.
PART I I - OTHER INFORMATION
ITEM 1 - LEGAL PROCEEDINGS:
In May, 1995, the Company was served with a Class Action Complaint against
the Company and its Chief Executive Officer in the United States District Court
for the Eastern District of Pennsylvania. The claim was made under Section 10(b)
and 20(a) of the Securities Exchange Act of 1934 and Rule 10(b)-5 thereunder.
The claim relates to the Company's settlement of the Litton Action in the Essex
Superior Court of Massachusetts and alleges, inter alia, that there was
insufficient disclosure by the Company of its true potential exposure in that
claim. In January, 1997 the parties negotiated a settlement of all claims in
consideration for a payment of $170,000. On April 8 the Court entered an Order
with Respect to Proposed Settlement of Class Action preliminarily approving the
settlement and proposed notice and setting times for objections. A hearing is
scheduled for July 2, 1997 to determine whether the proposed settlement should
be approved and to award counsel fees and costs.
ITEM 2 - CHANGES IN SECURITIES:
None
ITEM 3 - DEFAULTS UPON SENIOR SECURITIES:
None
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS:
None
8
<PAGE>
ITEM 5 - OTHER INFORMATION:
None
ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K:
(a) EXHIBITS
10.1 1997 Stock Option Plan.
10.2 Employment Agreement between Herley Industries, Inc.
and Lee N. Blatt dated as of January 1, 1997.
10.3 Employment Agreement between Herley Industries, Inc.
and Myron Levy dated as of January 1, 1997.
10.4 Revised Non-Negotiable Promissory Note of
Lee N. Blatt dated June 2, 1997.
10.5 Revised Non-Negotiable Promissory Note of
Gerald I. Klein dated June 2, 1997.
10.6 Revised Non-Negotiable Promissory Note of
Myron Levy dated June 2, 1997.
11 Computation of per share earnings.
27 Financial Data Schedule (for electronic filing only).
(b) During the quarter for which this report is filed, the
Registrant filed the following reports under Form 8-K:
None
9
<PAGE>
FORM 10-Q
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
HERLEY INDUSTRIES, INC.
-----------------------
(Registrant)
BY: /S/ Myron Levy
----------------------
Myron Levy, President
BY: /S/ Anello C. Garefino
---------------------------
Anello C. Garefino,
Principal Financial Officer
DATE: June 10, 1997
10
Exhibit 10.1
HERLEY INDUSTRIES, INC.
1997 Stock Option Plan
SECTION 1. GENERAL PROVISIONS
1.1. Name and General Purpose
The name of this plan is the Herley Industries, Inc. 1997 Stock Option
Plan (hereinafter called the "Plan"). The purpose of the Plan is to enable
Herley Industries, Inc. (the "Company") and its subsidiaries and affiliates to
foster and promote the interests of the Company by attracting and retaining
officers and employees of the Company who contribute to the Company's success by
their ability, ingenuity and industry, to enable such officers and employees of
the Company to participate in the long-term success and growth of the Company by
giving them a proprietary interest in the Company and to provide incentive
compensation opportunities competitive with those of competing corporations.
1.2 Definitions
a. "Affiliate" means any person or entity controlled by or under
common control with the Company, by virtue of the ownership of
voting securities, by contract or otherwise.
b. "Board" means the Board of Directors of the Company.
c. "Change in Control" means a change of control of the Company, or
in any person directly or indirectly controlling the Company,
which shall mean:
(a) a change in control as such term is presently defined in
Regulation 240.12b-(f) under the Securities Exchange Act of
1934, as amended (the "Exchange Act"); or
(b) if any "person" (as such term is used in Section 13(d) and
14(d) of the Exchange Act) other than the Company or any
"person" who on the date of this Agreement is a director or
officer of the Company, becomes the "beneficial owner" (as
defined in Rule 13(d)-3 under the Exchange Act) directly or
indirectly, of securities of the Company representing twenty
percent (20%) or more of the voting power of the Company's then
outstanding securities; or
(c) if during any period of two (2) consecutive years during the
term of this Plan, individuals who at the beginning of such
period constitute the Board of Directors, cease for any reason
to constitute at least a majority thereof.
d. "Code" means the Internal Revenue Code of 1986, as amended.
e. "Committee" means the Committee referred to in Section 1.3 of the
Plan.
f. "Common Stock" means shares of the Common Stock, par value $.10
per share, of the Company.
g. "Company" means Herley Industries, Inc., a corporation organized
under the laws of the State of Delaware (or any successor
corporation).
<PAGE>
h. "Fair Market Value" means the market price of the Common Stock on
the National Association of Securities Dealers Automated
Quotation ("NASDAQ") system on the date of the grant or on any
other date on which the Common Stock is to be valued hereunder.
If no sale shall have been reported on NASDAQ on such date, Fair
Market Value shall be determined by the Committee in accordance
with the Treasury Regulations applicable to incentive stock
options under Section 422 of the Code.
i "Incentive Stock Option" means an Incentive Stock Option as
described in Section 2.1 of the ---------------------- Plan.
j. "Non-Employee Director" shall have the meaning set forth in
Rule 16(b) promulgated by the Securities and Exchange
Commission ("Commission").
k. "Non-Qualified Stock Option" means a Non-Qualified Stock
Option as described in Section 2.1 of the Plan.
l. "Option" means any option to purchase Common Stock under
Section 2 of the Plan.
m. "Participant" means any officer or employee of the Company,
a Subsidiary or an Affiliate who is selected by the
Committee to participate in the Plan.
n. "Subsidiary" means any corporation in which the Company
possesses directly or indirectly 50% or more of the combined
voting power of all classes of stock of such corporation.
o. "Total Disability" means accidental bodily injury or
sickness which wholly and continuously disabled an optionee.
The Committee, whose decisions shall be final, shall make a
determination of Total Disability.
1.3 Administration of the Plan
The Plan shall be administered by the Committee appointed by the Board
consisting of two or more members of the Board all of who shall be Non-Employee
Directors. The Committee shall serve at the pleasure of the Board and shall have
such powers as the Board may, from time to time, confer upon it.
Subject to this Section 1.3, the Committee shall have sole and complete
authority to adopt, alter, amend or revoke such administrative rules, guidelines
and practices governing the operation of the Plan as it shall, from time to
time, deem advisable, and to interpret the terms and provisions of the Plan.
The Committee shall keep minutes of its meetings and of action taken by
it without a meeting. A majority of the Committee shall constitute a quorum, and
the acts of a majority of the members present at any meeting at which a quorum
is present, or acts approved in writing by all of the members of the Committee
without a meeting, shall constitute the acts of the Committee.
-2-
<PAGE>
1.4 Eligibility
Stock options may be granted only to officers or employees of the
Company or a Subsidiary or Affiliate. Subject to Section 2.3, any person who has
been granted any Option may, if he is otherwise eligible, be granted an
additional Option or Options.
1.5 Shares
The aggregate number of shares reserved for issuance pursuant to the
Plan shall be 1,250,000 shares of Common Stock, or the number and kind of shares
of stock or other securities which shall be substituted for such shares or to
which such shares shall be adjusted as provided in Section 1.6.
Such number of shares may be set aside out of the authorized but
unissued shares of Common Stock or out of issued shares of Common Stock acquired
for and held in the Treasury of the Company, not reserved for any other purpose.
Shares subject to, but not sold or issued under, any Option terminating or
expiring for any reason prior to its exercise in full will again be available
for Options thereafter granted during the balance of the term of the Plan.
1.6 Adjustments Due to Stock Splits,
Mergers, Consolidation, Etc.
If, at any time, the Company shall take any action, whether by stock
dividend, stock split, combination of shares or otherwise, which results in a
proportionate increase or decrease in the number of shares of Common Stock
theretofore issued and outstanding, the number of shares which are reserved for
issuance under the Plan and the number of shares which, at such time, are
subject to Options shall, to the extent deemed appropriate by the Committee, be
increased or decreased in the same proportion, provided, however, that the
Company shall not be obligated to issue fractional shares.
Likewise, in the event of any change in the outstanding shares of
Common Stock by reason of any recapitalization, merger, consolidation,
reorganization, combination or exchange of shares or other corporate change, the
Committee shall make such substitution or adjustments, if any, as it deems to be
appropriate, as to the number or kind of shares of Common Stock or other
securities which are reserved for issuance under the Plan and the number of
shares or other securities which, at such time are subject to Options.
In the event of a Change in Control, at the option of the Board or
Committee, (a) all options outstanding on the date of such Change in Control
shall, for a period of sixty (60) days following such Change in Control, become
immediately and fully exercisable, and (b) an optionee will be permitted to
surrender for cancellation within sixty (60) days after such Change in Control
any option or portion of an option which was granted more than six (6) months
prior to the date of such surrender, to the extent not yet exercised, and to
receive a cash payment in an amount equal to the excess, if any, of the Fair
Market Value (on the date of surrender) of the shares of Common Stock subject to
the option or portion thereof surrendered, over the aggregate purchase price for
such Shares under the option.
1.7 Non-Alienation of Benefits
Except as herein specifically provided, no right or unpaid benefit
under the Plan shall be subject to alienation, assignment, pledge or charge and
any attempt to alienate, assign, pledge or charge the same shall
-3-
<PAGE>
be void. If any Participant or other person entitled to benefits hereunder
should attempt to alienate, assign, pledge or charge any benefit hereunder, then
such benefit shall, in the discretion of the Committee, cease.
1.8 Withholding or Deduction for Taxes
If, at any time, the Company or any Subsidiary or Affiliate is
required, under applicable laws and regulations, to withhold, or to make any
deduction for any taxes, or take any other action in connection with any Option
exercise, the Participant shall be required to pay to the Company or such
Subsidiary or Affiliate, the amount of any taxes required to be withheld, or, in
lieu thereof, at the option of the Company, the Company or such Subsidiary or
Affiliate may accept a sufficient number of shares of Common Stock to cover the
amount required to be withheld.
1.9 Administrative Expenses
The entire expense of administering the Plan shall be borne by the
Company.
1.10 General Conditions
a. The Board or the Committee may, from time to time, amend, suspend
or terminate any or all of the provisions of the Plan, provided
that, without the Participant's approval, no change may be made
which would prevent an Incentive Stock Option granted under the
Plan from qualifying as an Incentive Stock Option under Section
422 of the Code or result in a "modification" of the Incentive
Stock Option under Section 424(h) of the Code or otherwise alter
or impair any right theretofore granted to any Participant ; and
further provided that, without the consent and approval of the
holders of a majority of the outstanding shares of Common Stock
of the Company present at a meeting at which a quorum exists,
neither the Board nor the Committee may make any amendment which
(i) changes the class of persons eligible for options; (ii)
increases (except as provided under Section 1.6 above) the total
number of shares or other securities reserved for issuance under
the Plan; (iii) decreases the minimum option prices stated in
Section 2.2 hereof (other than to change the manner of
determining Fair Market Value to conform to any then applicable
provision of the Code or any regulation thereunder); (iv) extends
the expiration date of the Plan, or the limit on the maximum term
of Options; or (v) withdraws the administration of the Plan from
a committee consisting of two or more members, each of whom is a
non-employee director.
b. With the consent of the Participant affected thereby, the
Committee may amend or modify any outstanding Option in any
manner not inconsistent with the terms of the Plan, including,
without limitation, and irrespective of the provisions of
Sections 2.3(c) and 2.4(b) below, to accelerate the date or dates
as of which an installment of an Option becomes exercisable.
c. Nothing contained in the Plan shall prohibit the Company or any
Subsidiary or Affiliate from establishing other additional
incentive compensation arrangements for employees of the Company
or such Subsidiary or Affiliate.
d. Nothing in the Plan shall be deemed to limit, in any way, the
right of the Company or any Subsidiary or Affiliate to terminate
a Participant's employment with the Company (or such Subsidiary
or Affiliate) at any time.
-4-
<PAGE>
e. Any decision or action taken by the Board or the Committee
arising out of or in connection with the construction,
administration, interpretation and effect of the Plan shall be
conclusive and binding upon all Participants and any person
claiming under or through any Participant.
f. No member of the Board or of the Committee shall be liable for
any act or action, whether of commission or omission, (i) by such
member except in circumstances involving actual bad faith, nor
(ii) by any other member or by any officer, agent or employee.
1.11 Compliance with Applicable Law
Notwithstanding any other provision of the Plan, the Company shall not
be obligated to issue any shares of Common Stock, or grant any Option with
respect thereto, unless it is advised by counsel of its selection that it may do
so without violation of the applicable Federal and State laws pertaining to the
issuance of securities and the Company may require any stock certificate so
issued to bear a legend, may give its transfer agent instructions limiting the
transfer thereof, and may take such other steps, as in its judgment are
reasonably required to prevent any such violation.
1.12 Effective Dates
The Plan was adopted by the Board on May 1, 1997. The Plan shall
terminate on April 30, 2007.
Section 2. OPTION GRANTS
2.1 Authority of Committee
Subject to the provisions of the Plan, the Committee shall have the
sole and complete authority to determine (i) the Participants to whom Options
shall be granted; (ii) the number of shares to be covered by each Option; and
(iii) the conditions and limitations, if any, in addition to those set forth in
Sections 2 and 3 hereof, applicable to the exercise of an Option, including
without limitation, the nature and duration of the restrictions, if any, to be
imposed upon the sale or other disposition of shares acquired upon exercise of
an Option.
Stock options granted under the Plan may be of two types: an incentive
stock option ("Incentive Stock Option"); and a non-qualified stock option
("Non-Qualified Stock Option").
It is intended that the Incentive Stock Options granted hereunder shall
constitute incentive stock options within the meaning of Section 422 of the Code
and shall be subject to the tax treatment described in Section 422 of the Code.
Anything in the Plan to the contrary notwithstanding, no provision of
the Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify either the Plan or, without the consent of the
optionee, any Incentive Stock Option under Section 422 of the Code.
-5-
<PAGE>
The Committee shall have the authority to grant Incentive Stock Options, or
to grant Non-Qualified Stock Options, or to grant both types of Options. To the
extent that any Option does not qualify as an Incentive Stock Option, in whole
or in part, it shall constitute a separate Non-Qualified Stock Option to the
extent of such disqualification.
2.2 Option Exercise Price
The price of stock purchased upon the exercise of Options granted
pursuant to the Plan shall be the Fair Market Value thereof at the time that the
Option is granted.
If an employee owns or is deemed to own (by reason of the attribution
rules applicable under Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of the stock of the Company or any parent
corporation of the Company or Subsidiary and an Option granted to such employee
is intended to qualify as an Incentive Stock Option within the meaning of
Section 422 of the Code, the exercise price shall be no less than 110% of the
Fair Market Value of the Common Stock on the date the Option is granted. The
purchase price is to be paid in full in cash, certified or bank cashier's check
or, at the option of the Company, Common Stock valued at its Fair Market Value
on the date of exercise, or a combination thereof, when the Option is exercised
and stock certificates will be delivered only against such payment.
2.3 Incentive Stock Option Grants
Each Incentive Stock Option will be subject to the following
provisions:
a. Term of Option
An Incentive Stock Option will be for a term of not more than
ten years from the date of grant, except in the case of an
employee described in the second paragraph of Section 2.2 above
in which case an Incentive Stock Option will be for a term of
not more than five years from the date of the grant.
b. Annual Limit
To the extent the aggregate Fair Market Value of the Common
Stock (determined as of the date of grant) with respect to which
any options granted hereunder are intended to be designated as
Incentive Stock Options under the Plan (or any other incentive
stock option plan of the Company or any Subsidiary) which may be
exercisable for the first time by the optionee in any calendar
year exceeds $100,000, such options shall not be considered
incentive stock options.
c. Exercise
Subject to the power of the Committee under Section 1.10(b)
above and except in the manner described below upon the death of
the optionee, an Incentive Stock Option may be exercised only in
installments as follows: up to one-half of the subject shares on
and after the first anniversary of the date of grant, up to all
of the subject shares on and after the second such anniversary
of the date of the grant of such Option but in no event later
than the expiration of the term of the Option.
-6-
<PAGE>
An Incentive Stock Option shall be exercisable during the
optionee's lifetime only by the optionee and shall not be
exercisable by the optionee unless, at all times since the date
of grant and at the time of exercise, such optionee is an
employee of the Company, any parent corporation of the Company
or any Subsidiary, except that, upon termination of all
employment (other than by death, Total Disability, or by Total
Disability followed by death in the circumstances provided
below) with the Company, any parent corporation of the Company
and any Subsidiary or Affiliate, the optionee may exercise an
Incentive Stock Option at any time within three months
thereafter but only to the extent such Option is exercisable on
the date of such termination.
Upon termination of all employment by Total Disability, the
Optionee may exercise such options at any time within one year
thereafter, but only to the extent such option is exercisable on
the date of such termination.
In the event of the death of an optionee (i) while an employee
of the Company, any parent corporation of the Company or any
Subsidiary or Affiliate, or (ii) within three months after
termination of all employment with the Company, any parent
corporation of the Company and any Subsidiary or Affiliate
(other than for Total Disability) or (iii) within one year after
termination on account of Total Disability of all employment
with the Company, any parent corporation of the Company and any
Subsidiary or Affiliate, such optionee's estate or any person
who acquires the right to exercise such option by bequest or
inheritance or by reason of the death of the optionee may
exercise such optionee's Option at any time within the period of
three years from the date of death. In the case of clauses (i)
and (iii) above, such Option shall be exercisable in full for
all the remaining shares covered thereby, but in the case of
clause (ii) such Option shall be exercisable only to the extent
it was exercisable on the date of such termination.
Notwithstanding the foregoing provisions regarding the exercise
of an Option in the event of death, Total Disability or other
termination of employment, in no event shall an Option be
exercisable in whole or in part after the termination date
provided in the Option.
d. Transferability
An Incentive Stock Option granted under the Plan shall not be
transferable otherwise than by will or by the laws of descent
and distribution.
2.4 Non-Qualified Stock Option Grants
Each Non-Qualified Stock Option will be subject to the following
provisions:
a. Term of Option
A Non-Qualified Stock Option will be for a term of not more than
ten years from the date of grant.
-7-
<PAGE>
b. Exercise
The exercise of a Non-Qualified Stock Option shall be subject to
the same terms and conditions as provided under Section 2.3(c)
above except that (i) upon termination of all employment by
Total Disability, the Optionee may exercise such options at any
time within three years thereafter and (ii) in the event of the
death of an Optionee within three years after termination on
account of Total Disability of all employment with the Company,
or any subsidiary or affiliate, such Optionee's estate or any
person who acquires the right to exercise such option by bequest
or inheritance or by reason of the death of the Optionee may
exercise such Optionee's option at any time within a period of
three years from the date of death.
c. Transferability
A Non-Qualified Stock Option granted under the Plan shall not be
transferable otherwise than by will or by the laws of descent
and distribution, except as may be permitted by the Board or the
Committee.
2.5 Agreements
In consideration of any Options granted to a Participant under the
Plan, each such Participant shall enter into an Option Agreement with the
Company providing, consistent with the Plan, such terms as the Committee may
deem advisable.
-8-
Exhibit 10.2
EMPLOYMENT AGREEMENT
AGREEMENT made as of this 1st day of January 1997, by and between HERLEY
INDUSTRIES, INC., a Delaware corporation (hereinafter called the "Company"), and
LEE N. BLATT, residing at 471 North Arrowhead Trail Vero Beach, Fl 32963,
(hereinafter called the "Employee").
WITNESSETH
WHEREAS, the Employee has been employed by the Company under an employment
agreement dated June 11, 1984 as amended; and the Company desires to enter into
a new employment agreement with Employee; and,
WHEREAS, Employee desires to enter into the new employment agreement with the
Company;
NOW THEREFORE, it is agreed as follows:
1. PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes any employment
agreements, oral or written, entered into between Employee and the Company
prior to the date of this Agreement.
2. RETENTION OF SERVICES. The Company hereby retains the services of
Employee, and Employee agrees to furnish such services, upon the terms and
conditions hereinafter set forth.
3. TERM. Subject to earlier termination on the terms and conditions
hereinafter provided, the term of this Agreement shall be comprised of a 6
six year period of employment commencing January 1, 1997 and ending
December 31, 2002. On each January 1, the term of the Employment Agreement
shall extend to six years from that date. In no event shall the term of the
Employment Agreement extend beyond December 31, 2006.
4. DUTIES AND EXTENT OF SERVICES DURING PERIOD OF EMPLOYMENT. During the
period of employment, Employee shall be employed as a Senior Executive of
the Company. In such capacity, Employee agrees that he shall serve the
Company under the direction of the Board of Directors of the Company to the
best of his ability, shall perform all duties incident to his offices on
behalf of the Company, and shall perform such other duties as may from time
to time be assigned to him by the Board of Directors of the Company.
1 of 8
<PAGE>
Employee shall also serve in similar capacities of such of the subsidiary
corporations of the Company as may be selected by the Board of Directors
and shall be entitled to such additional compensation therefore as may be
determined by the Board of Directors of the Company. Notwithstanding the
foregoing, it is understood and agreed that the duties of Employee during
the period employment shall not be inconsistent with (i) his position and
title as Senior Executive of the Company; or (ii) with those duties
ordinarily performed by a comparable executive officer.
5. REMUNERATION. During the period of employment, Employee shall be
entitled to receive the following compensation for his services:
i) The Company shall pay to Employee an annual salary at the rate
of FOUR HUNDRED SEVENTY-FIVE THOUSAND ($475,000) DOLLARS
commencing January 1, 1997, payable in weekly installments, or in
such other manner as shall be agreeable to the Company and
Employee.
ii) In addition to his salary set forth in Paragraph 5(i) above,
Employee shall receive an increment in an amount equal to the
greater of (a) the cumulative cost of living on his base salary as
reported in the "Consumer Price Index, New York Northeastern New
Jersey, all items", published by the United States Department of
Labor, Bureau of Labor Statistics, using January 1,1996 as the
base year for computation, or (b) 10% of his annual salary for the
year then ending. Such cost of living increment with respect to
the aforesaid salary of Employee shall be made semi-annually as
follows:
A. With respect to the first six months of each calendar
year during the period of employment, such increment shall
be calculated and payable cumulatively on or before the
first day of August of such year; and
B. With respect to the last six months of each calendar year
during the period of employment, such increment shall be
calculated and payable cumulatively on or before the first
day of February of the following calendar year.
If Employee's employment shall terminate during any six-month
period referred to in this Paragraph 5 (ii), then the cost of
living increment provided for herein shall be prorated
accordingly.
2 of 8
<PAGE>
iii) Not later than one hundred twenty (120) days after the end of
the fiscal year of the Company and each subsequent fiscal year of
the Company ending during the period of employment, the Company
shall pay to Employee, as incentive compensation an amount equal
to a bonus at the discretion of the Board of Directors but in no
event less than five (5%) percent of the Consolidated Pretax
Earnings of the Company.
For purposes hereof, the term "Consolidated Pretax Earnings"
of the Company shall mean, with respect to any fiscal year, the
consolidated income, if any, of the Company for such fiscal year as set
forth in the audited, consolidated financial statements of the Company
and its subsidiaries included in its Annual Report to stockholders for
such fiscal year, before deduction of taxes based on income or of the
incentive compensation to be paid to Employee for such fiscal year
under this Agreement."
6. EMPLOYEE BENEFITS - EXPENSES
a) Commencing January 1, 1997 and during the term of this agreement,
the Company shall provide, at its expense up to $40,000 annually to
purchase life insurance in the face amount of $4,000,000, with Employee
having the right to designate the insurer, owner and beneficiary of
such life insurance.
b) In the event of the death of Employee, within 30 days thereafter the
Company shall promptly make a lump sum payment to Employee's widow, or
to such other person or persons as may be designated by Employee in his
Will, or to his estate in the event of Employee's intestacy, of the
salary and compensation to which Employee is entitled hereunder for the
three year period from date of death and one-half of such salary for
the balance of the period covered by this Agreement, and in the year of
death an additional payment equal to the pro rata amount for said year
of the compensation set forth in paragraph 5 (iii), the Company's
contribution to the 401(k), and the pro-rata cost of living increment,
which additional payment shall be made in accordance with paragraph 5
(ii).
c) During the period of employment, Employee shall be eligible to
participate in the Company's stock option and stock purchase plans to
the extent determined in the sole discretion of the Board of Directors
of the Company or a committee thereof.
3 of 8
<PAGE>
d) During the period of employment, Employee shall be furnished with
office space and facilities commensurate with his position and adequate
for the performance of his duties; he shall be provided with the
perquisites customarily associated with the position of a Senior
Executive of the Company; and he shall be entitled to six weeks regular
vacation during each year.
e) It is contemplated that, during the period of employment, Employee
may be required to incur out-of-pocket expenses in connection with the
performance of his services hereunder, including expenses incurred for
travel and business entertainment. Accordingly, the Company shall pay,
or reimburse Employee, for all out-of-pocket expenses reasonably
incurred by Employee in the performance of his duties hereunder in
accordance with the usual procedures of the Company. Notwithstanding
the foregoing, the recognition that Employee will be required during
the term of this Agreement to do a considerable amount of driving in
connection with his services hereunder, the Company shall provide
Employee with the use of a suitable automobile and all expenses
incidental throughout the term of this Agreement, including fuel,
repairs, maintenance and insurance.
f) All benefits to Employee specially provided for herein shall be in
addition to, and shall not diminish, (i) such other benefits and/or
compensation as may hereafter be granted to or afforded to Employee by
the Board of Directors of the Company; and (ii) any rights which
Employee may have or may acquire under any hospitalization, life
insurance, pension, profit-sharing, incentive compensation or other
present or future employee benefit plan or plans of the Company
g) Employee currently works from offices in Lancaster, Pennsylvania and
from his homes where he has created work space and his responsibilities
do not require regular attendance at any Company office. These
responsibilities include, among other things, conducting executive
recruiting tasks and visiting customers, investment banks and potential
acquisition candidates in the best interests of the Company. In
recognition of these special employment conditions, disability for
Employee shall occur if he becomes unable, for twelve consecutive
4 of 8
<PAGE>
months or more, due to ill health or other incapacity to perform the
services described above. In that event, the Company may thereafter,
upon at least 90 days written notice to employee, place him on
disability status and terminate this agreement. If employee is so
determined by the Company as disabled, he shall be entitled to his
annual compensation as set forth in paragraph 5 (i) and 5 (ii) hereof
payable in weekly installments for the first two years after notice of
disability and thereafter one-half of such compensation payable in
weekly installments for the balance of the period covered by this
agreement.
7. NON-COMPETITION. Employee agrees that, during term of this Agreement, he
will not, without the prior written approval of the Board of Directors of
the Company, directly or indirectly through any other individual or
entity,(a) become an officer or employee of, or render any services to, any
competitor of the Company, (b) solicit, raid, entice or induce any customer
of the Company to cease purchasing goods or services from the Company or to
become a customer of any competitor of the Company, and Employee will not
approach any customer for any such purpose or authorize the taking of any
such actions by any other individual or entity, or (c) solicit, raid,
entice or induce any employee of the Company to become employed by any
competitor of the Company, and Employee will not approach any such employee
for any such purpose or authorize the taking of any such action by any
other individual or entity. However, nothing contained in this paragraph 7
shall be construed as preventing Employee from investing his assets in such
form or manner as will not require him to become an officer or employee of,
or render any services (including consulting services) to, any competitor
of the Company.
8. TERMINATION FOR CAUSE.
a) The Company has been intimately familiar with the ability,
competence and judgment of Employee, which are acknowledged to be of
the highest caliber. Accordingly, the Company and Employee agree that
Employee's services hereunder may be terminated by the Company only (i)
for an act of moral turpitude materially adversely affecting the
financial condition of the Company, or (ii) breach of the terms of this
Agreement which shall materially adversely affect the financial
condition of the Company.
5 of 8
<PAGE>
b) If the Company terminates Employee's employment hereunder for any
reason other than as set forth in paragraph 8 (a) hereof, Employee's
compensation shall continue to be paid to him as provided in paragraph
5 hereunder for the remainder of the term of this Agreement. Employee
shall have no duty to mitigate the Company's damages hereunder.
Therefore, no deduction shall be made by the Company for any
compensation earned by Employee from other employment or for monies or
property otherwise received by Employee subsequent to such termination
of his employment hereunder. Employee and the Company acknowledge that
the foregoing provisions of this paragraph 8(b) are reasonable and are
based upon the facts and circumstances of the parties at the time of
entering into this Agreement, and with due regard to future
expectations.
9. CONSOLIDATION OR MERGER. In the event of any consolidation or merger of
the Company into or with any other corporation during the term of this
Agreement, or the sale of all or substantially all of the assets of the
Company to another corporation during the term of this Agreement, such
successor corporation shall assume this Agreement and become obligated to
perform all of the terms and provisions hereof applicable to the Company,
and Employee's obligations hereunder shall continue in favor of such
successor corporation.
10. INDEMNIFICATION. The Company agrees to indemnify the Employee to the
fullest extent permitted by applicable law consistent with the Company's
Certification of Incorporation and By-Laws as in effect on the effective
date of this Agreement with respect to any action or failure to act on his
part while he was an officer, director and/or employee (a) of the Company
or any subsidiary thereof or (b) of any other entity if his service with
such entity was at the request of the Company. This provision shall survive
the termination of this Agreement.
11. NOTICES. Notice is to be given hereunder to the parties by telegram or
by certified or registered mail, addressed to the respective parties at the
addresses herein below set forth or to such addresses as may be hereinafter
furnished, in writing:
TO: Lee N. Blatt
481 North Arrowhead Trail
Vero Beach, FL 32963
6 of 8
<PAGE>
TO: HERLEY INDUSTRIES, INC.
10 Industry Drive
Lancaster, PA 17603
Attention: Myron Levy, President
12. CHANGE OF CONTROL In the event there shall be a change in the present
control of the Company as hereinafter defined, or in any person directly or
indirectly presently controlling the Company, as hereinafter defined,
Employee shall have the right to immediately receive as a lump sum payment
an amount equal to (i) two (2) times his "base amount", within the meaning
of Section 280G of the Internal Revenue Code of 1954, as amended
(hereinafter "the Code"), reduced by (ii) $100.00.
For purposes of this Agreement, a change in control of the Company, or
in any person directly or indirectly controlling the Company, shall
mean:
a) a change in control as such term is presently defined in
Regulation 240.12b-2 under the Securities Exchange Act of 1934
("Exchange Act"); or
b) if any "person" (as such term is used in Section 13(d) and 14
(d) of the Exchange Act) other than the Company or any "person"
who on the date of this Agreement is a director or officer of the
Company, becomes the "beneficial owner" (as defined in Rule
13(d)-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing thirty percent (30%) of
the voting power of the Company's then outstanding securities; or
c) if during any period of two (2) consecutive years during the
term of this Agreement, individuals who at the beginning of such
period constitute the Board of Directors cease for any reason to
constitute at least a majority thereof, unless the election of
each director who is not a director at the beginning of such
period has been approved in advance by directors representing at
least two-thirds (2/3) of the directors then in office who were
directors at the beginning of the period.
13. SUCCESSORS AND ASSIGNS. This agreement shall be binding upon and
inure to the benefit of the successors and assigns of the Company. Unless
clearly inapplicable, reference herein to the Company shall be deemed to
include such other successor. In addition, this Agreement shall be binding
upon and inure to the benefits of the Employee and his heirs, executors,
legal
7 of 8
<PAGE>
representatives and assigns, provided, however, that the obligations of
Employee hereunder may not be delegated without the prior written approval
of Directors of the company.
14.AMENDMENTS. This agreement may not be altered, modified, amended
or terminated except by a written instrument signed by each of the
parties hereto.
15. GOVERNING LAW. This agreement shall be governed by and construed
and interpreted in accordance with the laws of Delaware, without reference
to principles of conflict of laws. IN WITNESS WHEREOF, the parties hereto
have executed this Agreement as of the day and year first above written.
HERLEY INDUSTRIES, INC.
BY: ______________________________
MYRON LEVY, President
BY: ______________________________
LEE N BLATT, Employee
8 of 8
Exhibit 10.3
EMPLOYMENT AGREEMENT
AGREEMENT made as of this 1st day of January 1997, by and between HERLEY
INDUSTRIES, INC., a Delaware corporation (hereinafter called the "Company"), and
MYRON LEVY residing at 147 Deer Ford Drive, Lancaster PENNSYLVANIA 17603
(hereinafter called the "Employee").
WITNESSETH
WHEREAS, the Employee has been employed by the Company under an employment
agreement dated October 3, 1988 as amended; and the Company desires to enter
into a new employment agreement with Employee; and,
WHEREAS, Employee desires to enter into the new employment agreement with the
Company;
NOW THEREFORE, it is agreed as follows:
1. PRIOR AGREEMENTS SUPERSEDED. This Agreement supersedes any employment
agreements, oral or written, entered into between Employee and the Company
prior to the date of this Agreement.
2. RETENTION OF SERVICES. The Company hereby retains the services of Employee,
and Employee agrees to furnish such services, upon the terms and conditions
hereinafter set forth.
3. TERM. Subject to earlier termination on the terms and conditions
hereinafter provided, the term of the Agreement shall be comprised of a
"period of active employment" commencing on January 1, 1997 and ending on
December 31, 2002 (subject to extension by agreement of the Company and
Employee) and a "consulting period" commencing at the end of the period of
active employment (as the same may be extended) and continuing for a period
of five (5) years. On January 1 of each year, the term of the Employment
Agreement shall extend to six years from that date. In no event shall the
term of the Employment Agreement extend beyond December 31, 2006.
1 of 8
<PAGE>
4. DUTIES AND EXTENT OF SERVICES DURING PERIOD OF EMPLOYMENT
(a) During the period of active employment, Employee shall be employed as an
executive of the Company. In such capacity, Employee agrees that he shall
serve the Company under the direction of the Chief Executive Officer of the
Company to the best of his ability, shall devote full time during normal
business hours to such employment, shall perform all duties incident to his
offices on behalf of the Company, and shall perform such other duties as
may from time to time be assigned to him by the Chief Executive Officer of
the Company.
(b) Effective with the termination of the period of active employment, Employee
shall cease to be an employee of the Company. However, in recognition of
the continued value to the Company of Employee's extensive knowledge and
expertise, Employee shall serve as a consultant to the Company during the
consulting period. In such capacity, Employee shall consult with the
Company and its respective senior executive officers with respect to its
respective businesses and operations. Such consulting services shall not
require more than fifty (50) days in any one year, it being understood and
agreed that during the consulting period Employee shall have the right to
undertake full time or part time employment with any business enterprise
which is not a competitor of the Company. Employee's services as a
consultant to the Company shall be required at such times and such places
as shall result in the least inconvenience to Employee, having in mind his
other business commitments which may obligate him to perform services prior
to the performance of his services hereunder. To the end that there shall
be a minimum of interference with Employees other commitments, his
consulting services shall be rendered by personal consultation at his
residence or office wherever maintained, or by correspondence through mail,
telegram or telephone, or other similar modes of communications at times,
including weekends and evenings, most convenient to him. During the
consulting period, Employee shall not be obligated to serve as a member of
the Board of Directors of the Company or to occupy any office on behalf of
the Employer or any of its subsidiaries or affiliates.
5. REMUNERATION
(a) During the period of active employment, Employee shall be entitled to
receive the following compensation for his services:
(i) The Company shall pay to Employee an annual salary at the rate of
TWO HUNDRED SEVENTY-FIVE THOUSAND ($275,000) DOLLARS commencing
January 1, 1997, payable in weekly installments, or in such other
manner as shall be agreeable to the Company and Employee.
2 of 8
<PAGE>
(ii) In addition to his salary set forth in Paragraph 5(i) above,
Employee shall receive an increment in an amount equal to the
greater of (a) the cumulative cost of living on his base salary as
reported in the "Consumer Price Index, New York Northeastern New
Jersey, all items", published by the United States Department of
Labor, Bureau of Labor Statistics, using January 1,1996 as the
base year for computation, or (b) 10% of his annual salary for the
year then ending. Such cost of living increment with respect to
the aforesaid salary of Employee shall be made semi-annually as
follows:
(A) With respect to the first six months of each calendar year
during the period of employment, such increment shall be
calculated and payable cumulatively on or before the first
day of August of such year; and
(B) With respect to the last six months of each calendar year
during the period of employment, such increment shall be
calculated and payable cumulatively on or before the first
day of February of the following calendar year.
If Employee's employment shall terminate during any six-month
period referred to in this Paragraph 5 (ii), then the cost of
living increment provided for herein shall be prorated
accordingly.
(iii)Not later than one hundred twenty (120) days after the end of the
fiscal year of the Company and each subsequent fiscal year of the
Company ending during the period of employment, the Company shall
pay to Employee, as incentive compensation an amount equal to a
bonus at the discretion of the Board of Directors but in no event
less than three (3%) percent of the Consolidated Pretax Earnings
of the Company. For purposes hereof, the term "Consolidated Pretax
Earnings" of the Company shall mean, with respect to any fiscal
year, the consolidated income, if any, of the Company for such
fiscal year as set forth in the audited, consolidated financial
statements of the Company and its subsidiaries included in its
Annual Report to stockholders for such fiscal year, before
deduction of taxes based on income or of the incentive
compensation to be paid to Employee for such fiscal year under
this Agreement."
3 of 8
<PAGE>
(b)During the consulting period, Employee shall be entitled to a
consulting fee at the rate of SIXTY THOUSAND ($60,000) dollars per
annum, paid on a monthly basis.
6. EMPLOYEE BENEFITS - EXPENSES
a) During the period of active employment, Employee shall receive all
fringe benefits in the nature of health, medical, life and/or
other insurance, a Company car and related expenses as received by
other officers of the Company.
b) The Company shall reimburse Employee for all proper expenses
incurred by him, including disbursements made in the performance
of his duties to the Company; provided, however that no
extraordinary expenses and/or disbursements shall be incurred by
Employee without the prior approval of the Chief Executive Officer
or the Board of Directors of the Company.
c) During the period of employment, Employee shall be eligible to
participate in the Company's stock option and stock purchase plans
to the extent determined in the sole discretion of the Board of
Directors of the Company or a committee thereof.
d) During the period of employment, Employee shall be furnished with
office space and facilities commensurate with his position and
adequate for the performance of his duties; he shall be provided
with the perquisites customarily associated with the position of a
Senior Executive of the Company; and he shall be entitled to six
weeks regular vacation during each year.
e) In the event of the death of Employee, within 30 days thereafter
the Company shall promptly make a lump sum payment to Employee's
widow, or to such other person or persons as may be designated by
Employee in his Will, or to his estate in the event of Employee's
intestacy, of the salary and compensation to which Employee is
entitled hereunder for the two year period from date of death and
one-half of such salary for the balance of the period covered by
this Agreement, and in the year of death an additional payment
equal to the pro rata amount for said year of the compensation
set forth in paragraph 5 (iii), the Company's contribution to the
401(k), and the pro-rata cost of living increment, which
additional payment shall be made in accordance with paragraph 5
(ii).
4 of 8
<PAGE>
f) Disability for Employee shall occur if he becomes unable, for
twelve consecutive months or more, due to ill health or other
incapacity to perform the services described above. In that
event, the Company may thereafter, upon at least 90 days written
notice to employee, place him on disability status and terminate
this agreement. If employee is so determined by the Company as
disabled, he shall be entitled to his annual compensation as set
forth in paragraph 5 (i) and 5 (ii) hereof payable in weekly
installments for the first two years after notice of disability
and thereafter one-half of such compensation payable in weekly
installments for the balance of the period covered by this
agreement.
7. NON-COMPETITION. Employee agrees that, during term of this Agreement, he
will not, without the prior written approval of the Board of Directors of
the Company, directly or indirectly through any other individual or
entity,(a) become an officer or employee of, or render any services to, any
competitor of the Company, (b) solicit, raid, entice or induce any customer
of the Company to cease purchasing goods or services from the Company or to
become a customer of any competitor of the Company, and Employee will not
approach any customer for any such purpose or authorize the taking of any
such actions by any other individual or entity, or (c) solicit, raid,
entice or induce any employee of the Company to become employed by any
competitor of the Company, and Employee will not approach any such employee
for any such purpose or authorize the taking of any such action by any
other individual or entity. However, nothing contained in this paragraph 7
shall be construed as preventing Employee from investing his assets in such
form or manner as will not require him to become an officer or employee of,
or render any services (including consulting services) to, any competitor
of the Company.
8. TERMINATION FOR CAUSE.
a) The Company has been intimately familiar with the ability, competence
and judgment of Employee, which are acknowledged to be of the highest
caliber. Accordingly, the Company and Employee agree that Employee's
services hereunder may be terminated by the Company only (i) for an act
of moral turpitude materially adversely affecting the financial
condition of the Company, or (ii) breach of the terms of this Agreement
which shall materially adversely affect the financial condition of the
Company.
5 of 8
<PAGE>
b) If the Company terminates Employee's employment hereunder for any
reason other than as set forth in paragraph 8 (a) hereof, Employee's
compensation shall continue to be paid to him as provided in paragraph
5 hereunder for the remainder of the term of this Agreement. Employee
shall have no duty to mitigate the Company's damages hereunder.
Therefore, no deduction shall be made by the Company for any
compensation earned by Employee from other employment or for monies or
property otherwise received by Employee subsequent to such termination
of his employment hereunder. Employee and the Company acknowledge that
the foregoing provisions of this paragraph 8(b) are reasonable and are
based upon the facts and circumstances of the parties at the time of
entering into this Agreement, and with due regard to future
expectations.
9. CONSOLIDATION OR MERGER. In the event of any consolidation or merger of the
Company into or with any other corporation during the term of this
Agreement, or the sale of all or substantially all of the assets of the
Company to another corporation during the term of this Agreement, such
successor corporation shall assume this Agreement and become obligated to
perform all of the terms and provisions hereof applicable to the Company,
and Employee's obligations hereunder shall continue in favor of such
successor corporation.
10. INDEMNIFICATION. The Company agrees to indemnify the Employee to the
fullest extent permitted by applicable law consistent with the Company's
Certification of Incorporation and By-Laws as in effect on the effective
date of this Agreement with respect to any action or failure to act on his
part while he was an officer, director and/or employee (a) of the Company
or any subsidiary thereof or (b) of any other entity if his service with
such entity was at the request of the Company. This provision shall survive
the termination of this Agreement.
11. NOTICES. Notice is to be given hereunder to the parties by telegram or by
certified or registered mail, addressed to the respective parties at the
addresses herein below set forth or to such addresses as may be hereinafter
furnished, in writing:
TO: Myron Levy
147 Deer Ford Drive
Lancaster, PA 17601
TO: HERLEY INDUSTRIES, INC.
10 Industry Drive
Lancaster, PA 17603
Attention: Lee N. Blatt, Chairman
6 of 8
<PAGE>
12. CHANGE OF CONTROL In the event there shall be a change in the present
control of the Company as hereinafter defined, or in any person directly or
indirectly presently controlling the Company, as hereinafter defined,
Employee shall have the right to immediately receive as a lump sum payment
an amount equal to (i) two (2) times his "base amount", within the meaning
of Section 280G of the Internal Revenue Code of 1954, as amended
(hereinafter "the Code"), reduced by (ii) $100.00.
For purposes of this Agreement, a change in control of the Company, or
in any person directly or indirectly controlling the Company, shall
mean:
a) a change in control as such term is presently defined in
Regulation 240.12b-2 under the Securities Exchange Act of 1934
("Exchange Act"); or
b) if any "person" (as such term is used in Section 13(d) and 14 (d)
of the Exchange Act) other than the Company or any "person" who on
the date of this Agreement is a director or officer of the
Company, becomes the "beneficial owner" (as defined in Rule
13(d)-3 under the Exchange Act), directly or indirectly, of
securities of the Company representing thirty percent (30%) of the
voting power of the Company's then outstanding securities; or
c) if during any period of two (2) consecutive years during the term
of this Agreement, individuals who at the beginning of such period
constitute the Board of Directors cease for any reason to
constitute at least a majority thereof, unless the election of
each director who is not a director at the beginning of such
period has been approved in advance by directors representing at
least two-thirds (2/3) of the directors then in office who were
directors at the beginning of the period.
13. SUCCESSORS AND ASSIGNS. This agreement shall be binding upon and inure to
the benefit of the successors and assigns of the Company. Unless clearly
inapplicable, reference herein to the Company shall be deemed to include
such other successor. In addition, this Agreement shall be binding upon and
inure to the benefits of the Employee and his heirs, executors, legal
representatives and assigns, provided, however, that the obligations of
Employee hereunder may not be delegated without the prior written approval
of Directors of the company.
7 of 8
<PAGE>
14. AMENDMENTS. This agreement may not be altered, modified, amended or
terminated except by a written instrument signed by each of the parties
hereto.
15. GOVERNING LAW. This agreement shall be governed by and construed and
interpreted in accordance with the laws of Delaware, without reference to
principles of conflict of laws.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
day and year first above written.
HERLEY INDUSTRIES, INC.
BY: ______________________________
Lee Blatt, Chairman and CEO
BY: ______________________________
Myron Levy, Employee
8 of 8
Exhibit 10.4
NON-NEGOTIABLE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR UNDER ANY
STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR TRANSFERRED UNTIL
(i) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE
SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES LAW OR (ii) THE
COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH NOTE MAY BE
PLEDGED, SOLD, ASSIGNED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS.
$1,400,000 Lancaster, Pennsylvania
No. 4 June 2, 1997
FOR VALUE RECEIVED, the undersigned, LEE N. BLATT, residing at 471
North Arrowhead Trail, Vero Beach, Florida 32903 (the "Maker"), promises to pay
to HERLEY INDUSTRIES, INC., a Delaware corporation with its principal place of
business at 10 Industry Drive, Lancaster, Pennsylvania 17603 ("Payee"), the
principal amount of ONE MILLION FOUR HUNDRED THOUSAND ($1,400,000) DOLLARS, on
or before 12:00 noon on January 31, 1998, unless renewed by the Company from
year to year at 75% of the average closing price of the Company's Common Stock
for the ten trading days prior thereto, without set-off or counterclaim and
without any deduction or withholding, plus interest thereon at a rate determined
annually equal to the average rate of interest paid by the Company for borrowed
monies computed on a Company fiscal year basis. Interest shall be payable at the
maturity hereof. All payments shall be applied first to pay accrued but unpaid
interest, and the remainder to reduce the outstanding principal amount hereof.
In no event shall the rate of interest hereunder exceed that permitted by law
and if fulfillment of the obligations hereunder would violate the usury limit of
applicable law, the obligations hereunder shall be automatically reduced to the
limit of validity.
This Note may be prepaid in whole or in part, without premium or
penalty at any time.
The occurrence of any one of the following events shall constitute an
event of default hereunder:
(a) The Maker shall fail to pay within 10 days after written notice of
any failure to pay any amount due hereunder.
(b) The Maker shall commence a voluntary case under the federal
bankruptcy laws, shall seek to take advantage of any insolvency laws, shall make
an assignment for the benefit of creditors, shall apply for, consent to or
acquiesce in the appointment of, or taking possession by, a trustee,
C:\WP\SEC\10Q97\EXH10 4.WPD
1
<PAGE>
receiver, custodian or similar official or agent for itself or any substantial
part of its property, or shall take any action authorizing or seeking to effect
any of the foregoing.
(c) A trustee, receiver, custodian or similar official or agent shall
be appointed for the Maker or any substantial part of its property, or all or
any substantial part of the property of the Maker is condemned, seized or
otherwise appropriated by any governmental authority.
(d) The Maker shall have an order or decree for relief in any voluntary
or involuntary case under the federal bankruptcy laws entered against it, or any
involuntary petition seeking reorganization, liquidation, readjustment,
arrangement, composition, or other similar relief as to it under the federal
bankruptcy laws, or any similar law for the relief of debtors, shall be brought
and shall be consented to or shall remain undismissed.
In the event that an event of default described in paragraph (c) or (d)
above is cured by the Maker, such event shall no longer constitute an event of
default.
Not in limitation of any other right under any other agreement or at
law or in equity, if any event of default hereunder shall have occurred the
holder hereof may, upon notice to the Maker, declare all obligations under this
Note to be, and thereupon the same shall become, immediately due and payable by
the Maker without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Maker.
The due date of this Note shall be accelerated in the event of the
Maker's death or his disability, as defined and determined in the employment
agreement between the Maker and the Company dated 1/1/97. In the event of death
of the Maker, payment of principal and interest on this Note shall be due and
payable within 60 days after the date of death. In the event of disability, as
defined, payment of principal and interest on this Note shall be due and payable
on the first day of the 13th month following the determination of disability.
The Maker and all endorsers hereof hereby waive presentment, demand,
protest, notice of protest, notice of dishonor and all other forms of demand and
notice concerning this Note and consent to each and every extension or
postponement of the time of payment or other indulgence with respect to this
Note, and to each and every substitution, addition, exchange or release of
collateral and to the addition, substitution or release of any person primarily
or secondarily liable hereunder. No delay or omission by the Payee or other
holder hereof in exercising any right or power hereunder shall operate as a
waiver of such right or power, and a waiver on one occasion shall not be
construed as a waiver or a bar to the exercise of any right on any other
occasion. Any provision in this Note which is prohibited by law shall be
ineffective to the extent of such prohibition without invalidating any other
provision hereof.
The rights and remedies of the holder of this Note as provided in this
Note shall be cumulative and concurrent, and may be pursued singly,
successively, or together against the Payee for the payment hereof or otherwise
at the sole discretion of the Payee. The failure to exercise any such right or
remedy shall in no event be construed as a waiver or release of said rights or
remedies or of the right to exercise them at any time later.
C:\WP\SEC\10Q97\EXH10 4.WPD
2
<PAGE>
This Note may not be changed or terminated orally, but only by a
writing signed by the Maker and the Payee. This Note may not be endorsed,
assigned or transferred by the Payee without the consent of Maker.
The Note shall be governed and construed under the substantive laws of
the State of Pennsylvania, without regard to its conflicts of laws principles.
This Note and the attached Pledge and Security Agreement constitute the entire
agreement of the Maker and the Payee with respect to the indebtedness evidenced
hereby. Pursuant to the terms of the Pledge and Security Agreement, Maker has
collateralized this Note with 315,774 shares of the Maker's Common Stock.
The Maker agrees to pay all costs, charges and expenses incurred by the
Payee and its assigns (including, without limitation, costs of collection, court
costs and reasonable attorneys' fees and disbursements) in connection with the
enforcement of the Payee's rights under this Note.
This Note supersedes and replaces Note No. 1 between the parties dated
November 14, 1995 in the principal amount of $1,400,000, which prior note is
hereby cancelled.
Executed as a sealed instrument as of the date set forth above.
Lee N. Blatt
C:\WP\SEC\10Q97\EXH10 4.WPD
3
Exhibit 10.5
NON-NEGOTIABLE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR UNDER ANY
STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR TRANSFERRED UNTIL
(i) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE
SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES LAW OR (ii) THE
COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH NOTE MAY BE
PLEDGED, SOLD, ASSIGNED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS.
$300,000 Lancaster, Pennsylvania
No. 5 June 2, 1997
FOR VALUE RECEIVED, the undersigned, GERALD I. KLEIN, residing at 845
Breneman Road, Lancaster, Pennsylvania 17545 (the "Maker"), promises to pay to
HERLEY INDUSTRIES, INC., a Delaware corporation with its principal place of
business at 10 Industry Drive, Lancaster, Pennsylvania 17603 ("Payee"), the
principal amount of THREE HUNDRED THOUSAND ($300,000) DOLLARS, on or before
12:00 noon on January 31, 1998, unless renewed by the Company from year to year
at 75% of the average closing price of the Company's Common Stock for the ten
trading days prior thereto, without set-off or counterclaim and without any
deduction or withholding, plus interest thereon at a rate determined annually
equal to the average rate of interest paid by the Company for borrowed monies
computed on a Company fiscal year basis. Interest shall be payable at the
maturity hereof. All payments shall be applied first to pay accrued but unpaid
interest, and the remainder to reduce the outstanding principal amount hereof.
In no event shall the rate of interest hereunder exceed that permitted by law
and if fulfillment of the obligations hereunder would violate the usury limit of
applicable law, the obligations hereunder shall be automatically reduced to the
limit of validity.
This Note may be prepaid in whole or in part, without premium or
penalty at any time.
The occurrence of any one of the following events shall constitute an
event of default hereunder:
(a) The Maker shall fail to pay within 10 days after written notice of
any failure to pay any amount due hereunder.
(b) The Maker shall commence a voluntary case under the federal
bankruptcy laws, shall seek to take advantage of any insolvency laws, shall make
an assignment for the benefit of creditors, shall apply for, consent to or
acquiesce in the appointment of, or taking possession by, a trustee,
C:\WP\SEC\10Q97\EXH10 5.WPD
1
<PAGE>
receiver, custodian or similar official or agent for itself or any substantial
part of its property, or shall take any action authorizing or seeking to effect
any of the foregoing.
(c) A trustee, receiver, custodian or similar official or agent shall
be appointed for the Maker or any substantial part of its property, or all or
any substantial part of the property of the Maker is condemned, seized or
otherwise appropriated by any governmental authority.
(d) The Maker shall have an order or decree for relief in any voluntary
or involuntary case under the federal bankruptcy laws entered against it, or any
involuntary petition seeking reorganization, liquidation, readjustment,
arrangement, composition, or other similar relief as to it under the federal
bankruptcy laws, or any similar law for the relief of debtors, shall be brought
and shall be consented to or shall remain undismissed.
In the event that an event of default described in paragraph (c) or (d)
above is cured by the Maker, such event shall no longer constitute an event of
default.
Not in limitation of any other right under any other agreement or at
law or in equity, if any event of default hereunder shall have occurred the
holder hereof may, upon notice to the Maker, declare all obligations under this
Note to be, and thereupon the same shall become, immediately due and payable by
the Maker without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Maker.
The due date of this Note shall be accelerated in the event of the
Maker's death or his disability, as defined and determined in the employment
agreement between the Maker and the Company dated 1/1/92. In the event of death
of the Maker, payment of principal and interest on this Note shall be due and
payable within 60 days after the date of death. In the event of disability, as
defined, payment of principal and interest on this Note shall be due and payable
on the first day of the 13th month following the determination of disability.
The Maker and all endorsers hereof hereby waive presentment, demand,
protest, notice of protest, notice of dishonor and all other forms of demand and
notice concerning this Note and consent to each and every extension or
postponement of the time of payment or other indulgence with respect to this
Note, and to each and every substitution, addition, exchange or release of
collateral and to the addition, substitution or release of any person primarily
or secondarily liable hereunder. No delay or omission by the Payee or other
holder hereof in exercising any right or power hereunder shall operate as a
waiver of such right or power, and a waiver on one occasion shall not be
construed as a waiver or a bar to the exercise of any right on any other
occasion. Any provision in this Note which is prohibited by law shall be
ineffective to the extent of such prohibition without invalidating any other
provision hereof.
The rights and remedies of the holder of this Note as provided in this
Note shall be cumulative and concurrent, and may be pursued singly,
successively, or together against the Payee for the payment hereof or otherwise
at the sole discretion of the Payee. The failure to exercise any such right or
remedy shall in no event be construed as a waiver or release of said rights or
remedies or of the right to exercise them at any time later.
C:\WP\SEC\10Q97\EXH10 5.WPD
2
<PAGE>
This Note may not be changed or terminated orally, but only by a
writing signed by the Maker and the Payee. This Note may not be endorsed,
assigned or transferred by the Payee without the consent of Maker.
The Note shall be governed and construed under the substantive laws of
the State of Pennsylvania, without regard to its conflicts of laws principles.
This Note and the attached Pledge and Security Agreement constitute the entire
agreement of the Maker and the Payee with respect to the indebtedness evidenced
hereby. Pursuant to the terms of the Pledge and Security Agreement, Maker has
collateralized this Note with 80,000 shares of the Maker's Common Stock.
The Maker agrees to pay all costs, charges and expenses incurred by the
Payee and its assigns (including, without limitation, costs of collection, court
costs and reasonable attorneys' fees and disbursements) in connection with the
enforcement of the Payee's rights under this Note.
This Note supersedes and replaces Note No. 2 between the parties dated
November 14, 1995 in the principal amount of $300,000, which prior note is
hereby cancelled.
Executed as a sealed instrument as of the date set forth above.
Gerald I. Klein
C:\WP\SEC\10Q97\EXH10 5.WPD
3
Exhibit 10.6
NON-NEGOTIABLE PROMISSORY NOTE
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 NOR UNDER ANY
STATE SECURITIES LAW AND MAY NOT BE PLEDGED, SOLD, ASSIGNED OR TRANSFERRED UNTIL
(i) A REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE
SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES LAW OR (ii) THE
COMPANY RECEIVES AN OPINION OF COUNSEL TO THE COMPANY OR OTHER COUNSEL
REASONABLY SATISFACTORY TO THE COMPANY TO THE EFFECT THAT SUCH NOTE MAY BE
PLEDGED, SOLD, ASSIGNED OR TRANSFERRED WITHOUT AN EFFECTIVE REGISTRATION
STATEMENT UNDER THE SECURITIES ACT OF 1933 OR APPLICABLE STATE SECURITIES LAWS.
$300,000 Lancaster, Pennsylvania
No. 6 June 2, 1997
FOR VALUE RECEIVED, the undersigned, MYRON LEVY, residing at 147
Deerford Drive, Lancaster, Pennsylvania 17601 (the "Maker"), promises to pay to
HERLEY INDUSTRIES, INC., a Delaware corporation with its principal place of
business at 10 Industry Drive, Lancaster, Pennsylvania 17603 ("Payee"), the
principal amount of THREE HUNDRED THOUSAND ($300,000) DOLLARS, on or before
12:00 noon on January 31, 1998 unless renewed by the Company from year to year
at 75% of the average closing price of the Company's Common Stock for the ten
trading days prior thereto, without set-off or counterclaim and without any
deduction or withholding, plus interest thereon at a rate determined annually
equal to the average rate of interest paid by the Company for borrowed monies
computed on a Company fiscal year basis. Interest shall be payable at the
maturity hereof. All payments shall be applied first to pay accrued but unpaid
interest, and the remainder to reduce the outstanding principal amount hereof.
In no event shall the rate of interest hereunder exceed that permitted by law
and if fulfillment of the obligations hereunder would violate the usury limit of
applicable law, the obligations hereunder shall be automatically reduced to the
limit of validity.
This Note may be prepaid in whole or in part, without premium or
penalty at any time.
The occurrence of any one of the following events shall constitute an
event of default hereunder:
(a) The Maker shall fail to pay within 10 days after written notice of
any failure to pay any amount due hereunder.
(b) The Maker shall commence a voluntary case under the federal
bankruptcy laws, shall seek to take advantage of any insolvency laws, shall make
an assignment for the benefit of creditors,
C:\WP\SEC\10Q97\EXH10 6.WPD
1
<PAGE>
shall apply for, consent to or acquiesce in the appointment of, or taking
possession by, a trustee, receiver, custodian or similar official or agent for
itself or any substantial part of its property, or shall take any action
authorizing or seeking to effect any of the foregoing.
(c) A trustee, receiver, custodian or similar official or agent shall
be appointed for the Maker or any substantial part of its property, or all or
any substantial part of the property of the Maker is condemned, seized or
otherwise appropriated by any governmental authority.
(d) The Maker shall have an order or decree for relief in any voluntary
or involuntary case under the federal bankruptcy laws entered against it, or any
involuntary petition seeking reorganization, liquidation, readjustment,
arrangement, composition, or other similar relief as to it under the federal
bankruptcy laws, or any similar law for the relief of debtors, shall be brought
and shall be consented to or shall remain undismissed.
In the event that an event of default described in paragraph (c) or (d)
above is cured by the Maker, such event shall no longer constitute an event of
default.
Not in limitation of any other right under any other agreement or at
law or in equity, if any event of default hereunder shall have occurred the
holder hereof may, upon notice to the Maker, declare all obligations under this
Note to be, and thereupon the same shall become, immediately due and payable by
the Maker without presentment, demand, protest or further notice of any kind,
all of which are hereby expressly waived by the Maker.
The due date of this Note shall be accelerated in the event of the
Maker's death or his disability, as defined and determined in the employment
agreement between the Maker and the Company dated 1/1/97. In the event of death
of the Maker, payment of principal and interest on this Note shall be due and
payable within 60 days after the date of death. In the event of disability, as
defined, payment of principal and interest on this Note shall be due and payable
on the first day of the 13th month following the determination of disability.
The Maker and all endorsers hereof hereby waive presentment, demand,
protest, notice of protest, notice of dishonor and all other forms of demand and
notice concerning this Note and consent to each and every extension or
postponement of the time of payment or other indulgence with respect to this
Note, and to each and every substitution, addition, exchange or release of
collateral and to the addition, substitution or release of any person primarily
or secondarily liable hereunder. No delay or omission by the Payee or other
holder hereof in exercising any right or power hereunder shall operate as a
waiver of such right or power, and a waiver on one occasion shall not be
construed as a waiver or a bar to the exercise of any right on any other
occasion. Any provision in this Note which is prohibited by law shall be
ineffective to the extent of such prohibition without invalidating any other
provision hereof.
The rights and remedies of the holder of this Note as provided in this
Note shall be cumulative and concurrent, and may be pursued singly,
successively, or together against the Payee for the payment hereof or otherwise
at the sole discretion of the Payee. The failure to exercise any
C:\WP\SEC\10Q97\EXH10 6.WPD
2
<PAGE>
such right or remedy shall in no event be construed as a waiver or release of
said rights or remedies or of the right to exercise them at any time later.
This Note may not be changed or terminated orally, but only by a
writing signed by the Maker and the Payee. This Note may not be endorsed,
assigned or transferred by the Payee without the consent of Maker.
The Note shall be governed and construed under the substantive laws of
the State of Pennsylvania, without regard to its conflicts of laws principles.
This Note and the attached Pledge and Security Agreement constitute the entire
agreement of the Maker and the Payee with respect to the indebtedness evidenced
hereby. Pursuant to the terms of the Pledge and Security Agreement, Maker has
collateralized this Note with 50,000 shares of the Maker's Common Stock.
The Maker agrees to pay all costs, charges and expenses incurred by the
Payee and its assigns (including, without limitation, costs of collection, court
costs and reasonable attorneys' fees and disbursements) in connection with the
enforcement of the Payee's rights under this Note.
This Note supersedes and replaces Note No. 3 between the parties dated
November 14, 1995 in the principal amount of $300,000, which prior note is
hereby cancelled.
Executed as a sealed instrument as of the date set forth above.
Myron Levy
C:\WP\SEC\10Q97\EXH10 6.WPD
3
HERLEY INDUSTRIES, INC.
AND SUBSIDIARIES
Exhibit 11
COMPUTATION OF PER SHARE EARNINGS
<TABLE>
<CAPTION>
Thirteen weeks ended
------------------------------------------
May 4, 1997 April 28, 1996
--------------- ------------------
Primary Fully Diluted Primary Fully Diluted
----------- ------------- ----------- -------------
<S> <C> <C> <C> <C>
Net Income $ 1,450,567 $ 1,450,567 $ 777,477 $ 777,477
=========== =========== =========== ===========
Weighted average shares outstanding:
Shares outstanding from beginning of period 3,115,846 3,115,846 2,802,274 2,802,274
Shares issued for options exercised 71,942 71,942 11,326 11,326
Treasury shares acquired (57,765) (57,765) (16,608) (16,608)
Common equivalents - options and warrants 383,061 383,061 222,116 222,116
Common equivalents - using period end price -- -- -- 137,794
----------- ----------- ----------- -----------
Weighted average common and common
equivalent shares outstanding 3,513,084 3,513,084 3,019,108 3,156,902
=========== =========== =========== ===========
Earnings per common and
common equivalent share: $ .41 $ .41 $ .26 $ .25
=========== =========== =========== ===========
Forty weeks ended Thirty-nine weeks ended
May 4, 1997 April 28, 1996
----------------- -----------------------
Primary Fully Diluted Primary Fully Diluted
----------- ------------- ---------- -------------
Adjustment of net income:
Net Income $ 3,101,874 $ 3,101,874 $ 2,830,457 $ 2,830,457
Add elimination of interest, net of tax
benefit, under the modified treasury
stock method -- -- 77,222 --
----------- ----------- ----------- -----------
Adjusted net income $ 3,101,874 $ 3,101,874 $ 2,907,679 $ 2,830,457
=========== =========== =========== ===========
Weighted average shares outstanding:
Shares outstanding from beginning of period 2,936,122 2,936,122 3,015,988 3,015,988
Shares issued for options exercised 213,690 213,690 3,775 3,775
Treasury shares acquired (95,240) (95,240) (200,122) (200,122)
Common equivalents - options and warrants 481,016 481,016 548,063 548,063
Common equivalents - using period end price -- -- -- 53,567
----------- ----------- ----------- -----------
Weighted average common and common
equivalent shares outstanding 3,535,588 3,535,588 3,367,704 3,421,271
=========== =========== =========== ===========
Earnings per common and
common equivalent share: $ .88 $ .88 $ .86 $ .83
=========== =========== =========== ===========
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE UNAUDITED CONSOLIDATED FINANCIAL
STATEMENTS FOR THE 40 WEEKS ENDED MAY 4, 1997 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> AUG-03-1997
<PERIOD-START> JUL-29-1996
<PERIOD-END> MAY-04-1997
<CASH> 627,276
<SECURITIES> 0
<RECEIVABLES> 5,734,080
<ALLOWANCES> 0
<INVENTORY> 9,107,668
<CURRENT-ASSETS> 19,618,351
<PP&E> 24,335,032
<DEPRECIATION> 12,521,281
<TOTAL-ASSETS> 38,318,256
<CURRENT-LIABILITIES> 8,724,544
<BONDS> 0
0
0
<COMMON> 310,288
<OTHER-SE> 23,358,907
<TOTAL-LIABILITY-AND-EQUITY> 38,318,256
<SALES> 23,080,159
<TOTAL-REVENUES> 23,080,159
<CGS> 15,365,629
<TOTAL-COSTS> 19,648,461
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 443,362
<INCOME-PRETAX> 3,284,274
<INCOME-TAX> 182,400
<INCOME-CONTINUING> 3,101,874
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,101,874
<EPS-PRIMARY> 0.88
<EPS-DILUTED> 0.88
</TABLE>
