SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES AND EXCHANGE COMMISSION
For the fiscal year ended August 3, 1997
Commission File No. 0-5411
Herley Industries, Inc.
(Exact name of registrant as specified in its charter)
Delaware 23-2413500
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
10 Industry Drive, Lancaster, Pennsylvania 17603
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: (717) 397-2777
Securities registered pursuant to Section 12(b) of the Act:
Name of Exchange on
Title of Class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $ .10 par value
(Title of Class)
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. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (Sec. 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. [X]
Based on the closing sale price of $13.75 as of December 1, 1997, the
aggregate market value of the voting stock held by non-affiliates of the
registrant was $36,095,716.
The number of shares outstanding of registrant's common stock, $.10 par
value was 4,541,146 as of December 1, 1997.
Documents incorporated by reference: None
<PAGE>
PART III
ITEM TEN - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are as follows:
<TABLE>
<CAPTION>
Name Age Position(s) with the Company
<S> <C> <C>
Lee N. Blatt 69 Chairman of the Board and Chief Executive
Officer
Myron Levy 57 President and Director
Anello C. Garefino 50 Vice President-Finance, Treasurer and Chief
Financial Officer
Allan Coon 61 Vice President
Adam J. Bottenfield 37 Vice President-Engineering
Ray Umbarger 50 Vice President-Domestic Marketing
George Hopp 59 Vice President-International Marketing
Glenn Rosenthal 37 Vice President
David H. Lieberman 52 Secretary and Director
Adm.Thomas J. Allshouse (Ret.) 72 Director, Member of Compensation and
Audit Committees
Alvin M. Silver 66 Director, Member of Compensation and Audit
Committees
John A. Thonet 47 Director
Adm. Edward K. Walker, Jr.
(Ret.) 64 Director, Member of Compensation and
Audit Committees
</TABLE>
Mr. Lee N. Blatt is a co-founder of the Company and has been Chairman of
the Board of the Company since its organization in 1965. Mr. Blatt holds a
Bachelors Degree in Electrical Engineering from Syracuse University and a
Masters Degree in Business Administration from City College of New York. Mr.
Blatt's term as a director expires at the 1997 annual meeting of stockholders.
Mr. Myron Levy has been President of the Company since June 1993 and served
as Executive Vice President and Treasurer since May 1991, and prior thereto as
Vice President for Business Operations and Treasurer since October 1988. For
more than ten years prior to joining the Company, Mr. Levy, a certified public
accountant, was employed in various executive capacities, including
Vice-President, by Griffon Corporation (formerly Instrument Systems
Corporation). Mr. Levy's term as a director expires at the 1998 annual meeting
of stockholders.
Mr. Anello C. Garefino has been employed by the Company in various
executive capacities for more than the past five years. Mr. Garefino, a
certified public accountant, was appointed Vice President-Finance, Treasurer and
Chief Financial Officer in June 1993. From 1987 to January 1990, Mr. Garefino
was Corporate Controller of Exide Corporation.
Mr. Allan Coon joined the Company in 1992 and was appointed as a Vice
President in December 1995. Prior to joining the Company, Mr. Coon was Senior
Vice President and Chief Financial Officer of Alpha Industries, Inc. , a
publicly traded company engaged in military and commercial electronic programs.
<PAGE>
Mr. Adam J. Bottenfield was appointed Vice President - Engineering in July
1997. Mr. Bottenfield has been employed by the Company as Systems Engineering
Manager of Herley-Vega Systems since the Company's acquisition of Vega in 1993.
From 1984 to 1993, Mr. Bottenfield was Manager of Digital and Software
Engineering of Vega.
Mr. Ray Umbarger was appointed Vice President - Domestic Marketing in July
1997, having been employed by the Company since June 1995. For more than ten
years prior to that, Mr. Umbarger served in the U.S. Navy where he was a
Captain. His responsibilities in the Navy included the design, development
production, deployment and life cycle support of all Navy, and in some cases,
all Department of Defense target systems. Mr. Umbarger received a Bachelors
Degree in Aeronautical Engineering from the U.S. Naval Academy, a Masters Degree
in Aeronautical Engineering from Princeton University and a Masters Degree in
Business Adminstration from Monmouth College.
Mr. George Hopp was appointed Vice President - International Marketing in
July 1997. Mr. Hopp has been employed by the Company in a sales and marketing
position since 1995 and directs the operations of the Company's GSS division.
For more than ten years prior to joining the Company, Mr. Hopp was Director of
International Programs for Northrop Grumman, Military Aircraft Division.
Mr. Glenn Rosenthal was appointed Vice President of the Company in August
1997. From June 1988 until its acquisition by the Company in August 1997, Mr.
Rosenthal was employed by Metraplex Corporation holding the positions of
President (from June 1996) and Chief Operating Officer (from 1995). Mr.
Rosenthal holds a Bachelors Degree in Engineering from Carnegie Mellon
University.
Mr. David H. Lieberman has been a director of the Company since 1985 and
Secretary of the Company since 1994. Mr. Lieberman has been a practicing
attorney in the State of New York for more than the past ten years and is a
member of the firm of Blau, Kramer, Wactlar & Lieberman, P.C., general counsel
to the Company. Mr. Lieberman's term as a director expires at the 1999 annual
meeting of stockholders.
Admiral Thomas J. Allshouse (Ret.) has been a director of the Company since
September 1983. Prior to 1981, when he retired from the United States Navy,
Admiral Allshouse served for 34 years in various naval officer positions,
including acting as commanding officer of the United States Naval Ships Parts
Control Center. Admiral Allshouse holds a Bachelors Degree in Engineering from
the United States Naval Academy and a Masters Degree in Business Administration
from Harvard University. Admiral Allshouse's term as a director expires at the
1999 annual meeting of stockholders.
Mr. John A. Thonet has been a director of the Company since 1991 and
President of Thonet Associates, an environmental consulting firm specializing in
land planning and zoning matters for the past ten years. Mr. Thonet is the
son-in-law of Mr. Blatt. Mr. Thonet's term as a director expires at the 1998
annual meeting of stockholders.
Dr. Alvin M. Silver has been a director of the Company since October 1997.
Since 1977, Dr. Silver has been Executive Vice President of the Ademco Division
of Pittway Corporation. Dr. Silver holds a Bachelors Degree in Industrial
Engineering from Columbia University, a Masters Degree in Industrial Engineering
from Stevens Institute of Technology and a Doctor of Engineering Science Degree
in Industrial Engineering/Operations Research from Columbia University. Dr.
Silver is a Professor at the Frank G. Zarb School of Business of Hofstra
University. Mr. Silver's term as a director expires at the 1998 annual meeting
of stockholders.
<PAGE>
Admiral Edward K. Walker, Jr. (Ret.) has been a director of the Company
since October 1997. Since his retirement from the United States Navy in 1988,
Admiral Walker has been the Director of Corporate Strategy for Resource
Consultants, Inc., a member of Gilbert Associates, Inc. which is a professional
services company supporting the Department of Defense, particularly the Navy, in
a wide range of technical, engineering and management disciplines. Prior to his
retirement from the United States Navy, Admiral Walker served for 34 years in
various naval officer positions, including Commander of the Naval Supply Systems
Command, and Chief of Supply Corps. Admiral Walker holds a Bachelors Degree from
the United States Naval Academy and Masters Degree in Business Administration
from The George Washington University. Admiral Walker's term as a director
expires at the 1997 annual meeting of stockholders.
Mr. Gerald Klein, Chief Technologist for the Company since March 1994, has
been employed by the Company since 1988, serving as Chief Operating Officer and
Executive Vice President from July 1988 until December 1996 and was a director
of the Company from 1991 until December 1996.
ITEM ELEVEN - EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation with
respect to the Chairman/Chief Executive Officer, the Company's four most highly
compensated executive officers other than the Chief Executive Officer and one
individual who served as an executive officer for a portion of fiscal year 1997
and all of fiscal years 1996 and 1995 (the "named executive officers") for
services rendered for the fiscal years ended August 3, 1997, July 28, 1996 and
July 30, 1995.
<PAGE>
<TABLE>
<CAPTION>
Summary Compensation Table
Annual Compensation (1) Long-Term Compensation
Name and Securities
Principal Fiscal Underlying All Other
Position Year Salary(2) Bonus(3) Options/SARs(4) Compensation
- ----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lee N. Blatt 1997 $531,629 $302,432 599,999(5) $4,500(6)
Chairman of 1996 483,028 203,068 133,333(7) 4,500
the Board 1995 503,842 - 133,333 4,620
Myron Levy 1997 $307,764 $181,460 400,000(5) $9,000(6)
President 1996 288,726 121,841 66,667(7) 7,380
1995 295,331 27,500 66,666 6,636
Allan Coon 1997 $110,011 - 73,332(5) $5,751(6)
Vice President 1996 110,011 $30,000 13,333(7) 4,569
1995 99,008 15,000 - 4,245
Anello C. Garefino 1997 $101,914 - 59,999(5) $3,579(6)
Vice President 1996 97,885 $15,000 13,333(7) 3,424
Finance-Treasurer 1995 90,620 - 13,333 3,173
George Hopp 1997 $107,615 - 18,666(5) $1,422(6)
Vice President 1996 104,000 - - 1,185
1995 44,000 - 6,667 -
Gerald I. Klein(8) 1997 $307,764 $181,460 99,999(5) $4,500(6)
1996 288,726 121,841 66,667(7) 4,500
1995 295,328 - 66,666 4,620
<PAGE>
- --------
<FN>
(1) Does not include Other Annual Compensation because amounts of certain
perquisites and other non-cash benefits provided by the Company do not
exceed the lesser of $50,000 or 10% of the total annual base salary and
bonus disclosed in this table for the respective officer.
(2) Amounts set forth herein include cost of living adjustments under employment
contracts.
(3) Represents for Messrs. Blatt, Levy and Klein incentive compensation under
employment agreements. No incentive compensation was earned under the
employment agreements in fiscal 1995. Mr. Levy was awarded a bonus by the
Board of Directors for fiscal 1995.
(4) Adjusted to give effect to a four-for-three stock split on September 30,
1997. This table includes warrants issued to these individuals outside
the stock option plans.
(5) Consisting of the following options issued in October 1996 for the right to
purchase Common Stock of the Company at a price of $6.9375: Lee N.
Blatt - 133,333; Myron Levy - 100,000, Allan Coon - 26,666, Anello C.
Garefino - 13,333; options granted in February 1997 at a price of $8.3438
and repriced to $6.0938 in April 1997: Lee N. Blatt 133,333, Myron Levy -
100,000, Allan Coon - 20,000, Anello C. Garefino - 20,000, Gerald I.
Klein - 33,333 and George Hopp - 5,333; and options granted in May 1997 at
a price of $6.4688: Lee N. Blatt - 333,333, Myron Levy - 200,000, Allan
Coon - 26,666, Anello C. Garefino - 26,666, Gerald
I. Klein - 66,666 and George Hopp - 13,333.
(6) All Other Compenation includes: (a) group term life insurance as follows:
$4,500 for Mr. Levy, $2,387 for Mr. Coon, $522 for Mr. Garefino, and $1,422
for Mr. Hopp, and (b) contributions to the Company's 401(k) Plan as a
pre-tax salary deferral as follows: $4,500 for each of Messrs. Blatt,
Levy and Klein, $3,364 for Mr. Coon, and $3,057 for Mr. Garefino.
(7) Represents warrants issued in December 1995 for the right to
purchase Common Stock of the Company at a price of $4.6425.
(8) Effective December 1996, Mr. Klein ceased to serve as an executive officer
of the Company.
</FN>
</TABLE>
<PAGE>
Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Potential Realized Value at
Assumed Annual Rates of
Stock Price Appreciation
Individual Grants (1) Option Term (4)
------------------------------------------------------- ----------------------------
Number of
Securities % of Total
Underlying Options Issued Exercise
Options to Employees in Price Expiration
Name Granted(2) Fiscal Year(3) ($/Sh) Date 0% 5% 10%
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Lee N. Blatt 133,333 9 $6.9375 10/08/06 $0.00 $255,559 $564,720
133,333 9 $6.0938 04/04/07 $0.00 $224,480 $496,042
333,333 24 $6.4688 05/01/07 $0.00 $1,356,063 $3,436,530
Myron Levy 100,000 7 $6.9375 10/08/06 $0.00 $191,670 $423,541
100,000 7 $6.0938 04/04/07 $0.00 $168,360 $372,032
200,000 14 $6.4688 05/01/07 $0.00 $813,638 $2,061,920
Allan Coon 26,666 2 $6.9375 10/08/06 $0.00 $51,111 $112,942
20,000 1 $6.0938 04/04/07 $0.00 $33,672 $74,406
26,666 2 $6.4688 05/01/07 $0.00 $108,482 $274,916
Anello C. Garefino 13,333 1 $6.9375 10/08/06 $0.00 $25,555 $56,470
20,000 1 $6.0938 04/04/07 $0.00 $33,672 $74,406
26,666 2 $6.4688 05/01/07 $0.00 $108,482 $274,916
George Hopp 5,333 - $6.0938 04/04/07 $0.00 $8,979 $19,840
13,333 1 $6.4688 05/01/07 $0.00 $54,241 $137,458
Gerald I. Klein 33,333 2 $6.0938 04/04/07 $0.00 $56,120 $124,009
66,666 5 $6.4688 05/01/07 $0.00 $271,210 $687,301
- --------
<FN>
(1) Adjusted to give effect to a four-for-three stock split on September 30,
1997. This table includes warrants issued to these individuals outside the
stock option plans.
(2) Options were issued in fiscal 1997 at 100% of the closing price of the
Company's Common Stock on dates of issue and vest as follows: Lee N. Blatt-
all options vest at date of grant; Myron Levy, Allan Coon, Anello C.
Garefino and Gerald I. Klein - one third of the options vest at date of
grant, one-third vest one year from date of grant and the balance vest two
years from date of grant; George Hopp - one fifth of the options vest
one year from date of grant and one fifth each year thereafter.
(3) Total options issued to employees and directors in fiscal 1997 were for
1,465,649 shares of Common Stock.
(4) The amounts under the columns labeled "5%" and "10%" are included by the
Company pursuant to certain rules promulgated by the Commission and
are not intended to forecast future appreciation, if any, in the price of
the Common Stock. Such amounts are based on the assumption that the
named persons hold the options for the full term of the options. The
actual value of the options will vary in accordance with the market price
of the Common Stock. The column headed "0%" is included to demonstrate
that the options were issued with an exercise price equal to the trading
price of the Common Stock so that the holders of the options will not
recognize any gain without an increase in the stock price, which increase
benefits all stockholders commensurately.
</FN>
</TABLE>
<PAGE>
Aggregate Option/SAR Exercises in Last Fiscal Year and Fiscal Year End
Option/SAR Values
The following table sets forth stock options exercised during fiscal 1997
and all unexercised stock options and warrants held by the named executive
officers as of August 3, 1997.
<TABLE>
<CAPTION>
Shares Number of Unexercised Options Value of Unexercised In-the-Money
Acquired Value and Warrants at Fiscal Year-End(2) Options and Warrants at Fiscal Year-End (3)
Name Exercise(#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisabale
- ---------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Lee N. Blatt 688,886 $3,203,301 133,333 177,779 $706,532 $785,698
Myron Levy 264,441 1,255,128 66,667 255,558 353,293 969,833
Allan Coon 10,000 70,625 32,222 41,110 109,350 140,202
Anello Garefino 41,109 200,659 13,333 38,889 70,657 153,102
George Hopp 4,443 22,442 2,667 18,222 10,261 72,993
Gerald Klein 163,330 854,708 66,667 83,335 353,293 382,947
- --------
<FN>
(1) Values are calculated by subtracting the exercise price from the trading price of the Common Stock as of
the exercise date.
(2) Adjusted to give effect to a four-for-three stock split on September 30, 1997.
(3) Based upon the trading price of the Common Stock of $9.94 on August 3, 1997, as adjusted to
give effect to the four-for-three stock split on September 30, 1997.
</FN>
</TABLE>
<PAGE>
Employment Agreements
Lee N. Blatt has entered into a new employment agreement with the Company,
dated as of November 1, 1997, which provides for a three year term, terminating
on October 31, 2000. Pursuant to the agreement, Mr. Blatt receives compensation
consisting of a base salary of $375,000, with an annual cost of living increase
and an incentive bonus. Mr. Blatt's incentive bonus is 5% of the pretax income
of the Company in excess of 10% of the Company's stockholders' equity for
specific periods, as adjusted for stock issuances. Mr. Blatt's incentive bonus
cannot exceed his base salary.
Myron Levy has entered into a new employment agreement with the Company,
dated as of November 1, 1997, which provides for a five year term, terminating
on October 31, 2002, and a five year consulting period commencing at the end of
the employment period. Pursuant to the agreement, Mr. Levy receives compensation
consisting of a base salary of $275,000, with an annual cost of living increase
and an incentive bonus. Mr. Levy's incentive bonus is 4% of the pretax income of
the Company in excess of 10% of the Company's stockholders' equity for specific
periods, as adjusted for stock issuances. Mr. Levy's incentive bonus cannot
exceed his base salary.
Gerald Klein has entered into a new employment agreement with the Company,
dated as of November 1, 1997, which provides for a four year term, and a
follow-on consulting contract commencing at the end of his full-time employment
and terminating on December 31, 2010. Pursuant to the agreement, Mr. Klein
receives compensation consisting of a base salary of $275,000, with an annual
cost of living increase and an incentive bonus. Mr. Klein's incentive bonus is
3% of the pretax income of the Company in excess of 10% of the Company's
stockholders' equity for specific periods, as adjusted for stock issuances. Mr.
Klein's incentive bonus cannot exceed his base salary.
The employment agreements with Messrs. Blatt, Levy and Klein provide for
certain payments following death or disability. The employment agreements also
provides, in the event of a change in control of the Company, as defined
therein, the right, at their election, to terminate the agreement and receive a
lump sum payment of approximately twice their annual salary.
Glenn Rosenthal entered into an employment agreement with the Company and
Metraplex, dated as of August 4, 1997, which provides for a three year term,
terminating on August 4, 2000. Pursuant to this agreement, Mr. Rosenthal
receives annual compensation consisting of a base salary of $130,000 and an
incentive bonus based on 3% of the pre-tax income of Metraplex. The employment
agreement also provides that if Mr. Rosenthal is relocated out of Frederick,
Maryland, he shall receive $260,000 if during the first year of the employment
agreement, $195,000 if during the second year, and $130,000 if during the third
year or beyond.
In addition, Allan Coon has entered into a severance agreement with the
Company, dated June 11, 1997, which provides that in the event Mr. Coon is
terminated other than for cause prior to June 11, 1999, he is entitled to two
years' base salary and in the event he is so terminated after June 11, 1999 and
before June 11, 2002, he is entitled to one year's base salary. Mr. Coon's
present base salary is $110,000.
<PAGE>
Table of Ten-Year Option Repricings
The following table sets forth information concerning options of the named
executive officers that were repriced during fiscal 1997.
<TABLE>
<CAPTION>
Market Price Length of Original
Number of Securities of Stock at Exercise Price Option Term
Underlying Options Time of at Time of New Remaining at Date of
Repriced or Repricing or Repricing or Exercise Repricing or
Name Date Amended (#) Amendment ($) Amendment ($) Price ($) Amendment (Yrs)
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Lee N. Blatt 4/8/97 133,333 $6.0938 $8.3438 $6.0938 9 years, 10 months
Myron Levy 4/8/97 100,000 $6.0938 $8.3438 $6.0938 9 years, 10 months
Gerald I. Klein 4/8/97 33,333 $6.0938 $8.3438 $6.0938 9 years, 10 months
Anello C. Garefino 4/8/97 20,000 $6.0938 $8.3438 $6.0938 9 years, 10 months
Allan Coon 4/8/97 20,000 $6.0938 $8.3438 $6.0938 9 years, 10 months
</TABLE>
The Board of Directors determined to reprice the above described stock
options to strengthen the link that the Company believes exists between
executive compensation and corporate objectives.
<PAGE>
ITEM TWELVE - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The following table sets forth the indicated information as of November 18,
1997 with respect to the beneficial ownership of the Company's securities by:
(i) all persons known to the Company to be beneficial owners of more than 5% of
the outstanding shares of Common Stock, (ii) each director and named executive
officer of the Company, and (iii) by all executive officers and directors as a
group:
<TABLE>
<CAPTION>
Shares of Common
Stock Beneficially
Name Owned (1)(5)
- ---- -------------------
Shares Percent
------ -------
<S> <C> <C>
Lee N. Blatt (2)(4)(5) 913,065 19.3%
Myron Levy (4)(5)(6) 396,687 8.5%
Gerald I. Klein (4)(5) 356,186 7.7%
Anello C. Garefino(4)(5) 47,440 1.0%
Allan Coon(4) 45,555 1.0%
George Hopp (4) 7,111 -
Adm. Thomas J. Allshouse(4)(5) 32,798 -
David H. Lieberman(4)(5) 20,799 -
John A. Thonet (3)(4)(5) 28,359 -
Alvin M. Silver - -
Adm. Edward K. Walker, Jr. (Ret.) - -
Directors and executive
officers as a group
(14 persons) 1,518,471 30.3%
- ---------
<FN>
(1) No officer or director owns more than one percent of the outstanding
shares of Common Stock unless otherwise indicated. Ownership represents sole
voting and investment power.
(2) Does not include an aggregate of 562,259 shares owned by family
members, including Hannah Thonet, Rebecca Thonet, Kathi Thonet, Randi Rossignol,
Max Rossignol, Henry Rossignol, Patrick Rossignol and Allyson Gerber, of which
Mr. Blatt disclaims beneficial ownership.
(3) Does not include 153,332 shares, owned by Mr. Thonet's children, Hannah
and Rebecca Thonet, and 156,309 shares owned by his wife, Kathi Thonet. Mr.
Thonet disclaims beneficial ownership of these shares.
(4) Includes shares subject to options exercisable within the 60 days after
December 1, 1997 at prices ranging from $2.535 to $6.9375 per share pursuant to
the Company's Stock Plans: Lee N. Blatt - 66,667, Myron Levy - 50,002, Anello C.
Garefino - 6,667, Allan Coon - 45,555, George Hopp - 2,667, Adm. Thomas J.
Allshouse - 6,665, David H. Lieberman - 6,666, John A. Thonet - 6,666.
(5) Includes shares subject to outstanding warrants exercisable within 60
days after December 1, 1997 at a price of $4.6425: Lee N. Blatt - 133,333, Myron
Levy - 66,667, Gerald I. Klein - 66,667, Anello C. Garefino - 13,333, and the
following at a price of $5.3475: Adm. Thomas J. Allshouse - 13,333, David H.
Lieberman - 13,333, John A. Thonet - 13,333.
(6) Does not include 12,666 shares owned by Mr. Levy's children, Stephanie
Levy and Ronnie Roth, of which Mr. Levy disclaims beneficial ownership.
</FN>
</TABLE>
<PAGE>
ITEM THIRTEEN - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
In November 1995 and March 1996, the Company loaned $1,400,000, $300,000
and $300,000, to Messrs. Blatt, Levy and Klein, respectively, as authorized by
the Board of Directors, pursuant to the terms of non-negotiable promissory
notes. The loans are secured by 315,774, 50,000, and 80,000 shares of Common
Stock, respectively. The notes were initially due November 1996, March 1997 and
March 1997, respectively. The notes were extended by the Company and are now due
April 30, 1998, January 31, 1998 and January 31, 1998, respectively. Interest is
payable at maturity at the average rate of interest paid by the Company on
borrowed funds during the fiscal year. The pledge agreement also provides for
the Company to have the right of first refusal to purchase the pledged
securities, based on a formula as defined, in the event of the death or
disability of the officer.
On March 6, 1996, the Board of Directors, by action of the disinterested
directors, approved the purchase of an industrial parcel of land from the
Chairman of the Company for $940,000. A deposit of $94,000 was paid on execution
of the contract, and the balance of $846,000 will be paid at settlement on or
before March 31, 1998. The Company intends to use this land for possible future
expansion.
Stock Plans
Certain officers and directors of the Company hold options or warrants to
purchase Common Stock under the Company's 1992 Non-Qualified Stock Option Plan,
1996 Stock Option Plan, 1997 Stock Option Plan (collectively, the "Stock Plans")
and warrant agreements.
1992 Non-Qualified Stock Option Plan.
The 1992 Non-Qualified Stock Option Plan covers 1,333,333 shares of Common
Stock. Under the terms of the plan, the purchase price of the shares, subject to
each option granted, is 100% of the fair market value at the date of grant. The
date of exercise is determined at the time of grant by the Compensation
Committee or the Board of Directors. If not specified, 50% of the shares can be
exercised each year beginning one year after the date of grant. The options
expire ten years from the date of grant. In December 1995, this plan was
terminated except for outstanding options thereunder. At August 3, 1997,
non-qualified options to purchase 151,127 shares of Common Stock were
outstanding under this plan.
1996 Stock Option Plan.
The 1996 Stock Option Plan covers 666,667 shares of Common Stock. Options
granted under the plan may be incentive stock options qualified under Section
422 of the Internal Revenue Code of 1986, as amended (the "Internal Revenue
Code") or non-qualified stock options. Under the terms of the plan, the exercise
price of options granted under the plan will be the fair market value at the
date of grant. The nature and terms of the options to be granted are determined
at the time of grant by the Compensation Committee or the Board of Directors. If
not specified, 100% of the shares can be exercised one year after the date of
grant. The options expire ten years from the date of grant. Options for 663,997
shares of Common Stock were granted during the fiscal year ended August 3, 1997.
At August 3, 1997, non-qualified options to purchase 394,662 shares of Common
Stock were outstanding under this plan.
<PAGE>
1997 Stock Option Plan.
The 1997 Stock Option Plan covers 1,666,667 shares of Common Stock. Options
granted under the plan may be incentive stock options qualified under Section
422 of the Internal Revenue Code or non-qualified stock options. Under the terms
of the plan, the exercise price of options granted under the plan will be the
fair market value at the date of grant. The nature and terms of the options to
be granted are determined at the time of grant by the Compensation Committee or
the Board of Directors. If not specified, 100% of the shares can be exercised
one year after the date of grant. The options expire ten years from the date of
grant. Options for 800,665 shares of Common Stock were granted during the fiscal
year ended August 3, 1997. At August 3, 1997, options to purchase 369,553 shares
of Common Stock were outstanding under this plan.
Warrant Agreements.
In April 1993, common stock warrants were issued to certain officers and
directors for the right to acquire 573,333 shares of Common Stock at an exercise
price of $5.3475 per share, which was the closing price of the Common Stock on
the date of issue. In December 1995, warrants with respect to 533,333 of these
shares were canceled. The warrants expire April 30, 1998. In December 1995,
warrants were issued to certain officers for the right to acquire 293,333 shares
of Common Stock at an exercise price of $4.6425 per share at date of issue.
These warrants expire December 13, 2005.
Employee Savings Plan
The Company maintains an Employee Savings Plan that qualifies as a thrift
plan under Section 401(k) of the Internal Revenue Code. This plan allows
employees to contribute between 2% and 15% of their salaries to the plan. The
Company, at its discretion, can contribute 100% of the first 2% of the
employees' salary so contributed and 25% of the next 4% of salary. Additional
Company contributions can be made, depending on profits. The aggregate benefit
payable to an employee depends upon the employee's rate of contribution, the
earnings of the fund, and the length of time such employee continues as a
participant. The Company accrued approximately $178,000 for the fiscal year
ended August 3, 1997 and contributed approximately $159,000 and $151,000 to this
plan for the years ended July 28, 1996 and July 30, 1995, respectively. For the
year ended August 3, 1997, $4,500, $4,500, $3,364, and $3,057 was contributed by
the Company to this plan for Messrs. Blatt, Levy, Coon and Garefino,
respectively, and $20,452 was contributed for all officers and directors as a
group.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Company has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized on the 2nd day of
December, 1997.
Herley Industries, Inc.
By: /s/ Lee N. Blatt
--------------------------
Lee N. Blatt
Chairman of the Board
(Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below on December 2, 1997 by the following persons in
the capacities indicated:
Signature Title/Capacity
--------- --------------
/s/ Lee N. Blatt Chairman of the Board
- -----------------------------
Lee N. Blatt (Chief Executive Officer)
/s/ Myron Levy President and Director
- -----------------------------
Myron Levy
/s/ Anello C. Garefino Vice President - Finance, Treasurer
- -----------------------------
Anello C. Garefino (Chief Financial Officer and
Principal Accounting Officer)
/s/ Thomas J. Allshouse Director
- -----------------------------
Thomas J. Allshouse
/s/ David H. Lieberman Secretary and Director
- -----------------------------
David H. Lieberman
/s/ John Thonet Director
- -----------------------------
John Thonet
- ----------------------------- Director
Alvin M. Silver
/s/ Edward K. Walker, Jr. Director
- -----------------------------
Edward K. Walker, Jr.
