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 1, 1999
Commission File No. 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 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. [X] Yes [ ] No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K 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 $12.0625 as of November 1, 1999, the
aggregate market value of the voting stock held by non-affiliates of the
registrant was $45,278,379.
The number of shares outstanding of registrant's common stock, $.10 par
value was 4,577,728 as of November 1, 1999.
Documents incorporated by reference: None
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PART III
ITEM TEN - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are as follows:
Name Age Position(s) with the Company
- -------------------------------- --- --------------------------------------
Lee N. Blatt 71 Chairman of the Board and
Chief Executive Officer
Myron Levy 59 President and Director
Anello C. Garefino 52 Vice President-Finance, Treasurer
and Chief Financial Officer
Allan L. Coon 63 Senior Vice President
Adam J. Bottenfield 39 Vice President-Engineering
Ray Umbarger 52 Vice President-Domestic Marketing
George Hopp 61 Vice President-International Marketing
Mark A. Krumm 53 Vice President-Business Development
Howard M. Eckstein 48 Vice President
Mitchell Tuckman 48 Vice President
Richard Poirier 34 Vice President
Dr. Chandra Gupta 45 Vice President
David H. Lieberman 54 Secretary and Director
Adm.Thomas J. Allshouse (Ret.) 74 Director, Member of Compensation and
Audit Committees
Alvin M. Silver 68 Director, Member of Compensation and
Audit Committees
John A. Thonet 49 Director
Adm. Edward K. Walker, Jr. (Ret.) 66 Director, Member of Compensation and
Audit Committees
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 2000 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 2001 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 L. Coon joined the Company in 1992 and was appointed Senior Vice
President in December 1998, and served as a Vice President since 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.
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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 Administration 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. Mark A. Krumm was appointed Vice President for Business Development
upon joining the Company in November 1997. For more than 10 years prior to
joining the Company, Mr. Krumm was program manager for various electronic
defense systems with Harris Corporation. Mr. Krumm has a Bachelors Degree in
Aerospace engineering from St. Louis University and holds a Masters Degree in
Business Administration from Southern Illinois University.
Mr. Howard M. Eckstein was appointed Vice President - General Manager ,
Herley Vega in December 1998 and was Vice President-New Product Development upon
joining the Company in April 1998. Mr. Eckstein has 25 years experience in the
design and development of aerospace telemetry equipment and systems. Mr.
Eckstein served from 1992 to 1998 as Vice President - Advanced Products for L3
Communications, and as Vice President - Engineering from 1986 to 1992. Mr.
Eckstein earned his Bachelors Degree in Electrical Engineering from the
Pennsylvania State University and holds a Masters Degree in Engineering from the
University of Pennsylvania.
Mr. Mitchell Tuckman became a Vice President of Herley upon the acquisition
of General Microwave Corporation ("GMC") in January 1999. At the time of the
acquisition, Mr. Tuckman was President - Chief Executive Officer of GMC since
March, 1995. He was Executive Vice President and Chief Operating Officer of GMC
from August, 1994 until March, 1995. From June, 1993 until August, 1994, Mr.
Tuckman was Vice President-Microwave Engineering of GMC. Prior to that, he was
Chief Microwave Engineer of GMC.
Mr. Richard Poirier joined Micro-Dynamics, Inc. ("MDI") in 1987 as a
Microwave Engineer. Following the acquisition of MDI by Herley in 1992, Mr.
Poirier was appointed Sales Manager of Herley-MDI. On September 30, 1999, Mr.
Poirier became Vice President of Sales and Marketing for Herley's Microwave
Components Product Group. Mr. Poirier received his Bachelor of Science in
Electrical Engineering from Marquette University.
Dr. Chandra Gupta joined the Herley-MDI division as Manager of Operations
in September 1999, and was also appointed Vice President of Herley. Prior to
joining the Company, Dr. Gupta was the Integrated Product Team Manager for
Marconi North America, CNI Division. Dr. Gupta received his Ph.D and
undergraduate degrees from the University of Wales, UK.
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
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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 2001
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 2001 annual meeting
of stockholders.
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 2000 annual meeting of stockholders.
ITEM ELEVEN - EXECUTIVE COMPENSATION
The following table sets forth the annual and long-term compensation with
respect to the Chairman/Chief Executive Officer, and the Company's four most
highly compensated executive officers other than the Chief Executive Officer
(the "named executive officers") for services rendered for the fiscal years
ended August 1, 1999, August 2, 1998, and August 3, 1997.
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<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 1999 $ 475,908 $ 538,126 500,000 (7) $ 4,800 (6)
Chairman of 1998 485,549 303,191 - 4,800
the Board 1997 531,629 302,432 599,999 (5) 4,500
Myron Levy 1999 $ 329,166 $ 430,501 500,000 (7) $ 9,525 (6)
President 1998 333,912 242,553 - 9,300
1997 307,764 181,460 400,000 (5) 9,000
Allan L. Coon 1999 $ 137,157 $ 35,000 20,000 (7) $ 6,622 (6)
Vice President 1998 110,011 30,000 - 6,153
1997 110,011 - 73,332 (5) 5,751
Anello C. Garefino 1999 $ 105,019 $ 15,000 15,000 (7) $ 4,068 (6)
Vice President 1998 100,760 20,000 - 3,845
Finance-Treasurer 1997 101,914 - 59,999 (5) 3,579
George Hopp 1999 $ 108,011 $ 7,500 10,000 (7) $ 1,494 (6)
Vice President 1998 107,615 7,500 - 1,488
1997 107,615 - 18,666 (5) 1,422
- --------
<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 and Levy incentive compensation under
employment agreements.
(4) Adjusted to give effect to a four-for-three stock split on September 30,
1997.
(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 L. 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 L. Coon - 20,000, Anello C. Garefino - 20,000, 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 L. Coon - 26,666, Anello C. Garefino
- 26,666, and George Hopp - 13,333.
(6) All Other Compensation includes: (a) group term life insurance as follows:
$4,725 for Mr. Levy, $2,387 for Mr. Coon, $902 for Mr. Garefino, and $1,494
for Mr. Hopp, and (b) contributions to the Company's 401(k) Plan as a
pre-tax salary deferral as follows: $4,800 for each of Messrs. Blatt and
Levy, $4,235 for Mr. Coon, and $3,166 for Mr. Garefino.
(7) Consisting of the following options issued in August 1998 for the right to
purchase Common Stock of the Company at a price of $9.25: Lee N. Blatt -
250,000, Myron Levy - 250,000; options granted in December 1998 at a price
of $11.44: Allan L. Coon - 10,000, Anello C. Garefino - 7,500, and George
Hopp - 5,000; and at a price of $13.15 (at 115% of the market price on date
of issue): Allan L. Coon - 10,000, Anello C. Garefino - 7,500, and George
Hopp - 5,000; and options granted in June 1999 at a price of $12.13: Lee N.
Blatt - 125,000, and Myron Levy - 125,000, and at a price of $13.94 (at
115% of the market price on date of issue): Lee N. Blatt - 125,000, and
Myron Levy - 125,000.
</FN>
</TABLE>
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Option/SAR Grants in Last Fiscal Year
<TABLE>
<CAPTION>
Individual Grants
---------------------------------------------------- Potential Realized Value at
Number of Assumed Annual Rates of
Securities % of Total Stock Price Appreciation
Underlying Options Issued Exercise Option Term (3)
Options to Employees in Price Expiration --------------------------------
Name Granted(1) Fiscal Year(2) ($/Sh) Date 0% 5% 10%
- ---------------------- ---------- --------------- -------- ---------- ------ ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Lee N. Blatt 125,000 10 $13.94 6/17/09 $ 0.00 $ 725,831 $ 2,188,178
125,000 10 12.13 6/17/09 0.00 953,168 2,415,516
250,000 21 9.25 8/14/08 0.00 1,454,319 3,685,529
Myron Levy 125,000 10 $13.94 6/17/09 $ 0.00 $ 725,831 $ 2,188,178
125,000 10 12.13 6/17/09 0.00 953,168 2,415,516
250,000 21 9.25 8/14/08 0.00 1,454,319 3,685,529
Allan L. Coon 10,000 1 $13.15 12/10/08 $ 0.00 $54,776 $165,135
10,000 1 11.44 12/10/08 0.00 71,933 182,292
Anello C. Garefino 7,500 1 $13.15 12/10/08 $ 0.00 $41,082 $123,851
7,500 1 11.44 12/10/08 0.00 53,950 136,719
George Hopp 5,000 - $13.15 12/10/08 $ 0.00 $27,388 $82,568
5,000 - 11.44 12/10/08 0.00 35,966 91,146
- --------
<FN>
(1) Options were issued in fiscal 1999 at 100% and at 115% of the closing price
of the Company's Common Stock on dates of issue and vest as follows: Lee N.
Blatt and Myron Levy - 250,000 options each which vest at date of grant,
and 250,000 options each - one-third of which vest at date of grant,
one-third vest one year from date of grant and the balance vest two years
from date of grant; Allan L. Coon, Anello C. Garefino, and George Hopp
one-fifth of the options vest one year from date of grant and one-fifth
each year thereafter.
(2) Total options issued to employees and directors in fiscal 1999 were for
1,250,500 shares of Common Stock.
(3) 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 greater than or 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>
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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 1999
and all unexercised stock options and warrants held by the named executive
officers as of August 1, 1999.
<TABLE>
<CAPTION>
Value of
Number of Unexercised Unexercised In the-Money
Options and Warrants Options and Warrants
Shares at Fiscal Year-End(2) at Fiscal Year-End (3)
Acquired on Value ---------------------------- ----------------------------
Name Exercise(#) Realized($)(1) Exercisable Unexercisable Exercisable Unexercisable
- ------------------- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Lee N. Blatt 261,113 $ 2,066,512 383,333 166,666 $ 1,450,000 $ 770,830
Myron Levy 338,892 2,615,042 316,667 166,666 834,380 770,830
Allan L. Coon 5,000 37,967 57,332 16,000 388,806 25,266
Anello C. Garefino 38,890 354,472 16,333 12,000 127,860 18,950
George Hopp - - 14,890 15,999 109,369 71,875
- --------
<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 $13.875 on August 1,
1999.
</FN>
</TABLE>
Employment Agreements
Lee N. Blatt has entered into an employment agreement with the Company,
dated as of October 1, 1998, (as modified January 26, 1999 and June 17, 1999),
which provides for a four year and three month term, terminating on December 31,
2002. Pursuant to the agreement, Mr. Blatt receives compensation consisting of a
base salary of $587,972, 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 $2,000,000.
Myron Levy has entered into an employment agreement with the Company, dated
as of October 1, 1998, (as modified January 26, 1999 and June 17, 1999), which
provides for a four year and three month term, terminating on December 31, 2002,
and a five year consulting period commencing at the end of the active employment
period. Pursuant to the agreement, Mr. Levy receives compensation consisting of
a base salary of $433,876, 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 $2,000,000. Mr. Levy's compensation during the consulting
period is at the annual rate of $100,000.
The employment agreements with Messrs. Blatt and Levy provide for certain
payments following death or disability. The employment agreements also provide,
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 three times their annual salary.
Allan L. 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 12, 1999, he is entitled to two years' base
salary and in the event he is so terminated after June 11, 1999 and before June
12, 2002, he is entitled to one year's base salary. Mr. Coon's base salary as of
November 1, 1999 is $175,000.
Anello C. Garefino has entered into a severance agreement with the Company,
dated February 18, 1998, which provides that in the event Mr. Garefino is
terminated other than for cause prior to February 19, 2000, he is entitled to
two years' base salary and in the event he is so terminated after February 18,
2000 and before February 19, 2003, he is entitled to one year's base salary. Mr.
Garefino's base salary as of November 1, 1999 is $105,000.
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Indemnification Agreements
Herley has entered into separate indemnification agreements with the
officers and directors of Herley. Herley has agreed to provide indemnification
with regard to certain legal proceedings so long as the indemnified officer or
director has acted in good faith and in a manner he or she reasonably believed
to be in, or not opposed to, the best interests of Herley and with respect to
any criminal proceeding, had no reasonable cause to believe his or her conduct
was unlawful. Herley only provided indemnification for expenses, judgments,
fines and amounts paid in settlement actually incurred by the relevant officer
or director, or on his or her behalf, arising out of proceedings brought against
such officer or director by reason of his or her corporate status.
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ITEM TWELVE - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth the indicated information as of November 1,
1999 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
Owned (1)(5)
-------------------
Name Shares Percent
- ------------------------------------------------ ------- -------
<S> <C> <C>
Lee N. Blatt (2)(4)(5).......................... 604,263 12.0%
Myron Levy (4)(5)............................... 628,941 12.6%
Anello C. Garefino (4).......................... 44,031 1.0%
Allan L. Coon (4)............................... 51,332 1.1%
George Hopp (4)................................. 21,334
Adam J. Bottenfield (4)......................... 25,834
Ray Umbarger (4)................................ 20,287
Mark A. Krumm (4)............................... 5,000
Howard M. Eckstein (4).......................... 7,500
Mitchell Tuckman (4)............................ 4,000
Richard Poirier (4)............................. 5,150
Adm. Thomas J. Allshouse (4)(5)................. 34,666
David H. Lieberman (4)(5)....................... 13,933
John A. Thonet (3)(4)(5)........................ 39,693
Alvin M. Silver (4)............................. 24,000
Adm. Edward K. Walker, Jr. (Ret.) (4)........... 16,000
Kennedy Capital Management, Inc. (6)............ 648,712 14.2%
Fidelity Management & Research, Inc. (7)........ 450,566 9.8%
Emerald Asset Management, Inc. (8).............. 321,170 7.0%
Directors and executive
officers as a group
(16 persons).................................. 1,545,964 27.2%
- ---------
<FN>
(1) No executive 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 285,102 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 109,332 shares, owned by Mr. Thonet's children, Hannah and
Rebecca Thonet, and 24,278 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
November 1, 1999 at prices ranging from $2.535 to $16.46 per share pursuant
to the Company's Stock Plans: Lee N. Blatt - 333,333, Myron Levy - 333,333,
Anello C. Garefino - 6,000, Allan L. Coon - 51,332, George Hopp - 16,890,
Adam J. Bottenfield - 23,999, Ray Umbarger - 19,334, Mark A. Krumm - 5,000,
Howard Eckstein - 7,500, Mitchell Tuckman - 4,000, Richard Poirier - 4,933,
Adm. Thomas J. Allshouse - 23,333, David H. Lieberman - 13,333, John A.
Thonet - 23,333, Alvin M. Silver - 15,000, Edward K. Walker - 15,000.
(5) Includes shares subject to outstanding warrants exercisable within 60 days
after November 1, 1999 at a price of $4.6406: Lee N. Blatt - 133,333, Myron
Levy - 66,667, Anello C. Garefino - 13,333.
(6) Address is 10829 Olive Boulevard, St. Louis, Missouri 63141.
(7) Address is 82 Devonshire Street , Boston, Massachusetts 02109.
(8) Address is 1857 William Penn Way, Suite 203, Lancaster, Pennsylvania 17605.
</FN>
</TABLE>
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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, and 1998 Stock Option Plan
(collectively, the "Stock Plans"), and under certain 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 1, 1999, non-qualified options to purchase 12,668 shares
of Common Stock were outstanding under this plan.
1996 Stock Option Plan. The 1996 Stock Option Plan covers 666,666 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, 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. At August 1, 1999,
non-qualified options to purchase 79,663 shares of Common Stock were outstanding
under this plan.
1997 Stock Option Plan. The 1997 Stock Option Plan covers 1,666,666 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, 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 875,500 shares
of Common Stock were granted during the fiscal year ended August 1, 1999. At
August 1, 1999, options to purchase 927,282 shares of Common Stock were
outstanding under this plan.
1998 Stock Option Plan. The 1998 Stock Option Plan covers 1,500,000 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, 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 375,000 shares
of Common Stock were granted during the fiscal year ended August 1, 1999. At
August 1, 1999, options to purchase 375,000 shares of Common Stock were
outstanding under this plan.
On August 14, 1998, the Company issued 10 year options to purchase 250,000
shares of Common Stock at a price of $9.25 per share, the fair market value at
the date of grant, under these plans to each of Lee N. Blatt and Myron Levy,
which options vest one third on each of the grant date and on the first and
second anniversary dates of the grant date. On June 17, 1999, the Company issued
10 year options under these plans, which options vest immediately, to each of
Lee N. Blatt and Myron Levy to purchase 125,000 shares of Common Stock at a
price of $12.13 per share, the fair market value at the date of grant; and
options to purchase 125,000 shares of Common Stock at a price of $13.94 per
share, which was 115% of the fair market value at the date of grant.
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, and the remaining 40,000 warrants were
exercised in March 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. During fiscal 1998, warrants to purchase 66,667 shares of Common Stock
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were exercised at a price of $4.6425. At August 1, 1999, warrants to purchase
213,333 shares of Common Stock at $4.6425 per share were outstanding.
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 recognized expenses of approximately $266,000 for the
52 weeks ended August 1, 1999, and approximately $197,000 and $181,000 for the
52 weeks ended August 2, 1998 and the 53 weeks ended August 3, 1997,
respectively. For the year ended August 1, 1999, $4,800, $4,800, $4,235, and
$3,166 was contributed by the Company to this plan for Messrs. Blatt, Levy, Coon
and Garefino, respectively, and $32,146 was contributed for all officers and
directors as a group.
ITEM THIRTEEN - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On September 23, 1999, the Company closed on the sale of GMC's property in
Amityville, New York and relocated the plant to a leased facility in
Farmingdale, New York. The Company entered into a 10 year lease agreement with a
partnership owned by the children of certain officers of the Company. The lease
provides for initial minimum annual rent of $312,390, subject to escalation of
approximately 4% annually throughout the 10 year term. The Company believes that
these rents are at the fair market value. The outside directors of the Company
unanimously approved this transaction.
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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 16 day of
November, 1999
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 November 16, 1999 by the following persons
in the capacities indicated:
Signature Title
- ---------------------------------- ------------------------
/s/ Lee N. Blatt Chairman of the Board
- ------------------------- (Chief Executive Officer)
Lee N. Blatt
/s/ Myron Levy President and Director
- -------------------------
Myron Levy
/s/ Anello C. Garefino Vice President - Finance, Treasurer
- ------------------------- (Chief Financial Officer and
Anello C. Garefino 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
/s/Alvin M. Silver Director
- -------------------------
Alvin M. Silver
/s/ Edward K. Walker, Jr. Director
- -------------------------
Edward K. Walker, Jr.
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