As filed with the Securities and Exchange Commission on February 16, 1999
Registration No. 333-
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-3
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
HERLEY INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 23-2413500
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
10 Industry Drive Myron Levy, President
Lancaster, Pennsylvania 17603-4025 Herley Industries, Inc.
(717) 397-2777 10 Industry Drive
(Address, including zip code and telephone Lancaster, Pennsylvania 17603-4025
number, including area code, of registrant's (717) 397-2777
principal executive offices) (Name address and telephone number,
including area code, of agent for
service)
-------
Copy to:
David H. Lieberman, Esq.
Blau, Kramer, Wactlar & Lieberman, P.C.
100 Jericho Quadrangle
Jericho, New York 11753
(516) 822-4820
Approximate date of commencement of proposed sale to public: From time to
time after the effective date of this registration statement.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box [ ].
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box [X].
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering.
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration number of the earlier effective registration statement for the same
offering.
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box [ ].
<PAGE>
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Title of Each Class of Proposed Maximum Proposed Maximum
Securities to be Amount to be Offering Aggregate Amount of
Registered Registered Price Per Security (1) Offering Price (1) Registration Fee
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock,
par value $.10
per share (2) 220,000 shs. $13.875 $3,052,500 $850
Common Stock
Purchase Warrants 110,000 wts. $1.625 $178,750 $ 50
-----
Total $900
- ----------------------------------------------------------------------------------------------------
<FN>
(1) Estimated solely for the purpose of calculating the registration fee, based
on the closing price of the common stock and warrants reported in the
consolidated reporting system on February 11, 1999.
(2) Includes 110,000 shares of common stock underlying the warrants.
- ----------------------------------------------------------------------------------------------------
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
<PAGE>
Preliminary Prospectus
SUBJECT TO COMPLETION
Dated February 16, 1999
HERLEY INDUSTRIES, INC.
220,000 Shares of Common Stock, $.10 par value
110,000 Common Stock Purchase Warrants
This is an offering of 220,000 shares of common stock and 110,000 common
stock purchase warrants of Herley Industries, Inc. issuable upon the exercise of
managing underwriters warrants. 110,000 of the shares of common stock being
registered are issuable upon exercise of the common stock purchase warrants.
Each managing underwriters warrant represents the right to purchase one share of
common stock and one common stock purchase warrant. The shares and warrants are
being offered for sale from time to time by or for the accounts of the selling
securityholders. The selling securityholders received the right to purchase the
shares and warrants as or from the managing underwriters of Herley's public
offering in December 1997 of 1,265,000 shares of common stock and 1,265,000
common stock purchase warrants. The shares of common stock and warrants may be
offered by the selling securityholders from time to time in transactions on the
Nasdaq National Market System, in privately negotiated transactions, or by a
combination of such methods of sale, at fixed prices that may be changed, at
market prices prevailing at the time of sale, at prices related to such
prevailing market prices or at negotiated prices. The selling securityholders
may sell the shares and/or warrants to or through broker-dealers and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the selling securityholders or the purchaser of the shares or
warrants for whom such broker-dealers may act as agent or to whom they sell as
principal or both. The compensation to a particular broker-dealer might be in
excess of customary commissions. See "Selling Securityholders" and "Plan of
Distribution."
None of the proceeds from the sale of the shares or warrants by the selling
securityholders will be received by Herley. Herley will bear the expenses in
connection with the offering, including filing fees and Herley's legal and
accounting fees, estimated at $10,000.
Herley's common stock is traded on the Nasdaq National Market System under
the symbol HRLY and the warrants are traded on the Nasdaq National Market System
under the symbol HRLYW. On February 11, 1999, the last reported sale price of
Herley's common stock as reported by the Nasdaq National Market System was $13
7/8 per share and the last reported sale price of the warrants as reported by
the Nasdaq National Market System was $1 5/8 per share.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved these securities, or determined if this
prospectus is truthful or complete. Any representation to the contrary is a
criminal offense.
The date of this Prospectus is February __, 1999
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
Herley has filed with the Securities and Exchange Commission (the
"Commission"), Washington, D.C., a registration statement under the Securities
Act of 1933, as amended (the "Act"), with respect to the warrants, including the
common stock underlying the warrants, offered hereby. This prospectus does not
contain all the information set forth in the registration statement and the
exhibits relating thereto. For further information with respect to Herley and
the shares of common stock and warrants offered by this prospectus, reference is
made to such registration statement and the exhibits thereto. Statements
contained in this prospectus as to the contents of any contract or other
document are not necessarily complete and in each instance reference is made to
the copy of such contract or other document filed as an exhibit to the
registration statement for a full statement of the provisions thereof; each such
statement contained herein is qualified in its entirety by such reference.
Herley is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and, in accordance
therewith, files reports, proxy statements and other information with the
Commission. You may read and obtain copies of any materials filed by Herley with
the Commission at the Commission's Public Reference Room at 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Commission's Regional Offices at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511 and 7 World Trade Center, New York, New York 10048. You may
obtain information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. Copies of such material can also be obtained from
the Securities and Exchange Commission's Web site at the address
http://www.sec.gov.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents have been filed by Herley with the Commission
pursuant to the Exchange Act, are incorporated by reference in this prospectus
and shall be deemed to be a part hereof:
(1) Herley's Annual Report on Form 10-K for the fiscal year ended August 2,
1998.
(2) Herley's Quarterly Report on Form 10-Q for the quarter ended November
1, 1998.
(3) Herley's Proxy Statement dated December 30, 1998.
(4) Herley's Report on Form 8-K dated January 6, 1999.
(5) The description of the class of securities to be offered which is
contained in a Registration Statement filed under Section 12 of the Securities
and Exchange Act of 1934 (registration statement No. 333-39767), including any
amendment or report filed for the purpose of updating such description.
All documents filed pursuant to Section 13(a), 13(c), 14 or 15(d) of the
Exchange Act after the date of this prospectus and prior to the termination of
this offering of common stock and warrants shall be deemed to be incorporated by
reference in this prospectus and to be part hereof from the date of filing of
such documents.
Any statement contained in a document incorporated or deemed to be
incorporated by reference in this prospectus shall be deemed to be modified or
superseded for purposes of this prospectus to the extent that a statement
contained herein or in any subsequently filed document that also is or is deemed
to be incorporated by reference herein modifies or supersedes such statement.
Any statement so modified or superseded shall not be deemed, except as so
modified or superseded, to constitute a part of this prospectus.
Herley will provide without charge to each person to whom a copy of this
prospectus is delivered, upon the written or oral request of such person, a copy
of any or all of the documents incorporated by reference (except for exhibits
thereto unless specifically incorporated by reference therein). Requests for
such copies should be directed to the Secretary, Herley Industries, Inc., 10
Industry Drive, Lancaster, PA 17603, (717) 397-2777.
<PAGE>
THE COMPANY
General
Herley is engaged in the design, development, manufacture and sale of
flight instrumentation components and systems, and microwave products primarily
to the U.S. government, foreign governments, and aerospace companies. Flight
instrumentation products include command and control systems, transponders,
flight termination receivers, telemetry transmitters and receivers, pulse code
modulator ("PCM") encoders, and scoring systems. Flight instrumentation products
are used to: (i) accurately track the flight of space launch vehicles, targets,
and unmanned airborne vehicles ("UAVs"), (ii) communicate between ground systems
and the airborne vehicle, (iii) if necessary, destroy the vehicle if it is
veering from its planned trajectory, and (iv) train troops and test weapons.
Herley's command and control systems are used on training and test ranges
domestically and in foreign countries. Herley has an installed base of
approximately 100 command and control systems around the world, which are either
fixed installations, transportable units or portable units. Herley also
manufactures microwave devices used in its flight instrumentation systems and
products and in connection with the radar and defense electronic systems on
tactical fighter aircraft.
Herley has grown internally and through six strategic acquisitions. As a
result, Herley has evolved from a components manufacturer to a systems and
service provider and has leveraged its technical capabilities and expertise into
domestic commercial and foreign defense markets.
Since its inception in 1965, Herley has designed and manufactured microwave
devices for use in various tactical military programs. In June 1986, Herley
acquired a small engineering company, Mission Design, Inc., engaged in the
design and development of transponders. This acquisition enabled Herley to enter
the flight instrumentation business beginning with the design and manufacture of
range safety transponders. In September 1992, Herley acquired substantially all
of the assets of Micro-Dynamics, Inc. ("MDI") of Woburn, Massachusetts, a
microwave subsystem designer and manufacturer. In June 1993, Herley acquired
Vega Precision Laboratories, Inc. ("Vega") of Vienna, Virginia, a manufacturer
of flight instrumentation products. In March 1994, Herley entered into an
exclusive license agreement for the manufacture, marketing and sale of the
Multiple Aircraft GPS Integrated Command & Control (MAGIC2) systems. In July
1995, Herley acquired certain assets and the business of Stewart Warner
Electronics Corp. of Chicago, Illinois, a manufacturer of high frequency radio
and IFF interrogator systems. In August 1997, Herley acquired Metraplex
Corporation ("Metraplex") of Frederick, Maryland, which has enabled Herley to
enter the airborne PCM and FM telemetry and data acquisition systems market.
Recent Development
In January 1999, Herley acquired General Microwave Corporation ("GMC") of
Amityville, New York, a company engaged primarily in the design, development,
manufacture and marketing of microwave and electronic systems, equipment and
components.
<PAGE>
Products
Command and Control Systems (C2)
For over thirty years, Vega (a division of Herley) has been manufacturing
products in the radar enhancement field. Herley's command and control systems
have been used to fly remotely a large variety of unmanned aerial vehicles,
typically aircraft used as target drones or Remotely Piloted Vehicles ("RPVs")
and some surface targets. Operations have been conducted by users on the open
ocean, remote land masses, and instrumented test and training ranges.
Herley's command and control systems are currently in service throughout
the world. Herley's pulse-positioned-coded ("PPC") concept enables the use of
standard radar technology to track and control unmanned vehicles. Using the
radar beacon mode, PPC pulse groups are transmitted and received for transfer of
command and telemetry data while employing the location precision and advantages
of radar techniques.
Command and control systems permit a ground operator to fly a target or a
UAV through a pre-planned mission. That mission may be for reconnaissance, where
the vehicle is equipped with high definition TV sensors and the necessary data
links to send information back to its command and control systems ground
station. The UAV may also be used as a decoy, since the operator can direct the
flight operations that will make the small drone appear to be a larger combat
aircraft.
With the 1994 licensing of the MAGIC2 system, Herley increased the
selection of command and control systems. The 6104 TTCS (Target Tracking and
Control System) unit is a line-of-sight command and control system with an
installed base of equipment worldwide. Herley's engineers and marketers are now
able to offer the MAGIC2 system as a supplement to, or replacement for, this
installed base of equipment. The MAGIC2 system affords over-the-horizon command
and control using GPS guidance and control of multiple targets from a single
ground station. The ability to control multiple targets at increased distances
represents a significant product improvement. The increasing demand for enhanced
performance by the U.S. Navy as well as foreign navies in littoral warfare
scenarios can be satisfied by the use of the MAGIC2 system.
The new Model 6104 TTCS is a highly flexible, multiple processor design
with high resolution graphics, which can be field configured within minutes to
fly or control any selected vehicle for which it is equipped. The system is
designed to operate with a large variety of vehicles. A basic TTCS configuration
is normally supplied with a standard Herley command panel and the software
peculiar to one vehicle. Telemetry display software is embedded for the
specified vehicle, and a magnetic hard drive is supplied with a mission map
prepared in accordance with a customer supplied detailed map of the area. The
TTCS is used in support of missile, aircraft and other weapons systems
development and testing. Herley continues to provide this system to customers to
support their requirement.
The MAGIC2 system provides control of multiple targets from a single ground
control system, and utilizes GPS to provide accurate position information. The
MAGIC2 system meets a growing requirement to test against multiple threats with
the automated defense capabilities of ships like the AEGIS cruiser and the E-2C
aircraft.
Military surveillance operations typically use UAVs, RPVs, or drones to
avoid the cost and risk of manned surveillance vehicles in the event of an
<PAGE>
accident or if the vehicle is shot down. These inexpensive drones are controlled
in flight by a Herley command and control system, which may be mounted in a
trailer that may be moved from place to place by helicopter or truck. Herley
also manufactures portable command and control systems that are mounted on
tripods that can be easily transported by an operational team. The portable
units permit ready deployment in rugged terrain and may also be used on ships
during open ocean exercises.
In recent years, teaming arrangements between prime military contractors
and Herley have increased. Large companies bidding on major programs seek to
align themselves with parts and systems manufacturers such as Herley for
economic reasons as well as for the technical expertise afforded by such
alliances. Teaming arrangements with Tracor Corporation and Northrop Grumman
Corporation have resulted in recent awards to Herley for command and control
systems in Australia and Singapore, and Herley is presently negotiating
additional teaming arrangements.
Telemetry Systems
Missile, UAV, or target testing on domestic and international test ranges
requires flight safety and performance data transmission to maximize flight
safety during the test operation. Surveillance and intelligence gathering UAVs
also require a data transmission downlink and a command and control systems
uplink to accomplish their mission. Herley has developed a telemetry system
capability that can be configured to meet individual customers' needs. Various
components of the system include data encoders, transmitters and flight
termination receivers. Each has a distinctive role and each is key to the
success of the mission.
In 1972, Metraplex began developing data encoding and acquisition, and
signal conditioning equipment. Metraplex is now a leading manufacturer of PCM
and FM telemetry and data acquisition systems for severe environment
applications, whose products are used worldwide for testing space launch vehicle
instrumentation, aircraft flight testing, and amphibian, industrial and
automotive vehicle testing. The product portfolio ranges in size and complexity
from miniature encoders to completely programmable data acquisition systems.
Herley's acquisition of Metraplex in 1997 allows Herley to offer a complete
airborne data link system. With the digital capability of Metraplex in data
encoding and acquisition elements combined with the radio frequency capability
of Herley in providing its telemetry transmitters and flight termination
receivers, Herley offers a full line of narrow or wide band airborne telemetry
systems to meet a wide variety of industrial needs, both domestically and
internationally.
Transponders
Herley manufactures a variety of expendable transponders, including range
safety, identification friend or foe ("IFF"), command and control, and scoring
systems.
<PAGE>
Transponders are small, expendable, electronic systems consisting of a
transmitter, sensitive receiver and internal signal processing equipment
comprised of active and passive components, including microwave subassemblies
such as amplifiers, oscillators and circulators. The transponder receives
signals from radars, changes and amplifies the frequency of the signals, and
sends back a reply on a different frequency and signal level. This reply will be
a strong, noise free signal upon which the tracking radar can "lock," and one
which is far superior to skin reflection tracking, particularly under adverse
weather conditions after the launch.
In range safety applications, transponders enable accurate tracking of
space launch and unmanned aerial vehicles, missiles, and target drones so that
position and direction are known throughout its flight.
In the case of several defense and commercial space launch vehicles (i.e.,
Delta, Atlas, Titan and Pegasus), the Herley transponder is tracked by the
ground launch team all the way to space orbit, and in certain instances through
several orbits, as a reference location point in space to assure that the launch
payload has been properly placed in orbit.
IFF transponders, which are used in conjunction with the FAA Air Traffic
Control System, enable ground controllers to identify the unmanned targets,
drones and cruise missiles on which these units fly and to vector other manned
aircraft safely away from the flight path of the unmanned aerial vehicle.
Command and control transponders provide the link through the telemetry
system for relaying ground signals to direct the vehicle's flight. The uplink
from the ground control station, a series of coded pulse groups, carries the
signals that command the flight control guidance system of the vehicle. The
downlink to the ground provides both tracking signals for range safety, as well
as acknowledgment and status of the uplink commands and their implementation in
the vehicle. The transponder is therefore the means to fly the vehicle.
Scoring systems are mounted on both airborne and sea targets. Scoring
systems enable test and evaluation engineers to determine the "miss-distance"
between a projectile and the target at which it has been launched.
Flight Termination Receiver
A flight termination receiver ("FTR") is installed in a test missile, a
UAV, a target or a space launch vehicle as a safety device. The FTR has a
built-in decoder that enables it to receive a complex series of audio tones
which, when appropriate, will set off an explosive charge that will destroy the
vehicle. A Range Safety Officer ("RSO") using the range safety transponder will
track the vehicle in flight to determine if it is performing as required. If the
RSO detects a malfunction in the test or launch vehicle that causes it to veer
from a planned trajectory in a manner that may endanger personnel or facilities,
the RSO will transmit a coded signal to the onboard FTR to explode the vehicle
harmlessly.
<PAGE>
Microwave Devices
Herley manufactures solid state microwave devices in Lancaster,
Pennsylvania, at its MDI facility in Woburn, Massachusetts, at its GMC
facilities in Amityville, New York, and in the Talpiot Industrial Zone of
Jerusalem, Israel for use in its transponders and existing long-term military
programs, both as part of new production and for spare parts and repair
services. These microwave devices are used in a variety of radar, communications
and missile applications, including airborne and shipboard navigation and
missile guidance systems.
In Woburn, Herley designs and manufactures complex microwave integrated
circuits ("MICs"), which consist of sophisticated assemblies that perform many
functions, primarily involving switching of microwave signals. MICs manufactured
by Herley are employed in many defense electronics military systems as well as
missile programs. Herley also manufactures magnetrons, which are the power
source utilized in the production of Herley's transponders.
Herley produces receiver protector devices. These high power devices
protect a radar receiver from transient bursts of microwave energy and are
employed in almost every military and commercial radar system. With the
contraction of the defense business, Herley has only one significant competitor
in this market.
Herley also designs and manufactures high frequency radio and IFF
interrogators. This high frequency communications equipment is used by the U.S.
Navy and foreign navies that conduct joint military exercises with the U.S.
Navy. The IFF interrogators are used as part of shipboard equipment and are also
placed on coastlines, where they are employed as silent sentries.
New Product Development and Applications
Herley believes that its growth depends, in part, on its ability to renew
and expand its technology, products, and design and manufacturing processes with
an emphasis on cost effectiveness. Herley's primary efforts are focused on
engineering design and product development activities rather than pure research.
A substantial portion of Herley's development activities have been funded by
Herley's customers. Certain of Herley's officers and engineers are involved at
various times and in varying degrees in these activities. Herley's policy is to
assign the required engineering and support people, on an ad hoc basis, to new
product development as needs require and budgets permit. The cost of these
development activities, including employees' time and prototype development, net
of amounts paid by customers, were approximately $1,562,000, $1,828,000, and
$1,453,000 in fiscal 1998, 1997, and 1996, respectively.
The new products and systems that Herley plans to design, manufacture and
sell are data link systems, which include telemetry data encoders. Data link
systems and data encoders are currently being sold by others to Herley's
existing customers. With its acquisition of Metraplex in August 1997, Herley now
offers data link systems to its customers, either directly or through teaming
arrangements. Upon receipt of an order, Herley will customize the design of a
system for its customer for delivery typically nine months after receipt of such
order.
<PAGE>
Data Link Systems
Data link systems contain transmitters, amplifiers, receivers and other
components, and provide the means of communication between the control tower,
the ground station and the test or launch vehicle. Data link systems are the
equivalent of telephone links between the air and ground portions of launch
vehicles or test and training ranges. The uplink communication to the airborne
vehicle is transmitted via a telemetry signal from the ground to the vehicle.
The telemetry signals are used to command the airborne vehicle through its
command control transponder. The transponder will then change the flight control
guidance system as directed. The downlink signals from the airborne telemetry
transmitter to the ground telemetry receiver provide tracking signals for range
safety, confirmation of the uplink command and their implementation by the
vehicle and compilation of the data from on-board sensors gathered by the
telemetry data encoder.
Through the application of technology acquired from Metraplex, Herley
manufactures data encoders. Airborne targets and flight test missiles must have
many critical parameters simultaneously monitored from the ground to gain the
data required for verification of satisfactory performance or for identification
of details of hardware requiring design improvements. On-board sensors may
measure temperature, strain levels, vibration level and frequency, acoustic
noise levels, air pressure, air velocity, humidity and other parameters of
interest. The function of the encoder system is to convert the output of each of
these sensors to a signal form that may be sequentially sampled by an electronic
switch (multiplexer) produced by Herley in a known sequence and rate so as to
create a data stream that may be transmitted to the ground by the telemetry
system.
Commercial Lighting
Over the past three years, Herley has been seeking commercial applications
for the magnetron tubes produced by Herley's MDI division. In 1995, Herley
signed agreements with a large lighting company to develop miniature
cost-effective magnetron tubes, using electrode-less high density ("EHD")
techniques, for medical and industrial lighting applications. Based on initial
engineering results, prototype tubes were designed, manufactured and tested
satisfactorily to the specifications required. Herley and this other company are
currently planning limited production of magnetron tubes to be used in an EHD
industrial lighting application.
USE OF PROCEEDS
Herley will not receive any proceeds from this offering. Herley will
receive $14.40 per share upon the exercise by the selling securityholders of the
right to purchase the common stock and $.12 per warrant upon the exercise of
their right to purchase the common stock purchase warrant. Herley will receive
$15.60 per share upon exercise of the common stock purchase warrants.
<PAGE>
PRICE RANGE OF COMMON STOCK AND WARRANTS
Herley's common stock is traded in the Nasdaq National Market under the
symbol HRLY and the warrants are traded in the Nasdaq National Market under the
symbol HRLYW. The following table sets forth the high and low sales price as
reported by the Nasdaq National Market for the Herley common stock and warrants
for the periods indicated and gives retroactive effect to the four-for-three
stock split of the common stock on September 30, 1997.
<TABLE>
<CAPTION>
Common Stock
------------
High Low
---- ---
<S> <C> <C>
Fiscal Year 1997
First Quarter $7.97 $6.19
Second Quarter 10.69 7.31
Third Quarter 8.91 6.09
Fourth Quarter 10.69 6.19
Fiscal Year 1998
First Quarter 15.00 10.13
Second Quarter 14.75 10.50
Third Quarter 14.69 10.88
Fourth Quarter 14.25 8.63
Fiscal Year 1999
First Quarter 10.50 7.63
Second Quarter 15.31 9.25
Third Quarter (through 15.13 13.50
February 11, 1999)
</TABLE>
<TABLE>
<CAPTION>
Warrants
--------
High Low
---- ---
<S> <C> <C>
Fiscal Year 1998
First Quarter Not Traded Not Traded
Second Quarter 2.00 1.31
Third Quarter 2.91 1.69
Fourth Quarter 2.31 .81
Fiscal Year 1999
First Quarter 1.06 .41
Second Quarter 1.94 .50
Third Quarter (through 1.84 1.50
February 11, 1999)
</TABLE>
The closing price of the common stock on February 11, 1999 was $13 7/8 and
the closing price of the warrants was $1 5/8. As of February 11, 1999 there were
approximately 330 record holders of the Herley common stock and approximately 80
recordholders of the warrants.
<PAGE>
DIVIDEND POLICY
Herley has never paid any cash dividends on its Common Stock. There have
been no stock dividends declared or paid by Herley on its common stock during
the past two years except for a four-for-three stock split on September 30,
1997. Payment of future dividends, if any, will be dependent upon the earnings
and financial position of Herley and such factors as the Board of Directors
shall deem appropriate.
PERFORMANCE CHART
The following graph sets forth the cumulative total stockholder return to
Herley's stockholders during the five-year period ended August 2, 1998, as well
as an overall stock market index (NASDAQ Stock Market-US) and Herley's peer
group index (S&P Aerospace/Defense):
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN*
AMONG HERLEY INDUSTRIES, INC., THE NASDAQ STOCK MARKET-US INDEX AND
THE S & P AEROSPACE/DEFENSE INDEX
Cumulative Total Return
<TABLE>
<CAPTION>
7/93 7/94 7/95 7/96 7/97 7/98
<S> <C> <C> <C> <C> <C> <C>
Herley Industries, Inc. 100.00 50.00 68.25 111.11 176.19 168.25
Nasdaq Stock Market (U.S.) 100.00 102.91 144.50 157.43 232.31 274.20
S&P Aerospace/Defense 100.00 114.33 170.23 220.90 313.01 237.84
* $100 invested on 7/31/93 in stock or index including reinvestment of
dividends. Fiscal year ending July 31.
</TABLE>
<PAGE>
DESCRIPTION OF SECURITIES
Capital Stock
Herley's authorized capital stock consists of 20,000,000 shares of Herley
common stock, $.10 par value per share.
Common Stock
General. Herley has 20,000,000 authorized shares of Herley common stock,
5,224,028 of which were issued and outstanding on January 31, 1999. All shares
of Herley common stock currently outstanding are validly issued, fully paid and
non-assessable, and all shares which are the subject of this prospectus, when
issued and paid for upon the exercise of the warrants, will be validly issued,
fully paid and non-assessable.
Voting Rights. Each share of Herley common stock entitles the holder
thereof to one vote, either in person or by proxy, at meetings of the
stockholders. Herley's Board of Directors consists of three classes, each of
which serves for a term of three years. At each annual meeting of the
stockholders the directors in only one class will be elected. The holders are
not permitted to vote their shares cumulatively. Accordingly, the holders of
more than 50% of the outstanding shares of Herley common stock can elect all of
the directors of Herley standing for election at a stockholders' meeting.
Dividend Policy. All shares of Herley common stock are entitled to
participate ratably in dividends when and as declared by Herley's Board of
Directors out of the funds legally available therefor. Any such dividends may be
paid in cash, property or additional shares of Herley common stock. Herley has
not paid any cash dividends in the past two fiscal years or the current fiscal
year and does not anticipate that cash dividends will be declared in the
foreseeable future. While Herley declared a four-for-three stock split effected
as a stock dividend effective September 30, 1997, payment of future dividends is
subject to the discretion of Herley's Board of Directors and will depend upon,
among other things, future earnings, the operating and financial condition of
Herley, its capital requirements, general business conditions and other
pertinent facts. Therefore there can be no assurance that any dividends on the
Herley common stock will be paid in the future. See "Dividend Policy."
Miscellaneous Rights and Provisions. Holders of Herley common stock have no
preemptive or other subscription rights, conversion rights, redemption or
sinking fund provisions. In the event of the liquidation or dissolution, whether
voluntary or involuntary, of Herley, each share of common stock is entitled to
share ratably in any assets available for distribution to holders of the equity
of Herley after satisfaction of all liabilities.
Shares Eligible for Future Sale. Herley has 5,224,028 shares of Herley
common stock outstanding, of which 4,568,308 are freely tradeable without
restriction or further registration under the Securities Act, except for any
shares purchased by an "affiliate" of Herley (in general, a person who has a
control relationship with Herley), which will be subject to the limitations of
Rule 144 adopted under the Securities Act. The remaining shares are deemed to be
"restricted securities," as that term is defined under Rule 144.
In connection with the merger of GMC with a wholly-owned subsidiary of
Herley, Herley has issued approximately 966,675 warrants to purchase shares of
Herley common stock. In addition, Herley has outstanding 1,265,000 warrants that
<PAGE>
will be exercisable for 1,265,000 newly issued shares of Herley common stock.
Upon exercise of those warrants to purchase, all of these shares of Herley
common stock will also be freely tradeable without restriction or future
registration under the Securities Act.
In general, under Rule 144 as currently in effect, subject to the
satisfaction of certain other conditions, a person, who owns restricted
securities for at least one year is entitled to sell, within any three-month
period, a number of such securities that does not exceed the greater of 1% of
the total number of securities outstanding of the same class or the average
weekly trading volume of the securities on all exchanges and/or reported through
the automated quotation system of a registered securities association during the
four calendar weeks preceding the date on which notice of the sale is filed with
the Commission. Sales under Rule 144 are also subject to certain manner of sale
provisions, notice requirements and the availability of current public
information about the issue. In addition, an affiliate of the issuer is subject
to such volume limitations when selling both restricted and unrestricted
securities. A person who has not been an affiliate of Herley for at least the
three months immediately preceding the sale and who has beneficially owned the
securities for at least two years, however, is entitled to sell such securities
under Rule 144 without regard to any of the limitations described above. Of the
655,720 shares of Herley common stock that constitute restricted securities,
591,522 shares have been held for more than one year.
No predictions can be made as to the effect, if any, that sales of shares
of Herley common stock under Rule 144 or otherwise or the availability of shares
for sale will have on the market, if any, prevailing from time to time. Sales of
a substantial number of shares of the Herley common stock pursuant to Rule 144
or otherwise may adversely affect the market price of the Herley common stock or
the warrants.
Description of Warrants
The following is a brief summary of certain provisions of the warrants and
of the merger warrants issued in connection with the merger of GMC and a
wholly-owned subsidiary of Herley. Such summary does not purport to be complete
and is qualified in all respects by reference to the Warrant Agreement (the
"Warrant Agreement") among Herley, the Selling Stockholders and American Stock
Transfer & Trust Company (the "Warrant Agent"). A copy of the Warrant Agreement
has been filed as an exhibit to the registration statement. The warrants are a
different class than the Merger Warrants. The warrants are currently listed and
traded on the Nasdaq National Market System under the symbol HRLYW and the
Merger Warrants are currently listed and traded on the Nasdaq National Market
System under the symbol HRLYZ. The terms of the warrants and the Merger Warrants
are virtually identical except for the following: (i) the warrants expire in
January 2000 and the Merger Warrants expire in January 2002; (ii) the date on
which the exercise price of the warrants increases is January 16, 1999 and the
date on which the exercise price of the Merger Warrants increases is January 11,
1999; and (iii) the Merger Warrants are redeemable, in whole or in part, at any
time after 21 months from their issuance at a price of $1.00 per share of common
stock by delivery of 30 days' written notice if the average last reported sales
price of the Herley common stock has not been less than $17.60 per share for the
fifteen consecutive trading days immediately prior to the notice date.
Exercise Price and Terms. Each warrant entitles the registered holder
thereof to purchase one share of Herley common stock at an exercise price of $
14.40 per share prior to January 16, 1999 and $15.60 per share thereafter,
subject to adjustment in accordance with the anti-dilution and other provisions
referred to below. The holder of any warrant may exercise such warrant by
surrendering the certificate representing the Warrant to the Warrant Agent, with
the subscription form thereon properly completed and executed, together with
payment of the exercise price. The warrants may be exercised at any time in
whole or in part at the exercise price then in effect until expiration of the
warrants. The warrants expire twenty-four months from their date of issuance. No
fractional shares will be issued upon the exercise of the warrants.
<PAGE>
The exercise price of the warrants bears no relationship to any objective
criteria of future value. Accordingly, such exercise price should in no event be
regarded as an indication of any future trading price.
Adjustments. The exercise price and the number of shares of Herley common
stock purchasable upon the exercise of the warrants are subject to adjustment
upon the occurrence of certain events, including stock dividends, stock splits,
combinations or reclassifications of the Herley common stock, or sale by Herley
of shares of its Herley common stock or other securities convertible into Herley
common stock (exclusive of shares issued upon the exercise or conversion of
outstanding options, warrants and convertible securities) at a price below the
market price of the Herley common stock as defined in the Warrant Agreement.
Additionally, an adjustment would be made in the case of a reclassification or
exchange of Herley common stock, consolidation or merger of Herley with or into
another corporation (other than a consolidation or merger in which Herley is the
continuing corporation) or sale of all or substantially all of the assets of
Herley in order to enable Warrant holders to acquire the kind and number of
shares of stock or other securities or property receivable in such event by a
holder of the number of shares of Herley common stock that might otherwise have
been purchased upon the exercise of the Warrant.
Transfer, Exchange and Exercise. The warrants are in registered form and
may be presented to the Warrant Agent for transfer, exchange or exercise at any
time on or prior to their expiration date, at which time the warrants become
wholly void and of no value. If a market for the warrants develops, the holder
may sell the warrants instead of exercising them. There can be no assurance,
however, that a market for the warrants will develop or continue.
Warrant Holder Not a Stockholder. The warrants do not confer upon holders
any voting, dividend or other rights as stockholders of Herley.
<PAGE>
SELLING SECURITYHOLDERS
The following table sets forth the ownership of the selling
securityholders, the number of shares of common stock beneficially owned by each
of the selling securityholders, and the number of shares which may be offered
for resale pursuant to this prospectus. Except as otherwise disclosed herein,
none of the selling securityholders has had any position, office or other
material relationship with Herley or its predecessors or affiliates within the
past three years.
The information included below is based upon information provided by the
selling securityholders. Because the selling securityholders may offer all, some
or none of their shares, no definitive estimate as to the number of shares that
will be held by the selling securityholders after such offering can be provided.
<TABLE>
<CAPTION>
Number of Shares and Warrants Underlying
Selling Securityholder Managing Underwriters Warrants
---------------------- ----------------------------------------
<S> <C>
Southwest Securities, Inc. 47,300
Janney Montgomery Scott, Inc. 33,004
William J. Barrett 10,016
Herbert M. Gardner 10,016
C. William Dedmon, Jr. 7,700
Douglas Brickley 1,964
</TABLE>
<PAGE>
PLAN OF DISTRIBUTION
The Shares are traded on the Nasdaq Stock Market National Market System
under the symbol HRLY and the warrants are traded on the Nasdaq Stock Market
National Market System under the symbol HRLYW . The shares and warrants may be
sold from time to time directly by the selling securityholders. Alternatively,
the Selling Securityholders may from time to time offer such securities through
underwriters, dealers or agents. The distribution of securities by the selling
securityholders may be effected in one or more transactions that may take place
on the Nasdaq Stock Market National Market System, including ordinary broker's
transactions, privately-negotiated transactions or through sales to one or more
broker-dealers for resale of such shares as principals, at market prices
prevailing at the time of sale, at prices related to such prevailing market
prices or at negotiated prices. Usual and customary or specifically negotiated
brokerage fees or commissions may be paid by the selling securityholders in
connection with such sales of securities.
At the time a particular offer of securities is made by or on behalf of the
Selling Securityholders, to the extent required, a prospectus will be
distributed which will set forth the number of shares being offered and the
terms of the offering, including the name or names of any underwriters, dealers
or agents, if any, the purchase price paid by any underwriter for shares
purchased from the Selling Securityholders and any discounts, commissions or
concessions allowed or reallowed or paid to dealers, and the proposed selling
price to the public.
LEGAL OPINION
Certain legal matters in connection with this offering will be passed upon
for Herley by Blau, Kramer, Wactlar & Lieberman, P.C., Jericho, New York 11753.
David H. Lieberman, a member of the firm, is a director of Herley. Mr. Lieberman
owns 600 shares of common stock of Herley and options and warrants to purchase
17,333 shares of common stock.
EXPERTS
The audited financial statements of Herley Industries, Inc. incorporated by
reference in this prospectus and elsewhere in the registration statement have
been audited by Arthur Andersen LLP, independent public accountants, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in giving said reports.
<PAGE>
================================================================================
No dealer, salesperson, or other person has been authorized by Herley to give
any information or to make any representations other than those contained in
this prospectus and, if given or made, such other information or representations
must not be relied upon as having been so authorized by Herley. This prospectus
does not constitute an offer to sell, or a solicitation of an offer to buy, any
securities other than the securities to which it relates, or an offer to or
solicitation of any person in any jurisdiction in which such offer or
solicitation would be unlawful. Neither delivery of this prospectus nor any sale
made hereunder shall, under any circumstances, create any implication that the
information herein is correct as of any time subsequent to the date hereof.
TABLE OF CONTENTS
Page
----
Where You Can Find More Information ............ 2
Incorporation of Certain Documents
by Reference ................................. 2
The Company .................................... 3
Use of Proceeds ................................ 8
Price Range of Common Stock and Warrants ....... 9
Dividend Policy ................................ 10
Performance Chart .............................. 10
Description of Securities ...................... 11
Selling Securityholders ........................ 14
Plan of Distribution ........................... 15
Legal Opinion .................................. 15
Experts ........................................ 15
HERLEY INDUSTRIES, INC.
220,000 Shares of
Common Stock
110,000 Common Stock
Purchase Warrants
-----------
PROSPECTUS
-----------
February __, 1999
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution
<TABLE>
<CAPTION>
<S> <C>
Securities and Exchange Commission
Filing Fee. . . . . . . . . . . . . . . . . . $ 900
Legal and Accounting Fees . . . . . . . . . . 5,000
Miscellaneous . . . . . . . . . . . . . . . . 4,100
-------
Total . . . . . . . . . . . . . . . . . . . . $10,000
</TABLE>
Herley will pay all of these expenses.
Item 15. Indemnification of Directors and Officers
Under provisions of the By-Laws of Herley, each person who is or was a
director or officer of Herley may be indemnified by Herley to the full extent
permitted or authorized by the General Corporation Law of Delaware.
Under such law, to the extent that such person is successful on the merits
of defense of a suit or proceeding brought against him by reason of the fact
that he is a director or officer of Herley, he shall be indemnified against
expenses (including attorneys' fees) reasonably incurred in connection with such
action.
If unsuccessful in defense of a third-party civil suit or if a criminal
suit is settled, such a person may be indemnified under such law against both
(1) expenses (including attorneys' fees) and (2) judgements, fines and amounts
paid in settlement if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of the Company, and
with respect to any criminal action, had no reasonable cause to believe his
conduct was unlawful.
If unsuccessful in defense of a suit brought by or in the right of Herley,
or if such suit is settled, such a person may be indemnified under such law only
against expenses (including attorneys' fees) incurred in the defense or
settlement of such suit if he acted in good faith and in a manner he reasonably
believed to be in, or not opposed to, the best interests of Herley except that
if such a person is adjudged to be liable in such suit for negligence or
misconduct in the performance of his duty to the Company, he cannot be made
whole even for expenses unless the court determines that he is fairly and
reasonably entitled to indemnity for such expenses.
Herley and its officers and directors of Herley are covered by officers and
directors liability insurance. The policy coverage is $3,000,000, which includes
reimbursement for costs and fees. There is a maximum deductible under the policy
of $200,000 for each claim. The Company has entered into Indemnification
Agreements with certain of its officers and directors. The Agreements provide
for reimbursement for all direct and indirect costs of any type or nature
whatsoever (including attorneys' fees and related disbursements) actually and
reasonably incurred in connection with either the investigation, defense or
appeal of a Proceeding, as defined, including amounts paid in settlement by or
on behalf of an Indemnitee.
<PAGE>
Item 16. Exhibits
4.1 Managing Underwriters Warrant Agreement (incorporated by reference to
Exhibit 10.15 to registration statement No. 333-39767)
4.2 Registration Rights Agreement (incorporated by reference to Exhibit
10.16 to registration statement No. 333-39767)
5 Opinion of Blau, Kramer, Wactlar & Lieberman, P.C.
23.1 Consent of Arthur Andersen LLP
23.2 Consent of Blau, Kramer, Wactlar & Lieberman, P.C. (included in
Exhibit 5 hereof)
24 Powers of Attorney (included in the signature pages hereof)
Item 17. Undertakings
(a) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, as amended (the
"Act"), each filing of the registrant's annual report pursuant to Section 13(a)
or Section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to Section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
(b) Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions, or otherwise, the registrant has been
advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the registrant of expenses incurred
or paid by a director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
(c) The undersigned Registrant hereby undertakes:
(1) For purposes of determining any liability under the Act, the
information omitted from the form of prospectus filed as part of a registration
statement in reliance upon Rule 430A and contained in a form of prospectus filed
by the registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Act
shall be deemed to be part of the registration statement as of the time it was
declared effective.
(2) For the purpose of determining any liability under the Act, each
post-effective amendment that contains a form of prospectus shall be deemed to
be a new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this registration
statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in Lancaster, Pennsylvania on the 12th day of February, 1999.
Herley Industries, Inc.
By: /s/ Lee N. Blatt
---------------------
Lee N. Blatt
Chairman of the Board
POWER OF ATTORNEY
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below on February 12, 1999, by the
following persons in the capacities indicated. Each person whose signature
appears below also constitutes and appoints Lee N. Blatt and Myron Levy, and
each of them, his true and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and stead, in
any and all capacities to sign any and all amendments (including post-effective
amendments) to this Registration Statement, and to file the same, with all
exhibits thereto and all other documents in connection therewith, with the
Commission, granting unto said attorney-in-fact and agent full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he might or could do in
person, hereby ratifying and confirming all that said attorney-in-fact and agent
or his substitute or substitutes may lawfully do or cause to be done by virtue
hereof.
Signature Title
/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 (Chief
Anello C. Garefino Financial Officer and Principal Accounting
Officer)
/s/ Thomas J. Allshouse Director
Thomas J. Allshouse
/s/ David H. Lieberman Secretary and Director
David H. Lieberman
Director
John Thonet
/s/ Alvin M. Silver Director
Alvin M. Silver
/s/ Edward K. Walker, Jr. Director
Edward K. Walker, Jr.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
---------------
EXHIBITS
to
Form S-3
Registration Statement
---------------
Herley Industries, Inc.
(Exact name of registrant as specified in its charter)
EXHIBIT 5
February 16, 1999
Securities and Exchange Commission
450 Fifth Avenue, N.W.
Washington, D.C. 20549
Re: Herley Industries, Inc.
Registration Statement on Form S-3
----------------------------------
Gentlemen:
Reference is made to the filing by Herley Industries, Inc. (the "Company")
of a Registration Statement on Form S-3 (the "Registration Statement"), as
amended, with the Securities and Exchange Commission pursuant to the provisions
of the Securities Act of 1933, as amended, covering the registration of 110,000
shares of the Company's common stock, par value $.001 per share (the "Common
Stock"), 110,000 common stock purchase warrants (the "Warrants") and the
underlying 110,000 shares of Common Stock.
As counsel for the Company, we have examined its corporate records,
including its Certificate of Incorporation, By-Laws, its corporate minutes, the
form of its Common Stock certificate and Warrant certificate and such other
documents as we have deemed necessary or relevant under the circumstances.
Based upon our examination, we are of the opinion that:
1. The Company is duly organized and validly existing under the laws of the
State of Delaware.
2. The Warrants covered by the Registration Statement have been duly
authorized and, when issued in accordance with their terms, as more fully
described in the Registration Statement, will be validly issued, fully paid and
non-assessable.
3. The shares of Common Stock covered by the Registration Statement have
been duly authorized and, when issued in accordance with their terms, as more
fully described in the Registration Statement, will be validly issued, fully
paid and non-assessable.
4. The shares of Common Stock reserved for issuance upon the exercise of
the Warrants when issued in accordance with the terms and conditions of such
Warrants, will be validly issued, fully paid and non-assessable.
We hereby consent to be named in the Registration Statement and in the
prospectus which constitutes a part thereof as counsel to the Company, and we
hereby consent to the filing of this opinion as Exhibit 5.1 to the Registration
Statement.
Very truly yours,
/s/ Blau, Kramer, Wactlar & Lieberman, P.C.
EXHIBIT 23.1
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this registration statement of our report dated September 17, 1998,
included in Herley Industries, Inc.'s Form 10-K for the fiscal year ended August
2, 1998, and to all references to our Firm included in this registration
statement.
/s/ Arthur Andersen LLP
Lancaster, Pennsylvania
February 15, 1999
