-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, AVDtEqkEVjHEhEPdPIIWBivyNtkY1n24+e0tOcOsM+ueX62PpRo1iEW4LAll2s5U TGCWRwlfdFmdmVaZjhhB8g== 0000047035-99-000017.txt : 19991117 0000047035-99-000017.hdr.sgml : 19991117 ACCESSION NUMBER: 0000047035-99-000017 CONFORMED SUBMISSION TYPE: 10-K405/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19990801 FILED AS OF DATE: 19991116 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HERLEY INDUSTRIES INC /NEW CENTRAL INDEX KEY: 0000047035 STANDARD INDUSTRIAL CLASSIFICATION: SEARCH, DETECTION, NAVIGATION, GUIDANCE, AERONAUTICAL SYS [3812] IRS NUMBER: 232413500 STATE OF INCORPORATION: DE FISCAL YEAR END: 0731 FILING VALUES: FORM TYPE: 10-K405/A SEC ACT: SEC FILE NUMBER: 000-05411 FILM NUMBER: 99759107 BUSINESS ADDRESS: STREET 1: 10 INDUSTRY DR CITY: LANCASTER STATE: PA ZIP: 17603 BUSINESS PHONE: 7173972777 MAIL ADDRESS: STREET 1: 10 INDUSTRY DRIVE CITY: LANCASTER STATE: PA ZIP: 17603 FORMER COMPANY: FORMER CONFORMED NAME: HERLEY MICROWAVE SYSTEMS INC DATE OF NAME CHANGE: 19900510 FORMER COMPANY: FORMER CONFORMED NAME: HERLEY INDUSTRIES INC DATE OF NAME CHANGE: 19831103 10-K405/A 1 ANNUAL REPORT FORM 10-K AMENDMENT 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 C:\wp\SEC\Form10K\10k99\10KA99.wpd 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. C:\wp\SEC\Form10K\10k99\10KA99.wpd 2 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 C:\wp\SEC\Form10K\10k99\10KA99.wpd 3 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. C:\wp\SEC\Form10K\10k99\10KA99.wpd 4
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 - ------------------ ---- ---------- --------- --------------- ------------ 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 - -------- (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 $13.94 (at 115% of the market price on date of issue): Lee N. Blatt - 125,000, and Myron Levy - 125,000.
C:\wp\SEC\Form10K\10k99\10KA99.wpd 5 Option/SAR Grants in Last Fiscal Year
Individual Grants ---------------------------------------------------- Potential Realized Value at Number of Assumed Annual Rates of Securities % of Total Stock Price Appreciation Underlying Options Issued Exercise Option Term (3) Options to Employees in Price Expiration -------------------------------- Name Granted(1) Fiscal Year(2) ($/Sh) Date 0% 5% 10% - ---------------------- ---------- --------------- -------- ---------- ------ ---------- ----------- 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 - -------- (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.
C:\wp\SEC\Form10K\10k99\10KA99.wpd 6 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.
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 - ------------------- ----------- -------------- ----------- ------------- ----------- ------------- 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 - -------- (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.
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. C:\wp\SEC\Form10K\10k99\10KA99.wpd 7 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. C:\wp\SEC\Form10K\10k99\10KA99.wpd 8 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:
Shares of Common Stock Beneficially Owned (1)(5) ------------------- Name Shares Percent - ------------------------------------------------ ------- ------- 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% - --------- (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.
C:\wp\SEC\Form10K\10k99\10KA99.wpd 9 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 C:\wp\SEC\Form10K\10k99\10KA99.wpd 10 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. C:\wp\SEC\Form10K\10k99\10KA99.wpd 11 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. C:\wp\SEC\Form10K\10k99\10KA99.wpd 12 -----END PRIVACY-ENHANCED MESSAGE-----