UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only
(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-11(c) or Section 240.14a-12.
HERLEY INDUSTRIES, INC.
(Name of Registrant as Specified in its Charter)
--------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
----------------------------------------------------------------------
(5) Total fee paid:
----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
----------------------------------------------------------------------
(3) Filing Party:
----------------------------------------------------------------------
(4) Date Filed:
----------------------------------------------------------------------
HERLEY INDUSTRIES, INC.
---------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
March 17, 2009
---------------
To our Stockholders:
An annual meeting of stockholders will be held at the Eden Resort Inn &
Suites, 222 Eden Road, Lancaster, Pennsylvania 17601-4216 on Tuesday, March 17,
2009, beginning at 9:00 a.m. At the meeting, you will be asked to vote on the
following matters:
1. Election of two directors in Class III to hold office until the 2011
Annual Meeting of Stockholders.
2. Ratification of the appointment of Marcum & Kliegman LLP as our
independent registered public accountants for the year ending August
2, 2009.
3. Any other matters that properly come before the meeting.
The above matters are set forth in the proxy statement attached to this
notice to which your attention is directed.
If you are a stockholder of record at the close of business on January 26,
2009, you are entitled to vote at the meeting or at any adjournment or
postponement of the meeting. This notice and proxy statement are first being
mailed to stockholders on or about January 30, 2009.
By Order of the Board of Directors,
MYRON LEVY
Chairman and Chief Executive Officer
Dated: January 30, 2009
Lancaster, Pennsylvania
WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL MEETING, YOU ARE URGED TO COMPLETE,
SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD IN THE ACCOMPANYING PRE-ADDRESSED
POSTAGE-PAID ENVELOPE AS DESCRIBED ON THE ENCLOSED PROXY CARD. YOUR PROXY, GIVEN
THROUGH THE RETURN OF THE ENCLOSED PROXY CARD, MAY BE REVOKED PRIOR TO ITS
EXERCISE BY FILING WITH OUR CORPORATE SECRETARY PRIOR TO THE MEETING A WRITTEN
NOTICE OF REVOCATION OR A DULY EXECUTED PROXY BEARING A LATER DATE, OR BY
ATTENDING THE MEETING, FILING A WRITTEN NOTICE OF REVOCATION WITH THE SECRETARY
OF THE MEETING AND VOTING IN PERSON.
Directions To
The Best Western Eden Resort
The Best Western Eden Resort and Suites is located in the heart of Lancaster
County, Pennsylvania, less than an hour-and-a-half drive from both Philadelphia
and Baltimore, and only a three-hour drive southwest of New York City. Our
central location means you have easy, nearby access to all the major highways
serving the area.
From Southern New York/Northern New Jersey
Take the New Jersey Turnpike South to Exit 6 (PA Turnpike West). Exit PA
Turnpike at Exit 286. Route 222 South. Exit to the right onto Route 30 West.
Once on Route 30 West, stay in the far right lane and take the first Exit, 272
North (Oregon Pike). Go to the traffic light and make a right onto Eden Road.
The Best Western Eden Resort is on your right.
From Baltimore, MD
Interstate 83 North to York PA. Take Route 30 East to Lancaster. Take the
Lititz/Oregon Pike Exit off of 30 East. Go to the second traffic light and make
a left onto 272 North (Oregon Pike). Go to the first traffic light and make a
right onto Eden Road. The Best Western Eden Resort is on your right.
From Philadelphia, PA
Take PA Turnpike West to Exit 286 onto Route 222 South. Follow Route 222 South
to Route 30 West. Exit to the right onto Route 30 West. Once on Route 30 West
stay in the far right lane and take first Exit 272 North (Oregon Pike). Go to
the traffic light and make a right onto Eden road. The Best Western Eden Resort
is on your right.
From Pittsburgh, PA
PA Turnpike East to Exit 247 (Harrisburg) onto Route 283 East. Follow to the
junction with Route 30 East. Follow Route 30 East to the Lititz/Oregon Pike
Exit. At the first red light go straight. At the second red light turn left onto
272 North (Oregon Pike). At the first traffic light make a right onto Eden Road.
The Best Western Eden Resort will be on your right.
HERLEY INDUSTRIES, INC.
101 North Pointe Boulevard
Lancaster, Pennsylvania 17601
---------------
PROXY STATEMENT
---------------
ANNUAL MEETING OF STOCKHOLDERS
Tuesday, March 17, 2009
---------------
Our Annual Meeting of Stockholders will be held on Tuesday, March 17, 2009,
at Eden Resort Inn & Suites, 222 Eden Road, Lancaster, Pennsylvania 17601-4216
at 9:00 a.m. This proxy statement contains information about the matters to be
considered at the meeting or any adjournments or postponements of the meeting.
You are invited to attend the meeting.
ABOUT THE MEETING
Why did I receive these proxy materials?
We are providing these proxy materials in connection with the solicitation
by the Board of Directors of Herley Industries, Inc. ("Herley," the "Company",
"we," "us" or "our"), a Delaware corporation, of proxies to be voted at our 2009
Annual Meeting of Stockholders and at any adjournment or postponement.
The Annual Meeting will be held at the Eden Resort Inn & Suites. See the
inside front cover of this proxy statement for directions.
Stockholders will be admitted to the Annual Meeting beginning at 8:30 a.m.
Eastern Daylight Time. Seating will be limited.
No cameras, recording equipment, electronic devices, large bags, briefcases or
packages will be permitted in the meeting.
What is being considered at the meeting?
You will be voting on the following:
o election of two Class III directors;
o ratification of the appointment of our independent registered public
accountants.
Who is entitled to vote at the meeting?
You may vote if you owned stock as of the close of business on January 26,
2009. Each share of stock is entitled to one vote.
1
How do I vote?
You can vote in two ways:
o by attending the meeting in person; or
o by completing, signing and returning the enclosed proxy card.
Can I change my mind after I vote?
Yes, you may change your mind at any time before the vote is taken at the
meeting. You can do this by (1) signing another proxy with a later date and
returning it to us prior to the meeting or filing with our corporate secretary a
written notice revoking your proxy, or (2) voting again at the meeting.
What if I return my proxy card but do not include voting instructions?
Proxies that are signed and returned but do not include voting instructions
will be voted FOR the election of the nominee directors and FOR the appointment
of our independent registered public accountants.
What does it mean if I receive more than one proxy card?
It means that you have multiple accounts with brokers and/or our transfer
agent. Please vote all of these shares. We recommend that you contact your
broker and/or our transfer agent to consolidate as many accounts as possible
under the same name and address. Our transfer agent is American Stock Transfer &
Trust Company, (718) 921-8200.
Will my shares be voted if I do not provide my proxy?
If you hold your shares directly in your own name, they will not be voted
if you do not provide a proxy. Your shares may be voted under certain
circumstances if they are held in the name of a brokerage firm. Brokerage firms
generally have the authority to vote customers' unvoted shares on certain
"routine" matters, including the election of directors. When a brokerage firm
votes its customer's unvoted shares, these shares are counted for purposes of
establishing a quorum. At our meeting, these shares will be counted as voted by
the brokerage firm in the election of directors and appointment of our
independent registered public accountants, but will not be counted for all other
matters to be voted on because these other matters are not considered "routine"
under the applicable rules.
How many votes must be present to hold the meeting?
Your shares are counted as present at the meeting if you attend the meeting
and vote in person or if you properly return a proxy by mail. In order for us to
conduct our meeting, a majority of our outstanding shares of common stock as of
January 26, 2009 must be present at the meeting. This is referred to as a
quorum. On January 26, 2009, there were 13,559,427 shares issued and outstanding
and entitled to vote.
2
Is there a list of stockholders entitled to vote at the Annual Meeting?
The names of stockholders of record entitled to vote at the Annual Meeting
will be available at the Annual Meeting and for ten days prior to the meeting
for any purpose germane to the meeting, between the hours of 9:00 a.m. and 5:00
p.m. at our principal executive offices at 101 North Pointe Boulevard,
Lancaster, Pennsylvania.
What vote is required to approve each item?
Directors are elected by a plurality of the votes cast. Abstentions will
have no effect on the voting outcome with respect to the election of directors.
The affirmative vote of a majority of the issued and outstanding shares of
common stock present in person or by proxy and entitled to vote on the
appointment of our independent registered public accounting firm will be
required for approval. An abstention will be counted as a vote against this
proposal and broker non-votes will have no effect on the votes. Notwithstanding
the foregoing, in accordance with the most recent amendment to our by-laws, any
director nominee who receives more "withheld" votes than "for" votes in such
election, must immediately submit a resignation letter to the remaining Board of
Directors upon certification of the stockholder vote and the remaining Board of
Directors shall, upon a process managed by the Nominating Committee and
excluding the director nominee in question, within 45 days of receiving such
resignation letter determine whether to accept such resignation. The Board of
Director's explanation of its decision shall be promptly disclosed on Form 8-K
filed with the Securities and Exchange Commission.
Important Notice Regarding the Availability of Proxy Material for the
Stockholder Meeting to be Held on March 17, 2009
This year we are following a new Securities and Exchange Commission ("SEC")
rule which requires us to make available to you on the Internet a copy of this
proxy statement and our annual report to security holders. These are available
to you at www.herley.com under the heading "Proxy Material" found under "About
Us - Investor Relations."
Who will pay for the cost of this proxy solicitation?
We will pay the cost of soliciting proxies. Proxies may be solicited on our
behalf by directors, officers or employees in person or by telephone, electronic
transmission and facsimile transmission.
Who will count the vote?
Representatives of our transfer agent, American Stock Transfer & Trust
Company, will tabulate the votes and act as inspectors of election.
3
EXECUTIVE OFFICERS
Name Age Position
- ---- --- --------
Myron Levy 68 Chairman of the Board, Chief Executive Officer,
and Director
Jeffrey L. Markel 60 Chief Operating Officer
Anello C. Garefino 61 Chief Financial Officer
- -----------
Mr. Jeffrey L. Markel was appointed Chief Operating Officer in June 2007.
Prior to joining Herley, Mr. Markel was employed at BAE Systems serving as
President of the Network Enabled Systems Line of Business since 1997. From 1994
to 1997 he was Vice President of Program Management for GEC Marconi. His prior
employment was at Hazeltine Corporation, with his last position there being Vice
President, Communication Systems. Mr. Markel has over 38 years of experience in
the defense industry encompassing electronic systems, sub-systems, and
components. His educational background includes a Bachelor of Science in
Mechanical Engineering and a Bachelor of Arts in Applied Science from Lehigh
University, as well as a Masters in Business Administration from Long Island
University.
Mr. Anello C. Garefino was appointed Chief Financial Officer on January 12,
2009. He has been employed by us in various executive capacities for more than
the past five years. Mr. Garefino, a certified public accountant, was appointed
Vice President-Finance on September 13, 2004 and prior to that served as Vice
President Finance, Treasurer and Chief Financial Officer since June 1993. From
1987 to January 1990, Mr. Garefino was Corporate Controller of Exide
Corporation. Mr. Garefino earned his Bachelor of Science Degree in Accounting
from Rider University in 1969.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table presents certain information regarding the beneficial
ownership of our common stock as of January 26, 2009 by (a) each beneficial
owner of 5% or more of our outstanding stock known to us, based solely on
filings with the Securities and Exchange Commission, (b) each of our directors,
(c) each of our Named Executive Officers and (d) all of our directors and
executive officers as a group.
The percentage of beneficial ownership for the table is based on 13,559,427
shares of our common stock outstanding as of January 26, 2009. To our knowledge,
except under community property laws or as otherwise noted, the persons and
entities named in the table have sole voting and sole investment power over
their shares of our common stock. Unless otherwise indicated, each beneficial
owner listed below maintains a mailing address of c/o Herley Industries, Inc.,
101 North Pointe Boulevard, Lancaster, PA 17601.
The number of shares beneficially owned by each shareholder is determined
under SEC rules and is not necessarily indicative of beneficial ownership for
any other purpose. Under these rules, beneficial ownership includes those shares
of common stock over which the shareholder has sole or shared voting or
investment power and those shares of common stock that the shareholder has the
right to acquire within 60 days after January 26, 2009 through the exercise of
any stock option. The "Percentage of Shares" column treats as outstanding all
4
shares underlying such options held by the shareholder, but not shares
underlying options held by other shareholders.
Common Stock % of Outstanding
Name of Beneficial Owner Beneficially Owned (1) (2) Shares
- ------------------------ -------------------------- --------------------------
Myron Levy 1,527,515 10.4%
Jeffrey L. Markel (3) 100,000 *
Kevin J. Purcell (4) 10,000 *
Carlos C. Campbell 35,000 *
John A. Thonet (5) 107,649 *
Adm. Edward K. Walker, Jr. (Ret.) 74,110 *
Dr. Edward A. Bogucz 37,575 *
Adm. Robert M. Moore (Ret.) 37,500 *
GAMCO Investors (6) 3,097,812 22.8%
Third Avenue Management, Inc. (7) 1,947,161 14.4%
Dimensional Fund Advisors, Inc. (8) 1,187,857 8.8%
Wells Capital Management, Inc. (9) 1,178,796 8.7%
Barclays Global Investors NA (10) 723,558 5.3%
Lee N. Blatt (11) 1,544,399 10.4%
Directors and executive
officers as a group
(8 persons) 1,929,349 12.9%
<FN>
- -------
* Indicates ownership of less than one percent.
(1) No officer or director owns more than one percent of the outstanding shares
of common stock unless otherwise indicated. Ownership represents sole
voting and investment power.
(2) Includes beneficial ownership of the following number of shares that may be
acquired within 60 days of January 26, 2009 pursuant to stock options
awarded under our stock option plans:
Myron Levy 1,075,000 John A. Thonet 72,500
Adm. Edward K. Walker, Jr. 49,500 Jeffrey L. Markel 100,000
Dr. Edward A. Bogucz 37,500 Kevin J. Purcell 10,000
Adm. Robert M. Moore 37,500 Carlos C. Campbell 35,000
Directors and executive
officers as a group 1,417,000
(3) Mr. Markel was appointed Chief Operating Officer in June 2007.
(4) Mr. Purcell resigned as Chief Financial Officer on January 12, 2009.
(5) Does not include 155,998 shares, owned by Mr. Thonet's children, Hannah and
Rebecca Thonet, and 30,669 shares owned by his wife, Kathi Thonet. Mr.
Thonet disclaims beneficial ownership of these shares.
(6) Address is One Corporate Center, Rye, NY 10580.
(7) Address is 622 Third Avenue, New York, NY 10017.
(8) Address is 1299 Ocean Avenue, Santa Monica, CA 90401.
(9) Address is 525 Market Street, 10th Floor, San Francisco, CA 94105.
(10) Address is 45 Fremont Street, San Francisco, CA 94105.
(11) Includes beneficial ownership of 1,301,000 shares that may be acquired
within 60 days of January 26, 2009 pursuant to stock options. Mr. Blatt
entered into a voting trust agreement wherein sole voting power to
1,301,000 shares under stock options held by him and 21,099 shares held in
his IRA was granted to the Company's Chairman, Myron Levy. Mr. Blatt's
address is 471 N. Arrowhead Trail, Vero Beach, FL 32963
</FN>
5
PROPOSAL ONE
ELECTION OF DIRECTORS
Our certificate of incorporation and by-laws provide for a Board of
Directors consisting of not less than three nor more than twelve directors. Our
Board of Directors now consists of six directors. At each annual meeting of
stockholders, directors constituting a class are elected for staggered three
year terms.
The board has nominated John Thonet and Carlos C. Campbell for election as
Class III directors to serve until the 2011 annual meeting of stockholders or
until his successor is duly elected and qualified. Shares represented by
executed proxies in the form enclosed will be voted, unless otherwise indicated,
for the election as directors of the nominees named in Class III unless any such
nominee shall be unavailable, in which event such shares will be voted for a
substitute nominee designated by the Board of Directors. The Board of Directors
has no reason to believe that either of the nominees will be unavailable or, if
elected, will decline to serve.
The following table sets forth our directors and the classes in which they
will be presently serving.
Class I Class II Class III
------- -------- ---------
(To serve until the 2009 Annual (To serve until the 2010 Annual (To serve until the 2011 Annual
Meeting of Stockholders) Meeting of Stockholders) Meeting of Stockholders)
- ----------------------------------- ------------------------------- -----------------------------------
Rear Adm. Robert M. Moore (Ret.)(1)(2)(4) Myron Levy John A. Thonet
Rear Adm. Edward K. Walker, Jr. (Ret.) Dr. Edward A. Bogucz (1)(3)(4) Carlos C. Campbell (2)(3)(4)
(1)(2)(3)
<FN>
- -----------
(1) Member of Compensation Committee
(2) Member of Governance and Ethics Committee
(3) Member of Nominating Committee
(4) Member of Audit Committee
</FN>
The business experience of our directors is set forth below.
Mr. Myron Levy was appointed Chairman of the Board in June 2006 after
serving as Vice Chairman of the Board since August 2003, and has been our Chief
Executive Officer since August 2001. Prior thereto, Mr. Levy served as President
since June 1993, as Executive Vice President and Treasurer since May 1991, and
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.
Rear Admiral Edward K. Walker, Jr. (Ret.) was appointed Vice Chairman of
the Board in June 2006. Rear Admiral Walker served as the Director of Corporate
Strategy for Resource Consultants, Inc., a privately held corporation supporting
the Department of Defense and other government agencies, after his retirement
from the United States Navy in 1988 until 2000. Prior to his retirement from the
United States Navy, Rear Admiral Walker served for 34 years in various naval
officer positions, including Commander of the Naval Supply Systems Command, and
Chief of Supply Corps. He holds a Bachelor's Degree from the United States Naval
6
Academy and Master's Degree in Business Administration from The George
Washington University.
Dr. Edward A. Bogucz is currently Executive Director of the New York Center
of Excellence in Environmental Systems, a university-industry consortium that
includes 12 universities and research institutions. Previously, Dr. Bogucz
served as Dean of Engineering and Computer Science at Syracuse University from
1995 through 2003. Dean Bogucz earned his bachelor's and doctoral degrees in
mechanical engineering from Lehigh University and a Master's Degree from
Imperial College, University of London. His teaching and research expertise
includes fluid dynamics, energy systems, computational methods, and
multidisciplinary analysis and design. As Dean, he led the strengthening of the
College of Engineering and Computer Science in selected areas, including RF and
microwave devices, information fusion, systems assurance, and environmental
technologies.
Rear Admiral Robert M. Moore (Ret.) is a consultant in business and
financial management. He is a retired Rear Admiral, U.S. Navy. His 35-year
career in the Navy culminated in his last assignment in charge of the Navy's
worldwide supply system. He holds a Bachelor's Degree from the University of
Texas and a Master's Degree in Business Administration from Harvard University.
Mr. John A. Thonet has been Secretary since January 2003, and is President
of Thonet Associates, an environmental consulting firm specializing in land
planning and zoning matters, for the past ten years.
Carlos C. Campbell operates a consulting business in Reston, Virginia and
serves on the Board of Directors for Resource America, Inc. and Pico Holdings,
Inc., both publicly traded companies. He is a veteran of nine years as a Naval
Flight Officer and served in the Administration of President Reagan as the
Assistant Secretary for Economic Development, U.S. Department of Commerce.
DIRECTOR INDEPENDENCE
We have adopted the NASDAQ Stock Market's standards for determining the
independence of directors. Under these standards, an independent director means
a person other than an executive officer or one of our employees or any other
individual having a relationship which, in the opinion of the Board of
Directors, would interfere with the exercise of independent judgment in carrying
out the responsibilities of a director. In addition, the following persons shall
not be considered independent:
o a director who is, or at any time during the past three years was,
employed by us;
o a director who accepted or who has a family member who accepted any
compensation from us in excess of $100,000 during any period of twelve
consecutive months within the three years preceding the determination
of independence, other than the following:
o compensation for service on the Board of Directors or any
committee thereof;
o compensation paid to a family member who is one of our employees
(other than an executive officer); or
o under a tax-qualified retirement plan, or non-discretionary
compensation;
o a director who is a family member of an individual who is, or at any
time during the past three years was, employed by us as an executive
officer;
7
o a director who is, or has a family member who is, a partner in, or a
controlling shareholder or an executive officer of, any organization
to which we made, or from which we received, payments for property or
services in the current or any of the past three fiscal years that
exceed 5% of the recipient's consolidated gross revenues for that
year, or $200,000, whichever is more, other than the following:
o payments arising solely from investments in our securities; or
o payments under non-discretionary charitable contribution matching
programs;
o a director who is, or has a family member who is, employed as an
executive officer of another entity where at any time during the past
three years any of our executive officers served on the compensation
committee of such other entity; or
o a director who is, or has a family member who is, a current partner of
our outside auditor, or was a partner or employee of our outside
auditor who worked on our audit at any time during any of the past
three years.
For purposes of the NASDAQ independence standards, the term "family member"
means a person's spouse, parents, children and siblings, whether by blood,
marriage or adoption, or anyone residing in such person's home.
The Board of Directors has assessed the independence of each non-employee
director under the independence standards of the NASDAQ Stock Market set forth
above, and has affirmatively determined that four of our non-employee directors
(Mr. Campbell, Admirals Walker and Moore and Dr. Bogucz) are independent.
We expect each director to attend every meeting of the Board and the
committees on which he serves as well as the annual meeting. In 2008, each
director attended the 2008 Annual Meeting of Stockholders meeting. All directors
attended at least 75% of the meetings of the Board and the committees on which
they served in 2008.
MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS
During the fiscal year ended August 3, 2008 there were:
o 7 meetings of the Board of Directors
o 4 meetings of the Audit Committee
o 1 meeting of the Compensation Committee
o 3 meetings of the Governance and Ethics Committee
The Nominating Committee did not hold any meetings during the fiscal year
ended August 3, 2008.
8
Committee Autonomy
Each committee has the power to engage independent legal, financial or
other advisors, as it may deem necessary, without consulting or obtaining the
approval of our Board of Directors or any officer of the Company.
Audit Committee and Audit Committee Financial Expert
The Board has a standing Audit Committee. The Board has affirmatively
determined that each director who serves on the Audit Committee is independent,
as the term is defined by applicable NASDAQ and Securities and Exchange
Commission ("SEC") rules. During fiscal 2008, the Audit Committee of the Board
of Directors of the Company consisted of Robert M. Moore (Chairman), Carlos C.
Campbell, and Edward A. Bogucz. The members of the audit committee have
substantial experience in assessing the performance of companies, gained as
members of the Company's board of directors and audit committee, as well as by
serving in various capacities in other companies or governmental agencies. As a
result, they each have an understanding of financial statements. However, none
of them keep current on all aspects of generally accepted accounting principles.
Accordingly, the board of directors does not consider any of them to be a
financial expert as that term is defined in applicable regulations.
Nevertheless, the board of directors believes that they competently perform the
functions required of them as members of the audit committee and, given their
backgrounds; it would not be in the best interest of the Company to replace any
of them with another person to qualify a member of the audit committee as a
financial expert.
The Audit Committee regularly meets with our independent registered public
accounting firm outside the presence of management.
The Audit Committee operates under a charter approved by the Board of
Directors. The Audit Committee charter is not available on our website. A copy
of the Audit Committee charter was attached as an exhibit to our proxy statement
for the 2007 Annual Meeting of Stockholders and may be found through a link to
SEC filings from our website www.herley.com under "About Us - Investor
Relations."
Compensation Committee
Our Compensation Committee annually establishes, subject to the approval of
the Board of Directors and any applicable employment agreements, the salaries
which will be paid to our executive officers during the coming year, and
administers our stock-based benefit plans. The Compensation Committee currently
consists of Edward A. Bogucz, Chairman, Edward K. Walker, Jr. and Robert M.
Moore. Each member of the Compensation Committee is a director who is not
employed by us or any of our affiliates, and are independent directors under
NASDAQ listing standards.
The Compensation Committee operates under a charter approved by the Board
of Directors. A copy of the charter of the Compensation Committee is attached as
Appendix A to this proxy statement. The Compensation Committee charter is not
available on our website.
Nominating Committee
Our Nominating Committee currently consisting of Carlos C. Campbell,
Chairman, Edward K. Walker, Jr., and Edward A. Bogucz, each of whom is an
independent director, identifies individuals qualified to become Board members,
9
recommends to the Board nominees to fill vacancies in membership of the Board as
they occur and, prior to each Annual Meeting of Shareholders, recommends a slate
of nominees for election as Directors at such meeting.
The Nominating Committee operates under a charter approved by the Board of
Directors. A copy of the charter of the Nominating Committee is attached as
Appendix B to this proxy statement. The Nominating Committee charter is not
available on our website.
Governance and Ethics Committee
Our Governance and Ethics Committee, currently consisting of Edward K.
Walker, Jr., Chairman, Robert M. Moore and Carlos C. Campbell, each of whom is
an independent director, monitors developments in corporate governance
principles and other corporate governance matters and makes recommendations to
the Board of Directors regarding the adoption of additional corporate governance
principles.
Shareholder Recommendations for Board Nominees
The Nominating Committee will consider shareholder recommendations for
candidates for the Board. The name of any recommended candidate for director,
together with a brief biographical sketch, a document indicating the candidate's
willingness to serve, if elected, and evidence of the nominating shareholder's
ownership of Company stock, should be sent to the attention of the Secretary of
the Company.
Stockholder Communications with the Board
We have not developed to date a formal process by which stockholders may
communicate directly with directors. However, in recent years an informal
process has developed in which communications sent to the Board of Directors or
in care of an officer or our other representative is forwarded to the Chief
Executive Officer, who is also a director. We believe this process has
adequately served the needs of the Board of Directors and our stockholders. In
light of SEC disclosure rules on this matter, the Board of Directors may
consider the development and adoption of more formal procedures. Until such
procedures are adopted and disclosed to our stockholders, stockholders may
direct communications intended for the Board of Directors to the Secretary of
the Company, at 101 North Pointe Boulevard, Lancaster, Pennsylvania 17601. The
envelope containing such communication must contain a clear notation indicating
that the enclosed letter is a "Stockholder-Board Communication" or
"Stockholder-Director Communication" or similar statement that clearly and
unmistakably indicates the communication is intended for the Board of Directors.
All such communications must clearly indicate the author as a stockholder and
state whether the intended recipients are all members of the Board of Directors
or just certain specified directors. The Secretary will make copies of all such
communications and circulate them to the appropriate director or directors.
10
DIRECTOR COMPENSATION
Directors who are also employees of the Company are not separately
compensated for their services as directors.
Cash Compensation to Board Members
Directors who are not our employees receive an annual fee of $15,000 and a
fee of $1,500 for each board of directors meeting attended. The Corporate
Governance Committee Chairman receives an annual fee of $15,000, and other
members of the Corporate Governance Committee receive $5,000 annually. The Audit
Committee Chairman receives an annual fee of $25,000, and other members of the
Audit Committee receive $10,000 annually. The Compensation Committee Chairman
receives an annual fee of $7,500, and other members of the Compensation
Committee receive $5,000 annually. The Nominating Committee Chairman receives an
annual fee of $7,500, and other members of the Nominating Committee receive
$5,000 annually.
Equity Compensation to Board Members
The Company grants options to purchase shares of the Company's Common Stock
to its outside directors on a periodic basis. No options were granted to its
outside directors during fiscal 2008.
Other
Board members are reimbursed for reasonable expenses in attending meetings
of the Board of Directors and for expenses incurred in connection with their
complying with our corporate governance policies. The Company also provides
directors' and officers' liability insurance and indemnity agreements for our
directors. No other compensation is provided to our directors.
DIRECTOR COMPENSATION TABLE
The following table provides information with respect to all compensation
awarded to, earned by or paid to each person who served as a director (except
for Mr. Levy, our Chief Executive Officer, who receives no additional
compensation for his service on our Board) for all of fiscal 2008. Other than as
set forth in the table and the narrative that follows it, to date we have not
paid any fees to or reimbursed any expenses of our directors, except for
expenses incurred in connection with attendance at board meetings which in the
aggregate are less than $10,000 each, made any equity or non-equity awards to
directors, or paid any other compensation to directors.
11
Fees Earned
or Paid in
Name Cash ($) Option Awards ($) Total ($)
----- -------- ---------------- ---------
Rear Admiral Edward K. Walker, Jr. (Ret.) $100,000 (1) - $100,000
Dr. Edward A. Bogucz $45,000 - $45,000
Rear Admiral Robert M. Moore (Ret.) $52,500 - $52,500
John A. Thonet $22,500 - $22,500
Carlos C. Campbell $35,000 - $35,000
<FN>
- ----------
(1) Includes $37,500 paid to Mr. Walker under a consulting arrangement for
services relating to corporate governance and ethics.
</FN>
Compensation Committee Interlocks and Insider Participation
In fiscal 2008, our Compensation Committee consisted of Dr. Edward A.
Bogucz, Chairman, and Messrs. Edward K. Walker, Jr., and Robert M. Moore. None
of these persons were our officers or employees during fiscal 2008 nor had any
relationship requiring disclosures in this Annual Report. Mr. Walker has a
consulting arrangement with us for services relating to corporate governance and
ethics at an annual fee of $75,000.
Certain Relationships and Related Transactions
Effective October 12, 2006 and as a condition to entering into an
Administrative Agreement with the Department of the Navy we entered into an
agreement (the "Agreement") with Lee N. Blatt which provides that all
outstanding stock options previously issued to him which are all vested and
fully exercisable shall continue to be exercisable by him or, following his
death, by his designated beneficiaries, on or before the expiration date of the
specific option. In the event of a "change of control" of the Company as defined
in the Employment Agreement all remaining payments due under the Agreement
become immediately due and payable.
Prior to the acquisition of Micro Systems, Inc. ("MSI"), MSI had leased one
of its two buildings in Fort Walton Beach, Florida from MSI Investments, a
Florida General Partnership. MSI Investments is owned by four individuals, two
of whom are currently employees of MSI and one serves as a consultant.
We entered into a 10 year lease agreement with a partnership partially
owned by the children of an officer of the Company for our facility in
Farmingdale, NY. The lease provides for initial minimum annual rent of $312,000
subject to escalation of approximately 4% annually throughout the 10 year term.
Additionally, in March 2000, we entered into another 10 year lease with the same
partnership for additional space. The initial minimum annual rent of $92,000 is
subject to escalation of approximately 4% annually. On August 24, 2005, we
amended the agreement to incorporate the two individual leases into a single
12
lease and extended the term of the lease to August 31, 2010. During the fourth
quarter of fiscal 2008 we decided to close our manufacturing facility in
Farmingdale, NY and transfer its contracts and assets to our other facilities in
Whippany, New Jersey; Woburn, Massachusetts; Lancaster, Pennsylvania; and
Jerusalem, Israel. Closure of the facility has been completed.
Indemnification Agreements
We have entered into separate indemnification agreements with our officers
and directors. We have 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, our best interests and with respect to any criminal proceeding, had
no reasonable cause to believe his or her conduct was unlawful. We only provide
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.
COMPENSATION DISCUSSION AND ANALYSIS
Compensation Discussion and Analysis
This section discusses the principles underlying our executive compensation
policies and decisions and the most important factors relevant to an analysis of
these policies and decisions. It provides qualitative information regarding the
manner and context in which compensation is awarded to and earned by our Named
Executive Officers ("NEOs") (as defined in the Summary Compensation Table below)
and places in perspective the data presented in the tables and narrative that
follow.
Compensation Philosophy and Overview
We believe that the most effective compensation program is one that is
designed to reward the achievement of our financial and strategic goals, and
which aligns executives' interests with those of our shareholders.
The compensation plans for our executive officers have three principal
elements: a base salary, discretionary cash incentive bonuses linked to
achievement of financial and strategic goals and equity-based incentive
compensation. In addition, we provide our executive officers a variety of
benefits that in most cases are available generally to all of our salaried
employees. We view the components of compensation as related but distinct.
Although the Compensation Committee of our Board of Directors (the "Committee")
reviews the total compensation of our executive officers, we do not believe that
significant compensation derived from one component of compensation should
necessarily negate or reduce compensation from other components. We do believe
that the executive compensation package should be fair and reasonable when taken
as a whole.
We have not adopted any formal policies or guidelines for allocating
compensation between long-term and currently paid out compensation or between
cash and non-cash compensation. However, our philosophy is to keep cash
compensation at a competitive level while providing the opportunity to be
significantly rewarded through equity if our company and our stock price perform
well over time.
13
We also believe that executive officers should have a greater
percentage of their equity compensation in the form of stock options rather than
restricted stock or restricted stock unit awards, as stock options have greater
risk associated with them than these other equity grants. We believe that our
executive officers should have a larger portion of their equity incentive awards
at risk as compared with our other employees.
Role of Executive Officers in Compensation Decisions
Mr. Myron Levy, our Chief Executive Officer, annually reviews the
performance of each of our other executive officers. The conclusions reached by
Mr. Levy and his recommendations based on these reviews, including with respect
to salary adjustments, incentive awards and equity award amounts, are presented
by Mr. Levy to the Committee. The Committee can exercise its discretion in
modifying any recommended adjustments or awards to executives. The Committee
makes all final compensation decisions for each of our executive officers.
Committee meetings typically have included, for all or a portion of each
meeting, not only the Committee members but also our Chief Executive Officer.
Role of the Compensation Committee
The Compensation Committee currently consists of Edward A. Bogucz,
Chairman, Edward K. Walker, Jr. and Robert M. Moore. Each member of the
Compensation Committee is a director who is not employed by us or any of our
affiliates, and are independent directors under NASDAQ listing standards.
The Committee ensures that our executive compensation and benefits program
is consistent with our compensation philosophy and our corporate governance
guidelines and is empowered to make decisions regarding executive officers total
compensation, and subject to the approval of the Board, our Chief Executive
Officer's total compensation.
The Committee reviews our overall compensation strategy at least annually
to ensure that it promotes shareholder interests, supports our strategic and
tactical objectives and provides for appropriate rewards and incentives for our
executive officers. The Committee's most recent overall compensation review
occurred in October 2008.
Accounting and Tax Implications of Our Compensation Policies
In designing our compensation programs, the Committee considers the
financial accounting and tax consequences to the Company as well as the tax
consequences to our employees. We account for equity compensation paid to our
employees under SFAS 123(R), which requires us to estimate and record and
expense over the service period of the award. The SFAS 123(R) cost of out equity
awards is considered by management as part of our equity grant recommendations
to the Committee. Our equity grant practices have been impacted by SFAS 123(R),
which we adopted in the first quarter of our 2006 fiscal year.
Section 162(m) of the Internal Revenue Code places a limit of $1 million on
the amount of compensation that we may deduct for income tax purposes in any one
year with respect to our five most highly compensated executive officers. The $1
million limit does not apply to compensation that is considered "performance
14
based" under applicable tax rules. Our executive stock options are intended to
qualify as "performance-based," so that compensation attributable to those
options is fully tax deductible.
We also consider the tax impact to employees in designing our compensation
programs, particularly our equity compensation programs. For example, employees
generally control the timing of taxation with respect to the exercise of stock
options.
Components of our Executive Compensation Program
Base Salary
We establish base salaries that are sufficient, in the Committee's
judgment, to retain and motivate our NEOs while taking into account the unique
circumstances of our Company. In determining appropriate salaries, the Committee
considers each NEO's scope of responsibility and accountability within our
Company and reviews the NEO's compensation, individually and relative to other
officers, as well as similarly situated companies. We have entered into
employment agreements with our NEOs which provide for adjustments as set forth
more fully below in the section titled "Employment Agreements." In fiscal 2008,
there were no increases in any NEO's salary beyond what is called for in the
individual employment agreements, such as cost-of-living increases.
Discretionary Cash Incentive Bonuses
The Committee believes that discretionary cash bonus compensation for NEOs
should be directly linked to our overall corporate financial performance,
individual performance and our success in achieving both our short-term and
long-term strategic goals. In assessing the performance of our Company and our
NEOs during fiscal 2008, the Committee considered our performance in the
following areas:
o Increase levels of component integration and value added content;
o Enhancement of our manufacturing capabilities;
o Pursuit of selective commercial opportunities;
o Maintaining leadership in microwave technology;
o Strengthening and expanding customer relationships; and
o Maintaining our reputation for integrity.
In fiscal 2008, the Committee awarded Mr. Levy an additional performance
payment of $380,931 for fiscal year 2007 (which was paid in fiscal 2008) based
on a number of factors, including his performance as Chairman of the Board and
CEO and the comparison of his salary to our other NEOs, as well as our peer
group. Mr. Levy also received a payment of $300,000 for fiscal 2008 for his
performance as Chairman and CEO in guiding the Company through a difficult
period, including the recently settled criminal proceedings and the Company's
ongoing compliance requirements under its administrative order with the U.S.
Government. Mr. Purcell received a bonus of $50,000 for fiscal 2007 paid in
fiscal 2008; and Mr. Markel received an incentive in fiscal 2008 of $300,000 as
provided in his employment agreement. These awards by the Committee for fiscal
2008 are detailed in the Summary Compensation Table on page 17.
Our bonuses are structured to be deductible under Section 162(m) of the
Internal Revenue Code which denies publicly-held corporations a federal income
15
tax deduction for compensation in excess of $1 million paid to the CEO and the
four other most highly compensated officers during a fiscal year unless the
compensation is "performance-based." We believe that our process of awarding
cash bonuses satisfies this requirement; however, there can be no assurance that
any amounts paid as discretionary cash bonuses will be deductible.
Equity-Based Long Term Incentive Compensation
We believe that our equity incentive compensation arrangements are an
important factor in developing an overall compensation program that is
competitive with our peer group of companies and that aligns the interests of
our NEOs with those of our shareholders.
We believe that stock options effectively align the long-term interests of
management with our shareholders. Additionally, we believe that our NEO's should
have a greater percentage of their equity awards at risk as compared with our
other employees. Since NEOs do not benefit from stock options unless the price
of our stock increases after the grant date as compared with the grant price,
they clearly provide NEOs with an added incentive to build shareholder value. We
have not in the past, repriced the exercise price for stock options that have
been granted when the future stock price has decreased below the exercise price
of such stock options. The date of our awards of stock options is established by
the Committee at a meeting held approximately four to six weeks prior to the
date of grant. Grants of stock options vest over a period of years in order to
serve as an inducement for the NEOs to remain in the employ of our Company. It
is contemplated that we will continue to offer stock options as the principal
component of our equity compensation arrangement for our NEOs, however, no stock
options were granted for fiscal 2008 to our NEOs.
The number of shares of stock options awarded to our NEOs is established by
the Committee in consultation with our CEO, taking into account a number of
factors, including the position, job performance and overall responsibility of
each NEO. Since the value of the stock options granted to our NEOs is based upon
the price of our shares, the Committee believes that the granting of stock
options is a significant incentive to our NEOs to continue to build shareholder
value. The Committee also believes that the multi-year vesting periods for the
stock options will be helpful in linking equity compensation to long-term
performance.
We have not established any equity or security ownership requirement
guidelines for NEO's.
Retirement and other Executive Benefits and Perquisites
We have no retirement benefit program for our NEOs except for our 401(k)
program that is available to all of our employees. All of our executives are
eligible to participate in our employee benefit plans, including medical,
dental, life insurance and 401(k) plans. These plans are available to all
salaried employees and do not discriminate in favor of executive officers. It is
generally our policy not to extend significant perquisites to our executives
that are not available to our employees generally. We have no current plans to
make changes to levels of benefits and perquisites provided to executives.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee has reviewed and discussed with management the
disclosures set forth above under the heading "Compensation Discussion and
16
Analysis" and, based on such review and discussions, the Compensation Committee
recommended to the Board that such disclosure be included in our Proxy Statement
and in the Annual Report on Form 10-K for the fiscal year ended August 3, 2008.
The Compensation Committee: Edward A. Bogucz (Chairman)
Edward K. Walker
Robert M. Moore
Executive Compensation Tables
Summary Compensation Table
The following table sets forth the annual compensation awarded to, earned
by, or paid to our Chairman, Chief Executive Officer ("Principal Executive
Officer"), our Chief Financial Officer ("Principal Financial Officer") and our
other most highly compensated executive officers other than the Chief Executive
Officer who were serving as executive officers at the end of the last completed
fiscal year as required under SEC rules (collectively, the "Named Executive
Officers" or "NEOs") for services rendered for the fiscal years ended August 3,
2008 and July 29, 2007.
Non-Equity
Name and Principal Option Incentive Plan All Other
Position Year Salary Bonus (2) Awards (3) Compensation Compensation (8) Total
-------- ---- ------ --------- ---------- ------------ --------------- -----
Myron Levy, 2008 $ 735,613 (1) - - $ 300,000 $ 25,158 $ 760,771
Chairman of the 2007 713,126 - - (4) 750,000 (5) 18,677 1,481,803
Board and Chief
Executive Officer
Jeffrey L. Markel, 2008 $ 352,719 (1) - $ 543,350 $ 300,000 (6) $ 23,116 $ 1,219,185
Chief Operating 2007 47,116 $ - 299,346 - - 346,462
Officer (5)
Kevin J. Purcell 2008 $ 227,622 $ 50,000 $ 49,942 - $ 10,308 $ 337,872
Chief Financial 2007 220,000 10,000 75,871 - 14,660 320,531
Officer (7)
- --------
<FN>
(1) Includes a cost of living adjustment of $26,531 in fiscal 2008 and $27,371
in fiscal 2007 for Mr. Levy and $1,844 in fiscal 2008 for Mr. Markel under
their employment agreements.
(2) Executive bonuses are paid at the discretion of the board of directors.
(3) Amounts represent the aggregate expense recognized for financial statement
reporting purposes in accordance with SFAS 123(R) for stock options granted
to the NEOs in prior fiscal years (disregarding estimates of forfeitures
for service-based vesting). SFAS 123(R) expense for the stock options is
based on the fair value of the options on the date of grant using the
Black-Scholes option-valuation model. No options were granted to the NEOs
in fiscal 2008.
(4) Represents performance payment for fiscal 2008.
(5) Represents incentive compensation under employment agreement in fiscal 2007
and an additional performance payment of $380,931 for fiscal year 2007 paid
in fiscal 2008.
(6) Mr. Markel was appointed Chief Operating Officer on June 4, 2007 at an
annual rate of compensation of $350,000. Under the terms of his employment
agreement, Mr. Markel is to receive a minimum incentive payment of $300,000
for fiscal year 2008.
(7) Mr. Purcell resigned as Chief Financial Officer on January 12, 2009.
17
(8) The following table describes each component of the "All Other
Compensation" column in the "Summary Compensation Table" above. Other
compensation in 2008 for Mr. Markel includes reimbursement for relocation
expenses of $8,533.
</FN>
Other
Personal
Matching Including
Contribution Medical Personal
Fiscal to Employee Supplemental Insurance Use of
Year Savings Plan Life Insurance Benefits Auto Total
---- ------------ -------------- --------- --------- -----
Myron Levy 2008 $ 9,000 $ 4,763 $ 7,862 $3,533 $ 25,158
2007 8,800 4,572 1,552 3,753 18,677
Jeffrey L. Markel 2008 9,000 714 - 13,402 23,116
2007 - - - - -
Kevin J. Purcell 2008 9,000 606 - 702 10,308
2007 8,800 225 - 5,635 14,660
Grants of Plan-Based Awards in Fiscal 2008
No stock options were granted to the Named Executive Officers during fiscal
2008.
Outstanding Equity Awards at Fiscal 2008 Year End
The following table provides information with respect to each unexercised
stock option held by the Named Executive Officers as of August 3, 2008. The
vesting schedules for these grants are disclosed on the footnotes to this table.
Option Awards
------------- Number of
Number of securities
securities underlying
underlying unexercised
unexercised options Option Option
Grant options (#) (#) Exercise Expiration
Name Date Exercisable Unexercisable Price ($) Date
---- ---- ----------- ------------- --------- ----------
Myron Levy 5-18-00 225,000 - $ 10.45 5/18/2010
3-12-01 150,000 - $ 8.38 3/12/2011
12-3-01 250,000 - $ 13.10 12/3/2011
5-21-02 250,000 - $ 19.52 5/21/2012
5-2-05 200,000 - $ 17.98 5/2/2015
Jeffrey L. Markel 5-9-07 100,000 150,000 (1) $ 15.77 5/9/2017
Kevin J. Purcell 6-2-06 10,000 15,000 (2) $ 19.38 9/2/2011
<FN>
(1) Options vest or become exercisable to the extent of 20% on date of grant
and the remaining 80% in four equal annual installments from the date of
grant.
(2) Options vest or become exercisable in five equal annual installments,
commencing one year after date of grant.
</FN>
18
Option Exercises in Fiscal 2008
No stock options were exercised during fiscal 2008 by the Named
Executive Officers.
Employment Agreements
Myron Levy entered into an employment agreement with us, dated as of July
29, 2002 which expires December 31, 2013, subject to extension for additional
one-year periods annually each January 1 with a final expiration date of
December 31, 2015 (as amended December 9, 2003). The agreement provides for an
annual salary as of August 3, 2008 at the rate of $739,300 as adjusted under the
agreement for a semi-annual cost of living adjustment based on the consumer
price index. The agreement also provides for minimum annual incentive
compensation of 3% of our pretax income as adjusted. At the end of the
employment period, the agreement provides for a ten-year consulting period at an
annual compensation rate equivalent to one-half of Mr. Levy's annual salary in
effect at the end of the employment period, subject to annual cost of living
adjustments.
The employment agreement with Mr. Levy provides for certain payments
following death or disability, and also provides that, in the event there is a
change in control, as defined, he has the option to terminate the agreement and
receive a lump-sum payment equal to the sum of the salary payable for the
remainder of the employment term, plus the annual incentive (based on the
average of the three highest annual incentive awarded during the ten preceding
years) for the remainder of the employment term. As of August 3, 2008, the
amount payable in the event of such termination would be approximately
$8,357,000.
Mr. Jeffrey Markel entered into an employment agreement with us as of May
30, 2007 which expires July 31, 2011, subject to extension for additional
one-year periods annually beginning July 31, 2008 with a final expiration date
of July 31, 2012. The agreement provides for an initial annual salary of
$365,800 (adjusted for a semi-annual cost of living adjustment based on the
consumer price index), and an initial award of 250,000 non-qualified stock
options at the closing stock price on the date prior to execution of the
agreement of $15.77 per share. The options vest 20% upon award and 20% annually
over the next four years. The agreement also provides for incentive compensation
to be paid at the discretion of the Board of Directors, however, incentive
compensation for the fiscal year ended August 3, 2008 is to be paid at a minimum
of $300,000. The agreement also provides for a consulting period of ten years at
the end of the employment period at an annual compensation of $100,000. In the
event of a change in our control, as defined, the executive has the option to
terminate the agreement at any time after July 31, 2010 and receive a lump-sum
payment equal to the sum of: (1) his salary payable for the remainder of the
employment term, (2) the annual bonuses (based on the average of the annual
bonuses awarded during the term of the employment agreement) for the remainder
of the employment term, and (3) a lump sum payment of $500,000 representing full
consideration under the consulting period. As of August 3, 2008, the amount
payable in the event of such termination would be approximately $2,497.000.
Kevin J. Purcell entered into an employment agreement with us, dated as of
June 7, 2006 which expires June 6, 2009. The agreement provides for an annual
salary as of August 3, 2008 at the rate of $233,210, subject to review by the
Board of Directors, plus an annual bonus at the discretion of the Board of
Directors. On January 12, 2009, we entered into a severance agreement with Mr.
Purcell which included, inter alia, the payment of his agreed upon compensation
through June 6, 2009.
19
Estimate of Potential Payments upon Termination or Change in Control
The following table provides an estimate of the potential payments and
benefits that each of the NEOs would be entitled to receive upon termination of
employment under various circumstances and upon a change of control. The table
does not include payments the executive would be entitled to receive in the
absence of one of these specified events such as from the exercise of
previously-vested stock options, which amount can be calculated from the
Outstanding Equity Awards at Fiscal 2008 Year End table. The table also does not
include benefits that are provided on a non-discriminatory basis to salaried
employees generally, including amounts payable under the Company's 401(k) plan.
Termination
without Cause or
Termination a Constructive
without Cause Termination
prior to Change Change in after a Change
Name Benefit in Control Control(1) in Control(4)
----- -------- --------------- ----------- ---------------
Myron Levy Severance (5) $ 8,357,000 $ 8,357,000 $ 8,357,000
Jeffrey L. Markel Severance (5) $ 2,497,000 (2) $ 2,497,000(3) $ 2,497,000 (2)
<FN>
- -------
(1) Change in control is defined as such term is presently defined in
Regulation 240.12b-2 under the Securities Exchange Act of 1934; or if any
"person" (as such term is used in Section 13(d) and 14(d) of the Exchange
Act other than the Company or any "person" who is a director or officer of
the Company, becomes the "beneficial owner" (as defined in Rule 13(d)-3
under the Exchange Act), directly or indirectly, of securities of the
Company representing twenty-five percent (25%), (20% in the case of Mr.
Levy and 50.1% in the case of Mr. Markel), of the voting power of the
Company's then outstanding securities; or if individuals who constitute the
Board of Directors cease for any reason to constitute at least a majority
thereof.
(2) In the event of termination without cause or a "constructive termination",
Mr. Markel would be entitled to receive a lump-sum payment of approximately
$1,997,000 representing three times his salary and estimated incentive,
plus $500,000 in settlement of his consulting agreement.
(3) In the event of a change in control as defined in (1) above, Mr. Markel has
the option to terminate his employment agreement at any time after July 31,
2010 and receive a lump-sum payment presently estimated at $2,497,000.
(4) A "constructive termination" event is (1) a material reduction of the
annual base and incentive compensation opportunities specified in the
officer's employment agreement to which he does not consent, (2) a failure
of Herley's successor after a change of control to assume the officer's
employment agreement, (3) a substantial change in the officer's position or
responsibility or (4) the officer's position relocates to more than 35
additional commute miles.
(5) If any payments or benefits received by Messrs. Levy or Markel would be
subject to the "golden parachute" excise tax under Section 4999 of the
Internal Revenue Code, we would be required to pay him such additional
amounts as may be necessary to place him in the same after-tax position as
if the payments had not been subject to the excise tax.
</FN>
20
Equity Compensation Plan Information
The following table sets forth the indicated information as of August 3,
2008 with respect to our equity compensation plans:
(c)
Number of securities
(a) remaining available
Number of securities (b) for future issuance
to be issued upon Weighted-average under equity
exercise of exercise price of compensation plans
outstanding options, outstanding options, (excluding securities
Plan category warrants and rights warrants and rights reflected in column (a))
- ------------- ------------------- ------------------- ------------------------
Equity compensation
plans approved by
security holders 2,263,418 $ 13.23 32,250
Equity compensation
plans not approved
by security holders 1,248,807 $ 17.64 228,700
--------- -------
Total 3,512,225 $ 14.80 260,950
========= =======
The following information is provided about our stock option plans:
2006 New Employee Stock Option Plan. The 2006 New Employee Stock Option
Plan covers 500,000 shares of common stock (as amended June 8, 2007). Options
granted under the plan are non-qualified stock options. Under the terms of the
plan, the exercise price for 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. The options expire no later than ten years from the date of
grant, subject to certain restrictions. Options for 4000 and 250,000 shares were
granted under this plan during the fiscal years ended August 3, 2008 and July
29, 2007, respectively. Options for 213,000 shares of common stock are available
for grant and 287,000 were outstanding at August 3, 2008.
2003 Stock Option Plan. The 2003 Stock Option Plan covers 1,000,000 shares
of common stock. Options granted under the plan are 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 not
later than ten years from the date of grant, subject to certain restrictions.
Options for 12,000 shares of common stock were cancelled and no options were
granted during the fiscal year ended August 3, 2008. Options for 97,000 shares
were granted under this plan during the fiscal year ended July 29, 2007. Options
for 15,700 shares of common stock are available for grant and 954,800 were
outstanding at August 3, 2008.
2000 Stock Option Plan. The 2000 Stock Option Plan covers 1,500,000 shares
of common stock. Options granted under the plan are 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 not
21
later than ten years from the date of grant, subject to certain restrictions.
Options for 26,000 shares were granted under this plan during the fiscal year
ended July 29, 2007. Options for 30,500 shares of common stock were cancelled
and no options were granted during the fiscal year ended August 3, 2008. Options
for 32,250 shares of common stock are available for grant and 1,194,000 were
outstanding at August 3, 2008.
1998 Stock Option Plan. The 1998 Stock Option Plan, which has now expired
with respect to the granting of new options, covers 2,250,000 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. Prices for incentive stock options granted to employees who own 10% or
more of our stock are at least 110% of 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 not later than ten years from the date of grant, subject to
certain restrictions. Non-qualified stock options for 33,500 shares were granted
under this plan during the fiscal year ended July 29, 2007. Options for 51,000
shares of common stock were cancelled and no options were granted during the
fiscal year ended August 3, 2008. At August 3, 2008 options to purchase
1,002,342 shares of common stock were outstanding under this plan.
1997 Stock Option Plan. The 1997 Stock Option Plan, which has now expired
with respect to the granting of new options, covers 2,500,000 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. Prices for incentive stock options granted to employees who own 10% or
more of our stock are at least 110% of 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 not later than ten years from the date of grant, subject to
certain restrictions. At August 3, 2008 options to purchase 67,076 shares of
common stock were outstanding under this plan.
1996 Stock Option Plan. The 1996 Stock Option Plan, which has now expired
with respect to the granting of new options, covers 1,000,000 shares of common
stock. Options which have been granted under the plan are non-qualified stock
options. Under the terms of the plan, the exercise prices of the options granted
under the plan were at the fair market value at the date of grant. The options
expire not later than ten years from the date of grant. At August 3, 2008,
non-qualified options to purchase 7,007 shares of common stock were outstanding
under this plan.
Employee Savings Plan
We maintain an Employee Savings Plan ("Plan") which qualified as a thrift
plan under Section 401(k) of the Internal Revenue Code (the "Code"). Effective
August 1, 2006, the Plan was amended to allow employees to elect salary
deferrals up to the maximum dollar amounts permissible under Code Section 402(g)
not to exceed the limits of Code Section 401(k), 404 and 415. For the Plan year
beginning August 1, 2005, the Plan was amended to be considered a "Safe Harbor"
plan, where a contribution will be made to eligible participants in an amount
equal to 100% of the amount of each participant's elective deferral that does
not exceed 3% of compensation, plus 50% of the amount of the elective deferral
that exceeds 3% of compensation up to a maximum contribution of 5% of
compensation. Under the Safe Harbor provision, all contributions are 100% vested
when made. Additional Company contributions can be made by us, depending on
profits. The aggregate benefit payable to an employee is dependent upon the
22
employee's rate of contribution, the earnings of the fund, and the length of
time such employee continues as a participant. ICI, sold by us following the
close of our fiscal year ended August 3, 2008, also has a "Safe Harbor" plan,
where a contribution will be made to eligible participants in an amount equal to
100% of the amount of each participant's elective deferral that does not exceed
6% of compensation, subject to the Code limitations discussed above. We
recognized expenses of approximately $1,368,000, $1,766,000 and $1,773,000 under
the plans for the fifty-three weeks ended August 3, 2008, and the fifty-two
weeks ended July 29, 2007 and July 30, 2006, respectively. We also contributed
to a similar plan through EWST whereby we match employee elective contributions
up to a maximum of 5% of compensation. Expenses recognized for 2008, 2007 and
2006 were approximately $86,000, $75,200 and $55,900, respectively. For the year
ended August 3, 2008, $9,000 was contributed by us to this plan for each of
Messrs. Levy, Markel, and Purcell. A total of $76,375 was contributed for all
officers and directors as a group.
PROPOSAL TWO
PROPOSAL FOR APPOINTMENT OF INDEPENDENT REGISTERED ACCOUNTING FIRM
General
The Board of Directors, upon the recommendation of the Audit Committee,
recommends that the stockholders approve the appointment of Marcum & Kliegman,
LLP as our Company's independent certified public accounting firm to audit our
financial statements for the fiscal year ending August 2, 2009.
Board Position and Required Vote
The proposal will be adopted only if it receives the affirmative vote of a
majority of the issued and outstanding shares of common stock in person or by
proxy and entitled to vote at the Annual Meeting on this proposal. The Board of
Directors recommends a vote FOR the ratification of the appointment of Marcum &
Kliegman LLP as our independent registered public accounting firm.
AUDIT COMMITTEE REPORT
The Audit Committee has reviewed and discussed the audited financial
statements with our management. The Audit Committee also discussed with Marcum &
Kliegman LLP, our independent auditors, the matters required to be discussed by
Statement on Auditing Standards No. 61, "Communication with Audit Committees,"
as may be modified or supplemented. The Audit Committee has received the written
disclosures and the letter from Marcum & Kliegman LLP required by Independence
Standards Board Standard No. 1, "Independence Discussions with Audit
Committees," as may be modified or supplemented, and has discussed with Marcum &
Kliegman LLP its independence. Based upon the review and discussions referred to
23
above, the Audit Committee recommended to our Board of Directors that the
audited financial statements be included in our Annual Report on Form 10-K/A for
the fiscal year ended August 3, 2008 for filing with the SEC.
The Audit Committee has also reviewed and discussed the fees paid to Marcum
& Kliegman LLP during the last fiscal year for audit and non-audit services,
which are set forth under "Audit Fees" and has considered whether the provision
of the non-audit services is compatible with the firm's independence and has
concluded that it is.
This Audit Committee report shall not be deemed incorporated by reference
in any document previously or subsequently filed with the SEC that incorporates
by reference all or any portion of this proxy statement, except to the extent
that we specifically request that this report be specifically incorporated by
reference.
The Audit Committee for fiscal 2008:
Robert M. Moore (Chairman)
Edward A. Bogucz
Carlos C. Campbell
Audit Fees
Marcum & Kliegman LLP is our independent registered public accounting firm
and performed the audit of our consolidated financial statements for fiscal
years 2008, and 2007. The following table sets forth estimated fees for the
audits of the fiscal years ended August 3, 2008 and July 29, 2007 performed by
Marcum & Kliegman LLP:
2008 2007
---- ----
Audit Fees (1) $ 638,500 $ 568,000
Audit related fees (2) $ 28,179 $ 60,000
<FN>
- ---------------
(1) Audit Fees includes fees for professional services provided in connection
with the audits of our financial statements, the review of our quarterly
financial statements, Sarbanes-Oxley 404 related services, consents, and
audit services provided in connection with other statutory or regulatory
filings. All such services were pre-approved by the Audit committee.
(2) Audit related fees includes the audit of our 401k plan.
</FN>
The Audit Committee has sole authority to appoint, determine funding for,
retain and oversee our independent auditors and to pre-approve all audit
services and permissible non-audit services. The Audit Committee has delegated
to Adm. Moore the authority to pre-approve audit-related and non-audit services
not prohibited by law to be performed by our independent registered public
accounting firm and associated fees, provided that he reports any pre-approval
of audit-related or non-audit related services and fees to the full Audit
Committee at its next regular meeting.
Marcum & Kliegman LLP did not render any other non-audit related services
during fiscal years 2008 and 2007. We expect that a representative of Marcum &
Kliegman LLP will attend the annual meeting and the representative will have an
24
opportunity to make a statement if he or she so chooses. The representative will
also be available to respond to questions from stockholders.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING REQUIREMENTS
Section 16(a) of the Securities Exchange Act of 1934 requires directors,
executive officers and persons who beneficially own more than 10% of our common
stock (collectively, "Reporting Persons") to file initial reports of ownership
and reports of changes in ownership of our common stock with the Securities and
Exchange Commission. Reporting Persons are required by SEC regulations to
furnish us with copies of all Section 16(a) reports they file. To our knowledge,
based solely on our review of the copies of such reports received or written
representations from certain Reporting Persons that no other reports were
required, we believe that during fiscal 2008, all Reporting Persons timely
complied with all applicable filing requirements.
CORPORATE GOVERNANCE - CODE OF ETHICS
We have adopted a Corporate Code of Business Ethics (the "Code") that
applies to all employees, including our principal executive officer, principal
financial officer, and directors of the Company. The Code is broad in scope and
is intended to foster honest and ethical conduct, including accurate financial
reporting, compliance with laws and the like. If any substantive amendments are
made to the Code or if there is any grant of waiver, including any implicit
waiver, from a provision of the Code to our Chief Executive Officer or Chief
Financial Officer, we will disclose the nature of such amendment or waiver in a
report on Form 8-K. We have made the Code available on our website at
www.herley.com under the heading "Governance-Corporate Governance Documents"
found under "About Us - Investor Relations."
FINANCIAL STATEMENTS AND INCORPORATION BY REFERENCE
A copy of our Annual Report to Stockholders for the fiscal year ended
August 3, 2008 has been provided to all stockholders as of the Record Date.
Stockholders are referred to the report for financial and other information
about us, but such report, is not incorporated in this proxy statement and is
not a part of the proxy soliciting material.
25
COMMON STOCK PERFORMANCE
The following graph sets forth the cumulative total stockholder return to
our stockholders during the five year period ended August 3, 2008 as well as an
overall stock market index (NASDAQ Stock Market-US) and the Company's peer group
index (S&P Aerospace/Defense):
COMPARISON OF 5 YEAR CUMULATIVE TOTAL RETURN*
Among Herley Industries, Inc., The NASDAQ Composite Index
And The S&P Aerospace & Defense Index
- -------------------------------------------------------------------------------------------------
7/03 7/04 7/05 7/06 7/07 7/08
- -------------------------------------------------------------------------------------------------
Herley Industries, Inc. 100.00 101.29 105.28 57.81 76.56 85.45
NASDAQ Composite 100.00 110.60 128.03 125.96 154.17 139.46
S&P Aerospace & Defense 100.00 127.47 150.05 175.41 227.50 196.98
<FN>
* $100 invested on 7/31/03 in stock & index-including reinvestment of dividends.
Fiscal year ending July 31.
</FN>
26
MISCELLANEOUS INFORMATION
As of the date of this Proxy Statement, the Board of Directors does not
know of any business other than that specified above to come before the meeting,
but, if any other business does lawfully come before the meeting, it is the
intention of the persons named in the enclosed Proxy to vote in regard thereto
in accordance with their judgment.
We will pay the cost of soliciting proxies in the accompanying form. In
addition to solicitation by use of the mails, certain of our officers and
regular employees may solicit proxies by telephone, telegraph or personal
interview. We may also request brokerage houses and other custodians and
nominees and fiduciaries, to forward soliciting material to the beneficial
owners of stock held of record by such persons, and may make reimbursement for
payments made for their expense in forwarding soliciting material to such
beneficial owners.
Proposals of stockholders intending to be presented at the next Annual
Meeting of Stockholders pursuant to SEC Rule 14a-8 must be received at our
principal office not later than November 18, 2009 to be included in the proxy
statement for that meeting.
By Order of the Board of Directors,
MYRON LEVY
Chairman and Chief Executive Officer
Dated: January 30, 2009
Lancaster, Pennsylvania
27
Appendix A
COMPENSATION COMMITTEE CHARTER OF THE BOARD OF DIRECTORS OF
HERLEY INDUSTRIES, INC.
Purpose.
The purpose for the Compensation Committee of the Board of Directors of
Herley Industries, Inc. shall be to discharge the Board's responsibilities
relating to compensation of the Company's executive officers. The Compensation
Committee has overall responsibility for approving and evaluating the executive
officer compensation plans, policies and programs of the Company. The
Compensation Committee also has responsibility for preparing a report of
executive compensation for inclusion in the Company's annual proxy statement.
Membership
The Compensation Committee will consist of at least two members of the
Board of Directors, each of whom will be appointed by and serve at the
discretion of the Board of Directors and shall meet the following requirements,
as well as any requirements promulgated by the SEC now or in the future.
a) Each member will be independent, as defined by Nasdaq Rule 4200 and any
rule or regulation prescribed by the SEC,
b) Each member will meet the non-employee director definition of Rule 16b-3
promulgated under Section 16 of the Securities Exchange Act of 1934, as amended,
and
c) Each member will meet the outside director definition of Section 162(m)
of the Internal Revenue Code of 1986, as amended.
Responsibilities
The responsibilities of the Compensation Committee shall include:
a) The Compensation Committee shall annually review and approve for the CEO
and the executive officers of the Company (i) the annual base salary, (ii) the
annual incentive bonus, including the specific goals and amount, (iii) equity
compensation, (iv) employment agreements, severance arrangements, and change in
control agreements/provisions, and (v) any other benefits, compensation or
arrangements.
b) The Compensation Committee may make recommendations to the Board of
Directors with respect to incentive compensation plans.
c) The Compensation Committee may form and delegate authority to
subcommittees when appropriate.
d) The Compensation Committee shall make regular reports to the Board of
Directors, including the Report of the Compensation Committee required in the
Company's annual proxy statement.
A-1
e) The Compensation Committee shall review and reassess the adequacy of
this Charter annually and recommend any proposed changes to the Board of
Directors for approval.
f) The Compensation Committee shall annually review its own performance.
g) The Compensation Committee shall have the sole authority to retain and
terminate any compensation consultant to be used by the Company to assist in the
evaluation of CEO or executive officer compensation and shall have sole
authority to approve the consultant's fees and other retention terms.
h) The Compensation Committee shall also have authority to obtain advice
and assistance from internal or external legal, accounting or other advisors. In
addition to the above responsibilities, the Compensation Committee will
undertake such other duties as the Board of Directors delegates to it, and will
report, at least annually, to the Board of Directors regarding the Committee's
examinations and recommendations.
Meetings
The Compensation Committee will meet at least one time each year. The
Compensation Committee may establish its own schedule that it will provide to
the Board of Directors in advance.
Reports
The Compensation Committee will record its summaries of recommendations to
the Board of Directors in written form that will be incorporated as a part of
the minutes of the meeting of the Board of Directors at which those
recommendations are presented. The Compensation Committee shall prepare the
Report of the Compensation Committee required to be included in the Company's
annual proxy statement.
Minutes
The Compensation Committee will maintain written minutes of its meetings,
which minutes will be filed with the minutes of the meetings of the Board of
Directors.
A-2
Appendix B
NOMINATING COMMITTEE CHARTER OF THE BOARD OF DIRECTORS OF
HERLEY INDUSTRIES, INC.
1. Responsibility. The Nominating Committee is responsible for providing
assistance to the Board of Directors and Chairman in membership selection. The
Committee will make recommendations to the full Board of potential candidates
for membership.
2. Purpose. The Nominating Committee, in consultation with the Chairman,
will review the Board's composition and requirements, solicit and evaluate
candidates and make recommendations to the full Board for its action.
Specifically, the Committee will identify and make recommendations to the Board
on individuals qualified to serve on the Board of Directors.
3. Qualifications and Composition.
3.1 The members of the Committee will be familiar with Herley
Industries, Inc.'s strategic plan, shareholders' perspective, and
regulations regarding duties and qualifications of directors.
3.2 Insiders or interlocking directors will not be eligible for
membership on the Committee.
3.3 The Committee will be comprised of a minimum of two independent
directors.
4. Duties. In consultation with the Chairman of the Board, the Committee
will
4.1 Establish the Board's criteria for the selection of new directors,
including minimum qualifications of candidates;
4.2 Accept suggestions from both internal and external sources,
including shareholders, of potential Board candidates;
4.3 Evaluate candidates against the selection criteria;
4.4 Conduct appropriate verifications and identify any potential
conflicts of interest;
4.5 Present all suggested candidates to the Board with their
recommendation for their review and vote;
4.6 Subsequent to the vote of the Board, recommend to the shareholders
a slate of candidates at elections of directors;
4.7 Review the size and composition of the Board, committee structure
and assignments, meeting frequency and schedule;
4.8 Lead the Board in an annual review of the full Board and
performance of individual Board members.
B-1
PROXY
HERLEY INDUSTRIES, INC.
SOLICITED BY BOARD OF DIRECTORS FOR ANNUAL MEETING
MARCH 17, 2009
The undersigned hereby appoints MYRON LEVY and EDWARD K. WALKER, JR., Rear
Admiral, U. S. Navy (retired), or either of them, attorneys and Proxies with
full power of substitution in each of them, in the name and stead of the
undersigned to vote as Proxy all the stock of the undersigned in HERLEY
INDUSTRIES, INC., a Delaware corporation, at the Annual Meeting of Stockholders
scheduled to be held on March 17, 2009 and any adjournments thereof.
THE SHARES REPRESENTED HEREBY SHALL BE VOTED BY PROXIES, OR EITHER OF THEM, AS
SPECIFIED AND, IN THEIR DISCRETION, UPON SUCH OTHER MATTERS AS MAY PROPERLY COME
BEFORE THE MEETING. IF NO SPECIFICATION IS MADE, THE SHARES WILL BE VOTED FOR
THE PROPOSALS SET FORTH.
(Continued and to be signed on the reverse side)
ANNUAL MEETING OF STOCKHOLDERS OF
HERLEY INDUSTRIES, INC.
March 17, 2009
Please sign, date and mail
your proxy card in the
envelope provided as soon
as possible.
Please detach along perforated line and mail in the envelope provided
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE ELECTION OF DIRECTORS AND
"FOR" PROPOSAL 2. PLEASE SIGN, DATE AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE [x]
1. Election of the following nominees, as set forth in the proxy statement:
NOMINEES:
John A. Thonet
Carlos C. Campbell
[ ] FOR ALL NOMINEES
[ ] WITHHOLD AUTHORITY FOR ALL NOMINEES
[ ] FOR ALL EXCEPT
(See Instruction below)
INSTRUCTIONS: To withhold authority to vote for any individual nominee(s), mark
"FOR ALL EXCEPT" and fill in the circle next to each nominee you wish to
withhold, as shown here:
2. Ratification of the appointment of Marcum & Kliegman LLP as the Company's
independent registered public accountants for the year ending August 2,
2009.
FOR [ ] AGAINST [ ] ABSTAIN [ ]
3. Upon such other business as may properly come before the meeting or any
adjournment thereof.
PLEASE DATE, SIGN AND RETURN THIS PROXY IN THE ENCLOSED ENVELOPE
To change the address on your account, please check the box at right and
indicate your new address in the address space above. Please note that changes
to the registered name(s) on the account may not be submitted via this method.
[ ]
Signature of Stockholder_________________________________ Date ________________
Signature of Stockholder_________________________________ Date ________________
Note: Please sign exactly as your name or names appear on this Proxy. When
shares are held jointly, each holder should sign. When signing as executor,
administrator, attorney, trustee or guardian, please give full title as such. If
the signer is a corporation, please sign full corporate name by duly authorized
officer, giving full title as such. If signer is a partnership, please sign in
partnership name by authorized person.