Pursuant to the Voting Agreements, the HBE Stockholders have agreed to vote, or cause to be voted, all Shares owned by them in favor of the adoption of the Merger Agreement.  In addition, the HBE Stockholders have agreed to vote all such Shares against any proposal made in opposition to or in competition with the consummation of the Merger or the other transactions contemplated by the Merger Agreement, and against any other action intended or reasonably expected to interfere with or impede the Merger or the other transactions contemplated by the Merger Agreement.  Each HBE Stockholder has also granted an irrevocable proxy to the board of directors of Kratos to vote the Shares held by such stockholder in accordance with the terms of the Voting Agreements.

 

The Voting Agreements provide that each HBE Stockholder will not, among other things, sell, pledge, encumber, transfer or otherwise dispose of, or enter into any agreement or commitment with respect to the sale, pledge, encumbrance, transfer or other disposition of any Shares beneficially owned by such stockholder, or grant any proxies with respect to such Shares.  Each HBE Stockholder has also agreed not to exercise any rights to demand appraisal under Delaware law of Shares held by such stockholder.

 

The Voting Agreements will terminate upon the earliest to occur of:  (i) the termination of the Merger Agreement in accordance with its terms; (ii) the date on which the Merger becomes effective; and (iii) the date on which an amendment to the Merger Agreement is affected without the consent of the HBE Stockholders that decreases the Merger Consideration.

 

 

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(c) Not applicable.

 

(d) Reference is made to Items 4(a)-(b) above.  Pursuant to Section 1.4 of the Merger Agreement, from and after the effective time of the Merger, (i) the directors of Merger Sub will serve as directors of the surviving corporation, and (ii) the officers of Merger Sub will serve as the officers of the surviving corporation.

 

(e) Other than as described above, not applicable.

 

(f) Other than as described above, not applicable.

 

(g) Not applicable.

 

(h) Reference is made to Items 4(a)-(g) above.  Upon consummation of the Merger, the Shares will cease to be listed on the NASDAQ Stock Market.

 

(i) Not applicable.

 

(j) Other than as described in this Schedule or in the Merger Agreement or the Voting Agreements, Kratos does not currently have any plans or proposals that relate to, or may result in, any of the matters listed in Items 4(a) – (i) of this Schedule or any similar matter.  Kratos intends to continue to review HBE and its assets, corporate structure, dividend policy, capitalization, operations, properties, policies, management, personnel and other matters and to further consider, following consummation of the Merger, whether any changes would be desirable in light of the circumstances then existing, and reserves the right to take such actions or effect such changes as it deems desirable.

 

The foregoing descriptions of the Merger, the Merger Agreement and the Voting Agreements do not purport to be complete.  References to, and descriptions of, the Merger, the Merger Agreement and the Voting Agreements throughout this Schedule are qualified in their entirety by reference to the Merger Agreement, which is Exhibit 1 to this Schedule, and the form of Voting Agreement, which is Exhibit 2 to this Schedule.  These agreements are incorporated into this Schedule wherever references and descriptions of them appear.

 

Item 5.

Interest in Securities of the Issuer.

 

(a) and (b) As of the date hereof, Kratos does not own any Shares.  However, for purposes of Rule 13d-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as a result of the Voting Agreements, Kratos may be deemed to share with each HBE Stockholder the power to vote or to direct the voting of the Shares of such HBE Stockholder covered by the respective Voting Agreement solely with respect to those matters described in such Voting Agreement.

 

The HBE Stockholders collectively own 3,735,825 Shares, and 212,000 options to acquire Shares, which options are exercisable within 60 days of the filing date of this Schedule. Accordingly, Kratos may be deemed to be the beneficial owner of an aggregate of  3,947,825 Shares, which would represent 63.7% of the issued and outstanding Shares were the options fully exercised (based upon HBE’s representation in the Merger Agreement that there were 6,050,366 Shares issued and outstanding as of October 5, 2010 and 150,000 Shares reserved for issuance pursuant to the Asset Purchase Agreement dated as of September 2, 2010 by and between HBE and Professional Security Technologies, LLC).

 

Except as described in Item 4 of this Schedule and in the Voting Agreement, Kratos is not entitled to any rights as a stockholder of HBE.  Kratos disclaims beneficial ownership of the Shares covered by the Voting Agreements and nothing herein shall be construed as an admission that Kratos is the beneficial owner of such Shares.

 

Neither the filing of this Schedule nor any of its contents shall be deemed to constitute an admission by Kratos or any other person that he, she or it is a member of a “group” for purposes of Section 13(d) of the Exchange Act, or for any other purpose, and membership in a “group” is hereby expressly disclaimed.

 

Other than the Shares that may be deemed to be beneficially owned by Kratos by virtue of the Voting Agreements, Kratos does not beneficially own any Shares. To the knowledge of Kratos, none of the Schedule A Persons beneficially owns any Shares.

 

 

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For more detailed descriptions of the Merger Agreement and the Voting Agreements, see Item 4 above, which descriptions are incorporated by reference herein in response to this Item 5.

 

(c) Other than as described in this Schedule, neither Kratos nor, to its knowledge, any Schedule A Person, has effected any transaction in Shares during the past 60 days.

 

(d) To the knowledge of Kratos, no person other than the HBE Stockholders has the right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Shares covered by this Schedule.

 

(e) Not applicable.

 

Item 6.

Contracts, Arrangements, Understandings or Relationships With Respect to Securities of the Issuer.

 

The information set forth, or incorporated by reference herein, in Items 3, 4 and 5 of this Schedule is incorporated by reference herein.  Other than as described in this Schedule and the agreements incorporated by reference herein and set forth as exhibits hereto, Kratos does not have, and, to the knowledge of Kratos, the Schedule A Persons do not have, any contract, arrangement, understanding or relationship (legal or otherwise) with any other person with respect to any securities of HBE.

 

Item 7.	Material to be Filed as Exhibits.
Exhibit 1			Agreement and Plan of Merger, dated October 5, 2010, by and among Kratos Defense & Security Solutions, Inc., Hammer Acquisition Inc. and Henry Bros. Electronics, Inc. (incorporated by reference to Exhibit 2.1 of the Current Report on Form 8-K, filed by Kratos Defense & Security Solutions, Inc. on October 7, 2010).
Exhibit 2			Form of Voting Agreement, dated October 5, 2010, by and between Kratos Defense & Security Solutions, Inc., and the directors and certain executive officers of Henry Bros. Electronics Inc. (incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K, filed by Kratos Defense & Security Solutions, Inc. on October 7, 2010).

 

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SIGNATURES

 

After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct.

 

KRATOS DEFENSE & SECURITY SOLUTIONS,

INC.

 

By:   /s/ Eric M. DeMarco

Eric M. DeMarco

President and Chief Executive Officer

 

 

Date:  October ___, 2010

 

 

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Schedule A

 

Directors and Executive Officers of

 

Kratos Defense & Security Solutions, Inc.

 

The following tables set forth the name and present principal occupation or employment of each director and executive officer of Kratos Defense & Security Solutions, Inc.  Unless otherwise indicated below, the country of citizenship of each director and executive officer is the United States of America and the business address of each director and executive officer is: c/o Kratos Defense & Security Solutions, Inc., 4820 Eastgate Mall, San Diego, CA 92121.

 

Board of Directors

 

	Name		Principal Occupation or Employment
	Scott Anderson		Principal of Cedar Grove Partners, LLC, an investment and consulting/advisory partnership with a focus on wireless communications investments. Address:   3825 Issaquah Pine Lake Road                   Sammamish, WA 98075
	Bandel Carano		General Partner of Oak Investment Partners, LLC, a multi-stage venture capital firm. Address:   525 University Avenue, Suite 1300                  Palo Alto, CA 94301
	Eric DeMarco		President and Chief Executive Officer
	William Hoglund		Member and Owner of SAFE Boats International, LLC, a leading manufacturer of vessels for military, law enforcement, and commercial purposes. Address:   8800 SW Barney White Rd.                  Port Orchard, WA 98367
	Scot Jarvis		Managing Member of Cedar Grove Partners, LLC, an investment and consulting/advisory partnership with a focus on wireless communications investments. Address:   3825 Issaquah Pine Lake Road                   Sammamish, WA 98075
	Sam Liberatore		Retired

 

Executive Officers

 

(Other than Directors)

 

Name		Principal Occupation or Employment
Deanna Lund		Executive Vice President and Chief Financial Officer
Laura Siegal		Vice President, Corporate Controller, Secretary and Treasurer
Deborah Butera		Senior Vice President and General Counsel/Registered In-House Counsel
Benjamin Goodwin		President, Public Safety and Security Segment

 

 

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Schedule B

 

HBE Stockholders and Shares

 

Stockholder		Common Stock		Options Exercisable Within 60 Days
Richard D. Rockwell		2,282,416(1)		6,000
Joseph P. Ritorto		57,196		14,000
Brian Reach		132,000		150,000(2)
James W. Power		0		14,000
James E. Henry		1,205,519		0
Robert De Lia, Sr.		58,694		14,000
David Sands		0		14,000
Total:		3,735,825		212,000

(1) Includes 75,000 Shares which are deemed earned upon a change of control pursuant to the Asset Purchase Agreement, dated as of September 2, 2010, by and between HBE and Professional Security Technologies, LLC, as represented by HBE in the Merger Agreement.

(2) Includes 100,000 options which vest upon a change of control and 10,000 options that vest upon a change of control with termination.

 

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