Exhibit 10.1
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HERLEY INDUSTRIES, INC.
2003 Stock Option Plan
SECTION 1. GENERAL PROVISION
1.1 Name and General Purpose
The name of this plan is the Herley Industries, Inc. 2003 Stock Option
Plan (hereinafter called the "Plan"). The Plan is intended to be a
broadly-based incentive plan which enables Herley Industries, Inc. (the
"Company") and its subsidiaries and affiliates to foster and promote the
interests of the Company by attracting and retaining directors, officers
and employees of, and consultants to, the Company who contribute to the
Company's success by their ability, ingenuity and industry, to enable such
directors, officers, employees and consultants to participate in the
long-term success and growth of the Company by giving them a proprietary
interest in the Company and to provide incentive compensation opportunities
competitive with those of competing corporations.
1.2 Definitions
a. "Affiliate" means any person or entity controlled by or under
common control with the Company, by virtue of the ownership of voting
securities, by contract or otherwise.
b. "Board" means the Board of Directors of the Company.
c. "Change in Control" means a change of control of the Company, or in
any person directly or indirectly controlling the Company, which shall
mean:
(a) a change in control as such term is presently defined in
Regulation 240.12b-(2) under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"); or
(b) 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
on the date of this Agreement 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 percent (20%) or more of the voting power of the
Company's then outstanding securities; or
(c) if during any period of two (2) consecutive years during the
term of this Plan, individuals who at the beginning of such period
constitute the Board of Directors, cease for any reason to constitute
at least a majority thereof.
d. "Committee" means the Committee referred to in Section 1.3 of the
Plan.
e. "Common Stock" means shares of the Common Stock, par value $.10 per
share, of the Company.
f. "Company" means Herley Industries, Inc., a corporation organized
under the laws of the State of Delaware (or any successor corporation).
g. "Fair Market Value" means the market price of the Common Stock on
the National Association of Securities Dealers Automated Quotation
("NASDAQ") system on the date of the grant or on any other date on which
the Common Stock is to be valued hereunder. If no sale shall have been
reported on the NASDAQ on such date, Fair Market Value shall be determined
by the Committee.
h. "Non-Employee Director" shall have the meaning set forth in Rule
16(b) promulgated by the Securities and Exchange Commission ("Commission").
i. "Option" means any option to purchase Common Stock under Section 2
of the Plan.
j. "Option Agreement" means the option agreement described in Section
2.4 of the Plan.
k. "Participant" means any director, officer, employee or consultant
of the Company, a Subsidiary or an Affiliate who is selected by the
Committee to participate in the Plan.
l. "Subsidiary" means any corporation in which the Company possesses
directly or indirectly 50% or more of the combined voting power of all
classes of stock of such corporation.
m. "Total Disability" means accidental bodily injury or sickness which
wholly and continuously disabled an optionee. The Committee, whose
decisions shall be final, shall make a determination of Total Disability.
1.3 Administration of the Plan
The Plan shall be administered by the Board or by the Committee appointed
by the Board consisting of two or more members of the Board all of whom shall be
Non-Employee Directors. The Committee shall serve at the pleasure of the Board
and shall have such powers as the Board may, from time to time, confer upon it.
Subject to this Section 1.3, the Committee shall have sole and complete
authority to adopt, alter, amend or revoke such administrative rules, guidelines
and practices governing the operation of the Plan as it shall, from time to
time, deem advisable, and to interpret the terms and provisions of the Plan.
The Committee shall keep minutes of its meetings and of action taken by it
without a meeting. A majority of the Committee shall constitute a quorum, and
the acts of a majority of the members present at any meeting at which a quorum
is present, or acts approved in writing by all of the members of the Committee
without a meeting, shall constitute the acts of the Committee.
1.4 Eligibility
Options may be granted only to directors, officers, employees or
consultants of the Company or a Subsidiary or Affiliate. All employees are
eligible to receive Options under the Plan. Any person who has been granted any
Option may, if he is otherwise eligible, be granted an additional Option or
Options.
1.5 Shares
The aggregate number of shares reserved for issuance pursuant to the Plan
shall be 1,000,000 shares of Common Stock, or the number and kind of shares of
stock or other securities which shall be substituted for such shares or to which
such shares shall be adjusted as provided in Section 1.6.
Such number of shares may be set aside out of the authorized but unissued
shares of Common Stock or out of issued shares of Common Stock acquired for and
held in the Treasury of the Company, not reserved for any other purpose. Shares
subject to, but not sold or issued under, any Option terminating or expiring for
any reason prior to its exercise in full will again be available for Options
thereafter granted during the balance of the term of the Plan.
1.6 Adjustments Due to Stock Splits, Mergers, Consolidation, Etc.
If, at any time, the Company shall take any action, whether by stock
dividend, stock split, combination of shares or otherwise, which results in a
proportionate increase or decrease in the number of shares of Common Stock
theretofore issued and outstanding, the number of shares which are reserved for
issuance under the Plan and the number of shares which, at such time, are
subject to Options shall, to the extent deemed appropriate by the Committee, be
increased or decreased in the same proportion, provided, however, that the
Company shall not be obligated to issue fractional shares.
Likewise, in the event of any change in the outstanding shares of Common
Stock by reason of any recapitalization, merger, consolidation, reorganization,
combination or exchange of shares or other corporate change, the Committee shall
make such substitution or adjustments, if any, as it deems to be appropriate, as
to the number or kind of shares of Common Stock or other securities which are
reserved for issuance under the Plan and the number of shares or other
securities which, at such time are subject to Options.
In the event of a Change in Control, at the option of the Board or
Committee, (a) all Options outstanding on the date of such Change in Control
shall become immediately and fully exercisable, and (b) an optionee will be
permitted to surrender for cancellation within sixty (60) days after such Change
in Control any Option or portion of an Option which was granted more than six
(6) months prior to the date of such surrender, to the extent not yet exercised,
and to receive a cash payment in an amount equal to the excess, if any, of the
Fair Market Value (on the date of surrender) of the shares of Common Stock
subject to the Option or portion thereof surrendered, over the aggregate
purchase price for such Shares under the Option.
1.7 Non_Alienation of Benefits
Except as herein specifically provided, no right or unpaid benefit under
the Plan shall be subject to alienation, assignment, pledge or charge and any
attempt to alienate, assign, pledge or charge the same shall be void. If any
Participant or other person entitled to benefits hereunder should attempt to
alienate, assign, pledge or charge any benefit hereunder, then such benefit
shall, in the discretion of the Committee, cease.
1.8 Withholding or Deduction for Taxes
If, at any time, the Company or any Subsidiary or Affiliate is required,
under applicable laws and regulations, to withhold, or to make any deduction for
any taxes, or take any other action in connection with any Option exercise, the
Participant shall be required to pay to the Company or such Subsidiary or
Affiliate, the amount of any taxes required to be withheld, or, in lieu thereof,
at the option of the Company, the Company or such Subsidiary or Affiliate may
accept a sufficient number of shares of Common Stock to cover the amount
required to be withheld.
1.9 Administrative Expenses
The entire expense of administering the Plan shall be borne by the Company.
1.10 General Conditions
a. The Board or the Committee may, from time to time, amend, suspend
or terminate any or all of the provisions of the Plan, provided that,
without the Participant's approval, no change may be made which would alter
or impair any right theretofore granted to any Participant.
b. With the consent of the Participant affected thereby, the Committee
may amend or modify any outstanding Option in any manner not inconsistent
with the terms of the Plan, including, without limitation, and irrespective
of the provisions of Section 2.3(c) below, to accelerate the date or dates
as of which an installment of an Option becomes exercisable; provided, that
the Committee shall not have the right to reprice any outstanding Options.
c. Nothing contained in the Plan shall prohibit the Company or any
Subsidiary or Affiliate from establishing other additional incentive
compensation arrangements for employees of the Company or such Subsidiary
or Affiliate.
d. Nothing in the Plan shall be deemed to limit, in any way, the right
of the Company or any Subsidiary or Affiliate to terminate a Participant's
employment or service with the Company (or such Subsidiary or Affiliate) at
any time.
e. Any decision or action taken by the Board or the Committee arising
out of or in connection with the construction, administration,
interpretation and effect of the Plan shall be conclusive and binding upon
all Participants and any person claiming under or through any Participant.
f. No member of the Board or of the Committee shall be liable for any
act or action, whether of commission or omission, (i) by such member except
in circumstances involving actual bad faith, nor (ii) by any other member
or by any officer, agent or employee.
1.11 Compliance with Applicable Law
Notwithstanding any other provision of the Plan, the Company shall not be
obligated to issue any shares of Common Stock, or grant any Option with respect
thereto, unless it is advised by counsel of its selection that it may do so
without violation of the applicable Federal and State laws pertaining to the
issuance of securities and the Company may require any stock certificate so
issued to bear a legend, may give its transfer agent instructions limiting the
transfer thereof, and may take such other steps, as in its judgment are
reasonably required to prevent any such violation.
1.12 Effective Dates
The Plan was adopted by the Board on March 19, 2003. The Plan shall
terminate on March 18, 2013.
Section 2. OPTION GRANTS
2.1 Authority of Committee
Subject to the provisions of the Plan, the Committee shall have the sole
and complete authority to determine (i) the Participants to whom Options shall
be granted; (ii) the number of shares to be covered by each Option; and (iii)
the conditions and limitations, if any, in addition to those set forth in
Sections 2 and 3 hereof, applicable to the exercise of an Option, including
without limitation, the nature and duration of the restrictions, if any, to be
imposed upon the sale or other disposition of shares acquired upon exercise of
an Option.
Options granted under the Plan shall be non_qualified stock options.
The Committee shall have the authority to grant Options.
2.2 Option Exercise Price
The exercise price set forth in the Option Agreement at the time of grant
shall not be less than the Fair Market Value of the Common Stock at the time
that the Option is granted.
The purchase price is to be paid in full in cash, certified or bank
cashier's check or, at the option of the Company, Common Stock valued at its
Fair Market Value on the date of exercise, or a combination thereof, when the
Option is exercised and stock certificates will be delivered only against such
payment.
2.3 Option Grants
Each Option will be subject to the following provisions:
a. Term of Option
An Option will be for a term of not more than ten years from
the date of grant.
b. Exercise
(i) By an Employee:
Unless otherwise provided by the Committee and except in the
manner described below upon the death of the optionee, an Option
may be exercised only in installments as follows: up to one_half
of the subject shares on and after the first anniversary of the
date of grant, up to all of the subject shares on and after the
second such anniversary of the date of the grant of such Option
but in no event later than the expiration of the term of the
Option.
An Option shall be exercisable during the optionee's
lifetime only by the optionee and shall not be exercisable by the
optionee unless, at all times since the date of grant and at the
time of exercise, such optionee is an employee of or providing
services to the Company, any parent corporation of the Company or
any Subsidiary or Affiliate, except that, upon termination of all
such employment or provision of services (other than by death,
Total Disability, or by Total Disability followed by death in the
circumstances provided below), the optionee may exercise an
Option at any time within three months thereafter but only to the
extent such Option is exercisable on the date of such
termination.
Upon termination of all such employment by Total Disability,
the optionee may exercise such Options at any time within one
year thereafter, but only to the extent such Option is
exercisable on the date of such termination.
In the event of the death of an optionee (i) while an
employee of or providing services to the Company, any parent
corporation of the Company or any Subsidiary or Affiliate, or
(ii) within three months after termination of all such employment
or provision of services (other than for Total Disability) or
(iii) within one year after termination on account of Total
Disability of all such employment or provision of services, such
optionee's estate or any person who acquires the right to
exercise such option by bequest or inheritance or by reason of
the death of the optionee may exercise such optionee's Option at
any time within the period of three years from the date of death.
In the case of clauses (i) and (iii) above, such Option shall be
exercisable in full for all the remaining shares covered thereby,
but in the case of clause (ii) such Option shall be exercisable
only to the extent it was exercisable on the date of such
termination of employment or service.
(ii) By Persons other than Employees:
If the optionee is not an employee of the Company or the
parent corporation of the Company or any Subsidiary or Affiliate,
the vesting of such optionee's right to exercise his Options
shall be established and determined by the Committee in the
Option Agreement covering the Options granted to such optionee.
Notwithstanding the foregoing provisions regarding the
exercise of an Option in the event of death, Total Disability,
other termination of employment or provision of services or
otherwise, in no event shall an Option be exercisable in whole or
in part after the termination date provided in the Option
Agreement.
c. Transferability
An Option granted under the Plan shall not be transferable
otherwise than by will or by the laws of descent and
distribution, except as may be permitted by the Board or the
Committee.
2.4 Agreements
In consideration of any Options granted to a Participant under the Plan,
each such Participant shall enter into an Option Agreement with the Company
providing, consistent with the Plan, such terms as the Committee may deem
advisable.