Exhibit 10-1
- ------------
HERLEY INDUSTRIES, INC.
1996 STOCK OPTION PLAN
SECTION 1. GENERAL PROVISIONS
1.1. Name and General Purpose
- ---- ------------------------
The name of this plan is the Herley Industries, Inc. 1996 Stock Option
Plan (hereinafter called the "Plan"). The purpose of the Plan is to enable
Herley Industries, Inc. (the "Company") and its subsidiaries and affiliates to
foster and promote the interests of the Company by attracting and retaining
officers and employees of the Company who contribute to the Company's success by
their ability, ingenuity and industry, to enable such officers and employees of
the Company 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-(f) 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. "Code" means the Internal Revenue Code of 1986, as amended.
e. "Committee" means the Committee referred to in Section 1.3
of the Plan.
f. "Common Stock" means shares of the Common Stock, par value
$.10 per share, of the Company.
1
g. "Company" means Herley Industries, Inc., a corporation
organized under the laws of the State of Delaware (or any
successor corporation).
h. "Disinterested Person" shall have the meaning set forth in
Rule 16b-3(c)(2) as promulgated by the Securities and
Exchange Commission (the "Commission"); provided, that such
person is also an "outside director" as set forth in
Section 162(m) of the Code and the regulations promulgated
thereunder.
i. "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
NASDAQ on such date, Fair Market Value shall be determined
by the Committee in accordance with the Treasury
Regulations applicable to incentive stock options under
Section 422 of the Code.
j. "Incentive Stock Option" means an Incentive Stock Option as
described in Section 2.1 of the Plan.
k. "Non-Qualified Stock Option" means a Non-Qualified Stock
Option as described in Section 2.1 of the Plan.
l. "Option" means any option to purchase Common Stock under
Section 2 of the plan.
m. "Participant" means any officer or employee of the Company,
a Subsidiary or an Affiliate who is selected by the
Committee to participate in the Plan.
n. "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.
o. "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 Committee appointed by the Board
consisting of two or more members of the Board all of whom shall be
Disinterested Persons. 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.
2
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
- --- -----------
Stock options may be granted only to regular full-time and part-time
employees of the Company or a Subsidiary or Affiliate. Subject to Section 2.3,
any person who has been granted any Option may, if he is otherwise eligible, be
granted an additional Option or Options. Those directors who are not regular
employees are not eligible.
1.5 Shares
- --- ------
The aggregate number of shares reserved for issuance pursuant to the
Plan shall be 500,000 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, (a) all options outstanding on the
date of such Change in Control shall, for a period of sixty (60) days following
such Change in Control, 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.
3
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 prevent an Incentive Stock Option granted under the
Plan from qualifying as an Incentive Stock Option under Section
422 of the Code or result in a "modification" of the Incentive
Stock Option under Section 424(h) of the Code or otherwise alter
or impair any right theretofore granted to any Participant ; and
further provided that, without the consent and approval of the
holders of a majority of the outstanding shares of Common Stock of
the Company present at a meeting at which a quorum exists, neither
the Board nor the Committee may make any amendment which (i)
changes the class of persons eligible for options; (ii) increases
(except as provided under Section 1.6 above) the total number of
shares or other securities reserved for issuance under the Plan;
(iii) decreases the minimum option prices stated in Section 2.2
hereof (other than to change the manner of determining Fair Market
Value to conform to any then applicable provision of the Code or
any regulation thereunder); (iv) extends the expiration date of
the Plan, or the limit on the maximum term of Options; or (v)
withdraws the administration of the Plan from a committee
consisting of two or more members, each of whom is a Disinterested
Person.
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 Sections 2.3(c)
and 2.4(b) below, to accelerate the date or dates as of which an
installment of an Option becomes exercisable.
4
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 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 October 17, 1995, subject to
approval by the stockholders of the Company. The Plan shall terminate on October
16, 2005.
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.
Stock options granted under the Plan may be of two types: an incentive
stock option ("Incentive Stock Option"); and a non-qualified stock option
("Non-Qualified Stock Option").
5
It is intended that the Incentive Stock Options granted hereunder shall
constitute incentive stock options within the meaning of Section 422 of the Code
and shall be subject to the tax treatment described in Section 422 of the Code.
Anything in the Plan to the contrary notwithstanding, no provision of
the Plan relating to Incentive Stock Options shall be interpreted, amended or
altered, nor shall any discretion or authority granted under the Plan be so
exercised, so as to disqualify either the Plan or, without the consent of the
optionee, any Incentive Stock Option under Section 422 of the Code.
The Committee shall have the authority to grant Incentive Stock Options,
or to grant Non-Qualified Stock Options, or to grant both types of Options. To
the extent that any Option does not qualify as an Incentive Stock Option, in
whole or in part, it shall constitute a separate Non-Qualified Stock Option to
the extent of such disqualification.
2.2 Option Exercise Price
- --- ---------------------
The price of stock purchased upon the exercise of Options granted
pursuant to the Plan shall be the Fair Market Value thereof at the time that the
Option is granted.
If an employee owns or is deemed to own (by reason of the attribution
rules applicable under Section 424(d) of the Code) more than 10% of the combined
voting power of all classes of the stock of the Company or any parent
corporation of the Company or Subsidiary and an Option granted to such employee
is intended to qualify as an Incentive Stock Option within the meaning of
Section 422 of the Code, the exercise price shall be no less than 110% of the
Fair Market Value of the Common Stock on the date 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 Incentive Stock Option Grants
- --- -----------------------------
Each Incentive Stock Option will be subject to the following provisions:
a. Term of Option
An Incentive Stock Option will be for a term of not more than ten
years from the date of grant, except in the case of an employee
described in the second paragraph of Section 2.2 above in which
case an Incentive Stock Option will be for a term of not more than
five years from the date of the grant.
b. Annual Limit
To the extent the aggregate Fair Market Value of the Common Stock
(determined as of the date of grant) with respect to which any
options granted hereunder are intended to be designated as
Incentive Stock Options under the Plan (or any other incentive
stock option plan of the Company or any Subsidiary) which may be
exercisable for the first time by the optionee in any calendar year
exceeds $100,000, such options shall not be considered incentive
stock options.
6
c. Exercise
Subject to the power of the Committee under Section 1.10(b) above
and except in the manner described below upon the death of the
optionee, an Incentive Stock Option may be exercised for all of the
subject shares on and after the first 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 Incentive Stock 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
the Company, any parent corporation of the Company or any
Subsidiary, except that, upon termination of all employment (other
than by death or by Total Disability followed by death in the
circumstances provided below) with the Company, any parent
corporation of the Company and any Subsidiary or Affiliate, the
optionee may exercise an Incentive Stock Option at any time within
three months thereafter but only to the extent such Option is
exercisable on the date of such termination.
If termination of employment is the result of the optionee having
reached normal retirement age, option grants continue to be
exercisable for five years after retirement but in no event later
than the expiration of the term of the Option.
In the event of the death of an optionee (i) while an employee of
the Company, any parent corporation of the Company or any
Subsidiary or Affiliate, or (ii) within three months after
termination of all employment with the Company, any parent
corporation of the Company and any Subsidiary or Affiliate (other
than for Total Disability) or (iii) within three months after
termination on account of Total Disability of all employment with
the Company, any parent corporation of the Company and any
Subsidiary, 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 one year 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.
If an optionee's employment is terminated for deliberate, willful
or gross misconduct, all rights under an Option expire upon receipt
by the optionee of the notice of such termination.
Notwithstanding the foregoing provisions regarding the exercise of
an Option in the event of death, Total Disability or other
termination of employment, in no event shall an Option be
exercisable in whole or in part after the termination date provided
in the Option.
d. Transferability
An Incentive Stock Option granted under the Plan shall not be
transferable otherwise than by will or by the laws of descent and
distribution.
7
2.4 Non-Qualified Stock Option Grants
- --- ---------------------------------
Each Non-Qualified Stock Option will be subject to the following
provisions:
a. Term of Option
A Non-Qualified Stock Option will be for a term of not more than
ten years from the date of grant.
b. Exercise
The exercise of a Non-Qualified Stock Option shall be subject to
the same terms and conditions as provided under Section 2.3(c)
above.
c. Transferability
A Non-Qualified Stock Option granted under the Plan shall not be
transferable otherwise than by will or by the laws of descent and
distribution.
2.5 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.
8