Exhibit 10.1
HERLEY INDUSTRIES, INC.
1997 Stock Option Plan
SECTION 1. GENERAL PROVISIONS
1.1. Name and General Purpose
The name of this plan is the Herley Industries, Inc. 1997 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.
g. "Company" means Herley Industries, Inc., a corporation organized
under the laws of the State of Delaware (or any successor
corporation).
h. "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.
i "Incentive Stock Option" means an Incentive Stock Option as
described in Section 2.1 of the ---------------------- Plan.
j. "Non-Employee Director" shall have the meaning set forth in
Rule 16(b) promulgated by the Securities and Exchange
Commission ("Commission").
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 who 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.
-2-
1.4 Eligibility
Stock options may be granted only to officers or 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.
1.5 Shares
The aggregate number of shares reserved for issuance pursuant to the
Plan shall be 1,250,000 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, 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.
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
-3-
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
non-employee director.
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.
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.
-4-
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 May 1, 1997. The Plan shall
terminate on April 30, 2007.
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").
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.
-5-
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.
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 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.
-6-
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, Total Disability, 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.
Upon termination of all 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 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 one year after
termination on account of Total Disability of all employment
with the Company, any parent corporation of the Company and any
Subsidiary or Affiliate, 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.
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.
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.
-7-
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 except that (i) upon termination of all employment by
Total Disability, the Optionee may exercise such options at any
time within three years thereafter and (ii) in the event of the
death of an Optionee within three years after termination on
account of Total Disability of all employment with the Company,
or any subsidiary or affiliate, 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 a period of
three years from the date of death.
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, except as may be permitted by the Board or the
Committee.
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-