EXHIBIT 10.21
AMENDMENT AND RESTATEMENT OF
2006 NEW EMPLOYEE STOCK OPTION PLAN OF
HERLEY INDUSTRIES, INC.
BACKGROUND
On August 1, 2006, the Board of Directors ("Board") of Herley Industries,
Inc., a Delaware corporation (the "Company"), adopted the 2006 New Employee
Stock Option Plan (the "Plan"); and
On June 8, 2007, the Board approved an amendment to the Plan increasing the
number of shares reserved for issuance under the Plan from 250,000 to 500,000;
and
On July 22, 2009, the Board approved a further amendment to the Plan
increasing from 500,000 to 600,000 the number of shares reserved for issuance
under the Plan, and providing for the direct issuance of restricted shares to
participants in the Plan.
NOW, THEREFORE, in consideration of the Premises, the Company hereby amends
and restates the Plan in its entirety to give effect to the amendments referred
to above and to make additional conforming changes as follows:
HERLEY INDUSTRIES, INC.
2006 New Employee Stock Option Plan
-----------------------------------
(as amended through July 22, 2009)
--------------------------------
SECTION 1. GENERAL PROVISION
-----------------
1.1 Name and General Purpose
------------------------
The name of this plan is the Herley Industries, Inc. 2006 New Employee
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 new employees to the Company who will
contribute to the Company's success by their ability, ingenuity and industry, to
enable such employees 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.
1
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 more than fifty (50%) 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 1.4 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. "New Employee" means a person who has not been an employee of the
Company or any subsidiary within 24 months of the date of
determination.
i. "Non-Employee Director" shall have the meaning set forth in Rule 16(b)
(3) promulgated by the Securities and Exchange Commission
("Commission").
j. "Option" means any option to purchase Common Stock under Section 2 of
the Plan.
k. "Option Agreement" means the option agreement described in Section 2.4
of the Plan.
l. "Optionee Participant" means any new employee of the Company, a
Subsidiary or an Affiliate whose options are issued in connection with
his or her employment and who is selected by the Committee to
participate in the Plan.
m. "Participent" means any Option Participant or Shares Participant.
2
n. "Restricted Shares" and "Restricted Period" shall have meanings set
forth in Section 3 of the Plan.
o. "Share Participant" means any new employee of the Company, a
Subsidiary or an Affiliate who received Restricted Shares in
connection with his or her employment and who is selected by the
Committee or Board to participate in the Plan.
p. "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.
q. "Total Disability" means accidental bodily injury or sickness which
wholly and continuously disables a Participant. The Committee or
Board, whose decisions shall be final, shall make a determination of
Total Disability.
1.3 Structure of The Plan
---------------------
The Plan shall be divided into two (2) separate equity programs:
(i) the Option Grant Program under which eligible persons ("Optionee
Participants") may, at the discretion of the Board, be granted options
to purchase shares of common stock; and
(ii) the Restricted Shares Issuance Program under which eligible persons
("Share Participants") may, at the discretion of the Board, be issued
shares of common stock subject to the restrictions set forth in
Section 3.2 of the Plan ("Restricted Shares").
The provisions of Articles One shall apply to both equity programs under
the Plan and shall accordingly govern the interests of all persons under the
Plan.
The Board or Committee shall have full authority to determine, (i) with
respect to the grants made under the Option Grant Program, which eligible
persons are to receive the option grants, the time or times when each option is
to become exercisable, the vesting schedule and events (if any) applicable to
the option shares and the maximum term for which the option is to remain
outstanding, and (ii) with respect to stock issuances made under the Restricted
Shares Issuance Program, which eligible persons are to receive such stock
issuances, the time or times when those issuances are to be made, the number of
shares to be issued to each Participant, and the vesting schedule and events (if
any) applicable to the issued shares.
The Board or Committee shall have the absolute discretion either to grant
options in accordance with the Option Grant Program or to issue stock in
accordance with the Restricted Shares Issuance Program.
1.4 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
3
and shall have such powers as the Board may, from time to time, confer upon it.
Subject to this Section 1.4, the Committee or Board, as the case may be,
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 or Board, as the case may be, shall keep minutes of its
meetings and of action taken by it without a meeting. A majority of the
Committee or Board 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 or Board without a meeting, shall
constitute the acts of the Committee.
1.5 Eligibility
-----------
Options and Restricted Shares may be granted only to new employees of the
Company or a Subsidiary or Affiliate whose options are issued in connection with
his or her employment as a new employee.
1.6 Shares
------
The aggregate number of shares reserved for issuance pursuant to the Plan
shall be 600,000 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.
1.7 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 and with respect to grants of Restricted Shares, in the
number and kind of Shares covered thereby, shall, to the extent deemed
appropriate by the Committee or Board, as the case may be, 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 or
Board 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
4
shares or other securities which, at such time are subject to Options and with
respect to grants of Restricted Shares, in the number and kind of Shares covered
thereby.
In the event of a Change in Control (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; and (c) all
Restricted Shares shall become immediately vested.
1.8 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.
1.9 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.
1.10 Administrative Expenses
-----------------------
The entire expense of administering the Plan shall be borne by the Company.
1.11 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 or
Board may amend or modify any outstanding Option or Restricted Shares
theretofore granted 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 or to
accelerate the termination of a Restricted Period; provided, that the
Committee or Board shall not have the right to reprice any outstanding
Options.
5
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.
1.12 Compliance with Applicable Law
------------------------------
Notwithstanding any other provision of the Plan, the Company shall not be
obligated to issue any shares of Common Stock upon the exercise of an option or
the vesting of Restricted Shares granted under the Plan, 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.
1.13 Effective Dates
---------------
The Plan was adopted by the Board on August 1, 2006. The Plan shall
terminate on July 31, 2016.
SECTION 2. OPTION GRANTS
2.1 Authority of Committee
----------------------
Subject to the provisions of the Plan, the Committee or Board, as the case
may be, 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 or Board, as the case may be, shall have the authority to
grant Options.
6
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:
o Up to 33-1/3% on and after the first anniversary of the
of the date of the grant of such Option;
o Up to 66-2/3% on and after the second anniversary of
the date of grant of the date of the grant of such
Option;
o Up to all of the subject shares on and after the third
anniversary of the date of grant 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 such employment by Total Disability, all
outstanding options shall immediately vest and the optionee may
exercise such Options at any time within one year thereafter.
7
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. Such Option shall be
exercisable in full for all the remaining shares covered thereby.
(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 or Board 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.
SECTION 3. TERMS AND CONDITIONS OF GRANTS OF RESTRICTED SHARES.
---------------------------------------------------
3.1 General
-------
With respect to each grant of Restricted Shares under the Plan, the
Committee or Board, as the case may be, in its sole discretion, shall determine
the period during which the restrictions set forth in Section 3.2 shall apply to
such Restricted Shares (the "Restricted Period"). Unless otherwise determined by
the Committee, the Restricted Period shall not be less than 36 nor more than 60
consecutive months commencing with the first day of the month in which the
Restricted Shares are granted. Subject to the provisions of Section 3.3, a grant
8
of Restricted Shares shall be effective for the Restricted Period and may not be
revoked.
3.2 Restrictions
------------
At the time of grant of Restricted Shares to a Participant, a certificate
representing the number of shares of Common Stock granted shall be registered in
his name and issued to the Participant. The Participant shall have the entire
beneficial ownership interest in, and all rights and privileges of a stockholder
as to, such Restricted Shares, including the right to receive dividends and the
right to vote such Restricted Shares, subject to the following restrictions: (i)
no unvested Restricted Shares may be sold, transferred, assigned, pledged, or
otherwise encumbered or disposed of during the Restricted Period; and (ii)
vested Restricted Shares may only be sold, transferred or otherwise disposed of
in compliance with applicable securities laws. In the event of a Change in
Control, all restrictions set forth above in this Section as to previously
granted Restricted Shares shall lapse.
3.3 Termination of Employment
-------------------------
(i) Total Disability or Death. If a Participant ceases to be an employee
prior to the end of a Restricted Period by reason of Total Disability,
death, all Restricted Shares granted to such Participant shall
immediately vest in Participant or in his beneficiary or estate, as
the case may be, and all restrictions applicable to such shares shall
lapse.
(ii) All Other Terminations. If a Participant ceases to be an employee
prior to the end of a Restricted Period for any reason other than
death, Total Disability or Change of Control, the Participant shall
immediately forfeit all Restricted Shares then subject to the
restrictions of Section 3.2 hereof in accordance with the provisions
thereof, except that the Committee or Board may, if it finds that the
circumstances in the particular case so warrant, allow such
Participant to retain any or all of the Restricted Shares then subject
to the restrictions of Section 3.2 and all restrictions applicable to
such retained shares shall lapse.
3.4 Vesting of Restricted Shares
----------------------------
At the end of the Restricted Period or at such earlier time as provided for
in Section 3.3 hereof or as the Committee or Board may determine, all
restrictions applicable to the Restricted Shares shall lapse, except that such
shares may only be sold, transferred or otherwise disposed of in compliance with
applicable securities laws.
9