Exhibit 10.7
ULTRALIFE BATTERIES, INC.
1992 STOCK OPTION PLAN
Section 1. Purpose.
The Plan authorizes the Committee (as hereafter defined) to provide key
Employees and Consultants of the Corporation and its Subsidiaries, who are in a
position to contribute materially to the long-term success of the Corporation,
with options to acquire common stock of the Corporation, in accordance with the
terms specified herein. The Corporation believes that this incentive program
will cause those persons to increase their interest in the Corporation's
welfare, and aid in attracting and retaining Employees and Consultants of
outstanding ability.
Section 2. Definitions.
Unless the context clearly indicates otherwise, the following terms,
when used in this Plan, shall have the meanings set forth in this Section:
(a) "Board" shall mean the Board of Directors of the Corporation.
(b) "Change in Control" shall mean the occurrence of any of the
following: (i) any "person" (as such term is used in Sections 13(d) and 14(d) of
the Exchange Act) is or becomes a "beneficial owner" (as defined in Rule 13d-3
under the Exchange Act), directly or indirectly, of securities of the
Corporation representing 30% or more of the voting power of the then outstanding
securities of the Corporation; (ii) during any period of two consecutive
calendar years there is a change of 25% or more in the composition of the Board
of the Corporation in office at the beginning of the period except for changes
approved by at least two-thirds of the Directors then in office who were
Directors at the beginning of the period; (iii) the stockholders of the
Corporation approve an agreement providing for (A) the merger or consolidation
of the Corporation with another Corporation where the stockholders of the
Corporation, immediately before the merger or consolidation, would not
beneficially own immediately after the merger or consolidation, shares entitling
such stockholders to 50% or more of all votes (without consideration of the
rights of any class of stock to elect Directors by separate class vote) to which
all stockholders of the corporation issuing cash or securities in the merger or
consolidation would be entitled in the election of directors or where the
members of the Board, immediately prior to the merger or consolidation,
constitute a majority of the Board of Directors of the Corporation issuing cash
or securities in the merger or consolidation or (B) the sale or other
disposition of all or substantially all the assets of the Corporation, or a
liquidation, dissolution or statutory exchange of the Corporation; or (iv) any
person has commenced, or announced an intention to commence, a tender offer or
exchange offer for 30% or more of the voting power of then-outstanding
securities of the Corporation.
(c) "Code" shall mean the Internal Revenue Code of 1986 as it may be
amended from time to time.
(d) "Committee" shall mean a Committee of not less than two Directors
who are "Disinterested Persons," as that term is defined and interpreted
pursuant to Rule 16b-3 under the Exchange Act. The Committee shall be appointed
by and serve at the pleasure of the Board.
(e) "Consultant" shall mean any consultant of the Corporation or its
Subsidiaries.
(f) "Control Person" shall mean any person who, as of the date of grant
of an Option, owns (within the meaning of Section 422(b)(6) of the Code) stock
possessing more than ten percent of the total combined voting power or value of
all classes of stock of the Corporation or of any parent or Subsidiary.
(g) "Corporation" shall mean Ultralife Batteries, Inc., a Delaware
corporation.
(h) "Director" shall mean any member of the Board.
(i) "Employee" shall mean any employee of the Corporation or its
Subsidiaries, including Directors who are otherwise employed by the Corporation.
(j) "Exchange Act" shall mean the Securities Exchange Act of 1934 as it
may be amended from time to time.
(k) "Fair Market Value" shall mean for any day (i) if the Corporation
is a registrant under Section 12 of the Exchange Act, the closing price of the
Stock in the over-the-counter market, as reported through the National
Association of Securities Dealers Automated Quotation System or, if the stock is
listed or admitted to trading on any national securities exchange, the last
reported sale price on such exchange or, (ii) if the Corporation in not a
registrant under Section 12 of the Exchange Act, the price of the Stock will be
determined by the Board on the date of grant but will not be less than the par
value of such Stock.
(l) "Grantee" shall mean a Person granted an Option under the Plan.
(m) "ISO" shall mean an Option granted pursuant to the Plan to purchase
shares of the Stock and intended to qualify as an incentive stock option under
Section 422 of the Code, as now or hereafter constituted.
(n) "NQSO" shall mean an Option granted pursuant to the Plan to
purchase shares of the Stock that is not an ISO.
(o) "Options" shall refer collectively to NQSOs and ISOs subject to the
Plan.
(p) "Parent" shall mean any parent of the Corporation as defined in
Section 424 of the Code.
(q) "Plan" shall mean this 1992 Stock Option Plan as set forth herein
and as amended from time to time.
(r) "Stock" shall mean shares of the Common Stock of the Corporation.
(s) "Subsidiary" shall mean any subsidiary corporation as defined in
Section 424 of the Code.
Section 3. Shares of Stock Subject to the Plan
Subject to the provisions of Section 8, the Stock which may be issued
or transferred pursuant to Options granted under the Plan shall not exceed
1,150,000 shares in the aggregate. Stock issuable upon the exercise of any
Option may be authorized but unissued shares or reacquired shares of Stock. If
any unexercised Options lapse or terminate for any reason, the Stock covered
thereby may again be optioned. More than one Option may be granted to one
person.
Section 4. Administration of the Plan.
The Plan shall be administered by the Committee. Subject to the express
provisions of the Plan, the Committee shall have the authority to interpret the
Plan, to prescribe, amend, and rescind rules and regulations relating to the
Plan, to determine the terms and provisions of stock option agreements
thereunder and to make all other determinations necessary or advisable for the
administration of the Plan. Any controversy or claim arising out of or related
to this plan or the Options granted thereunder shall be determined unilaterally
by, and at the sole discretion of, the Committee. The provisions of stock option
agreements for Options granted under Section 6 hereof may provide that, upon the
occurrence of a Change in Control specified in Section 2(b)(iii) hereof, the
Committee may require the cancellation for cash of outstanding Options or the
issuance of comparable replacement options granted by the surviving entity.
Section 5. Types of Options.
Options granted under the Plan may be of two types: ISOs and NQSOs. The
Committee shall have the authority and discretion to grant to an eligible
Employee either ISOs, NQSOs, or both, but shall clearly designate the nature of
each Option at the time of grant. Consultants shall only receive NQSOs.
Section 6. Grant of Options to Employees, Consultants and Directors.
(a) Key Employees and Consultants of the Corporation and its
Subsidiaries shall be eligible to receive Options under the Plan. Employees
shall be eligible to receive ISOs and NQSOs; Consultants shall be eligible to
receive NQSOs only.
(b) The exercise price per share of Stock subject to an Option granted
to an Employee or Consultant shall be determined by the Committee, provided
however, (i) that the exercise price of each share subject to an ISO shall be
not less than 100% of the Fair Market Value of a share of the Stock on the date
such ISO is granted, (ii) that such exercise price shall not be less than 110%
of such Fair Market Value for any ISO granted to a Control Person, and (iii)
that the exercise price of each share subject to a NQSO shall be not less than
85% of the Fair Market Value of a share of the Stock on the date such NQSO is
granted.
(c) The term of each Option granted to an Employee or Consultant shall
be determined by the Committee, provided that no Option shall be exercisable
more than ten years from the date such Option is granted, and provided further
that no ISO granted to a Control Person shall be exercisable more than five
years from the date of Option grant.
(d) The Committee shall determine and designate from time to time the
Employees and Consultants who are to be granted Options, the nature of each
Option granted and the number of shares of Stock subject to each such Option.
(e) Notwithstanding any other provisions hereof, the aggregate Fair
Market Value (determined at the time the ISO is granted) of the Stock with
respect to which ISOs are exercisable for the first time by any Employee during
any calendar year under all plans of the Corporation and any Parent or
Subsidiary corporation shall not exceed $100,000.
(f) The Committee, in its sole discretion, shall determine whether any
Option granted to an Employee or Consultant shall become exercisable in one or
more installments and specify the installment dates. The Committee may also make
such other provisions, not inconsistent with the terms of this Plan as it may
deem desirable, including such provisions as it may deem necessary to qualify
any ISO under the provisions of Section 422 of the Code. The Committee, in its
discretion, shall have the power to accelerate the period or periods during
which Options become exercisable. Notwithstanding any determination by the
Committee regarding the exercise period of any Option granted to an Employee or
Consultant, all such Options shall immediately become exercisable upon a Change
in Control of the Corporation.
(g) The Committee may, at any time, grant new or additional options to
any eligible Employee or Consultant who has previously received Options under
this Plan, or options under other plans, whether such prior Options or other
options are still outstanding, have been exercised previously in whole or in
part, or have been canceled. The exercise price of such new or additional
Options may be established by the Committee, subject to Section 6(b) hereof,
without regard to such previously granted Options or other options.
(h) Except as provided in Section 6(i) below, no Option shall be
granted under this Section 6 to an Employee or Consultant who is a Director
except by a Committee of not less than two persons having full authority to act
in the manner, all of whom are disinterested persons, as defined above.
(i) On the last day of each calendar quarter, commencing June 30, 1993,
there shall be granted to each director of the Corporation on such date,
including directors who are also employees of the Corporation, a NQSO to
purchase 1,500 shares of Stock, up until the fifth anniversary of the grant
date, for a price equal to the closing price of the Stock on the Grant Date.
These options will be deemed vested on the date that they are granted.
Section 7. Exercise of Options.
(a) Upon the exercise of any Option, the Grantee shall pay the exercise
price for the shares being purchased in the manner provided in the particular
stock option agreement, including payment for such shares by surrender of shares
of Stock (at their Fair Market Value) if permitted by such stock option
agreement, including Stock acquired pursuant to the Option then being exercised.
(b) The number of shares which are issued pursuant to the exercise of
an Option shall be charged against the maximum limitation on shares set forth in
Section 3 hereof.
(c) Except as provided in Section 9, no Option granted to an Employee
or Consultant shall be exercised unless at the time of such exercise the Grantee
is then an Employee or Consultant.
(d) Before the Corporation issues Stock to a Grantee pursuant to the
exercise of a NQSO, the Corporation shall have the right to require that the
Grantee make such provisions, or furnish the Corporation such authorization,
necessary or desirable so that the Corporation may satisfy its obligation, under
applicable income tax laws, to withhold for income or other taxes due upon or
incident to such exercise. The Committee may adopt such rules, forms, and
procedures as it considers necessary or desirable to implement this section
7(d), which rules, forms, and procedures shall be binding upon all Grantees, and
which shall be applied uniformly to all Grantees similarly situated.
Section 8. Adjustment Upon Changes in Capitalization.
In the event of any reclassification, recapitalization, merger,
consolidation, reorganization, issuance of warrants, right or debentures, stock
dividend, stock split or reverse stock split, cash dividend, property dividend,
combination or exchange of shares, repurchase of shares or any other change in
corporate structure which in the judgment of the Committee materially affects
the value of shares, the Committee may determine the appropriate adjustment, if
any, to the number and class of shares and the exercise price per share set
forth in any Option theretofore granted, provided that no such adjustments shall
be made to any ISO without the Grantee's consent, if such adjustment would cause
such ISO to fail to qualify as such.
Section 9. Termination of Relationship with the Corporation.
(a) Except as provided below in this Section 9(a), upon the termination
of an Employee's employment or a Consultant's consulting relationship with the
Corporation or a Director's term of office with the Corporation (unless the
Director continues to be an employee or consultant to the Corporation), such
Grantee's options shall terminate on the day three months following such
termination of employment, consultancy or directorship. The Committee shall have
the discretion to provide that upon termination of an Employee's employment or a
Consultant's consulting relationship as a result of retirement, disability or
death, such Grantee or his or her legal representative may exercise any
outstanding and then exercisable installments of his or her Options for a period
not to exceed: (i) one year from the date of such termination in the case of
death or permanent and total disability (within the meaning of Section 22(e)(3)
of the Code), and (ii) three months from the date of such termination in the
case of retirement or other disability, provided, however, that in no event
shall the period extend beyond the expiration of the Option term. In no event
shall any Option be exercisable for more than the maximum number of shares that
the Grantee was entitled to purchase at the date of retirement, disability, or
death as the case may be. In the case of an Employee or Consultant, the transfer
among the Corporation and any Subsidiary shall not be deemed to be a termination
of the employment or consulting relationship, and a change from the status of an
Employee to a Consultant or from a Consultant to an Employee shall not be deemed
to be a termination of the employment or consultant relationship.
(b) Subject to the foregoing, in the event of death, Options may be
exercised by a Grantee's legal representative.
Section 10. General Provisions
(a) Each Option grant shall be evidenced by a written stock option
agreement containing such terms and conditions, not inconsistent with this Plan,
as the Committee shall approve. ISOs and NQSOs may be granted to Employees
simultaneously and subject to a single stock option agreement, provided,
however, that in no event shall a NQSO be granted in tandem with an ISO such
that the exercise of one affects the right to exercise the other. The terms and
provisions of such stock option agreements (including the exercise price
specified therein) may vary among Grantees and among different Options granted
to the same Grantee.
(b) The grant of an Option in any year shall not give the Grantee any
right to similar grants in future years or any right to continue such Grantee's
employment or consultant relationship with the Corporation or its Subsidiaries.
All Grantees shall remain subject to discharge to the same extent as if the Plan
were not in effect.
(c) No Grantee, and no beneficiary or other persons claiming under or
through the Grantee shall have any right, title or interest by reason of any
Option to any particular assets of the Corporation or its Subsidiaries, or any
shares of Stock allocated or reserved for the purposes of the Plan or subject to
any Option except as set forth herein. The Corporation shall not be required to
establish any fund or make any other segregation of assets to assure the payment
of any Option.
(d) No Option or other right under the Plan shall be subject to
anticipation, sale, assignment, pledge, encumbrance, or charge except by will or
the laws of descent and distribution, and an Option shall be exercisable during
the Grantee's lifetime only by the Grantee.
(e) Notwithstanding any other provision of this Plan or stock option
agreements made pursuant thereto, the Corporation shall not be required to issue
or deliver any certificate or certificates for shares of Stock under this Plan
prior to fulfillment of all of the following conditions:
(1) The listing, or approval for listing upon notice of
issuance, of such shares on any securities exchange on which the Stock
may then be traded;
(2) Any registration or other qualification of such shares
under any state or federal law or regulation, or other qualification
which the Board shall, in its absolute discretion and upon the advice
of counsel, deem necessary or advisable;
(3) The obtaining of any other consent, approval or permit
from any state or federal government agency which the Board shall, in
its absolute discretion and upon the advice of counsel, determine to be
necessary or advisable; and
(4) The execution by the Grantee (or the Grantee's legal
representative) of such written representation that the Committee may
in its sole discretion deem necessary or advisable to the effect that
the shares then being purchased are being purchased for investment with
no present intention of reselling or otherwise disposing of such shares
in any manner which may result in a violation of the Securities Act of
1933, as amended, and the placement upon certificates for such shares
of an appropriate legend in connection therewith.
(f) The issuance of shares of Stock to Grantees or to their legal
representatives shall be subject to any applicable taxes and other laws or
regulations of the United States or of any state having jurisdiction thereof.
(g) In the case of a grant of an Option to any Employee or Consultant
of a Subsidiary, the Corporation may, if the Committee so directs, issue or
transfer the shares covered by the Option to the Subsidiary, for such lawful
consideration as the Committee may specify, upon the condition or understanding
that the Subsidiary will transfer the shares to the Employee or Consultant in
accordance with the terms of the Plan and the stock option agreement relating to
such Option.
Section 11. Amendment or Termination.
The Board may, at any time, alter, amend, suspend, discontinue or
terminate this Plan; provided, however, that no such action shall adversely
affect the rights of Grantees to Options previously granted hereunder and,
provided further, however, that any shareholder approval necessary or desirable
in order to comply with Rule 16b-3 under the Exchange Act or with Section 422 of
the Code (or other applicable law or regulation) shall be obtained in the manner
required therein.
Section 12. Duration of Plan.
This Plan, as amended, is effective upon its adoption by the Board on
July 22, 1993, subject to the approval of the Corporation's stockholders. This
Plan shall terminate at the close of business on 13 October, 2002, and no Option
may be granted under the Plan thereafter, but such termination shall not affect
any Options theretofore granted.