Exhibit 2.1.3
THE SECURITY REPRESENTED BY THIS INSTRUMENT WAS ORIGINALLY ISSUED ON JULY
3, 2006, AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THE TRANSFER OF SUCH SECURITY IS SUBJECT TO THE CONDITIONS
SPECIFIED IN THE ASSET PURCHASE AGREEMENT, DATED AS OF MAY 1, 2006, AS
AMENDED AND MODIFIED FROM TIME TO TIME, BY AND AMONG XXXXXXXX RESEARCH
LTD., XXXXXX XXXXX, XXXX XXXXXX, XX., XXXXX XXXXX, XXXXX XXXXXXXXX,
ULTRALIFE BATTERIES, INC. (THE "COMPANY") AND MR ACQUISITION CORPORATION,
AND THE COMPANY RESERVES THE RIGHT TO REFUSE THE TRANSFER OF SUCH SECURITY
UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH RESPECT TO SUCH TRANSFER.
UPON WRITTEN REQUEST, A COPY OF SUCH CONDITIONS SHALL BE FURNISHED BY THE
COMPANY TO THE HOLDER HEREOF WITHOUT CHARGE.
THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND MAY NOT BE OFFERED OR SOLD EXCEPT: (i) PURSUANT TO
AN EFFECTIVE REGISTRATION STATEMENT UNDER THE ACT (ii) TO THE EXTENT
APPLICABLE, PURSUANT TO RULE 144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER
THE ACT RELATING TO THE DISPOSITION OF SECURITIES), OR (iii) UPON THE
DELIVERY BY THE HOLDER TO THE COMPANY OF AN OPINION OF COUNSEL, REASONABLY
SATISFACTORY TO COUNSEL FOR THE COMPANY, AND AN EXEMPTION FROM REGISTRATION
UNDER THE ACT IS AVAILABLE.
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SUBORDINATED CONVERTIBLE
PROMISSORY NOTE
FOR VALUE RECEIVED, ULTRALIFE BATTERIES, INC., a Delaware corporation with
offices at 0000 Xxxxxxxxxx Xxxxxxx, Xxxxxx, Xxx Xxxx 00000 (the "Company"),
hereby promises to pay to the order of XXXXXXXX RESEARCH, LTD., which has an
address of 000 Xxxxx 0xx Xxxxxx, Xxxx, Xxxxx 00000, or registered assigns
("Holder") the principal sum of Twenty Million Dollars ($20,000,000), or such
lesser principal amount to which this Note shall have been adjusted in
accordance with the provisions of the Asset Purchase Agreement, together with
interest thereon calculated from the date hereof, in accordance with the
provisions of this Note.
This Note was issued pursuant to the Asset Purchase Agreement, dated as of
May 1, 2006 (the "Purchase Agreement"), by and among the Holder, Xxxxxx Xxxxx,
Xxxx Xxxxxx, Xx., Xxxxx Xxxxx, Xxxxx Xxxxxxxxx, the Company and MR Acquisition
Corporation and the applicable provisions thereof are hereby incorporated herein
in full by reference. The Purchase Agreement contains terms governing the rights
of the Holder of this Note and the Holder is entitled to the benefits thereof.
All capitalized terms used herein and not otherwise defined shall have the
meanings given thereto in the Purchase Agreement.
1. INTEREST. Except as otherwise expressly provided herein, interest shall
accrue on the unpaid principal amount of this Note outstanding from the date
hereof until such time as payment thereof is actually delivered to the Holder
(including after acceleration, maturity, or judgment) at the rate of four
percent (4%) per annum. All interest shall be calculated on the basis of actual
days elapsed divided by a 360 day year.
Upon the occurrence of an Event of Default, at Holder's option interest on
the outstanding principal hereunder shall accrue at a rate per annum from time
to time equal to the rate of interest then in effect on this Note plus two
percent (2%) per annum. Any increase in the interest rate shall be in addition
to the Holder's other available remedies.
2. PAYMENTS. Interest shall be due and payable quarterly in arrears of each
year that this Note is outstanding, commencing on October 1, 2006 and continuing
on the first day of each calendar quarter thereafter until the principal hereof
shall have become due and payable, and on the Maturity Date hereof.
All unpaid accrued interest and all outstanding principal shall be due and
payable in full on July 3, 2011 (the "Maturity Date").
3. VOLUNTARY PREPAYMENTS. This Note may be prepaid by the Company in whole
or in part at any time after sixty (60) days prior written notice to Holder
(during which period Holder may exercise its conversion rights hereunder).
4. CONVERSION RIGHTS.
(a) The Holder may convert the outstanding principal amount of this Note
(or a portion of such outstanding principal amount as provided in Section 4(c))
into fully paid and nonassessable shares of Common Stock of the Company (the
"Conversion Shares") at any time, and from time to time, prior to the time the
outstanding principal amount of this Note is paid in full (subject to the notice
periods and conversion rights related thereto described elsewhere in this Note),
at the Conversion Price (defined below) then in effect (collectively, the
"Conversion Rights"); provided, however, that if the closing price of the
Company's Common Stock as quoted on Nasdaq on the Closing Date is greater than
$12.00 per share, then the Holder will be precluded from exercising the
conversion rights under this Note until the first anniversary date of this Note.
The initial per share conversion price (the "Conversion Price") shall be Fifteen
and no/100 Dollars ($15.00). The Conversion Price is subject to adjustment as
provided in Section 5.
(b) The provisions of this Note that apply to conversion of the outstanding
principal amount of this Note also apply to a partial conversion of this Note.
The Holder is not entitled to
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any rights of a holder of Conversion Shares until the Holder has converted this
Note (or a portion thereof) into Conversion Shares, and only to the extent that
this Note is deemed to have been converted into Conversion Shares under this
Section 4.
(c) To convert all or a portion of this Note, the Holder must (a) complete
and sign a notice of election to convert substantially in the form of Exhibit I
hereto (each, a "Conversion Notice"), (b) surrender the Note to the Company, and
(c) furnish appropriate endorsements or transfer documents if required by the
Company. The date on which the Holder satisfies all of such requirements is the
conversion date (the "Conversion Date"). As soon as practicable, and in any
event within ten (10) business days after the Conversion Date, the Company will
deliver, or cause to be delivered, to the Holder a certificate for the number of
whole Conversion Shares issuable upon such conversion and a check for any
fractional Conversion Share determined pursuant to Section 4(d). The person in
whose name the certificate for Conversion Shares is to be registered shall
become the stockholder of record on the Conversion Date and, as of the
Conversion Date, the rights of the Holder as to this Note shall cease as to the
portion thereof so converted; provided, however, that no surrender of a Note on
any date when the stock transfer books of the Company shall be closed shall be
effective to constitute the person entitled to receive the Conversion Shares
upon such conversion as the stockholder of record of such Conversion Shares on
such date, but such surrender shall be effective to constitute the person
entitled to receive such Conversion Shares as the stockholder of record thereof
for all purposes at the close of business on the next succeeding day on which
such stock transfer books are open; provided further that such conversion shall
be at the Conversion Price in effect on the date that this Note shall have been
surrendered for conversion, as if the stock transfer books of the Company had
not been closed.
In the case of a partial conversion of this Note, upon such conversion, the
Company shall execute and deliver to the Holder, at the expense of the Company,
a new Note in an aggregate principal amount equal to the unconverted portion of
the principal amount.
(d) No fractional Conversion Shares shall be issued upon exercise of the
Conversion Rights. Instead of any fractional Conversion Share which would
otherwise be issuable upon conversion of this Note, the Company shall calculate
and pay a cash adjustment in respect of such fraction (calculated to the nearest
1/100th of a share) in an amount equal to the same fraction of the Conversion
Price at the close of business on the Conversion Date.
(e) The issuance of certificates for Conversion Shares upon exercise of any
of the Conversion Rights shall be made without charge to the Holder for such
certificates or for any tax in respect of the issuance of such certificates, and
such certificates shall be issued in the name of, or in such names as may be
directed by, the Holder; provided, however, that in the event that certificates
for Conversion Shares are to be issued in a name or names other than the name of
the Holder, such Note, when surrendered for conversion, shall be accompanied by
an instrument of transfer, in form satisfactory to the Company, duly executed by
the Holder or his duly authorized attorney; and provided further, moreover, that
the Company shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any such certificates
in a name or names other than that of the Holder, and the Company shall not be
required to issue or deliver such certificates unless or until the person or
persons requesting the issuance thereof shall have paid to the Company the
amount of such tax or shall have established to the satisfaction of the Company
that such tax has been paid or is not applicable.
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(f) The Company shall at all times reserve and keep available, free from
preemptive rights, out of its authorized and unissued Common Stock, solely for
the purpose of effecting the conversion of this Note, the full number of
Conversion Shares then issuable upon the conversion in full of this Note.
If the Company or an affiliate of the Company shall at any time after the
date hereof and prior to the conversion of the Note in full issue any rights to
subscribe for shares of Common Stock or any other securities of the Company or
of such affiliate to all the stockholders of the Company, the Holder of the
unconverted portion of the Note shall be entitled, in addition to the shares of
Common Stock or other securities receivable upon the Conversion thereof, to
receive such rights at the time such rights are distributed to the other
stockholders of the Company, to be calculated on an as-converted basis.
5. ADJUSTMENTS TO CONVERSION RIGHTS.
(a) General. In order to prevent dilution of the rights granted under this
Note, the Conversion Price and the number of Conversion Shares shall be subject
to adjustment from time to time as provided in this Section 5(a). It is the
intention of the Company that the Conversion Price shall at all times be the
lower of (i) the Conversion Price on the date of this Note and (ii) the
Conversion Price determined by adjustment pursuant to the remainder of this
Section 5(a). In the event that at any time the Common Stock of the Company
shall be exchanged for, or changed into, a different kind and/or a number of
shares of stock of the Company or of another corporation by reason of a merger,
consolidation, sale of assets, recapitalization, reclassification, stock
dividend, stock split-up or combination of shares or otherwise, then, until any
further adjustment is required, there shall be issuable upon the conversion of
the Note, in lieu of each share of Common Stock of the Company or of any other
stock theretofore issued pursuant to the provisions of this Note, the kind
and/or number of shares of stock for which each share of Common Stock of the
Company or such other stock shall be so exchanged, or into which each share of
Common Stock of the Company or such other stock shall be so changed and the
Conversion Price shall be automatically adjusted to a new Conversion Price as
nearly equivalent as practicable to the adjustment in shares of stock, if by
reason of such merger, consolidation, recapitalization, reclassification or
otherwise the number of issued and outstanding shares of Common Stock of the
Company shall have been exchanged for or changed into such new shares on other
than a one-to-one basis. No adjustment in the Conversion Price shall be made for
cash dividends on the shares of Common Stock of the Company or any other stock
issued upon any conversion of the Note.
(b) Notices. Immediately upon any adjustment of the Conversion Price, the
Company shall give written notice thereof to the Holder, setting forth in
reasonable detail and certifying the calculation of such adjustment.
6. COMPANY RIGHT TO COMPEL CONVERSION. Notwithstanding any other provisions
of this Note, the Company shall have the right, at the Company's sole
discretion, to compel the Holder to convert the Note at any time after the
30-day average closing price of the Company's Common Stock exceeds Seventeen and
50/100 Dollars ($17.50) per share. In such event, the Company shall provide the
Holder with written notice of conversion, setting forth the basis upon which the
conditions to compel the conversion were satisfied. Thereafter, the Note shall
only
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represent the right to receive the Conversion Shares and any accrued but unpaid
interest.
7. SUBORDINATION. The Holder agrees that the payment of the principal of
and the interest on the Note is expressly subordinated to the payment of all
Senior Indebtedness, to the extent and subject to the conditions set forth in
this Section 7. As used herein, the term "Senior Indebtedness" shall mean the
principal of, the interest on and the premium, if any, on all indebtedness of
the Company for money borrowed by it from any financial institution including
banks, savings institutions or insurance companies and similar institutional
lenders, and all renewals, extensions and refundings of any such indebtedness,
whether such indebtedness shall have been incurred prior to, on, or subsequent
to the date hereof, unless by the terms of the instruments creating or
evidencing any such indebtedness it is provided that such indebtedness is not to
be considered Senior Indebtedness for the purpose of this Note.
(a) No interest or principal shall be paid on the Note without the consent
of the holders of all outstanding Senior Indebtedness if, at the date fixed
herein for such interest or principal payment, the Company shall be in default
of payment of principal or interest upon such Senior Indebtedness. In the event
any payment of interest or principal hereunder shall be prohibited pursuant to
this Section 7(a), such payment shall be deemed to be deferred until the cure of
all defaults in payment of principal or interest upon the Senior Indebtedness,
and the payments hereon so deferred shall immediately become due and payable
upon the cure of such defaults.
(b) In the event of any dissolution, winding up, liquidation or
reorganization of the Company, whether in bankruptcy, insolvency or receivership
proceedings, or upon an assignment for the benefit of creditors or in any other
marshalling of the assets and liabilities of the Company the holders of all
Senior Indebtedness shall first be entitled to receive payment in full of such
Senior Indebtedness before the Holder shall be entitled to receive any payment
upon the principal of, the interest on, or the premium, if any, on the
indebtedness evidenced by the Note. Upon any such dissolution, winding up,
liquidation or reorganization, any payment or distribution of assets of the
Company of any kind or character, whether in cash, property or securities, to
which the Holder would be entitled, except for the provisions of this Section 7,
shall be made by the liquidating trustee or agent or such person making such
payment or distribution, whether a trustee in bankruptcy, a receiver or
liquidating trustee or otherwise, directly to the Holders of the Senior
Indebtedness or their representatives or to the trustee or trustees under any
indenture or indentures under which any instruments evidencing any such Senior
Indebtedness may have been issued, ratably according to the aggregate amounts
remaining unpaid on account of the Senior Indebtedness held or represented by
each, to the extent necessary to pay in full all such Senior Indebtedness
remaining unpaid, after giving effect to all concurrent payments or
distributions with respect to such Senior Indebtedness.
(c) In the event that, notwithstanding the provisions of Section 7(b), upon
any such dissolution, or winding up, liquidation or reorganization, any payment
or distribution of assets of the Company of any kind or character, whether in
cash, property or securities, shall be received by the Holder before all Senior
Indebtedness is paid in full, such payment or distribution shall be paid over to
the holders of such Senior Indebtedness or their representatives, ratably as
aforesaid, for the application to the payment of all Senior Indebtedness
remaining unpaid until all such Senior Indebtedness shall have been paid in
full, after giving effect to any concurrent payment or distribution with respect
to such Senior Indebtedness.
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(d) Subject to the payment in full of all Senior Indebtedness, the Holder
to the extent permitted by law, shall be subrogated to the rights of each holder
of Senior Indebtedness (to the extent of the payments or distributions made to
such holder pursuant to the provisions of Sections 7(b) and 7(c)) to receive
payments or distributions of assets of the Company applicable to the Senior
Indebtedness until the principal of, the interest on, and the premium, if any,
on this Note shall be paid in full, and each holder of Senior Indebtedness by
accepting such payments or distributions shall be deemed to have agreed to said
subrogation. No payments or distributions to the Senior Indebtedness pursuant to
the provisions of Sections 7(b) and 7(c) shall, as between the Company, its
creditors, other than the holders of the Senior Indebtedness, and the Holder, be
deemed to be a payment by the Company to or on account of the Note, the
provisions of this Section 7 being, and being intended, solely for the purpose
of defining the relative rights of the Holder, on the one hand, and the holders
of the Senior Indebtedness, on the other hand; and nothing contained in this
Section 7 or elsewhere in this Note is intended to or shall impair, as between
the Company, the Holder and the other creditors of the Company, other than the
holders of Senior Indebtedness, the obligations of the Company, which is
unconditional and absolute, to pay to the Holder as and when the same shall
become due and payable in accordance with the terms herein, or to affect the
relative rights of the Holder and the other creditors of the Company, other than
the holders of Senior Indebtedness, or to prevent the Holder from exercising all
of the remedies otherwise permitted by applicable law upon default as provided
for herein, subject to the rights, if any, under this Section 7 of the holders
of the Senior Indebtedness in respect of any cash, property or securities of the
Company received upon the exercise of any such remedy.
(e) In the event that this Note shall be declared due and payable before
the Maturity Date because of the occurrence of a default hereunder, the Company
will give prompt notice in writing of such happening to the holders of the
Senior Indebtedness, and any and all Senior Indebtedness shall forthwith become
immediately due and payable upon demand by the respective holders thereof
regardless of the express maturity dates thereof.
Without limiting any of the foregoing, this Note is further subject to the
Subordination and Intercreditor Agreement dated as of July 3, 2006 among XX
Xxxxxx Chase Bank, N.A., Manufacturers and Traders Trust Company, XxXxxxxx
Research, Ltd. and Ultralife Batteries, Inc. under which this Note and Ultralife
Batteries, Inc.'s obligations hereunder are subordinated in the manner and to
the extent set forth therein to the prior payment of certain obligations to the
holders of Senior Obligations as defined therein.
8. EVENTS OF DEFAULT.
In the event that there shall be any Event of Default hereunder and such
Event of Default shall remain uncorrected or unremedied for a period of more
than thirty (30) days after the Company shall have received notice of such Event
of Default from the Holder, then the full unpaid principal amount of the Note,
together with any accrued but unpaid interest, may, at the option of the Holder,
become immediately due and payable without further notice by the Holder.
(a) "Event of Default" as used in this Section 8 shall mean and refer to
any of the following:
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(i) the failure of the Company to pay any installment of interest
or principal on the Note when and as the same shall become due and
payable, whether at maturity, by call for redemption, by declaration
or otherwise;
(ii) the failure of the Company, to pay any installment of
interest or principal on Senior Indebtedness when and as the same
shall become due and payable, unless such payment shall have been
deferred or waived by the terms of the instruments evidencing such
Senior Indebtedness or by the holder thereof;
(iii) the failure of the Company to observe and perform all of
the covenants and agreements on the part of the Company contained
herein or in the Asset Purchase Agreement;
(iv) failure of any representation or warranty made by the
Company in the Asset Purchase Agreement to be truthful, accurate or
correct;
(v) the adjudication of the Company as a bankrupt by a court of
competent jurisdiction or the entry by a court of competent
jurisdiction of an order approving a petition seeking reorganization
of the Company under the federal bankruptcy laws or any other
applicable law or statute of the United States of America or any state
thereof or any other jurisdiction;
(vi) the appointment by a court of competent jurisdiction of a
trustee or receiver or receivers of the Company of all or any
substantial part of its property upon the application of any creditor
in any insolvency or bankruptcy proceeding or other creditor suit,
unless such appointment or decree or order shall be stayed upon appeal
or otherwise;
(vii) the filing by the Company of a petition involuntary
bankruptcy or the making by the Company of an assignment for the
benefit of its creditors or the consenting by the Company to the
appointment of a receiver or receivers for all or any substantial
portion of the property of the Company;
(viii) the filing by the Company of a petition or answer seeking
reorganization under the federal bankruptcy laws or any other
applicable law or statute of the United States of America or any state
thereof or jurisdiction, or the filing by the Company of a petition to
take advantage of any debtor's act.
(b) Upon the occurrence of an Event of Default which shall remain
uncorrected or unremedied for a period of more than thirty (30) days after the
Company shall have received notice of such Event of Default from the Holder, the
Holder shall at all times have the right to institute any suit, action or
proceeding, in equity or at law, for the enforcement of rights as provided for
herein, or in aid of the exercise of any right or power granted herein.
(c) The Note shall be the obligation of the Company solely and there shall
be no recourse had for the payment thereof or interest thereon against any
stockholder, officer or
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director of the Company, either directly or through the Company, by reason of
any matter prior to the delivery of the Note, or against any present or future
officer or director of the Company, all such liability being expressly released
by the Holder and by any subsequent holders hereof by the acceptance hereof and
as part of the consideration for the issuance thereof.
The Holder shall also have any other rights which the Holder may have been
afforded under any contract or agreement at any time and any other rights which
such holder may have pursuant to applicable law. The Company hereby waives
diligence, presentment and protest and expressly agrees that this Note, or any
payment hereunder, may be extended from time to time and that the Holder may
accept security for this Note or release security for this Note, all without in
any way affecting the liability of the Company hereunder.
9. AMENDMENT AND WAIVER. Except as otherwise expressly provided herein, the
provisions of this Note may be amended and the Company may take any action
herein prohibited, or omit to perform any act herein required to be performed by
it, only if the Company has obtained the written consent of the Holder.
10. CANCELLATION. After all principal and accrued interest at any time owed
on this Note has been paid in full, this Note shall be surrendered to the
Company for cancellation and shall not be reissued.
11. PAYMENTS. Unless otherwise expressly provided herein, all payments to
be made to the Holders shall be made in the lawful money of the United States of
America in immediately available funds which shall be delivered to the address
designated by the Holder.
12. TRANSFER OF NOTE. This Note may be transferred only in accordance with
the terms of the Asset Purchase Agreement, and the Company shall treat the
Person to whom this Note is assigned in accordance therewith for the purpose of
receiving payment and for all other purposes, and the Company shall not be
affected by any notice to the contrary.
13. BUSINESS DAYS. If any payment is due, or any time period for giving
notice or taking action expires, on a day which is a Saturday, Sunday or legal
holiday in the State of New York, the payment shall be due and payable on, and
the time period shall automatically be extended to, the next business day
immediately following such Saturday, Sunday or legal holiday, and interest shall
continue to accrue at the required rate hereunder until any such payment is
made.
14. RIGHT OF OFFSET. This Note is subject to the Buyer's right of offset
pursuant to the provisions of Section 8.3 of the Purchase Agreement.
15. NOTICES. All notices, demands or other communications to be given or
delivered under or by reason of the provisions of this Note shall be given in
accordance with the Purchase Agreement.
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16. NEW YORK LAW. This Note is intended to be performed in the State of New
York and shall be construed and enforced in accordance with the laws of such
State.
[Signature Page Follows]
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IN WITNESS WHEREOF, the Company has executed and delivered this Note on
July 3, 2006.
ULTRALIFE BATTERIES, INC.
By:
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Xxxx X. Xxxxxxxxxxx
Title: Chief Executive Officer
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EXHIBIT I
FORM OF CONVERSION NOTICE
The undersigned hereby irrevocably elects to exercise its right, pursuant
to the Subordinated Convertible Promissory Note dated _____________ (the "Note")
of Ultralife Batteries, Inc. (the "Company") in the outstanding principal amount
of $_________, which Note is tendered herewith, to convert $__________ of the
amount outstanding under the Note to __________________ shares of the common
stock of the Company (the "Shares"), all in accordance with the terms of the
Note. The undersigned requests that a Certificate for such Shares be registered
in the name of ______________, whose address is ____________, and that such
Certificate be delivered to ________________, whose address is ________________,
[and that a replacement Note in the principal amount of $___________,
representing the balance of the principal amount outstanding thereunder after
giving effect to this conversion, be issued in the amount of $_________ and
delivered to ___________, whose address is ____________].
Dated:
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Signature:
-------------------------
(Signature must conform in all respects to name of holder as specified on the
face of the Note.)
____________________________________
____________________________________
(Insert Taxpayer Identification, Social
Security or Other Identifying Number of
Holder)
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