Exhibit 10.26
SUBORDINATED PROMISSORY NOTE
$500,000.00 Newark, New York
March 4, 2003
FOR VALUE RECEIVED, the undersigned ("Maker") promises to pay to
Hitschler, Kimelman Holdings, LLC ("Lender"), or order, without deduction or
setoff, the sum of five hundred thousand dollars ($500,000.00), together with
interest at the rate of seven and one-half percent (7.5%) per annum accruing
from the date hereof on the principal balance from time to time unpaid, with all
principal and interest being due on June 4, 2003 (the "Maturity Date"), subject
to the subordination provisions of Section 4 of the Loan Agreement (as defined
below).
All payments required under the terms of this Note shall be paid in lawful
money of the United States of America at such place as the holder of this Note
may at any time or from time to time designate in writing to Maker.
Maker may prepay the principal amount outstanding, together with accrued
interest thereon, in whole or in part, at any time, without premium or penalty
on ten (10) days' written notice to Lender. Any prepayment shall first be
applied to accrued but unpaid interest and the balance, if any, shall be applied
in reduction of the unpaid balance of the principal due hereunder.
This Note is the "Promissory Note" issued pursuant to the provisions of a
certain Loan Agreement (the "Loan Agreement") of even date herewith by and
between the Maker and the Lender, all of which provisions, including, but not
limited to, the subordination provisions of Section 4 are incorporated herein by
reference. The Lender is entitled to the rights and benefits of the Loan
Agreement, subject to the subordination provisions thereof.
If this Note is forwarded to an attorney for collection, Maker shall pay
on demand all costs and expenses of collection including a reasonable attorney's
fee.
An event of default under this Note ("Event of Default") shall be deemed
to have occurred if (i) Maker fails to pay any of Maker's obligations hereunder,
including, without limitation, any installment of principal and/or interest
within ten (10) days after such installment is due and payable, (ii) there is
any Event of Default under the Loan Agreement, or (iii) Maker fails to honor any
obligation under the warrant attached hereto as Exhibit A (the "Warrant").
If an Event of Default shall occur, the holder of this Note may declare
the entire unpaid principal balance of this Note, together with accrued interest
thereon, immediately due and payable,
Page 1 of 3
and shall, in addition to all remedies under this Note, have all of the rights
under the Loan Agreement and the Warrant.
No extension of time for payment shall release, modify or affect the
liability of Maker hereunder.
The rights and remedies set forth in this Note may be exercised by the
holder of this Note during any default by Maker, regardless of any prior
forbearance.
Maker hereby waives presentment for payment, demand for payment, protest,
notice of protest and of dishonor, and any and all demands and notices that
might otherwise be required by law.
Lender may convert some or all of the principal amount of this Promissory
Note into shares of the common stock of Maker by sending a notice to Maker
setting forth the amount of principal of this Promissory Note Lender desires to
convert into common stock of Maker. If Lender's election to convert some or all
of the principal amount of this Promissory Note is made prior to or at the
Maturity Date and no Event of Default has occurred, the conversion price shall
be four dollars ($4.00) per share. If Lender's election to convert some or all
of the principal amount of this Promissory Note is made after an Event of
Default has occurred, then the conversion price shall be two dollars ($2.00) per
share. Should Maker provide Lender with a written notice of prepayment of all of
the principal and interest due under this Promissory Note, then Lender's right
to convert some or all of the principal due under this Promissory Note into
common stock of Maker shall lapse and shall be of no further effect if (i)
Lender fails to elect to make an election to convert some or all of the
principal due under this Promissory Note prior to the date established for
prepayment in the notice and (ii) Maker prepays all of the principal and
interest due under this Promissory Note on the date established for prepayment
in the notice. Upon such conversion, Lender shall nonetheless be entitled to
receive all accrued and unpaid interest due on this Promissory Note through the
date of conversion.
The aggregate number and shares of common stock of Maker subject to
issuance upon conversion of some or all of this Promissory Note and the
conversion price shall be proportionately adjusted for any increase, decrease,
or change in the total outstanding shares of the Borrower's common stock
resulting from a stock dividend, recapitalization, merger, consolidation,
split-up, combination, exchange of shares, issuance of additional shares, or
similar transaction.
This Note shall be governed by the laws of the State of Delaware, whose
courts shall have jurisdiction and venue to enforce the terms thereof.
Page 2 of 3
Maker hereby acknowledges that the debt which is represented by this Note
was incurred by Maker solely to acquire or carry on a business or commercial
enterprise.
IN WITNESS WHEREOF, Maker has executed this Note, under seal, the day and
year first above written.
ATTEST:
Ultralife Batteries, Inc.
/s/ John Kavazanjian By /s/ Robert W. Fishback (SEAL)
- -------------------- -----------------------------------
Robert W. Fishback,
Vice President of Finance and
Chief Financial Officer
Page 3 of 3