Exhibit 10.27
LOAN AGREEMENT
EXPLANATORY STATEMENT
Hitschler, Kimelman Holdings, LLC ("Lender") has agreed to lend to
Ultralife Batteries, Inc. ("Borrower") the sum of five hundred thousand dollars
($500,000.00) (the "Loan Amount"). In consideration of Lender's agreement to
lend to Borrower the Loan Amount, Borrower has agreed (i) pursuant to the terms
and conditions set forth in the promissory note attached as Exhibit A (the
"Promissory Note") to pay Lender 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 the total principal and interest due being due and
payable on June 4, 2003, and (ii) to grant to Lender a warrant to purchase for
twenty-five thousand (25,000) shares of common stock of Borrower, all on the
terms and conditions as set forth on the stock warrant agreement attached as
Exhibit B (the "Warrant"); and (iii) to provide Lender with the opportunity, at
Lender's option, to convert the principal amount due under the Promissory Note
into one hundred twenty-five thousand (125,000) shares of common stock of
Borrower, all on the terms and conditions as set forth in the Promissory Note.
NOW, THEREFORE, the parties agree as follows:
1. LOAN BY LENDER. Lender agrees to transfer to Borrower, by wire
transfer, the Loan Amount on or before close of business on March 4, 2003 (the
"Closing Date").
2. DELIVERY OF PROMISSORY NOTE AND WARRANT. On or before close of business
on the Closing Date, Borrower will execute and deliver to Lender the Promissory
Note and the Warrant. Borrower covenants, represents, and warrants that both the
Promissory Note and the Warrant are obligations of the Borrower and all
necessary authority and approval to issue, execute, and deliver the Promissory
Note and the Warrant have been made, obtained, or issued.
3. CONDITIONS OF LENDING. It is a condition precedent that the obligation
of Lender to lend to Borrower the Loan Amount is subject to the following
express conditions precedent that all legal matters incident to this Agreement
shall be satisfactory to counsel for the Lender, and the Borrower shall have
reimbursed the Lender for the fees and expenses of Lender's counsel in
connection with the preparation of this Agreement and all matters incident
thereto.
4. SUBORDINATION OF PROMISSORY NOTE. Lender and Borrower agree that the
payment of the principal and interest under this Promissory Note is expressly
subordinated to the payment of all Senior Indebtedness to the extent and subject
to the conditions set forth in this Section 4. As used herein, the term "Senior
Indebtedness" means all indebtedness, obligations, and liabilities of any kind,
including, without limitation, the principal of, the interest on (including
interest accruing in any Insolvency Proceeding (as defined below)
notwithstanding
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any law to the contrary), and the premium, if any, fees, costs, and expenses on
or relating to all indebtedness of Borrower for money incurred or borrowed by
Borrower from any financial institution, including banks, commercial finance
companies, savings institutions, or insurance companies, including Congress
Financial Corporation (New England) and its affiliates (collectively "Congress")
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 instrument creating or evidencing any
such indebtedness it is provided that such indebtedness is not to be considered
Senior Indebtedness for the purposes of the Promissory Note.
4.1. No interest or principal shall be paid on the Promissory Note
without the consent of the holders of all Senior Indebtedness if (a) for the
thirty (30) consecutive days prior to and, as projected, for the thirty (30)
consecutive days after the date fixed in the Promissory Note for interest or
principal payment, the average Excess Availability (as such term is defined in
the Congress Loan Agreement, as defined below) shall be less than $250,000.00
and such Excess Availability on the date of such payment, after giving effect
thereto, is less than $250,000.00, or (b) at the date fixed in the Promissory
Note for interest or principal payment, Borrower shall be in default of payment
of principal or interest upon such Senior Indebtedness or is in default under
that certain Loan and Security Agreement dated June 15, 2000, as amended from
time to time, by and among, amongst others, Congress and Borrower (the "Congress
Loan Agreement"). At least ten (10), but not more than twenty (20), days prior
to making any payment on the Promissory Note, Borrower shall provide to Congress
a projection on a daily basis of average Excess Availability during the thirty
(30) day period following the payment date. The projections shall be in form and
substance satisfactory to Congress.
4.2. In the event of any default under the Congress Loan Agreement or
any dissolution, winding up, liquidation, or reorganization of Borrower, 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 Borrower (all of which are referred to collectively as a
"Insolvency Proceeding"), the holders of all Senior Indebtedness shall first be
entitled to receive payment in full of such Senior Indebtedness before the
holder of the Promissory Note shall be entitled to receive any payment upon the
principal of, or the interest on, the indebtedness evidenced by the Promissory
Note. In any Insolvency Proceeding, no payment shall be made to the holder of
the Promissory Note until the holders of the Senior Indebtedness have been
indefeasibly paid in full in cash.
4.3. In the event that, notwithstanding the provisions of Section 4.2.,
the holder of the Promissory Note receives any payment or distribution of any
kind in an Insolvency Proceeding before the Senior Indebtedness has been paid in
full, the holder of the Promissory Note shall pay over to Congress and, once all
Senior Indebtedness held by Congress has been paid in full in cash, to the
holders of the Senior Indebtedness, or their representatives, the payments or
distributions so made. All payments shall be first made to Congress and
thereafter made to the holders of the Senior Indebtedness ratably in proportion
to the amount of Senior Indebtedness that they hold.
4.4. Subject to the complete satisfaction and indefeasible payment in
full in cash of the Senior Indebtedness, the holder of the Promissory Note, to
the extent permitted by law and to the extent of the payments or distributions
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made to such holders pursuant to the provisions of Sections 4.2. and 4.3. of
this Loan Agreement, shall be subrogated to the rights of the various holders of
the Senior Indebtedness to receive payments or distributions of assets of
Borrower until the Promissory Note has been completely satisfied. None of the
provisions of this Section 4 and no payments or distributions made to holders of
the Senior Indebtedness pursuant to the terms of this Section 4, shall, as
between Borrower, its creditors, other than the holders of the Senior
Indebtedness, and the holder of the Promissory Note, be deemed to be a payment
by Borrower to or on account of the Promissory Note, the provisions of this
Section 4 being, and being intended, solely for the purpose of defining the
relative rights of the holder of the Promissory Note, on one hand, and the
holders of the Senior Indebtedness, on the other hand; and nothing contained in
this Section 4 or elsewhere in this Loan Agreement is intended to or shall
impair, as between Borrower, the holder of the Promissory Note, and the other
creditors of Borrower, other than the holders of the Senior Indebtedness, the
obligation of Borrower, which unconditional and absolute, to pay to the holder
of the Promissory Note as and when the same shall become due and payable in
accordance with its terms and the terms of this Loan Agreement, or to affect the
relative rights of the holder of the Promissory Note and other creditors of
Borrower, other than the holders of the Senior Indebtedness, or to prevent the
holder of the Promissory Note from exercising all of the remedies otherwise
permitted by applicable law upon default as provided for in the Promissory Note
and in this Loan Agreement, subject to the rights, if any, under this Section 4
of the the holders of the Senior Indebtedness in respect of cash, property, or
securities of Borrower received upon the exercise of any such remedy.
4.5. In the event that the Promissory Note shall be declared due and
payable before its stated maturity date because of the occurrence of an Event of
Default (as defined in the Promissory Note), Borrower 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
regardless of the expressed maturity dates thereof.
5. REPRESENTATIONS AND WARRANTIES. To induce the Lender to make the Loan
hereunder, the Borrower hereby makes the following representations and
warranties to the Lender:
5.1. The Borrower (a) is a corporation duly organized, existing, and in
good standing under the laws of the State of Delaware, and (b) has the power to
own its property and to carry on its business and is qualified to do business
and is in good standing in each jurisdiction in which the character of
properties owned by it or the transaction of its business makes such
qualification necessary.
5.2. The Borrower has full power and authority to enter into this
Agreement, to make the borrowings hereunder, to execute and deliver the
Promissory Note and the Warrant and to perform and comply with the terms,
conditions, and agreements set forth herein and therein, all of which have been
duly authorized by all proper and necessary corporate action of the Borrower. No
consent or approval of the shareholders of the Borrower or of any governmental
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authority is required as a condition to the validity of this Agreement, the
Promissory Note, or the Warrant.
5.3. This Agreement constitutes, and the Promissory Note and the
Warrant constitute or will constitute when issued and delivered for value
received, the valid and legally binding obligations of the Borrower enforceable
in accordance with their respective terms.
5.4. Except as disclosed in Borrower's Exchange Act filings, there are
no proceedings pending or, so far as any person signing below as or on behalf of
the Borrower knows, threatened before any court or administrative agency which
will materially adversely affect the financial condition or operations of the
Borrower.
5.5. There are no provisions of the Borrower's charter and by-laws and
no provisions of any existing mortgage, deed of trust, indenture, contract,
lease, or agreement binding on the Borrower or affecting its property which
would conflict with or in any way prevent the execution, delivery, or carrying
out of the terms of this Agreement, the Promissory Note, or the Warrant;
provided, however, there may be provisions in the Congress Loan Agreement which
may conflict with or prevent the execution, delivery, or carrying out of the
terms of this Agreement, the Promissory Note, or the Warrant, but Congress has
waived any and all such provisions with respect to this Agreement, the
Promissory Note, and the Warrant.
5.6. The Borrower's financial statements, copies of which have been
furnished to the Lender, were prepared in accordance with generally accepted
accounting principles consistently applied and are complete and correct and
fairly and accurately present the financial condition of the Borrower as of
their date and the results of its operations for the period then ended, subject
only to ordinary and customary year end audit adjustments. There has been no
material adverse change in the financial condition of the Borrower or the
results of its operations since the date of such financial statements.
5.7. All information contained in any financial statement, application,
schedule, report, certificate, opinion, or any other document given by the
Borrower or by any other person in connection with the Loan or with the
Promissory Note or the Warrant is in all respects true and accurate, and the
Borrower or such other person has not omitted to state any material fact or any
fact necessary to make such information not misleading.
5.8. The Borrower has never done business under any name other than the
name of the Borrower set forth in this Agreement except as follows: Ultralife
(UK).
5.9. Neither the consummation of the Loan nor the use, directly or
indirectly, of all or any portion of the proceeds of the Loan hereunder will
violate or result in a violation of any provision of any applicable statute,
regulation or order of, or any restriction imposed by any state having
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jurisdiction over Borrower or the United States of America or by any authorized
official, board, department, instrumentality, or agency thereof.
6. EVENTS OF DEFAULT. The occurrence of any one or more of the following
events (the "Events of Default") shall constitute an event of default hereunder:
6.1. If the Borrower shall fail to make any payment on the Promissory
Note, whether of principal or interest, within ten (10) days after such payment
is due and payable.
6.2. If the Borrower shall fail to duly perform, comply with, or
observe any of the other terms, conditions, or covenants contained in this
Agreement, the Promissory Note, or the Warrant.
6.3. If any representation and warranty or any statement or
representation made in any report, opinion, schedule, officer's certificate, or
other certificate or any other information given by the Borrower or furnished in
connection with the Loan shall prove to be false or incorrect in any material
respect on the date as of which made.
6.4. If an event of default (as described or defined therein) shall
occur or exist under the provisions of the Promissory Note or the Warrant.
6.5. If any obligation of the Borrower (other than the Loan Amount) for
the payment of borrowed money becomes or is declared to be due and payable prior
to the expressed maturity thereof and the time of payment is not extended by the
lender.
6.6. If any judgment against the Borrower or any attachment or other
levy against the property of the Borrower with respect to a claim remains
unpaid, unstayed on appeal, undischarged, unbonded, or undismissed for a period
of thirty (30) days.
6.7. If the Borrower becomes insolvent or generally does not pay its
debts as they become due, or if a petition for relief in a bankruptcy court is
filed by the Borrower, or if the Borrower applies for, consents to, or
acquiesces in the appointment of a trustee, custodian, or receiver for the
Borrower or any of its assets and property, or makes a general assignment for
the benefit of creditors; or, in the absence of such application, consent, or
acquiescence, a trustee, custodian, or receiver is appointed for the Borrower or
for a substantial part of the assets and property of the Borrower and is not
discharged within (30) days; or any bankruptcy, reorganization, debt
arrangement, or other proceeding or case under any bankruptcy or insolvency law
or any dissolution or liquidation proceeding is instituted against the Borrower,
and if instituted against the Borrower is consented to or acquiesced in by the
Borrower or remains undismissed for sixty (60) days; or the Borrower takes any
action to authorize any of the actions described in this subsection.
7. REMEDIES. The occurrence or non-occurrence of an Event of Default under
this Agreement shall in no way affect or condition the right of the Lender to
demand payment at any time of any amount due under the Promissory Note that is
payable on demand regardless of whether or not such an Event of Default has
occurred. If any one or more Events of Default shall occur, then in
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each and every such case, the Lender at its option may at any time thereafter
exercise and/or enforce any or all of the following rights and remedies:
7.1. Declare without notice to the Borrower the amounts due under the
Promissory Note to be immediately due and payable, whereupon the same shall
become due and payable, together with accrued and unpaid interest thereon,
without presentment, demand, protest, or notice, all of which the Borrower
hereby waives.
7.2. Exercise any rights and remedies available to the Lender under
this Agreement, the Promissory Note, the Warrant and under applicable laws.
7.3. The Borrower shall reimburse and pay to the Lender upon demand all
costs and expenses (the "Liquidation Costs"), including, without limitation,
reasonable attorneys' fees and expenses, advanced, incurred by, or on behalf of
the Lender in collecting and enforcing the Promissory Note, this Agreement,
and/or the Warrant. All Liquidation Costs shall bear interest payable by the
Borrower to the Lender upon demand from the date advanced or incurred until paid
in full at ten percent (10%) per annum.
7.4. Each right, power, and remedy of the Lender as provided for in
this Agreement or in the Promissory Note or Warrant, or now or hereafter
existing at law or in equity or by statute or otherwise shall be cumulative and
concurrent and shall be in addition to every other right, power, or remedy
provided for in this Agreement or in the Promissory Note or Warrant or now or
hereafter existing at law or in equity or by statute or otherwise, and the
exercise or beginning of the exercise by the Lender of any one or more of such
rights, powers, or remedies shall not preclude the simultaneous or later
exercise by the Lender of any or all such other rights, powers, or remedies.
7.5. No failure or delay by the Lender to insist upon the strict
performance of any term, condition, covenant, or agreement of this Agreement or
of the Promissory Note or Warrant, or to exercise any right, power, or remedy
consequent upon a breach thereof, shall constitute a waiver of any such term,
condition, covenant, or agreement or of any such breach, or preclude the Lender
from exercising any such right, power, or remedy at any later time or times. By
accepting payment after the due date of any amount payable under this Agreement,
the Promissory Note, or the Warrant, the Lender shall not be deemed to waive the
right either to require prompt payment when due of all other amounts payable
under this Agreement or under the Promissory Note, or the Warrant or to declare
an Event of Default for failure to effect such prompt payment of any such other
amount.
8. MISCELLANEOUS.
8.1. ASSURANCES. Each of the parties to this Agreement shall execute
all such certificates and other documents and shall do all such filing,
recording, publishing and other acts as is appropriate to effectuate the
provisions of this Agreement.
8.2. SPECIFIC PERFORMANCE. The parties recognize that irreparable
injury will result from a breach of any provision of this Agreement, and money
damages will be inadequate to fully remedy the injury. Accordingly, in the event
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of a breach or threatened breach of one or more of the provisions of this
Agreement, any party who may be injured (in addition to any other remedies which
may be available to that party) shall be entitled to one or more preliminary or
permanent orders (i) restraining and enjoining any act which would constitute a
breach or (ii) compelling the performance of any obligation which, if not
performed, would constitute a breach.
8.3. COMPLETE AGREEMENT. This Agreement and the various instruments and
agreements attached as exhibits constitute the complete and exclusive statement
of the agreement among the parties. They supersede all prior written and oral
statements, including any prior representation, statement, condition or
warranty. This Agreement and the various instruments and agreements attached as
exhibits, including, without limitation, the Promissory Note, may not be amended
without the written consent of all of the parties and the written consent of
Congress.
8.4. APPLICABLE LAW. All questions concerning the construction,
validity and interpretation of this Agreement and the performance of the
obligations imposed by this Agreement shall be governed by the internal law, not
the law of conflicts, of the State of Delaware.
8.5. SECTION TITLES. The headings herein are inserted as a matter of
convenience only, and do not define, limit or describe the scope of this
Agreement or the intent of the provisions hereof.
8.6. BINDING PROVISIONS. This Agreement is binding upon, and inures to
the benefit of, the parties hereto and their respective heirs, executors,
administrators, personal and legal representatives, successors and permitted
assigns.
8.7. JURISDICTION AND VENUE. Any suit involving any dispute or matter
arising under this Agreement may only be brought in the United States District
Court for the District of Delaware or any Delaware State Court having
jurisdiction over the subject matter of the dispute or matter. All of the
parties hereto hereby consent to the exercise of personal jurisdiction by any
such court with respect to any such proceeding.
8.8. JURY TRIAL. Neither party shall elect a trial by jury in any
action, suit, proceeding, or counterclaim arising out of or in any way connected
with this Agreement.
8.9. TERMS. Common nouns and pronouns shall be deemed to refer to the
masculine, feminine, neuter, singular and plural, as the identity of the person
may in the context require.
8.10. SEPARABILITY OF PROVISIONS. Each provision of this Agreement
shall be considered separable; and if, for any reason, any provision or
provisions herein are determined to be invalid and contrary to any existing or
future law, such invalidity shall not impair the operation of or affect those
portions of this Agreement which are valid.
8.11. COUNTERPARTS; FACSIMILE AND ELECTRONIC SIGNATURES. This Agreement
may be executed simultaneously in two or more counterparts each of which shall
be deemed an original, and all of which, when taken together, constitute one and
the same document. The signature of any party to any counterpart shall be deemed
a
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signature to, and may be appended to, any other counterpart. Facsimile and
electronic signatures shall be deemed to be original signatures.
8.12. NO STRICT CONSTRUCTION. The language used in this Agreement shall
be deemed to be the language chosen by the parties hereto to express their
mutual intent, and this Agreement shall be interpreted without regard to any
presumption or other rule requiring interpretation of this agreement more
strongly against the party causing this Agreement to be drafted.
8.13. ATTORNEYS' FEES. In the event that any party is required to
institute legal action to remedy any breach or threatened breach of this
Agreement, the prevailing party shall be entitled, in addition to all other
remedies, to an award of reasonable attorneys' fees and expenses of litigation
incurred in such action, including any fees and expenses incurred in enforcing a
judgment. As used in this Section, the term "prevailing party" means the party
in the legal action which has achieved the greatest material benefit with
respect to the various matters at issue taken as a whole.
8.14. EXPLANATORY STATEMENT. The Explanatory Statement set forth at the
beginning of this Agreement is incorporated into this Agreement as a substantive
provision.
IN WITNESS WHEREOF, Lender and Borrower have executed this Agreement,
under seal, the day and year first above written.
ATTEST/WITNESS:
Ultralife Batteries, Inc.
/s/ John Kavazanjian By /s/ Robert W. Fishback (SEAL)
- -------------------- -----------------------------------
Robert W. Fishback,
Vice President of Finance
and Chief Financial Officer
Hitschler, Kimelman Holdings, LLC
______________________________ By /s/ W. Anthony Hitschler (SEAL)
-----------------------------------
W. Anthony Hitschler, Member
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