Exhibit 10.3
LOAN AND STOCK SUBSCRIPTION AGREEMENT
This Loan Agreement (the "Agreement") is made as of the 7th day of
October, 2003 among ULTRALIFE BATTERIES, INC., a Delaware corporation, having
its principle office at 2000 Technology Parkway, Newark, NY 14513, U.S.A.
("UBI") and ULTRALIFE TAIWAN, INC., a company organized and existing under the
laws of the Republic of China ("R.O.C."), having its principle office at No. 2-3
Industry E. Rd. II, Science-Based Industrial Park, Hsinchu, Taiwan, R.O.C. (the
"Company").
The Company currently has an authorized capital of NT$2,500,000,000
divided into 250,000,000 shares of common stock at a par value of NT$10 each, of
which 194,062,000 shares are fully issued and outstanding. The Company intends
to first reduce its paid-in capital and then increase its paid-in capital by
issuing certain new shares of common stock. UBI desires to invest in the Company
by initially making a loan to the Company and then, upon repayment of that loan
under certain conditions, subscribing for certain shares of common stock to be
issued by the Company under such capital increase, all upon the terms and
conditions set forth in this Agreement.
In consideration of the covenants and conditions set forth in this
Agreement, the parties agree as follows:
1. Amount of Loan. UBI agrees to lend to the Company and the Company
agrees to borrow from UBI, a loan in the amount of US$2,350,000) (the "Loan").
UBI agrees to remit the Loan into the bank account designated by the Company on
October 7th, 2003. The Loan shall be evidenced by a promissory note in the form
attached hereto as Exhibit A.
2. Reduction of Paid-in Capital. The Company shall take all
necessary corporate actions to reduce its paid-in capital from NT$1,940,620,000
to NT$776,248,000 by reducing NT$1,164,372,000 representing 116,437,200 shares
in proportion to the number of shares held by each of the shareholders of the
Company, namely, six hundred (600) shares shall be reduced for every one
thousand (1,000) old shares ("Contemplated Capital Reduction").
3. Increase of Paid-in Capital. Immediately following the
comsummation of the Contemplated Capital Reduction, the Company shall take all
necessary corporate actions to increase its paid-in capital by at least
NT$300,000,000. ("Contemplated Capital Increase").
4. Repayment of the Loan. The Company shall repay the Loan plus an
interest accrued at the interest rate of three percent (3%) per annum (i) at
least three (3) days prior to the record date of the Contemplated Capital
Increase; or (ii) immediately upon the request of UBI in the event that the
Contemplated Capital Increase or the Contemplated Capital Reduction has not been
consummated prior to March 1st, 2004. The repayment to be made by the Company
pursuant to this Agreement shall be made in US Dollars to a bank account
designated by UBI.
5. Subscription to Shares. Subject to the repayment of the Loan in
accordance with Section 4(i) (rather than in accordance with Sections 4(ii) or 8
in which case UBI shall have no obligation to subscribe) and the terms and
conditions set forth herein, UBI agrees to subscribe to as many shares (the
"Shares") of common stock of the Company to be newly issued under the
Contemplated Capital Increase as the loan plus the accrued interest would buy at
the US dollar-New Taiwan dollar exchange rate at the day of the subscription.
The Company shall take any and all corporate actions to issue the Shares for
subscription by UBI, including, if necessary, obtaining waivers of any
preemptive rights with respect to the Shares.
6. Closing. The closing of the share subscription (the "Closing")
shall be held at the time and place and in the manner to which the Company and
UBI may agree. At the Closing, UBI shall effect payment of the Subscription
Price through wire transfer to the bank account designated by the Company and
shall provide documentary evidence showing such payment. Upon receipt of such
documentary evidence, the Company shall deliver to UBI a certificate
acknowlegding receipt of payment of the Subscription Price and a certificate
confirming delivery of the share certificates representing the Shares within
seven (7) days after the Company amendment registration reflecting the
Contemplated Capital Increase has been approved by the Science-based Industrial
Park Administration ("SIPA").
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7. Representations of the Company. The Company represents, warrants
and agrees as follows:
(a) The Company is a corporation duly organized and validly
existing under the laws of the R.O.C. and has obtained all the government
approvals, certificates and permits necessary for the rights, benefits and
incentives that it is entitled to under the laws and regulations of the R.O.C.
(b) The Company has the authority to execute and deliver this
Agreement and to otherwise carry out and perform its obligations hereunder. The
execution and delivery of this Agreement and the other agreements contemplated
by this Agreement by the Company and the consummation by it of the transactions
contemplated thereby have been duly authorized by all necessary action on the
part of the Company. This Agreement and the other agreements contemplated by
this Agreement have been duly executed by the Company and constitute the valid
and binding obligations of the Company, enforceable against the Company in
accordance with their terms.
(c) The total paid-in capital of the Company consists solely
of 194,062,000 shares of common stock at par value of NT$10 per share, all of
which have been issued and outstanding as of the date of this Agreement. Except
for the obligations set forth herein, there is no outstanding security or other
instrument convertible into or exchange for share capital of the Company nor is
there any subscription, option, warrant, right, agreement, call or commitment
relating to the issuance, sale, delivery or transfer by the Company or any of
its shareholders of any share capital of the Company of any class.
(d) The Company is in compliance with its organizational and
corporate documents and with all laws, ordinances, regulations and orders
applicable to its business. The Company is not aware of any non-compliance of
such laws, ordinances, regulations and orders of a material nature that have not
been corrected.
(e) The Company owns or possesses sufficient legal rights to
all patents, trademarks, service marks, tradenames, copyrights, trade secrets,
licenses, information and proprietary rights and processes necessary for its
business as presently conducted, to the Company's knowledge with respect to any
such rights in recipes, without any conflict with, or infringement of, the
rights of others.
(f) There are neither any claims, actions, suits, proceedings
or investigations pending against the Company before any court or government
agency, nor is there any reasonable basis therefor or threat thereof.
(g) The per share subscription price payable by UBI to the
Company pursuant to Section 3 shall not be higher than those payable by other
investors who also participate in subscription to the shares issued under the
Contemplated Capital Increase.
(h) As of the record date of the Contemplated Capital
Reduction, the net value of the shares of the Company shall be no less than NT$2
(two) per share.
(i) The Company shall obtain for the benefit of UBI loan
subordinations from any Company officer or director (a "Company affiliate") who
is a creditor of the Company to the effect that any obligation owed UBI by the
Company shall be paid in full prior to making any payment on any obligation owed
to a Company affiliate.
(j) The Company has delivered to UBI its audited financial
statements for the year Ended December 31, 2002 and interim financial statements
for the eight months ended August 31, 2003 (the "Financial Statements"). Such
Financial Statements and any notes thereto fairly present the financial
condition and the results of operations of the Company as of the respective
dates of and for the periods referred to in such Financial Statements in
accordance with generally accepted accounting principles and reflect the
consistent application of such accounting principles throughout the period
involved.
(k) The Company owns all the real, personal and tangible
property and assets that it purports to own or located in facilities leased by
the Company or reflected as owned in the books and records of the Company,
including all of the properties and assets reflected in the Financial
Statements. All material properties and assets reflected in the Financial
Statements are free and clear of all encumbrances except as noted in the
Financial Statements.
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(l) The Company has no liabilities or obligations of any
nature except for liabilities or obligations reflected or reserved against in
the most recent Financial Statements and current liabilities incurred in the
ordinary course of business since the date thereof.
(m) The Company has filed or caused to be filed (on a timely
basis) all applicable tax returns that are or were required to be filed and has
paid, or made provision for the payment of, all taxes that have or may have
become due pursuant to those tax returns or otherwise, or pursuant to any
assessment received by the Company.
(n) No representation or warranty of the Company in this
Agreement omits to state a material fact necessary to make the statements herein
or therein, in light of the circumstances in which they were made, not
misleading.
8. Acceleration of Maturity Date. Under any of the following
circumstances, the Loan and the interest accrued thereon shall be deemed matured
in full amount, effective immediately without requiring a further notice, and
the Company shall repay the Loan upon its maturity without any delay:
(a) The Company fails to pay as and when due and payable
(whether at maturity, by acceleration or otherwise) all or any part of the
principal of or interest on any indebtedness of or assumed by it, or of the
rentals due under any lease or sublease, or of any other obligation for the
payment of money, and such default shall not be cured within the period or
periods of grace, if any, specified in the instruments governing such
obligations; or default shall occur under any evidence of, or any indenture,
lease, sublease, agreement or other instrument governing such obligations, and
such default shall continue for a period of time sufficient to permit the
acceleration of the maturity of any such indebtedness or other obligation or the
termination of such lease or sublease;
(b) The Company: (i) becomes insolvent; or (ii) is unable, or
admits in writing its inability to pay its debts as they mature; or (iii) makes
a general assignment for the benefit of creditors or to an agent authorized to
liquidate any substantial amount of its property; or (iv) becomes the subject of
a creditor's petition for liquidation, reorganization or to effect a plan or
other arrangement with creditors; or (v) applies to a court for the appointment
of a custodian or receiver for any of its assets; or (vi) has a custodian or
receiver appointed for any of its assets (with or without its consent); or (vii)
otherwise becomes the subject of any insolvency proceedings or propose or enter
into any formal or informal composition or arrangement with its creditors; or
(c) The Company has materially breached any of its
representations or obligations under this Agreement.
9. Termination after Closing. After the Closing, this Agreement may
be terminated by UBI by written notice to the Company with immediate effect, if:
(a) The Contemplated Capital Reduction or the Contemplated
Capital Increase has not been consummated before March 1st, 2004, regardless of
the reasons therefor; or
(b) The Company has materially breached any of its
representations or obligations under this Agreement.
10. Effect of Termination. If this Agreement is terminated pursuant
to Section 9, the Company shall be liable for returning the Subscription Price
back to UBI as well as any and all costs and expenses of UBI incurred in
performing this Agreement within three (3) days after such termination.
Termination hereunder shall be without prejudice to the respective right and
liabilities of the parties accrued prior to termination, or to any provision
expressed to remain in full force and effect notwithstanding termination.
11. Compensation for Issuance of Additional Shares. If the Company
shall issue any shares ("Additional Shares"), within three (3) months after the
record date of the Contemplated Capital Increase, for a consideration (the "New
Consideration") per share less than the per share subscription price paid by UBI
to the Company pursuant to Section 5 (the "Subscription Price"), the Company
shall pay UBI an amount equal to the difference between the Subscription Price
and the New Consideration multiplied by the number of Shares for which UBI
subscribed:
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12. Counterparts. This Agreement may be executed in counterparts,
each of which will be deemed an original but all of which will be deemed one
instrument.
13. Expenses and Taxes. Except otherwise provided herein, each party
shall be responsible for its owned costs, expenses incurred in performing this
Agreement and any tax levied by the authorities in accordance with applicable
laws.
14. Notice. All notices and other communications hereunder shall be
given if given in writing and delivered personally, by registered or certified
mail, return receipt requested, postage prepaid, or by overnight courier for
which a receipt confirming delivery is provided, to the party to receive the
same at its respective address set forth below (or at such other address as may
from time to time be designated by such party to the others in accordance with
this Section 15):
If to the Company, to:
ULTRALIFE TAIWAN, INC.
No. 2-3 Industry E. Rd. II, Science-Based Industrial
Park, Hsinchu, Taiwan, R.O.C.
Attention: J.F. Hsu, Chairman
If to UBI, to:
ULTRALIFE BATTERIES, INC.
2000 Technology Parkway, Newark, NY 14513, U.S.A.
Attention: Peter F. Comerford, Vice President of
Administration and General Counsel
15. Survival of Representations and Warranties. All representations
and warranties made in this Agreement or any other instrument or document
delivered in connection herewith shall survive the execution and delivery
hereof.
16. Prior Agreements. This Agreement constitutes the entire
agreement between the parties and supersedes any prior or contemporaneous
understandings or agreements concerning the subject matter hereof.
17. Severability. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
18. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the R.O.C, without giving effect to
the principles of conflicts of laws. Any disputes arising out of or relating to
this Agreement shall be submitted for arbitration in Taipei in accordance with
the R.O.C. Arbitration Act.
19. Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of the Agreement for any other purpose.
20. Amendments and Waivers. This Agreement may not be amended,
supplemented or otherwise modified except by an instrument in writing signed by
both parties that specifically refers to this Agreement. Any party hereto may,
only by an instrument in writing, waive compliance by the other parties hereto
with any term or provision of this Agreement on the part of such other parties
to be performed or complied with. The waiver by a party hereto of a breach of
any term or provision of this Agreement shall not be construed as a waiver of
any subsequent breach. Any amended or waiver effected in accordance with this
Section 21 shall be binding upon each party and its permitted assigns.
[THE BALANCE OF THIS PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
ULTRALIFE BATTERIES, INC.
By: /s/ Robert W. Fishback
-------------------------------
Name: Robert W. Fishback
Title: VP - Finance & CFO
ULTRALIFE TAIWAN, INC.
By: /s/ J. F. Hsu
-------------------------------
Name: J.F. Hsu
Title: Chairman / President
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Exhibit A
PROMISSORY NOTE
US $2,350, 000 Newark , New York
October 7, 2003
FOR VALUE RECEIVED, Ultralife Taiwan, Inc. (the "Company") a company
organized and existing under the laws of the Republic of China ("R.O.C.") with
its principal office at No. 2-3 Industry E. Rd. II, Science Based Industrial
Park, Hsinchu, Taiwan, R.O.C. hereby promises to pay to the order of Ultralife
Batteries, Inc. ("UBI") a Delaware corporation at its principal office of 2000
Technology Parkway, Newark, NY 14513, or, at the holder's option, at such other
place as may be designated from time to time by the holder, the principal sum of
US Two Million Three Hundred Fifty Thousand Dollars (US$ 2,350,000) in lawful
money of the United States of America, plus interest at a per annum rate equal
to three percent (3%). In no event shall the rate of interest on this Note
exceed the maximum rate authorized by applicable law. Interest will be
calculated for each day at 1/360th of the applicable per annum rate, which will
result in a higher effective annual rate.
This Promissory Note is the promissory note referenced in that certain
Loan and Stock Subscription Agreement by and between the Company and UBI dated
October 7, 2003 (the " Loan Agreement").
The Company shall repay this Promissory Note in an amount equal to the
then unpaid principal balance hereof, together with any unpaid interest (i) at
least three (3) days prior to the record date of the Contemplated Capital
Increase (as such term is defined herein); or (ii) immediately upon the request
of UBI in the event that the Contemplated Capital Increase or the Contemplated
Capital Reduction (as such term is defined herein) has not been consummated
prior to March 1st, 2004.
"Contemplated Capital Reduction" shall mean the Company reducing its
paid-in capital from NT$1,940,620,000 to NT$776,248,000 by reducing
NT$1,164,372,000 representing 116,437,200 shares in proportion to the number of
shares held by each of the shareholders of the Company, namely, six hundred
(600) shares shall be reduced for every one thousand (1,000) old shares.
"Contemplated Capital Increase" shall mean immediately following the
consummation of the Contemplated Capital Reduction, the Company shall take all
necessary corporate actions to increase its paid-in capital by at least
NT$300,000,000.
The Company may make a partial or complete pre-payment of this Promissory
Note at any time without penalty. If any installment of this Note is not paid
when due, whether because such installment becomes due on a Saturday, Sunday or
a federally recognized holiday, or for any other reason, the Company will pay
interest thereon at the applicable rate until the date of actual receipt of such
installment by the holder of this Note.
Any holder of this Promissory Note may declare all indebtedness evidenced
by this Note to be immediately due and payable upon the happening of any of the
following:
(a) The Company fails to pay as and when due and payable (whether at
maturity, by acceleration or otherwise) all or any part of the principal of or
interest on any indebtedness of or assumed by it, or of the rentals due under
any lease or sublease, or of any other obligation for the payment of money, and
such default shall not be cured within the period or periods of grace, if any,
specified in the instruments governing such obligations; or default shall occur
under any evidence of, or any indenture, lease, sublease, agreement or other
instrument governing such obligations, and such default shall continue for a
period of time sufficient to permit the acceleration of the maturity of any such
indebtedness or other obligation or the termination of such lease or sublease;
(b) The Company: (i) becomes insolvent; or (ii) is unable, or admits
in writing its inability to pay its debts as they mature; or (iii) makes a
general assignment for the benefit of creditors or to an agent authorized to
liquidate any substantial amount of its property; or (iv) becomes the subject of
a creditor's petition for liquidation, reorganization or to effect a plan or
other arrangement with creditors; or (v) applies to a court for the
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appointment of a custodian or receiver for any of its assets; or (vi) has a
custodian or receiver appointed for any of its assets (with or without its
consent); or (vii) otherwise becomes the subject of any insolvency proceedings
or propose or enter into any formal or informal composition or arrangement with
its creditors; or
(c) The Company has materially breached any of its representations
or obligations under the Loan Agreement.
No failure by UBI to exercise, and no delay in exercising, any right or
remedy hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise by such holder of any right or remedy hereunder preclude any
other or further exercise thereof or the exercise of any other right or remedy.
The rights and remedies of UBI as herein specified are cumulative and not
exclusive of any other rights or remedies that such holder may otherwise have.
No recission, waiver, forbearance, release or amendment of any provision
of this Promissory Note shall be made, except by a written agreement duly
executed by the Company and UBI. This Promissory Note may not be assigned by the
Company. The provisions of this Promissory Note shall inure to the benefit of
UBI and its successors and assigns. If any provision of this Promissory Note
shall, to any extent, be held invalid or unenforceable, then only such provision
shall be deemed ineffective and the remainder of this Promissory Note shall not
be affected.
This Promissory Note shall be governed by and construed in accordance with
the laws of the State of New York (but not its conflicts of law provisions). The
Company agrees to submit any dispute hereunder to the jurisdiction and venue of
the state and federal courts located in Monroe County, New York and waives any
objection it may have to the convenience of the forum. The Company agrees to pay
all costs and expenses incurred by the holder hereof in enforcing this
Promissory Note, including, without limitation, actual attorney's fees and
disbursements. All notices hereunder shall be in writing and shall be deemed
given three business day following deposit with an overnight courier service or
ten days following deposit in the United States mail, certified and return
receipt requested.
ULTRALIFE TAIWAN, INC.
By: /s/ J. F. Hsu
-----------------------
Name: J. F. Hsu
Title: Chairman / President
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