Exhibit 10.1
SETTLEMENT AGREEMENT
SETTLEMENT AGREEMENT is made as of October 3, 2007 (the "Effective Date"),
by and among MRC Chargers, Ltd., a Texas limited partnership ("Seller"),
formerly named McDowell Research Ltd., Frank Alexander ("FA"), James Evans
("JE"), Thomas Hauke ("TH"), Earl Martin, Sr. ("EM"), Gloria Martin ("GM"),
Lillian Hauke ("LH"), Ultralife Batteries, Inc., a Delaware corporation ("ULB"),
and McDowell Research Co., Inc., a Delaware corporation wholly owned by ULB and
formerly named MR Acquisition Corporation ("MRCI" and together with ULB,
"Buyer").
Recitals
R.1. Seller, TH, EM, JE, FA and Buyer are parties to an Asset Purchase
Agreement, dated as of May 1, 2006 (together with the Exhibits and Schedules
thereto, the "APA"), pursuant to which Buyer purchased the Transferred Assets
from Seller on July 3, 2006 (the "Closing"). At the Closing, Buyer paid the $25
million Purchase Price for the Transferred Assets pursuant to the APA as
follows: (a) $5,000,000 by wire transfer to Seller and (b) by delivery of a $20
million subordinated convertible note to Seller in the form of APA Exhibit A
(the "Original Convertible Note"). (Capitalized terms used but not defined
herein shall have the meanings ascribed to them in the APA.)
R.2. On or about April 1, 2007, as requested by Seller pursuant to APA
Section 5.20, ULB issued, as successor notes to the Original Convertible Note,
six subordinated convertible promissory notes in the aggregate principal amount
of $20 million (the "Convertible Notes"). The holders and principal amounts of
the Convertible Notes immediately prior to the effectiveness of this Agreement
are, respectively, as follows: (a) FA-$500,000; (b) JE-$1,000,000;
(c)TH-$4,625,000; (d) EM-$4,625,000; (e) GM-$4,625,000; and (f)LH-$4,625,000.
R.3. In a letter dated June 27, 2007 from Buyer's counsel Arent Fox LLP to
Seller and Seller Shareholders, Buyer made claims against Seller and Seller
Shareholders, including for (a) the reimbursement of an overpayment made by
Buyer to Seller on or about January 16, 2007 pursuant to APA Section 2.6(c) and
(b) the reduction of the aggregate principal amount of the Convertible Notes as
indemnification under APA Section 8.1 for Buyer Losses that resulted from
breaches of the APA by Seller and each of FA, JE, TH and EM ("Seller
Shareholders"), as set forth in the letter from Buyer's counsel ("Buyer's Claim
Letter").
R.4. In a letter dated July 6, 2007 from TH to ULB's representative Philip
A. Fain, Seller and Seller Shareholders protested Buyer's claims set forth in
Buyer's Claim Letter and claimed that Buyer owes Seller a specified additional
amount pursuant to APA Section 2.6 (c) ("Seller's Response Letter").
R.5. The Parties desire to (a) settle, release and discharge in full all
claims set forth in the Buyer's Claim Letter and Seller's Response Letter and
(b) release and discharge in full any and all claims arising from
representations and warranties in the APA and certain other claims that might
otherwise arise pursuant to the APA.
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Now, therefore, in consideration of the mutual benefits to be derived from
this Agreement, the representations, warranties, covenants and agreements
expressly set forth in this Agreement, and other good and valuable
consideration, the receipt and adequacy of which are hereby acknowledged, the
Parties, intending to be bound legally, represent, warrant, covenant and agree
as follows:
Section 1. General Settlement.
(a) Purchase Price Adjustment. The Parties agree that, in consideration of
the settlement, release and discharge hereunder of all of Buyer's claims against
Seller and Seller Shareholders set forth in Buyer's Claim Letter, and on the
other terms and conditions hereof, including the release and discharge of
certain other claims and potential claims under or otherwise arising from the
APA, all as provided in Sections 2 and 3, as of the Effective Date:
(i) the Purchase Price under the APA, including as defined in APA Section
2.6(a), shall be, and hereby is, reduced from $25 million to $19 million for all
purposes and such Purchase Price reduction shall be effected by reducing the
aggregate principal amount of the Convertible Notes, on a pro rata basis, from
$20 million to $14 million as of the Effective Date, as provided in Section
1(b);
(ii) the Convertible Notes shall be further amended as of the Effective
Date by (1) increasing the interest rate on the unpaid principal amount of the
Convertible Notes, as reduced pursuant to Section 1.1 (a)(i), from four percent
to five percent per annum and (2) obligating ULB to make, on or before November
18, 2007, (x) a prepayment in full of $350,000 and $700,000, respectively, on
the Convertible Notes issued to FA and JE and (y) a prepayment of $2,450,000 on
the principal amount of the Convertible Notes, on a pro rata basis, issued to
TH, EM, GM and LH, all as provided in Section 1(b); and
(iii) the final amount payable to Seller under APA Section 2.6(c) is fixed
at $1,500,000 and the Parties acknowledge and agree that Buyer paid such fixed
amount to Seller in January 2007, and as a result no claims shall be made by any
Party in respect of APA Section 2.6(c).
(b) Amendment of Convertible Notes. To amend and restate the Convertible
Notes pursuant to Section 1(a), simultaneously with the execution and delivery
of this Agreement:
(i) ULB is issuing and FA is accepting a successor Convertible Note dated
the Settlement Date, in the principal amount of $350,000, substantially in the
form of Exhibit A, and in exchange therefor, FA is surrendering to ULB FA's
$500,000 Convertible Note dated April 1, 2007;
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(ii) ULB is issuing and JE is accepting a successor Convertible Note dated
the Settlement Date, in the principal amount of $700,000, substantially in the
form of Exhibit A, and in exchange therefor, JE is surrendering to ULB JE's
$1,000,000 Convertible Note dated April 1, 2007;
(iii) ULB is issuing and TH is accepting a successor Convertible Note dated
the Settlement Date, in the principal amount of $3,237,500, substantially in the
form of Exhibit B, and in exchange therefor, TH is surrendering to ULB TH's
$4,625,000 Convertible Noted dated April 1, 2007;
(iv) ULB is issuing and EM is accepting a successor Convertible Note dated
the Settlement Date, in the principal amount of $3,237,500, substantially in the
form of Exhibit B, and in exchange therefor, EM is surrendering to ULB EM's
$4,625,000 Convertible Note dated April 1, 2007;
(v) ULB is issuing and GM is accepting a successor Convertible Note dated
the Settlement Date, in the principal amount of $3,237,500, substantially in the
form of Exhibit B, and in exchange therefor, GM is surrendering to ULB GM's
$4,625,000 Convertible Note dated April 1, 2007;
(vi) ULB is issuing and LH is accepting a successor Convertible Note dated
the Settlement Date, in the principal amount of $3,237,500, substantially in the
form of Exhibit B, and in exchange therefor, LH is surrendering to ULB LH's
$4,625,000 Convertible Note dated April 1, 2007; and
(vii) each of Seller, FA, JE, TH, EM, GM, LH and ULB is executing and
delivering an Amendment to Subordination and Intercreditor Agreement with
JPMorgan Chase Bank, N.A., as Senior Lender Representative, dated on or about
the date hereof, substantially in the form of Exhibit C, which, in connection
with the transactions contemplated hereby, amends the Subordination and
Intercreditor Agreement dated as of July 3, 2006 among Seller, ULB and Senior
Lender Representative.
Section 2. Release of Certain APA Claims.
(a) Release of Seller, Seller Shareholders, GM and LH. Buyer does hereby
release, acquit and forever discharge Seller, each of Seller Shareholders, GM
and LH from any and all Released Claims.
(b) Seller's Response Letter. Seller, each of Seller Shareholders, GM and
LH does hereby release, acquit and forever discharge Buyer from any and all
claims of Seller, one or more Seller Shareholders, GM or LH against Buyer set
forth in Seller's Response Letter, including any and all such claims under APA
Section 2.6(c).
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Section 3. Certain Acknowledgments, Representations and Warranties. Each Party
acknowledges, represents and warranties to the other Parties that:
(a) such Party is entering into this Agreement and consummating the
transactions contemplated hereby freely and voluntarily;
(b) such Party has ascertained and weighed all the facts and circumstances
likely to influence the Party's judgment herein;
(c) such Party has given due consideration to the terms and conditions
herein;
(d) such Party has been advised by, and has had a full and fair opportunity
to review the contents of this Agreement with, the Party's counsel, and the
Party thoroughly understands and consents to all terms and conditions hereof;
(e) such Party has full legal right, power and authority to enter into and
perform all of the Party's obligations under this Agreement, and this Agreement
has been duly executed and delivered by the Party in accordance with its terms;
(f) this Agreement constitutes without further action by or authorization
of any other Person, a legal, valid and binding obligation of such Party
enforceable against the Party in accordance with its terms; and
(g) neither the execution and delivery of this Agreement nor the
consummation by such Party of the transactions contemplated hereby, or
compliance by the Party any of the provisions hereof will (with or without the
giving of notice or the passage of time) (i) result in a breach of any
agreement, (ii) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Party or any of its assets, or (iii) require the
consent, approval, permission or other authorization of any other Person.
Section 4. Continued Effectiveness of Certain Agreements. Notwithstanding the
effectiveness of this Agreement, the Registration Rights Agreement and the
Separation Agreement and Release effective as of February 26, 2007 between MRCI
and each of FA and TH shall remain in full force and effect, without change,
amendment, modification or waiver hereby. As of and after the Effective Date,
any and all obligations and liabilities of Seller, each of Seller Shareholders,
GM and LH under the APA are hereby and shall be released, acquitted and forever
discharged by Buyer, except that, notwithstanding the foregoing or anything else
herein to the contrary, the respective obligations and liabilities of Seller,
each of Seller Shareholders, GM and LH under the Continuing APA Sections shall
remain in full force and effect, without change, amendment, modification or
waiver hereby. Except as otherwise set forth in or contemplated by this
Agreement, or set forth in or contemplated by the successor Convertible Notes
referenced in Section 1, the APA shall remain in full force and effect, without
change, amendment, modification or waiver, as to the obligations and liabilities
of Buyer thereunder to the other Parties.
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Section 5. Settlement Closing. Subject to the terms and conditions hereof, the
consummation of the transactions contemplated hereby (the "Settlement Closing")
shall take place at the offices of Arent Fox LLP, 1050 Connecticut Avenue, N.W.,
Washington, D.C. 20036, or such other place as Buyer and Seller may agree, on
the Effective Date. Notwithstanding anything herein to the contrary, the
Settlement Closing shall only be deemed to have been consummated upon the
Effective Date.
Section 6. Non-Disparagement and Confidentiality
(a) Except in connection with enforcing any rights or obligations under
this Agreement or under any other agreement referenced herein, including the APA
and the Convertible Notes, Seller, each Seller Shareholder, GM and LH shall
refrain from taking any action or making any statements, written or oral, which
disparage or defame the goodwill or reputation of ULB or MRCI or any of their
respective officers, agents, directors, employees and subsidiaries.
(b) Seller, each Seller Shareholder, GM and LH shall refrain from taking
any action or making any statements, written or oral, which contain
confidential, sensitive, financial, strategic or non-public information about
ULB or MRCI or any of their respective officers, agents, directors, employees
and subsidiaries.
(c) Except in connection with enforcing any rights or obligations under
this Agreement or under any other agreement referenced herein, including the APA
and the Convertible Notes, Buyer and Buyer's directors and officers shall
refrain from taking any action or making any statements, written or oral, which
disparage or defame the goodwill of Seller, any Seller Shareholder, GM or LH.
Section 7. Retroactive Termination of this Agreement. Notwithstanding anything
to the contrary herein, if as of 5:00 p.m. EST on November 18, 2007, any of the
$350,000, $700,000 or $2,450,000 prepayments contemplated by Section 1(a)(ii)
have not been made, any one or more of FA, JE, TH, EM, GM and LH holding a
majority in principal amount of the Convertible Notes issued pursuant to Section
1(b) shall be entitled, upon five Business Day's prior notice to Buyer, to
terminate this Agreement, provided that (a) all of the unpaid prepayments
contemplated by Section 1 (a)(ii) have not been subsequently paid before the
effectiveness of such termination and (b) all six successor Convertible Notes
issued pursuant to Section 1(b) have been surrendered to Buyer in exchange for
the Convertible Notes surrendered pursuant to Section 1(b). Upon such
termination, (a) this Agreement shall be null and void retroactively and of no
force or effect whatsoever (except as provided in this Section 7), as if it were
never entered into nor the transactions contemplated hereby ever consummated,
including the issuances of the successor Convertible Notes pursuant to Section 1
and the settlement and release of claims pursuant to Sections 1 and 2, (b) the
six Convertible Notes surrendered pursuant clause (i) through (vi) of Section
1(b) shall be reissued by Buyer to their respect holders as if they had never
been surrendered for successor Convertible Notes hereunder, and (c) all rights,
benefits, remedies, powers, covenants, obligations and liabilities of the
Parties under or otherwise in respect of the APA and the Convertible Notes
surrendered pursuant to clauses (i) through (vi) of Section 1(b) shall remain
unchanged, as though this Agreement had never been executed and effective and
the transactions contemplated hereby (other than pursuant to this Section 7) had
never been consummated.
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Section 8. Specific Performance. Each of the Parties recognizes and affirms that
in the event of breach by any of them of any of the provisions of this
Agreement, money damages would be inadequate and no adequate remedy at law would
exist. Accordingly, each of the Parties agree that any Party shall have the
right to enforce its rights and the obligations of any other Party under this
Agreement by an action or action for specific performance, injunction or other
equitable relief to enforce or prevent any breach of the provisions of this
Agreement. The rights under this Section 8 will not be exclusive of other rights
and remedies existing in favor of an aggrieved Party, and will not be exclusive
of actions for damages, unless the court, in awarding equitable relief, awards
such relief on an exclusive basis.
Section 9. Entire Agreement. This Agreement and the other agreements expressly
referred to herein set forth the entire agreement and understanding of the
Parties in respect of the transactions contemplated hereby and supersede all
prior agreements, arrangements and understandings relating to the subject matter
hereof, including all such agreements, arrangements and understandings between
the Parties.
Section 10. Waivers and Modifications. This Agreement may be changed, extended,
superseded or canceled, only by a written instrument executed by the Parties,
and no waiver of compliance with any term or condition hereof shall be effected
unless evidenced by an instrument in writing duly executed by the proper Party.
Section 11. Notices. All notices, requests, demands, claims, and other
communications hereunder will be in writing. Any notice, request, demand, claim,
or other communication hereunder shall be deemed duly given (a) upon receipt, if
it is sent by registered or certified mail, return receipt requested, postage
prepaid, (b) two days after receipt is electronically confirmed, if sent by fax
(provided that a hard copy shall be promptly sent by first class mail), or (c)
two Business Days following deposit with a recognized national overnight courier
service for next day delivery, charges prepaid, and, in each case, addressed to
the intended recipient as set forth below:
If to Seller: (d) EM
Mr. Frank Alexander Mr. Earl Martin, Sr.
499 Harding Lane 216 Buckingham
Moody, Texas 76557 Hewitt, Texas 76557
If to Seller Shareholders: (e) GM
(a) FA Mrs. Gloria Martin
Mr. Frank Alexander 216 Buckingham
499 Harding Lane Hewitt, Texas 76557
Moody, Texas 76557
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(b) JE (f) LH
Mr. James Evans Mrs. Lillian Hauke
3008 Bay Shore Lane 99 River Ridge Drive
Suffolk, VA 23435 Waco, Texas 76705
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(c) TH In respect of any notice to Seller,
Mr. Thomas Hauke Seller Shareholders, GM or LH,
99 River Ridge Drive with a copy to (which shall not
Waco, Texas 76705 constitute notice):
Naman, Howell, Smith & Lee, LLP
900 Washington Avenue, 7th Floor
Waco Texas 76703-1470
Attention: Wesley J. Filer
Fax: (254) 754-6331
If to Buyer: With a copy to (which shall not
constitute notice):
Ultralife Batteries, Inc. Arent Fox LLP
2000 Technology Parkway 1050 Connecticut Avenue, N.W.
Newark, New York 14513 Washington, D.C. 20036
Attention: Chief Executive Officer Attention: Carter Strong
Fax: (315) 331-7048 Fax: (202) 857-6395
Any Party may give any notice, request, demand, claim, or other
communication hereunder using any other means (including personal delivery,
expedited courier, messenger service, telecopy, telex, ordinary mail, or
electronic mail), but no such notice, request, demand, claim, or other
communication shall be deemed to have been duly given unless and until it
actually is delivered to the Person for whom it is intended. Any Party may
change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other parties notice
in the manner herein set forth.
Section 12. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York, without regard
to its principles of conflicts of laws.
Section 13. No Assignment. This Agreement shall be binding upon the
successors and permitted assigns of the Parties. No assignment of any rights or
delegation of any obligations provided for herein may be made by any Party.
Section 14. Survival. All of the respective representations, warranties,
acknowledgments, covenants and agreements of the Parties contained herein shall
survive the Effective Date and Settlement Closing.
Section 15. Further Assurances. If at any time Buyer or Seller shall consider or
be advised that any further agreements, assurances or other documents are
reasonably necessary or desirable to carry out the provisions hereof and the
transactions contemplated hereby, the Parties hereto shall execute and deliver
any and all such agreements or other documents, and do all things necessary or
appropriate to carry out fully the provisions hereof.
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Section 16. Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed an original and all of which together shall constitute
one and the same instrument.
Section 17. Facsimiles. Facsimile copies of signatures on this Agreement shall
be deemed originals for all purposes hereof and a Party may produce such copies,
without the need to produce original signatures, to prove the existence of the
Agreement on any proceeding brought hereunder.
Section 18. Expenses. Each Party shall pay its own costs and expenses in
connection with this Agreement.
Section 19. Principles of Construction and Certain Definitions.
(a) Construction of this Agreement and Certain Terms and Phrases.
(i) The section headings contained in this Agreement are inserted for
purposes of convenience of reference only and shall not affect the meaning or
interpretation hereof.
(ii) Unless the context of this Agreement otherwise requires, (1) words of
any gender include each other gender; (2) words using the singular or plural
number also include the plural or singular number, respectively; (3) the terms
"hereof," "herein," "hereby" and derivative or similar words refer to this
entire Agreement; and (4) the terms "Section" and "Exhibit" refer to the
specified Section and Exhibit, respectively, of this Agreement.
(iii) The word "including" is not exclusive; if exclusion is intended, the
word "comprising" is used instead.
(iv) The word "or" shall be construed to mean "and/or" unless the context
clearly prohibits that construction.
(v) The Parties have participated jointly in the negotiation and drafting
of this Agreement. If an ambiguity or question of intent or interpretation
arises, this Agreement shall be construed as if drafted jointly by the Parties
and no presumption or burden of proof shall arise favoring or disfavoring any
party by virtue of the authorship of any of the provisions of this Agreement.
(b) Certain Defined Terms. As used in this Agreement, the following defined
terms have the meanings ascribed to them below.
(i) "Agreement" means this Settlement Agreement by and among the Parties,
including Exhibits A, B and C.
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(ii) "Business Day" means any day, other than a Saturday or Sunday, on
which commercial banking institutions in New York, New York are open for the
transaction of substantially all of their banking business.
(iii) "Continuing APA Sections" means (1) any one or more of APA Sections
5.4 (Business Name Change) and 5.11 (Non-Competition), and (2) APA Sections
8.1(b) (Indemnification by Seller and Seller Shareholders), 8.3 (Right of
Offset), 8.4 (Indemnification Procedures), and 8.5 (Indemnification Limitations)
and APA Article X (In General), in each case with regard to such APA Sections
and APA Article X only in respect of APA Sections 5.4 and 5.11.
(iv) "Party" means any of Seller, FA, JE, TH, EM, GM, LH and Buyer.
(v) "Person" means an individual, a corporation, an association, a
partnership, a limited liability company, a joint stock company, an estate, a
trust and any other entity, including governmental entity or other organization.
(vi) "Released Claims" means (1) any and all claims of Buyer set forth in
Buyer's Claim Letter, and (2) any and all other claims of Buyer including those
claims that arose before or on the Effective Date and those that, but for this
Agreement, would have arisen after the Effective Date, under or otherwise in
respect of the APA other than under or otherwise in respect of one or more
Continuing APA Sections.
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IN WITNESS WHEREOF, the Parties have caused this Agreement to be duly
executed as of the day and year first above written.
MCR Chargers, Ltd.
By: MCR Chargers GP, Inc. as General Partner
By: /s/Thomas Hauke
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Thomas Hauke, President
/s/Frank Alexander
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Frank Alexander
/s/James Evans
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James Evans
/s/Thomas Hauke
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Thomas Hauke
/s/Earl Martin, Sr.
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Earl Martin, Sr.
/s/Gloria Martin
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Gloria Martin
/s/Lillian Hauke
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Lillian Hauke
Ultralife Batteries, Inc.
By: /s/John D. Kavazanjian
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John D. Kavazanjian
Chief Executive Officer and President
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McDowell Research Co., Inc.
By: /s/Peter F. Comerford
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Name: Peter F. Comerford
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Title: Secretary
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