THE SECURITY
REPRESENTED BY THIS INSTRUMENT WAS ORIGINALLY ISSUED ON NOVEMBER
16, 2007, 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 STOCK PURCHASE AGREEMENT, DATED AS OF
OCTOBER 30, 2007, AS AMENDED AND MODIFIED FROM TIME TO TIME, BY AND
AMONG ULTRALIFE CORPORATION F/K/A ULTRALIFE BATTERIES, INC. (THE
“ COMPANY ”), WILLIAM MAHER AND STATIONARY POWER
SERVICES, INC., 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 AMENDED
AND RESTATED 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.
AMENDED AND RESTATED
THREE-YEAR SUBORDINATED
CONVERTIBLE PROMISSORY NOTE
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$3,419,920
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Newark, New York
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FOR VALUE RECEIVED
, ULTRALIFE CORPORATION f/k/a ULTRALIFE BATTERIES, INC. , a
Delaware corporation with offices at 2000 Technology Parkway,
Newark, New York 14513 (the “ Company ”
), hereby promises to pay to the order of WILLIAM
MAHER , a natural person with an address of 525 Tallahassee
Drive, St. Petersburg, FL 33702 or his registered assigns (
“ Holder ” ) the principal sum of
$3,419,920, or such lesser principal amount to which this Amended
and Restated Note shall have been adjusted in accordance with the
provisions of the Stock Purchase Agreement, together with interest
thereon calculated from the date hereof, in accordance with the
provisions of this Amended and Restated Note.
This Amended and
Restated Note, amends and restates in its entirety, the Note
originally issued on November 16, 2007 pursuant to the Stock
Purchase Agreement, dated as of October 30, 2007 (the “
Purchase Agreement ”), by and among the Company,
Holder and Stationary Power Services, Inc. and the applicable
provisions thereof are hereby incorporated herein in full by
reference. This Amended and Restated Note confirms the
parties’ agreement to reduce the
principal
amount under the original Note by an amount equal to $580,080, as
an offset for such amounts owed by WMSP Holdings, LLC (an entity
wholly owned by Holder) to the Company’s wholly owned
subsidiary, Stationary Power Services, Inc. pursuant to Invoice
#45699. Except for one outstanding interest only payment due on
April 1, 2009 (which the parties agree shall be paid by the
Company to Holder within five (5) business days of the date
hereof without penalty or recourse), the Holder hereby confirms
that all amounts due, prior to and on the date hereof, under the
original Note and this Amended and Restated Note have been paid in
full by the Company, and the Holder further waives and releases the
Company from any and all claims, causes of action, costs or
expenses with respect to the Company’s failure to pay any
installment of principal or interest prior to the date hereof
including, without limitation, any claim of default for the failure
to pay the aforementioned interest installment pursuant to the
terms of the original Note. The Purchase Agreement contains terms
governing the rights of the Holder of this Amended and Restated
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 Amended and Restated 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 5% per annum. All interest shall be calculated on the basis
of actual days elapsed divided by a 365 day year.
After the
occurrence of Event of Default, the Holder may, upon one
day’s written notice but without demand, declare all or any
portion of the unpaid principal amount of this Amended and Restated
Note, any unpaid and accrued interest thereon and any applicable
late fees, to be immediately due and payable and may otherwise take
action to enforce this Amended and Restated Note. 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 Amended and Restated Note plus 5% per annum. Any
increase in the interest rate shall be in addition to the
Holder’s other available remedies.
Holder does not
intend or expect to pay, nor does Company intend or expect to
charge, accept or collect any interest which shall be in excess of
the highest lawful rate allowable under the laws of the State of
New York or the United States of America, whichever is lower.
Should any charges upon the earning of interest be in excess of the
highest lawful rate allowable under the laws of the State of New
York or the United States of America, whichever is lower, then any
and all such excess is hereby waived and shall be applied against
the remaining principal balance, if any, and thereafter refunded to
Holder.
2.
Payments. Interest shall be due and payable quarterly in
arrears of each year that this Amended and Restated Note is
outstanding, commencing on July 1, 2009 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.
If Holder has not
received the full amount of any installment by the end of fifteen
(15) calendar days from the date it is due, Company shall pay a
late charge to Holder. The amount of
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the late charge
will be five percent (5%) of the amount of the payment due. The
late charge shall be due and payable immediately but shall be paid
only once on each late payment.
All unpaid accrued
interest and all outstanding principal shall be due and payable in
full on the third anniversary of the Closing (the “
Maturity Date ”).
3.
Voluntary Prepayments . This Amended and Restated Note
may be prepaid by the Company in whole or in part at any time after
60 days prior written notice to Holder (during which period
Holder may exercise its conversion rights hereunder).
(a) The
Holder may convert the outstanding principal amount of this Amended
and Restated 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 prior to the time the
outstanding principal amount of this Amended and Restated Note is
paid in full (subject to the notice periods and conversion rights
related thereto described elsewhere in this Amended and Restated
Note), at the Conversion Price (defined below) then in effect
(collectively, the “ Conversion Rights ”). The
initial per share conversion price (the “ Conversion
Price ”) shall be $15.00. The Conversion Price is subject
to adjustment as provided in Section 5.
(b) The
provisions of this Amended and Restated Note that apply to
conversion of the outstanding principal amount of this Amended and
Restated Note also apply to a partial conversion of this Amended
and Restated Note. The Holder is not entitled to any rights of a
holder of Conversion Shares until the Holder has converted this
Amended and Restated Note (or a portion thereof) into Conversion
Shares, and only to the extent that this Amended and Restated Note
is deemed to have been converted into Conversion Shares under this
Section 4.
(c) To
convert all or a portion of this Amended and Restated 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 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 Amended and Restated 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
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at the
Conversion Price in effect on the date that this Amended and
Restated 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 Amended and Restated 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 Amended and
Restated 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.
(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 Amended
and Restated Note, the full number of Conversion Shares then
issuable upon the conversion in full of this Amended and Restated
Note. The Company hereby grants Holder piggyback registration
rights as more particularly set forth in the Purchase Agreement and
the Registration Rights Agreement entered into pursuant
thereto.
(g) 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 en
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