Exhibit 10.33
Loan and Security Agreement
by and between
CONGRESS FINANCIAL CORPORATION (NEW ENGLAND)
as Lender
and
ULTRALIFE BATTERIES, INC.
and
ULTRALIFE BATTERIES (UK) LTD.
as Borrowers
Dated: June ___, 2000
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TABLE OF CONTENTS
1. DEFINITIONS..............................................................1
2. CREDIT FACILITIES.......................................................12
2.1 REVOLVING LOANS.......................................................12
2.2 LETTER OF CREDIT ACCOMMODATIONS.......................................13
2.3 TERM LOAN.............................................................15
2.4 AVAILABILITY RESERVES.................................................15
2.5 LIABILITIES...........................................................15
3. INTEREST AND FEES.......................................................16
3.1 INTEREST..............................................................16
3.2 CLOSING FEE...........................................................18
3.3 INTENTIONALLY OMITTED.................................................18
3.4 SERVICING FEE.........................................................18
3.5 UNUSED LINE FEE.......................................................19
3.6 CHANGES IN LAWS AND INCREASED COSTS OF LOANS..........................19
4. CONDITIONS PRECEDENT....................................................20
4.1 CONDITIONS PRECEDENT TO INITIAL LOANS AND LETTER
OF CREDIT ACCOMMODATIONS............................................20
4.1 CONDITIONS PRECEDENT TO INITIAL LOANS AND LETTER
OF CREDIT ACCOMMODATIONS............................................20
4.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTER OF
CREDIT ACCOMMODATIONS...............................................21
5. GRANT OF SECURITY INTEREST..............................................22
6. COLLECTION AND ADMINISTRATION...........................................23
6.1 BORROWER'S LOAN ACCOUNT...............................................23
6.2 STATEMENTS............................................................23
6.3 COLLECTION OF ACCOUNTS................................................23
6.4 PAYMENTS..............................................................24
6.5 AUTHORIZATION TO MAKE LOANS...........................................25
6.6 USE OF PROCEEDS.......................................................25
6.7 APPOINTMENT OF PARENT AS REPRESENTATIVE...............................25
7. COLLATERAL REPORTING AND COVENANTS......................................26
7.1 COLLATERAL REPORTING..................................................26
7.2 ACCOUNTS COVENANTS....................................................27
7.3 INVENTORY COVENANTS...................................................28
7.4 EQUIPMENT COVENANTS...................................................29
7.5 POWER OF ATTORNEY.....................................................29
7.6 RIGHT TO CURE.........................................................30
7.7 ACCESS TO PREMISES....................................................30
8. REPRESENTATIONS AND WARRANTIES..........................................31
8.1 CORPORATE EXISTENCE, POWER AND AUTHORITY; SUBSIDIARIES................31
8.2 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE......................31
8.3 CHIEF EXECUTIVE OFFICE; COLLATERAL LOCATIONS..........................31
8.4 PRIORITY OF LIENS; TITLE TO PROPERTIES................................32
8.5 TAX RETURNS...........................................................32
8.6 LITIGATION............................................................32
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8.7 COMPLIANCE WITH OTHER AGREEMENTS AND APPLICABLE LAWS..................32
8.8 BANK ACCOUNTS.........................................................32
8.9 ACCURACY AND COMPLETENESS OF INFORMATION..............................32
8.10 EMPLOYEE BENEFITS.....................................................33
8.11 ENVIRONMENTAL COMPLIANCE..............................................33
8.10 SURVIVAL OF WARRANTIES; CUMULATIVE....................................34
9. AFFIRMATIVE AND NEGATIVE COVENANTS......................................34
9.1 MAINTENANCE OF EXISTENCE..............................................34
9.2 NEW COLLATERAL LOCATIONS..............................................35
9.3 COMPLIANCE WITH LAWS, REGULATIONS, ETC................................35
9.4 PAYMENT OF TAXES AND CLAIMS...........................................36
9.5 INSURANCE.............................................................36
9.6 FINANCIAL STATEMENTS AND OTHER INFORMATION............................37
9.7 SALE OF ASSETS, CONSOLIDATION, MERGER, DISSOLUTION, ETC...............38
9.8 ENCUMBRANCES..........................................................39
9.9 INDEBTEDNESS..........................................................39
9.10 LOANS, INVESTMENTS, GUARANTEES, ETC...................................40
9.11 DIVIDENDS AND REDEMPTIONS.............................................40
9.12 TRANSACTIONS WITH AFFILIATES..........................................41
9.13 ADDITIONAL BANK ACCOUNTS..............................................41
9.15 ADJUSTED NET WORTH....................................................41
9.16 COSTS AND EXPENSES....................................................41
9.17 COMPLIANCE WITH ERISA.................................................42
9.18 FURTHER ASSURANCES....................................................42
10. EVENTS OF DEFAULT AND REMEDIES..........................................43
10.2 REMEDIES..............................................................44
11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW............46
11.1 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF
PROCESS; JURY TRIAL WAIVER..........................................46
11.2 WAIVER OF NOTICES.....................................................47
11.3 AMENDMENTS AND WAIVERS................................................47
11.4 WAIVER OF COUNTERCLAIMS...............................................48
11.5 INDEMNIFICATION.......................................................48
12. TERM OF AGREEMENT; MISCELLANEOUS........................................48
12.1 TERM..................................................................48
12.2 NOTICES...............................................................49
12.3 PARTIAL INVALIDITY....................................................50
12.4 SUCCESSORS............................................................50
12.5 CONFIDENTIALITY.......................................................50
12.6 JUDGMENT CURRENCY.....................................................51
12.7 ENTIRE AGREEMENT......................................................51
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INDEX TO
EXHIBITS AND SCHEDULES
Exhibit A Information Certificate
Exhibit B Form of Borrowing Base Certificate
Exhibit C Form of Term Promissory Note
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LOAN AND SECURITY AGREEMENT
This Loan and Security Agreement dated June ___, 2000 is entered into by
and between Congress Financial Corporation (New England), a Massachusetts
corporation ("Lender"), Ultralife Batteries, Inc., a Delaware corporation
("Parent") and Ultralife Batteries (UK) Ltd., a limited liability company
organized under the laws of England ("Ultralife (UK)" and, together with Parent,
the "Borrowers").
W I T N E S S E T H:
WHEREAS, Borrowers have requested that Lender enter into certain financing
arrangements with Borrowers pursuant to which Lender may make loans and provide
other financial accommodations to Borrowers; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. DEFINITIONS
All terms used herein which are defined in Article 1 or Article 9 of the
Uniform Commercial Code shall have the meanings given therein unless otherwise
defined in this Agreement. All references to the plural herein shall also mean
the singular and to the singular shall also mean the plural unless the context
otherwise requires. All references to Parent, Ultralife (UK) and Lender pursuant
to the definitions set forth in the recitals hereto, or to any other person
herein, shall include their respective successors and assigns. The words
"hereof", "herein", "hereunder", "this Agreement" and words of similar import
when used in this Agreement shall refer to this Agreement as a whole and not any
particular provision of this Agreement and as this Agreement now exists or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced. The word "including" when used in this Agreement shall mean
"including, without limitation". An Event of Default shall exist or continue or
be continuing until such Event of Default is waived in accordance with Section
11.3 or is cured in a manner satisfactory to Lender, if such Event of Default is
capable of being cured as determined by Lender in good faith, provided that this
provision is not intended to limit Borrowers' rights with respect to events or
conditions which with the passage of time or notice or both might become an
Event of Default but which have not become an Event of Default and for which a
cure period is provided under Section 10 hereof. Any accounting term used herein
unless otherwise defined in this Agreement shall have the meanings customarily
given to such term in accordance with GAAP. For purposes of this Agreement, the
following terms shall have the respective meanings given to them below:
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1.1 "Accounts" shall mean all present and future rights of Borrowers to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
1.2 "Adjusted Eurodollar Rate" shall mean, with respect to each Interest
Period for any Eurodollar Rate Loan, the rate per annum (rounded upwards, if
necessary, to the next one-sixteenth (1/16) of one (1%) percent) determined by
dividing (a) the Eurodollar Rate for such Interest Period by (b) a percentage
equal to: (i) one (1) minus (ii) the Reserve Percentage. For purposes hereof,
"Reserve Percentage" shall mean the reserve percentage, expressed as a decimal,
prescribed by any United States or foreign banking authority for determining the
reserve requirement which is or would be applicable to deposits of United States
dollars in a non-United States or an international banking office of Reference
Bank used to fund a Eurodollar Rate Loan or any Eurodollar Rate Loan made with
the proceeds of such deposit, whether or not the Reference Bank actually holds
or has made any such deposits or loans. The Adjusted Eurodollar Rate shall be
adjusted on and as of the effective day of any change in the Reserve Percentage.
1.3 "Adjusted Net Worth" shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any), the amount
equal to: (a) the difference between: (i) the aggregate net book value of all
assets of such Person and its subsidiaries, calculating the book value of
inventory for this purpose on a first-in-first-out basis, after deducting from
such book values all appropriate reserves in accordance with GAAP (including all
reserves for doubtful receivables, obsolescence, depreciation and amortization)
and (ii) the aggregate amount of the indebtedness and other liabilities of such
Person and its subsidiaries (including tax and other proper accruals) plus (b)
indebtedness of such Person and its subsidiaries which is subordinated in right
of payment to the full and final payment of all of the Obligations on terms and
conditions acceptable to Lender.
1.4 "Availability Reserves" shall mean, as of any date of determination,
such amounts as Lender may from time to time establish and revise in good faith
reducing the amount of Revolving Loans and Letter of Credit Accommodations which
would otherwise be available to Parent under the lending formula(s) provided for
herein: (a) to reflect events, conditions, contingencies or risks which, as
determined by Lender in good faith, do or may affect either (i) the Collateral
or any other property which is security for the Obligations or its value, (ii)
the assets, business or prospects of Borrower or any Obligor or (iii) the
security interests and other rights of Lender in the Collateral (including the
enforceability, perfection and priority thereof) or (b) to reflect Lender's good
faith belief that any collateral report or financial information furnished by or
on behalf of any Borrower or any Obligor to Lender is or may have been
incomplete, inaccurate or misleading in any material respect or (c) to reflect
outstanding Letter of Credit Accommodations as provided in Section 2.2 hereof or
(d) in respect of any state of facts which Lender determines in good faith
constitutes an Event of Default or is reasonably expected, with notice or
passage of time or both, to constitute an Event of Default.
1.5 "Blocked Accounts" shall have the meaning set forth in Section 6.3
hereof.
1.6 "Business Day" shall mean any day other than a Saturday, Sunday, or
other day on which commercial banks are authorized or required to close under
the laws of the State of New
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York or the Commonwealth of Pennsylvania or England, and a day on which the
Reference Bank and Lender are open for the transaction of business, except that
if a determination of a Business Day shall relate to any Eurodollar Rate Loans,
the term Business Day shall also exclude any day on which banks are closed for
dealings in dollar deposits in the London interbank market or other applicable
Eurodollar Rate market.
1.7 "Borrowing Base Certificate" shall mean a certificate substantially in
the form of Exhibit B hereto, as such form may from time to time be modified by
Lender, which is duly completed (including all schedules thereto) and executed
by the chief financial officer or other appropriate financial officer of Parent
acceptable to Lender and delivered to Lender.
1.8 "Cash Position" shall mean, at any time, the difference between (a)
the value of Eligible Investments, which are not subject to any pledge, security
interest, lien or encumbrance other than in favor of the Lender less (b) the
then outstanding principal amount of the Loans. The value of Eligible
Investments shall be determined using the national securities exchange or market
in which the applicable security is listed or quoted provided that if no such
listing or quotation is available, value shall be determined by Lender, acting
reasonably.
1.9 "Change in Control" shall mean, at any time, that any Person, together
with the affiliates and associates of such Person within the meaning of Rule
12b-2 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"),
shall acquire beneficial ownership within the meaning of Rule 13d of the
Exchange Act of more than thirty (30%) percent of the voting stock or total
equity of Parent, or if a change in the Board of Directors of Parent occurs in
which the individuals who constituted the Board of Directors at the beginning of
the two (2) year period immediately preceding such change (together with any
other director whose election by the Board of Directors was approved by at least
two-thirds of the directors then in office at the beginning of such period)
cease for any reason to constitute a majority of the directors of Parent then in
office.
1.10 "Code" shall mean the Internal Revenue Code of 1986, as the same now
exists or may from time to time hereafter be amended, modified, recodified or
supplemented, together with all rules, regulations and interpretations
thereunder or related thereto.
1.11 "Collateral" shall have the meaning set forth in Section 5 hereof.
1.12 "Eligible Accounts" shall mean Accounts created by Parent which are
and continue to be acceptable to Lender based on the criteria set forth below.
In general, Accounts shall be Eligible Accounts if:
(a) such Accounts arise from the actual and bona fide sale and
delivery of goods by Parent or rendition of services by Parent in the ordinary
course of its business which transactions are completed in accordance with the
terms and provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than ninety (90) days after
the date of the original invoice for them;
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(c) such Accounts comply with the terms and conditions contained in
Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment, guaranteed
sale, sale and return, sale on approval, or other terms under which payment by
the account debtor may be conditional or contingent;
(e) except for Eligible Fyrentics Accounts, the chief executive
office of the account debtor with respect to such Accounts is located in the
United States of America, or, at Lender's option, if: (i) the account debtor has
delivered to Parent an irrevocable letter of credit issued or confirmed by a
bank satisfactory to Lender and payable only in the United States of America and
in U.S. dollars, sufficient to cover such Account, in form and substance
satisfactory to Lender and, if required by Lender, the original of such letter
of credit has been delivered to Lender or Lender's agent and the issuer thereof
notified of the assignment of the proceeds of such letter of credit to Lender,
or (ii) such Account is subject to credit insurance payable to Lender issued by
an insurer and on terms and in an amount acceptable to Lender, or (iii) such
Account is otherwise acceptable in all respects to Lender (subject to such
lending formula with respect thereto as Lender may determine);
(f) such Accounts do not consist of progress billings, bill and hold
invoices or retainage invoices, except as to bill and hold invoices, if Lender
shall have received an agreement in writing from the account debtor, in form and
substance satisfactory to Lender, confirming the unconditional obligation of the
account debtor to take the goods related thereto and pay such invoice;
(g) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to, any right of setoff against such
Accounts (but the portion of the Accounts of such account debtor in excess of
the amount at any time and from time to time owed by Parent to such account
debtor or claimed owed by such account debtor shall be deemed Eligible
Accounts);
(h) there are no facts, events or occurrences which would impair the
validity, enforceability or collectability of such Accounts or reduce the amount
payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of the
account debtor with respect to such Accounts is an officer, employee or agent of
or affiliated with Parent directly or indirectly by virtue of family membership,
ownership, control, management or otherwise;
(k) the account debtors with respect to such Accounts are not any
foreign government, the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, unless, if the
account debtor is the United States of America, any State, political
subdivision, department, agency or instrumentality thereof, upon Lender's
request,
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the Federal Assignment of Claims Act of 1940, as amended or any similar State or
local law, if applicable, has been complied with in a manner satisfactory to
Lender;
(l) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which might
result in any material adverse change in any such account debtor's financial
condition;
(m) such Accounts of a single account debtor or its affiliates
(other than Eligible Fyrnetics Accounts) do not constitute more than twenty
(20%) percent of all otherwise Eligible Accounts (but the portion of the
Accounts not in excess of such percentage may be deemed Eligible Accounts);
(n) such Accounts are not owed by an account debtor who has Accounts
unpaid more than ninety (90) days after the date of the original invoice for
them which constitute more than fifty (50%) percent of the total Accounts of
such account debtor;
(o) such Accounts are owed by account debtors whose total
indebtedness to Parent does not exceed the credit limit with respect to such
account debtors as determined by Lender in good faith from time to time and of
which Lender has informed chief financial officer or controller of Parent (but
the portion of the Accounts not in excess of such credit limit shall be deemed
Eligible Accounts); and
(p) such Accounts are owed by account debtors deemed creditworthy at
all times by Lender, as determined by Lender in good faith and, if Lender
determines that an account debtor is not creditworthy, of which from Lender has
informed chief financial officer or controller of Parent.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender in good faith. Any Accounts which are not Eligible Accounts
shall nevertheless be part of the Collateral.
1.13 "Eligible Equipment" shall mean Equipment owned by Parent or by
Ultralife (UK), located at Parent's premises or at Ultralife (UK)'s premises, as
the case may be and acceptable to Lender in all respects. General criteria for
Eligible Equipment may be established and revised from time to time by Lender in
Lender's good faith judgment. In determining such acceptability Lender may, but
need not, rely on reports furnished to Lender by Borrowers, but reliance thereon
by Lender from time to time shall not be deemed to limit Lender's right to
revise standards of eligibility at any time. In general, except in Lender's
discretion, Eligible Equipment shall not include (a) Equipment at the premises
of third parties or subject to a security interest or lien in favor of any third
parties, (b) Equipment which is not subject to Lender's perfected security
interest or fixed charge, as the case may be, (c) fixtures, (d) defective,
damaged, obsolete or unserviceable Equipment (e) Equipment not in good condition
and repair or (f) Equipment not used or usable in the ordinary course of
Parent's or Ultralife (UK)'s business as presently conducted; provided, however,
any Equipment which would otherwise be deemed Eligible Equipment at locations
which are not owned and operated by Parent or Ultralife (UK) may nevertheless be
considered Eligible Equipment if Lender shall have received an agreement in
writing, in form and substance satisfactory to Lender, from the owner and/or
operator of such
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location, as the case may be, pursuant to which such owner and/or operator, if
required by Lender: (i) acknowledges the first priority lien of Lender on such
Equipment, (ii) agrees to waive any and all claims such owner and/or operator
may, at any time, have against such Equipment and (iii) grants to Lender the
right to enter and remain on the premises in order to exercise Lender's rights
and remedies on terms acceptable to Lender. Any Equipment which Lender
determines to be ineligible or unacceptable for purposes of the lending formula
shall nevertheless be and remain at all times part of the Collateral.
1.14 "Eligible Fyrnetics Account" shall mean any Account arising out of a
sale of Inventory to Fyrnetics (Hong Kong) Limited ("Fyrnetics") that satisfies
all the criteria of Eligible Accounts hereunder other than the limitations set
forth in clauses (e) and (m) to the definition of Eligible Accounts, which shall
not apply; provided, however, that the aggregate outstanding amount of all
Eligible Accounts to Fyrnetics shall not exceed $1,250,000.00 (but the portion
of the Eligible Accounts not in excess of such amount shall be deemed to be
Eligible Accounts).
1.15 "Eligible Inventory" shall mean Inventory consisting of finished
goods held for resale in the ordinary course of the business of Parent and raw
materials for such finished goods which are acceptable to Lender based on the
criteria set forth below. In general, Eligible Inventory shall not include (a)
work-in-process; (b) components which are not part of finished goods; (c) spare
parts for equipment; (d) packaging and shipping materials; (e) supplies used or
consumed in Parent's business; (f) Inventory at premises other than those owned
and controlled by Parent, except if Lender shall have received an agreement in
writing from the person in possession of such Inventory and/or the owner or
operator of such premises in form and substance satisfactory to Lender
acknowledging Lender's first priority security interest in the Inventory,
waiving security interests and claims by such person against the Inventory and
permitting Lender access to, and the right to remain on, the premises so as to
exercise Lender's rights and remedies and otherwise deal with the Collateral;
(g) Inventory subject to a security interest or lien in favor of any person
other than Lender except those permitted in this Agreement; (h) bill and hold
goods; (i) unserviceable, obsolete or slow moving Inventory; (j) Inventory which
is not subject to the first priority, valid and perfected security interest of
Lender; (k) returned, damaged and/or defective Inventory; and (l) Inventory
purchased or sold on consignment. General criteria for Eligible Inventory may be
established and revised from time to time by Lender in good faith. Any Inventory
which is not Eligible Inventory shall nevertheless be part of the Collateral.
1.16 "Eligible Investments" shall mean any one or more of the following
obligations or securities:
(a) direct short term obligations of, and obligations fully
guaranteed as to timely payment of principal and interest by, the United States
of America or any agency or instrumentality of the United States of America the
obligations of which are backed by the full faith and credit of the United
States of America;
(b) repurchase agreements or obligations with respect to any
security described in clause (a) above where such security has a remaining
maturity of one year or less and where the repurchase agreement has been entered
into with a depository institution or trust company (acting as principal)
described in clause (c) below;
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(c) cash, federal funds, demand and time deposits in, short term
certificates of deposits of, or bankers' acceptances issued by, any depository
institution or trust company incorporated or organized under the laws of the
United States of America or any state thereof and subject to supervision and
examination by federal and/or state banking authorities, so long as the
commercial paper or other short-term debt obligations of such depository
institution or trust company are rated no lower than A-1 by Standard & Poor's
Rating Group, a division of McGraw Hill, Inc. ("S&P") (or such equivalent rating
by Moody's Investors Services ("Moody's")) and the long-term obligations of such
depository institution or trust company are rated in one of the two highest
rating categories by S&P or Moody's;
(d) securities bearing interest or sold at a discount with a
maturity of less than one year issued by any corporation incorporated under the
laws of the United States of America or any state thereof which have a credit
rating from S&P no lower than A-1 (or an equivalent rating from Moody's) with
respect to short-term debt obligations, and within one of the two highest rating
categories applicable to long-term debt obligations from either S&P or Moody's,
with respect to long-term debt obligations;
(e) commercial paper (including both non-interest-bearing discount
obligations and interest-bearing obligations payable on demand or on a specified
date not more than one year after the date of issuance thereof) rated by S&P no
lower than A-1 (or an equivalent rating by Moody's); and
(f) shares of money market funds provided that such fund is
registered under the Investment Company Act of 1940, has assets of at least
$1,000,000,000 and invests exclusively in investments listed under clauses (a)
through (e) above.
1.17 "Environmental Law" shall mean all foreign, Federal, State and local
laws (including common law), legislation, rules, codes, licenses, permits
(including conditions imposed therein), authorizations, judicial or
administrative decisions, injunctions or agreements between Parent or Ultralife
(UK) and any governmental authority: relating to pollution and the protection,
preservation or restoration of the environment (including air, water vapor,
surface water, ground water, drinking water, drinking water supply, surface
land, subsurface land, plant and animal life or any other natural resource), or
to human health or safety, (b) relating to the exposure to, or the use, storage,
recycling, treatment, generation, manufacture, processing, distribution,
transportation, handling, labeling, production, release or disposal, or
threatened release, of Hazardous Materials, or (c) relating to all laws with
regard to recordkeeping, notification, disclosure and reporting requirements
respecting Hazardous Materials. The term "Environmental Laws" includes (i) the
Federal Comprehensive Environmental Response, Compensation and Liability Act of
1980, the Federal Superfund Amendments and Reauthorization Act, the Federal
Water Pollution Control Act of 1972, the Federal Clean Water Act, the Federal
Clean Air Act, the Federal Resource Conservation and Recovery Act of 1976
(including the Hazardous and Solid Waste Amendments thereto), the Federal Solid
Waste Disposal and the Federal Toxic Substances Control Act, the Federal
Insecticide, Fungicide and Rodenticide Act, and the Federal Safe Drinking Water
Act of 1974, (ii) applicable state or foreign counterparts to such laws, and
(iii) any common law or equitable doctrine that may impose liability or
obligations for injuries or damages due to, or threatened as a result of, the
presence of or exposure to any Hazardous Materials.
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1.18 "Equipment" shall mean all of Borrowers' now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or licensed), vehicles, tools, furniture, fixtures, all
attachments, accessions and property now or hereafter affixed thereto or used in
connection therewith, and substitutions and replacements thereof, wherever
located.
1.19 "ERISA" shall mean the United States Employee Retirement Income
Security Act of 1974, as the same now exists or may hereafter from time to time
be amended, modified, recodified or supplemented, together with all rules,
regulations and interpretations thereunder or related thereto.
1.20 "ERISA Affiliate" shall mean any person required to be aggregated
with Parent or any of its Subsidiaries under Sections 414(b), 414(c), 414(m) or
414(o) of the Code.
1.21 "Eurodollar Rate Loans" shall mean any Loans or portion thereof on
which interest is payable based on the Adjusted Eurodollar Rate in accordance
with the terms hereof.
1.22 "Eurodollar Rate" shall mean with respect to the Interest Period for
a Eurodollar Rate Loan, the interest rate per annum equal to the arithmetic
average of the rates of interest per annum (rounded upwards, if necessary, to
the next one-sixteenth (1/16) of one (1%) percent) at which Reference Bank is
offered deposits of United States dollars in the London interbank market (or
other Eurodollar Rate market selected by Borrower and approved by Lender) on or
about 9:00 a.m. (New York time) two (2) Business Days prior to the commencement
of such Interest Period in amounts substantially equal to the principal amount
of the Eurodollar Rate Loans requested by and available to a Borrower in
accordance with this Agreement, with a maturity of comparable duration to the
Interest Period selected by such Borrower.
1.23 "Event of Default" shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.24 "Excess Availability" shall mean the amount, as determined by Lender,
calculated at any time, equal to the lesser of: (i) the amount of the Revolving
Loans available to Parent as of such time based on the applicable lending
formulas multiplied by the Net Amount of Eligible Accounts and the Value of
Eligible Inventory, as determined by Lender, and subject to the sublimits and
Availability Reserves from time to time established by Lender hereunder, and
(ii) the Maximum Credit (less the then outstanding aggregate principal amount of
the Term Loans), minus the sum of: (i) the amount of all then outstanding
aggregate and unpaid Obligations (but not including for this purpose the then
outstanding principal amount of the Term Loans), plus (ii) the aggregate amount
of all then outstanding and unpaid trade payables of Borrowers which are more
than sixty (60) days past due as of such time (unless such trade payables are
subject to a binding agreement permitting longer payment terms or are being
contested in good faith by Borrower or are to be repaid with the Revolving Loan
then requested by Parent), plus (iii) the amount of checks issued by Borrower to
pay trade payables, but not yet sent and the book overdraft of Borrower.
1.25 "Financing Agreements" shall mean, collectively, this Agreement and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by any
Borrower or any Obligor in connection with this
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Agreement, as the same now exist or may hereafter be amended, modified,
supplemented, extended, renewed, restated or replaced.
1.26 "GAAP" shall mean generally accepted accounting principles in the
United States of America as in effect from time to time as set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and pronouncements
of the Financial Accounting Standards Board which are applicable to the
circumstances as of the date of determination consistently applied, except that,
for purposes of Section 9.15 hereof, GAAP shall be determined on the basis of
such principles in effect on the date hereof and consistent with those used in
the preparation of the audited financial statements delivered to Lender prior to
the date hereof.
1.27 "Hazardous Materials" shall mean any hazardous, toxic or dangerous
substances, materials and wastes, including hydrocarbons (including naturally
occurring or man-made petroleum and hydrocarbons), flammable explosives,
asbestos, urea formaldehyde insulation, radioactive materials, biological
substances, polychlorinated biphenyls, pesticides, herbicides and any other kind
and/or type of pollutants or contaminants (including materials which include
hazardous constituents), sewage, sludge, industrial slag, solvents and/or any
other similar substances, materials, or wastes and including any other
substances, materials or wastes that are or become regulated under any
Environmental Law (including any that are or become classified as hazardous or
toxic under any Environmental Law).
1.28 "Information Certificate" shall mean the Information Certificate of
Parent and the Information Certificate of Ultralife (UK) constituting Exhibit A
hereto containing material information with respect to Parent and Ultralife
(UK), their business and assets provided by or on behalf of Borrower to Lender
in connection with the preparation of this Agreement and the other Financing
Agreements and the financing arrangements provided for herein.
1.29 "Interest Period" shall mean for any Eurodollar Rate Loan, a period
of approximately one (1), two (2), or three (3) months duration as Borrowers may
elect, the exact duration to be determined in accordance with the customary
practice in the applicable Eurodollar Rate market; provided, that, Borrowers may
not elect an Interest Period which will end after the last day of the
then-current term of this Agreement.
1.30 "Interest Rate" shall mean, as to Prime Rate Loans, a rate of three
quarters of one (.75%) percent per annum in excess of the Prime Rate and, as to
Eurodollar Rate Loans, a rate of two and three quarters (2.75%) percent per
annum in excess of the Adjusted Eurodollar Rate (based on the Eurodollar Rate
applicable for the Interest Period selected by Borrowers as in effect three (3)
Business Days after the date of receipt by Lender of the request of Borrower for
such Eurodollar Rate Loans in accordance with the terms hereof, whether such
rate is higher or lower than any rate previously quoted to Borrowers); provided,
that, the Interest Rate shall mean the rate of three and three quarters (3.75%)
percent per annum in excess of the Prime Rate as to Prime Rate Loans and the
rate of five and three quarters (5.75%) percent per annum in excess of the
Adjusted Eurodollar Rate as to Eurodollar Rate Loans, at Lender's option,
without notice, (a) for the period (i) from and after the date of termination or
non-renewal hereof until Lender has received full and final payment of all
obligations (notwithstanding entry of a judgment against any Borrower) and (ii)
from and after the date of the occurrence of an Event of Default for so
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long as such Event of Default is continuing as determined by Lender, and (b) on
the Revolving Loans at any time outstanding in excess of the amounts available
to Parent under Section 2 (whether or not such excess(es), arise or are made
with or without Lender's knowledge or consent and whether made before or after
an Event of Default).
1.31 "Inventory" shall mean all of Borrowers' now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.32 "Investment Property" shall mean all of Borrowers' now owned and
hereafter existing or acquired securities, financial assets, securities
accounts, securities entitlements and all other investment property of
whatsoever kind or nature, wherever located, including, without limitation,
securities issued by any subsidiary of Borrowers.
1.33 "Letter of Credit Accommodations" shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time either (a)
issued or opened by Lender for the account of Parent or (b) with respect to
which Lender has agreed to indemnify the issuer or guaranteed to the issuer the
performance by Parent of its obligations to such issuer..
1.34 "Loans" shall mean the Revolving Loans and the Term Loans.
1.35 "Maximum Credit" shall mean the amount of $20,000,000.00.
1.36 "Net Amount of Eligible Accounts" shall mean the gross amount of
Eligible Accounts less (a) sales, excise or similar taxes included in the amount
thereof and (b) returns, discounts, claims, credits and allowances of any nature
at any time issued, owing, granted, outstanding, available or claimed with
respect thereto.
1.37 "Obligations" shall mean any and all Revolving Loans, all Term Loans,
Letter of Credit Accommodations and all other obligations, liabilities and
indebtedness of every kind, nature and description owing by any Borrower to
Lender and/or its affiliates, including principal, interest, charges, fees,
costs and expenses, however evidenced, whether as principal, surety, endorser,
guarantor or otherwise, whether arising under this Agreement or otherwise,
whether now existing or hereafter arising, whether arising before, during or
after the initial or any renewal term of this Agreement or after the
commencement of any case with respect to Borrower under the United States
Bankruptcy Code or any similar statute (including the payment of interest and
other amounts which would accrue and become due but for the commencement of such
case, whether or not such amounts are allowed or allowable in whole or in part
in such case), whether direct or indirect, absolute or contingent, joint or
several, due or not due, primary or secondary, liquidated or unliquidated,
secured or unsecured, and however acquired by Lender.
1.38 "Obligor" shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than a Borrower.
1.39 "Orderly Liquidation Value" or "OLV" shall mean, with respect to
Eligible Equipment, the orderly liquidation value thereof as determined by an
appraisal in form, scope and methodology acceptable to Lender and from an
appraiser acceptable to Lender.
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1.40 "Payment Account" shall have the meaning set forth in Section 6.3
hereof.
1.41 "Permanent Availability Reserve" shall mean an Availability Reserve
established on the date hereof in the amount of $1,500,000.00, which
Availability Reserve shall be reduced monthly by the amount by which the
outstanding principal amount of the Term Loans amortizes and otherwise shall not
be released except in the sole discretion of the Lender.
1.42 "Person" or "person" shall mean any individual, sole proprietorship,
partnership, corporation (including any corporation which elects subchapter S
status under the Internal Revenue Code of 1986, as amended), limited liability
company, limited liability partnership, business trust, unincorporated
association, joint stock corporation, trust, joint venture or other entity or
any government or any agency or instrumentality or political subdivision
thereof.
1.43 "Prime Rate" shall mean the rate announced by First Union National
Bank, or its successors, from time to time as its prime rate, whether or not
such announced rate is the best rate available at such bank.
1.44 "Prime Rate Loans" shall mean any Loans or portion thereof on which
interest is payable based on the Prime Rate in accordance with the terms
thereof.
1.45 "Records" shall mean all of Borrowers' present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrowers with respect to the
foregoing maintained with or by any other person).
1.46 "Reference Bank" shall mean First Union National Bank, or such other
bank as Lender may from time to time designate.
1.47 "Revolving Loans" shall mean the loans now or hereafter made by
Lender to or for the benefit of Parent on a revolving basis (involving advances,
repayments and readvances) as set forth in Section 2.1 hereof.
1.48 "Term Loans" shall mean the term loans now or hereafter made by
Lender to Borrowers as provided for in Section 2.3 hereof.
1.49 "Term Loan Availability Limit" shall mean $12,000,000 less (a) the
original principal amount of each Term Loan made under Section 2.3 hereof, less
(b) commencing on August 1, 2000 and continuing on the first day of each month
thereafter, an amount equal to (i) $200,000 less (ii) the aggregate principal
amount payable each month on the Term Promissory Notes.
1.50 "Term Promissory Note" shall mean a term promissory note in
substantially the form of Exhibit C hereto evidencing Term Loans made to Parent
or Ultralife (UK) and all amendments, modifications and changes thereto.
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1.51 "Ultralife (UK)" shall mean Ultralife Batteries (UK) Ltd., a limited
liability company organized under the laws of England.
1.52 "Value" shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in-first-out
basis in accordance with GAAP or (b) market value.
2. CREDIT FACILITIES
2.1 Revolving Loans.
(a) Subject to and upon the terms and conditions contained herein,
Lender agrees to make Revolving Loans to Parent from time to time in amounts
requested by Parent up to the amount equal to the sum of:
(i) eighty-five (85%) percent of the Net Amount of Eligible
Accounts, plus
(ii) the lesser of: (A) fifty-three (53%) percent of the Value
of Eligible Inventory or (B) $6,000,000.00, less
(iii) any Availability Reserves.
(b) Lender may, in its discretion, from time to time, upon not less
than five (5) days prior notice to Parent, (i) reduce the lending formula with
respect to Eligible Accounts to the extent that Lender determines in good faith
that: (A) the dilution with respect to the Accounts for any period (based on the
ratio of (1) the aggregate amount of reductions in Accounts other than as a
result of payments in cash to (2) the aggregate amount of total sales) has
increased in any material respect or may be reasonably anticipated to increase
in any material respect above historical levels, or (B) the general
creditworthiness of account debtors has declined or (ii) reduce the lending
formula(s) with respect to Eligible Inventory to the extent that Lender
determines that: (A) the number of days of the turnover of the Inventory for any
period has changed in any material respect or (B) the liquidation value of the
Eligible Inventory, or any category thereof, has decreased, or (C) the nature
and quality of the Inventory has deteriorated. In determining whether to reduce
the lending formula(s), Lender may consider events, conditions, contingencies or
risks which are also considered in determining Eligible Accounts, Eligible
Inventory or in establishing Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount of the Loans
and the Letter of Credit Accommodations outstanding at any time shall not exceed
the Maximum Credit. In the event that the outstanding amount of any component of
the Loans, or the aggregate amount of the outstanding Loans and Letter of Credit
Accommodations, exceed the amounts available under the lending formulas, or the
Maximum Credit, as applicable, such event shall not limit, waive or otherwise
affect any rights of Lender in that circumstance or on any future occasions and
Borrowers shall, upon demand by Lender, which may be made at any time or from
time to time, immediately repay to Lender the entire amount of any such
excess(es) for which payment is demanded.
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(d) For purposes only of applying the sublimit on Revolving Loans
based on Eligible Inventory pursuant to Section 2.1(a)(ii)(B), without
duplication for Availability Reserves, Lender may treat the then undrawn amounts
of outstanding Letter of Credit Accommodations for the purpose of purchasing
Eligible Inventory as Revolving Loans to the extent Lender is in effect basing
the issuance of the Letter of Credit Accommodations on the Value of the Eligible
Inventory being purchased with such Letter of Credit Accommodations. In
determining the actual amounts of such Letter of Credit Accommodations to be so
treated for purposes of the sublimit, the outstanding Revolving Loans and
Availability Reserves shall be attributed first to any components of the lending
formulas in Section 2.1(a) that are not subject to such sublimit, before being
attributed to the components of the lending formulas subject to such sublimit.
2.2 Letter of Credit Accommodations.
(a) Subject to and upon the terms and conditions contained herein,
at the request of Parent, Lender agrees to provide or arrange for Letter of
Credit Accommodations for the account of Parent containing terms and conditions
acceptable to Lender and the issuer thereof. Any payments made by Lender to any
issuer thereof and/or related parties in connection with the Letter of Credit
Accommodations shall constitute additional Revolving Loans to Parent pursuant to
this Section 2.
(b) In addition to any charges, fees or expenses charged by any bank
or issuer in connection with the Letter of Credit Accommodations, Parent shall
pay to Lender a letter of credit fee at a rate equal to one and one half (1.5%)
percent per annum ("Letter of Credit Fee") on the daily outstanding balance of
the Letter of Credit Accommodations for the immediately preceding month (or part
thereof), payable in arrears as of the first day of each succeeding month,
except that Parent shall pay to Lender such Letter of Credit Fee, at Lender's
option, without notice, at a rate equal to four and one half (4.5%) percent per
annum on such daily outstanding balance for: (i) the period from and after the
date of termination or non-renewal hereof until Lender has received full and
final payment of all Obligations (notwithstanding entry of a judgment against
Parent) and (ii) the period from and after the date of the occurrence of an
Event of Default for so long as such Event of Default is continuing as
determined by Lender. Such Letter of Credit Fee shall be calculated on the basis
of a three hundred sixty (360) day year and actual days elapsed and the
obligation of Parent to pay such fee shall survive the termination or
non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available unless on
the date of the proposed issuance of any Letter of Credit Accommodations, the
Revolving Loans available to Parent (subject to the Maximum Credit and any
Availability Reserves) are equal to or greater than: (i) if the proposed Letter
of Credit Accommodation is for the purpose of purchasing Eligible Inventory, the
sum of (A) the percentage equal to one hundred (100%) percent minus the then
applicable percentage set forth in Section 2.1(a)(ii)(A) above of the Value of
such Eligible Inventory, plus (B) freight, taxes, duty and other amounts which
Lender estimates must be paid in connection with such Inventory upon arrival and
for delivery to one of Parent's locations for Eligible Inventory within the
United States of America and (ii) if the proposed Letter of Credit Accommodation
is for any other purpose, an amount equal to one hundred (100%) percent of the
face amount thereof and all other commitments and obligations made or incurred
by Lender with
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respect thereto. For example, prior to the issuance of a Letter of Credit
Accommodation, Parent shall be able, under the formula set forth in Section
2.1(a), to borrow a Revolving Loan in the amount of (i) such Letter of Credit
Accommodation, if the Letter of Credit Accommodation is for a standby letter of
credit and (ii) forty-seven (47%) percent of such Letter of Credit
Accommodation, if the letter of credit is a documentary letter of credit.
Effective on the issuance of each Letter of Credit Accommodation, an
Availability Reserve shall be established in the applicable amount set forth in
Section 2.2(c)(i) or Section 2.2(c)(ii).
(d) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith shall not at any time exceed
$5,000,000.00. At any time an Event of Default exists or has occurred and is
continuing, upon Lender's request, Borrower will either furnish cash collateral
to secure the reimbursement obligations to the issuer in connection with any
Letter of Credit Accommodations or furnish cash collateral to Lender for the
Letter of Credit Accommodations, and in either case, the Revolving Loans
otherwise available to Borrower shall not be reduced as provided in Section
2.2(c) to the extent of such cash collateral.
(e) Parent shall indemnify and hold Lender harmless from and against
any and all losses, claims, damages, liabilities, costs and expenses which
Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including any losses, claims, damages, liabilities, costs and expenses due to
any action taken by any issuer or correspondent with respect to any Letter of
Credit Accommodation unless such losses, claims, damages, liabilities, costs and
expenses are determined by a final and non-appealable judgment or court order
binding on Lender to be due to the gross negligence or willful misconduct of
Lender. Parent assumes all risks with respect to the acts or omissions of the
drawer under or beneficiary of any Letter of Credit Accommodation and for such
purposes the drawer or beneficiary shall be deemed Parent's agent. Parent
assumes all risks for, and agrees to pay, all foreign, Federal, State and local
taxes, duties and levies relating to any goods subject to any Letter of Credit
Accommodations or any documents, drafts or acceptances thereunder. Parent hereby
releases and holds Lender harmless from and against any acts, waivers, errors,
delays or omissions, whether caused by Parent, by any issuer or correspondent or
otherwise with respect to or relating to any Letter of Credit Accommodation. The
provisions of this Section 2.2(e) shall survive the payment of Obligations and
the termination or non-renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to grant
Parent any right or authority to pledge the credit of Lender in any manner.
Lender shall have no liability of any kind with respect to any Letter of Credit
Accommodation provided by an issuer other than Lender unless Lender has duly
executed and delivered to such issuer the application or a guarantee or
indemnification in writing with respect to such Letter of Credit Accommodation.
Parent shall be bound by any interpretation made in good faith by Lender, or any
other issuer or correspondent under or in connection with any Letter of Credit
Accommodation or any documents, drafts or acceptances thereunder,
notwithstanding that such interpretation may be inconsistent with any
instructions of Parent. Lender shall have the sole and exclusive right and
authority to, and Parent shall not: (i) at any time an Event of Default exists
or has occurred and is continuing, (A) approve or resolve any questions of
non-compliance of documents, (B) give any instructions as to acceptance or
rejection of any documents or goods or (C) execute any and all applications for
steamship or airway guaranties, indemnities or delivery orders, and (ii) at all
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times, (A) grant any extensions of the maturity of, time of payment for, or time
of presentation of, any drafts, acceptances, or documents, and (B) agree to any
amendments, renewals, extensions, modifications, changes or cancellations of any
of the terms or conditions of any of the applications, Letter of Credit
Accommodations, or documents, drafts or acceptances thereunder or any letters of
credit included in the Collateral. Lender may take such actions either in its
own name or in Parent's name.
(g) Any rights, remedies, duties or obligations granted or
undertaken by Parent to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Parent to Lender. Any duties or obligations
undertaken by Lender to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement by Lender in favor of any
issuer or correspondent relating to any Letter of Credit Accommodation, shall be
deemed to have been undertaken by Parent to Lender and to apply in all respects
to Parent.
2.3 Term Loans. Lender agrees to make Term Loans to Parent and to
Ultralife (UK) from time to time up to an aggregate original principal amount
equal to the lesser of (a) 100% of the OLV of Eligible Equipment or (b) the Term
Loan Availability Limit, provided that the aggregate principal amount of the
Term Loans made to Parent shall not exceed $11,000,000 and the aggregate
principal amount of Term Loans to Ultralife (UK) shall not exceed $1,000,000.
The Term Loans made on the date hereof shall be in the aggregate original
principal amount of $4,000,000.00 and be comprised of a $3,000,000 Term Loan to
the Parent and a $1,000,000 Term Loan to Ultralife (UK) (the "Initial Term
Loans") and thereafter each Term Loan requested by Parent or by Ultralife (UK)
shall be in the minimum principal amount of $500,000.00 and in integral
multiples of $500,000.00 in excess thereof, or the remaining principal amount
available to be drawn by Parent and by Ultralife (UK) hereunder. Each Term Loan
shall be (a) evidenced by a Term Promissory Note in the original principal
amount borrowed, duly executed and delivered by Parent or by Ultralife (UK), as
the case may be, to Lender concurrently with the borrowing of such Term Loan;
(b) repaid, together with interest and other amounts, in accordance with this
Agreement, the applicable Term Promissory Note, and the other Financing
Agreements and (c) secured by all of the Collateral. Term Loans that are repaid
or prepaid may not be reborrowed. The Initial Term Loans shall not be prepaid
unless Parent and Ultralife (UK) simultaneously terminate this Agreement in
accordance with the requirements of Section 12.1 including, without limitation,
by making the payment of any termination fee then due under Section 12.1(c)
2.4 Availability Reserves. All Revolving Loans otherwise available to
Parent pursuant to the lending formulas and subject to the Maximum Credit and
other applicable limits hereunder shall be subject to the Permanent Availability
Reserve and to Lender's continuing right, acting in good faith and upon notice
to Borrower, to establish and revise additional Availability Reserves.
2.5 Liabilities. Ultralife (UK) shall be liable hereunder for the Term
Loans made to it and for all interest, fees, charges, costs and expenses
relating thereto or arising hereunder with respect thereto and as otherwise may
be set forth herein. Ultralife (UK) shall not be liable for the Revolving Loans,
Term Loans or Letter of Credit Accommodations made to or on behalf of the
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Parent or for the interest, fees, charges, costs and expenses relating thereto
or arising hereunder with respect thereto. Parent has entered into a Guarantee
of all of the liabilities, indebtedness and obligations of Ultralife (UK), which
Guarantee shall be secured by all of the Collateral.
3. INTEREST AND FEES
3.1 Interest.
(a) Each Borrower shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations (outstanding to each such
Borrower) at the Interest Rate. All interest accruing hereunder on and after the
date of any Event of Default or termination or non-renewal hereof shall be
payable on demand.
(b) Borrowers may from time to time request that Prime Rate Loans be
converted to Eurodollar Rate Loans or that any existing Eurodollar Rate Loans
continue for an additional Interest Period. Such request from Borrowers shall
specify the amount of the Prime Rate Loans which will constitute Eurodollar Rate
Loans (subject to the limits set forth below) and the Interest Period to be
applicable to such Eurodollar Rate Loans. Subject to the terms and conditions
contained herein, three (3) Business Days after receipt by Lender of such a
request from Borrowers, such Prime Rate Loans shall be converted to Eurodollar
Rate Loans or such Eurodollar Rate Loans shall continue, as the case may be,
provided, that, (i) no Event of Default, or event which with notice or passage
of time or both would constitute an Event of Default exists or has occurred and
is continuing, (ii) no party hereto shall have sent any notice of termination or
non-renewal of this Agreement, (iii) Borrowers shall have complied with such
customary procedures as are established by Lender and specified by Lender to
Borrower from time to time for requests by Borrowers for Eurodollar Rate Loans,
(iv) no more than four (4) Interest Periods may be in effect at any one time,
(v) the aggregate amount of the Eurodollar Rate Loans must be in an amount not
less than $2,000,000 or an integral multiple of $1,000,000 in excess thereof,
(vi) the maximum amount of the Eurodollar Rate Loans at any time requested by
Borrowers shall not exceed the amount equal to (A) the principal amount of the
Term Loans which it is anticipated will be outstanding as of the last day of the
applicable Interest Period plus (B) eighty (80%) percent of the lowest principal
amount of the Revolving Loans which it is anticipated will be outstanding during
the applicable Interest Period, in each case as determined by Lender (but with
no obligation of Lender to make such Revolving Loans) and (vii) Lender shall
have determined that the Interest Period or Adjusted Eurodollar Rate is
available to Lender through the Reference Bank and can be readily determined as
of the date of the request for such Eurodollar Rate Loan by Borrowers. Any
request by Borrowers to convert Prime Rate Loans to Eurodollar Rate Loans or to
continue any existing Eurodollar Rate Loans shall be irrevocable.
Notwithstanding anything to the contrary contained herein, Lender and Reference
Bank shall not be required to purchase United States Dollar deposits in the
London interbank market or other applicable Eurodollar Rate market to fund any
Eurodollar Rate Loans, but the provisions hereof shall be deemed to apply as if
Lender and Reference Bank had purchased such deposits to fund the Eurodollar
Rate Loans.
(c) Any Eurodollar Rate Loans shall automatically convert to Prime
Rate Loans upon the last day of the applicable Interest Period, unless Lender
has received and approved a
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request to continue such Eurodollar Rate Loan at least three (3) Business Days
prior to such last day in accordance with the terms hereof. Any Eurodollar Rate
Loans shall, at Lender's option, upon notice by Lender to Borrowers, convert to
Prime Rate Loans in the event that (i) an Event of Default or event which, with
the notice or passage of time, or both, would constitute an Event of Default,
shall exist, (ii) this Agreement shall terminate or not be renewed, or (iii) the
aggregate principal amount of the Prime Rate Loans which have previously been
converted to Eurodollar Rate Loans or existing Eurodollar Rate Loans continued,
as the case may be, at the beginning of an Interest Period shall at any time
during such Interest Period exceed either (A) the aggregate principal amount of
the Loans then outstanding, or (B) the sum of the then outstanding principal
amount of the Term Loans plus the Revolving Loans then available to Parent under
Section 2 hereof. Borrowers shall pay to Lender, upon demand by Lender (or
Lender may, at its option, charge any loan account of Borrowers) any amounts
required to compensate Lender, the Reference Bank or any participant with Lender
for any loss (including loss of anticipated profits), cost or expense incurred
by such person, as a result of the conversion of Eurodollar Rate Loans to Prime
Rate Loans pursuant to any of the foregoing.
(d) Interest shall be payable by Borrowers to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty (360) day year and actual days
elapsed. The interest rate on non-contingent Obligations (other than Eurodollar
Rate Loans) shall increase or decrease by an amount equal to each increase or
decrease in the Prime Rate effective on the first day of the month after any
change in such Prime Rate is announced based on the Prime Rate in effect on the
last day of the month in which any such change occurs. In no event shall charges
constituting interest payable by Borrower to Lender exceed the maximum amount or
the rate permitted under any applicable law or regulation, and if any such part
or provision of this Agreement is in contravention of any such law or
regulation, such part or provision shall be deemed amended to conform thereto.
(e) The Interest Rate shall be subject to adjustment based upon the
annual consolidated net income (loss) from continuing operations of the Parent,
excluding all extraordinary and nonrecurring gains, determined in accordance
with GAAP ("Net Income" or "Loss") as shown on the annual audited financial
statements of the Borrower delivered to Lender pursuant to Section 9.6(a)(ii)
hereof. If Parent's Net Income is in excess of $1.00, the Interest Rate shall be
decreased by .25%, provided that in no event shall the Interest Rate as to Prime
Rate Loan be less than one quarter of one percent (.25%) per annum in excess of
the Prime Rate and the Interest Rate as to Eurodollar Rate Loans be less than
two and one quarter percent (2.25%) per annum in excess of the Adjusted
Eurodollar Rate. If Parent incurs a Loss, the Interest Rate shall be increased
by .25%, provided that in no event, absent the occurrence of an event or
condition described in the proviso to the definition of "Interest Rate," shall
the Interest Rate as to Prime Loans be greater than one and one quarter percent
(1.25%) per annum in excess of the Prime Rate and the Interest Rate as to
Eurodollar Rate Loans be greater than three and one quarter percent (3.25%) per
annum in excess of Adjusted Eurodollar Rate. Each adjustment to the Interest
Rate hereunder shall be effective, as to Prime Rate Loans, as of the first day
of the month following Lender's receipt of Borrower's Section 9.6(a)(ii) annual
audited financial statements and, as to Eurodollar Rate Loans, for Eurodollar
Rate Loans made after the first day of such month.
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(f) (i) Otherwise than pursuant to this Section 3.1(f), Ultralife
(UK) shall not be liable to pay any amount for taxes imposed by the
UK Inland Revenue by virtue of Lender being a "person whose usual
place of abode is outside the United Kingdom" and not a bank for the
purposes of Section 349 of the "Income and Corporation Taxes Act"
(1988).
(ii) Where, pursuant to Section 3.1(f)(i) above, Ultralife
(UK) makes a deduction (a "Required Deduction") in respect of any
interest payment to Lender, Ultralife (UK) shall, on the date on
which such interest is due to be paid to Lender, advance to Lender
an interest free, unsecured loan in an amount equal to the amount of
such Required Deduction (an "Interest Advance") repayable in
accordance with Section 3.1(f)(iii).
(iii) Each Interest Advance shall be repayable to Lender
immediately following payment by the Inland Revenue, to the Lender,
of an amount equal to the Required Deduction.
(iv) Ultralife (UK) agrees to provide to Lender (and, for the
avoidance of doubt, Lender shall be under no obligation to repay any
Interest Advance unless Ultralife (UK) complies with the provisions
of this Section 3.1(f)(iv)):
(A) a tax deduction certificate in relation to the Required
Deduction; and
(B) such other documents as are required by Lender to enable
it to obtain a repayment equal to the amount of the
Required Deduction.
(v) In the event that Ultralife (UK) receives any written
notification from the Inland Revenue requiring it to make payments
in respect of any Required Deduction otherwise than in the manner
provided for in this Section 3.1(f), then the parties shall make
such amendments to this Section 3.1(f) as may be necessary to comply
with the terms of such notification from the Inland Revenue and so
far as possible to put the parties in the same position as they
would have been had the provisions of Sections 3.1(f)(ii), (iii),
and (iv) been implemented.
3.2 Closing Fee. Borrowers shall pay to Lender as a closing fee the amount
of $150,000.00, which shall be fully earned as of the date hereof and payable
one-half on the date hereof and one-half on the first to occur of the first
anniversary of the date hereof or the termination of this Agreement.
3.3 Intentionally Omitted.
3.4 Servicing Fee. Borrowers shall pay to Lender monthly a servicing fee
in an amount equal to $1,000.00 in respect of Lender's services for each month
(or part thereof) while this Agreement remains in effect and for so long
thereafter as any of the Obligations are outstanding, which fee shall be fully
earned as of and payable in advance on the date hereof and on the first day of
each month hereafter.
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3.5 Unused Line Fee. Parent shall pay to Lender monthly an unused line fee
at a rate equal to one quarter of one (.25%) percent per annum calculated upon
the amount by which the Maximum Credit exceeds the average daily principal
balance of the outstanding Loans and Letter of Credit Accommodations during the
immediately preceding month (or part thereof) while this Agreement is in effect
and for so long thereafter as any of the Obligations are outstanding, which fee
shall be payable on the first day of each month in arrears.
3.6 Changes in Laws and Increased Costs of Loans.
(a) Notwithstanding anything to the contrary contained herein, all
Eurodollar Rate Loans shall, upon notice by Lender to Borrowers, convert to
Prime Rate Loans in the event that (i) any change in applicable law or
regulation (or the interpretation or administration thereof) shall either (A)
make it unlawful for Lender, Reference Bank or any participant to make or
maintain Eurodollar Rate Loans or to comply with the terms hereof in connection
with the Eurodollar Rate Loans, or (B) shall result in the increase in the costs
to Lender, Reference Bank or any participant of making or maintaining any
Eurodollar Rate Loans by an amount deemed by Lender to be material, or (C)
reduce the amounts received or receivable by Lender in respect thereof, by an
amount deemed by Lender to be material or (ii) the cost to Lender, Reference
Bank or any participant of making or maintaining any Eurodollar Rate Loans shall
otherwise increase by an amount deemed by Lender to be material. Borrowers shall
pay to Lender, upon demand by Lender (or Lender may, at its option, charge any
loan account of Borrowers) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any loss (including loss of
anticipated profits), cost or expense incurred by such person as a result of the
foregoing, including, without limitation, any such loss, cost or expense
incurred by reason of the liquidation or reemployment of deposits or other funds
acquired by such person to make or maintain the Eurodollar Rate Loans or any
portion thereof. A certificate of Lender setting forth the basis for the
determination of such amount necessary to compensate Lender as aforesaid shall
be delivered to Borrowers and shall be conclusive, absent manifest error.
(b) If any payments or prepayments in respect of the Eurodollar Rate
Loans are received by Lender other than on the last day of the applicable
Interest Period (whether pursuant to acceleration, upon maturity or otherwise),
including any payments pursuant to the application of collections under Section
6.3 or any other payments made with the proceeds of Collateral, Borrowers shall
pay to Lender upon demand by Lender (or Lender may, at its option, charge any
loan account of Borrowers) any amounts required to compensate Lender, the
Reference Bank or any participant with Lender for any additional loss (including
loss of anticipated profits), cost or expense incurred by such person as a
result of such prepayment or payment, including, without limitation, any loss,
cost or expense incurred by reason of the liquidation or reemployment of
deposits or other funds acquired by such person to make or maintain such
Eurodollar Rate Loans or any portion thereof. Lender shall apply prepayments and
payments made on the Loans first to the Prime Rate Loans of the type of Loan
(either Revolving Loans or Term Loans) being repaid and thereafter to Eurodollar
Rate Loans of the type of Loan being repaid and, so long as no Event of Default
exists or has occurred and is continuing, Lender will hold such payments as cash
collateral to apply to the Eurodollar Rate Loans upon the first to occur of the
expiration of the applicable Interest Period or such time as no cost or expense
would be incurred by Borrowers for the prepayment of such Eurodollar Rate Loan.
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4. CONDITIONS PRECEDENT
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received, in form and substance satisfactory
to Lender, all releases, terminations and such other documents as Lender may
request to evidence and effectuate the termination by the existing lender or
lenders to Borrowers of their respective financing arrangements with Borrowers
and the termination and release by it or them, as the case may be, of any
interest in and to any assets and properties of each Borrower and each Obligor,
duly authorized, executed and delivered by it or each of them, including, but
not limited to, (i) UCC termination statements for all UCC financing statements
previously filed by it or any of them or their predecessors, as secured party
and any Borrower or any Obligor, as debtor and (ii) satisfactions and discharges
of any mortgages, deeds of trust or deeds to secure debt by any Borrower or any
Obligor in favor of such existing lender or lenders, in form acceptable for
recording in the appropriate government office;
(b) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority
security interests in and liens upon the Collateral and any other property which
is intended to be security for the Obligations or the liability of any Obligor
in respect thereof, subject only to the security interests and liens permitted
herein or in the other Financing Agreements;
(c) all requisite corporate action and proceedings in connection
with this Agreement and the other Financing Agreements shall be satisfactory in
form and substance to Lender, and Lender shall have received all information and
copies of all documents, including records of requisite corporate action and
proceedings which Lender may have requested in connection therewith, such
documents where requested by Lender or its counsel to be certified by
appropriate corporate officers or governmental authorities;
(d) no material adverse change shall have occurred in the assets,
business or prospects of any Borrower since the date of Lender's latest field
examination and no change or event shall have occurred which would impair the
ability of any Borrower or any Obligor to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of Lender
to enforce the Obligations or realize upon the Collateral;
(e) Lender shall have completed a field review of the Records and
such other information with respect to the Collateral as Lender may require to
determine the amount of Revolving Loans available to Parent, the results of
which shall be satisfactory to Lender, not more than three (3) business days
prior to the date hereof;
(f) Lender shall have received, in form and substance satisfactory
to Lender, all consents, waivers, acknowledgments and other agreements from
third persons which Lender may deem necessary or desirable in order to permit,
protect and perfect its security interests in and liens upon the Collateral or
to effectuate the provisions or purposes of this Agreement and the other
Financing Agreements, including acknowledgments by lessors, mortgagees and
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warehousemen of Lender's security interests in the Collateral, waivers by such
persons of any security interests, liens or other claims by such persons to the
Collateral and agreements permitting Lender access to, and the right to remain
on, the premises to exercise its rights and remedies and otherwise deal with the
Collateral;
(g) the sum of (i) the Excess Availability as determined by Lender,
as of the date hereof, after giving effect to the initial Loans made or to be
made and Letter of Credit Accommodations issued or to be issued in connection
with the initial transactions hereunder plus (ii) the value of the Parent's
Eligible Investments, as reasonably determined by Lender, plus (iii) the balance
of the undrawn amount of the Term Loans under Section 2.3 shall not be less than
$20,000,000.00;
(h) Lender shall have received evidence of insurance and loss payee
endorsements required hereunder and under the other Financing Agreements, in
form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(i) Lender shall have received, in form and substance satisfactory
to Lender, all instruments, agreements and documents necessary for Lender to
make Term Loans to Ultralife (UK) and to grant to Lender charges over all of
Ultralife (UK)'s assets and an undertaking by such subsidiary;
(j) Lender shall have received, in form and substance satisfactory
to Lender, such opinion letters of counsel to Borrowers with respect to the
Financing Agreements and such other matters as Lender may request;
(k) Lender shall have received a Borrowing Base Certificate setting
forth the Loans available to Parent as of the date hereof as completed in a
manner reasonably satisfactory to the Lender and duly authorized, executed and
delivered on behalf of Parent; and
(l) the other Financing Agreements and all instruments and documents
hereunder and thereunder shall have been duly executed and delivered to Lender,
in form and substance satisfactory to Lender.
4.2 Conditions Precedent to All Loans and Letter of Credit Accommodations.
Each of the following is an additional condition precedent to Lender making
Loans and Letter of Credit Accommodations to Parent and Ultralife (UK),
including the initial Loans and / or providing Letter of Credit Accommodations
and any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in the
other Financing Agreements shall be true and correct in all material respects
with the same effect as though such representations and warranties had been made
on and as of the date of the making of each such Loan or providing each such
Letter of Credit Accommodation and after giving effect thereto; and
(b) no Event of Default and no event or condition which, with notice
or passage of time or both, would constitute an Event of Default, shall exist or
have occurred and be
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continuing on and as of the date of the making of such Loan or providing each
such Letter of Credit Accommodation and after giving effect thereto.
5. GRANT OF SECURITY INTEREST
To secure payment and performance of all Obligations, each Borrower hereby
grants to Lender a continuing security interest in, a lien upon, and a right of
set off against, and hereby assigns to Lender as security, the following
property and interests in property of each Borrower, whether now owned or
hereafter acquired or existing, and wherever located (collectively, the
"Collateral"):
5.1 Accounts;
5.2 all present and future contract rights, general intangibles (including
tax and duty refunds, registered and unregistered patents, trademarks, service
marks, copyrights, trade names, applications for the foregoing, trade secrets,
goodwill, processes, drawings, blueprints, customer lists, licenses, whether as
licensor or licensee, choses in action and other claims and existing and future
leasehold interests in equipment, real estate and fixtures), chattel paper,
documents, instruments, securities and other investment property, letters of
credit, bankers' acceptances and guaranties;
5.3 all present and future monies, securities, credit balances, deposits,
deposit accounts and other property of each Borrower now or hereafter held or
received by or in transit to Lender or its affiliates or at any other depository
or other institution from or for the account of such Borrower, whether for
safekeeping, pledge, custody, transmission, collection or otherwise, and all
present and future liens, security interests, rights, remedies, title and
interest in, to and in respect of Accounts and other Collateral, including (a)
rights and remedies under or relating to guaranties, contracts of suretyship,
letters of credit and credit and other insurance related to the Collateral, (b)
rights of stoppage in transit, replevin, repossession, reclamation and other
rights and remedies of an unpaid vendor, lienor or secured party, (c) goods
described in invoices, documents, contracts or instruments with respect to, or
otherwise representing or evidencing, Accounts or other Collateral, including
returned, repossessed and reclaimed goods, and (d) deposits by and property of
account debtors or other persons securing the obligations of account debtors;
5.4 Inventory;
5.5 Equipment;
5.6 Investment Property (provided that the Lender's pledge of share
capital of Ultralife (UK) shall not exceed sixty six (66%) percent thereof);
5.7 Records; and
5.8 all products and proceeds of the foregoing, in any form, including
insurance proceeds and all claims against third parties for loss or damage to or
destruction of any or all of the foregoing.
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6. COLLECTION AND ADMINISTRATION
6.1 Borrowers' Loan Account. Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Loans, Letter of
Credit Accommodations and other Obligations and the Collateral, (b) all payments
made by or on behalf of Borrowers and (c) all other appropriate debits and
credits as provided in this Agreement, including fees, charges, costs, expenses
and interest. All entries in the loan account(s) shall be made in accordance
with Lender's customary practices as in effect from time to time.
6.2 Statements. Lender shall render to Parent each month a statement
setting forth the balance in the Borrowers' loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrowers and conclusively binding
upon Borrowers as an account stated except to the extent that Lender receives a
written notice from Borrowers of any specific exceptions of Borrowers thereto
within forty-five (45) days after the date such statement has been mailed by
Lender. Until such time as Lender shall have rendered to Parent a written
statement as provided above, the balance in Borrowers' loan account(s) shall be
presumptive evidence of the amounts due and owing to Lender by Borrower.
6.3 Collection of Accounts.
(a) Borrowers shall establish and maintain, at their expense,
blocked accounts or lockboxes and related blocked accounts (in either case,
"Blocked Accounts"), as Lender may specify, with such banks as are acceptable to
Lender into which Borrowers shall promptly deposit and direct its account
debtors to directly remit all payments on Accounts and all payments constituting
proceeds of Inventory or other Collateral in the identical form in which such
payments are made, whether by cash, check or other manner. The banks at which
the Blocked Accounts are established shall enter into an agreement, in form and
substance satisfactory to Lender, providing that all items received or deposited
in the Blocked Accounts are the property of Lender, that the depository bank has
no lien upon, or right to setoff against, the Blocked Accounts, the items
received for deposit therein, or the funds from time to time on deposit therein
and that the depository bank will wire, or otherwise transfer, in immediately
available funds, on a daily basis, at such time as Lender shall direct, all
funds received or deposited into the Blocked Accounts to such bank account of
Lender as Lender may from time to time designate for such purpose ("Payment
Account"). Lender shall instruct the depository banks at which the Blocked
Accounts are maintained to transfer the funds on deposit in the Blocked Accounts
to such operating bank account of Borrowers as Borrowers may specify in writing
to Lender until such time as Lender shall notify the depository bank otherwise.
Lender may instruct the depository banks at which the Blocked Accounts are
maintained to transfer all funds received or deposited into the Blocked Accounts
to the Payment Account at any time that either: (i) an Event of Default, or
event which with notice or passage of time or both would constitute an Event of
Default, shall exist or have occurred, or (ii) Borrowers shall have failed to
deliver any Borrowing Base Certificate in accordance with the terms hereof, or
(iii) upon Lender's good faith belief that any information contained in any
Borrowing Base Certificate is incomplete, inaccurate or misleading, or (iv)
Borrower's Cash Position is equal to or less than $3,000,000.00, or (v) Parent
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requests a Revolving Loan and for so long as any Revolving Loan is outstanding.
Borrowers agree that all payments made to such Blocked Accounts or other funds
received and collected by Lender, whether on the Accounts or as proceeds of
Inventory or other Collateral or otherwise shall be the property of Lender.
(b) For purposes of calculating the amount of the Loans available to
Borrowers, such payments will be applied (conditional upon final collection) to
the Obligations on the business day of receipt by Lender of immediately
available funds in the Payment Account provided such payments and notice thereof
are received in accordance with Lender's usual and customary practices as in
effect from time to time and within sufficient time to credit Borrowers' loan
account on such day, and if not, then on the next business day. For the purposes
of calculating interest on the Obligations, such payments or other funds
received will be applied (conditional upon final collection) to the Obligations
one (1) business day(s) following the date of receipt of immediately available
funds by Lender in the Payment Account provided such payments or other funds and
notice thereof are received in accordance with Lender's usual and customary
practices as in effect from time to time and within sufficient time to credit
Borrowers' loan account on such day, and if not, then on the next business day.
(c) Each Borrower and all of its affiliates, subsidiaries,
shareholders, directors, employees or agents shall, acting as trustee for
Lender, receive, as the property of Lender, any monies, checks, notes, drafts or
any other payment relating to and/or proceeds of Accounts or other Collateral
which come into their possession or under their control and immediately upon
receipt thereof, shall deposit or cause the same to be deposited in the Blocked
Accounts, or remit the same or cause the same to be remitted, in kind, to
Lender. In no event shall the same be commingled with Borrowers' own funds. Each
Borrower agrees to reimburse Lender on demand for any amounts owed or paid to
any bank at which a Blocked Account is established or any other bank or person
involved in the transfer of funds to or from the Blocked Accounts arising out of
Lender's payments to or indemnification of such bank or person. The obligation
of Borrowers to reimburse Lender for such amounts pursuant to this Section 6.3
shall survive the termination or non-renewal of this Agreement.
6.4 Payments. All Obligations shall be payable to the Payment Account as
provided in Section 6.3 or such other place as Lender may designate from time to
time. Lender may apply payments received or collected from Borrowers or for the
account of Borrowers (including the monetary proceeds of collections or of
realization upon any Collateral) to such of the Obligations, whether or not then
due, in such order and manner as Lender determines. At Lender's option, all
principal, interest, fees, costs, expenses and other charges provided for in
this Agreement or the other Financing Agreements may be charged directly to the
loan account(s) of Borrowers. Borrowers shall make all payments to Lender on the
Obligations free and clear of, and without deduction or withholding for or on
account of, any setoff, counterclaim, defense, duties, taxes, levies, imposts,
fees, deductions, withholding, restrictions or conditions of any kind. If any
taxes, levies, imposts, duties, charges, fees, deductions or withholdings
(collectively, "Taxes") are required to be withheld from any amounts payable to
Lender, the amounts so payable to Lender shall be increased to the extent
necessary to yield to Lender (after payment of all Taxes) interest or any other
amounts payable hereunder at the rates or in the amounts specified in this
Agreement. Whenever any Taxes are payable by a Borrower, as promptly as possible
thereafter, the applicable Borrower shall send to Lender a certified copy of an
original
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official receipt received by such Borrower showing payment thereof. If any
Borrower fails to pay any Taxes when due or fails to remit the required receipts
or other required documentary evidence, Borrowers shall indemnify and hold
Lender harmless for any incremental, interest, penalties, charges, costs and
expenses (including reasonable attorneys' fees and expenses) that Lender may
incur or pay as a result thereof. If after receipt of any payment of, or
proceeds of Collateral applied to the payment of, any of the Obligations, Lender
is required to surrender or return such payment or proceeds to any Person for
any reason, then the Obligations intended to be satisfied by such payment or
proceeds shall be reinstated and continue and this Agreement shall continue in
full force and effect as if such payment or proceeds had not been received by
Lender. Each Borrower shall be liable to pay to Lender, and does hereby
indemnify and hold Lender harmless for the amount of any payments or proceeds
surrendered or returned. This Section 6.4 shall remain effective notwithstanding
any contrary action which may be taken by Lender in reliance upon such payment
or proceeds. This Section 6.4 shall survive the payment of the Obligations and
the termination or non-renewal of this Agreement.
6.5 Authorization to Make Loans. Lender is authorized to make the Loans
and provide the Letter of Credit Accommodations based upon telephonic or other
instructions received from anyone purporting to be an officer of a Borrower or
other authorized person or, at the discretion of Lender, if such Loans are
necessary to satisfy any Obligations. All requests for Loans or Letter of Credit
Accommodations hereunder shall specify the date on which the requested advance
is to be made or Letter of Credit Accommodations established (which day shall be
a business day) and the amount of the requested Loan. Requests received after
11:00 a.m. Eastern time on any day shall be deemed to have been made as of the
opening of business on the immediately following business day. All Loans and
Letter of Credit Accommodations under this Agreement shall be conclusively
presumed to have been made to, and at the request of and for the benefit of,
Borrowers when deposited to the credit of a Borrower or otherwise disbursed or
established in accordance with the instructions of a Borrower or in accordance
with the terms and conditions of this Agreement.
6.6 Use of Proceeds. Borrowers shall use the initial proceeds of the Loans
provided by Lender to Borrowers hereunder only for: (a) payments to each of the
persons listed in the disbursement direction letter furnished by Borrowers to
Lender on or about the date hereof and (b) costs, expenses and fees in
connection with the preparation, negotiation, execution and delivery of this
Agreement and the other Financing Agreements. All other Loans made or Letter of
Credit Accommodations provided by Lender to Borrowers pursuant to the provisions
hereof shall be used by Borrowers only for general operating, working capital
and other proper corporate purposes of Borrowers not otherwise prohibited by the
terms hereof. None of the proceeds will be used, directly or indirectly, for the
purpose of purchasing or carrying any margin security or for the purposes of
reducing or retiring any indebtedness which was originally incurred to purchase
or carry any margin security or for any other purpose which might cause any of
the Loans to be considered a "purpose credit" within the meaning of Regulation U
of the Board of Governors of the Federal Reserve System, as amended.
6.7 Appointment of Parent as Representative. Ultralife (UK) hereby
irrevocably appoints Parent, and Parent agrees to act under this Agreement, as
the agent and representative of Ultralife (UK) for all purposes under this
Agreement, including requesting Loans, selecting whether any Loan or portion
thereof is to bear interest as a Prime Rate Loan or Eurodollar Rate
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Loan, providing notices, Borrowing Base Certificates and other reports and
certificates from the Borrowers, and receiving any notices and communications to
the Borrowers from the Lender. Lender may rely, and shall be fully protected in
relying, on any notice, reports, requests, information or other communication
made or given by Parent whether in its own name, or on behalf of the Borrowers
and Lender shall have no obligation to make any inquiry or request any
confirmation from or on behalf of Ultralife (UK) as to the binding effect
thereof on all of the Borrowers.
7. COLLATERAL REPORTING AND COVENANTS
7.1 Collateral Reporting.
(a) Parent shall provide Lender with the following documents in a
form satisfactory to Lender:
(i) prior to the time that any Revolving Loans are outstanding
hereunder, on a monthly basis on or before the fifteenth (15th) day
of each month or more frequently at Parent's option or as Lender
may reasonably request, a Borrowing Base Certificate setting forth
Parent 's calculation of the Revolving Loans and Letter of Credit
Accommodations available to Parent pursuant to the terms and
conditions contained herein as of the last business day of the
immediately preceding month as to the Accounts and as of the last
day of the preceding month as to Inventory, duly completed and
executed by the chief financial officer or other appropriate
financial officer acceptable to Lender, together with all schedules
required pursuant to the terms of the Borrowing Base Certificate
duly completed (including, without limitation, a schedule of all
Accounts created, collections received and credit memos issued for
each day of the immediately preceding week); provided, that, without
limiting any other rights of Lender, upon Lender's request, Parent
shall provide Lender on a daily basis with a schedule of Accounts,
collections received and credits issued and on a monthly basis with
an inventory report in the event that at any time: (A) an Event of
Default or event which with notice or passage of time or both would
constitute an Event of Default, shall exist or have occurred, or (B)
Parent shall have failed to deliver any Borrowing Base Certificate
in accordance with the terms hereof, or (C) upon Lender's good faith
belief, any information contained in any Borrowing Base Certificate
is incomplete, inaccurate or misleading, or (D) Parent's Cash
Position is equal to or less than $3,000,000.00, or (E) Parent
requests a Revolving Loan and for so long as any Revolving Loan is
outstanding;
(ii) on a monthly basis or more frequently as Lender may
request, (A) perpetual inventory reports, (B) inventory reports by
category and (C) agings of accounts payable;
(iii) upon Lender's request, (A) copies of customer statements
and credit memos, remittances advices and reports, and copies of
deposit slips and bank statements, (B) copies of shipping and
delivery documents, and (C) copies of
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purchase orders, invoices and delivery of documents for Inventory
and Equipment acquired by any Borrower;
(iv) agings of accounts receivable on a monthly basis or more
frequently as Lender may request; and
(v) such other reports as to the Collateral as Lender shall
request from time to time.
(b) Nothing contained in any Borrowing Base Certificate shall be
deemed to limit, impair or otherwise affect the rights of Lender contained
herein and in the event of any conflict or inconsistency between the calculation
of the Revolving Loans and Letter of Credit Accommodations available to Parent
as set forth in any Borrowing Base Certificate and as determined by Lender, the
determination of Lender shall govern and be conclusive and binding upon Parent.
Without limiting the foregoing, Parent shall furnish to Lender any information
which Lender may reasonably request regarding the determination and calculation
of any of the amounts set forth in the Borrowing Base Certificate. If any
Borrowers' records or reports of the Collateral are prepared or maintained by an
accounting service, contractor, shipper or other agent, each Borrower hereby
irrevocably authorizes such service, contractor, shipper or agent to deliver
such records, reports and related documents to Lender and to follow Lender's
instructions with respect to further services at any time that an Event of
Default exists or has occurred and is continuing.
7.2 Accounts Covenants.
(a) Parent shall notify Lender promptly of: (i) any material delay
in Parent's performance of any of its obligations to any account debtor or the
assertion of any claims, offsets, defenses or counterclaims by any account
debtor, or any disputes with account debtors, or any settlement, adjustment or
compromise thereof, (ii) all material adverse information relating to the
financial condition of any account debtor and (iii) any event or circumstance
which, to Parent's knowledge would cause Lender to consider any then existing
Accounts as no longer constituting Eligible Accounts. No credit, discount,
allowance or extension or agreement for any of the foregoing shall be granted to
any account debtor without Lender's consent, except in the ordinary course of
Parent's business in accordance with Parent's past practices and policies. So
long as no Event of Default exists or has occurred and is continuing, Parent
shall settle, adjust or compromise any claim, offset, counterclaim or dispute
with any account debtor. At any time that an Event of Default exists or has
occurred and is continuing, Lender shall, at its option, have the exclusive
right to settle, adjust or compromise any claim, offset, counterclaim or dispute
with account debtors or grant any credits, discounts or allowances.
(b) Without limiting the obligation of Parent to deliver any other
information to Lender, Parent shall promptly report to Lender any return of
Inventory by any one account debtor if the Inventory so returned in such case
has a value in excess of $100,000.00. At any time that Inventory is returned,
reclaimed or repossessed, the Account (or portion thereof) which arose from the
sale of such returned, reclaimed or repossessed Inventory shall not be deemed an
Eligible Account. In the event any account debtor returns Inventory when an
Event of Default exists or has occurred and is continuing, Parent shall, upon
Lender's request, (i) hold the returned
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Inventory in trust for Lender, (ii) segregate all returned Inventory from all of
its other property, (iii) dispose of the returned Inventory solely according to
Lender's instructions, and (iv) not issue any credits, discounts or allowances
with respect thereto without Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, (ii) no payments shall be made thereon except payments
immediately delivered to Lender pursuant to the terms of this Agreement, (iii)
no credit, discount, allowance or extension or agreement for any of the
foregoing shall be granted to any account debtor except as reported to Lender in
accordance with this Agreement and except for credits, discounts, allowances or
extensions made or given in the ordinary course of Parent's business in
accordance with practices and policies previously disclosed to Lender, (iv)
there shall be no setoffs, deductions, contras, defenses, counterclaims or
disputes existing or asserted with respect thereto except as reported to Lender
in accordance with the terms of this Agreement, (v) none of the transactions
giving rise thereto will violate any applicable State or Federal laws or
regulations, all documentation relating thereto will be legally sufficient under
such laws and regulations and all such documentation will be legally enforceable
in accordance with its terms.
(d) Lender shall have the right at any time or times, in Lender's
name or in the name of a nominee of Lender, to verify the validity, amount or
any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
(e) Parent shall deliver or cause to be delivered to Lender, with
appropriate endorsement and assignment, with full recourse to Parent, all
chattel paper and instruments which Parent now owns or may at any time acquire
immediately upon Parent's receipt thereof, except as Lender may otherwise agree.
(f) Lender may, at any time or times that an Event of Default exists
or has occurred and is continuing, (i) notify any or all account debtors that
the Accounts have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all accounts debtors to make
payment of Accounts directly to Lender, (ii) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts or such other obligations, but without any duty
to do so, and Lender shall not be liable for its failure to collect or enforce
the payment thereof and (iv) take whatever other action Lender may deem
necessary or desirable for the protection of its interests. At any time that an
Event of Default exists or has occurred and is continuing, at Lender's request,
all invoices and statements sent to any account debtor shall state that the
Accounts and such other obligations have been assigned to Lender and are payable
directly and only to Lender and Parent shall deliver to Lender such originals of
documents evidencing the sale and delivery of goods or the performance of
services giving rise to any Accounts as Lender may require.
7.3 Inventory Covenants. With respect to the Inventory: (a) Parent shall
at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Parent's cost
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therefor and daily withdrawals therefrom and additions thereto; (b) at Lender's
request but no more than once a year if no Event of Default exists or has
occurred and is continuing or, if Revolving Loans are outstanding, upon Lender's
reasonable request from time to time Parent shall conduct a physical count of
the Inventory and promptly following such physical inventory shall supply Lender
with a report in the form and with such specificity as may be reasonably
satisfactory to Lender concerning such physical count; (c) upon Lender's request
but no more than once a year if no Event of Default exists or has occurred and
is continuing, or, if Revolving Loans are outstanding, upon Lender's reasonable
request from time to time Parent shall, at its expense, deliver or cause to be
delivered to Lender appraisals as to the Inventory in form, scope and
methodology satisfactory to the Lender and from an appraiser satisfactory to the
Lender and addressed to Lender or upon which Lender is expressly permitted to
rely; (d) Parent shall not remove any Inventory from the locations set forth or
permitted herein, without the prior written consent of Lender, except for sales
of Inventory in the ordinary course of Parent's business and except to move
Inventory directly from one location set forth or permitted herein to another
such location; (e) Parent shall produce, use, store and maintain the Inventory
with all reasonable care and caution and in accordance with applicable standards
of any insurance and in conformity with applicable laws (including the
requirements of the Federal Fair Labor Standards Act of 1938, as amended and all
rules, regulations and orders related thereto); (f) Parent assumes all
responsibility and liability arising from or relating to the production, use,
sale or other disposition of the Inventory; (g) Parent shall not sell Inventory
to any customer on approval, or any other basis which entitles the customer to
return or may Parent Borrower to repurchase such Inventory other than pursuant
to Parent's standard warranty provisions; (h) Borrower shall keep the Inventory
in good and marketable condition; and (i) Parent shall not, without prior
written notice to Lender, acquire or accept any Inventory on consignment or
approval.
7.4 Equipment Covenants. With respect to the Equipment: (a) upon Lender's
request but no more than once a year if no Event of Default exists or has
occurred and is continuing, each Borrower shall, at their expense, at any time
or times as Lender may request, deliver or cause to be delivered to Lender
written reports or appraisals as to the Equipment in form, scope and methodology
acceptable to Lender and by an appraiser acceptable to Lender; (b) Borrowers
shall keep the Equipment in good order, repair, running and marketable condition
(ordinary wear and tear excepted); (c) Borrowers shall use the Equipment with
all reasonable care and caution and in accordance with applicable standards of
any insurance and in conformity with all applicable laws; (d) the Equipment is
and shall be used in Borrowers' business and not for personal, family, household
or farming use; (e) except as otherwise permitted herein, Borrowers shall not
remove any Equipment from the locations set forth or permitted herein, except to
the extent necessary to have any Equipment repaired or maintained in the
ordinary course of the business of Borrowers or to move Equipment directly from
one location set forth or permitted herein to another such location and except
for the movement of motor vehicles used by or for the benefit of Borrowers in
the ordinary course of business; (f) the Equipment is now and shall remain
personal property and Borrowers shall not permit any of the Equipment to be or
become a part of or affixed to real property; and (g) Borrowers assume all
responsibility and liability arising from the use of the Equipment.
7.5 Power of Attorney. Each Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as such Borrower's true
and lawful attorney-in-fact, and authorizes Lender, in Borrower's or Lender's
name, to: (a) at any time an Event of
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Default exists or has occurred and is continuing (i) demand payment on Accounts
or other proceeds of Inventory or other Collateral, (ii) enforce payment of
Accounts by legal proceedings or otherwise, (iii) exercise all of such
Borrower's rights and remedies to collect any Account or other Collateral, (iv)
sell or assign any Account upon such terms, for such amount and at such time or
times as the Lender deems advisable, (v) settle, adjust, compromise, extend or
renew an Account, (vi) discharge and release any Account, (vii) prepare, file
and sign such Borrower's name on any proof of claim in bankruptcy or other
similar document against an account debtor, (viii) notify the post office
authorities to change the address for delivery of such Borrower's mail to an
address designated by Lender, and open and dispose of all mail addressed to
Borrower, and (ix) do all acts and things which are necessary, in Lender's
determination, to fulfill such Borrower's obligations under this Agreement and
the other Financing Agreements and (b) at any time to (i) take control in any
manner of any item of payment or proceeds thereof, (ii) have access to any
lockbox or postal box into which Borrower's mail is deposited, (iii) endorse
such Borrower's name upon any items of payment or proceeds thereof and deposit
the same in the Lender's account for application to the Obligations, (iv)
endorse such Borrower's name upon any chattel paper, document, instrument,
invoice, or similar document or agreement relating to any Account or any goods
pertaining thereto or any other Collateral, (v) sign such Borrower's name on any
verification of Accounts and notices thereof to account debtors and (vi) execute
in Borrower's name and file any UCC financing statements or amendments thereto.
Each Borrower hereby releases Lender and its officers, employees and designees
from any liabilities arising from any act or acts under this power of attorney
and in furtherance thereof, whether of omission or commission, except as a
result of Lender's own gross negligence or willful misconduct as determined
pursuant to a final non-appealable order of a court of competent jurisdiction.
7.6 Right to Cure. Lender may, at its option, upon notice to Borrowers,
(a) cure any default by any Borrower under any agreement with a third party or
pay or bond on appeal any judgment entered against any Borrower, (b) discharge
taxes, liens, security interests or other encumbrances at any time levied on or
existing with respect to the Collateral and (c) pay any amount, incur any
expense or perform any act which, in Lender's judgment, is necessary or
appropriate to preserve, protect, insure or maintain the Collateral and the
rights of Lender with respect thereto. Lender may add any amounts so expended to
the Obligations and charge Borrowers' account therefor, such amounts to be
repayable by Borrowers on demand. Lender shall be under no obligation to effect
such cure, payment or bonding and shall not, by doing so, be deemed to have
assumed any obligation or liability of Borrowers. Any payment made or other
action taken by Lender under this Section shall be without prejudice to any
right to assert an Event of Default hereunder and to proceed accordingly.
7.7 Access to Premises. From time to time as requested by Lender, at the
cost and expense of Borrowers, and without unreasonably interrupting the
business operations of Borrowers (a) Lender or its designee shall have complete
access to all of Borrowers' premises during normal business hours and after
notice to Borrowers, as the case may be, or at any time and without notice to
Borrowers, as the case may be, if an Event of Default exists or has occurred and
is continuing, for the purposes of inspecting, verifying and auditing the
Collateral and all of Borrowers' books and records, including the Records, and
(b) Borrowers shall promptly furnish to Lender such copies of such books and
records or extracts therefrom as Lender may request, and (c) use during normal
business hours such of Borrowers' personnel, equipment, supplies and
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premises as may be reasonably necessary for the foregoing and if an Event of
Default exists or has occurred and is continuing for the collection of Accounts
and realization of other Collateral.
8. REPRESENTATIONS AND WARRANTIES
Borrowers hereby represent and warrant to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrowers:
8.1 Corporate Existence, Power and Authority; Subsidiaries. Parent is a
corporation duly organized and in good standing under the laws of its state of
incorporation and Ultralife (UK) is a limited liability company duly organized
and validly existing under the laws of England. Each Borrower is duly qualified
as a foreign corporation and is in good standing in all states or other
jurisdictions where the nature and extent of the business transacted by it or
the ownership of assets makes such qualification necessary, except for those
jurisdictions in which the failure to so qualify would not have a material
adverse effect on either Borrower's financial condition, results of operation or
business or the rights of Lender in or to any of the Collateral. The execution,
delivery and performance of this Agreement, the other Financing Agreements and
the transactions contemplated hereunder and thereunder are all within each
Borrower's corporate powers, have been duly authorized and are not in
contravention of law or the terms of either Borrower's certificate of
incorporation, by-laws, or other organizational documentation, or any indenture,
agreement or undertaking to which either Borrower is a party or by which either
Borrower or their respective property are bound. This Agreement and the other
Financing Agreements constitute legal, valid and binding obligations of each
Borrower enforceable in accordance with their respective terms. Borrowers do not
have any subsidiaries except as set forth on the Information Certificate.
8.2 Financial Statements; No Material Adverse Change. All financial
statements relating to Borrowers which have been or may hereafter be delivered
by either Borrower to Lender have been prepared in accordance with GAAP and
fairly present the financial condition and the results of operation of Borrowers
as at the dates and for the periods set forth therein. Except as disclosed in
any interim financial statements furnished by Borrowers to Lender prior to the
date of this Agreement, there has been no material adverse change in the assets,
liabilities, properties and condition, financial or otherwise, of either
Borrower, since the date of the most recent audited financial statements
furnished by Borrowers to Lender prior to the date of this Agreement.
8.3 Chief Executive Office; Collateral Locations. The chief executive
offices of Borrowers and Borrowers Records concerning Accounts are located only
at the addresses set forth below and their only other places of business and the
only other locations of Collateral, if any, are the addresses set forth in the
Information Certificate, subject to the right of Borrowers to establish new
locations in accordance with Section 9.2 below. The Information Certificate
correctly identifies any of such locations which are not owned by Borrowers and
sets forth the owners and/or operators thereof and to the best of Borrowers'
knowledge, the holders of any mortgages on such locations.
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8.4 Priority of Liens; Title to Properties. The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof. Each of the
Borrowers has good and marketable title to all of its properties and assets
subject to no liens, mortgages, pledges, security interests, encumbrances or
charges of any kind, except those granted to Lender and such others as are
specifically listed on Schedule 8.4 hereto or permitted under Section 9.8
hereof.
8.5 Tax Returns. Each Borrower has filed, or caused to be filed, in a
timely manner all tax returns, reports and declarations which are required to be
filed by it (without requests for extension except as previously disclosed in
writing to Lender). All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Each Borrower
has paid or caused to be paid all taxes due and payable or claimed due and
payable in any assessment received by it, except taxes the validity of which are
being contested in good faith by appropriate proceedings diligently pursued and
available to Borrowers and with respect to which adequate reserves have been set
aside on its books. Adequate provision has been made for the payment of all
accrued and unpaid Federal, State, county, local, foreign and other taxes
whether or not yet due and payable and whether or not disputed.
8.6 Litigation. Except as set forth on the Information Certificate, there
is no present investigation by any governmental agency pending, or to the best
of Borrowers' 's knowledge threatened, against or affecting either Borrower, or
their assets or business and there is no action, suit, proceeding or claim by
any Person pending, or to the best of Borrowers' knowledge threatened, against
either Borrower or their assets or goodwill, or against or affecting any
transactions contemplated by this Agreement, which if adversely determined
against either Borrower would result in any material adverse change in the
assets, business or prospects of any Borrower or would impair the ability of
either Borrower to perform its obligations hereunder or under any of the other
Financing Agreements to which it is a party or of Lender to enforce any
Obligations or realize upon any Collateral.
8.7 Compliance with Other Agreements and Applicable Laws. Neither Borrower
is in default in any material respect under, or in violation in any material
respect of any of the terms of, any agreement, contract, instrument, lease or
other commitment to which it is a party or by which it or any material portion
of its assets are bound and each Borrower is in compliance in all material
respects with all applicable provisions of laws, rules, regulations, licenses,
permits, approvals and orders of any foreign, Federal, State or local
governmental authority.
8.8 Bank Accounts. All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrowers maintained at any bank or
other financial institution are set forth on Schedule 8.8 hereto, subject to the
right of Borrowers to establish new accounts in accordance with Section 9.13
below.
8.9 Accuracy and Completeness of Information. All information furnished by
or on behalf of Borrowers in writing to Lender in connection with this Agreement
or any of the other Financing Agreements or any transaction contemplated hereby
or thereby, including all information on the Information Certificate is true and
correct in all material respects on the date
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as of which such information is dated or certified and does not omit any
material fact necessary in order to make such information not misleading. No
event or circumstance has occurred which has had or could reasonably be expected
to have a material adverse affect on the business, assets or prospects of any
Borrower, which has not been fully and accurately disclosed to Lender in
writing.
8.10 Employee Benefits.
(a) Borrowers have not engaged in any transaction in connection with
which any Borrower or any of its ERISA Affiliates could be subject to either a
civil penalty assessed pursuant to Section 502(i) of ERISA or a tax imposed by
Section 4975 of the Code, including any accumulated funding deficiency described
in Section 8.10(c) hereof and any deficiency with respect to vested accrued
benefits described in Section 8.10(d) hereof.
(b) No liability to the Pension Benefit Guaranty Corporation has
been or is expected by Borrowers to be incurred with respect to any employee
benefit plan of any Borrower or any of its ERISA Affiliates. There has been no
reportable event (within the meaning of Section 4043(b) of ERISA) or any other
event or condition with respect to any employee pension benefit plan of any
Borrower or any of its ERISA Affiliates which presents a risk of termination of
any such plan by the Pension Benefit Guaranty Corporation.
(c) Full payment has been made of all amounts which any Borrower or
any of its ERISA Affiliates is required under Section 302 of ERISA and Section
412 of the Code to have paid under the terms of each employee benefit plan as
contributions to such plan as of the last day of the most recent fiscal year of
such plan ended prior to the date hereof, and no accumulated funding deficiency
(as defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, exists with respect to any employee benefit plan, including any penalty
or tax described in Section 8.10(a) hereof and any deficiency with respect to
vested accrued benefits described in Section 8.10(d) hereof.
(d) The current value of all vested accrued benefits under all
employee benefit plans maintained by Borrowers that are subject to Title IV of
ERISA does not exceed the current value of the assets of such plans allocable to
such vested accrued benefits, including any penalty or tax described in Section
8.10(a) hereof and any accumulated funding deficiency described in Section
8.10(c) hereof. The terms "current value" and "accrued benefit" have the
meanings specified in ERISA.
(e) Neither Borrower nor any of its ERISA Affiliates is or has ever
been obligated to contribute to any "multiemployer plan" (as such term is
defined in Section 4001(a)(3) of ERISA) that is subject to Title IV of ERISA.
8.11 Environmental Compliance.
(a) Except as set forth on Schedule 8.11 hereto, neither Borrower
has generated, used, stored, treated, transported, manufactured, handled,
produced or disposed of any Hazardous Materials, on or off its premises (whether
or not owned by it) in any manner which at any time violates any applicable
Environmental Law or any license, permit, certificate, approval or similar
authorization thereunder and the operations of each Borrower complies in all
material respects
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with all Environmental Laws and all licenses, permits, certificates, approvals
and similar authorizations thereunder.
(b) Except as set forth on Schedule 8.11 hereto, there has been no
investigation, proceeding, complaint, order, directive, claim, citation or
notice by any governmental authority or any other person nor is any pending or
to the best of Borrowers' 's knowledge threatened, with respect to any
non-compliance with or violation of the requirements of any Environmental Law by
either Borrower or the release, spill or discharge, threatened or actual, of any
Hazardous Material or the generation, use, storage, treatment, transportation,
manufacture, handling, production or disposal of any Hazardous Materials or any
other environmental, health or safety matter, which affects Borrowers or their
business, operations or assets or any properties at which either Borrower has
transported, stored or disposed of any Hazardous Materials.
(c) Neither Borrower has any material liability (contingent or
otherwise) in connection with a release, spill or discharge, threatened or
actual, of any Hazardous Materials or the generation, use, storage, treatment,
transportation, manufacture, handling, production or disposal of any Hazardous
Materials.
(d) Each Borrower has all licenses, permits, certificates, approvals
or similar authorizations required to be obtained or filed in connection with
the operations of Borrowers under any Environmental Law and all of such
licenses, permits, certificates, approvals or similar authorizations are valid
and in full force and effect.
8.12 Survival of Warranties; Cumulative. All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder, subject to changes that Borrower may
advise Lender of after the date hereof that are in compliance with the covenants
and other terms of this Agreement, and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrowers shall now or hereafter give, or cause to be given, to Lender.
9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 Maintenance of Existence. Each Borrower shall at all times preserve,
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on the business as presently or proposed to be
conducted. Borrowers shall give Lender thirty (30) days prior written notice of
any proposed change in its corporate name, which notice shall set forth the new
name and Borrowers shall deliver to Lender a copy of the amendment to the
Certificate of Incorporation of such Borrower providing for the name change
certified by the Secretary of State of the jurisdiction of incorporation of such
Borrower as soon as it is available.
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9.2 New Collateral Locations. Parent may open any new location within the
continental United States and Ultralife (UK) within the United Kingdom provided
Borrowers (a) give Lender thirty (30) days prior written notice of the intended
opening of any such new location (other than sales offices at which only office
Equipment of de minimis value and no Inventory will be maintained) and (b)
executes and delivers, or causes to be executed and delivered, to Lender such
agreements, documents, and instruments as Lender may deem reasonably necessary
or desirable to protect its interests in the Collateral at such location,
including UCC financing statements.
9.3 Compliance with Laws, Regulations, Etc.
(a) Borrowers shall, at all times, comply in all material respects
with all laws, rules, regulations, licenses, permits, approvals and orders
applicable to it and duly observe all requirements of any Federal, State or
local governmental authority, including the Employee Retirement Security Act of
1974, as amended, the Occupational Safety and Health Act of 1970, as amended,
the Fair Labor Standards Act of 1938, as amended, and all statutes, rules,
regulations, orders, permits and stipulations relating to environmental
pollution and employee health and safety, including all of the Environmental
Laws.
(b) Borrowers shall establish and maintain, at their expense, a
system to assure and monitor its continued compliance with all Environmental
Laws in all of its operations, which system shall include annual reviews of such
compliance by employees or agents of Borrowers who are familiar with the
requirements of the Environmental Laws. [As of the date of this Agreement,
Parent's environmental systems were described to Lender's counsel and no
additional requirements were recommended.] Copies of all environmental surveys,
audits, assessments, feasibility studies and results of remedial investigations
shall be promptly furnished, or caused to be furnished, by Borrowers to Lender.
Borrowers shall take prompt and appropriate action to respond to any
non-compliance with any of the Environmental Laws and shall regularly report to
Lender on such response.
(c) Borrowers shall give both oral and written notice to Lender
immediately upon either Borrowers' receipt of any notice of, or Borrower's
otherwise obtaining knowledge of, (i) the occurrence of any event involving the
release, spill or discharge, threatened or actual, of any Hazardous Material or
(ii) any investigation, proceeding, complaint, order, directive, claims,
citation or notice with respect to: (A) any non-compliance with or violation of
any Environmental Law by either Borrower or (B) the release, spill or discharge,
threatened or actual, of any Hazardous Material or (C) the generation, use,
storage, treatment, transportation, manufacture, handling, production or
disposal of any Hazardous Materials or (D) any other environmental, health or
safety matter, which affects Borrowers or their business, operations or assets
or any properties at which a Borrower transported, stored or disposed of any
Hazardous Materials.
(d) Without limiting the generality of the foregoing, whenever
Lender reasonably determines that there is non-compliance, or any condition
which requires any action by or on behalf of a Borrower in order to avoid any
material non-compliance, with any Environmental Law, Borrowers shall, at
Lender's request and Borrower's expense: (i) cause an independent environmental
engineer acceptable to Lender to conduct such tests of the site where such
Borrowers' non-compliance or alleged non-compliance with such Environmental Laws
has
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occurred as to such non-compliance and prepare and deliver to Lender a report as
to such non-compliance setting forth the results of such tests, a proposed plan
for responding to any environmental problems described therein, and an estimate
of the costs thereof and (ii) provide to Lender a supplemental report of such
engineer whenever the scope of such non-compliance, or Borrowers' response
thereto or the estimated costs thereof, shall change in any material respect.
(e) Borrowers shall indemnify and hold harmless Lender, its
directors, officers, employees, agents, invitees, representatives, successors
and assigns, from and against any and all losses, claims, damages, liabilities,
costs, and expenses (including attorneys' fees and legal expenses) directly or
indirectly arising out of or attributable to the use, generation, manufacture,
reproduction, storage, release, threatened release, spill, discharge, disposal
or presence of a Hazardous Material, including the costs of any required or
necessary repair, cleanup or other remedial work with respect to any property of
Borrowers and the preparation and implementation of any closure, remedial or
other required plans. All representations, warranties, covenants and
indemnifications in this Section 9.3 shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
9.4 Payment of Taxes and Claims. Borrowers shall duly pay and discharge
all taxes, assessments, contributions and governmental charges upon or against
it or its properties or assets, except for taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrowers and with respect to which adequate reserves have been set
aside on their books. Borrowers shall be liable for any tax or penalties imposed
on Lender as a result of the financing arrangements provided for herein and
Borrowers agree to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrowers such amount shall be added and deemed part of the Loans, provided,
that, nothing contained herein shall be construed to require Borrowers to pay
any income or franchise taxes attributable to the income of Lender from any
amounts charged or paid hereunder to Lender. The foregoing indemnity shall
survive the payment of the Obligations and the termination or non-renewal of
this Agreement.
9.5 Insurance. Borrowers shall, at all times, maintain with financially
sound and reputable insurers insurance with respect to the Collateral against
loss or damage and all other insurance of the kinds and in the amounts
customarily insured against or carried by corporations of established reputation
engaged in the same or similar businesses and similarly situated. Said policies
of insurance shall be satisfactory to Lender as to form, amount and insurer.
Borrowers shall furnish certificates, policies or endorsements to Lender as
Lender shall require as proof of such insurance, and, if Borrowers fail to do
so, Lender is authorized, but not required, to obtain such insurance at the
expense of Borrowers. All policies shall provide for at least thirty (30) days
prior written notice to Lender of any cancellation or reduction of coverage and
that Lender may act as attorney for Borrowers in obtaining, and at any time an
Event of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Borrowers shall cause Lender to be named
as a loss payee and an additional insured (but without any liability for any
premiums) under such insurance policies and Borrowers shall obtain
non-contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Lender as its interests may appear and further specify that Lender shall be
paid regardless of any act or omission by either Borrower or any of their
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affiliates. So long as Parent maintains a Cash Position equal to or in excess of
$3,000,000, no Revolving Loans are outstanding and no Event of Default exists or
has occurred and is continuing, Lender agrees that up to $5,000,000 of insurance
proceeds may be applied by Borrowers to the repair or replacement of Collateral
with Collateral of the same or greater value, utility and quality as
demonstrated to the reasonable satisfaction of Lender. If the foregoing
conditions are not satisfied, Lender, at its option, may apply any insurance
proceeds received by Lender at any time to the cost of repairs or replacement of
Collateral and/or to payment of the Obligations, whether or not then due, in any
order and in such manner as Lender may determine or hold such proceeds as cash
collateral for the Obligations.
9.6 Financial Statements and Other Information.
(a) Borrowers shall keep proper books and records in which true and
complete entries shall be made of all dealings or transactions of or in relation
to the Collateral and the business of Parent and its subsidiaries (including
Ultralife (UK)) in accordance with GAAP and Borrower shall furnish or cause to
be furnished to Lender: (i) within thirty (30) days after the end of each fiscal
month, monthly unaudited consolidated financial statements, and, unaudited
consolidating financial statements (including in each case balance sheets,
statements of income and loss, statements of cash flow, and statements of
shareholders' equity), all in reasonable detail, fairly presenting the financial
position and the results of the operations of Parent and its subsidiaries as of
the end of and through such fiscal month and (ii) within ninety (90) days after
the end of each fiscal year, audited consolidated financial statements and,
audited consolidating financial statements of Parent and its subsidiaries
(including in each case balance sheets, statements of income and loss,
statements of cash flow and statements of shareholders' equity), and the
accompanying notes thereto, all in reasonable detail, fairly presenting the
financial position and the results of the operations of Parent and its
subsidiaries as of the end of and for such fiscal year, together with the
unqualified opinion of independent certified public accountants, which
accountants shall be an independent accounting firm selected by Parent and
reasonably acceptable to Lender, that such financial statements have been
prepared in accordance with GAAP, and present fairly the results of operations
and financial condition of Parent and its subsidiaries as of the end of and for
the fiscal year then ended.
(b) Borrowers shall promptly notify Lender in writing of the details
of (i) any loss, damage, investigation, action, suit, proceeding or claim
relating to the Collateral or any other property which is security for the
Obligations or which would result in any material adverse change in any
Borrower's business, properties, assets, goodwill or condition, financial or
otherwise and (ii) the occurrence of any Event of Default or event which, with
the passage of time or giving of notice or both, would constitute an Event of
Default.
(c) Parent shall promptly notify Lender in writing in the event that
at any time after the delivery of a Borrowing Base Certificate by Parent to
Lender but prior to the delivery of the next Borrowing Base Certificate to be
delivered by Parent to Lender in accordance with the terms hereof: (i) at such
time as Revolving Loans are outstanding, the amount of Revolving Loans available
to Parent pursuant to the terms and conditions contained herein (calculated
without regard to the then outstanding Revolving Loans) is less than ninety
(90%) percent of the amount of Revolving Loans available to Parent pursuant to
the terms and conditions contained herein (calculated without regard to the then
outstanding Revolving Loans) as set forth in the
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most recent Borrowing Base Certificate previously delivered by Borrower to
Lender pursuant to Section 7.1 hereof, (ii) the Revolving Loans made by Lender
to Parent at such time exceed the amount of the Revolving Loans then available
to Borrower under the terms hereof as a result of any decrease in the amount of
Revolving Loans then available, and the amount of such excess, (iii) Excess
Availability plus the balance of the undrawn amount of the Term Loans under
Section 2.3 is less than $1,000,000.00 as a result of any decrease in the
amounts of Revolving Loans available to Parent pursuant to the terms and
conditions contained herein, or (iv) Parent's Cash Position is equal to or less
than $3,000,000.00.
(d) Parent shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which Parent
sends to its stockholders generally and copies of all reports and registration
statements which Parent files with the Securities and Exchange Commission, any
national securities exchange or the National Association of Securities Dealers,
Inc.
(e) Parent shall furnish or cause to be furnished to Lender such
budgets, forecasts, projections and other information respecting the Collateral
and the business of Borrowers, as Lender may, from time to time, reasonably
request. Subject to the provisions of Section 12.5 hereof, Lender is hereby
authorized to deliver a copy of any financial statement or any other information
relating to the business of Borrowers to any court or other government agency or
to any participant or assignee or prospective participant or assignee. Borrowers
hereby irrevocably authorize and direct all accountants or auditors to deliver
to Lender, at Borrowers's expense, copies of the financial statements of
Borrowers and any reports or management letters prepared by such accountants or
auditors on behalf of Borrowers and to disclose to Lender such information as
they may have regarding the business of Borrowers. Any documents, schedules,
invoices or other papers delivered to Lender may be destroyed or otherwise
disposed of by Lender one (1) year after the same are delivered to Lender,
except as otherwise designated by Parent to Lender in writing.
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc. Neither
Borrower shall, without the prior written consent of Lender, directly or
indirectly, (a) merge into or with or consolidate with any other Person or
permit any other Person to merge into or with or consolidate with it, or (b)
sell, assign, lease, transfer, abandon or otherwise dispose of any stock or
indebtedness it owns of another Person to any other Person or any of its assets
to any other Person (except for (i) sales of Inventory in the ordinary course of
business and (ii) the disposition of worn-out or obsolete Equipment or Equipment
no longer used in the business of Borrowers so long as (A) if an Event of
Default exists or has occurred and is continuing, any proceeds net of the
reasonable out-of-pocket costs incurred by Borrowers in such disposition are
paid to Lender and (B) such sales do not involve Equipment having an aggregate
fair market value in excess of $100,000.00 for all such Equipment disposed of in
any fiscal year of Borrowers ), or (c) form or acquire any subsidiaries, except
pursuant to a transaction permitted under Section 9.10(e) hereof provided that
such subsidiary shall enter into a guarantee and security agreement in favor of
and satisfactory to Lender and shall grant to Lender a first priority security
interest in all of its assets as security for the guarantee, or (d) wind up,
liquidate or dissolve or (e) agree to do any of the foregoing.
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9.8 Encumbrances. Neither Borrower shall create, incur, assume or suffer
to exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets or properties,
including the Collateral, except: (a) liens and security interests of Lender;
(b) liens securing the payment of taxes, either not yet overdue or the validity
of which are being contested in good faith by appropriate proceedings diligently
pursued and available to Borrowers and with respect to which adequate reserves
have been set aside on its books; (c) non-consensual statutory liens (other than
liens securing the payment of taxes) arising in the ordinary course of a
Borrower's business to the extent: (i) such liens secure indebtedness which is
not overdue or (ii) such liens secure indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to Borrowers, in each
case prior to the commencement of foreclosure or other similar proceedings and
with respect to which adequate reserves have been set aside on its books; (d)
zoning restrictions, easements, licenses, covenants and other restrictions
affecting the use of real property which do not interfere in any material
respect with the use of such real property or ordinary conduct of the business
of Borrowers as presently conducted thereon or materially impair the value of
the real property which may be subject thereto; (e) purchase money security
interests in Equipment (including capital leases) and purchase money mortgages
on real estate not to exceed $50,000.00 in the aggregate at any time outstanding
so long as such security interests and mortgages do not apply to any property of
Borrowers other than the Equipment or real estate so acquired, and the
indebtedness secured thereby does not exceed the cost of the Equipment or real
estate so acquired, as the case may be; and (f) the security interests and liens
set forth on Schedule 8.4 hereto including the security interest granted to the
Chase Manhattan Bank ("Chase") in certain cash and investment property to secure
the credit facilities described on Schedule 9.9.
9.9 Indebtedness. Neither Borrower shall incur, create, assume, become or
be liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, except: (a) the Obligations; (b) trade obligations and normal
accruals in the ordinary course of business not yet due and payable, or with
respect to which a Borrower is contesting in good faith the amount or validity
thereof by appropriate proceedings diligently pursued and available to such
Borrower, and with respect to which adequate reserves have been set aside on its
books; (c) purchase money indebtedness (including capital leases) to the extent
not incurred or secured by liens (including capital leases) in violation of any
other provision of this Agreement; (d) subordinated indebtedness (including
indebtedness convertible into equity securities of Borrowers) incurred in
connection with a transaction permitted under Section 9.10 (e)(i) hereof so long
as prior to the issuance thereof the terms of such indebtedness including the
subordination provisions thereof are satisfactory to Lender; and (e) the
indebtedness including the credit facilities and other indebtedness to Chase as
set forth on Schedule 9.9 hereto; provided, that, in respect of indebtedness
incurred under clauses (c) or (d) above or set forth on Schedule 9.9, (i)
Borrowers may only make regularly scheduled payments of principal and interest
in respect of such indebtedness in accordance with the terms of the agreement or
instrument evidencing or giving rise to such indebtedness as in effect on the
date hereof, (ii) Borrowers shall not, directly or indirectly, (A) amend,
modify, alter or change the terms of such indebtedness or any agreement,
document or instrument related thereto as in effect on the date hereof, or (B)
redeem, retire, defease, purchase or otherwise acquire such indebtedness, or set
aside or otherwise deposit or invest any sums for such purpose, and (iii)
Borrowers shall furnish to Lender all notices or
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demands in connection with such indebtedness either received by a Borrower or on
its behalf, promptly after the receipt thereof, or sent by a Borrower or on its
behalf, concurrently with the sending thereof, as the case may be.
9.10 Loans, Investments, Guarantees, Etc. Borrowers shall not, directly or
indirectly, make any loans or advance money or property to any person, or invest
in (by capital contribution, dividend or otherwise) or purchase or repurchase
the stock or indebtedness or all or a substantial part of the assets or property
of any person, or guarantee, assume, endorse, or otherwise become responsible
for (directly or indirectly) the indebtedness, performance, obligations or
dividends of any Person or agree to do any of the foregoing, except: (a) the
endorsement of instruments for collection or deposit in the ordinary course of
business; (b) investments in Eligible Investments; provided, that, as to the
foregoing, unless waived in writing by Lender, Borrowers shall take such actions
as are deemed necessary by Lender to perfect the security interest of Lender in
such investments; (c) investments in (i) 210 shares of Intermagnetics General
Corporation and (ii) in subsidiaries and affiliates made prior to the date
hereof, and as to Ultralife (UK) only, so long as Borrower's Cash Position
remains at $3,000,000, an additional $200,000 per month and as to all other
subsidiaries and affiliates in aggregate amount not to exceed at any time
$50,000; and (d) the loans, advances and guarantees set forth on Schedule 9.10
hereto; provided, that, as to such loans, advances and guarantees, (i) Borrowers
shall not, directly or indirectly, (A) amend, modify, alter or change the terms
of such loans, advances or guarantees or any agreement, document or instrument
related thereto, or (B) as to such guarantees, redeem, retire, defease, purchase
or otherwise acquire the obligations arising pursuant to such guarantees, or set
aside or otherwise deposit or invest any sums for such purpose, and (ii)
Borrowers shall furnish to Lender all notices or demands in connection with such
loans, advances or guarantees or other indebtedness subject to such guarantees
either received by Borrowers or on their behalf, promptly after the receipt
thereof, or sent by a Borrower or on their behalf, concurrently with the sending
thereof, as the case may be; and (e) loans and advances to and investments in
subsidiaries and joint ventures so long as Borrowers notify Lender thereof at
least ten (10) days prior to the consummation thereof and (i) the investment is
on a "cash neutral" basis to the Borrowers, as defined below, or (ii) if the
transaction is not cash neutral to the Borrowers and no Revolving Loans are
outstanding the aggregate amount of loans, advances and investments outstanding
does not exceed $2,000,000 more than the amount thereof outstanding on the date
hereof, provided that after giving effect to any such transaction, the Cash
Position of the Borrowers shall equal or exceed $3,000,000 and, provided,
further, that from the time that Revolving Loans are outstanding hereunder, the
foregoing $2,000,000 limit on the amount that can be invested, advanced or
loaned hereunder shall be reduced to $200,000 per year. For purposes hereof, a
transaction will be deemed to be cash neutral to Borrowers, if, after giving
effect to the transaction including the receipt by Borrowers of the net proceeds
of the issuance by Borrowers of equity securities (including convertible
securities) or subordinated debt securities arranged in connection with the
transaction, the Cash Position of the Borrowers will not decrease and will be
equal to $3,000,000 or more.
9.11 Dividends and Redemptions. Neither Borrower shall, directly or
indirectly, declare or pay any dividends on account of any shares of class of
capital stock of Borrowers now or hereafter outstanding, or set aside or
otherwise deposit or invest any sums for such purpose, or redeem, retire,
defease, purchase or otherwise acquire any shares of any class of capital stock
(or set aside or otherwise deposit or invest any sums for such purpose) for any
consideration other
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than common stock or apply or set apart any sum, or make any other distribution
(by reduction of capital or otherwise) in respect of any such shares or agree to
do any of the foregoing.
9.12 Transactions with Affiliates. Neither Borrower shall, directly or
indirectly, (a) purchase, acquire or lease any property from, or sell, transfer
or lease any property to, any officer, director, agent or other person
affiliated with any Borrower, except in the ordinary course of and pursuant to
the reasonable requirements of Borrower's business and upon fair and reasonable
terms no less favorable to the Borrowers than Borrower would obtain in a
comparable arm's length transaction with an unaffiliated person or (b) make any
payments of management, consulting or other fees for management or similar
services, or of any indebtedness owing to any officer, employee, shareholder,
director or other person affiliated with Borrowers except reasonable
compensation to officers, employees and directors for services rendered to
Borrowers in the ordinary course of business.
9.13 Additional Bank Accounts. Neither Borrower shall, directly or
indirectly, open, establish or maintain any deposit account, investment account
or any other account with any bank or other financial institution, other than
the Blocked Accounts and the accounts set forth in Schedule 8.8 hereto, except:
(a) as to any new or additional Blocked Accounts and other such new or
additional accounts which contain any Collateral or proceeds thereof, with the
prior written consent of Lender and subject to such conditions thereto as Lender
may establish and (b) as to any accounts used by Borrowers to make payments of
payroll, taxes or other obligations to third parties, after prior written notice
to Lender.
9.14 Intentionally Omitted
9.15 Adjusted Net Worth. Borrowers shall maintain Adjusted Net Worth of
not less than the amounts shown below during the periods corresponding thereto:
Period Amount
------ ------
Date hereof through March 31, 2001 $48,900,000
April 1, 2001 and thereafter $44,900,000
9.16 Costs and Expenses. Borrowers shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including: (a) all costs and
expenses of filing or recording (including Uniform Commercial Code financing
statement filing taxes and fees, documentary taxes, intangibles taxes and
mortgage recording taxes and fees, if applicable); (b) reasonable costs and
expenses and fees for insurance premiums, environmental audits, surveys,
assessments, engineering reports and inspections, appraisal fees and search
fees; (c) costs and expenses of remitting loan proceeds, collecting checks and
other items of payment, and establishing and maintaining the Blocked Accounts,
together with Lender's customary charges and fees with respect thereto; (d)
charges, fees or expenses charged by any bank or issuer in connection with the
Letter of Credit Accommodations; (e) costs and expenses of preserving and
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protecting the Collateral; (f) costs and expenses paid or incurred in connection
with obtaining payment of the Obligations, enforcing the security interests and
liens of Lender, selling or otherwise realizing upon the Collateral, and
otherwise enforcing the provisions of this Agreement and the other Financing
Agreements or defending any claims made or threatened against Lender arising out
of the transactions contemplated hereby and thereby (including preparations for
and consultations concerning any such matters); (g) all reasonable out-of-pocket
expenses and costs heretofore and from time to time hereafter incurred by Lender
during the course of periodic field examinations of the Collateral and
Borrowers' 's operations, plus a per diem charge at the rate of $650.00 per
person per day for Lender's examiners in the field and office; and (h) the fees
and disbursements of counsel (including legal assistants) to Lender in
connection with any of the foregoing. Lender agrees that with respect to field
examinations of the Borrowers and Obligors, so long as an Event of Default or
event or condition which with the passage of time or notice or both would
constitute an Event of Default does not exist and Parent's Excess Availability
plus the undrawn amount of the Term Loans under Section 2.3 hereof exceeds
$1,000,000, the aggregate annual per diem charges to Borrowers will not exceed
$13,000 for field examinations of the Parent (the field examinations of
Ultralife (UK) would also be capped at such amount) plus out-of-pocket expenses
and costs.
9.17 Compliance with ERISA.
(a) Borrowers shall not with respect to any "employee benefit plans"
maintained by Borrowers or any of their ERISA Affiliates: (i) terminate any of
such employee benefit plans so as to incur any liability to the Pension Benefit
Guaranty Corporation established pursuant to ERISA, (ii) allow or suffer to
exist any prohibited transaction involving any of such employee benefit plans or
any trust created thereunder which would subject a Borrower or such ERISA
Affiliate to a tax or penalty or other liability on prohibited transactions
imposed under Section 4975 of the Code or ERISA, (iii) fail to pay to any such
employee benefit plan any contribution which it is obligated to pay under
Section 302 of ERISA, Section 412 of the Code or the terms of such plan, (iv)
allow or suffer to exist any accumulated funding deficiency, whether or not
waived, with respect to any such employee benefit plan, (v) allow or suffer to
exist any occurrence of a reportable event or any other event or condition which
presents a material risk of termination by the Pension Benefit Guaranty
Corporation of any such employee benefit plan that is a single employer plan,
which termination could result in any liability to the Pension Benefit Guaranty
Corporation or (vi) incur any withdrawal liability with respect to any
multiemployer pension plan.
(b) As used in this Section 9.17, the terms "employee benefit
plans", "accumulated funding deficiency" and "reportable event" shall have the
respective meanings assigned to them in ERISA, and the term "prohibited
transaction" shall have the meaning assigned to it in Section 4975 of the Code
and ERISA.
9.18 Further Assurances. At the request of Lender at any time and from
time to time, Borrowers shall, at their expense, duly execute and deliver, or
cause to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time
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and from time to time request a certificate from an officer of Borrowers
representing that all conditions precedent to the making of Loans and providing
Letter of Credit Accommodations contained herein are satisfied. In the event of
such request by Lender, Lender may, at its option, cease to make any further
Loans or provide any further Letter of Credit Accommodations until Lender has
received such certificate and, in addition, Lender has determined that such
conditions are satisfied. Where permitted by law, Borrowers hereby authorize
Lender to execute and file one or more UCC financing statements signed only by
Lender.
10. EVENTS OF DEFAULT AND REMEDIES
10.1 Events of Default. The occurrence or existence of any one or more of
the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) (i) Any Borrower or any Obligor fails to pay when due any of the
Obligations or (ii) any Borrower or any Obligor fails to perform any of the
covenants contained in Section 9.1 (other than as to the maintenance of such
Borrower's or such Obligor's existence for which no cure period shall be
allowed), 9.3, 9.4, 9.5 (other than as to the maintenance of the required
insurance) and 9.6 of this Agreement and such failure shall continue for fifteen
(15) days; provided, that, such fifteen (15) day period shall not apply in the
case of: (A) any failure to observe any such covenant which is not capable of
being cured at all or within such fifteen (15) day period or which has been the
subject of a prior failure within a six (6) month period or (B) an intentional
breach of Borrower or any Obligor of any such covenant, or (iii) any Borrower or
any Obligor fails to perform any of the terms, covenants, conditions or
provisions contained in this Agreement or any of the other Financing Agreements
other than those described in Sections 10.1(a)(i) and 10.1(a)(ii) above;
(b) any representation, warranty or statement of fact made by any
Borrower or any Obligor to Lender in this Agreement, the other Financing
Agreements or any other agreement, schedule, confirmatory assignment or
otherwise shall when made or deemed made be false or misleading in any material
respect;
(c) any Obligor revokes, terminates or fails to perform any of the
terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
(d) any judgment for the payment of money is rendered against any
Borrower or any Obligor in excess of $125,000.00 in any one case or in excess of
$250,000.00 in the aggregate and shall remain undischarged or unvacated for a
period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against any
Borrower or any Obligor or any of their assets;
(e) any Obligor (being a natural person or a general partner of an
Obligor which is a partnership) dies or any Borrower or any Obligor, which is a
partnership, limited liability company, limited liability partnership or a
corporation, dissolves or suspends or discontinues doing business;
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(f) any Borrower or any Obligor becomes insolvent (however defined
or evidenced), makes an assignment for the benefit of creditors, makes or sends
notice of a bulk transfer or calls a meeting of its creditors or principal
creditors;
(g) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at law or
in equity) is filed against any Borrower or any Obligor or all or any part of
its properties and such petition or application is not dismissed within thirty
(30) days after the date of its filing or any Borrower or any Obligor shall file
any answer admitting or not contesting such petition or application or indicates
its consent to, acquiescence in or approval of, any such action or proceeding or
the relief requested is granted sooner;
(h) a case or proceeding under the bankruptcy laws of the United
States of America now or hereafter in effect or under any insolvency,
reorganization, receivership, readjustment of debt, dissolution or liquidation
law or statute of any jurisdiction now or hereafter in effect (whether at a law
or equity) is filed by any Borrower or any Obligor or for all or any part of its
property; or
(i) any default by any Borrower or any Obligor under any agreement,
document or instrument relating to any indebtedness for borrowed money owing to
any person other than Lender, or any capitalized lease obligations, contingent
indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any person other than Lender, in any case
in an amount in excess of $50,000.00, which default continues for more than the
applicable cure period, if any, with respect thereto, or any default by any
Borrower or any Obligor under any material contract, lease, license or other
obligation to any person other than Lender, which default continues for more
than the applicable cure period, if any, with respect thereto;
(j) any Change in the Control of Parent shall occur or any change in
the ownership of Ultralife (UK) shall occur;
(k) the indictment of any Borrower or any Obligor under any criminal
statute, or commencement of criminal or civil proceedings against any Borrower
or any Obligor, pursuant to which statute or proceedings the penalties or
remedies sought or available include forfeiture of any of the property of any
Borrower or such Obligor;
(l) there shall be a material adverse change in the business, assets
or prospects of any Borrower or any Obligor after the date hereof; or
(m) there shall be an event of default under any of the other
Financing Agreements.
10.2 Remedies.
(a) At any time an Event of Default exists or has occurred and is
continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the Uniform Commercial Code and other
applicable law, all of which rights and
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remedies may be exercised without notice to or consent by any Borrower or any
Obligor, except as such notice or consent is expressly provided for hereunder or
required by applicable law. All rights, remedies and powers granted to Lender
hereunder, under any of the other Financing Agreements, the Uniform Commercial
Code or other applicable law, are cumulative, not exclusive and enforceable, in
Lender's discretion, alternatively, successively, or concurrently on any one or
more occasions, and shall include, without limitation, the right to apply to a
court of equity for an injunction to restrain a breach or threatened breach by
any Borrower of this Agreement or any of the other Financing Agreements. Lender
may, at any time or times, proceed directly against any Borrower or any Obligor
to collect the Obligations without prior recourse to the Collateral.
(b) Without limit to the foregoing, at any time an Event of Default
exists or has occurred and is continuing, Lender may, in its discretion and
without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (provided, that, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require each Borrower, at Borrowers' expense,
to assemble and make available to Lender any part or all of the Collateral at
any place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including entering into contracts
with respect thereto, public or private sales at any exchange, broker's board,
at any office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
Borrowers, which right or equity of redemption is hereby expressly waived and
released by each Borrower and/or (vii) terminate this Agreement. If any of the
Collateral is sold or leased by Lender upon credit terms or for future delivery,
the Obligations shall not be reduced as a result thereof until payment therefor
is finally collected by Lender. If notice of disposition of Collateral is
required by law, five (5) days prior notice by Lender to Borrowers designating
the time and place of any public sale or the time after which any private sale
or other intended disposition of Collateral is to be made, shall be deemed to be
reasonable notice thereof and each Borrower waives any other notice. In the
event Lender institutes an action to recover any Collateral or seeks recovery of
any Collateral by way of prejudgment remedy, each Borrower waives the posting of
any bond which might otherwise be required.
(c) Lender may apply the cash proceeds of Collateral actually
received by Lender from any sale, lease, foreclosure or other disposition of the
Collateral to payment of the Obligations, in whole or in part and in such order
as Lender may elect, whether or not then due. Borrowers shall remain liable to
Lender for the payment of any deficiency with interest at the highest rate
provided for herein and all costs and expenses of collection or enforcement,
including attorneys' fees and legal expenses.
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<PAGE>
(d) Without limiting the foregoing, upon the occurrence of an Event
of Default or an event which with notice or passage of time or both would
constitute an Event of Default, Lender may, at its option, without notice, (i)
cease making Loans or arranging for Letter of Credit Accommodations or reduce
the lending formulas or amounts of Revolving Loans, Term Loans and Letter of
Credit Accommodations available to Borrowers and/or (ii) terminate any provision
of this Agreement providing for any future Loans or Letter of Credit
Accommodations to be made by Lender to Borrowers.
(e) Each Borrower acknowledges and agrees that each and every Event
of Default described above shall be of equal weight and significance, and
equally and fully shall allow Lender to exercise its rights and remedies
hereunder. Each Borrower acknowledges and agrees that each such Event of Default
has been a material inducement for Lender to enter into this Agreement and that
Lender would be irreparably harmed if Lender, in any way, were unable to
exercise its rights and remedies on the basis that certain Events of Default
(for example, Events of Default not relating to payment) were of less weight or
significance than certain other Events of Default (for example, Events of
Default relating to payment).
11. JURY TRIAL WAIVER; OTHER WAIVERS AND CONSENTS; GOVERNING LAW
11.1 Governing Law; Choice of Forum; Service of Process; Jury Trial
Waiver.
(a) The validity, interpretation and enforcement of this Agreement
and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the Commonwealth of
Massachusetts (without giving effect to principles of conflicts of law).
(b) Each Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the Superior Court of Suffolk County of the
Commonwealth of Massachusetts and the United States District Court for the
District of Massachusetts and waive any objection based on venue or forum non
conveniens with respect to any action instituted therein arising under this
Agreement or any of the other Financing Agreements or in any way connected with
or related or incidental to the dealings of the parties hereto in respect of
this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Lender shall have the right to bring any action or
proceeding against any Borrower or their property in the courts of any other
jurisdiction which Lender deems necessary or appropriate in order to realize on
the Collateral or to otherwise enforce its rights against Borrower or its
property).
(c) Each Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof (or, as to Ultralife (UK), as provided in (f) below)
and service so made shall be deemed to be completed five (5) days after the same
shall have been so deposited in the U.S. mails, or, at Lender's option, by
service upon Borrowers in any other manner provided under the rules of any such
courts. Within thirty (30)
46
<PAGE>
days after such service, Borrowers shall appear in answer to such process,
failing which Borrowers shall be deemed in default and judgment may be entered
by Lender against Borrowers for the amount of the claim and other relief
requested.
(d) EACH BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL
BY JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. EACH BORROWER AND
LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT EACH
BORROWER OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT
WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE
WAIVER OF THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrowers (whether in
tort, contract, equity or otherwise) for losses suffered by Borrowers in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the losses were
the result of acts or omissions constituting gross negligence or willful
misconduct. In any such litigation, Lender shall be entitled to the benefit of
the rebuttable presumption that it acted in good faith and with the exercise of
ordinary care in the performance by it of the terms of this Agreement.
(f) Ultralife (UK) hereby irrevocably appoints and designates
Ultralife Batteries, Inc. with an address at 2000 Technology Parkway, Newark, NY
14513 as its agent for the acceptance of service of process hereunder. Ultralife
(UK) agrees that service made to such agent in the manner provided under (c)
above shall be binding on Ultralife (UK) in all respects.
11.2 Waiver of Notices. Each Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations, the Collateral
and this Agreement, except such as are expressly provided for herein. No notice
to or demand on any Borrower which Lender may elect to give shall entitle any
Borrower to any other or further notice or demand in the same, similar or other
circumstances.
11.3 Amendments and Waivers. Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of any
Borrower. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless
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<PAGE>
such waiver shall be in writing and signed by an authorized officer of Lender.
Any such waiver shall be enforceable only to the extent specifically set forth
therein. A waiver by Lender of any right, power and/or remedy on any one
occasion shall not be construed as a bar to or waiver of any such right, power
and/or remedy which Lender would otherwise have on any future occasion, whether
similar in kind or otherwise.
11.4 Waiver of Counterclaims. Each Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other then
compulsory counterclaims) in any action or proceeding with respect to this
Agreement, the Obligations, the Collateral or any matter arising therefrom or
relating hereto or thereto.
11.5 Indemnification. Each Borrower shall indemnify and hold Lender, and
its directors, agents, employees and counsel, harmless from and against any and
all losses, claims, damages, liabilities, costs or expenses imposed on, incurred
by or asserted against any of them in connection with any litigation,
investigation, claim or proceeding commenced or threatened related to the
negotiation, preparation, execution, delivery, enforcement, performance or
administration of this Agreement, any other Financing Agreements, or any
undertaking or proceeding related to any of the transactions contemplated hereby
or any act, omission, event or transaction related or attendant thereto,
including amounts paid in settlement, court costs, and the fees and expenses of
counsel. To the extent that the undertaking to indemnify, pay and hold harmless
set forth in this Section may be unenforceable because it violates any law or
public policy, Borrowers shall pay the maximum portion which it is permitted to
pay under applicable law to Lender in satisfaction of indemnified matters under
this Section. The foregoing indemnity shall survive the payment of the
Obligations and the termination or non-renewal of this Agreement.
12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 Term.
(a) This Agreement and the other Financing Agreements shall become
effective as of the date set forth on the first page hereof and shall continue
in full force and effect for a term ending on the date three (3) years from the
date hereof (the "Renewal Date"), and from year to year thereafter, unless
sooner terminated pursuant to the terms hereof. Lender or Borrowers may
terminate this Agreement and the other Financing Agreements effective on the
Renewal Date or on the anniversary of the Renewal Date in any year by giving to
the other party at least sixty (60) days prior written notice; provided, that,
this Agreement and all other Financing Agreements must be terminated
simultaneously. Upon the effective date of termination or non-renewal of the
Financing Agreements, Borrowers shall pay to Lender, in full, all outstanding
and unpaid Obligations and shall furnish cash collateral to Lender in such
amounts as Lender determines are reasonably necessary to secure Lender from
loss, cost, damage or expense, including attorneys' fees and legal expenses, in
connection with any contingent Obligations, including issued and outstanding
Letter of Credit Accommodations and checks or other payments provisionally
credited to the Obligations and/or as to which Lender has not yet received final
and indefeasible payment. Such payments in respect of the Obligations and cash
collateral shall be remitted by wire transfer in Federal funds to such bank
account of Lender, as Lender may, in its discretion,
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<PAGE>
designate in writing to Borrowers for such purpose. Interest shall be due until
and including the next business day, if the amounts so paid by Borrowers to the
bank account designated by Lender are received in such bank account later than
12:00 noon, Eastern time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrowers of their respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior to the end
of the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof and as a result of Lender's deferral of payment of
fees that would be payable at the inception and during the term of this
Agreement, Borrowers agree to pay to Lender, upon the effective date of such
termination, an early termination fee in the amount set forth below if such
termination is effective in the period indicated:
Amount Period
(i) 3% of Maximum Credit From the date hereof to and including
the first anniversary of the date hereof;
(ii) 1% of Maximum Credit From the first anniversary of the date
hereof to and including the second
anniversary of the date hereof; and
(iii) .5% of Maximum Credit From the second anniversary of the date
hereof to and including the third
anniversary of the date hereof.
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrowers agree
that it is reasonable under the circumstances currently existing. In addition,
Lender shall be entitled to such early termination fee upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h) hereof, even if
Lender does not exercise its right to terminate this Agreement, but elects, at
its option, to provide financing to Borrowers or permit the use of cash
collateral under the United States Bankruptcy Code. The early termination fee
provided for in this Section 12.1 shall be deemed included in the Obligations.
12.2 Notices. All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrowers
at their respective chief executive offices set forth below, or to such other
address as either party may designate by written notice to the other in
accordance with this provision, and (b) deemed to have been given or made: if
delivered in person, immediately upon delivery; if by telex, telegram or
facsimile transmission,
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immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
business day, one (1) business day after sending and upon confirmation of
delivery; and if by certified mail, return receipt requested, five (5) days
after mailing.
12.3 Partial Invalidity. If any provision of this Agreement is held to be
invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 Successors. This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrowers, and their respective
successors and assigns, except that neither Borrower may assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrowers, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation.
12.5 Confidentiality.
(a) Lender shall use all reasonable efforts to keep confidential, in
accordance with its customary procedures for handling confidential information
and safe and sound lending practices, any non-public information supplied to it
by Borrowers pursuant to this Agreement which is clearly and conspicuously
marked as confidential at the time such information is furnished by Borrowers to
Lender, provided, that, nothing contained herein shall limit the disclosure of
any such information: (i) to the extent required by statute, rule, regulation,
subpoena or court order, (ii) to bank examiners and other regulators, auditors
and/or accountants, (iii) in connection with any litigation to which Lender is a
party, (iv) to any assignee or participant (or prospective assignee or
participant) so long as such assignee or participant (or prospective assignee or
participant) shall have first agreed in writing to treat such information as
confidential in accordance with this Section 12.5, or (v) to counsel for Lender
or any participant or assignee (or prospective participant or assignee).
(b) In no event shall this Section 12.5 or any other provision of
this Agreement or applicable law be deemed: (i) to apply to or restrict
disclosure of information that has been or is made public by Borrowers or any
third party without breach of this Section 12.5 or otherwise become generally
available to the public other than as a result of a disclosure in violation
hereof, (ii) to apply to or restrict disclosure of information that was or
becomes available to Lender on a non-confidential basis from a person other than
Borrowers, (iii) require Lender to return any materials furnished by Borrowers
to Lender or (iv) prevent Lender from responding to routine informational
requests in accordance with the Code of Ethics for the Exchange of Credit
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Information promulgated by The Robert Morris Associates or other applicable
industry standards relating to the exchange of credit information. The
obligations of Lender under this Section 12.5 shall supersede and replace the
obligations of Lender under any confidentiality letter signed prior to the date
hereof.
12.6 Judgment Currency. To the extent permitted by applicable law, the
obligations of Borrowers in respect of any amount due under this Agreement
shall, notwithstanding any payment in any other currency (the "Other Currency")
(whether pursuant to a judgment or otherwise), be discharged only to the extent
of the amount in United States Dollars being the currency in which it is due
(the "Agreed Currency") that Lender may, in accordance with normal banking
procedures, purchase with the sum paid in the Other Currency (after any premium
and costs of exchange) on the business day immediately after the day on which
Lender receives the payment. If the amount in the Agreed Currency that may be so
purchased for any reason falls short of the amount originally due, Borrowers,
as the case may be, shall pay all additional amounts, in the Agreed Currency, as
may be necessary to compensate for the shortfall. Any obligations of Borrowers,
as the case may be, not discharged by that payment shall, to the extent
permitted by law, be due as a separate and independent obligations and, until
discharged as provided in this section, continue in full force and effect.
12.7 Entire Agreement. This Agreement, the other Financing Agreements, any
supplements hereto or thereto, and any instruments or documents delivered or to
be delivered in connection herewith or therewith represents the entire agreement
and understanding concerning the subject matter hereof and thereof between the
parties hereto, and supersede all other prior agreements, understandings,
negotiations and discussions, representations, warranties, commitments,
proposals, offers and contracts concerning the subject matter hereof, whether
oral or written. In the event of any inconsistency between the terms of this
Agreement and any schedule or exhibit hereto, the terms of this Agreement shall
govern.
[Remainder of Page Intentionally Left Blank]
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IN WITNESS WHEREOF, Lender and Parent have caused these presents to be
duly executed as of the day and year first above written.
LENDER BORROWERS
CONGRESS FINANCIAL CORPORATION ULTRALIFE BATTERIES, INC.
(NEW ENGLAND)
By:___________________________ By:___________________________
Name:______________________ Name:______________________
Title:______________________ Title:______________________
Address: Chief Executive Office:
-------- -----------------------
One Post Office Square 2000 Technology Parkway
Suite 3600 Newark, NY 14513
Boston, MA 02109
52
<PAGE>
STATE OF )
ss
COUNTY OF )
Then appeared before me the above-named _______________ and stated that he
is the _____________ of Ultralife Batteries, Inc. and stated that he is fully
authorized to execute this Loan and Security Agreement for and on behalf of the
said corporation as his free act and deed and the free act and deed of said
corporation, before me.
_____________________________
Notary Public
My Commission Expires:
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IN WITNESS of which this Deed has been duly executed and delivered as a
Deed the day and year first above written.
Executed and Delivered as a Deed for and on behalf of
ULTRALIFE BATTERIES (UK) LIMITED,
acting by two of its directors or one director and its secretary
.............................Director
.............................Secretary
Chief Executive Office:
-----------------------
18 Nuffield Way
Abingdon, Oxfordshire, England
54
<PAGE>
EXHIBIT A
INFORMATION CERTIFICATE
(SEE ATTACHED)
1
<PAGE>
EXHIBIT B
TO
LOAN AND SECURITY AGREEMENT
BORROWING BASE CERTIFICATE
CONGRESS FINANCIAL CORPORATION (NEW ENGLAND)
("Lender")
ULTRALIFE BATTERIES, INC.
("Borrower")
Purpose of this Form
Many asset based borrowers are required to keep the dollar amount of their
borrowings within a dollar total based on percentage advances against accounts
receivable and inventory. This Certificate assures compliance with the terms.
Completion Instructions
The Borrowing Base Certificate should be completed by the Borrower.
A. Enter date of information.
B. All Certificates should be numbered in sequential order.
RECONCILIATION OF COLLATERAL BALANCE
Accounts Availability
C. Enter date of most recent Certificate previously delivered to Lender.
1. Enter dollar balance certified to Lender per previous Certificate and the
date of the previous Certificate. (Dollar figure from line 5 of previous
Certificate).
2. Enter dollar amount of collections applied by the Borrower against
accounts receivable since the date of the last Certificate.
3. Enter dollar amount of other credits and adjustments applied by the
Borrower against accounts receivable.
1
<PAGE>
4. Enter dollar amount of any new sales by the Borrower since the date of the
last Certificate.
5. Enter total of all Accounts being certified to Lender per the date of the
Certificate. This is the sum of lines 1 through 4 above and is calculated
as follows:
(a) Dollar balance certified to Lender per previous Certificate
minus (-)
(b) Dollar amount of collections and credits received since date of last
Certificate
plus (+)
(c) Dollar amount of any new sales since the date of the last
Certificate.
6. Enter dollar amount of Accounts not meeting the criteria of Eligible
Accounts. Eligible Accounts are defined in the Loan and Security Agreement
between Lender and the Borrower.
7. Subtract item 6 from item 5 and enter this figure.
8. Enter accounts receivable advance rate.
9. Multiply the dollar amount in item 7 by the percentage in item 8 (which is
the percentage of the lending formula applicable to Eligible Accounts
provided for in the Loan and Security Agreement) and enter this new dollar
amount.
10. Enter Availability Reserves.
11. Subtract the Availability Reserves in item 10 from item 9 and enter
Accounts Availability.
Inventory Availability
D. Enter date of most recent Inventory Report delivered to Lender
12. Enter total Value of Inventory as of the most recent Inventory Report
delivered to Lender. "Value" is lower of cost or market and should be
determined in the same manner as in prior certificates.
13. Enter the total Value of Inventory from the most recent Inventory Report
delivered to Lender which did not meet the criteria for Eligible
Inventory. Eligible Inventory is defined in the Loan and Security
Agreement between Lender and the Borrower.
14. Subtract item 13 from item 12 and enter this figure.
2
<PAGE>
15. Enter the inventory advance rate.
16. Multiply the dollar amount in item 14 by the percentage in item 15 (which
is the percentage of the lending formula applicable to Eligible Inventory
provided for in the Loan and Security Agreement) and enter this new dollar
amount.
17. Enter applicable Availability Reserves, excluding reserves for Letter of
Credit Accommodations relating to Inventory purchases and freight, taxes,
duty and other amounts which Lender estimates must be paid in connection
with delivery of Inventory to Borrower's premises.
18. Subtract the Availability Reserves in item 17 Excluding reserves for
Letter of Credit Accommodations, from item 16.
19. Enter the amount of the sublimit on loans based on Inventory from the Loan
and Security Agreement between Lender and Borrower.
20. Enter lesser of formula availability as set forth in item 16 or the
sublimit on loans based on Inventory provided for in the Loan and Security
Agreement as set forth in item 17.
Total Availability
21. Enter the sum of item 10 plus item 18.
22.
(a) Enter outstanding undrawn amounts of Letter of Credit Accommodations
issued for purposes of purchasing Eligible Inventory plus the amount equal to
freight, taxes, duty and other amounts which Lender estimates must be paid in
connection with delivery of Inventory to Borrower's premises.
(b) Enter the inventory advance rate.
(c) Multiply items 22(a) by item 22(b) and enter this amount.
23. Enter the sum of item 21 plus item 22(c)
24. Enter the amount of the Maximum Credit from the Loan and Security
Agreement, less the then outstanding principal amount of the Term Loans,
if any.
25. Enter the lesser of item 23 or item 24.
RECONCILIATION OF LOAN BALANCE
26. Enter dollar figure of outstanding Loans from last Certificate.
27. List cash collections received by Borrower and remitted or to be remitted
to Lender since last Certificate.
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28. Enter dollar amount of Loans made by Lender and other charges payable to
Lender (including adjustments for returned checks and other remittances,
fees, interests, costs and expenses) since last Certificate.
29. Enter dollar amount of outstanding Revolving Loans (item 26 less item 27
plus item 28).
30. Enter outstanding amounts of Letter of Credit Accommodations.
31. Enter total outstanding Revolving Loans and Letter of Credit
Accommodations. (Add items 29 and 30).
32. Subtract item 31 from 25 and enter dollar amount.
33. Name of Borrower.
34. Signature of person authorized by Borrower on the corporate borrowing
resolution.
4
<PAGE>
Date: _(A)_
Number: _(B)_
BORROWING BASE CERTIFICATE
Pursuant to the Loan and Security Agreement between Congress Financial
Corporation (New England) ("Lender") and the undersigned ("Borrower"), and any
amendments thereto (the "Loan Agreement), Borrower hereby certifies to Lender,
as of the above date, as follows:
RECONCILIATION OF COLLATERAL BALANCE
Note: Letters and numbers in the chart correspond to the instructions provided
on the prior four pages.
Accounts Availability
(1) Total Accounts as of _(C)_ $ (1)
-------
(2) Less: Collections $ (2)
-------
(3) Less: Credits and Adjustments since
date of prior Certificate $ (3)
-------
(4) Add: New sales since date of prior
Certificate $ (4)
-------
(5) Current total of all Accounts $ (5)
-------
(6) Total amount of Accounts which are
not Eligible Accounts (as per Schedule I
annexed hereto) $ (6)
-------
(7) Net Amount of Eligible Accounts
(item 5 less item 6) $ (7)
-------
(8) Accounts Receivable Advance Rate (%) (8)%
-------
(9) Availability based on Net Amount of
Eligible Accounts $ (8)
-------
5
<PAGE>
(10) Less: Availability Reserves $ (10)
-------
(11) Accounts Availability $ (11)
-------
Inventory Availability
(12) Total Value of Inventory as of _D_ $ (12)
-------
(13) Total Value of Inventory which is
not Eligible Inventory (as per
Schedule II annexed hereto) $ (13)
-------
(14) Value of Eligible Inventory
(item 11 less item 12) $ (14)
-------
(15) Inventory Advance Rate (%) (15)%
-------
(16) Availability based on Eligible
Inventory $ (16)
-------
(17) Less: Availability Reserves $ (17)
-------
(18) Inventory Formula Availability $ (18)
-------
(19) Inventory Sublimit $ (19)
-------
(20) Inventory Availability (lesser of
item 18 or item 19 $ (20)
-------
Total Availability
(21) Total Availability based on Accounts
and Inventory $ (21)
-------
(22) Plus: Availability for Letter of Credit
Accommodations for the purchase of
Eligible Inventory
(a) Amount of Letter of Credit
Accommodations based on the
purchase of Eligible Inventory $ (22a)
-------
(b) Inventory Advance Rate (%) (22b)%
-------
(c) Availability for Letter of Credit
Accommodations based on the
purchase of Eligible Inventory $ (22c)
-------
(23) Availability (item 21 plus item 22(c)) $ (23)
-------
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(24) Maximum Credit (less the then outstanding
amount of the Term Loan, if any) $ (24)
-------
(25) Total Availability (lesser of item 23
or item 24) $ (25)
-------
RECONCILIATION OF LOAN BALANCE
(26) Principal amount of outstanding Loans as of
the date of prior Certificate $ (26)
-------
(27) Less: Net cash collections since date
of prior Certificate $ (27)
-------
(28) Add: Principal amount of Revolving Loans
made since date of prior Certificate $ (28)
-------
(29) Current principal amount of outstanding
Revolving Loans $ (29)
-------
(30) Current undrawn amount of outstanding Letter
of Credit Accommodations $ (30)
-------
(31) Total Revolving Loans (item 27 plus item 28) $ (31)
-------
(32) Unused availability (item 23 less item 29) $ (32)
-------
As of the date of this Certificate, no Event of Default exists or has
occurred and is continuing. Borrower acknowledges that the Loans by Lender to
Borrower are based upon Lender's reliance on the information contained herein
and all representations and warranties with respect to Accounts and Inventory in
the Loan Agreement are applicable to the Accounts and Inventory included in this
Certificate. The reliance by Lender on this Certificate should not be deemed to
limit the right of Lender to establish or revise criteria of eligibility or
Availability Reserves or otherwise limit, impair, or affect in any manner the
rights of Lender under the Loan Agreement. In the event of any conflict between
the determination of Lender of the amount of the Loans available to Borrower in
accordance with the terms of the Loan Agreement and the determination by
Borrower of such amounts, the determination of Lender shall govern. All
capitalized terms used in this Certificate shall have the meaning assigned to
them in the Loan Agreement.
_______________________(33)_________
By: ___________________(34)_________
Title:
7
<PAGE>
SCHEDULE I
to
BORROWING BASE CERTIFICATE
(i) Accounts unpaid more than ____ days after invoice $______
date
(ii) Cross-Age Accounts $______
(iii) Concentration Accounts $______
(iv) Affiliate Accounts $______
(v) Returns, Discounts, Claims, Credits Allowances, $______
Taxes
(vi) Other $______
(vii) Other $______
(viii) Other $______
(ix) Other $______
(x) Other $______
Total Accounts which are not Eligible Accounts $______
8
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SCHEDULE II
to
BORROWING BASE CERTIFICATE
(xi) Work in Process $______
(xii) Slow Moving $______
(xiii) Packaging and Supplies $______
(xiv) Other $______
(xv) Other $______
(xvi) Other $______
(xvii) Other $______
(xviii) Other $______
(xix) Other $______
Total Value of Inventory which is not Eligible $______
Inventory
9
<PAGE>
EXHIBIT C
TO
LOAN AND SECURITY AGREEMENT
TERM PROMISSORY NOTE
$_____________ Boston, Massachusetts
_______________, 2000
FOR VALUE RECEIVED, ULTRALIFE BATTERIES, INC./ULTRALIFE BATTERIES (UK);
LTD., a Delaware corporation (the "Debtor"), hereby unconditionally promises to
pay to the order of CONGRESS FINANCIAL CORPORATION (New England), a
Massachusetts corporation (the "Payee"), at the offices of Payee at One Post
Office Square, Suite 3600, Boston, Massachusetts 02109
___________________________________________, or at such other place as the Payee
or any holder hereof may from time to time designate, the principal sum of
___________________________ DOLLARS ($__________) in lawful money of the United
States of America and in immediately available funds, in sixty (60) consecutive
monthly installments (or earlier as hereinafter provided) on the first day of
each month commencing ___________, 200_ of which the first fifty-nine (59)
installments shall each be in the amount of
_________________________________________ DOLLARS ($_________), and the last
installment shall be in the amount of the entire unpaid balance of this Note.
Debtor hereby further promises to pay interest to the order of Payee on
the unpaid principal balance hereof at the Interest Rate. Such interest shall be
paid in like money at said office or place from the date hereof, commencing
____________, 2000 and on the first day of each month thereafter until the
indebtedness evidenced by this Note is paid in full. Interest payable upon and
after an Event of Default or termination or non-renewal of the Loan Agreement
shall be payable upon demand.
For purposes hereof,
(a) the term "Interest Rate" shall mean, as to Prime Rate Loans, a
rate of three quarters of one (.75%) percent per annum in excess of the Prime
Rate, and as to Eurodollar Rate Loans, a rate of two and three quarters (2.75%)
percent per annum in excess of the Adjusted Eurodollar Rate; provided, that, at
Payee's option, the Interest Rate shall mean a rate of three and three quarters
(3.75%) percent per annum in excess of the Prime Rate as to Prime Rate Loans and
a rate of five and three quarters (5.75%) percent per annum in excess of the
Adjusted Eurodollar Rate as to Eurodollar Rate Loans upon and after an Event of
Default or termination or non-renewal of the Loan Agreement and the Interest
Rate shall be subject to further adjustment as provided in Section 3.1(e) of the
Loan Agreement,
(b) the term "Prime Rate" shall mean the rate from time to time
publicly announced by First Union National Bank, or its successors, at its
office in Philadelphia, Pennsylvania, as its prime rate, whether or not such
announced rate is the best rate available at such bank,
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<PAGE>
(c) the term "Event of Default" shall mean an Event of Default as
such term is defined in the Loan Agreement, and
(d) the term "Loan Agreement" shall mean the Loan and Security
Agreement, dated of even date herewith, between Debtor and Payee, as the same
now exists or may hereafter be amended, modified, supplemented, extended,
renewed, restated or replaced.
Unless otherwise defined herein, all capitalized terms used herein shall
have the meaning assigned thereto in the Loan Agreement.
The Interest Rate applicable to Prime Rate Loans payable hereunder shall
increase or decrease by an amount equal to each increase or decrease,
respectively, in the Prime Rate, effective on the first day of the month after
any change in the Prime Rate is announced. The increase or decrease shall be
based on the Prime Rate in effect on the last day of the month in which any such
change occurs. Interest shall be calculated on the basis of a three hundred
sixty (360) day year and actual days elapsed. In no event shall the interest
charged hereunder exceed the maximum permitted under the laws of the
Commonwealth of Massachusetts or other applicable law.
This Note is issued pursuant to the terms and provisions of the Loan
Agreement to evidence the Term Loan by Payee to Debtor. This Note is secured by
the Collateral described in the Loan Agreement and all notes, guarantees,
security agreements and other agreements, documents and instrument now or at any
time hereafter executed and/or delivered by Debtor or any other party in
connection therewith (all of the foregoing, together with the Loan Agreement, as
the same now exist or may hereafter be amended, modified, supplemented, renewed,
extended, restated or replaced, being collectively referred to herein as the
"Financing Agreements"), and is entitled to all of the benefits and rights
thereof and of the other Financing Agreements. At the time any payment is due
hereunder, at its option, Payee may charge the amount thereof to any account of
Debtor maintained by Payee.
If any payment of principal or interest is not made when due hereunder, or
if any other Event of Default shall occur for any reason, or if the Loan
Agreement shall be terminated or not renewed for any reason whatsoever, then and
in any such event, in addition to all rights and remedies of Payee under the
Financing Agreements, applicable law or otherwise, all such rights and remedies
being cumulative, not exclusive and enforceable alternatively, successively and
concurrently, Payee may, at its option, declare any or all of Debtor's
obligations, liabilities and indebtedness owing to Payee under the Loan
Agreement and the other Financing Agreements (the "Obligations"), including,
without limitation, all amounts owing under this Note, to be due and payable,
whereupon the then unpaid balance hereof, together with all interest accrued
thereon, shall forthwith become due and payable, together with interest accruing
thereafter at the then applicable Interest Rate stated above until the
indebtedness evidenced by this Note is paid in full, plus the costs and expenses
of collection hereof, including, but not limited to, attorneys' fees and legal
expenses.
Debtor (i) waives diligence, demand, presentment, protest and notice of
any kind, (ii) agrees that it will not be necessary for Payee to first institute
suit in order to enforce payment of this Note and (iii) consents to any one or
more extensions or postponements of time of payment,
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<PAGE>
release, surrender or substitution of collateral security, or forbearance or
other indulgence, without notice or consent. The pleading of any statute of
limitations as a defense to any demand against Debtor is expressly hereby waived
by Debtor. Upon any Event of Default or termination or non-renewal of the Loan
Agreement, Payee shall have the right, but not the obligation to setoff against
this Note all money owed by Payee to Debtor.
Payee shall not be required to resort to any Collateral for payment, but
may proceed against Debtor and any guarantors or endorsers hereof in such order
and manner as Payee may choose. None of the rights of Payee shall be waived or
diminished by any failure or delay in the exercise thereof.
The validity, interpretation and enforcement of this Note and the other
Financing Agreements and any dispute arising in connection herewith or therewith
shall be governed by the internal laws of the Commonwealth of Massachusetts
(without giving effect to principles of conflicts of law).
Debtor irrevocably consents and submits to the non-exclusive jurisdiction
of the Superior Court of Suffolk County of the Commonwealth of Massachusetts and
the United States District Court for the District of Massachusetts and waives
any objection based on venue or forum non conveniens with respect to any action
instituted therein arising under this Note or any of the other Financing
Agreements or in any way connection with or related or incidental to the
dealings of Debtor and Payee in respect of this Note or any of the other
Financing Agreements or the transactions related hereto or thereto, in each case
whether now existing or hereafter arising, and whether in contract, tort, equity
or otherwise, and agrees that any dispute arising out of the relationship
between Debtor and Payee or the conduct of such persons in connection with this
Note or otherwise shall be heard only in the courts described above (except that
Payee shall have the right to bring any action or proceeding against Debtor or
its property in the courts of any other jurisdiction which Payee deems necessary
or appropriate in order to realize on the Collateral or to otherwise enforce its
rights against Debtor or its property).
Debtor hereby waives personal service of any and all process upon it and
consents that all such service of process may be made by certified mail (return
receipt requested) directed to it and service so made shall be deemed to be
completed five (5) days after the same shall have been so deposited in the U.S.
mails, or, at Payee's option, by service upon Debtor in any other manner
provided under the rules of any such courts. Within thirty (30) days after such
service, Debtor shall appear in answer to such process, failing which Debtor
shall be deemed in default and judgment may be entered by Payee against Debtor
for the amount of the claim and other relief requested.
EACH DEBTOR WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION
OR CAUSE OF ACTION ARISING UNDER THIS NOTE OR IN ANY WAY CONNECTED WITH OR
RELATED OR INCIDENTAL TO THE DEALINGS BETWEEN DEBTOR AND PAYEE IN RESPECT OF
THIS NOTE OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS RELATED
HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. DEBTOR AGREES AND
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<PAGE>
CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION SHALL BE DECIDED
BY COURT TRIAL WITHOUT A JURY.
The execution and delivery of this Note has been authorized by the Board
of Directors and by any necessary vote or consent of the stockholders of Debtor.
Debtor hereby authorizes Payee to complete this Note in any particulars
according to the terms of the loan evidenced hereby.
This Note shall be binding upon the successors and assigns of Debtor and
inure to the benefit of Payee and its successors, endorsees and assigns.
Whenever used herein, the term "Debtor" shall be deemed to include its
successors and assigns and the term "Payee" shall be deemed to include its
successors, endorsees and assigns. If any term or provision of this Note shall
be held invalid, illegal or unenforceable, the validity of all other terms and
provisions hereof shall in no way be affected thereby.
ATTEST: ULTRALIFE BATTERIES, INC./
ULTRALIFE BATTERIES (UK), LTD
_________________________________ By: _________________________________
Secretary/Assistant Secretary
[Corporate Seal] Title: _________________________________
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<PAGE>
STATE OF NEW YORK
_______________, ss ____,
Then appeared before me the above-named _______________ and stated that he
is the _____________ of __________________ and stated that he is fully
authorized to execute this ____________________ for and on behalf of the said
___________________.
__________________________________
Notary Public
My Commission Expires:
5
