AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 21, 2002
REGISTRATION NO. 333-_______
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
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REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
ULTRALIFE BATTERIES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 16-387013
(State or Other Jurisdiction (I.R.S. Employer
of Incorporation or Organization) Identification Number)
2000 Technology Parkway
NEWARK, NEW YORK 14513
(315) 332-7100
(Address, including Zip Code, and Telephone Number,
including Area Code, of Registrant's Principal Executive Offices)
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John D. Kavazanjian
President and Chief Executive Officer
Ultralife Batteries, Inc.
2000 Technology Parkway
Newark, New York 14513
(315) 332-7100
(Name, Address, including Zip Code, and Telephone Number,
including Area Code, of Agent for Service)
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Copy to:
Jeffrey H. Bowen, Esq.
Harter, Secrest & Emery LLP
1600 Bausch & Lomb Place
Rochester, New York 14604
(585) 232-6500
CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount of
Title Of Each Class Of Amount Offering Price Aggregate Offering Registration
Securities To Be Registered To Be Registered Per Security Price Fee
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Common Stock, $.10 par value....... 1,001,333(1) $3.41(2) $3,414,545.53 $314.14
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(1) Includes 200,000 shares of the Registrant's Common Stock issuable upon the
conversion of a Debenture issued by the Registrant.
(2) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457(c) of Regulation C under the Securities Act of 1933,
based upon the average of the high and low prices of the Registrant's
Common Stock, as quoted on the Nasdaq National Market on June 19, 2002.
Approximate date of commencement of proposed sale to the public: From time to
time after this Registration Statement becomes effective.
If the only securities being registered on this Form are being offered to
dividend or interest reinvestment plans, please check the following box. [ ]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box. [X]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ] THE REGISTRANT HEREBY AMENDS THIS
REGISTRATION STATEMENT ON SUCH DATE OR DATES AS MAY BE NECESSARY TO DELAY ITS
EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE A FURTHER AMENDMENT THAT
SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT SHALL THEREAFTER BECOME
EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF THE SECURITIES ACT OF 1933 OR UNTIL
THE REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE
COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a), MAY DETERMINE.
PROSPECTUS
Dated June __, 2002
1,001,333 Shares of Common Stock, Par Value $.10
Ultralife Batteries, Inc.
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This Prospectus relates to the public offering of 1,001,333 shares of our
Common Stock, par value $.10 per share. Of the total 1,001,333 shares of Common
Stock being registered, 801,333 shares are being registered for the accounts of
the selling stockholders identified in Table A of the section of this Prospectus
entitled "Selling Stockholders". The remaining 200,000 of such shares are being
registered for the account of Joseph C. Abeles, who is one of our directors and
the owner of a $600,000 Senior Convertible Subordinated Debenture issued by us.
This offering will not be underwritten. All 1,001,333 shares may be
offered by certain of our stockholders or by pledgees, donees, transferees or
other successors-in-interest who receive the shares as a gift, partnership
distribution or other non-sale related transfer. Of the 1,001,333 shares of our
Common Stock being registered, 801,333 shares were originally issued in private
transactions pursuant to the terms of Stock Purchase Agreements by and between
us and each of the stockholders identified in the section of this Prospectus
entitled "Selling Stockholders". The Debenture, which will automatically convert
into the remaining 200,000 shares of Common Stock upon approval of the
conversion at our Annual Meeting of Shareholders scheduled to take place in
December 2002, was issued in a private transaction pursuant to the terms of that
certain Debenture Purchase Agreement by and between us and Mr. Abeles.
The issuance of the Debenture and shares of our Common Stock was exempt
from registration pursuant to Section 4(2) of the Securities Act of 1933, as
amended, and Regulation D, as promulgated under the Securities Act of 1933. We
are registering the shares of our Common Stock pursuant to the terms of certain
Registration Rights Agreements by and among us and the selling stockholders
identified in the section of this Prospectus entitled "Selling Stockholders".
The shares of Common Stock that we are registering may be offered by the
selling stockholders (including those holding stock as a result of the future
conversion of the Debenture) from time to time in transactions in the
over-the-counter market, in negotiated transactions, or in a combination of such
methods of sale. The shares may be offered at fixed prices that may be changed,
at market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. The selling stockholders (including those
holding stock as a result of the future conversion of the Debenture) may effect
such transactions by selling the shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the selling stockholders (including those holding stock as a
result of the future conversion of the Debenture) and/or the purchasers of the
shares for whom such broker-dealers act as agents or to whom they sell as
principals, or both. This compensation might be in excess of customary
commissions. For further information, see the section entitled "Plan of
Distribution" below.
We will not receive any of the proceeds from the sale of the shares of our
Common Stock. We have agreed to bear certain expenses in connection with the
registration of the shares of our Common Stock being offered and sold by the
selling stockholders (including those holding stock as a result of the future
conversion of the Debenture). Our Common Stock is quoted on the Nasdaq National
Market under the symbol "ULBI". On June 19, 2002, the last reported sale price
for the Common Stock was $3.35.
Investing in shares of our Common Stock involves certain risks. For more
information, please see the section of this Prospectus entitled "Risk Factors",
which begins on Page 3 of this Prospectus.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
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Table of Contents
PROSPECTUS SUMMARY............................................................2
RISK FACTORS..................................................................3
Forward-Looking Statements....................................................9
USE OF PROCEEDS..............................................................10
SELLING STOCKHOLDERS.........................................................10
PLAN OF DISTRIBUTION.........................................................11
LEGAL MATTERS................................................................12
EXPERTS......................................................................12
WHERE YOU CAN FIND MORE INFORMATION.........................................12
INCORPORATION OF INFORMATION BY REFERENCE....................................13
COMMISSION'S POSITION ON INDEMNIFICATION.....................................14
You should rely only on the information contained or incorporated by
reference in this Prospectus. We have not authorized any other person to provide
you with different information. If anyone provides you with different or
inconsistent information, you should not rely on it. If you are in a
jurisdiction where offers to sell, or solicitations of offers to purchase, the
securities offered by this Prospectus are unlawful, or if you are a person to
whom it is unlawful to direct these types of activities, then the offer
presented in this Prospectus does not extend to you. You should assume that the
information appearing in this Prospectus is accurate only as of the date on the
front cover of this Prospectus. Our business, financial condition, results of
operations and prospects may have changed since that date.
PROSPECTUS SUMMARY
This summary highlights selected information and does not contain all of
the information that is important to you. We urge you to read the entire
Prospectus carefully and any information contained in or incorporated by
reference in this Prospectus before you decide whether to buy our Common Stock.
You should pay special attention to the risks of investing in our Common Stock
discussed below under the heading "Risk Factors". Unless the context otherwise
requires, references in this Prospectus to Ultralife, we, us, and our refer to
Ultralife Batteries, Inc. and our subsidiaries.
Our Business
We develop, manufacture and market a wide range of standard and customized
primary and rechargeable lithium batteries for use in a wide array of
applications and markets, including military, automotive telematics, safety and
medical, and computers and communications. We believe that our proprietary
technologies allow us to offer batteries that are ultra-thin, light weight and
that generally achieve greater operating performance than other batteries
currently available. We sell our products
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directly to original equipment manufacturers in the United States and abroad and
have contractual arrangements with sales representatives who market our products
on a commission basis in particular areas. We also distribute our products to
domestic and international distributors and retailers that purchase our
batteries for resale. We have obtained ISO 9001 certification for our lithium
batteries manufacturing operations in Newark, New York and Abingdon, England. As
of May 31, 2002, we had approximately 350 employees worldwide.
We were formed in December 1990 as a Delaware corporation. In March 1991,
we acquired certain technology and assets from Eastman Kodak Company relating to
its 9-volt lithium manganese dioxide primary battery and in June 1994, as a
result of the formation of our United Kingdom subsidiary and acquisition of
certain battery-related assets, acquired a presence in Europe. In December 1998,
we announced a joint venture to produce our polymer rechargeable batteries in
Taiwan.
Our principal executive office is located at 2000 Technology Parkway,
Newark, New York 14513. Our telephone number is (315) 332-7100.
RISK FACTORS
An investment in shares of Common Stock offered hereby involves a high
degree of risk. The following risk factors should be considered carefully in
addition to the other information in this Prospectus before purchasing the
Common Stock offered by this Prospectus. The following factors could cause
actual results to differ materially from the matters described in the
forward-looking statements, with material and adverse effects on our business,
operating results, financial condition and the value of our stock.
History of Operating Losses; Uncertainty of Future Profitability
We began operating our company in March 1991. During each year since 1991,
we have had net operating losses. These losses have resulted mainly from the
cost of researching, developing and manufacturing our products and general and
administrative costs associated with operating our company. We may not generate
an operating profit or achieve profitability in the future.
Uncertainty of Our Ability to Generate Positive Cash Flows and Continue as a
Going Concern
We have experienced negative cash flow since our inception. Our current
cash and credit situation is strained. While we are focusing intently on
increasing revenues and reducing costs and expenses, these efforts may not
generate cash. Our failure to successfully attain positive cash flow could have
a material adverse effect on the our business, financial condition, and the
results of our operations. Such material adverse effects could include a
violation of debt covenants, an inability to pay vendors in a timely fashion, or
could impact upon our ability to continue as a going concern. If we are
unsuccessful in generating positive cash flows, we may need to access capital
markets for additional debt or equity funding, and we may not be successful in
doing so.
Uncertainty of Our Ability to Borrow Money to Fund Our Operations
In October 2001, we were informed by our primary lending institution that
our borrowing availability under our credit facility had been effectively
reduced to zero as a result of an appraisal of our fixed assets. In February
2002, our primary lending institution amended the credit facility to reduce our
available line of credit from $20,000,000 to $15,000,000, mainly due to the
reduction in the valuation of our fixed assets, which limited our borrowing
capacity under the term loan component, as well as minimized the cost of unused
line fees. Additionally, the term loan and revolving line components of our
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line of credit were revised and the minimum net worth covenant was reduced.
While these changes to the credit facility improve our overall financial
flexibility, our future liquidity depends on our ability to successfully
generate positive cash flow from operations and achieve adequate operational
savings. We may not have sufficient credit available to us to meet our working
capital and capital expenditure requirements.
Uncertainty of Current and Future Demand for Our Primary Battery Products
Although we are currently producing various primary battery products, this
demand may not continue. We are in the process of developing new battery
configurations for use in the manufacture of original equipment and for military
applications. Such products may not be accepted in the market. Additionally,
while we have recently been awarded a contract to supply several models of our
non-rechargeable batteries to the U.S. Army's Communications and Electronics
Command, our products may not pass military qualification standards in the
future. Our inability to manufacture and sell new products could have a material
adverse effect on our business, financial condition and the results of our
operations.
Uncertainty of Market Acceptance of Advanced Rechargeable Batteries
Although we have begun volume production of our rechargeable batteries,
our advanced rechargeable batteries have not yet achieved wide acceptance in the
market. The market may not ever accept our advanced rechargeable batteries. The
introduction of new products is subject to the inherent risks of unforeseen
delays and the time necessary to achieve market success for any individual
product is uncertain. If volume production and/or market penetration of our
advanced rechargeable batteries is delayed for any reason, our competitors may
introduce emerging technologies or improve existing technologies which could
have a material adverse effect on our business, financial condition and the
results of our operations.
Need to Create New Jobs to Fulfill Conditions of Government Grants
In November 2001, we received approval for two grants from New York State
and a federally sponsored small cities program in the aggregate amount of
$1,050,000. The grants will assist us in funding current capital expansion plans
that we expect will lead to job creation. However, in connection with the
receipt of the grants, we are obligated to create a certain level of new jobs
over the next five years. Our capital expansion may not lead to the creation of
a sufficient number of jobs to satisfy the employment quotas required by the
government grants. If we do not meet these employment quotas, we could be
required to pay back a portion of the amount of the grants.
Dependence on OEM Relationships and Products for Sale of Advanced Rechargeable
Batteries
We will continue to promote market demand for, and awareness of, our
advanced rechargeable batteries. We will accomplish this partly through the
development of relationships with original equipment manufacturers, or OEMs,
that manufacture products requiring the performance characteristics of our
advanced rechargeable batteries. The success of any such relationship depends
upon the general business condition of the OEM and our ability to produce our
advanced rechargeable batteries at the quality and cost and within the period
required by such OEMs. Our failure to develop a sufficient number of
relationships with OEMs could have a material adverse effect on our business,
financial condition and results of operations.
A substantial portion of our business will depend upon the success of
products sold by OEMs that use our batteries. Therefore, our success is
substantially dependent upon the acceptance of the OEMs' products in the
marketplace. We are subject to many risks beyond our control that influence the
success
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or failure of a particular product manufactured by an OEM, including,
competition faced by the OEM in its particular industry; market acceptance of
the OEM's product; the engineering, sales, marketing and management capabilities
of the OEM; technical challenges unrelated to our technology or products faced
by the OEM in developing its products; and, the financial and other resources of
the OEM.
Risks Relating to Growth and Expansion
Rapid growth of our advanced rechargeable battery business or other
segments of our business may significantly strain our management, operations and
technical resources. If we are successful in obtaining rapid market growth of
our advanced rechargeable batteries, we will be required to deliver large
volumes of quality products to our customers on a timely basis at a reasonable
cost to those customers. Our business may not rapidly grow and our efforts to
expand our manufacturing and quality control activities may be unsuccessful.
Likewise, we may not be able to satisfy commercial scale production requirements
on a timely and cost-effective basis. We will also be required to continue to
improve our operations, management and financial systems and controls. Our
failure to manage our growth effectively could have an adverse effect on our
business, financial condition and the results of our operations.
Competition; Technological Obsolescence
The primary and rechargeable battery industry is characterized by intense
competition, with a large number of companies offering or seeking to develop
technology and products similar to ours. We are subject to competition from
manufacturers of traditional rechargeable batteries, such as nickel- cadmium
batteries, from manufacturers of rechargeable batteries of more recent
technologies, such as nickel-metal hydride, lithium-ion liquid electrolyte and
lithium-ion solid-polymer batteries, as well as from companies engaged in the
development of batteries incorporating new technologies.
Manufacturers of nickel-cadmium and nickel-metal hydride batteries include
Eveready, Sanyo Electric Co. Ltd., Sony Corp., Toshiba Corp., Matsushita
Electric Industrial Co., Ltd. and Duracell International, Inc. Manufacturers of
lithium-ion liquid electrolyte batteries currently include Saft-Soc des ACC,
Sony Corp., Toshiba Corp., Matsushita Electric Industrial Co., Ltd., Sanyo
Electric Co. Ltd. and Duracell International, Inc. Valence Technology, Inc.,
Lithium Technology Corporation, and Yuasa-Exide, Inc. have developed prototype
solid-polymer batteries and are constructing commercial-scale manufacturing
facilities. We also compete with large and small manufacturers of alkaline,
carbon-zinc, seawater, high rate and primary batteries as well as other
manufacturers of lithium batteries.
We may not successfully compete with these manufacturers, many of which
have substantially greater financial, technical, manufacturing, distribution,
marketing, sales and other resources. Many companies with substantially greater
resources than ours are developing a variety of battery technologies, including
liquid electrolyte lithium and solid electrolyte lithium batteries, which are
expected to compete with our technology. Other companies undertaking research
and development activities of solid-polymer batteries have already developed
prototypes and are constructing commercial scale production facilities. If these
companies successfully market their batteries before the introduction of our
products, there could be a material adverse effect on our business, financial
condition and results of operations. The market for our products is
characterized by changing technology and evolving industry standards, often
resulting in product obsolescence or short product lifecycles.
Although we believe that our batteries, particularly our 9-volt and
advanced rechargeable batteries, are comprised of state-of-the-art technology,
there can be no assurance that competitors will not develop technologies or
products that would render our technology and products obsolete or less
marketable.
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Dependence on Key Personnel
Because of the specialized, technical nature of our business, we are
highly dependent on certain members of our management, marketing, engineering
and technical staff. If we lose the services of these members, this could have a
material adverse effect on our business, financial condition and the results of
our operations. In addition to developing manufacturing capacity so that we can
produce high volumes of our advanced rechargeable batteries, we must attract,
recruit and retain a sizeable workforce of technically competent employees. Our
ability to pursue effectively our business strategy will depend upon, among
other factors, the successful recruitment and retention of additional highly
skilled and experienced managerial, marketing, engineering and technical
personnel. We may not be able to retain or recruit this type of personnel.
Safety Risks; Demands of Environmental and Other Regulatory Compliance
Components of our batteries contain certain elements that are known to
pose safety risks. Our primary battery products incorporate lithium metal, which
when it reacts with water may cause fires if not handled properly. In addition
to a December 1996 fire at our Abingdon, England facility, a fire occurred
August 1997 at our Newark, New York facility and fires occurred in July 1994 and
September 1995 at our Abingdon, England facility, each of which temporarily
interrupted certain manufacturing operations in a specific area of these
facilities. Although we incorporate safety procedures in our research,
development and manufacturing processes that are designed to minimize safety
risks, more accidents may occur. Although we currently carry insurance policies
which cover loss of our plant and machinery, leasehold improvements, inventory
and business interruption, any accident, whether at our manufacturing facilities
or from the use of our products, may result in significant production delays or
claims for damages resulting from injuries. These types of losses could have a
material adverse effect on our business, financial condition and the results of
our operations.
National, state and local laws impose various environmental controls on
the manufacture, storage, use and disposal of lithium batteries and/or of
certain chemicals used in the manufacture of lithium batteries. Although we
believe that our operations are in substantial compliance with current
environmental regulations and that, except as noted below, there are no
environmental conditions that will require material expenditures for clean-up at
our present or former facilities or at facilities to which it has sent waste for
disposal, there can be no assurance that changes in such laws and regulations
will not impose costly compliance requirements on we or otherwise subject it to
future liabilities. Moreover, state and local governments may enact additional
restrictions relating to the disposal of lithium batteries used by our customers
which could have a material adverse effect on our business, financial condition
and results of operations. In addition, the U.S. Department of Transportation
and certain foreign regulatory agencies that consider lithium to be a hazardous
material regulate the transportation of batteries which contain lithium metal.
We currently ship our lithium batteries in accordance with regulations
established by the U.S. Department of Transportation. There can be no assurance
that additional or modified regulations relating to the manufacture,
transportation, storage, use and disposal of materials used to manufacture our
batteries or restricting disposal of batteries will not be imposed or how these
regulations will affect us or our customers.
In connection with our purchase/lease of our Newark, New York facility in
1998, a consulting firm performed a Phase I and II Environmental Site Assessment
which revealed the existence of contaminated soil and ground water around one of
our buildings. We retained an engineering firm which estimated that the cost of
remediation should be in the range of $230,000. This cost, however, is merely an
estimate and the cost may in fact be much higher. In February 1998, we entered
into an agreement with a third party which provides that we and this third party
will retain an environmental consulting firm to conduct a supplemental Phase II
investigation to verify the existence of the contaminants and further
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delineate the nature of the environmental concern. The third party agreed to
reimburse us for fifty percent of the cost of correcting the environmental
concern on the Newark property. Test sampling occurred in the fourth quarter of
fiscal 2001 and the engineering report was submitted to the New York State
Department of Environmental Conservation (NYSDEC) for review. NYSDEC reviewed
the report and, in January 2002, recommended additional testing. We responded by
submitting a proposed work plan to NYSDEC, which was approved by NYSDEC in April
2002. We are now soliciting proposals from engineering firms to complete
remedial work contained in the work plan, and it is unknown at this time whether
the final cost to remediate will be in the range of the original estimate, given
the passage of time. The ultimate resolution of this matter may have a
significant adverse impact on the results of our operations in the period in
which it is resolved. Furthermore, we may face claims resulting in substantial
liability which would have a material adverse effect on our business, financial
condition and the results of our operations in the period in which such claims
are resolved.
Limited Sources of Supply
Certain materials we use in our products are available only from a single
or a limited number of suppliers. Additionally, we may elect to develop
relationships with a single or limited number of suppliers for materials that
are otherwise generally available. Although we believe that alternative
suppliers are available to supply materials that could replace materials
currently used by us and that, if necessary, we would be able to redesign our
products to make use of such alternatives, any interruption in our supply from
any supplier that serves as our sole source could delay product shipments and
have a material adverse effect on our business, financial condition and results
of operations. Although we have experienced interruptions of product deliveries
by sole source suppliers, these interruptions have not had a material adverse
effect on our business, financial condition and results of operations. We cannot
guarantee that we will not experience a material interruption of product
deliveries from sole source suppliers.
Dependence on Proprietary Technologies
Our success depends more on the knowledge, ability, experience and
technological expertise of our employees than on the legal protection of our
patents and other proprietary rights. We claim proprietary rights in various
unpatented technologies, know-how, trade secrets and trademarks relating to our
products and manufacturing processes. We cannot guarantee the degree of
protection these various claims may or will afford, or that our competitors will
not independently develop or patent technologies that are substantially
equivalent or superior to our technology. We protect our proprietary rights in
our products and operations through contractual obligations, including
nondisclosure agreements with certain employees, customers, consultants and
strategic partners. There can be no assurance as to the degree of protection
these contractual measures may or will afford. We, however, have had patents
issued and patent applications pending in the U.S. and elsewhere. However, we
cannot guarantee (1) that patents will be issued from any pending applications,
or that the claims allowed under any patents will be sufficiently broad to
protect our technology, (2) that any patents issued to us will not be
challenged, invalidated or circumvented, or (3) as to the degree or adequacy of
protection any patents or patent applications may or will afford. If we are
found to be infringing third party patents, there can be no assurance that we
will be able to obtain licenses with respect to such patents on acceptable
terms, if at all. Our failure to obtain necessary licenses could delay product
shipment or the introduction of new products, and costly attempts to design
around such patents could foreclose the development, manufacture or sale of our
products.
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Dependence on Technology Transfer Agreements
Our research and development of advanced rechargeable battery technology
and products utilizes internally-developed technology, acquired technology and
certain patents and related technology licensed by us pursuant to non-exclusive,
technology transfer agreements. There can be no assurance that our competitors
will not develop, independently or through the use of similar technology
transfer agreements, rechargeable battery technology or products that are
substantially equivalent or superior to the technologies and products currently
under research and development by us.
Risks Related to China Joint Venture Program
In July 1992, we entered into several agreements related to the
establishment of a manufacturing facility in Changzhou, China, for the
production and distribution in and from China of 2/3A lithium primary batteries.
Changzhou Ultra Power Battery Co., Ltd., a company organized in China ("China
Battery"), purchased from us certain technology, equipment, training and
consulting services relating to the design and operation of a lithium battery
manufacturing plant. China Battery was required to pay approximately $6.0
million to us over the first two years of the agreement, of which approximately
$5.6 million has been paid. We have been attempting to collect the balance due
under this contract. China Battery has indicated that it will not make these
payments until certain contractual issues have been resolved. Due to China
Battery's questionable willingness to pay, we wrote off in fiscal 1997 the
entire balance owed to us as well as our investment aggregating $805,000. Since
China Battery has not purchased technology, equipment, training or consulting
services from us to produce batteries other than 2/3 A lithium batteries, we do
not believe that China Battery has the capacity to become our competitor. We do
not anticipate that the manufacturing or marketing of 2/3 A lithium batteries
will be a substantial portion of our product line in the future. However, in
December 1997, China Battery sent to us a letter demanding reimbursement of an
unspecified amount of losses they have incurred plus a refund for certain
equipment that we sold to China Battery. We have attempted to initiate
negotiations to resolve the dispute. However, an agreement has not yet reached.
Although China Battery has not taken any additional steps, there can be no
assurance that China Battery will not further pursue such a claim which, if
successful, would have a material adverse effect on our business, financial
condition and results of operations. We believe that such a claim is without
merit.
Ability to Insure Against Losses
Because certain of our primary batteries are used in a variety of security
and safety products and medical devices, we may be exposed to liability claims
if such a battery fails to function properly. We maintain what we believe to be
sufficient liability insurance coverage to protect against potential claims;
however, there can be no assurance that the liability insurance will continue to
be available, or that any such liability insurance would be sufficient to cover
any claim or claims.
Possibility of Warranty Claims
We provide warranties for our various products. The longest warranty
duration is ten years, which covers our 9-volt battery used in certain smoke
detector applications. We maintain a warranty reserve to cover potential
warranty claims. We cannot guarantee, however, that the reserves will be
sufficient to satisfy warranty claims made. In the event that we experience a
significant rise in warranty claims made, such action could have a material
adverse effect on our business, financial condition and the results of our
operations.
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Possible Volatility of Stock Price
Future announcements concerning us or our competitors, including
technological innovations or commercial products, litigation or public concerns
as to the safety or commercial value of one or more of our products, may cause
the market price of our Common Stock to fluctuate substantially for reasons
which may be unrelated to operating results. These fluctuations, as well as
general economic, political and market conditions, may have a material adverse
effect on the market price of our Common Stock.
Risk Related to Arthur Andersen's Role in Auditing Our Financial Statements
Arthur Andersen LLP audited our annual financial statements and issued a
report, dated August 16, 2001, concerning those financial statements. Our
financial statements and Arthur Andersen's report are incorporated by reference
into this Prospectus. The Rochester, New York office of Arthur Andersen, which
was primarily responsible for auditing our financial statements, is undergoing a
mandatory employee force reduction and is expected to permanently close in the
imminent future. Accordingly, we are unable to obtain the consent of Arthur
Andersen to incorporate its report into this Prospectus. Our inability to obtain
Arthur Andersen's consent to incorporate such report into this Prospectus may
prevent you from being able to recover damages from Arthur Andersen under the
Securities Act of 1933. In particular, because of this lack of consent, you will
not be able to sue Arthur Andersen under Section 11(a)(4) of the Securities Act
for any untrue statements of material fact contained in the report or financial
statements audited by Arthur Andersen or any failure to state a material fact
required to be stated in the report or those financial statements and therefore
your right of recovery under that section may be limited.
FORWARD-LOOKING STATEMENTS
This Prospectus, including information contained in documents that are
incorporated by reference in this Prospectus, contains forward-looking
statements, as that term is defined by federal securities laws, that relate to
the financial condition, results of operations, plans, objectives, future
performance and business of Ultralife. These statements are frequently preceded
by, followed by or include the words believes, expects, anticipates, estimates
or similar expressions.
We have based these forward-looking statements on our current expectations
and projections about future events. The statements contained in this Prospectus
relating to matters that are not historical facts are forward-looking statements
that involve risks and uncertainties, including future demand for our products
and services, the successful commercialization of our advanced rechargeable
batteries, general economic conditions, government and environmental regulation,
competition and customer strategies, technological innovations in the primary
and rechargeable battery industries, changes in our business strategy or
development plans, capital deployment, business disruptions, including those
caused by fire, raw materials, supplies and other risks and uncertainties,
certain of which are beyond our control.
In addition to these risks, in the section of this Prospectus entitled
"Risk Factors", we have summarized a number of the risks and uncertainties that
could affect the actual outcome of the forward-looking statements included in
this Prospectus. We advise you not to place undue reliance on these
forward-looking statements in light of the material risks and uncertainties to
which they are subject. Should one or more of these risks or uncertainties
materialize, or should underlying assumptions prove incorrect, actual results
may differ materially from those described herein as anticipated, believed,
estimated or expected. We undertake no obligation to publicly update or revise
any forward-looking statements, whether as a result of new information, future
events or otherwise.
-9-
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the shares of
Common Stock by the selling stockholders. We have agreed to bear all expenses,
other than selling commissions and fees and expenses of counsel and other
advisors to the selling stockholders, in connection with the registration of the
shares being offered.
SELLING STOCKHOLDERS
The following Table A sets forth the number of shares of Common Stock
owned by each of the selling stockholders who purchased shares of our Common
Stock in our recent private placement. None of these selling stockholders has
had a material relationship with us within the past three years other than as a
result of the ownership of our Common Stock. Because the selling stockholders
may offer all or some of the Common Stock which they hold pursuant to the
offering contemplated by this Prospectus, and because there are currently no
agreements, arrangements or understandings with respect to the sale of any of
the shares, no estimate can be given as to the amount of shares that will be
held by the selling stockholders after completion of this offering. The shares
offered by this Prospectus may be offered from time to time by the selling
stockholders named below or by pledgees, donees, transferees or other successors
in interest who receive the shares as a gift, partnership distribution or other
non-sale related transfer.
Table A
Number of
Shares
Number of Shares Number of Beneficially Percent of
Beneficially Shares Owned After Outstanding
Owned Prior to Registered Completion Shares after
Completion of for Sale of the Completion of
Name of Selling Stockholder the Offering Hereby(1) Offering the Offering(2)
- -------------------------------------------------------------------------------------------------------------------
Grace Brothers, Ltd. 1,085,633 433,333 652,300 *
W. Anthony Hitschler 330,000 330,000 0 *
Stuart Shikiar 120,600 30,000 90,600 *
Holly E. Zug Trust Dated 8/5/97 11,500 8,000 3,000 *
Total 1,547,773 801,333 745,900 5.57%
- ----------
* Represents beneficial ownership of less than 1%.
(1) This Registration Statement shall also cover any additional shares of our
Common Stock which become issuable in connection with the Common Stock
registered for sale hereby by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt
of consideration which results in an increase in the number of our
outstanding shares of Common Stock.
(2) Based on 13,379,519 shares of our Common Stock, par value $.10 per share,
outstanding as of June 20, 2002, prior to subtraction of 27,250 treasury
shares and 231,980 out of 700,000 shares owned by Ultralife Taiwan, Inc.,
a Taiwanese venture of which we own approximately approximately 33%.
The following Table B sets forth the number of shares of Common Stock to
be owned upon the conversion of the $600,000 Debenture issued to Joseph C.
Abeles. Mr. Abeles is our Treasurer and a member of our Board of Directors. Mr.
Abeles has confirmed to us that he has not engaged in any
-10-
agreement or understanding, directly or indirectly, with any person, to
distribute the Common Stock issuable upon conversion of the Debenture. Because
the Mr. Abeles or subsequent selling stockholders may offer all or some of the
Common Stock which they hold pursuant to the offering contemplated by this
Prospectus, and because there are currently no agreements, arrangements or
understandings with respect to the sale of any of the shares, no estimate can be
given as to the amount of shares that will be held by Mr. Abeles or subsequent
selling stockholders after completion of this offering. The shares offered by
this Prospectus may be offered from time to time by the Mr. Abeles or subsequent
selling stockholders or by pledgees, donees, transferees or other successors in
interest who receive the shares as a gift, partnership distribution or other
non-sale related transfer.
Table B
Number of
Shares Percent of
Number of Shares Number of Beneficially Outstanding
Beneficially Shares Owned After Shares after
Owned Prior to Registered Completion Completion of
Completion of the for Sale of the the Offering
Name of Selling Stockholder Offering(1) Hereby(1)(2) Offering (3)
- ------------------------------------------------------------------------------------------------------------------
Joseph C. Abeles 461,989 200,000 261,989 *
Total 461,989 200,000 261,989 *
- ----------
* Represents beneficial ownership of less than 1%.
(1) Figures include the shares that will be issued upon the conversion of the
Debenture by such selling stockholder.
(2) This Registration Statement shall also cover any additional shares of our
Common Stock which become issuable in connection with the Common Stock
registered for sale hereby by reason of any stock dividend, stock split,
recapitalization or other similar transaction effected without the receipt
of consideration which results in an increase in the number of our
outstanding shares of Common Stock.
(3) Based on 13,379,519 shares of our Common Stock, par value $.10 per share,
outstanding as of June 20, 2002, prior to subtraction of 27,250 treasury
shares and 231,980 out of 700,000 shares owned by Ultralife Taiwan, Inc.,
a Taiwanese venture of which we own approximately approximately 33%.
PLAN OF DISTRIBUTION
We will receive no proceeds from this offering. The shares offered by this
Prospectus may be sold by the selling stockholders (including those holding
stock as a result of the future conversion of the Debenture) from time to time
in transactions in the over-the-counter market, in negotiated transactions, or
in a combination of such methods of sale, at fixed prices which may be changed,
at market prices prevailing at the time of sale, at prices related to prevailing
market prices or at negotiated prices. The selling stockholders (including those
holding stock as a result of the future conversion of the Debenture) may effect
such transactions by selling the shares to or through broker-dealers, and such
broker-dealers may receive compensation in the form of discounts, concessions or
commissions from the selling stockholders (including those holding stock as a
result of the future conversion of the Debenture) and/or the purchasers of the
shares for whom such broker-dealers may act as agents or to whom they sell as
principals, or both. This compensation might be in excess of customary
commissions. The shares we are offering may be sold either pursuant to this
Registration Statement or pursuant to Rule 144 issued by the SEC under the
Securities Act of 1933.
-11-
In order to comply with the securities laws of certain states, if
applicable, the shares will be sold in such jurisdictions only through
registered or licensed brokers or dealers. In addition, in certain states the
shares may not be sold unless they have been registered or qualified for sale in
the applicable state or an exemption from the registration or qualification
requirement is available and is complied with.
The selling stockholders (including those holding stock as a result of the
future conversion of the Debenture) and any broker-dealers or agents that
participate with the selling stockholders (including those holding stock as a
result of the future conversion of the Debenture) in the distribution of the
shares may be deemed to be "underwriters" within the meaning of the Securities
Act of 1933, and any commissions received by them and any profit on the resale
of the shares purchased by them may be deemed to be underwriting commissions or
discounts under federal law.
Under applicable federal rules and regulations, any person engaged in the
distribution of our Common Stock may not simultaneously engage in market making
activities with respect to our Common Stock for a period of two business days
prior to the commencement of such distribution. In addition, and without
limiting the foregoing, each selling stockholder will be subject to applicable
provisions of the Securities Exchange Act of 1934 and the rules and regulations
of the SEC promulgated thereunder. These rules include, without limitation,
Rules 10b-6 and 10b-7, which may limit the timing of purchases and sales of
shares of our Common Stock by the selling stockholders (including those holding
stock as a result of the future conversion of the Debenture).
LEGAL MATTERS
The validity of the securities offered hereby will be passed upon for us
by Harter, Secrest & Emery LLP, Rochester, New York.
EXPERTS
Our consolidated balance sheets as of June 30, 2000 and June 30, 2001 and
our consolidated statements of income, retained earnings, and cash flow for each
of the three years in the period ended June 30, 2001 incorporated by reference
in this Prospectus, have been incorporated herein in reliance on the report of
Arthur Andersen LLP, independent accountants, given on the authority of that
firm as experts in accounting and auditing.
After reasonable efforts, we have not been able to obtain Arthur
Andersen's written consent to the inclusion of their report in this Prospectus,
and we have dispensed with the requirement to file their consent in reliance on
Rule 437a, as promulgated under the Securities Act of 1933. Because Arthur
Andersen has not consented to the inclusion of its report in this Prospectus,
your ability to assert claims against Arthur Andersen may be limited. In
particular, because of this lack of consent, you will not be able to sue Arthur
Andersen under Section 11(a)(4) of the Securities Act for any untrue statements
of material fact contained in the financial statements audited by Arthur
Andersen or any omissions to state a material fact required to be stated in
those financial statements and therefore your right of recovery under that
section may be limited.
WHERE YOU CAN FIND MORE INFORMATION
No person has been authorized to give any information or to make any
representations other than those contained in this Prospectus in connection with
this offering of our Common Stock. If any such information or representations
are given or made, such information or representations must not be relied upon
as having been authorized by us, by any selling stockholder or by any other
person. Neither the
-12-
delivery of this Prospectus nor any sale made hereunder shall, under any
circumstances, create any implication that information herein is correct as of
any time subsequent to the date hereof. This Prospectus does not constitute an
offer to sell or a solicitation of an offer to buy any security other than the
Common Stock covered by this Prospectus, nor does it constitute an offer to or
solicitation of any person in any jurisdiction in which such offer or
solicitation may not lawfully be made.
We are subject to the informational requirements of the Securities
Exchange Act of 1934, as amended. As a result, we file reports, proxy
statements, information statements and other information with the Securities and
Exchange Commission (the "SEC"). You may inspect and copy any reports, proxy
statements and other information that we file at the Public Reference Room
maintained by the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549. You can
obtain copies of such materials by mail from the Public Reference Room of the
SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates and at the Commission's regional offices in New York City, 75 Park Place,
Room 1400, New York, New York 10007 and Chicago, Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. You may obtain information
on the operation of the Public Reference Room by calling the SEC at
1-800-SEC-0330. The SEC maintains a World Wide Web site that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC. The address of the SEC's web site is
http://www.sec.gov. Our Common Stock is quoted on the Nasdaq National Market,
and such material may also be inspected at the offices of Nasdaq Operations,
1735 K Street N.W. Washington, D.C. 20006.
We have filed with the SEC a Registration Statement on Form S-3 (together
with all amendments and exhibits, referred to in this Prospectus as the
"Registration Statement") under the Securities Act of 1933 with respect to the
Common Stock we are offering. This Prospectus does not contain, nor is it
required to contain, all of the information set forth in the Registration
Statement, certain parts of which are omitted in accordance with the rules and
regulations of the SEC. For further information regarding us and our Common
Stock, you should refer to the Registration Statement and its exhibits and
schedules. The Registration Statement, including its exhibits and schedules, may
be inspected as described above.
INCORPORATION OF INFORMATION BY REFERENCE
The following documents filed with the SEC pursuant to the Securities
Exchange Act of 1934 are incorporated herein by reference:
1. Our Annual Report on Form 10-K for the fiscal year ended June 30,
2001, filed on September 26, 2001, as amended on Form 10-K/A, filed
on December 12, 2001;
2. Our Quarterly Reports on Form 10-Q, filed on February 13, 2002 and
May 14, 2002;
3. Our Quarterly Report on Form 10-Q, filed on November 7, 2001, as
amended on Form 10-Q/A, filed on December 28, 2002;
4. Our Current Reports on Form 8-K, filed on July 12, 2001, July 24,
2001, April 24, 2002 and June 7, 2002;
5. The description of our Common Stock, par value $.10 per share,
contained in our Registration Statement on Form S-1, filed on
December 23, 1992 (Registration No. 33-54470), including any
amendment or report filed for the purpose of updating such
description; and
6. All reports and other documents filed by us pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Securities Exchange Act of 1934
subsequent to the date of this Prospectus and prior to the
termination of this offering.
-13-
Any statement contained in a document incorporated by reference herein
shall be deemed to be incorporated by reference in this Prospectus and to be
part hereof from the date of filing of such documents. Any statement modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Prospectus. We will provide to you upon written or
oral request and without charge a copy of any or all of such documents which are
incorporated herein by reference (other than exhibits to such documents unless
such exhibits are specifically incorporated by reference into the documents that
this Prospectus incorporates). Written or oral requests for copies (at no cost
to requestor) should be directed to our Secretary, at our principal executive
offices: Ultralife Batteries, Inc., 2000 Technology Parkway, Newark, New York
14513. Our telephone number is (315) 332-7100.
COMMISSION'S POSITION ON INDEMNIFICATION
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers of persons controlling us pursuant
to the foregoing provisions, we have been informed that in the opinion of the
Securities and Exchange Commission such indemnification is against public policy
as expressed in such Act and is therefore unenforceable.
-14-
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by Ultralife Batteries, Inc. in
connection with the sale of Common Stock being registered. All amounts are
estimates except the SEC registration fee.
SEC Registration Fee............................. $ 314.14
Legal fees and expenses.......................... 20,000.00
Accounting fees and expenses..................... 5,000.00
Miscellaneous fees and expenses.................. 5,500.00
----------
Total............................................ $30,814.14
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS
With respect to indemnification of directors and officers, Section 145 of
the Delaware General Corporation Law ("DGCL") provides that a corporation shall
have the power to indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other than
an action by or in the right of the corporation) by reason of the fact that the
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by the person in
connection with such action, suit or proceeding, if the person acted in good
faith and in a manner the person reasonably believed to be in or not opposed to
the best interests of the corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe the person's conduct was
unlawful. Under this provision of the DGCL, the termination of any action, suit
or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo
contendere or its equivalent, shall not, of itself, create a presumption that
the person did not act in good faith and in a manner which the person reasonably
believed to be in or not opposed to the best interests of the corporation, and
with respect to any criminal action or proceeding, had reasonable cause to
believe that the person's conduct was unlawful.
Furthermore, the DGCL provides that a corporation shall have the power to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that the
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by the person in connection with the defense or settlement
of such action or suit if the person acted in good faith and in a manner the
person reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Court of
Chancery or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
II-1
The Registrant's Restated Certificate of Incorporation (the "Certificate
of Incorporation") and By-laws, as amended (the "By-laws") provide for
limitation of the liability of directors to the Registrant and its stockholders
and for indemnification of directors, officers, employees and agents of the
Registrant, respectively, to the maximum extent permitted by the DGCL.
The Certificate of Incorporation provides that directors are not liable to
the Registrant or its stockholders for monetary damages for breaches of
fiduciary duty as a director, except for liability (a) for any breach of the
director's duty of loyalty to the Registrant or its stockholders, (b) for acts
or omissions not in good faith or that involve intentional misconduct or a
knowing violation of law, (c) for dividend payments or stock repurchases in
violation of Delaware law, or (d) for any transaction from which the director
derived any improper personal benefit.
The By-laws include provisions by which the Registrant will indemnify its
officers and directors and other persons against expenses, judgments, fines and
amounts paid in settlement with respect to threatened, pending or completed
suits or proceedings against such persons by reason of serving or having served
the Registrant as officers, directors or in other capacities, except in relation
to matters with respect to which such persons shall be determined not to have
acted in good faith, lawfully or in the best interests of the Registrant. With
respect to matters to which the Registrant's officers, directors, employees,
agents or other representatives are determined to be liable for misconduct or
negligence in the performance of their duties, the By-laws provide for
indemnification only to the extent that the Registrant determines that such
person acted in good faith and in a manner he reasonably believed to be in or
not opposed to the best interests of the Registrant.
ITEM 16. EXHIBITS
4.1 Form of Stock Purchase Agreement entered into by the Registrant and
certain Selling Stockholders
4.2 Specimen of Registrant's Common Stock Certificate (incorporated by
reference to Exhibit 3.1 of the Registrant's Registration Statement,
Commission File No. 33-54470)
4.3 Debenture Purchase Agreement, by and between the Registrant and Joseph C.
Abeles
4.4 $600,000 Senior Convertible Subordinated Debenture issued by the
Registrant to Joseph C. Abeles
4.5 Form of Registration Rights Agreement entered into by the Registrant and
the Selling Stockholders
4.6 Registration Rights Agreement, by and between the Registrant and Joseph C.
Abeles
5.1 Opinion of Harter, Secrest & Emery LLP
23.1 Consent of Arthur Andersen LLP, Independent Accountant (omitted pursuant
to Rule 437a, as promulgated under the Securities Act of 1933)
23.2 Consent of Harter, Secrest & Emery LLP (included in the Opinion of Counsel
filed as Exhibit 5.1 hereto)
24.1 Power of Attorney (included with signatures on page II-5)
-2-
ITEM 17. UNDERTAKINGS
The undersigned Registrant hereby undertakes (subject to the proviso
contained in Item 512(a) of Regulation S-K):
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) to include any Prospectus required by section 10(a)(3) of the
Securities Act of 1933; (ii) to reflect in the Prospectus any facts or events
arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflect in the form of
Prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than 20 percent
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement; and
(iii) to include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed to be
a new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Securities Exchange Act of 1934 that is incorporated by reference in the
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned Registrant hereby undertakes to supplement the Prospectus,
after expiration of the subscription period, to set forth the results of the
subscription offer, the transactions by the underwriters during the subscription
period, the amount of unsubscribed securities to be purchased by the
underwriters, and the terms of any subsequent reoffering thereof. If any public
offering by the underwriters is to be made on terms different from those set
forth on the cover page of the Prospectus, a post-effective amendment will be
filed to set forth the terms of such offering.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by a director, officer or
controlling person of the Registrant in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Registrant will, unless
in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a
-3-
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act of 1933 and will
be governed by the final adjudication of such issue.
The undersigned registrant hereby undertakes to deliver or cause to be
delivered the Prospectus, to each person to whom the Prospectus is sent or
given, the latest annual report, to security holders that is incorporated by
reference in the Prospectus and furnished pursuant to and meeting the
requirements of Rule 14a-3 or Rule 14c-3 under the Exchange Act of 1934; and,
where interim financial information required to be presented by Article 3 of
Regulation S-X is not set forth in the Prospectus, to deliver, or cause to be
delivered to each person to whom the Prospectus is sent or given, the latest
quarterly report that is specially incorporated by referred in the Prospectus to
provide such interim financial information.
-4-
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that is has reasonable grounds to believe that it meets all of the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Newark, State of New York, on this 21st day of June,
2002.
ULTRALIFE BATTERIES, INC.
By: /s/ John D. Kavazanjian
-------------------------------------
John D. Kavazanjian,
President and Chief Executive Officer
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature
appears below hereby constitutes and appoints John D. Kavazanjian, Robert W.
Fishback and Peter F. Comerford as his or her true and lawful attorney-in-fact,
each with full power of substitution and resubstitution for and in the name,
place and stead to sign, attest and file this Registration Statement and any and
all amendments and exhibits hereto and any and all applications or other
documents to be filed with the Securities and Exchange Commission, granting unto
said attorneys full power and authority to do and perform any and all acts and
things whatsoever requisite or necessary to be done in the premises.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated:
Signature Title Date
/s/ John D. Kavazanjian Chief Executive Officer, June 21, 2002
- ------------------------------------ President and Director
John D. Kavazanjian (Principal Executive Officer)
/s/ Robert W. Fishback Vice President-Finance and June 21, 2002
- ------------------------------------ Chief Financial Officer (Principal
Robert W. Fishback Financial Officer and Principal
Accounting Officer)
/s/ Joseph C. Abeles Director June 21, 2002
- ------------------------------------
Joseph C. Abeles
Director June 21, 2002
/s/ Joseph N. Barrella
- ------------------------------------
Joseph N. Barrella
Director June 21, 2002
/s/ Patricia C. Barron
- ------------------------------------
Patricia C. Barron
Director June 21, 2002
/s/ Daniel W. Christman
- ------------------------------------
Daniel W. Christman
Director June 21, 2002
/s/ Carl H. Rosner
- ------------------------------------
Carl H. Rosner
Director June 21, 2002
/s/ Ranjit Singh
- ------------------------------------
Ranjit Singh
II-5
Index to Exhibits
4.1 Form of Stock Purchase Agreement entered into by the Registrant and
certain Selling Stockholders
4.2 Specimen of Registrant's Common Stock Certificate (incorporated by
reference to Exhibit 3.1 of the Registrant's Registration Statement,
Commission File No. 33-54470)
4.3 Debenture Purchase Agreement, by and between the Registrant and Joseph C.
Abeles
4.4 $600,000 Senior Convertible Subordinated Debenture issued by the
Registrant to Joseph C. Abeles
4.5 Form of Registration Rights Agreement entered into by the Registrant and
the Selling Stockholders
4.6 Registration Rights Agreement, by and between the Registrant and Joseph C.
Abeles
5.1 Opinion of Harter, Secrest & Emery LLP
23.1 Consent of Arthur Andersen LLP, Independent Accountant (omitted pursuant
to Rule 437a, as promulgated under the Securities Act of 1933)
23.2 Consent of Harter, Secrest & Emery LLP (included in the Opinion of Counsel
filed as Exhibit 5.1 hereto)
24.1 Power of Attorney (included with signatures on page II-5)
Exhibit 4.1
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (the "Agreement") is made as of the ___ day
of _____, 2002 between ULTRALIFE BATTERIES, INC., a Delaware corporation (the
"Company") and _______________ (the "Purchaser").
The Company desires to issue and sell, and the Purchaser desires to buy,
shares of the Common Stock, $0.10 par value (the "Common Stock") of the Company
on the terms and conditions set forth in this Agreement.
In consideration of the covenants and conditions set forth in this
Agreement, the parties agree as follows:
1. Sale of Shares. The Company agrees to sell, transfer and assign
to the Purchaser and, subject to and in reliance upon the representations,
warranties, terms and conditions of this Agreement, the Purchaser agrees to
purchase ________ newly issued shares (the "Shares") of Common Stock at a
purchase price of $3.00 per share for an aggregate purchase price of $________.
2. Closing. The closing of the purchase and sale of the Shares (the
"Closing") shall be held concurrently with the execution and delivery of this
Agreement at the offices of the Company, or at any other time and place or in
such other manner to which the Company and the Purchaser may agree. At the
Closing, the Company shall authorize its transfer agent to issue to the
Purchaser a certificate representing the Shares bearing the legend required by
Section 7 of this Agreement. Within ten (10) business days of the Closing, the
Company will cause to be delivered to the Purchaser a certificate representing
the Shares.
3. Representations of the Company. The Company represents, warrants
and agrees as follows:
(a) Neither the execution nor delivery by the Company of this
Agreement will conflict with or violate any provision of the Articles of
Incorporation, Bylaws or any agreement to which the Company is a party.
(b) The Shares, when issued, sold, delivered and paid for in
accordance with the terms hereof, will be duly and validly issued, fully paid
and nonassessable.
(c) The sale and issuance of the Shares in accordance with the
terms of and on the basis of the representations and warranties set forth in
this Agreement, will be exempt from the registration requirements of the
Securities Act of 1933, as amended (the "Securities Act").
(d) This Agreement has been duly executed and delivered by the
Company and is enforceable against the Company in accordance with its terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance, fraudulent transfer, marshalling or similar
laws affecting creditors' rights and remedies generally,
and general principles of equity, including without limitation, concepts of
materiality, reasonableness, good faith and fair dealing (regardless of whether
such enforceability is considered in a proceeding in equity or at law). Except
for any notice of issuance to or listing of additional shares with NASDAQ, if
required, all consents, approvals, orders or authorizations of, or
registrations, qualifications, designations or filings with any federal or state
governmental authority on the part of the Company required in connection with
the consummation of the transactions contemplated herein have been obtained and
are effective.
4. Representations of the Purchaser. The Purchaser represents,
warrants and agrees as follows:
(a) It is the Purchaser's present intention to acquire the
Shares hereunder for the Purchaser's own account as principal and that the
shares are being and will be acquired for the purpose of investment and not with
a view to distribution or resale.
(b) The Purchaser has such knowledge and experience in
business and financial matters that the Purchaser is capable of evaluating the
merits and risks of the investment contemplated hereby.
(c) The Purchaser has full power and authority to execute,
deliver and perform this Agreement and to make this Agreement the valid and
enforceable obligation of the Purchaser.
(d) The Purchaser understands that the Shares will be
"restricted securities" as that term is defined in Rule 144 under the Securities
Act and that the Shares may only be resold in compliance with applicable federal
and state securities laws.
(e) The Purchaser's domicile is located at the Purchaser's
address set forth on the signature page hereto.
(f) The Purchaser is an "Accredited Investor" as defined in
Rule 501(a) of the Securities Act, a copy of which is set forth on Exhibit A to
this Agreement, and the Purchaser has certified to the Company the basis for
that Purchaser's Accredited Investor status by checking the appropriate category
on Exhibit A and signing and dating that Exhibit.
(g) The Purchaser acknowledges that the Company has entered
into or expects to enter into separate but substantially identical stock
purchase agreements (the "Other Stock Purchase Agreements" and together with
this Agreement, the "Stock Purchase Agreements") with other purchasers ("Other
Purchasers") providing for the sale to the Other Purchasers of shares of Common
Stock. This Agreement and the Other Stock Purchase Agreements are separate
agreements and the sales of such shares to the Purchaser and the Other
Purchasers are and will be deemed to be separate sales.
(h) The Purchaser has no contract, understanding, agreement or
arrangement with any person to sell, transfer or pledge to such person or anyone
else any of the Shares the Purchaser hereby purchases (in whole or in part) and
that the Purchaser has no present plans to enter into any such contract,
undertaking, agreement or arrangement.
2
(i) The Purchaser will provide, if requested, any additional
information that may be requested or required to determine the Purchaser's
eligibility to purchase the Shares.
(j) The Purchaser acknowledges that the Purchaser's
representations, warranties, acknowledgements and agreements in this Agreement
will be relied upon by the Company in determining the Purchaser's suitability as
a purchaser of the Shares.
(k) The Purchaser has not retained a broker or finder in
connection with the Purchaser's purchase of the Shares and to the Purchaser's
knowledge there are no other persons entitled to compensation in connection with
the sale of the Shares to the Purchaser other than consulting fees due to
Richard Hansen.
5. Company Information. The Purchaser and the Company agree that
each is capable of evaluating the merits and risks of the purchase and sale,
respectively, of the Shares hereunder. The Purchaser acknowledges that it has
reviewed the Company's (i) Annual Report on Form 10-K for the fiscal year ended
June 30, 2001, as filed with the Securities and Exchange Commission (the "SEC")
pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange
Act"); (ii) Proxy Statement for its 2001 Annual Meeting of Shareholders; (iii)
Quarterly Reports on Form 10-Q, as amended, for the fiscal quarters ended
September 30, 2001 and December 31, 2001 as filed with the SEC pursuant to the
Exchange Act; and (iv) all other reports filed with the SEC since December 31,
2001. Since December 31, 2001, the Company has filed with the SEC all reports,
documents, definitive proxy statements and all other filings required to be
filed with the SEC. The Purchaser further acknowledges that it has reviewed the
Risk Factors of the Company set forth on Exhibit B to this Agreement. The
Purchaser further acknowledges that it has been furnished with all materials
relating to the business, finances and operations of the Company and materials
relating to the offer and sale of the Shares that have been requested by the
Purchaser. The Purchaser further acknowledges that it has been afforded the
opportunity to meet with and ask questions of senior officers of the Company
concerning the Company's business, finance and operations, including in
particular the Company's business, finances and operations since December 31,
2001.
6. Registration Rights. On or before June 30, 2002, the Company
shall prepare and file with the SEC a resale registration statement (the
"Registration Statement") on Form S-3 covering the Shares (including any shares
of the Company's Common Stock issued as, or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as, a dividend
or other distribution with respect to, or in exchange for or in replacement of,
the Shares), provided that Form S-3 is available to the Company for such
purpose. The Company shall take all actions necessary or desirable to qualify to
use Form S-3 for the registration of the resale of the Shares. The Company shall
be required to file only one Registration Statement. The Purchaser and the
Company agree that promptly after the Closing, they shall enter into a separate
Registration Rights Agreement consistent with the provisions of this Section 6,
which Registration Rights Agreement shall contain customary representations and
warranties and provisions regarding indemnification and contribution.
7. Legend. The Purchaser understands and acknowledges that the
certificates evidencing the Shares will bear the following legend: "THE
SECURITIES EVIDENCED BY
3
THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND ARE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144
PROMULGATED UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE DISTRIBUTED EXCEPT (I) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE ACT; (II) IN COMPLIANCE WITH RULE 144; OR (III)
AFTER RECEIPT OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO ULTRALIFE
BATTERIES, INC. THAT SUCH REGISTRATION OR COMPLIANCE IS NOT REQUIRED AS TO SAID
SALE, OFFER OR DISTRIBUTION."
8. Counterparts. This Agreement may be executed in counterparts,
each of which will be deemed an original but all of which will be deemed one
instrument.
9. Expenses and Taxes. The Company shall pay any and all stamp and
other taxes payable or determined to be payable in connection with the
execution, delivery and performance of this Agreement and any other instruments
and documents to be delivered hereunder and agrees to save the Purchaser
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and filing fees.
10. Survival of Representations and Warranties. All representations
and warranties made in this Agreement or any other instrument or document
delivered in connection herewith shall survive the execution and delivery
hereof.
11. Prior Agreements. This Agreement constitutes the entire
agreement between the parties and supersedes any prior or contemporaneous
understandings or agreements concerning the subject matter hereof.
12. Severability. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
13. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York. The rights of
the parties under this Agreement are unique and, accordingly, the parties shall,
in addition to such other remedies as may be available to any of them at law or
in equity, have the right to enforce their rights hereunder by actions of
specific performance to the extent permitted by law.
14. Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of the Agreement for any other purpose.
15. Amendments and Waivers. This Agreement may not be amended,
supplemented or otherwise modified except by an instrument in writing signed by
both parties that specifically refers to this Agreement. Either party hereto
may, only by an instrument in writing, waive compliance by the other party
hereto with any term or provision of this Agreement on the part of such other
party to be performed or complied with. The waiver by a party hereto of a breach
of any term or provision of this Agreement shall not be construed as a waiver of
any
4
subsequent breach. Any amended or waiver effected in accordance with this
Section 15 shall be binding upon each party and its permitted assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ULTRALIFE BATTERIES, INC.
By:
--------------------------------------
Name:
Title:
THE PURCHASER:
---------------------------
Print Name
- ------------------------------------------
Signature
Address:
---------------------------------
---------------------------------
Social Security Number or
Employment Identification Number:
--------
5
EXHIBIT A
Section 501(a) of the Securities Act of 1933, as Amended:
"As used in Regulation D (17 CFR ss.ss. 230.501-230.508), the following terms
shall have the meaning indicated:
(a) Accredited investor. "Accredited investor" shall mean any person who
comes within any of the following categories, or who the issuer
reasonably believes comes within any of the following categories, at
the time of the sale of the securities to that person:
(1) Any bank as defined in section 3(a)(2) of the [Securities Act
of 1933, as amended (the "Act")], or any savings and loan
association or other institution as defined in section
3(a)(5)(A) of the Act whether acting in its individual or
fiduciary capacity; any broker or dealer registered pursuant
to section 15 of the Securities Exchange Act of 1934; any
insurance company as defined in section 2(13) of the Act; any
investment company registered under the Investment Company Act
of 1940 or a business development company as defined in
section 2(a)(48) of that Act; any Small Business Investment
Company licensed by the U.S. Small Business Administration
under section 301(c) or (d) of the Small Business Investment
Act of 1958; any plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality
of a state or its political subdivisions, for the benefit of
its employees, if such plan has total assets in excess of
$5,000,000; any employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974 if the
investment decision is made by a plan fiduciary, as defined in
section 3(21) of such Act, which is either a bank, savings and
loan association, insurance company, or registered adviser, or
if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment
decisions made solely by persons that are accredited
investors;
(2) Any private business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940;
(3) Any organization described in section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific
purpose of acquiring the securities offered, with total assets
in excess of $5,000,000;
(4) Any director, executive officer, or general partner of the
issuer of the securities being offered or sold, or any
director, executive officer, or general partner of a general
partner of that issuer;
(5) Any natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his purchase
exceeds $1,000,000;
(6) Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income
with that person's spouse in excess of $300,000 in each of
those years and has a reasonable expectation of reaching the
same income level in the current year;
(7) Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a sophisticated person
as described in ss. 230.506(b)(2)(ii); and
(8) Any entity in which all of the equity owners are accredited
investors."
The undersigned Purchaser hereby certifies to the Company that the Purchaser is
an "Accredited Investor" on the basis of the box checked above.
PURCHASER
Date:
----------------------------- -------------------------------
Print Name
-------------------------------
Signature
2
EXHIBIT B
RISK FACTORS
Please carefully consider all information provided by the Company. In
particular, the following factors could cause actual results to differ
materially from the matters described in the forward-looking statements, with
material and adverse effects on the Company's business, operating results,
financial condition and the value of Ultralife stock.
HISTORY OF OPERATING LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY
The Company commenced operations in March 1991 and has incurred net operating
losses since its inception. Losses have resulted principally from research and
development, manufacturing and general and administrative costs. No assurance
can be given that the Company will generate an operating profit or achieve
profitability in the future.
UNCERTAINTY ABOUT THE COMPANY'S ABILITY TO GENERATE POSITIVE CASH FLOWS AND
CONTINUE AS A GOING CONCERN
The Company has been in a negative cash flow situation since its inception. The
Company's current cash and credit situation is strained. While the Company is
focusing intently on increasing revenues and reducing costs and expenses, there
can be no assurance that these efforts will bring the Company to a cash
generating position. The Company's inability to successfully attain a positive
cash flow position could have a material adverse effect on the Company's
business, financial condition, and results of operations. Such material adverse
effects could include a violation of debt covenants, an inability to pay vendors
in a timely fashion, or could impact upon its ability to continue as a going
concern. If the Company is unsuccessful in generating positive cash flows, it
may result in the need to further access the capital markets for additional debt
or equity funding, and there can be no assurance that the Company would be
successful in doing so.
UNCERTAINTY OF CURRENT DEMAND FOR EXISTING PRODUCTS AND FUTURE DEMAND FOR NEW
PRODUCTS IN THE COMPANY'S PRIMARY BATTERY PRODUCT LINE
Although the Company is currently in volume production for its various primary
battery products, there can be no assurance that this demand will continue. The
Company is in the process of developing new battery configurations for both OEM
and military applications and there can be no assurance as to the market
acceptance and/or military qualification of these batteries. The Company's
inability to manufacture and sell these new products could have a material
adverse effect on the Company's business, financial condition and results of
operations.
1
UNCERTAINTY OF MARKET ACCEPTANCE OF ADVANCED RECHARGEABLE BATTERIES
Although the Company is capable of volume production of its rechargeable
batteries, the Company's advanced rechargeable batteries have not yet achieved
wide market acceptance and there can be no assurance that market acceptance of
its technology or advanced rechargeable batteries will ever be achieved. The
introduction of new products is subject to the inherent risks of unforeseen
delays and the time necessary to achieve market success for any individual
product is uncertain. If volume production and/or market penetration of the
Company's advanced rechargeable batteries is delayed for any reason, the
Company's competitors may introduce emerging technologies or refine existing
technologies which could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company routinely reviews the appropriateness of the carrying value of its
assets. If facts and circumstances indicate that the carrying amount of a
long-lived asset may be impaired, an evaluation of recoverability would be
performed. If an impairment is determined to exist, a loss would be recognized
to the extent the carrying value of the asset is in excess of its fair value.
Such an impairment charge could have a material adverse effect on the Company's
business, financial condition and results of operations.
DEPENDENCE ON OEM RELATIONSHIPS AND THEIR PRODUCTS FOR SALE OF BATTERIES
The Company intends to continue to promote demand for, and awareness of, its
batteries, in part, through the development of relationships with OEMs that
manufacture products which require the performance characteristics of the
Company's batteries. The success of any such relationship is dependent upon the
general business condition of the OEM and the ability of the Company to produce
its batteries at the quality and cost and within the time frame required by such
OEMs. Failure to develop a sufficient number of relationships with OEMs could
have a material adverse effect on the Company's business, financial condition
and results of operations.
A substantial portion of the Company's business will depend upon the success of
products sold by OEMs that use the Company's batteries. Therefore, the Company's
success is substantially dependent upon the acceptance of the OEMs' products in
the marketplace. The Company is subject to many risks beyond its control that
influence the success or failure of a particular product manufactured by an OEM,
including among others, competition faced by the OEM in its particular industry;
market acceptance of the OEM's product; the engineering, sales and marketing and
management capabilities of the OEM; technical challenges unrelated to the
Company's technology or products faced by the OEM in developing its products;
and, the financial and other resources of the OEM.
RISKS RELATING TO GROWTH AND EXPANSION
Rapid growth of the Company's primary or advanced rechargeable battery
businesses, or other segments of its business, may significantly strain the
Company's management, operations and technical resources. If the Company is
successful in obtaining rapid
2
market penetration of its batteries, the Company will be required to deliver
large volumes of quality products to its customers on a timely basis at a
reasonable cost to those customers. There can be no assurance, however, that the
Company's business will achieve rapid growth or that its efforts to expand its
manufacturing and quality control activities will be successful or that it will
be able to satisfy commercial scale production requirements on a timely and
cost-effective basis. The Company will also be required to continue to improve
its operations, management and financial systems and controls. Failure by the
Company to manage its growth effectively could have an adverse effect on the
Company's business, financial condition and results of operations.
COMPETITION; TECHNOLOGICAL OBSOLESCENCE
The primary and rechargeable battery industry is characterized by intense
competition with a large number of companies offering or seeking to develop
technology and products similar to those of the Company. The Company is subject
to competition from manufacturers of traditional rechargeable batteries, such as
nickel-cadmium batteries, from manufacturers of rechargeable batteries of more
recent technologies, such as nickel-metal hydride, lithium-ion liquid
electrolyte and lithium-metal solid-polymer batteries, as well as from companies
engaged in the development of batteries incorporating new technologies.
Manufacturers of nickel-cadmium and nickel-metal hydride batteries include
Eveready, Sanyo Electric Co. Ltd., Sony Corp., Toshiba Corp., Matsushita
Electric Industrial Co., Ltd. and Duracell International, Inc. Manufacturers of
lithium-ion liquid electrolyte batteries currently include Saft-Soc des ACC,
Sony Corp., Toshiba Corp., Matsushita Electric Industrial Co., Ltd., Sanyo
Electric Co. Ltd. and Duracell International, Inc. Valence Technology, Inc.,
Lithium Technology Corporation, and Yuasa-Exide, Inc. have developed prototype
solid-polymer batteries and are constructing commercial-scale manufacturing
facilities. The Company also competes with large and small manufacturers of
alkaline, carbon-zinc, seawater, high rate and primary batteries as well as
other manufacturers of lithium batteries. There can be no assurance that the
Company will be successful in competing with these manufacturers, many of which
have substantially greater financial, technical, manufacturing, distribution,
marketing, sales and other resources. A number of companies with substantially
greater resources than the Company are pursuing the development of a wide
variety of battery technologies, including both liquid electrolyte lithium and
solid electrolyte lithium batteries, which are expected to compete with the
Company's technology. Other companies undertaking research and development
activities of solid-polymer batteries have already developed prototypes and are
constructing commercial scale production facilities. If such other companies
successfully market their batteries prior to the introduction of the Company's
products, there will be a material adverse effect on the Company's business,
financial condition and results of operations. The market for the Company's
products is characterized by changing technology and evolving industry
standards, often resulting in product obsolescence or short product lifecycles.
Although the Company believes that its batteries are comprised of
state-of-the-art technology, there can be no assurance that competitors will not
develop technologies or products that would render the Company's technology and
products obsolete or less marketable.
3
DEPENDENCE ON KEY PERSONNEL
Because of the specialized, technical nature of the Company's business, the
Company is highly dependent on certain members of its management, marketing,
engineering and technical staff, the loss of whose services could have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition to developing manufacturing capacity that
meets the rigorous tolerances necessary for the Company's high volume production
capability, the Company must attract, recruit and retain a sizeable workforce of
technically competent employees. The ability of the Company to pursue
effectively its business strategy will depend upon, among other factors, the
successful recruitment and retention of additional highly skilled and
experienced managerial, marketing, engineering and technical personnel. There
can be no assurance that the Company will be able to retain or recruit such
personnel.
SAFETY RISKS; DEMANDS OF ENVIRONMENTAL AND OTHER REGULATORY COMPLIANCE
Components of the Company's batteries contain certain elements that are known to
pose safety risks. The Company's primary battery products incorporate lithium
metal, which when it reacts with water may cause fires if not handled properly.
In addition to a December 1996 fire at the Company's Abingdon, England facility,
a fire occurred August 1997 at the Company's Newark, New York facility and fires
occurred in July 1994 and September 1995 at the Company's Abingdon, England
facility, each of which temporarily interrupted certain manufacturing operations
in a specific area of the facility. Although the Company incorporates safety
procedures in its research, development and manufacturing processes that are
designed to minimize safety risks, there can be no assurance that an accident in
its facilities or one involving its products will not occur. Although the
Company currently has in force insurance policies which cover loss of its plant
and machinery, leasehold improvements, inventory and business interruption, any
accident, whether at the Company's manufacturing facilities or from the use of
its products, may result in significant production delays or claims for damages
resulting from injuries, any of which could have a material adverse effect on
the Company's business, financial condition and results of operations. National,
state and local regulations impose various environmental controls on the
manufacture, storage, use and disposal of lithium batteries and/or of certain
chemicals used in the manufacture of lithium batteries. Although the Company
believes that its operations are in substantial compliance with current
environmental regulations and that, except as noted below, there are no
environmental conditions that will require material expenditures for clean-up at
its present or former facilities or at facilities to which it has sent waste for
disposal, there can be no assurance that changes in such laws and regulations
will not impose costly compliance requirements on the Company or otherwise
subject it to future liabilities. Moreover, state and local governments may
enact additional restrictions relating to the disposal of lithium batteries used
by customers of the Company which could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
the transportation of batteries which contain lithium metal is regulated by the
U.S. Department of Transportation and by certain foreign regulatory agencies
that consider lithium to be a hazardous material. The Company currently ships
4
its lithium batteries in accordance with regulations established by the U.S.
Department of Transportation. There can be no assurance that additional or
modified regulations relating to the manufacture, transportation, storage, use
and disposal of materials used to manufacture the Company's batteries or
restricting disposal of batteries will not be imposed or as to the effect such
regulations may have on the Company or its customers.
In connection with the Company's purchase/lease of its Newark, New York facility
in 1998, a consulting firm performed a Phase I and II Environmental Site
Assessment which revealed the existence of contaminated soil and ground water
around one of the Company's buildings. The Company retained an engineering firm
which estimated that the cost of remediation should be in the range of $230,000.
There can be no assurance, however, that this will be the case. In February
1998, the Company entered into an agreement with a third party which provides
that the Company and this third party would retain an environmental consulting
firm to conduct a supplemental Phase II investigation to verify the existence of
the contaminants and further delineate the nature of the environmental concern.
The third party agreed to reimburse the Company for fifty percent of the cost
associated with remediating the environmental concern. This investigation has
recently been completed, and the Company has submitted a proposed work plan to
the New York State Department of Environmental Conservation for review. There
can be no assurance that the Company will not face claims resulting in
substantial liability which would have a material adverse effect on the
Company's business, financial condition and results of operations in the period
in which such claims are resolved.
LIMITED SOURCES OF SUPPLY
Certain materials used in the Company's products are available only from a
single or a limited number of suppliers. Additionally, the Company may elect to
develop relationships with a single or limited number of suppliers for materials
that are otherwise generally available. Although the Company believes that
alternative suppliers are available to supply materials that could replace
materials currently used by the Company and that, if necessary, the Company
would be able to redesign its products to make use of such alternatives, any
interruption in its supply from any supplier that serves as the Company's sole
source could delay product shipments and have a material adverse effect on the
Company's business, financial condition and results of operations. Although the
Company has experienced interruptions of product deliveries by sole source
suppliers, none of such interruptions has had a material adverse effect on the
Company's business, financial condition and results of operations. There can be
no assurance that the Company will not experience a material interruption of
product deliveries from sole source suppliers which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
DEPENDENCE ON PROPRIETARY TECHNOLOGIES
The Company believes that its success is less dependent on the legal protection
that its patents and other proprietary rights may or will afford than on the
knowledge, ability, experience and technological expertise of its employees. The
Company claims proprietary rights in various unpatented technologies, know how,
trade secrets and trademarks
5
relating to its products and manufacturing processes. There can be no assurance
as to the degree of protection these various claims may or will afford, or that
the Company's competitors will not independently develop or patent technologies
that are substantially equivalent or superior to the Company's technology. It is
the policy of the Company to protect its proprietary rights in its products and
operations through contractual obligations, including nondisclosure agreements
with certain employees, customers, consultants and strategic partners. There can
be no assurance as to the degree of protection these contractual measures may or
will afford. The Company, however, has had patents issued and patent
applications pending in the U.S. and elsewhere. There can be no assurance (i)
that patents will be issued from any pending applications, or that the claims
allowed under any patents will be sufficiently broad to protect the Company's
technology, (ii) that any patents issued to the Company will not be challenged,
invalidated or circumvented, or (iii) as to the degree or adequacy of protection
any patents or patent applications may or will afford. If the Company is found
to be infringing third party patents, there can be no assurance that it will be
able to obtain licenses with respect to such patents on acceptable terms, if at
all. Failure of the Company to obtain necessary licenses could result in delays
in product shipment or the introduction of new products, and costly attempts to
design around such patents could foreclose the development, manufacture or sale
of the Company's products.
DEPENDENCE ON TECHNOLOGY TRANSFER AGREEMENTS
The Company's research and development of advanced rechargeable battery
technology and products utilizes internally-developed technology, acquired
technology and certain patents and related technology licensed by the Company
pursuant to non-exclusive, technology transfer agreements. There can be no
assurance that the Company's competitors will not develop, independently or
through the use of similar technology transfer agreements, rechargeable battery
technology or products that are substantially equivalent or superior to the
technologies and products currently under research and development by the
Company.
RISKS RELATED TO CHINA JOINT VENTURE PROGRAM
In July 1992, the Company entered into several agreements related to the
establishment of a manufacturing facility in Changzhou, China, for the
production and distribution in and from China of 2/3A lithium primary batteries.
Changzhou Ultra Power Battery Co., Ltd., a company organized in China ("China
Battery"), purchased from the Company certain technology, equipment, training
and consulting services relating to the design and operation of a lithium
battery manufacturing plant. China Battery was required to pay approximately
$6.0 million to the Company over the first two years of the agreement, of which
approximately $5.6 million has been paid. The Company has been attempting to
collect the balance due under this contract. China Battery has indicated that
these payments will not be made until certain contractual issues have been
resolved. Due to China Battery's questionable willingness to pay, the Company
wrote off in fiscal 1997 the entire balance owed to the Company as well as the
Company's investment aggregating $805,000. Since China Battery has not purchased
technology, equipment, training or consulting services from the Company to
produce batteries other than 2/3 A lithium
6
batteries, the Company does not believe that China Battery has the capacity to
become a competitor of the Company. The Company does not anticipate that the
manufacturing or marketing of 2/3 A lithium batteries will be a substantial
portion of its product line in the future. However, in December 1997, China
Battery sent to the Company a letter demanding reimbursement of an unspecified
amount of losses they have incurred plus a refund for certain equipment that the
Company sold to China Battery. The Company has attempted to initiate
negotiations to resolve the dispute. However, an agreement has not yet
materialized. Although China Battery has not taken any additional steps, there
can be no assurance that China Battery will not further pursue such a claim
which, if successful, would have a material adverse effect on the Company's
business, financial condition and results of operations. The Company believes
that such a claim is without merit.
ABILITY TO INSURE AGAINST LOSSES
Because certain of the Company's primary batteries are used in a variety of
security and safety products and medical devices, the Company may be exposed to
liability claims if such a battery fails to function properly. The Company
maintains what it believes to be sufficient liability insurance coverage to
protect against potential claims; however, there can be no assurance that the
liability insurance will continue to be available, or that any such liability
insurance would be sufficient to cover any claim or claims.
POSSIBILTY OF WARRANTY CLAIMS
The Company provides warranties for its various products. The longest duration
warranty is a ten (10) year warranty on the Company's 9-volt battery when used
in certain smoke detector applications. The Company maintains a warranty reserve
to cover potential warranty claims. There can be no guarantee, however, that the
reserves will be sufficient to satisfy claims made. In the event the Company
experiences a significant rise in warranty claims made, such action could have a
material adverse effect on the Company's business, financial condition and
results of operations.
POSSIBLE VOLATILITY OF STOCK PRICE
Future announcements concerning the Company or its competitors, including
technological innovations or commercial products, litigation or public concerns
as to the safety or commercial value of one or more of the Company's products,
may cause the market price of the Common Stock to fluctuate substantially for
reasons which may be unrelated to operating results. These fluctuations, as well
as general economic, political and market conditions, may have a material
adverse effect on the market price of the Common Stock.
FORWARD-LOOKING STATEMENTS
This Agreement and information contained in documents provided or made
available to the Purchaser, contain forward-looking statements, as that term is
defined by federal securities laws, that relate to the financial condition,
results of operations, plans, objectives, future performance and business of the
Company. These statements are frequently preceded by, followed by or include the
words believes, expects, anticipates,
7
estimates or similar expressions. The Company has based these forward-looking
statements on its current expectations and projections about future events.
These statements relate to matters that are not historical facts are
forward-looking statements that involve risks and uncertainties, including
future demand for products and services, the successful commercialization of the
Company's batteries, general economic conditions, government and environmental
regulation, competition and customer strategies, technological innovations in
the primary and rechargeable battery industries, changes in business strategy or
development plans, capital deployment, business disruptions, including those
caused by fire, raw materials, supplies and other risks and uncertainties,
certain of which are beyond the Company's control. In addition to these risks,
in this Exhibit entitled Risk Factors, the Company has summarized a number of
the risks and uncertainties that could affect the actual outcome of the
forward-looking statements included elsewhere. The Company advises you not to
place undue reliance on these forward-looking statements in light of the
material risks and uncertainties to which they are subject. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may differ materially from those described
herein as anticipated, believed, estimated or expected. The Company undertakes
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
8
Exhibit 4.3
DEBENTURE PURCHASE AGREEMENT
This Debenture Purchase Agreement (the "Agreement") is made as of the 23rd
day of April, 2002 between ULTRALIFE BATTERIES, INC., a Delaware corporation
(the "Company") and Joseph C. Abelese (the "Purchaser").
The Company desires to issue and sell, and the Purchaser desires to buy, a
Senior Convertible Subordinated Debenture of the Company in the principal amount
of $600,000 (the "Debenture"), which Debenture will automatically convert into
shares of the Common Stock, $0.10 par value (the "Shares") of the Company at the
rate of $3.00 per share on the terms and conditions set forth in this Agreement.
The Debenture and the Shares are collectively referred to in this Agreement as
the "Securities".
In consideration of the covenants and conditions set forth in this
Agreement, the parties agree as follows:
1. Sale of Debenture. The Company agrees to sell, transfer and
assign to the Purchaser and, subject to and in reliance upon the
representations, warranties, terms and conditions of this Agreement, the
Purchaser agrees to purchase from the Company the Debenture.
2. Closing. The closing of the purchase and sale of the Debenture
(the "Closing") shall be held concurrently with the execution and delivery of
this Agreement at the offices of the Company, or at any other time and place or
in such other manner to which the Company and the Purchaser may agree. At the
Closing, the Company shall issue to the Purchaser the Debenture.
3. Representations of the Company. The Company represents, warrants
and agrees as follows:
(a) Neither the execution nor delivery by the Company of this
Agreement will conflict with or violate any provision of the Articles of
Incorporation, Bylaws or any agreement to which the Company is a party.
(b) The Debenture, when issued, sold, delivered and paid for
in accordance with the terms hereof, will be duly and validly issued, fully paid
and nonassessable, and the Shares issued on conversion of the Debenture will be
duly and validly issued, fully paid and non-assessable.
(c) The sale and issuance of the Debenture and the Shares in
accordance with the terms of and on the basis of the representations and
warranties set forth in this Agreement, will be exempt from the registration
requirements of the Securities Act of 1933, as amended (the "Securities Act").
(d) This Agreement has been duly executed and delivered by the
Company and is enforceable against the Company in accordance with its terms,
except as limited by applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent conveyance,
fraudulent transfer, marshalling or similar laws affecting creditors' rights and
remedies generally, and general principles of equity, including without
limitation, concepts of materiality, reasonableness, good faith and fair dealing
(regardless of whether such enforceability is considered in a proceeding in
equity or at law). Except for any notice of issuance to or listing of additional
shares with NASDAQ, if required, all consents, approvals, orders or
authorizations of, or registrations, qualifications, designations or filings
with any federal or state governmental authority on the part of the Company
required in connection with the consummation of the transactions contemplated
herein have been obtained and are effective.
4. Representations of the Purchaser. The Purchaser represents,
warrants and agrees as follows:
(a) It is the Purchaser's present intention to acquire the
Securities hereunder for the Purchaser's own account as principal and that the
Securities are being and will be acquired for the purpose of investment and not
with a view to distribution or resale.
(b) The Purchaser has such knowledge and experience in
business and financial matters that the Purchaser is capable of evaluating the
merits and risks of the investment contemplated hereby.
(c) The Purchaser has full power and authority to execute,
deliver and perform this Agreement and to make this Agreement the valid and
enforceable obligation of the Purchaser.
(d) The Purchaser understands that the Debenture will be
"restricted" as that term is defined in Rule 144 under the Securities Act, that
the Shares if not registered under the Act will also be "restricted" and that
the Debenture and the Shares may only be resold in compliance with applicable
federal and state securities laws.
(e) The Purchaser's domicile is located at the Purchaser's
address set forth on the signature page hereto.
(f) The Purchaser is an "Accredited Investor" as defined in
Rule 501(a) of the Securities Act, a copy of which is set forth on Exhibit A to
this Agreement, and the Purchaser has certified to the Company the basis for
that Purchaser's Accredited Investor status by checking the appropriate category
on Exhibit A and signing and dating that Exhibit.
(g) The Purchaser acknowledges that the Company has entered
into or expects to enter into separate but substantially identical stock
purchase agreements (the "Stock Purchase Agreements") with other purchasers
("Other Purchasers") providing for the sale to the Other Purchasers of shares of
the Company's Common Stock. This Agreement and the Stock Purchase Agreements are
separate agreements and the sales of such shares to the Other Purchasers are and
will be deemed to be separate sales. The Purchaser also acknowledges that he is
purchasing the Debenture as a means to allow the Company to obtain prior
stockholder approval of the issuance of the Shares to him.
2
(h) The Purchaser has no contract, understanding, agreement or
arrangement with any person to sell, transfer or pledge to such person or anyone
else any of the Shares the Purchaser hereby purchases (in whole or in part) and
that the Purchaser has no present plans to enter into any such contract,
undertaking, agreement or arrangement.
(i) The Purchaser will provide, if requested, any additional
information that may be requested or required to determine the Purchaser's
eligibility to purchase the Debenture.
(j) The Purchaser acknowledges that the Purchaser's
representations, warranties, acknowledgements and agreements in this Agreement
will be relied upon by the Company in determining the Purchaser's suitability as
a purchaser of the Debenture.
(k) The Purchaser has not retained a broker or finder in
connection with the Purchaser's purchase of the Debenture and to the Purchaser's
knowledge there are no other persons entitled to compensation in connection with
the sale of the Debenture to the Purchaser other than consulting fees due to
Richard Hansen.
5. Company Information. The Purchaser and the Company agree that
each is capable of evaluating the merits and risks of the purchase and sale,
respectively, of the Securities hereunder. The Purchaser acknowledges that he
has reviewed the Company's (i) Annual Report on Form 10-K for the fiscal year
ended June 30, 2001, as filed with the Securities and Exchange Commission (the
"SEC") pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"); (ii) Proxy Statement for its 2001 Annual Meeting of
Shareholders; (iii) Quarterly Reports on Form 10-Q, as amended, for the fiscal
quarters ended September 30, 2001 and December 31, 2001 as filed with the SEC
pursuant to the Exchange Act; and (iv) all other reports filed with the SEC
since December 31, 2001. Since December 31, 2001, the Company has filed with the
SEC all reports, documents, definitive proxy statements and all other filings
required to be filed with the SEC. The Purchaser further acknowledges that he
has reviewed the Risk Factors of the Company set forth on Exhibit B to this
Agreement. The Purchaser further acknowledges that he has been furnished with
all materials relating to the business, finances and operations of the Company
and materials relating to the offer and sale of the Securities that have been
requested by the Purchaser. The Purchaser further acknowledges that he has been
afforded the opportunity to meet with and ask questions of senior officers of
the Company concerning the Company's business, finance and operations, including
in particular the Company's business, finances and operations since December 31,
2001.
6. Registration Rights. On or before June 30, 2002, the Company
shall prepare and file with the SEC a resale registration statement (the
"Registration Statement") on Form S-3 covering the Shares (including any shares
of the Company's Common Stock issued as, or issuable upon the conversion or
exercise of any warrant, right or other security which is issued as, a dividend
or other distribution with respect to, or in exchange for or in replacement of,
the Shares), provided that Form S-3 is available to the Company for such
purpose. The Company shall take all actions necessary or desirable to qualify to
use Form S-3 for the registration of the resale of the Shares. The Company shall
be required to file only one Registration Statement. The Purchaser and the
Company agree that promptly after the Closing, they shall enter into a
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separate Registration Rights Agreement consistent with the provisions of this
Section 6, which Registration Rights Agreement shall contain customary
representations and warranties and provisions regarding indemnification and
contribution.
7. Legend. The Purchaser understands and acknowledges that the
Debenture will bear a legend denoting the restrictions on transfer and that
unless the Shares have been duly registered under the Act, the certificate(s)
evidencing the Shares will bear the following legend: "THE SECURITIES EVIDENCED
BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "ACT"), AND ARE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144
PROMULGATED UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE DISTRIBUTED EXCEPT (I) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
FOR THE SECURITIES UNDER THE ACT; (II) IN COMPLIANCE WITH RULE 144; OR (III)
AFTER RECEIPT OF AN OPINION OF COUNSEL REASONABLY SATISFACTORY TO ULTRALIFE
BATTERIES, INC. THAT SUCH REGISTRATION OR COMPLIANCE IS NOT REQUIRED AS TO SAID
SALE, OFFER OR DISTRIBUTION."
8. Counterparts. This Agreement may be executed in counterparts,
each of which will be deemed an original but all of which will be deemed one
instrument.
9. Expenses and Taxes. The Company shall pay any and all stamp and
other taxes payable or determined to be payable in connection with the
execution, delivery and performance of this Agreement and any other instruments
and documents to be delivered hereunder and agrees to save the Purchaser
harmless from and against any and all liabilities with respect to or resulting
from any delay in paying or omission to pay such taxes and filing fees.
10. Survival of Representations and Warranties. All representations
and warranties made in this Agreement or any other instrument or document
delivered in connection herewith shall survive the execution and delivery
hereof.
11. Prior Agreements. This Agreement constitutes the entire
agreement between the parties and supersedes any prior or contemporaneous
understandings or agreements concerning the subject matter hereof.
12. Severability. The invalidity or unenforceability of any
provision hereof shall in no way affect the validity or enforceability of any
other provision.
13. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York. The rights of
the parties under this Agreement are unique and, accordingly, the parties shall,
in addition to such other remedies as may be available to any of them at law or
in equity, have the right to enforce their rights hereunder by actions of
specific performance to the extent permitted by law.
4
14. Headings. Section and subsection headings in this Agreement are
included herein for convenience of reference only and shall not constitute a
part of the Agreement for any other purpose.
15. Amendments and Waivers. This Agreement may not be amended,
supplemented or otherwise modified except by an instrument in writing signed by
both parties that specifically refers to this Agreement. Either party hereto
may, only by an instrument in writing, waive compliance by the other party
hereto with any term or provision of this Agreement on the part of such other
party to be performed or complied with. The waiver by a party hereto of a breach
of any term or provision of this Agreement shall not be construed as a waiver of
any subsequent breach. Any amended or waiver effected in accordance with this
Section 15 shall be binding upon each party and its permitted assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ULTRALIFE BATTERIES, INC.
By: /s/ Peter F. Comerford
-----------------------------------
Name: Peter F. Comerford
Title: Vice President of Administration and General Counsel
THE PURCHASER: Jospeh C. Abeles
------------------------
Print Name
/s/ Jospeh C. Abeles
- ---------------------------------------
Signature
Address: 400 Columbus Ave.
----------------------
Valhalla, NY 10595
Social Security Number or
Employment Identification Number:
------
5
EXHIBIT A
Section 501(a) of the Securities Act of 1933, as Amended:
"As used in Regulation D (17 CFR ss.ss. 230.501-230.508), the following terms
shall have the meaning indicated:
(a) Accredited investor. "Accredited investor" shall mean any person who
comes within any of the following categories, or who the issuer
reasonably believes comes within any of the following categories, at
the time of the sale of the securities to that person:
(1) Any bank as defined in section 3(a)(2) of the [Securities Act
of 1933, as amended (the "Act")], or any savings and loan
association or other institution as defined in section
3(a)(5)(A) of the Act whether acting in its individual or
fiduciary capacity; any broker or dealer registered pursuant
to section 15 of the Securities Exchange Act of 1934; any
insurance company as defined in section 2(13) of the Act; any
investment company registered under the Investment Company Act
of 1940 or a business development company as defined in
section 2(a)(48) of that Act; any Small Business Investment
Company licensed by the U.S. Small Business Administration
under section 301(c) or (d) of the Small Business Investment
Act of 1958; any plan established and maintained by a state,
its political subdivisions, or any agency or instrumentality
of a state or its political subdivisions, for the benefit of
its employees, if such plan has total assets in excess of
$5,000,000; any employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974 if the
investment decision is made by a plan fiduciary, as defined in
section 3(21) of such Act, which is either a bank, savings and
loan association, insurance company, or registered adviser, or
if the employee benefit plan has total assets in excess of
$5,000,000 or, if a self-directed plan, with investment
decisions made solely by persons that are accredited
investors;
(2) Any private business development company as defined in section
202(a)(22) of the Investment Advisers Act of 1940;
(3) Any organization described in section 501(c)(3) of the
Internal Revenue Code, corporation, Massachusetts or similar
business trust, or partnership, not formed for the specific
purpose of acquiring the securities offered, with total assets
in excess of $5,000,000;
(4) Any director, executive officer, or general partner of the
issuer of the securities being offered or sold, or any
director, executive officer, or general partner of a general
partner of that issuer;
(5) Any natural person whose individual net worth, or joint net
worth with that person's spouse, at the time of his purchase
exceeds $1,000,000;
(6) Any natural person who had an individual income in excess of
$200,000 in each of the two most recent years or joint income
with that person's spouse in excess of $300,000 in each of
those years and has a reasonable expectation of reaching the
same income level in the current year;
(7) Any trust, with total assets in excess of $5,000,000, not
formed for the specific purpose of acquiring the securities
offered, whose purchase is directed by a sophisticated person
as described in ss. 230.506(b)(2)(ii); and
(8) Any entity in which all of the equity owners are accredited
investors."
The undersigned Purchaser hereby certifies to the Company that the Purchaser is
an "Accredited Investor" on the basis of the box checked above.
PURCHASER
Date:
----------------------------- ----------------------------
Print Name
----------------------------
Signature
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EXHIBIT B
RISK FACTORS
Please carefully consider all information provided by the Company. In
particular, the following factors could cause actual results to differ
materially from the matters described in the forward-looking statements, with
material and adverse effects on the Company's business, operating results,
financial condition and the value of Ultralife stock.
HISTORY OF OPERATING LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY
The Company commenced operations in March 1991 and has incurred net operating
losses since its inception. Losses have resulted principally from research and
development, manufacturing and general and administrative costs. No assurance
can be given that the Company will generate an operating profit or achieve
profitability in the future.
UNCERTAINTY ABOUT THE COMPANY'S ABILITY TO GENERATE POSITIVE CASH FLOWS AND
CONTINUE AS A GOING CONCERN
The Company has been in a negative cash flow situation since its inception. The
Company's current cash and credit situation is strained. While the Company is
focusing intently on increasing revenues and reducing costs and expenses, there
can be no assurance that these efforts will bring the Company to a cash
generating position. The Company's inability to successfully attain a positive
cash flow position could have a material adverse effect on the Company's
business, financial condition, and results of operations. Such material adverse
effects could include a violation of debt covenants, an inability to pay vendors
in a timely fashion, or could impact upon its ability to continue as a going
concern. If the Company is unsuccessful in generating positive cash flows, it
may result in the need to further access the capital markets for additional debt
or equity funding, and there can be no assurance that the Company would be
successful in doing so.
UNCERTAINTY OF CURRENT DEMAND FOR EXISTING PRODUCTS AND FUTURE DEMAND FOR NEW
PRODUCTS IN THE COMPANY'S PRIMARY BATTERY PRODUCT LINE
Although the Company is currently in volume production for its various primary
battery products, there can be no assurance that this demand will continue. The
Company is in the process of developing new battery configurations for both OEM
and military applications and there can be no assurance as to the market
acceptance and/or military qualification of these batteries. The Company's
inability to manufacture and sell these new products could have a material
adverse effect on the Company's business, financial condition and results of
operations.
1
UNCERTAINTY OF MARKET ACCEPTANCE OF ADVANCED RECHARGEABLE BATTERIES
Although the Company is capable of volume production of its rechargeable
batteries, the Company's advanced rechargeable batteries have not yet achieved
wide market acceptance and there can be no assurance that market acceptance of
its technology or advanced rechargeable batteries will ever be achieved. The
introduction of new products is subject to the inherent risks of unforeseen
delays and the time necessary to achieve market success for any individual
product is uncertain. If volume production and/or market penetration of the
Company's advanced rechargeable batteries is delayed for any reason, the
Company's competitors may introduce emerging technologies or refine existing
technologies which could have a material adverse effect on the Company's
business, financial condition and results of operations.
The Company routinely reviews the appropriateness of the carrying value of its
assets. If facts and circumstances indicate that the carrying amount of a
long-lived asset may be impaired, an evaluation of recoverability would be
performed. If an impairment is determined to exist, a loss would be recognized
to the extent the carrying value of the asset is in excess of its fair value.
Such an impairment charge could have a material adverse effect on the Company's
business, financial condition and results of operations.
DEPENDENCE ON OEM RELATIONSHIPS AND THEIR PRODUCTS FOR SALE OF BATTERIES
The Company intends to continue to promote demand for, and awareness of, its
batteries, in part, through the development of relationships with OEMs that
manufacture products which require the performance characteristics of the
Company's batteries. The success of any such relationship is dependent upon the
general business condition of the OEM and the ability of the Company to produce
its batteries at the quality and cost and within the time frame required by such
OEMs. Failure to develop a sufficient number of relationships with OEMs could
have a material adverse effect on the Company's business, financial condition
and results of operations.
A substantial portion of the Company's business will depend upon the success of
products sold by OEMs that use the Company's batteries. Therefore, the Company's
success is substantially dependent upon the acceptance of the OEMs' products in
the marketplace. The Company is subject to many risks beyond its control that
influence the success or failure of a particular product manufactured by an OEM,
including among others, competition faced by the OEM in its particular industry;
market acceptance of the OEM's product; the engineering, sales and marketing and
management capabilities of the OEM; technical challenges unrelated to the
Company's technology or products faced by the OEM in developing its products;
and, the financial and other resources of the OEM.
RISKS RELATING TO GROWTH AND EXPANSION
Rapid growth of the Company's primary or advanced rechargeable battery
businesses, or other segments of its business, may significantly strain the
Company's management, operations and technical resources. If the Company is
successful in obtaining rapid
2
market penetration of its batteries, the Company will be required to deliver
large volumes of quality products to its customers on a timely basis at a
reasonable cost to those customers. There can be no assurance, however, that the
Company's business will achieve rapid growth or that its efforts to expand its
manufacturing and quality control activities will be successful or that it will
be able to satisfy commercial scale production requirements on a timely and
cost-effective basis. The Company will also be required to continue to improve
its operations, management and financial systems and controls. Failure by the
Company to manage its growth effectively could have an adverse effect on the
Company's business, financial condition and results of operations.
COMPETITION; TECHNOLOGICAL OBSOLESCENCE
The primary and rechargeable battery industry is characterized by intense
competition with a large number of companies offering or seeking to develop
technology and products similar to those of the Company. The Company is subject
to competition from manufacturers of traditional rechargeable batteries, such as
nickel-cadmium batteries, from manufacturers of rechargeable batteries of more
recent technologies, such as nickel-metal hydride, lithium-ion liquid
electrolyte and lithium-metal solid-polymer batteries, as well as from companies
engaged in the development of batteries incorporating new technologies.
Manufacturers of nickel-cadmium and nickel-metal hydride batteries include
Eveready, Sanyo Electric Co. Ltd., Sony Corp., Toshiba Corp., Matsushita
Electric Industrial Co., Ltd. and Duracell International, Inc. Manufacturers of
lithium-ion liquid electrolyte batteries currently include Saft-Soc des ACC,
Sony Corp., Toshiba Corp., Matsushita Electric Industrial Co., Ltd., Sanyo
Electric Co. Ltd. and Duracell International, Inc. Valence Technology, Inc.,
Lithium Technology Corporation, and Yuasa-Exide, Inc. have developed prototype
solid-polymer batteries and are constructing commercial-scale manufacturing
facilities. The Company also competes with large and small manufacturers of
alkaline, carbon-zinc, seawater, high rate and primary batteries as well as
other manufacturers of lithium batteries. There can be no assurance that the
Company will be successful in competing with these manufacturers, many of which
have substantially greater financial, technical, manufacturing, distribution,
marketing, sales and other resources. A number of companies with substantially
greater resources than the Company are pursuing the development of a wide
variety of battery technologies, including both liquid electrolyte lithium and
solid electrolyte lithium batteries, which are expected to compete with the
Company's technology. Other companies undertaking research and development
activities of solid-polymer batteries have already developed prototypes and are
constructing commercial scale production facilities. If such other companies
successfully market their batteries prior to the introduction of the Company's
products, there will be a material adverse effect on the Company's business,
financial condition and results of operations. The market for the Company's
products is characterized by changing technology and evolving industry
standards, often resulting in product obsolescence or short product lifecycles.
Although the Company believes that its batteries are comprised of
state-of-the-art technology, there can be no assurance that competitors will not
develop technologies or products that would render the Company's technology and
products obsolete or less marketable.
3
DEPENDENCE ON KEY PERSONNEL
Because of the specialized, technical nature of the Company's business, the
Company is highly dependent on certain members of its management, marketing,
engineering and technical staff, the loss of whose services could have a
material adverse effect on the Company's business, financial condition and
results of operations. In addition to developing manufacturing capacity that
meets the rigorous tolerances necessary for the Company's high volume production
capability, the Company must attract, recruit and retain a sizeable workforce of
technically competent employees. The ability of the Company to pursue
effectively its business strategy will depend upon, among other factors, the
successful recruitment and retention of additional highly skilled and
experienced managerial, marketing, engineering and technical personnel. There
can be no assurance that the Company will be able to retain or recruit such
personnel.
SAFETY RISKS; DEMANDS OF ENVIRONMENTAL AND OTHER REGULATORY COMPLIANCE
Components of the Company's batteries contain certain elements that are known to
pose safety risks. The Company's primary battery products incorporate lithium
metal, which when it reacts with water may cause fires if not handled properly.
In addition to a December 1996 fire at the Company's Abingdon, England facility,
a fire occurred August 1997 at the Company's Newark, New York facility and fires
occurred in July 1994 and September 1995 at the Company's Abingdon, England
facility, each of which temporarily interrupted certain manufacturing operations
in a specific area of the facility. Although the Company incorporates safety
procedures in its research, development and manufacturing processes that are
designed to minimize safety risks, there can be no assurance that an accident in
its facilities or one involving its products will not occur. Although the
Company currently has in force insurance policies which cover loss of its plant
and machinery, leasehold improvements, inventory and business interruption, any
accident, whether at the Company's manufacturing facilities or from the use of
its products, may result in significant production delays or claims for damages
resulting from injuries, any of which could have a material adverse effect on
the Company's business, financial condition and results of operations. National,
state and local regulations impose various environmental controls on the
manufacture, storage, use and disposal of lithium batteries and/or of certain
chemicals used in the manufacture of lithium batteries. Although the Company
believes that its operations are in substantial compliance with current
environmental regulations and that, except as noted below, there are no
environmental conditions that will require material expenditures for clean-up at
its present or former facilities or at facilities to which it has sent waste for
disposal, there can be no assurance that changes in such laws and regulations
will not impose costly compliance requirements on the Company or otherwise
subject it to future liabilities. Moreover, state and local governments may
enact additional restrictions relating to the disposal of lithium batteries used
by customers of the Company which could have a material adverse effect on the
Company's business, financial condition and results of operations. In addition,
the transportation of batteries which contain lithium metal is regulated by the
U.S. Department of Transportation and by certain foreign regulatory agencies
that consider lithium to be a hazardous material. The Company currently ships
4
its lithium batteries in accordance with regulations established by the U.S.
Department of Transportation. There can be no assurance that additional or
modified regulations relating to the manufacture, transportation, storage, use
and disposal of materials used to manufacture the Company's batteries or
restricting disposal of batteries will not be imposed or as to the effect such
regulations may have on the Company or its customers.
In connection with the Company's purchase/lease of its Newark, New York facility
in 1998, a consulting firm performed a Phase I and II Environmental Site
Assessment which revealed the existence of contaminated soil and ground water
around one of the Company's buildings. The Company retained an engineering firm
which estimated that the cost of remediation should be in the range of $230,000.
There can be no assurance, however, that this will be the case. In February
1998, the Company entered into an agreement with a third party which provides
that the Company and this third party would retain an environmental consulting
firm to conduct a supplemental Phase II investigation to verify the existence of
the contaminants and further delineate the nature of the environmental concern.
The third party agreed to reimburse the Company for fifty percent of the cost
associated with remediating the environmental concern. This investigation has
recently been completed, and the Company has submitted a proposed work plan to
the New York State Department of Environmental Conservation for review. There
can be no assurance that the Company will not face claims resulting in
substantial liability which would have a material adverse effect on the
Company's business, financial condition and results of operations in the period
in which such claims are resolved.
LIMITED SOURCES OF SUPPLY
Certain materials used in the Company's products are available only from a
single or a limited number of suppliers. Additionally, the Company may elect to
develop relationships with a single or limited number of suppliers for materials
that are otherwise generally available. Although the Company believes that
alternative suppliers are available to supply materials that could replace
materials currently used by the Company and that, if necessary, the Company
would be able to redesign its products to make use of such alternatives, any
interruption in its supply from any supplier that serves as the Company's sole
source could delay product shipments and have a material adverse effect on the
Company's business, financial condition and results of operations. Although the
Company has experienced interruptions of product deliveries by sole source
suppliers, none of such interruptions has had a material adverse effect on the
Company's business, financial condition and results of operations. There can be
no assurance that the Company will not experience a material interruption of
product deliveries from sole source suppliers which could have a material
adverse effect on the Company's business, financial condition and results of
operations.
DEPENDENCE ON PROPRIETARY TECHNOLOGIES
The Company believes that its success is less dependent on the legal protection
that its patents and other proprietary rights may or will afford than on the
knowledge, ability, experience and technological expertise of its employees. The
Company claims proprietary rights in various unpatented technologies, know how,
trade secrets and trademarks
5
relating to its products and manufacturing processes. There can be no assurance
as to the degree of protection these various claims may or will afford, or that
the Company's competitors will not independently develop or patent technologies
that are substantially equivalent or superior to the Company's technology. It is
the policy of the Company to protect its proprietary rights in its products and
operations through contractual obligations, including nondisclosure agreements
with certain employees, customers, consultants and strategic partners. There can
be no assurance as to the degree of protection these contractual measures may or
will afford. The Company, however, has had patents issued and patent
applications pending in the U.S. and elsewhere. There can be no assurance (i)
that patents will be issued from any pending applications, or that the claims
allowed under any patents will be sufficiently broad to protect the Company's
technology, (ii) that any patents issued to the Company will not be challenged,
invalidated or circumvented, or (iii) as to the degree or adequacy of protection
any patents or patent applications may or will afford. If the Company is found
to be infringing third party patents, there can be no assurance that it will be
able to obtain licenses with respect to such patents on acceptable terms, if at
all. Failure of the Company to obtain necessary licenses could result in delays
in product shipment or the introduction of new products, and costly attempts to
design around such patents could foreclose the development, manufacture or sale
of the Company's products.
DEPENDENCE ON TECHNOLOGY TRANSFER AGREEMENTS
The Company's research and development of advanced rechargeable battery
technology and products utilizes internally-developed technology, acquired
technology and certain patents and related technology licensed by the Company
pursuant to non-exclusive, technology transfer agreements. There can be no
assurance that the Company's competitors will not develop, independently or
through the use of similar technology transfer agreements, rechargeable battery
technology or products that are substantially equivalent or superior to the
technologies and products currently under research and development by the
Company.
RISKS RELATED TO CHINA JOINT VENTURE PROGRAM
In July 1992, the Company entered into several agreements related to the
establishment of a manufacturing facility in Changzhou, China, for the
production and distribution in and from China of 2/3A lithium primary batteries.
Changzhou Ultra Power Battery Co., Ltd., a company organized in China ("China
Battery"), purchased from the Company certain technology, equipment, training
and consulting services relating to the design and operation of a lithium
battery manufacturing plant. China Battery was required to pay approximately
$6.0 million to the Company over the first two years of the agreement, of which
approximately $5.6 million has been paid. The Company has been attempting to
collect the balance due under this contract. China Battery has indicated that
these payments will not be made until certain contractual issues have been
resolved. Due to China Battery's questionable willingness to pay, the Company
wrote off in fiscal 1997 the entire balance owed to the Company as well as the
Company's investment aggregating $805,000. Since China Battery has not purchased
technology, equipment, training or consulting services from the Company to
produce batteries other than 2/3 A lithium
6
batteries, the Company does not believe that China Battery has the capacity to
become a competitor of the Company. The Company does not anticipate that the
manufacturing or marketing of 2/3 A lithium batteries will be a substantial
portion of its product line in the future. However, in December 1997, China
Battery sent to the Company a letter demanding reimbursement of an unspecified
amount of losses they have incurred plus a refund for certain equipment that the
Company sold to China Battery. The Company has attempted to initiate
negotiations to resolve the dispute. However, an agreement has not yet
materialized. Although China Battery has not taken any additional steps, there
can be no assurance that China Battery will not further pursue such a claim
which, if successful, would have a material adverse effect on the Company's
business, financial condition and results of operations. The Company believes
that such a claim is without merit.
ABILITY TO INSURE AGAINST LOSSES
Because certain of the Company's primary batteries are used in a variety of
security and safety products and medical devices, the Company may be exposed to
liability claims if such a battery fails to function properly. The Company
maintains what it believes to be sufficient liability insurance coverage to
protect against potential claims; however, there can be no assurance that the
liability insurance will continue to be available, or that any such liability
insurance would be sufficient to cover any claim or claims.
POSSIBILTY OF WARRANTY CLAIMS
The Company provides warranties for its various products. The longest duration
warranty is a ten (10) year warranty on the Company's 9-volt battery when used
in certain smoke detector applications. The Company maintains a warranty reserve
to cover potential warranty claims. There can be no guarantee, however, that the
reserves will be sufficient to satisfy claims made. In the event the Company
experiences a significant rise in warranty claims made, such action could have a
material adverse effect on the Company's business, financial condition and
results of operations.
POSSIBLE VOLATILITY OF STOCK PRICE
Future announcements concerning the Company or its competitors, including
technological innovations or commercial products, litigation or public concerns
as to the safety or commercial value of one or more of the Company's products,
may cause the market price of the Common Stock to fluctuate substantially for
reasons which may be unrelated to operating results. These fluctuations, as well
as general economic, political and market conditions, may have a material
adverse effect on the market price of the Common Stock.
FORWARD-LOOKING STATEMENTS
This Agreement and information contained in documents provided or made
available to the Purchaser, contain forward-looking statements, as that term is
defined by federal securities laws, that relate to the financial condition,
results of operations, plans, objectives, future performance and business of the
Company. These statements are frequently preceded by, followed by or include the
words believes, expects, anticipates,
7
estimates or similar expressions. The Company has based these forward-looking
statements on its current expectations and projections about future events.
These statements relate to matters that are not historical facts are
forward-looking statements that involve risks and uncertainties, including
future demand for products and services, the successful commercialization of the
Company's batteries, general economic conditions, government and environmental
regulation, competition and customer strategies, technological innovations in
the primary and rechargeable battery industries, changes in business strategy or
development plans, capital deployment, business disruptions, including those
caused by fire, raw materials, supplies and other risks and uncertainties,
certain of which are beyond the Company's control. In addition to these risks,
in this Exhibit entitled Risk Factors, the Company has summarized a number of
the risks and uncertainties that could affect the actual outcome of the
forward-looking statements included elsewhere. The Company advises you not to
place undue reliance on these forward-looking statements in light of the
material risks and uncertainties to which they are subject. Should one or more
of these risks or uncertainties materialize, or should underlying assumptions
prove incorrect, actual results may differ materially from those described
herein as anticipated, believed, estimated or expected. The Company undertakes
no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or otherwise.
8
Exhibit 4.4
This Debenture has not been registered under the Securities Act of 1933, as
amended, and cannot be sold or transferred except in compliance with that Act.
SENIOR CONVERTIBLE SUBORDINATED DEBENTURE
$600,000
April 23, 2002
FOR VALUE RECEIVED, the undersigned, Ultralife Batteries, Inc., a Delaware
corporation ("Ultralife"), hereby promises to pay to Joseph C. Abeles
("Purchaser"), or order on December 31, 2002 (the "Maturity Date"), the
principal sum of Six Hundred Thousand Dollars ($600,000), and to pay simple
interest thereon, computed on the basis of a 360-day year of 12 30-day months,
from the date hereof at the rate of 10% per annum. Interest shall be calculated
monthly and shall be accrued through the Maturity Date.
The principal hereof and interest hereon shall be payable at the office of
the undersigned, in such coin or currency of the United States of America as at
the time of payment shall be legal tender for the payment of public and private
debts.
This Debenture is one of a duly authorized issue of debentures of
Ultralife Batteries, Inc. designated as its Senior Convertible Subordinated
Debentures due December 31, 2002 ("Debentures"), each such Debenture being
subject to the same terms and conditions as contained herein.
W I T N E S S E T H:
--------------------
I. Recording and Transfer.
-----------------------
1.1 Ultralife will have the right at any time, or from time to time,
subsequent to the date hereof, to issue a new Debenture or Debentures to the
Purchaser or holder in printed form or in any other form in substitution for
this Debenture, provided that such substitute Debenture or Debentures shall
contain all the terms and conditions of this Debenture, and no other terms and
conditions. In the event of such reissuance of Debentures, the Purchaser or
holder will be obligated to return to Ultralife this Debenture, or any
subsequently issued Debentures, in exchange therefor.
1.2 Ultralife will keep books at its principal office for the registration
or transfer of the Debentures, or Ultralife may designate any bank or trust
company or any registrar and transfer company as its Registrar and Transfer
Agent for such purpose. The person in whose name a Debenture shall be registered
on the books of Ultralife or its Transfer Agent shall be deemed and regarded as
the absolute owner thereof for all purposes, notwithstanding any notice or
knowledge to the contrary, and payment of the principal of, the interest on, or
the premium, if any, on the Debentures shall be made, and the conversion thereof
shall be effected, only by or
upon the order of such registered owner. Any such payment or conversion shall be
valid and effectual to satisfy and discharge Ultralife of liability upon such
Debenture to the extent of such sum or sums so paid or the Common Stock of
Ultralife issued upon such conversion.
1.3 Subject to the provisions hereof, the Debenture shall be treated as
negotiable, and the Purchaser may transfer or assign the Debenture, or any
portion thereof, subject to all of the provisions and obligations contained
herein. No transfer shall be valid unless made on the books of Ultralife or its
Transfer Agent. Such transfers may be effected on the books of Ultralife or its
Transfer Agent upon delivery of: (a) this Debenture, duly endorsed or
accompanied by a written instrument of transfer, with the signature of
endorsement guaranteed by a commercial bank or trust company; (b) a sum
sufficient to reimburse Ultralife for any documentary stock transfer tax or
other governmental charge imposed upon the transfer; and (c) a letter or other
document from the transferee, in form and content satisfactory to Ultralife,
stating that such transferee is acquiring the Debenture for his own account and
without a view to, or in connection with, any distribution thereof in violation
of the Securities Act of 1933, as amended (hereinafter referred to as the
"Act"), or applicable state law. Upon receipt of such documents, Ultralife shall
issue a new Debenture in the form of the original Debenture to the proper
parties as instructed by the transferor.
1.4 Upon receipt of evidence satisfactory to Ultralife or its Transfer
Agent of the loss, theft, destruction or mutilation of this Debenture, together
with indemnification reasonably satisfactory to Ultralife and reimbursement for
all expenses incident thereto, Ultralife or its Transfer Agent shall issue and
deliver a new Debenture in lieu of any Debenture which may become lost, stolen,
destroyed or mutilated.
II. Subordination.
--------------
The parties hereto agree that the payment of the principal of and the
interest on the Debenture is expressly subordinated to the payment of all Senior
Indebtedness, to the extent and subject to the conditions set forth in this
Article II. As used herein, the term "Senior Indebtedness" shall mean the
principal of, the interest on and the premium, if any, on all indebtedness of
Ultralife for money borrowed by it from any financial institution including
banks, savings institutions or insurance companies and all renewals, extensions
and refundings of any such indebtedness, whether such indebtedness shall have
been incurred prior to, on, or subsequent to the date hereof, unless by the
terms of the instrument creating or evidencing any such indebtedness it is
provided that such indebtedness is not to be considered Senior Indebtedness for
the purpose of the Debenture.
2.1 No interest or principal shall be paid on the Debenture without the
consent of the holders of all outstanding Senior Indebtedness if, at the date
fixed herein for such interest or principal payment, Ultralife shall be in
default of payment of principal or interest upon such Senior Indebtedness. In
the event any payment of interest or principal hereunder shall be prohibited
pursuant to this Section 2. 1, such payment shall be deemed to be deferred until
the cure of all defaults in payment of principal or interest upon the Senior
Indebtedness, and the
2
payments hereon so deferred shall immediately become due and payable, without
any interest thereon, upon the cure of such defaults.
2.2 In the event of any dissolution, winding up, liquidation or
reorganization of Ultralife, whether in bankruptcy, insolvency or receivership
proceedings, or upon an assignment for the benefit of creditors or in any other
marshalling of the assets and liabilities of Ultralife, the holders of all
Senior Indebtedness shall first be entitled to receive payment in full of such
Senior Indebtedness before the holders of the Debentures shall be entitled to
receive any payment upon the principal of, the interest on, or the premium, if
any, on the indebtedness evidenced by the Debentures. Upon any such dissolution,
winding up, liquidation or reorganization, any payment or distribution of assets
of Ultralife of any kind or character, whether in cash, property or securities,
to which the holders of the Debentures would be entitled, except for the
provisions of this Article II, shall be made by the liquidating trustee or agent
or such person making such payment or distribution, whether a trustee in
bankruptcy, a receiver or liquidating trustee or otherwise, directly to the
holders of the Senior Indebtedness or their representatives or to the trustee or
trustees under any indenture or indentures under which any instruments
evidencing any such Senior Indebtedness may have been issued, ratably according
to the aggregate amounts remaining unpaid on account of the Senior Indebtedness
held or represented by each, to the extent necessary to pay in full all such
Senior Indebtedness remaining unpaid, after giving effect to all concurrent
payment or distribution with respect to such Senior Indebtedness.
2.3 In the event that, notwithstanding the provisions of Section 2.2 of
this Article II, upon any such dissolution, winding up, liquidation or
reorganization, any payment or distribution of assets of Ultralife of any kind
or character, whether in cash, property or securities, shall be received by the
holders of the Debentures before all Senior Indebtedness is paid in full, such
payment or distribution shall be paid over to the holders of such Senior
Indebtedness or their representatives or to the trustee or trustees under any
indenture or indentures referred to in said Section 2.2, ratably as aforesaid,
for application to the payment of all Senior Indebtedness remaining unpaid until
all such Senior Indebtedness shall have been paid in full, after giving effect
to any concurrent payment or distribution with respect to such Senior
Indebtedness.
2.4 Subject to the payment in full of all Senior Indebtedness, the holders
of the Debentures, to the extent permitted by law, shall be subrogated to the
rights of each holder of Senior Indebtedness (to the extent of the payments or
distributions made to such holder pursuant to the provisions of Sections 2.2 and
2.3 of this Article II) to receive payments or distributions of assets of
Ultralife applicable to the Senior Indebtedness until the principal of, the
interest on, and the premium, if any, on this Debenture shall be paid in full,
and each holder of Senior Indebtedness by accepting such payments or
distributions shall be deemed to have agreed to said subrogation. No payments or
distributions to the Senior Indebtedness pursuant to the provisions of Sections
2.2 and 2.3 shall, as between Ultralife, its creditors, other than the holders
of the Senior Indebtedness, and the holders of the Debentures, be deemed to be a
payment by Ultralife to or on account of the Debentures, the provisions of this
Article II being, and being intended, solely for the purpose of defining the
relative rights of the holders of the Debentures, on the one hand, and the
holders of the Senior Indebtedness, on the other hand; and nothing contained in
this Article II or elsewhere in this Debenture is intended to or shall impair,
as between Ultralife, the
3
holders of the Debentures and the other creditors of Ultralife, other than the
holders of Senior Indebtedness, the obligation of Ultralife, which is
unconditional and absolute, to pay to the holders of the Debentures as and when
the same shall become due and payable in accordance with the terms herein, or to
affect the relative rights of the holders of the Debentures and the other
creditors of Ultralife, other than the holders of Senior Indebtedness, or to
prevent the holders of the Debentures from exercising all of the remedies
otherwise permitted by applicable law upon default as provided for herein,
subject to the rights, if any, under this Article II of the holders of the
Senior Indebtedness in respect of any cash, property or securities of Ultralife
received upon the exercise of any such remedy.
2.5 In the event that this Debenture shall be declared due and payable
before the Maturity Date because of the occurrence of a default hereunder,
Ultralife will give prompt notice in writing of such happening to the holders of
the Senior Indebtedness, and any and all Senior Indebtedness shall forthwith
become immediately due and payable upon demand by the respective holders thereof
regardless of the expressed maturity dates thereof.
III. Conversion.
-----------
The Purchaser agrees that at any time prior to the Maturity Date hereof,
if Ultralife obtains the approval of the holders of a majority of the issued and
outstanding shares of its $.10 per value Common Stock ("Common Stock") of the
conversion of this Debenture, the principal amount of the Debenture shall
automatically and mandatorily convert into Common Stock. The conversion price
shall be Three Dollars and no Cents ($3.00) per share (hereinafter referred to
as the "Conversion Price") subject to the following terms and conditions:
3.1 Interest shall cease to accrue on the principal amount of the
Debenture converted pursuant to the provisions of this Article III, immediately
upon, and as of, the conversion thereof, and any and all accrued interest shall
be forfeited by the Purchaser. As promptly as shall be practicable after the
surrender of the Debenture for conversion in whole or in part, Ultralife will
issue and deliver to the Purchaser or holder, the number of whole shares of
Common Stock into which the Debenture shall be so converted. Such conversion
shall for all purposes be deemed to have been effected at the close of business
on the day of obtaining stockholder approval of the conversion of this
Debenture.
3.2 In connection with the conversion, if there is not an effective
registration statement with respect to the shares of Common Stock issuable on
conversion, Ultralife reserves the right to imprint restrictive legends on the
certificates representing the shares of Common Stock into which the Debenture
shall be converted and to place stop transfer orders against the same. Nothing
contained herein shall be construed as requiring counsel for Ultralife to
subsequently issue any opinion letter that registration is not required, and
such counsel may refuse to issue such an opinion letter on any reasonable
grounds or may require opinion letters from counsel for the proposed transferor,
affidavits from the proposed transferor or transferee, letters from the
Securities and Exchange Commission or any other documents which said counsel may
deem to be necessary or desirable and proper as a condition precedent to issuing
such an opinion letter.
4
3.3 In the event that at any time the Common Stock of Ultralife shall be
exchanged for, or changed into, a different kind and/or a number of shares of
stock of Ultralife or of another corporation by reason of a merger,
consolidation, sale of assets, recapitalization, reclassification, stock
dividend, stock split-up or combination of shares or otherwise, then, until any
further adjustment is required, there shall be issuable upon the conversion of
this Debenture, in lieu of each share of Common Stock of Ultralife or of any
other stock theretofore issued pursuant to the provisions of this Article III,
the kind and/or number of shares of stock for which each share of Common Stock
of Ultralife or such other stock shall be so exchanged, or into which each share
of Common Stock of Ultralife or such other stock shall be so changed and the
Conversion Price of Three Dollars and no cents ($3.00) per share of Common Stock
shall be automatically adjusted to a new Conversion Price as nearly equivalent
as practicable to the adjustment in shares of stock, if by reason of such
merger, consolidation, recapitalization, reclassification or otherwise the
number of issued and outstanding shares of Common Stock of Ultralife shall have
been exchanged for or changed into such new shares on other than a one-to-one
basis. If such event requires an adjustment in the Conversion Price, Ultralife
shall mail notice of the nature of such event and the new Conversion Price to
the Purchaser at the Purchaser's registered address within ten (10) days after
the occurrence of such event.
3.4 No adjustment in the Conversion Price shall be made for cash dividends
on the shares of Common Stock of Ultralife or any other stock issued upon any
conversion of the Debenture. No fractional shares or scrip representing
fractional shares will be issued upon the conversion of the Debentures. In lieu
of the issuance of any fractional share otherwise called for upon such
conversion, Ultralife will pay to the Purchaser or holder an amount in cash
equal to the value of such fractional share, based upon the Conversion Price.
3.5 Ultralife shall at all times, prior to the maturity date of the
Debenture, reserve and keep available out of its authorized but unissued Common
Stock, solely for the purposes of issuance upon conversion of Debentures as
herein provided an appropriate number of shares of Common Stock as shall be
issuable upon the conversion of the Debenture. Such shares of Common Stock when
issued upon conversion shall be duly and validly issued and fully-paid and
non-assessable; however, unless such shares have been registered under the Act,
such shares of Common Stock will be restricted and subject to restrictions on
resale.
IV. Representations and Warranties of Ultralife.
--------------------------------------------
Ultralife represents and warrants to the Purchaser as follows:
4.1 Ultralife is duly incorporated, validly existing and in good standing
under the laws of the State of Delaware, and Ultralife is qualified to transact
business and is in good standing in all states in which it owns property, and
has power and authority to own its property and to carry on its business as now
being conducted.
4.2 All necessary action on the part of Ultralife relating to the
authorization of the execution and delivery of this Debenture and the
performance of its other obligations hereunder
5
has been taken, and all of the same shall be valid and enforceable in accordance
with their respective terms, except as may be limited by bankruptcy, insolvency
or other laws of general application relating to or affecting the enforcement of
creditors' rights. Such action will not violate any provision of law, or of
Ultralife's Certificate of Incorporation or By-Laws, and will not violate or
create a default under any agreement to which Ultralife is a party, or by which
any of its properties is bound, or any order, writ, injunction or decree of any
Court or governmental. instrumentality, and will not result in the creation or
imposition of any lien, charge or encumbrance upon any of the properties of
Ultralife.
V. Default.
--------
In the event that there shall be any Event of Default hereunder and such
Event of Default shall remain uncorrected or unremedied for a period of more
than thirty (30) days after Ultralife shall have received notice of such Event
of Default from the Purchaser or other holders of Debentures, then such portion
of the Debenture with respect to which the Event of Default occurred may, at the
option of the Purchaser or the holders thereof, become immediately due and
payable without further notice by the Purchaser or holders thereof.
"Event of Default" as used in this Article V shall mean and refer to any of the
following: (i) the failure of Ultralife to pay any installment of interest or
principal on any of the Debentures when and as the same shall become due and
payable, whether at maturity, by call for redemption, by declaration or
otherwise; (ii) the failure of Ultralife to cure a default declared by the
holder of Senior Indebtedness within the applicable period of time to cure such
default; (iii) the failure of Ultralife to observe and perform all of the
covenants and agreements on the part of Ultralife contained herein; (iv) failure
of any representation or warranty made by Ultralife herein to be truthful,
accurate or correct; (v) the adjudication of Ultralife as a bankrupt by a court
of competent jurisdiction or the entry by a court of competent jurisdiction of
an order approving a petition seeking reorganization of Ultralife under the
federal bankruptcy laws or any other applicable law or statute of the United
States of America or any state thereof or any other jurisdiction; (vi) the
appointment by a court of competent jurisdiction of a trustee or receiver or
receivers of Ultralife of all or any substantial part of its property upon the
application of any creditor in any insolvency or bankruptcy proceeding or other
creditor's suit, unless such appointment or decree or order shall be stayed upon
appeal or otherwise; (vii) the filing by Ultralife of a petition in voluntary
bankruptcy or the making by Ultralife of an assignment for the benefit of its
creditors or the consenting by Ultralife to the appointment of a receiver or
receivers of all or any substantial portion of the property of Ultralife; (viii)
the filing by Ultralife of a petition or answer seeking reorganization under the
federal bankruptcy laws or any other applicable law or statute of the United
States of America or any state thereof or any jurisdiction, or the filing by
Ultralife of a petition to take advantage of any debtor's act.
5.1 Upon the occurrence of an Event of a Default, each holder of any of
the Debentures shall at all times have the right to institute any suit, action
or proceeding, in equity or at law, for the enforcement of his rights as
provided for herein, or in aid of the exercise of any right or power granted
herein.
6
5.2 The Debentures shall be the obligation of Ultralife solely and there
shall be no recourse had for the payment thereof or interest thereon against any
stockholder, officer or director of Ultralife, either directly or through
Ultralife, by reason of any matter prior to the delivery of the Debentures, or
against any present or future officer or director of Ultralife, all such
liability being expressly released by the Purchaser and by any subsequent
holders hereof by the acceptance hereof and as part of the consideration for the
issue hereof.
VI. Miscellaneous.
--------------
6.1 All notices and other communications required to be given hereunder
shall be in writing, by certified mail, postage prepaid, return receipt
requested, addressed to Ultralife at its principal office or to the holder of
the Debenture at his registered address as reflected on the books and records of
Ultralife or its Transfer Agent.
6.2 This Debenture represents the entire agreement between the parties
hereto and may not be modified or rescinded except by mutual agreement of the
parties hereto, except in accordance with the terms herein.
6.3 No waiver of any breach of this Debenture shall be deemed or construed
as a waiver of any subsequent breach thereof.
6.4 This Debenture may not be assigned by the Purchaser except in
accordance with the provisions hereof. This Debenture shall inure to the benefit
of, and be binding upon, the successors and assigns of Ultralife.
6.5 The headings of the Articles of this Debenture are inserted for
convenience only and do not constitute a part hereof.
6.6 Throughout this Debenture, the masculine gender shall be deemed to
include the feminine and neuter, and the singular the plural, and vice versa.
IN WITNESS WHEREOF, Ultralife has executed this Debenture on April 23,
2002.
ULTRALIFE BATTERIES, INC.
By: /s/ John D. Kavazanjian
------------------------------------
John D. Kavazanjian, President
ATTEST:
/s/ Peter F. Comerford
- --------------------------------------
Peter F. Comerford, Secretary
7
Exhibit 4.5
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made as of the ___
day of ___ ______________, 2002 between ULTRALIFE BATTERIES, INC., a Delaware
corporation (the "Company") and ___________________ (the "Purchaser").
The Company and the Purchaser have entered into that certain Stock
Purchase Agreement (the "Stock Purchase Agreement") pursuant to which the
Purchaser purchased ____________ newly-issued shares of the Company's Common
Stock (the "Shares") at a purchase price of $3.00 per share and also pursuant to
which the Company agreed to register the Shares for the benefit of the
Purchaser. The Purchaser acknowledges that there are other purchasers of shares
of the Company's Common Stock or securities convertible into Common Stock who
will be entering into similar registration rights agreements with the Company,
all of whom, together with the Purchaser are collectively referred to as the
"Purchasers."
Capitalized terms not defined in this Agreement shall have the meanings
given them in the Stock Purchase Agreement.
In consideration of the covenants and conditions set forth in this
Agreement, the parties agree as follows:
1. REGISTRATION; COMPLIANCE WITH THE SECURITIES ACT; COVENANTS
1.1 Registration of Shares
1.1.1 Registration Statement; Expenses
The Company shall:
(a) as soon as practicable after the Closing Date, but in no event later
than June 30, 2002, prepare and file with the Securities and Exchange Commission
(the "Commission") a Registration Statement on Form S-3 (or, if the Company is
ineligible to use Form S-3, then on Form S-1) relating to the sale of the Shares
by the Purchasers from time to time on the Nasdaq National Market (or the
facilities of any national securities exchange on which the Company's Common
Stock is then traded) or in privately negotiated transactions (the "Registration
Statement");
(b) provide to the Purchasers any information required to permit the sale
of the Shares under Rule 144A of the Securities Act;
(c) subject to receipt of necessary information from the Purchasers, use
its reasonable best efforts to cause the Commission to declare the Registration
Statement effective as soon as practicable after the Registration Statement is
filed with the Commission;
(d) notify Purchasers promptly upon the Registration Statement, and any
post-effective amendment thereto, being declared effective by the Commission;
(e) prepare and file with the Commission such amendments and supplements
to the Registration Statement and the Prospectus (as defined in Section 1.3.1
below) and take such other action, if any, as may be necessary to keep the
Registration Statement effective until the earlier of (i) the date on which the
Shares may be resold by the Purchasers without registration and without regard
to any volume limitations by reason of Rule 144(k) under the Securities Act or
any other rule of similar effect or (ii) all of the Shares have been sold
pursuant to the Registration Statement or Rule 144 under the Securities Act or
any other rule of similar effect;
(f) promptly furnish to the Purchasers with respect to the Shares
registered under the Registration Statement such reasonable number of copies of
the Prospectus, including any supplements to or amendments of the Prospectus, in
order to facilitate the public sale or other disposition of all or any of the
Shares by the Purchasers;
(g) during the period when copies of the Prospectus are required to be
delivered under the Securities Act or the Exchange Act, will file all documents
required to be filed with the Commission pursuant to Section 13, 14 or 15 of the
Exchange Act within the time periods required by the Exchange Act and the rules
and regulations promulgated thereunder;
(h) file documents required of the Company for customary Blue Sky
clearance in all states requiring Blue Sky clearance; provided, however, that
the Company shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so qualified or
has not so consented;
(i) advise each Purchaser, promptly after it shall receive notice or
obtain knowledge of the issuance of any stop order by the Commission delaying or
suspending the effectiveness of the Registration Statement or of the initiation
of any proceeding for that purpose; and it will promptly use its best efforts to
prevent the issuance of any stop order or to obtain its withdrawal at the
earliest practicable moment if such stop order should be issued; and
(j) bear all expenses in connection with the procedures in paragraphs (a)
through (i) of this Section 1.1.1 and the registration of the Shares pursuant to
the Registration Statement.
1.2 Transfer of Shares After Registration
Purchaser agrees that the Purchaser will not effect any disposition of the
Shares or right to purchase the Shares that would constitute a sale within the
meaning of the Securities Act, except as contemplated in the Registration
Statement referred to in Section 1.1 or as otherwise permitted by law, and that
the Purchaser will promptly notify the Company of any changes in the information
set forth in the Registration Statement regarding the Purchaser or the
Purchaser's plan of distribution.
2
1.3 Indemnification
For the purpose of this Section 1.3, the term "Registration Statement" shall
include any preliminary or final prospectus, exhibit, supplement or amendment
included in or relating to the Registration Statement referred to in Section
1.1.
1.3.1 Indemnification by the Company
The Company agrees to indemnify and hold harmless each of the Purchasers and
each person, if any, who controls any Purchaser within the meaning of the
Securities Act, against any losses, claims, damages, liabilities or expenses,
joint or several, to which such Purchasers or such controlling person may become
subject, under the Securities Act, the Exchange Act, or any other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of the Company, which consent shall not be unreasonably withheld),
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof as contemplated below) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, including the Prospectus, financial statements and
schedules, and all other documents filed as a part thereof, as amended at the
time of effectiveness of the Registration Statement, including any information
deemed to be a part thereof as of the time of effectiveness pursuant to
paragraph (b) of Rule 430A, or pursuant to Rule 434, of the Rules and
Regulations, or the Prospectus, in the form first filed with the Commission
pursuant to Rule 424(b) of the Regulations, or filed as part of the Registration
Statement at the time of effectiveness if no Rule 424(b) filing is required (the
"Prospectus"), or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state in any of them a material
fact required to be stated therein or necessary to make the statements in any of
them, in light of the circumstances under which they were made, not misleading,
or arise out of or are based in whole or in part on any inaccuracy in the
representations and warranties of the Company contained in this Agreement, or
any failure of the Company to perform its obligations under this Agreement or
under applicable law, and will reimburse each Purchaser and each such
controlling person for any legal and other expenses as such expenses are
reasonably incurred by such Purchaser or such controlling person in connection
with investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that the Company
will not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense arises out of or is based upon (i) an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, the Prospectus or any amendment or supplement of the
Registration Statement or Prospectus in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the Purchaser
expressly for use in the Registration Statement or the Prospectus, or (ii) the
failure of such Purchaser to comply with the covenants and agreements contained
in the Stock Purchase Agreement or in Section 1.2 of this Agreement respecting
resale of the Shares, or (iii) the inaccuracy of any representations made by
such Purchaser in this Agreement or (iv) any untrue statement or omission of a
material fact required to make such statement not misleading in any Prospectus
that is corrected in any subsequent Prospectus that was delivered to the
Purchaser before the pertinent sale or sales by the Purchaser.
3
1.3.2 Indemnification by the Purchaser
Each Purchaser will severally and not jointly indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of the Securities Act, against any losses, claims, damages, liabilities or
expenses to which the Company, each of its directors, each of its officers who
signed the Registration Statement or controlling person may become subject,
under the Securities Act, the Exchange Act, or any other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Purchaser, which consent shall not be unreasonably withheld)
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof as contemplated below) arise out of or are based upon (i) any
failure on the part of such Purchaser to comply with the covenants and
agreements contained in the Stock Purchase Agreement or Section 1.2 of this
Agreement respecting the sale of the Shares or (ii) the inaccuracy of any
representation made by such Purchaser in this Agreement or (iii) any untrue or
alleged untrue statement of any material fact contained in the Registration
Statement, the Prospectus, or any amendment or supplement to the Registration
Statement or Prospectus, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Registration
Statement, the Prospectus, or any amendment or supplement thereto, in reliance
upon and in conformity with written information furnished to the Company by or
on behalf of such Purchaser expressly for use therein; provided, however, that
the Purchaser shall not be liable for any such untrue or alleged untrue
statement or omission or alleged omission of which the Purchaser has delivered
to the Company in writing a correction before the occurrence of the transaction
from which such loss was incurred, and the Purchaser will reimburse the Company,
each of its directors, each of its officers who signed the Registration
Statement or controlling person for any legal and other expense reasonably
incurred by the Company, each of its directors, each of its officers who signed
the Registration Statement or controlling person in connection with
investigating, defending, settling, compromising or paying any such loss, claim,
damage, liability, expense or action.
1.3.3 Indemnification Procedure
(a) Promptly after receipt by an indemnified party under this Section 1.3
of notice of the threat or commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
under this Section 1.3, promptly notify the indemnifying party in writing of the
claim; but the omission so to notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party for contribution
or otherwise under the indemnity agreement contained in this Section 1.3 or to
the extent it is not prejudiced as a result of such failure.
(b) In case any such action is brought against any indemnified party and
such indemnified party seeks or intends to seek indemnity from an indemnifying
party, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with all other indemnifying parties similarly
notified, to assume the defense thereof with counsel reasonably satisfactory to
such indemnified party; provided, however, if the defendants in any such action
include both the
4
indemnified party and the indemnifying party and the indemnified party shall
have reasonably concluded that there may be a conflict between the positions of
the indemnifying party and the indemnified party in conducting the defense of
any such action or that there may be legal defenses available to it or other
indemnified parties that are different from or additional to those available to
the indemnifying party, the indemnified party or parties shall have the right to
select separate counsel to assume such legal defenses and to otherwise
participate in the defense of such action on behalf of such indemnified party or
parties. Upon receipt of notice from the indemnifying party to such indemnified
party of its election so to assume the defense of such action and approval by
the indemnified party of counsel, the indemnifying party will not be liable to
such indemnified party under this Section 7.3 for any legal or other expenses
subsequently incurred by such indemnified party in connection with the defense
thereof unless:
(i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the proviso
to the preceding sentence (it being understood, however, that the indemnifying
party shall not be liable for the expenses of more than one separate counsel,
approved by such indemnifying party representing all of the indemnified parties
who are parties to such action) or
(ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of action, in each
of which cases the reasonable fees and expenses of counsel shall be at the
expense of the indemnifying party. Notwithstanding the provisions of this
Section 1.3, the Purchaser shall not be liable for any indemnification
obligation under this Agreement in excess of the amount of net proceeds received
by the Purchaser from the sale of the Shares.
1.3.4 Contribution
If the indemnification provided for in this Section 1.3 is required by its terms
but is for any reason held to be unavailable to or otherwise insufficient to
hold harmless an indemnified party under this Section 1.3 in respect to any
losses, claims, damages, liabilities or expenses referred to in this Agreement,
then each applicable indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of any losses, claims, damages,
liabilities or expenses referred to in this Agreement
(a) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Purchaser from the placement of Common Stock or
(b) if the allocation provided by clause (a) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (a) above but the relative fault of the
Company and the Purchaser in connection with the statements or omissions or
inaccuracies in the representations and warranties in this Agreement that
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations.
The respective relative benefits received by the Company on the one hand and
each Purchaser on the other shall be deemed to be in the same proportion as the
amount paid by such Purchaser to the Company pursuant to this Agreement for the
Shares purchased by such Purchaser that were
5
sold pursuant to the Registration Statement bears to the difference (the
"Difference") between the amount such Purchaser paid for the Shares that were
sold pursuant to the Registration Statement and the amount received by such
Purchaser from such sale. The relative fault of the Company and each Purchaser
shall be determined by reference to, among other things, whether the untrue or
alleged statement of a material fact or the omission or alleged omission to
state a material fact or the inaccurate or the alleged inaccurate representation
or warranty relates to information supplied by the Company or by such Purchaser
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities and
expenses referred to above shall be deemed to include, subject to the
limitations set forth in Section 1.3.3, any legal or other fees or expenses
reasonably incurred by such party in connection with investigating or defending
any action or claim. The provisions set forth in Section 1.3.3 with respect to
the notice of the threat or commencement of any threat or action shall apply if
a claim for contribution is to be made under this Section 1.3.4; provided,
however, that no additional notice shall be required with respect to any threat
or action for which notice has been given under Section 1.3 for purposes of
indemnification. The Company and each Purchaser agree that it would not be just
and equitable if contribution pursuant to this Section 1.3 were determined
solely by pro rata allocation (even if the Purchaser were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in this paragraph.
Notwithstanding the provisions of this Section 1.3, no Purchaser shall be
required to contribute any amount in excess of the amount by which the
Difference exceeds the amount of any damages that such Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Purchasers' obligations to contribute pursuant to this
Section 1.3 are several and not joint.
1.4 Termination of Conditions and Obligations
The restrictions imposed by the Stock Purchase Agreement or this Agreement upon
the transferability of the Shares shall cease and terminate as to any particular
number of the Shares upon the passage of two years from the Closing Date or at
such time as an opinion of counsel satisfactory in form and substance to the
Company shall have been rendered to the effect that such conditions are not
necessary in order to comply with the Securities Act.
6
1.5 Information Available
From the date of this Agreement through the date the Registration Statement
covering the resale of Shares owned by any Purchaser is no longer effective, the
Company will furnish to such Purchaser:
(a) as soon as practicable after available (but in the case of the
Company's Annual Report to Shareholders, within 90 days after the end of each
fiscal year of the Company), one copy of
(i) its Annual Report to Shareholders (which Annual Report shall
contain financial statements audited in accordance with generally accepted
accounting principles by a national firm of certified public accountants);
(ii) if not included in substance in the Annual Report to
Stockholders, its Annual Report on Form 10-K;
(iii) if not included in substance in its Quarterly Reports to
Stockholders, its quarterly reports on Form 10-Q; and
(iv) a full copy of the particular Registration Statement covering
the Shares (the foregoing, in each case, excluding exhibits);
(b) upon the request of the Purchaser, a reasonable number of copies of
the Prospectus to supply to any other party requiring the Prospectus.
1.6 Rule 144 Information
Until the earlier of (i) the date on which the Shares may be resold by the
Purchasers without registration and without regard to any volume limitations by
reason of Rule 144(k) under the Securities Act or any other rule of similar
effect or (ii) all of the Shares have been sold pursuant to the Registration
Statement or Rule 144 under the Securities Act or any other rule of similar
effect, the Company shall file all reports required to be filed by it under the
Securities Act, the Rules and Regulations and the Exchange Act and shall take
such further action to the extent required to enable the Purchasers to sell the
Shares pursuant to Rule 144 under the Securities Act (as such rule may be
amended from time to time).
7
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER
2.1 Securities Law Representations and Warranties
The Purchaser represents, warrants and covenants to the Company as
follows:
(a) The Purchaser has acquired the Shares for the Purchaser's own account
for investment only, and has no present intention of distributing any of the
Shares, nor any arrangement or understanding with any other persons regarding
the distribution of the Shares within the meaning of Section 2(11) of the
Securities Act, other than as contemplated in Section 1 of this Agreement.
(b) The Purchaser will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) any of the Shares except in compliance
with the Securities Act and rules and regulations promulgated thereunder the
"Rules and Regulations").
(c) The Purchaser has completed or caused to be completed the Registration
Statement Questionnaire, attached to this Agreement as Appendix I, for use in
preparation of the Registration Statement, and the answers to the Questionnaire
are true and correct as of the date of this Agreement and will be true and
correct as of the effective date of the Registration Statement; provided,
however, that the Purchaser shall be entitled to update such information by
providing notice thereof to the Company before the effective date of the
Registration Statement.
2.2 Resales of Shares
(a) The Purchaser hereby covenants with the Company not to make any
sale of the Shares without satisfying the requirements of the Securities Act and
the Rules and Regulations, including, in the event of any resale under the
Registration Statement, the prospectus delivery requirements under the
Securities Act, and the Purchaser acknowledges and agrees that such Shares are
not transferable on the books of the Company pursuant to a resale under the
Registration statement unless the certificate submitted to the transfer agent
evidencing the Shares is accompanied by a separate certificate
(i) in the form of Appendix II to this Agreement;
(ii) executed by the Purchaser individually, or if the
Purchaser is an entity, by an officer of, or other authorized person designated
by, the Purchaser; and
(iii) to the effect that (a) the Shares have been sold in
accordance with the Registration Statement and (b) the requirement of delivering
a current prospectus has been satisfied.
(b) The Purchaser acknowledges that there may occasionally be times
when the Company determines, in good faith following consultation with its Board
of Directors or a committee thereof, the use of the Prospectus forming a part of
the Registration Statement should be suspended until such time as an amendment
or supplement to the Registration Statement or the Prospectus has been filed by
the Company with the Commission and any such amendment to the Registration
Statement is declared effective by the Commission, or until such time as the
Company
8
has filed an appropriate report with the Commission pursuant to the Exchange
Act. The Purchaser hereby covenants that the Purchaser will not sell any Shares
pursuant to the Prospectus during the period commencing at the time at which the
Company gives the Purchaser written notice of the suspension of the use of the
Prospectus and ending at the time the Company gives the Purchaser written notice
that the Purchaser may thereafter effect sales pursuant to the Prospectus. The
Company may, upon written notice to the Purchaser, suspend the use of the
Prospectus for up to thirty (30) days in any 365-day period based on the
reasonable determination of the Company's Board of Directors that there is a
significant business purpose for such determination, such as pending corporate
developments, public filings with the Commission or similar events. The Company
shall in no event be required to disclose the business purpose for which it has
suspended the use of the Prospectus if the Company determines in its good faith
judgment that the business purpose should remain confidential. In addition, the
Company shall notify each Purchaser (i) of any request by the Commission for an
amendment or any supplement to such Registration Statement or the Prospectus, or
any other information request by any other governmental agency directly relating
to the sale of Shares, and (ii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of the Prospectus or the initiation or threat
of any proceeding for that purpose.
(c) The Purchaser further covenants to notify the Company promptly
of the sale of any of the Shares, other than sales pursuant to the Registration
Statement or sales upon termination of the transfer restrictions pursuant to
Section 1.4 of this Agreement.
3. MISCELLANEOUS
3.1 Counterparts
This Agreement may be executed in counterparts, each of which will be
deemed an original but all of which will be deemed one instrument.
3.2 Survival of Representations and Warranties
All representations and warranties made in this Agreement or any other
instrument or document delivered in connection herewith shall survive the
execution and delivery hereof.
3.3 Prior Agreements
This Agreement constitutes the entire agreement between the parties and
supersedes any prior or contemporaneous understandings or agreements concerning
the subject matter hereof.
3.4 Severability
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
3.5 Governing Law
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York. The rights of the parties under this Agreement
are unique and, accordingly,
9
the parties shall, in addition to such other remedies as may be available to any
of them at law or in equity, have the right to enforce their rights hereunder by
actions of specific performance to the extend permitted by law.
3.6 Headings
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of the Agreement
for any other purpose.
3.7 Amendments and Waivers
This Agreement may not be amended, supplemented or otherwise modified
except by an instrument in writing signed by both parties that specifically
refers to this Agreement. Either party hereto may, only by an instrument in
writing, waive compliance by the other party hereto with any term or provision
of this Agreement on the part of such other party to be performed or complied
with. The waiver by a party hereto of a breach of any term or provision of this
Agreement shall not be construed as a waiver of any subsequent breach. Any
amendment or waiver effected in accordance with this Section 2.7 shall be
binding upon each party and its permitted assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ULTRALIFE BATTERIES, INC.
By:
----------------------------------------
Name:
--------------------------------------
Title:
-------------------------------------
PURCHASER:
- --------------------------------------------
Print Name:
- --------------------------------------------
Signature
10
APPENDIX I
ULTRALIFE BATTERIES, INC.
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement, please provide
us with the following information:
1. Pursuant to the "Selling Stockholder" section of the Registration
Statement, please state your or your organization's name exactly as it
should appear in the Registration Statement:
- -------------------------------------------------------
2. Please provide the number of shares that you or your organization will own
immediately after Closing, including those Shares purchased by you or your
organization pursuant to this Purchase Agreement and those shares
purchased by you or your organization through other transactions:
--------------------------------------------------
3. Have you or your organization had any position, office or other material
relationship within the past three years with the Company or its
affiliates?
_____ Yes _____ No
If yes, please indicate the nature of any such relationships below:
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
- -------------------------------------------------------
APPENDIX II
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, an officer of, or other person duly authorized by
- --------------------------------------------------------------------------------
[fill in official name of individual or institution]
hereby certifies that he/she/it is the Purchaser of the shares evidenced by the
attached certificate, and as such, sold such shares on ________________, 200__
in accordance with Registration Statement number 333-________________, and
complied with the requirement of delivering a current prospectus in connection
with such sale.
Print or Type:
Name of Purchaser (Individual or Institution):
- --------------------------------------------------------------------------------
Name of Individual representing Purchaser (if an Institution)
- --------------------------------------------------------------------------------
Title of Individual representing Purchaser (if an Institution):
- --------------------------------------------------------------------------------
Signature:
Individual Purchaser or Individual representing Purchaser:
- --------------------------------------------------------------------------------
Exhibit 4.6
REGISTRATION RIGHTS AGREEMENT
This Registration Rights Agreement (the "Agreement") is made as of the
23rd day of April, 2002 between ULTRALIFE BATTERIES, INC., a Delaware
corporation (the "Company") and Joseph C. Abeles (the "Purchaser").
The Company and the Purchaser have entered into that certain Debenture
Purchase Agreement (the "Purchase Agreement") pursuant to which the Purchaser
purchased a $600,000 Senior Convertible Subordinated Debenture of the Company
(the "Debenture"), which Debenture by its terms will, upon the Company obtaining
stockholder approval of such conversion, automatically convert into 200,000
newly-issued shares of the Company's Common Stock (the "Shares") at a price of
$3.00 per share and also pursuant to which the Company agreed to register the
Shares for the benefit of the Purchaser. The Purchaser acknowledges that there
are other purchasers of shares of the Company's Common Stock who will be
entering into similar registration rights agreements with the Company, all of
whom, together with the Purchaser are collectively referred to as the
"Purchasers."
Capitalized terms not defined in this Agreement shall have the meanings
given them in the Purchase Agreement.
In consideration of the covenants and conditions set forth in this
Agreement, the parties agree as follows:
1. REGISTRATION; COMPLIANCE WITH THE SECURITIES ACT; COVENANTS
1.1 Registration of Shares
1.1.1 Registration Statement; Expenses
The Company shall:
(a) as soon as practicable after the Closing Date, but in no event later
than June 30, 2002, prepare and file with the Securities and Exchange Commission
(the "Commission") a Registration Statement on Form S-3 (or, if the Company is
ineligible to use Form S-3, then on Form S-1) relating to the sale of the Shares
by the Purchasers from time to time on the Nasdaq National Market (or the
facilities of any national securities exchange on which the Company's Common
Stock is then traded) or in privately negotiated transactions (the "Registration
Statement");
(b) provide to the Purchasers any information required to permit the sale
of the Shares under Rule 144A of the Securities Act;
(c) subject to receipt of necessary information from the Purchasers, use
its reasonable best efforts to cause the Commission to declare the Registration
Statement effective as soon as practicable after the Registration Statement is
filed with the Commission;
(d) notify Purchasers promptly upon the Registration Statement, and any
post-effective amendment thereto, being declared effective by the Commission;
(e) prepare and file with the Commission such amendments and supplements
to the Registration Statement and the Prospectus (as defined in Section 1.3.1
below) and take such other action, if any, as may be necessary to keep the
Registration Statement effective until the earlier of (i) the date on which the
Shares may be resold by the Purchasers without registration and without regard
to any volume limitations by reason of Rule 144(k) under the Securities Act or
any other rule of similar effect or (ii) all of the Shares have been sold
pursuant to the Registration Statement or Rule 144 under the Securities Act or
any other rule of similar effect;
(f) promptly furnish to the Purchasers with respect to the Shares
registered under the Registration Statement such reasonable number of copies of
the Prospectus, including any supplements to or amendments of the Prospectus, in
order to facilitate the public sale or other disposition of all or any of the
Shares by the Purchasers;
(g) during the period when copies of the Prospectus are required to be
delivered under the Securities Act or the Exchange Act, will file all documents
required to be filed with the Commission pursuant to Section 13, 14 or 15 of the
Exchange Act within the time periods required by the Exchange Act and the rules
and regulations promulgated thereunder;
(h) file documents required of the Company for customary Blue Sky
clearance in all states requiring Blue Sky clearance; provided, however, that
the Company shall not be required to qualify to do business or consent to
service of process in any jurisdiction in which it is not now so qualified or
has not so consented;
(i) advise each Purchaser, promptly after it shall receive notice or
obtain knowledge of the issuance of any stop order by the Commission delaying or
suspending the effectiveness of the Registration Statement or of the initiation
of any proceeding for that purpose; and it will promptly use its best efforts to
prevent the issuance of any stop order or to obtain its withdrawal at the
earliest practicable moment if such stop order should be issued; and
(j) bear all expenses in connection with the procedures in paragraphs (a)
through (i) of this Section 1.1.1 and the registration of the Shares pursuant to
the Registration Statement.
1.2 Transfer of Shares After Registration
Purchaser agrees that the Purchaser will not effect any disposition of the
Shares or right to purchase the Shares that would constitute a sale within the
meaning of the Securities Act, except as contemplated in the Registration
Statement referred to in Section 1.1 or as otherwise permitted by law, and that
the Purchaser will promptly notify the Company of any changes in the information
set forth in the Registration Statement regarding the Purchaser or the
Purchaser's plan of distribution.
2
1.3 Indemnification
For the purpose of this Section 1.3, the term "Registration Statement" shall
include any preliminary or final prospectus, exhibit, supplement or amendment
included in or relating to the Registration Statement referred to in Section
1.1.
1.3.1 Indemnification by the Company
The Company agrees to indemnify and hold harmless each of the Purchasers and
each person, if any, who controls any Purchaser within the meaning of the
Securities Act, against any losses, claims, damages, liabilities or expenses,
joint or several, to which such Purchasers or such controlling person may become
subject, under the Securities Act, the Exchange Act, or any other federal or
state statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of the Company, which consent shall not be unreasonably withheld),
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof as contemplated below) arise out of or are based upon any untrue
statement or alleged untrue statement of any material fact contained in the
Registration Statement, including the Prospectus, financial statements and
schedules, and all other documents filed as a part thereof, as amended at the
time of effectiveness of the Registration Statement, including any information
deemed to be a part thereof as of the time of effectiveness pursuant to
paragraph (b) of Rule 430A, or pursuant to Rule 434, of the Rules and
Regulations, or the Prospectus, in the form first filed with the Commission
pursuant to Rule 424(b) of the Regulations, or filed as part of the Registration
Statement at the time of effectiveness if no Rule 424(b) filing is required (the
"Prospectus"), or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state in any of them a material
fact required to be stated therein or necessary to make the statements in any of
them, in light of the circumstances under which they were made, not misleading,
or arise out of or are based in whole or in part on any inaccuracy in the
representations and warranties of the Company contained in this Agreement, or
any failure of the Company to perform its obligations under this Agreement or
under applicable law, and will reimburse each Purchaser and each such
controlling person for any legal and other expenses as such expenses are
reasonably incurred by such Purchaser or such controlling person in connection
with investigating, defending, settling, compromising or paying any such loss,
claim, damage, liability, expense or action; provided, however, that the Company
will not be liable in any such case to the extent that any such loss, claim,
damage, liability or expense arises out of or is based upon (i) an untrue
statement or alleged untrue statement or omission or alleged omission made in
the Registration Statement, the Prospectus or any amendment or supplement of the
Registration Statement or Prospectus in reliance upon and in conformity with
written information furnished to the Company by or on behalf of the Purchaser
expressly for use in the Registration Statement or the Prospectus, or (ii) the
failure of such Purchaser to comply with the covenants and agreements contained
in the Purchase Agreement or in Section 1.2 of this Agreement respecting resale
of the Shares, or (iii) the inaccuracy of any representations made by such
Purchaser in this Agreement or (iv) any untrue statement or omission of a
material fact required to make such statement not misleading in any Prospectus
that is corrected in any subsequent Prospectus that was delivered to the
Purchaser before the pertinent sale or sales by the Purchaser.
3
1.3.2 Indemnification by the Purchaser
Each Purchaser will severally and not jointly indemnify and hold harmless the
Company, each of its directors, each of its officers who signed the Registration
Statement and each person, if any, who controls the Company within the meaning
of the Securities Act, against any losses, claims, damages, liabilities or
expenses to which the Company, each of its directors, each of its officers who
signed the Registration Statement or controlling person may become subject,
under the Securities Act, the Exchange Act, or any other federal or state
statutory law or regulation, or at common law or otherwise (including in
settlement of any litigation, if such settlement is effected with the written
consent of such Purchaser, which consent shall not be unreasonably withheld)
insofar as such losses, claims, damages, liabilities or expenses (or actions in
respect thereof as contemplated below) arise out of or are based upon (i) any
failure on the part of such Purchaser to comply with the covenants and
agreements contained in the Purchase Agreement or Section 1.2 of this Agreement
respecting the sale of the Shares or (ii) the inaccuracy of any representation
made by such Purchaser in this Agreement or (iii) any untrue or alleged untrue
statement of any material fact contained in the Registration Statement, the
Prospectus, or any amendment or supplement to the Registration Statement or
Prospectus, or arise out of or are based upon the omission or alleged omission
to state therein a material fact required to be stated therein or necessary to
make the statements therein not misleading, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Registration Statement, the
Prospectus, or any amendment or supplement thereto, in reliance upon and in
conformity with written information furnished to the Company by or on behalf of
such Purchaser expressly for use therein; provided, however, that the Purchaser
shall not be liable for any such untrue or alleged untrue statement or omission
or alleged omission of which the Purchaser has delivered to the Company in
writing a correction before the occurrence of the transaction from which such
loss was incurred, and the Purchaser will reimburse the Company, each of its
directors, each of its officers who signed the Registration Statement or
controlling person for any legal and other expense reasonably incurred by the
Company, each of its directors, each of its officers who signed the Registration
Statement or controlling person in connection with investigating, defending,
settling, compromising or paying any such loss, claim, damage, liability,
expense or action.
1.3.3 Indemnification Procedure
(a) Promptly after receipt by an indemnified party under this Section 1.3
of notice of the threat or commencement of any action, such indemnified party
will, if a claim in respect thereof is to be made against an indemnifying party
under this Section 1.3, promptly notify the indemnifying party in writing of the
claim; but the omission so to notify the indemnifying party will not relieve it
from any liability which it may have to any indemnified party for contribution
or otherwise under the indemnity agreement contained in this Section 1.3 or to
the extent it is not prejudiced as a result of such failure.
(b) In case any such action is brought against any indemnified party and
such indemnified party seeks or intends to seek indemnity from an indemnifying
party, the indemnifying party will be entitled to participate in, and, to the
extent that it may wish, jointly with all other indemnifying parties similarly
notified, to assume the defense thereof with counsel reasonably satisfactory to
such
4
indemnified party; provided, however, if the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have reasonably concluded that there may be a conflict
between the positions of the indemnifying party and the indemnified party in
conducting the defense of any such action or that there may be legal defenses
available to it or other indemnified parties that are different from or
additional to those available to the indemnifying party, the indemnified party
or parties shall have the right to select separate counsel to assume such legal
defenses and to otherwise participate in the defense of such action on behalf of
such indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of its election so to assume the defense of such
action and approval by the indemnified party of counsel, the indemnifying party
will not be liable to such indemnified party under this Section 7.3 for any
legal or other expenses subsequently incurred by such indemnified party in
connection with the defense thereof unless:
(i) the indemnified party shall have employed such counsel in
connection with the assumption of legal defenses in accordance with the proviso
to the preceding sentence (it being understood, however, that the indemnifying
party shall not be liable for the expenses of more than one separate counsel,
approved by such indemnifying party representing all of the indemnified parties
who are parties to such action) or
(ii) the indemnifying party shall not have employed counsel
reasonably satisfactory to the indemnified party to represent the indemnified
party within a reasonable time after notice of commencement of action, in each
of which cases the reasonable fees and expenses of counsel shall be at the
expense of the indemnifying party. Notwithstanding the provisions of this
Section 1.3, the Purchaser shall not be liable for any indemnification
obligation under this Agreement in excess of the amount of net proceeds received
by the Purchaser from the sale of the Shares.
1.3.4 Contribution
If the indemnification provided for in this Section 1.3 is required by its terms
but is for any reason held to be unavailable to or otherwise insufficient to
hold harmless an indemnified party under this Section 1.3 in respect to any
losses, claims, damages, liabilities or expenses referred to in this Agreement,
then each applicable indemnifying party shall contribute to the amount paid or
payable by such indemnified party as a result of any losses, claims, damages,
liabilities or expenses referred to in this Agreement
(a) in such proportion as is appropriate to reflect the relative benefits
received by the Company and the Purchaser from the placement of Common Stock or
(b) if the allocation provided by clause (a) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (a) above but the relative fault of the
Company and the Purchaser in connection with the statements or omissions or
inaccuracies in the representations and warranties in this Agreement that
resulted in such losses, claims, damages, liabilities or expenses, as well as
any other relevant equitable considerations.
The respective relative benefits received by the Company on the one hand and
each Purchaser on the other shall be deemed to be in the same proportion as the
amount paid by such Purchaser to
5
the Company pursuant to this Agreement for the Shares purchased by such
Purchaser that were sold pursuant to the Registration Statement bears to the
difference (the "Difference") between the amount such Purchaser paid for the
Shares that were sold pursuant to the Registration Statement and the amount
received by such Purchaser from such sale. The relative fault of the Company and
each Purchaser shall be determined by reference to, among other things, whether
the untrue or alleged statement of a material fact or the omission or alleged
omission to state a material fact or the inaccurate or the alleged inaccurate
representation or warranty relates to information supplied by the Company or by
such Purchaser and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
The amount paid or payable by a party as a result of the losses, claims,
damages, liabilities and expenses referred to above shall be deemed to include,
subject to the limitations set forth in Section 1.3.3, any legal or other fees
or expenses reasonably incurred by such party in connection with investigating
or defending any action or claim. The provisions set forth in Section 1.3.3 with
respect to the notice of the threat or commencement of any threat or action
shall apply if a claim for contribution is to be made under this Section 1.3.4;
provided, however, that no additional notice shall be required with respect to
any threat or action for which notice has been given under Section 1.3 for
purposes of indemnification. The Company and each Purchaser agree that it would
not be just and equitable if contribution pursuant to this Section 1.3 were
determined solely by pro rata allocation (even if the Purchaser were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in this paragraph.
Notwithstanding the provisions of this Section 1.3, no Purchaser shall be
required to contribute any amount in excess of the amount by which the
Difference exceeds the amount of any damages that such Purchaser has otherwise
been required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission. No person guilty of fraudulent misrepresentation
(within the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Purchasers' obligations to contribute pursuant to this
Section 1.3 are several and not joint.
1.4 Termination of Conditions and Obligations
The restrictions imposed by the Purchase Agreement or this Agreement upon the
transferability of the Shares shall cease and terminate as to any particular
number of the Shares upon the passage of two years from the Closing Date or at
such time as an opinion of counsel satisfactory in form and substance to the
Company shall have been rendered to the effect that such conditions are not
necessary in order to comply with the Securities Act.
1.5 Information Available
From the date of this Agreement through the date the Registration Statement
covering the resale of Shares owned by any Purchaser is no longer effective, the
Company will furnish to such Purchaser:
(a) as soon as practicable after available (but in the case of the
Company's Annual Report to Shareholders, within 90 days after the end of each
fiscal year of the Company), one copy of
6
(i) its Annual Report to Shareholders (which Annual Report shall
contain financial statements audited in accordance with generally accepted
accounting principles by a national firm of certified public accountants);
(ii) if not included in substance in the Annual Report to
Stockholders, its Annual Report on Form 10-K;
(iii) if not included in substance in its Quarterly Reports to
Stockholders, its quarterly reports on Form 10-Q; and
(iv) a full copy of the particular Registration Statement covering
the Shares (the foregoing, in each case, excluding exhibits);
(b) upon the request of the Purchaser, a reasonable number of copies of
the Prospectus to supply to any other party requiring the Prospectus.
1.6 Rule 144 Information
Until the earlier of (i) the date on which the Shares may be resold by the
Purchasers without registration and without regard to any volume limitations by
reason of Rule 144(k) under the Securities Act or any other rule of similar
effect or (ii) all of the Shares have been sold pursuant to the Registration
Statement or Rule 144 under the Securities Act or any other rule of similar
effect, the Company shall file all reports required to be filed by it under the
Securities Act, the Rules and Regulations and the Exchange Act and shall take
such further action to the extent required to enable the Purchasers to sell the
Shares pursuant to Rule 144 under the Securities Act (as such rule may be
amended from time to time).
2. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE PURCHASER
2.1 Securities Law Representations and Warranties
The Purchaser represents, warrants and covenants to the Company as
follows:
(a) The Purchaser has acquired the Debenture and the Shares issuable on
conversion of the Debenture for the Purchaser's own account for investment only,
and has no present intention of distributing the Debenture or any of the Shares,
nor any arrangement or understanding with any other persons regarding the
distribution of the Debenture or the Shares within the meaning of Section 2(11)
of the Securities Act, other than as contemplated in Section 1 of this
Agreement.
(b) The Purchaser will not, directly or indirectly, offer, sell, pledge,
transfer or otherwise dispose of (or solicit any offers to buy, purchase or
otherwise acquire or take a pledge of) the Debenture or any of the Shares except
in compliance with the Securities Act and rules and regulations promulgated
thereunder the "Rules and Regulations").
(c) The Purchaser has completed or caused to be completed the Registration
Statement Questionnaire, attached to this Agreement as Appendix I, for use in
preparation of the Registration Statement, and the answers to the Questionnaire
are true and correct as of the date of this Agreement
7
and will be true and correct as of the effective date of the Registration
Statement; provided, however, that the Purchaser shall be entitled to update
such information by providing notice thereof to the Company before the effective
date of the Registration Statement.
2.2 Resales of Shares
(a) The Purchaser hereby covenants with the Company not to make any sale
of the Shares without satisfying the requirements of the Securities Act and the
Rules and Regulations, including, in the event of any resale under the
Registration Statement, the prospectus delivery requirements under the
Securities Act, and the Purchaser acknowledges and agrees that such Shares are
not transferable on the books of the Company pursuant to a resale under the
Registration statement unless the certificate submitted to the transfer agent
evidencing the Shares is accompanied by a separate certificate
(i) in the form of Appendix II to this Agreement;
(ii) executed by the Purchaser individually, or if the Purchaser is
an entity, by an officer of, or other authorized person designated by, the
Purchaser; and
(iii) to the effect that (a) the Shares have been sold in accordance
with the Registration Statement and (b) the requirement of delivering a current
prospectus has been satisfied.
(b) The Purchaser acknowledges that there may occasionally be times when
the Company determines, in good faith following consultation with its Board of
Directors or a committee thereof, the use of the Prospectus forming a part of
the Registration Statement should be suspended until such time as an amendment
or supplement to the Registration Statement or the Prospectus has been filed by
the Company with the Commission and any such amendment to the Registration
Statement is declared effective by the Commission, or until such time as the
Company has filed an appropriate report with the Commission pursuant to the
Exchange Act. The Purchaser hereby covenants that the Purchaser will not sell
any Shares pursuant to the Prospectus during the period commencing at the time
at which the Company gives the Purchaser written notice of the suspension of the
use of the Prospectus and ending at the time the Company gives the Purchaser
written notice that the Purchaser may thereafter effect sales pursuant to the
Prospectus. The Company may, upon written notice to the Purchaser, suspend the
use of the Prospectus for up to thirty (30) days in any 365-day period based on
the reasonable determination of the Company's Board of Directors that there is a
significant business purpose for such determination, such as pending corporate
developments, public filings with the Commission or similar events. The Company
shall in no event be required to disclose the business purpose for which it has
suspended the use of the Prospectus if the Company determines in its good faith
judgment that the business purpose should remain confidential. In addition, the
Company shall notify each Purchaser (i) of any request by the Commission for an
amendment or any supplement to such Registration Statement or the Prospectus, or
any other information request by any other governmental agency directly relating
to the sale of Shares, and (ii) of the issuance by the Commission of any stop
order suspending the effectiveness of the Registration Statement or of any order
preventing or suspending the use of the Prospectus or the initiation or threat
of any proceeding for that purpose.
8
(c) The Purchaser further covenants to notify the Company promptly of the
sale of any of the Shares, other than sales pursuant to the Registration
Statement or sales upon termination of the transfer restrictions pursuant to
Section 1.4 of this Agreement.
3. MISCELLANEOUS
3.1 Counterparts
This Agreement may be executed in counterparts, each of which will be
deemed an original but all of which will be deemed one instrument.
3.2 Survival of Representations and Warranties
All representations and warranties made in this Agreement or any other
instrument or document delivered in connection herewith shall survive the
execution and delivery hereof.
3.3 Prior Agreements
This Agreement constitutes the entire agreement between the parties and
supersedes any prior or contemporaneous understandings or agreements concerning
the subject matter hereof.
3.4 Severability
The invalidity or unenforceability of any provision hereof shall in no way
affect the validity or enforceability of any other provision.
3.5 Governing Law
This Agreement shall be governed by, and construed in accordance with, the
laws of the State of New York. The rights of the parties under this Agreement
are unique and, accordingly, the parties shall, in addition to such other
remedies as may be available to any of them at law or in equity, have the right
to enforce their rights hereunder by actions of specific performance to the
extend permitted by law.
3.6 Headings
Section and subsection headings in this Agreement are included herein for
convenience of reference only and shall not constitute a part of the Agreement
for any other purpose.
3.7 Amendments and Waivers
This Agreement may not be amended, supplemented or otherwise modified
except by an instrument in writing signed by both parties that specifically
refers to this Agreement. Either party hereto may, only by an instrument in
writing, waive compliance by the other party hereto with any term or provision
of this Agreement on the part of such other party to be performed or complied
with. The waiver by a party hereto of a breach of any term or provision of this
Agreement shall not be construed as a waiver of any subsequent breach. Any
amendment or
9
waiver effected in accordance with this Section 2.7 shall be binding upon each
party and its permitted assigns.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
ULTRALIFE BATTERIES, INC.
By: /s/ Peter F. Comerford
--------------------------------
Name: Peter F. Comerford
------------------------------
Title: Vice President of Administration and General Counsel
----------------------------------------------------
PURCHASER:
Joseph C. Abeles
- ------------------------------------
Print Name:
/s/ Joseph C. Abeles
- ------------------------------------
Signature
10
APPENDIX I
ULTRALIFE BATTERIES, INC.
REGISTRATION STATEMENT QUESTIONNAIRE
In connection with the preparation of the Registration Statement, please provide
us with the following information:
1. Pursuant to the "Selling Stockholder" section of the Registration
Statement, please state your or your organization's name exactly as it
should appear in the Registration Statement:
Joseph C. Abeles
- --------------------------------------------------------------------------------
2. Please provide the number of shares that you or your organization will own
immediately after Closing, including those Shares purchased by you or your
organization pursuant to this Purchase Agreement and those shares
purchased by you or your organization through other transactions: 461,989
--------
3. Have you or your organization had any position, office or other material
relationship within the past three years with the Company or its
affiliates?
|X| Yes |_| No
If yes, please indicate the nature of any such relationships below:
Treasurer, Board of Directors
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
11
APPENDIX II
PURCHASER'S CERTIFICATE OF SUBSEQUENT SALE
The undersigned, an officer of, or other person duly authorized by
- --------------------------------------------------------------------------------
[fill in official name of individual or institution]
hereby certifies that he/she/it is the Purchaser of the shares evidenced by the
attached certificate, and as such, sold such shares on ________________, 200__
in accordance with Registration Statement number 333-________________, and
complied with the requirement of delivering a current prospectus in connection
with such sale.
Print or Type:
Name of Purchaser (Individual or Institution):
- --------------------------------------------------------------------------------
Name of Individual representing Purchaser (if an Institution)
- --------------------------------------------------------------------------------
Title of Individual representing Purchaser (if an Institution):
- --------------------------------------------------------------------------------
Signature:
Individual Purchaser or Individual representing Purchaser:
- --------------------------------------------------------------------------------
Exhibit 5.1
June 21, 2002
Ultralife Batteries, Inc.
2000 Technology Parkway
Newark, New York 14513
Re: Ultralife Batteries, Inc. Registration Statement on Form S-3
Ladies and Gentlemen:
You have requested our opinion in connection with your Registration
Statement on Form S-3, filed pursuant to the Securities Act of 1933, as amended,
with the Securities and Exchange Commission (the "Registration Statement"), with
respect to the resale of an aggregate of 801,333 authorized and issued shares of
the Common Stock, par value $.10 per share (the "Common Stock"), of Ultralife
Batteries, Inc. (the "Corporation"), which may be sold by certain stockholders
of the Corporation, and 200,000 shares of Common Stock to be issued upon the
automatic conversion of a certain $600,000 Senior Convertible Subordinated
Debenture issued by the Company (the "Debenture").
We have examined the following corporate records and proceedings of the
Corporation in connection with the preparation of this opinion: its Certificate
of Incorporation; its By-laws as currently in force and effect; its Minute
Books, containing minutes and records of other proceedings of its stockholders
and its Board of Directors, from the date of incorporation to the date hereof;
the Registration Statement; applicable provisions of the laws of the State of
Delaware; and such other documents and matters as we have deemed necessary.
In rendering this opinion, we have made such examination of laws as we
have deemed relevant for the purposes hereof. As to various questions of fact
material to this opinion, we have relied upon representations and/or
certificates of officers of the Corporation, certificates and documents issued
by public officials and authorities, and information received from searchers of
public records. Based upon and in reliance on the foregoing, we are of the
opinion that:
1. The Corporation has been duly incorporated and is validly
existing under the laws of the State of Delaware.
2. The Corporation had the authority to issue an aggregate of
801,333 shares of Common Stock and to authorize the issuance of an
aggregate 200,000 shares of Common Stock upon conversion of the Debenture.
3. The 801,333 shares of Common Stock issued by the Corporation and
registered pursuant to the Registration Statement are legally and validly
issued, and fully paid and non-assessable, the Debenture has been legally
and validly issued, and, upon issuance in accordance with the terms and
provisions of the Debenture, the shares of Common Stock
HARTER SECREST & EMERY LLP
---------------------
ATTORNEYS AND COUNSELORS
Ultralife Batteries, Inc.
June 21, 2002
Page 2
issued upon conversion of the Debenture will be legally and validly
issued, and will be fully paid and non-assessable.
We hereby consent to be named in the Registration Statement as attorneys
passing upon legal matters in connection with the registration of the 1,001,333
shares of Common Stock covered thereby, and we hereby consent to the filing of
this opinion as Exhibit 5.1 to the Registration Statement.
Very truly yours,
/s/ Harter, Secrest & Emery LLP