Exhibit 10.32
FORBEARANCE
AND AMENDMENT NUMBER TWO
TO
AMENDED AND RESTATED CREDIT AGREEMENT
This Forbearance and Amendment Number Two to Amended and Restated Credit
Agreement (this “Agreement”) is made and entered into as of January 22, 2010, by
and between Ultralife Corporation (formerly known as Ultralife Batteries, Inc.)
(“Borrower”) and JPMorgan Chase Bank, N.A., as Administrative Agent for itself
and the other lenders under the facility (each a “Lender” and collectively, the
“Lenders”) (in such capacity, the “Agent”).
RECITALS
A. As of January 27, 2009, Borrower entered into that certain Amended and
Restated Credit Agreement, as amended (as may hereafter be amended and modified,
the “Credit Agreement”) with the Agent and the Lenders party thereto. The Credit
Agreement and all documents, instruments and agreements executed in connection
therewith are collectively, the “Loan Documents.” Capitalized terms used and not
otherwise defined herein shall have the meanings ascribed to them in the Credit
Agreement.
B. As of January 20, 2010, the amounts outstanding under the Loan Documents are
as follows, plus costs and expenses (“Obligations”):

         
Principal
  $ 15,834,720.00  
Interest
  $ 38,078.47  
Fees
  $ 57,604.48  
 
     
TOTAL
  $ 15,930,402.95  

C. Borrower’s Obligations under the Credit Agreement are unconditionally
guaranteed by each of McDowell Research Co., Inc., RedBlack Communications,
Inc., and Stationary Power Services, Inc. as successor by merger of RPS Power
Systems, Inc., and Stationary Power Services, Inc. (each a “Guarantor” and
collectively, the “Guarantors”) pursuant to the provisions of each Guarantor’s
respective guaranty (collectively, the “Guaranties”).
D. On October 30, 2009, Borrower advised the Agent that Borrower failed to
comply with the financial covenants in Section 6.09 of the Credit Agreement as
of September 30, 2009 (the “Covenant Default”).
E. By letter dated October 30, 2009, the Agent provided Borrower with notice of
the Covenant Default pursuant to Section 7(e) of the Credit Agreement (“Default
Letter”).
F. On January 15, 2010, the Agent provided Borrower with notice that Events of
Default exist under the Loan Documents (“Demand Letter”) as a result of (i) the
Covenant Default remaining uncured more than thirty (30) days after the Agent
sent the Default Letter, and (ii) Borrower’s failure to pay interest and
expenses when due as required pursuant to Section 7(b) of the Credit Agreement
(“Payment Default” and collectively with the Covenant Default, the “Disclosed
Defaults”).
G. The Disclosed Defaults entitle the Agent and the Lenders to exercise the
default remedies set forth in the Loan Documents. Borrower and each of the
Guarantors acknowledge receipt of all notices of the Disclosed Defaults required
under the Loan Documents or otherwise waive any notices required under the Loan
Documents.

 

 

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H. Borrower and each of the Guarantors have requested that the Agent and the
Lenders forbear from exercising their respective rights and remedies under the
Loan Documents arising on account of the Disclosed Defaults for a period of
time. The Agent and the Lenders have agreed to forbear from exercising such
respective rights and remedies, other than the Agent and Lenders right to
terminate the Commitments, until the Termination Date (as defined below) upon
the terms and conditions set forth herein.
AGREEMENTS
NOW, THEREFORE, in consideration of the Recitals, which are deemed a material
part of this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, it is agreed as
follows:
1. In consideration of and as an express condition of the Agent’s and the
Lenders’ agreement to comply with the request of Borrower and the Guarantors to
forbear from exercising their respective rights and remedies on account of the
Disclosed Defaults, other than the Agent and Lenders right to terminate the
Commitments, until the Termination Date (as defined below), Borrower and each of
the Guarantors agree to the Recitals set forth herein and to undertake the
actions hereinafter set forth.
2. In consideration for the agreements and representations made herein, the
Agent and the Lenders agree to a) forbear from exercising their respective
rights and remedies under the Loan Documents on account of the Disclosed
Defaults (which are not waived but expressly preserved), and b) delay the date
which all Obligations are due and owing to the Agent and Lenders by the Borrower
and Guarantors pursuant to the Demand Letter, until the earlier of: (i) the end
of business on February 18, 2010; (ii) the occurrence of a default, other than
the Disclosed Defaults, under the Loan Documents, (iii) the date on which the
Agent, at the direction of the Required Lenders, elects to terminate the
Forbearance Period (as defined below) upon the occurrence of the breach by the
Borrower of any term or condition of this Agreement, or iv) the date on which
the transaction contemplated by the RBS Commitment (as defined below) is closed.
The earlier of (i), (ii) and (iii) herein shall be referred to herein as the
“Termination Date” and the period of time from the effectiveness of this
forbearance to the Termination Date shall be referred to as the “Forbearance
Period.”
3. The Agent’s and the Lenders’ forbearance in Paragraph 2 above shall be
conditioned upon, and shall not become effective until, satisfaction of the
following:

  A.  
Borrower and each of the Guarantors duly execute and deliver this Agreement to
the Agent, in form and substance acceptable to the Agent in its sole discretion
by 5:00 P.M. on January 22, 2010, and the Agreement is agreed to and executed by
the Agent and the Lenders; and

  B.  
The representation and warranties contained in Section 7 of this Agreement and
in the Credit Agreement shall be true, correct and complete as of the effective
date of this Agreement as though made on such date; and

  C.  
The Agent shall have received $62,500 from Borrower for the benefit of the Agent
and the Lenders on a pro rata basis in consideration of the forbearance and
modifications set forth herein; and

  D.  
The Agent and each Lender shall have received all fees required to be paid under
the Credit Agreement, and all expenses for which invoices have been presented to
Borrower by the Agent and the Lenders (including the reasonable fees and
expenses of legal counsel) to date; and

 

 

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  E.  
Execution and delivery to the Agent of a completed initial Collateral Status
Certificate (as defined below) and such other and further documentation as the
Agent and the Lenders may reasonably deem necessary or appropriate to accomplish
the terms set forth herein, each in form and substance reasonably acceptable to
the Agent and the Lenders; and

  F.  
Borrower is current with respect to all amounts currently due and owing to the
Agent and the Lenders under the Loan Documents as amended hereby.

4. The Commitments are hereby terminated. Effective upon the satisfaction of all
conditions specified in Section 3 hereof, the Credit Agreement is hereby amended
as follows:
A. The following definition is hereby added to Section 1.01 of the Credit
Agreement in the appropriate alphabetical order:
“Amendment No. 2” means that certain Forbearance and Amendment Number Two to the
Amended and Restated Credit Agreement dated as of January 22, 2010 among,
Borrower, Administrative Agent and Lenders.
B. The definition of “Commitment” set forth in Section 1.01 of the Credit
Agreement is hereby deleted in its entirety and replaced with the following:
“Commitment” means, with respect to each Lender, the commitment of such Lender
to make Revolving Loans expressed as an amount representing the maximum
aggregate amount of such Lender’s Revolving Credit Exposure. As of the effective
date of the Amendment No. 2, the aggregate amount of the Lenders’ Commitments is
$0.
C. Schedule 2.01 of the Credit Agreement is deleted in its entirety. Borrower
agrees that the Lenders will not make Revolving Loans to Borrower during the
Forbearance Period.
D. Section 2.04 of the Credit Agreement is deleted in its entirety.
E. Section 2.05 of the Credit Agreement is deleted in its entirety.
F. Section 2.06 of the Credit Agreement is deleted in its entirety.
G. Section 2.12(a) of the Credit Agreement is deleted in its entirety.
H. Section 5.01 of the Credit Agreement is hereby amended so that: (i) in
subsection (g) thereof the word “and” at the end of such subsection is hereby
deleted, (ii) in subsection (h) thereof the period ”.” at the end of such
subsection is hereby deleted and replaced with “; and” and (iii) the following
subsection is added thereto:
(i) During the Forbearance Period (as defined in Amendment No. 2), on a monthly
basis, Borrower’s internally prepared financial statements for such month,
including balance sheet and related statements of operations and cash flows in
form historically prepared by Borrower.
I. The first sentence of Section 5.08 of the Credit Agreement is hereby
superseded and replaced in its entirety and amended to read as follows:
“The proceeds of the Revolving Loans will be used only for working capital
purposes of the Borrower in the ordinary course of business as evidenced by
supporting documents as requested by the Agent from time to time.”

 

 

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5. Borrower and Guarantors each hereby covenant and agree with the Agent and the
Lenders to the following during the Forbearance Period (as applicable relative
to their respective obligations and in addition to, but not in limitation of
unless expressly noted, any terms, conditions, and/or covenants set forth in the
Loan Documents):

  A.  
Borrower and each of the Guarantors shall provide the Agent and the Lenders with
any information, documents, or reports concerning or related to the Indebtedness
under the Credit Agreement, the repayment thereof and their businesses, as the
Agent and/or the Lenders may request in their sole discretion, and shall make
their management, officers, employees, professionals, agents, and consultants,
available to the Agent and the Lenders upon request to answer any reasonable
questions regarding the matters set forth above; and

  B.  
All information provided by Borrower and each of the Guarantors to the Agent
and/or the Lenders in connection with this Agreement, whether or not during the
Forbearance Period, including, without limitation, information on the exhibits
attached hereto or concerning financial status, assets, liabilities, or business
plans, whether communicated orally or in writing, shall be true and correct in
all material respects.

  C.  
Borrower shall provide evidence satisfactory to the Agent, as soon as available
but in any event at the end of each calendar week, during the Forbearance Period
that all payroll, sales and withholding taxes are currently paid and maintained.

  D.  
Borrower agrees that the Obligations shall bear interest at the rate set forth
in Section 2.13(c) of the Credit Agreement.

  E.  
Borrower shall, at all time during the Forbearance Period, remain in pro forma
compliance with the conditions precedent to closing of the $35,000,000 senior
secured credit facility offered to Borrower by RBS Business Capital, as set
forth in the term sheet dated November 2, 2009, as previously or hereafter
amended (“RBS Commitment”).

  F.  
Borrower shall provide to the Agent, as soon as available but in any event on
each Friday during the Forbearance Period, a rolling thirteen (13) week cash
flow forecast in form and substance reasonably acceptable to the Agent.

  G.  
Borrower shall make payments on the outstanding principal amount of the
Obligations to Agent for the benefit of the Lenders in the following manner:
(i) on the date of execution and delivery of the Agreement, Borrower shall make
a payment in the amount of $1,500,000; (ii) on or before January 29, 2010,
Borrower shall make a payment in the amount of $3,500,000; and (iii) commencing
February 5, 2010 and continuing on each Friday thereafter during the Forbearance
Period, Borrower shall make a payment in the amount of $500,000.

  H.  
Borrower shall immediately notify Agent of any change to the terms or status of
the RBS Commitment.

  I.  
The “Margined Collateral Not Borrowed” identified on line 33 of the Collateral
Status Certificate (defined below) attached as Exhibit A, shall not drop below
$9,000,000 during the Forbearance Period.

  J.  
Borrower and Guarantors shall deposit the proceeds of all Accounts (as defined
below) of the Borrower and Guarantors in bank accounts maintained with either of
the Lenders.

 

 

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6. Borrower shall provide the Agent, as soon as available but in any event on
every Friday during the Forbearance Period, and at such other times as may be
requested by the Agent, as of the period then ended, a Collateral Status
Certificate and supporting information in connection therewith, together with
any additional reports with respect to the Collateral Status as the Agent may
reasonably request.

  A.  
For the purposes of defining Collateral Status, the following definitions shall
be applicable:

  i).  
“Account” has the meaning assigned to such term in the Security Agreement (as
defined herein).

  ii).  
“Account Debtor” means any Person obligated on any of the Accounts.

  iii).  
“Affiliate” means, with respect to a specified Person, another Person that
directly, or indirectly through one or more intermediaries, Controls or is
Controlled by or is under common Control with the Person specified.

  iv).  
“Collateral Status” means, at any time, the sum of (a) up to 80% of Eligible
Accounts at such time, plus (b) 30% of Eligible Inventory, valued at the lower
of cost or market value, determined on a first-in-first-out basis, at such time,
minus (c) Reserves. The maximum amount of Inventory which may be included as
part of the Collateral Status is $10,000,000. The Agent and Lenders may, in
their discretion, reduce the advance rates set forth above, adjust Reserves or
reduce one or more of the other elements used in computing the Collateral
Status.

  v).  
“Collateral Status Certificate” means a certificate, signed and certified as
accurate and complete by the chief financial officer, principal accounting
officer, treasurer or controller of the Borrower, in substantially the form of
Exhibit A or another form which is acceptable to the Agent in its sole
discretion.

  vi).  
“Collateral” has the meaning assigned to such term in the Security Agreement.

  vii).  
“Control” means the possession, directly or indirectly, of the power to direct
or cause the direction of the management or policies of a Person, whether
through the ability to exercise voting power, by contract or otherwise.
“Controlling” and “Controlled” have meanings correlative thereto.

  viii).  
“Eligible Accounts” means, at any time, the Accounts of the Borrower and
Guarantors which the Agent determines in its discretion would be eligible.
Without limiting the Agent’s discretion provided herein, Eligible Accounts shall
not include any Account:

  a).  
which is not subject to a first priority perfected security interest in favor of
the Agent;

  b).  
which is subject to any Lien other than (i) a Lien in favor of the Agent and
(ii) a Permitted Encumbrance which does not have priority over the Lien in favor
of the Agent;

  c).  
with respect to which (i) is unpaid more than 90 days after the date of the
original invoice therefor or more than 60 days after the original due date, or
(ii) which has been written off the books of Borrower or any of the Guarantors
or otherwise designated as uncollectible;

 

 

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  d).  
which is owing by an Account Debtor for which more than 50% of the Accounts
owing from such Account Debtor and its Affiliates are ineligible hereunder;
    e).  
which is owing by an Account Debtor to the extent the aggregate amount of
Accounts owing from such Account Debtor and its Affiliates to all Borrower and
Guarantors exceeds 10% of the aggregate amount of Eligible Accounts of Borrower
and Guarantors;
    f).  
with respect to which any covenant, representation, or warranty contained in
this Agreement, the Credit Agreement or in the Security Agreement has been
breached or is not true;
    g).  
which (i) does not arise from the sale of goods or performance of services in
the ordinary course of business, (ii) is not evidenced by an invoice or other
documentation satisfactory to the Agent which has been sent to the Account
Debtor, (iii) represents a progress billing, (iv) is contingent upon the
Borrower’s or Guarantors’ completion of any further performance, (v) represents
a sale on a bill-and-hold, guaranteed sale, sale-and-return, sale on approval,
consignment, cash-on-delivery or any other repurchase or return basis or (vi)
relates to payments of interest;
    h).  
for which the goods giving rise to such Account have not been shipped to the
Account Debtor or for which the services giving rise to such Account have not
been performed by Borrower or any of the Guarantors or if such Account was
invoiced more than once;
    i).  
with respect to which any check or other instrument of payment has been returned
uncollected for any reason;
    j).  
which is owed by an Account Debtor which has (i) applied for, suffered, or
consented to the appointment of any receiver, custodian, trustee, or liquidator
of its assets, (ii) has had possession of all or a material part of its property
taken by any receiver, custodian, trustee or liquidator, (iii) filed, or had
filed against it, any request or petition for liquidation, reorganization,
arrangement, adjustment of debts, adjudication as bankrupt, winding-up, or
voluntary or involuntary case under any state or federal bankruptcy laws,
(iv) has admitted in writing its inability, or is generally unable to, pay its
debts as they become due, (v) become insolvent, or (vi) ceased operation of its
business;
    k).  
which is owed by any Account Debtor which has sold all or a substantially all of
its assets;
    l).  
which is owed by an Account Debtor which (i) does not maintain its chief
executive office in the U.S. or Canada or (ii) is not organized under applicable
law of the U.S., any state of the U.S., Canada, or any province of Canada
unless, in either case, such Account is backed by a Letter of Credit acceptable
to the Agent which is in the possession of, and is directly drawable by, the
Agent;

 

 

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  m).  
which is owed in any currency other than U.S. dollars;
    n).  
which is owed by (i) the government (or any department, agency, public
corporation, or instrumentality thereof) of any country other than the U.S.
unless such Account is backed by a Letter of Credit acceptable to the Agent
which is in the possession of the Administrative Agent, or (ii) any Federal
Account Debtor unless the Federal Assignment of Claims Act of 1940, as amended
(31 U.S.C. § 3727 et seq. and 41 U.S.C. § 15 et seq.), and any other steps
necessary to perfect the Lien of the Agent in such Account have been complied
with to the Agent’s satisfaction;
    o).  
which is owed by any Affiliate, employee, officer, director, agent or
stockholder of Borrower or any of the Guarantors;
    p).  
which, for any Account Debtor, exceeds a credit limit determined by the Agent,
to the extent of such excess;
    q).  
which is owed by an Account Debtor or any Affiliate of such Account Debtor to
which Borrower or any of the Guarantors is indebted, but only to the extent of
such indebtedness or is subject to any security, deposit, progress payment,
retainage or other similar advance made by or for the benefit of an Account
Debtor, in each case to the extent thereof;
    r).  
which is subject to any counterclaim, deduction, defense, setoff or dispute but
only to the extent of any such counterclaim, deduction, defense, setoff or
dispute;
    s).  
which is evidenced by any promissory note, chattel paper, or instrument;
    t).  
which is owed by an Account Debtor located in any jurisdiction which requires
filing of a “Notice of Business Activities Report” or other similar report in
order to permit Borrower or any of the Guarantors to seek judicial enforcement
in such jurisdiction of payment of such Account, unless Borrower or any of the
Guarantors has filed such report or qualified to do business in such
jurisdiction;
    u).  
with respect to which such Borrower or any of the Guarantors has made any
agreement with the Account Debtor for any reduction thereof, other than
discounts and adjustments given in the ordinary course of business, or any
Account which was partially paid and Borrower created a new receivable for the
unpaid portion of such Account;
    v).  
which does not comply in all material respects with the requirements of all
applicable laws and regulations, whether Federal, state or local, including
without limitation the Federal Consumer Credit Protection Act, the Federal Truth
in Lending Act and Regulation Z of the Board;

 

 

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  w).  
which is for goods that have been sold under a purchase order or pursuant to the
terms of a contract or other agreement or understanding (written or oral) that
indicates or purports that any Person other than such Borrower or any of the
Guarantors has or has had an ownership interest in such goods, or which
indicates any party other than such Borrower or Guarantors as payee or
remittance party;
    x).  
which was created on cash on delivery terms; or
    y).  
which the Agent determines may not be paid by reason of the Account Debtor’s
inability to pay or which the Agent otherwise determines is unacceptable for any
reason whatsoever.

In the event that an Account which was previously an Eligible Account ceases to
be an Eligible Account hereunder, Borrower shall notify the Agent thereof on and
at the time of submission to the Agent of the next Collateral Status
Certificate. In determining the amount of an Eligible Account, the face amount
of an Account may, in the Agent’s discretion, be reduced by, without
duplication, to the extent not reflected in such face amount, (i) the amount of
all accrued and actual discounts, claims, credits or credits pending,
promotional program allowances, price adjustments, finance charges or other
allowances (including any amount that Borrower or any of the Guarantors may be
obligated to rebate to an Account Debtor pursuant to the terms of any agreement
or understanding (written or oral)) and (ii) the aggregate amount of all cash
received in respect of such Account but not yet applied by such Borrower or
Guarantors to reduce the amount of such Account.

  ix).  
“Eligible Inventory” means, at any time, the Inventory of the Borrower and
Guarantors which the Agent determines in its discretion would be eligible.
Without limiting the Agent’s discretion provided herein, Eligible Inventory
shall not include any Inventory:

  a).  
which is not subject to a first priority perfected Lien in favor of the Agent;
    b).  
which is subject to any Lien other than (i) a Lien in favor of the
Administrative Agent and (ii) a Permitted Encumbrance which does not have
priority over the Lien in favor of the Agent;
    c).  
which is, in the Agent’s opinion, slow moving, obsolete, unmerchantable,
defective, used, unfit for sale, not salable at prices approximating at least
the cost of such Inventory in the ordinary course of business or unacceptable
due to age, type, category and/or quantity;
    d).  
with respect to which any covenant, representation, or warranty contained in the
Credit Agreement or the Security Agreement has been breached or is not true and
which does not conform to all standards imposed by any Governmental Authority;

 

 

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  e).  
in which any Person (as defined below) other than such Borrower or any of the
Guarantors shall (i) have any direct or indirect ownership, interest or title to
such Inventory or (ii) be indicated on any purchase order or invoice with
respect to such Inventory as having or purporting to have an interest therein;
    f).  
which is not finished goods or which constitutes work-in-process, spare or
replacement parts, subassemblies, packaging and shipping material, manufacturing
supplies, samples, prototypes, displays or display items, bill-and-hold goods,
goods that are returned or marked for return, repossessed goods, defective or
damaged goods, goods held on consignment, or goods which are not of a type held
for sale in the ordinary course of business;
    g).  
which is not located in the U.S.;
    h).  
which is in transit;
    i).  
which is located in any location leased by such Borrower or any of the
Guarantors unless (i) the lessor has delivered to the Agent a Landlord Waiver
Agreement (as defined in the Security Agreement) or (ii) a Reserve for rent,
charges, and other amounts due or to become due with respect to such facility
has been established by the Agent in its discretion;
    j).  
which is located in any third party warehouse or is in the possession of a
bailee (other than a third party processor), unless (i) such warehouseman or
bailee has delivered to the Agent a Landlord Waiver Agreement and such other
documentation as the Agent may require or (ii) an appropriate Reserve has been
established by the Agent in its discretion;
    k).  
which is being processed offsite at a third party location or outside processor,
or is in-transit to or from said third party location or outside processor;
    l).  
which is a discontinued product or component thereof;
    m).  
which is the subject of a consignment by such Borrower or any of the Guarantors
as consignor;
    n).  
which is perishable;
    o).  
which contains or bears any intellectual property rights licensed to such
Borrower or any of the Guarantors unless the Agent is satisfied that it may sell
or otherwise dispose of such Inventory without (i) infringing the rights of such
licensor, (ii) violating any contract with such licensor, or (iii) incurring any
liability with respect to payment of royalties other than royalties incurred
pursuant to sale of such Inventory under the current licensing agreement;
    p).  
which is not reflected in a current perpetual inventory report of such Borrower
or Guarantors;
    q).  
for which reclamation rights have been asserted by the seller; or

 

 

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  r).  
which the Agent otherwise determines is unacceptable for any reason whatsoever.

In the event that Inventory which was previously Eligible Inventory ceases to be
Eligible Inventory hereunder, Borrower shall notify the Agent thereof on and at
the time of submission to the Agent of the next Collateral Status Certificate.

  x).  
“Inventory” has the meaning assigned to such term in the Security Agreement.

  xi).  
“Net Orderly Liquidation Value” means, with respect to Inventory of Borrower,
the orderly liquidation value thereof as determined in a manner acceptable to
the Agent by an appraiser acceptable to the Agent, net of all costs of
liquidation thereof.

  xii).  
“Person” means any natural person, corporation, limited liability company,
trust, joint venture, association, company, partnership, Governmental Authority
or other entity.

  xiii).  
“Reserves” means any and all reserves which the Agent deems necessary, in its
discretion, to maintain with respect to the Collateral.

  xiv).  
“Security Agreement” means collectively the General Security Agreement given by
Borrower to the Agent dated as of June 30, 2004 and the General Security
Agreements given by each of the Guarantors to the Agent as the same may be
modified, amended or reaffirmed.

  B.  
Borrower shall provide the Agent, as soon as available but in any event at the
end of each calendar month, and at such other times as may be requested by the
Agent, in form satisfactory to the Agent, a detailed aging of the Borrower’s and
Guarantors’ Accounts (1) including all invoices aged by invoice date and due
date (with an explanation of the terms offered) and (2) reconciled to the
Collateral Status Certificate delivered as of such date prepared in a manner
reasonably acceptable to the Agent, together with a summary specifying the name,
address, and balance due for each account debtor.

  C.  
Borrower shall provide the Agent, as soon as available but in any event at the
end of each calendar month, and at such other times as may be requested by the
Agent, in form satisfactory to the Agent a schedule detailing the Borrower’s and
Guarantors’ Inventory, in form satisfactory to the Agent, (1) by location
(showing Inventory in transit, any Inventory located with a third party under
any consignment, bailee arrangement, or warehouse agreement), by class (raw
material, work-in-process and finished goods), by product type, and by volume on
hand, which Inventory shall be valued at the lower of cost (determined on a
first-in, first-out basis) or market and adjusted for Reserves as the Agent has
previously indicated to the Borrower are deemed by the Agent to be appropriate,
(2) including a report of any variances or other results of Inventory counts
performed by the Borrower or any Guarantors since the last Inventory schedule
(including information regarding sales or other reductions, additions, returns,
credits issued by Borrower or Guarantors and complaints and claims made against
the Borrower or Guarantors), and (3) reconciled to the Collateral Status
Certificate delivered as of such date.

 

 

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  D.  
Subject to the limitations set forth below, the Agent is authorized by Borrower
and the Lenders, from time to time, at the direction of the Required Lenders,
(but shall have absolutely no obligation to), to make Loans to the Borrower, on
behalf of all Lenders, which the Required Lenders, in their discretion, deem
necessary or desirable (i) to preserve or protect the Collateral, or any portion
thereof, (ii) to enhance the likelihood of, or maximize the amount of, repayment
of the Loans and other Obligations, or (iii) to pay any other amount chargeable
to or required to be paid by the Borrowers pursuant to the terms of this
Agreement, including payments of reimbursable expenses (including costs, fees,
and expenses as described in Section 9.03) and other sums payable under the Loan
Documents (any of such Loans are herein referred to as “Protective Advances”).
Protective Advances may be made even if the conditions precedent set forth in
Section 4.02 of the Credit Agreement have not been satisfied. The Protective
Advances shall be secured by the Liens in favor of the Agent for the benefit of
the Lenders in and to the Collateral and shall constitute Obligations hereunder.
All Protective Advances shall be at the discretion of the Agent. The Agent may
request the Lenders to make a Revolving Loan to repay a Protective Advance and
Lenders shall make such Revolving Loan directly to the Agent.

Upon the making of a Protective Advance by the Agent (whether before or after
the occurrence of a Default), each Lender shall be deemed, without further
action by any party hereto, to have unconditionally and irrevocably purchased
from the Agent without recourse or warranty, an undivided interest and
participation in such Protective Advance in proportion to its Applicable
Percentage. From and after the date, if any, on which any Lender is required to
fund its participation in any Protective Advance purchased hereunder, the Agent
shall promptly distribute to such Lender, such Lender’s applicable percentage of
all payments of principal and interest and all proceeds of Collateral received
by the Agent in respect of such Protective Advance.
7. As a material inducement to the Agent and the Lenders to enter into this
Agreement, Borrower and each of the Guarantors (as appropriate relative to their
respective obligations) hereby represent and warrant that:

  A.  
Each of the Recitals set forth above is true and correct in all material
respects;

  B.  
Except for the Disclosed Defaults, to the best of their knowledge, Borrower and
each of the Guarantors have complied with all of their respective obligations
under the Loan Documents in all material respects. There is no Default or Event
of Default which has occurred and is continuing under any of the Loan Documents
other than the Disclosed Defaults;

  C.  
Except for the Disclosed Defaults arising out of breaches of representations and
warranties contained in the Loan Documents, the representations and warranties
set forth in Loan Documents remain true and correct in all material respects as
of the date of this Agreement;

  D.  
The execution, delivery, and performance of this Agreement, and any other
document required herein, is within the corporate powers of Borrower and the
Guarantors, has been duly authorized by all necessary corporate action and does
not and will not: (i) require any consent or approval of the board of directors
of Borrower or the Guarantors; (ii) violate any provision of the articles of
incorporation of Borrower or the Guarantors, its bylaws, any other document of
corporate governance, or any law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award presently in effect having
applicability to Borrower or the Guarantors; (iii) require the consent or
approval of, or filing or registration with, any governmental body, agency or
authority; (iv) cause any breach of, or constitute a default under, any
contract, indenture or other agreement or instrument under which Borrower or any
Guarantor is a party or by which it or its properties may be bound or affected;
or (v) result in the imposition of any lien, charge or encumbrance upon any
property of Borrower or any Guarantor;

 

 

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  E.  
This Agreement constitutes, and any of the documents required herein will
constitute upon execution and delivery, legal, valid, and binding obligations of
the Borrower and each of the Guarantors, enforceable in accordance with its
terms;

  F.  
Borrower and each of the Guarantors do not, and hereby covenant that they will
not, contest that the Agent and the Lender have and will continue to possess
valid and perfected security interests in, and liens upon, all of the property
as set forth in the Loan Documents; and

  G.  
All information provided by Borrower and each of the Guarantors to the Agent
and/or the Lenders, previously or in connection with this Agreement, including,
without limitation, information on the exhibits attached hereto and concerning
financial status, assets, liabilities, or business plans, whether communicated
orally or in writing, is true and correct in all material respects.

8. In the event that Borrower or any of the Guarantors fails to satisfy any
covenants, representations, warranties, or agreements of this Agreement or any
other Loan Document (other than the violations giving rise to the Disclosed
Defaults), such failure shall immediately without further notice constitute an
event of default under this Agreement (“Forbearance Default”) and the Agent and
the Lenders shall be deemed to have no obligation to forbear in exercising any
of its rights or remedies under the Loan Documents, this Agreement, or any
agreement or document executed in connection herewith.
9. Upon the occurrence of a Forbearance Default as defined in Paragraph 8
hereof, the Agent and the Lenders may, at their option, terminate their
obligations under this Agreement and the Loan Documents; and thereafter the
Agent and the Lenders shall be entitled to immediately exercise all respective
rights and remedies available to the Agent and the Lenders herein and in the
Loan Documents, under the Uniform Commercial Code, and any other state or
federal law. Notwithstanding the foregoing, however, the representations,
warranties, acknowledgments, covenants, and agreements made by Borrower and
Guarantors herein shall survive the Agent’s and the Lenders’ election to
terminate its obligations hereunder in the event of a Forbearance Default.
10. Borrower and each of the Guarantors acknowledge and agree that: (i) the
Disclosed Defaults have occurred and are existing under the Loan Documents as of
the date of this Agreement; and (ii) the Agent and the Lenders are entitled to
take all actions legally available to them under the Loan Documents or
applicable law upon the occurrence of an event of default without any further or
additional notice to Borrower or the Guarantors.
11. Borrower and each of the Guarantors restate, acknowledge and agree that:
(i) the amounts set forth in Recital B above are outstanding under the
Obligations without claim, offset, counterclaim, defense or affirmative defense
of any kind and the Obligations remain the continuing and individual obligations
of Borrower and each of the Guarantors, until all amounts due thereunder,
including attorneys’ fees and costs incurred by the Agent and the Lenders in
connection with this Agreement or enforcement of the Loan Documents, are paid in
full; (ii) the liens and security interests granted to the Agent and the Lenders
by Borrower and each of the Guarantors are and remain valid security interests
in the assets of those parties; and (iii) as of the date hereof, Borrower and
each of the Guarantors hereby release, discharge, and agree to hold harmless the
Agent and the Lenders and their representatives, agents, employees, attorneys,
directors, officers, parents, affiliates, assigns, insurers, subsidiaries, and
their successors and assigns (collectively, the “Released Parties”) from any and
all claims, defenses, affirmative defenses, setoffs, counterclaims, actions,
causes of action, suits, controversies, agreements, provisions, liabilities and
demands in law or in equity, whether known or unknown (collectively, the
“Claims”) which Borrower or any of the Guarantors ever had, now has, or may
hereafter have against or related to the Released Parties through the date of
this Agreement, including, but not limited to, Claims relating to or arising out
of the Loan Documents or the transactions described therein, the Obligations,
the Agent’s and the Lenders’ administration of the Loan Documents, the banking
relationship of Borrower or any of the Guarantors with the Agent and/or the
Lenders, or this Agreement.

 

 

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12. Each of the Guarantors hereby acknowledges and agrees to the continuing
authenticity and enforceability of each of the Guaranties notwithstanding the
agreements set forth herein. Each of the Guarantors hereby ratify and reaffirm
each of the Guaranties in their entirety, confirm the continuing validity of
each of the Guaranties and agree that each of the Guaranties shall remain in
full force and effect until the Obligations have been paid in full in cash to
the Agent and the Lenders and all remaining obligations of the Borrower and each
of the Guarantors to the Agent and the Lenders under the Loan Documents and this
Agreement have been performed to the Agent’s and the Lenders’ satisfaction. The
Guaranties are incorporated herein by reference.
13. Each of the Guarantors agrees that, as of the date hereof, it has no claims
or defenses of any kind by way of offset or otherwise to the payment and
satisfaction in full of the Obligations to Agent and the Lenders pursuant to
each of the Guaranties. To the extent that any such claim or defense may
presently exist or may arise in the future, each of the Guarantors expressly
waive any and all claims or defenses against any of the Released Parties that
now or hereafter exist by reason of, among other things, and without limitation:
(i) any and all amendments or modifications of any document or instrument;
(ii) any and all alterations, accelerations, extensions or other changes in the
time or manner of payment or performance of the Obligations; (iii) any and all
increases or decreases in the rate of interest or other charges; (iv) the
release, substitution or addition of any collateral or any shareholder of the
corporation; (v) any failure of the Agent or the Lenders to give notice of
default to the Borrower or any shareholder; (vi) any failure of the Agent or the
Lenders to pursue the Borrower or any of the Borrower’s property with due
diligence; or (vii) any failure of the Agent or the Lenders to resort to the
collateral or to remedies which may be available to it.
14. The agreements set forth herein constitute the terms and conditions of
forbearance only and not a novation. Except as specifically set forth in this
Agreement, the Loan Documents shall remain in full force and effect and are
hereby ratified and confirmed. To the extent that any provision of this
Agreement conflicts with any terms or conditions set forth in the Loan
Documents, the provisions of this Agreement shall supersede and control.
Borrower and each of the Guarantors shall continue to comply with all
undertakings, obligations and representations set forth in the Loan Documents to
the extent not modified in this Agreement. Except as expressly provided herein,
the execution and delivery of this Agreement shall not: (i) constitute an
extension, modification, or waiver of any aspect of the Loan Documents or any
right or remedy thereunder; (ii) extend the terms of the Loan Documents or the
due date of any of the loans set forth therein; (iii) establish a course of
dealing between the Agent and/or the Lenders and Borrower and/or any of the
Guarantors or give rise to any obligation on the part of the Agent or the
Lenders to extend, modify or waive any term or condition of the Loan Documents;
or (iv) give rise to any defenses or counterclaims to the Agent’s or the
Lenders’ right to compel payment of any loan or to otherwise enforce their
respective rights and remedies under the Loan Documents.
15. Borrower and each of the Guarantors acknowledge that it: (i) has been
represented, or had the opportunity to be represented, by its own legal counsel
in connection with the Loan Documents and this Agreement, including, without
limitation, with respect to the releases set forth in Paragraph 11 above;
(ii) that it has exercised independent judgment with respect to the Loan
Documents and this Agreement; (iii) that it has not relied on the Agent or the
Lenders or on their counsel for any advice with respect to the Loan Documents or
this Agreement; and (iv) has had a reasonable opportunity to consider whether
there may be future damages, injuries, claims, obligations, or liabilities which
presently are unknown, unforeseen or not yet in existence and consciously
intends to release them. Based upon the foregoing, no rule of contract
construction or interpretation shall be employed to construe this Agreement more
strictly against one party or the other.
16. This Agreement has been negotiated, executed, and delivered in the State of
New York and shall be deemed to have been made in the State of New York. The
validity of this Agreement, its construction, interpretation, and enforcement as
well as the rights of the parties hereunder (including, without limitation, with
respect to the collateral) shall be determined under, governed by, and construed
in accordance with the internal laws of the State of New York (without regard to
its conflict of law principles).

 

 

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17. Each provision of this Agreement shall be severable from every other
provision of this Agreement for the purpose of determining the legal
enforceability of any specific provision.
18. This Agreement and the other documents referred to herein contain the entire
agreement between the Agent, the Lenders, Borrower, and the Guarantors, or any
of them, with respect to the subject matter hereof and supersedes all previous
communications and negotiations. No representation, undertaking, promise, or
condition concerning the subject matter hereof shall be binding upon the Agent
or the Lenders unless clearly expressed in this Agreement or in the other
documents referred to herein. Any discussions and correspondence about the terms
of a possible extension, modification, and/or restructuring of the Loan
Documents shall be deemed to be in the nature of settlement negotiations.
Accordingly, any such discussions and correspondence will not be admissible in
any legal or administrative proceedings and shall not be actionable under any
theory of law or utilized for any purpose without the consent of all parties. No
agreement which is reached herein shall give rise to any claim or cause of
action except for breach of the express provisions of a legally binding written
agreement.
19. Nothing contained in this Agreement or any other document referred to
herein, nor any action taken pursuant hereto or thereto, shall be construed as:
(i) permitting or obligating the Agent or the Lenders to act as financial or
business advisor or consultant to Borrower or any of the Guarantors;
(ii) permitting or obligating the Agent or the Lenders to control or to conduct
the operations of Borrower or any of the Guarantors; (iii) creating any
fiduciary obligation on the part of the Agent or the Lenders to Borrower or any
of the Guarantors; or (iv) causing Borrower or any of the Guarantors to be
treated as an agent of the Agent or the Lenders.
20. This Agreement may be executed in any number of counterparts, all of which
taken together shall constitute one agreement. Any of the parties hereto may
execute this Agreement by signing, whether by facsimile or portable document
format transmission or otherwise, any such counterpart.
21. BORROWER AND EACH OF THE GUARANTORS HEREBY CONSENT TO THE EXCLUSIVE
JURISDICTION OF ANY STATE OR FEDERAL COURT SITUATED IN NEW YORK CITY, NEW YORK,
AND WAIVE ANY OBJECTION BASED ON LACK OF PERSONAL JURISDICTION, IMPROPER VENUE
OR FORUM NON CONVENIENS, WITH REGARD TO ANY ACTIONS, CLAIMS, DISPUTES OR
PROCEEDINGS RELATING TO THIS AGREEMENT, ANY OF THE LOAN DOCUMENTS, OR ANY
DOCUMENT DELIVERED HEREUNDER OR IN CONNECTION HEREWITH, OR ANY TRANSACTION
ARISING FROM OR CONNECTED TO ANY OF THE FOREGOING. BORROWER AND EACH OF THE
GUARANTORS WAIVE PERSONAL SERVICE OF ANY AND ALL PROCESS UPON THEM, AND CONSENT
TO ALL SUCH SERVICE OF PROCESS MADE BY MAIL OR BY MESSENGER DIRECTED TO THEM AT
THE ADDRESSES SPECIFIED IN THE LOAN DOCUMENTS. NOTHING HEREIN SHALL AFFECT THE
AGENT’S OR THE LENDERS’ RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW,
OR LIMIT THE AGENT’S OR THE LENDERS’ RIGHT TO BRING PROCEEDINGS AGAINST BORROWER
OR ANY OF THE GUARANTORS OR ANY OF THEIR PROPERTY OR ASSETS IN THE COMPETENT
COURTS OF ANY OTHER JURISDICTION OR JURISDICTIONS.
22. BORROWER AND EACH OF THE GUARANTORS HEREBY WAIVE ANY AND ALL RIGHT TO TRIAL
BY JURY IN ANY ACTION OR PROCEEDING RELATING TO THIS AGREEMENT, ANY OF THE LOAN
DOCUMENTS, ANY DOCUMENT DELIVERED HEREUNDER OR IN CONNECTION HEREWITH, OR ANY
TRANSACTION ARISING FROM OR CONNECTED TO ANY OF THE FOREGOING. BORROWER AND EACH
OF THE GUARANTORS REPRESENT THAT THIS WAIVER IS KNOWINGLY, WILLINGLY AND
VOLUNTARILY GIVEN.
23. BORROWER AND EACH OF THE GUARANTORS HEREBY WAIVE ANY RIGHT ANY OF THEM MAY
NOW OR HEREAFTER HAVE TO CLAIM OR RECOVER FROM THE AGENT OR THE LENDERS ANY
SPECIAL, INDIRECT, CONSEQUENTIAL OR PUNITIVE DAMAGES (AS OPPOSED TO DIRECT OR
ACTUAL DAMAGES).

 

 

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24. This Agreement shall be binding on Borrower, the Guarantors and each of
their respective successors and assigns, and shall inure solely to the benefit
of the Agent, the Lenders, their successors, assigns, and affiliates. No
third-party or other person or entity shall have any rights or benefits under
this Agreement.
25. Borrower agrees to pay on demand all costs and expenses of the Agent and the
Lenders in connection with the preparation, execution and delivery of this
Agreement and the other documents related hereto, including the fees and
out-of-pocket expenses of counsel for the Agent and the Lenders.
[Signature Page Follows]

 

 

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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their respective representatives thereunto duly authorized as of the date
first above written.

                      ULTRALIFE CORPORATION    
 
                    By:   /s/ Philip A. Fain                  
 
      Name:   Philip A. Fain    
 
      Title:   Chief Financial Officer and Treasurer    
 
                ADMINISTRATIVE AGENT:   JPMORGAN CHASE BANK, N.A., as Agent    
 
                    By:   /s/ Thomas C. Strasenburgh                  
 
      Name:   Thomas C. Strasenburgh    
 
      Title:   Vice President    
 
                LENDERS:   JPMORGAN CHASE BANK, N.A.    
 
                    By:   /s/ Thomas C. Strasenburgh                  
 
      Name:   Thomas C. Strasenburgh    
 
      Title:   Vice President    
 
                    MANUFACTURERS AND TRADERS
TRUST COMPANY    
 
                    By:   /s/ Jon Fogle                  
 
      Name:   Jon Fogle    
 
      Title:   Vice President