United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 8-K
Current Report Pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934
May 1, 2006
(Date of Report)
ULTRALIFE BATTERIES, INC.
(Exact name of registrant as specified in its charter)
Delaware 000-20852 16-1387013
(State of incorporation) (Commission File Number) (IRS Employer
Identification No.)
2000 Technology Parkway, Newark, New York 14513
(Address of principal executive offices) (Zip Code)
(315) 332-7100
(Registrant's telephone number, including area code)
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Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
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Item 1.01 Entry into a Material Definitive Agreement.
On May 1, 2006, Ultralife Batteries, Inc. (the "Registrant") and its
wholly-owned subsidiary, MR Acquisition Corporation, entered into an asset
purchase agreement with McDowell Research, Ltd., a Texas limited partnership
("Seller"), Thomas Hauke, Earl Martin, Sr., James Evans and Frank Alexander.
Together, Hauke, Martin, Evans and Alexander beneficially own all of the limited
partner interests of Seller and, through such ownership, they indirectly control
Seller. There are no material relationships between the Registrant or its
affiliates and Seller, Hauke, Martin, Evans or Alexander, other than in respect
of the asset purchase agreement, which is described below.
Seller is engaged in the business of designing and developing power systems
and battery chargers for sale to military and commercial customers. Pursuant to
the terms and conditions of the asset purchase agreement, at the closing of the
transaction, which is expected to occur during the third quarter of the
Registrant's current fiscal year, the Registrant will acquire substantially all
of those assets of Seller that relate to Seller's business, including certain
intellectual property and contract rights, as well as inventory, fixtures,
equipment, customer lists and other assets. In addition, the Registrant will
assume certain liabilities of Seller that relate to Seller's business, including
certain debt and obligations under assumed contracts.
Pursuant to the terms and conditions of the asset purchase agreement, at
the closing of the transaction, the Registrant will pay Seller a purchase price
of $25,000,000, subject to certain adjustments discussed below. The Registrant
will pay the purchase price by tendering a single cash payment in the amount of
$5,000,000 and delivering a subordinated convertible promissory note in the
principal amount of $20,000,000. The purchase price is subject to adjustment in
certain circumstances. If the sum of the value of Seller's accounts receivable
and inventory minus its accounts payable is less than $3,000,000, then the
principal amount of the promissory note will be reduced by the amount of such
shortfall. If the sum of the value of Seller's accounts receivable and inventory
minus its accounts payable is more than $3,000,000, then such excess will be
paid to Seller in accordance with the terms of the asset purchase agreement.
The principal amount of the promissory note matures and is payable on the
fifth anniversary of the closing of the transaction. The promissory note bears
interest at the rate of four percent per year, which rate can increase if an
event of default defined within the promissory note occurs. The promissory note
is cross-defaulted against the asset purchase agreement. During the term of the
promissory note, interest is payable in arrears on a quarterly basis. Subject to
Seller's conversion rights discussed below, the Registrant can pay off all
amounts outstanding under the promissory note before its maturity date by
providing written notice to Seller at least 60 days before the anticipated
payoff date. The payment of principal and interest under the promissory note is
subordinate to the rights of any commercial lenders, such as banks or other
financial institutions, that lend money to the Registrant.
Subject to certain limitations, the promissory note is convertible into
shares of the Registrant's common stock at any time prior to the time the
outstanding principal amount of the promissory note is paid in full. If the
closing price of the Registrant's common stock on the closing date of the
transaction is greater than $12.00 per share, then Seller will be precluded from
exercising its conversion rights until the first anniversary of the closing
date. The initial per share conversion price is $15.00, and the conversion price
is subject to customary anti-dilution adjustments. The Registrant has the right
to compel Seller to convert the promissory note at any time after the 30-day
average closing price of the Registrant's common stock exceeds $17.50 per share.
The Registrant has undertaken to register the shares issuable upon a conversion
of the promissory note.
Prior to the closing of the transaction, the asset purchase agreement may
be terminated under a number of circumstances. Termination can occur upon the
mutual consent of the parties or where laws or orders of government bodies would
prohibit the transaction. In addition, Seller can terminate the asset purchase
agreement if the transaction does not close within 30 days of the satisfaction
of all applicable closing conditions as a result of the Registrant's action or
inaction. Similarly, the Registrant can terminate the asset purchase agreement
if the transaction does not close within 30 days of the satisfaction of all
applicable closing conditions as a result of Seller's action or inaction. The
Registrant can also terminate the asset purchase agreement if a material adverse
event described in the asset purchase agreement occurs. Finally, either party
may terminate the asset purchase agreement if the transaction does not close by
September 30, 2006, as long as the terminating party is not in material breach
of its contractual obligations.
The asset purchase agreement contains customary representations, warranties
and covenants for a transaction of this type. The completion of the transaction
is subject to the satisfaction of a number of closing conditions, including
conditions relating to the Registrant's financing for the transaction and the
parties securing all necessary approvals for the transaction. The asset purchase
agreement also contains an exclusivity provision that provides the Registrant
with the exclusive right to pursue the transaction until September 30, 2006.
The Registrant expects to file the asset purchase agreement as an exhibit
to its quarterly report on Form 10-Q for the quarter ended July 1, 2006. A copy
of the press release issued by the Registrant in connection with the transaction
is attached as Exhibit 99.1 to this report.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits.
99.1 Press Release, dated May 2, 2006, announcing the
agreement to acquire McDowell Research, Ltd.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: As of May 1, 2006 ULTRALIFE BATTERIES, INC.
/s/ Peter F. Comerford
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Peter F. Comerford
Vice President of Administration &
General Counsel