Ultralife Batteries to Acquire McDowell Research, Ltd.; $25 Million Acquisition Expands Ultralife's Global Military Presence and Product Line

Established in 1992, McDowell, which ranked 357th on Inc.Magazine's 2005 "Inc. 500" list of the fastest growing privatecompanies in the U.S., designs and manufactures power solutions andaccessories to support military communications systems including powersupplies, RF Amplifiers, battery chargers, amplified speakers,equipment mounts, case equipment and integrated communication systems.In 2005 McDowell generated approximately $1.6 million in operatingincome on approximately $22 million in revenue. The 2005 operatingincome included $1.6 million in non-recurring costs associated with adevelopment function that is not part of the acquisition.

The company sells its standard products to all branches of theU.S. military, including entities such as Special Operations Forces.McDowell also utilizes a General Services Administration (GSA)contract to provide these same items to the U.S. Military and variousU.S. Government agencies. GSA establishes long-term government-widecontracts with commercial firms to provide access to commercialsupplies and services that can be ordered directly from GSA Schedulecontractors. Additionally, the company sells its products to foreigndefense organizations and U.S. prime contractors including: HarrisCorporation, Thales Communications, Raytheon Company and L-3Communications.

Under the terms of the agreement, the purchase price ofapproximately $25 million will consist of $5 million in cash and a $20million non-transferable convertible note to be held by the sellers.The company expects the cash portion to be financed by its primarylending banks. The $20 million convertible note carries a five-yearterm and is convertible at $15 per share into 1.33 million shares ofUltralife common stock, with a forced conversion feature at $17.50 pershare. Ultralife anticipates that this acquisition will be accretivein 2006. Members of the McDowell management team will be retained aswell as the McDowell brand of products.

"McDowell Research is a well-respected, profitable and growingcompany specializing in military communications power accessories, andwill significantly broaden our solutions offerings into the militaryand government sectors," said John D. Kavazanjian, Ultralife'spresident and chief executive officer. "This acquisition will enhanceour channels into the rapidly growing special operations area as wellas strengthen the expansion of Ultralife's presence in global militarymarkets."

"We are delighted to become part of Ultralife," said Tom Hauke,president and founder of McDowell Research. "Joining forces with aleading power sources company like Ultralife will help to both expandour capabilities and extend the reach of our products worldwide. TheMcDowell team looks forward to combining the skills, technology andmarket reach of both companies."

Information about McDowell Research, Ltd. is available at thecompany's web site, www.mcdowellresearch.com.

About Ultralife Batteries, Inc.

Ultralife is a global provider of high-energy power systems fordiverse applications. The company develops, manufactures and markets awide range of non-rechargeable and rechargeable batteries, chargingsystems and accessories for use in military, industrial and consumerportable electronic products. Through its portfolio of standardproducts and engineered solutions, Ultralife is at the forefront ofproviding the next generation of power systems. Industrial, retail andgovernment customers include General Dynamics, Philips MedicalSystems, General Motors, Energizer, Kidde Safety, Lowe's, Radio Shackand the national defense agencies of the United States, UnitedKingdom, Germany and Australia, among others.

Ultralife's headquarters, principal manufacturing and researchfacilities are in Newark, New York, near Rochester. UltralifeBatteries (UK) Ltd., a second manufacturing facility, is located inAbingdon, England. Both facilities are ISO-9001 certified. Detailedinformation on Ultralife is available at the company's web site,www.ultralifebatteries.com.

This press release may contain forward-looking statements based oncurrent expectations that involve a number of risks and uncertainties.The potential risks and uncertainties that could cause actual resultsto differ materially include: worsening global economic conditions,increased competitive environment and pricing pressures, disruptionsrelated to restructuring actions and delays. Further information onthese factors and other factors that could affect Ultralife'sfinancial results is included in Ultralife's Securities and ExchangeCommission (SEC) filings, including the latest Annual Report on Form10-K.