Exhibit 10.26

                          SUBORDINATED PROMISSORY NOTE

$500,000.00                                                     Newark, New York
                                                                   March 4, 2003

      FOR  VALUE  RECEIVED,   the  undersigned  ("Maker")  promises  to  pay  to
Hitschler,  Kimelman Holdings,  LLC ("Lender"),  or order,  without deduction or
setoff,  the sum of five hundred thousand dollars  ($500,000.00),  together with
interest at the rate of seven and  one-half  percent  (7.5%) per annum  accruing
from the date hereof on the principal balance from time to time unpaid, with all
principal and interest being due on June 4, 2003 (the "Maturity Date"),  subject
to the  subordination  provisions of Section 4 of the Loan Agreement (as defined
below).

      All payments required under the terms of this Note shall be paid in lawful
money of the  United  States of America at such place as the holder of this Note
may at any time or from time to time designate in writing to Maker.

      Maker may prepay the principal amount  outstanding,  together with accrued
interest thereon,  in whole or in part, at any time,  without premium or penalty
on ten (10)  days'  written  notice to Lender.  Any  prepayment  shall  first be
applied to accrued but unpaid interest and the balance, if any, shall be applied
in reduction of the unpaid balance of the principal due hereunder.

      This Note is the "Promissory  Note" issued pursuant to the provisions of a
certain  Loan  Agreement  (the "Loan  Agreement")  of even date  herewith by and
between the Maker and the Lender,  all of which provisions,  including,  but not
limited to, the subordination provisions of Section 4 are incorporated herein by
reference.  The  Lender is  entitled  to the  rights  and  benefits  of the Loan
Agreement, subject to the subordination provisions thereof.

      If this Note is forwarded to an attorney for  collection,  Maker shall pay
on demand all costs and expenses of collection including a reasonable attorney's
fee.

      An event of default  under this Note ("Event of Default")  shall be deemed
to have occurred if (i) Maker fails to pay any of Maker's obligations hereunder,
including,  without  limitation,  any  installment of principal  and/or interest
within ten (10) days after such  installment  is due and payable,  (ii) there is
any Event of Default under the Loan Agreement, or (iii) Maker fails to honor any
obligation under the warrant attached hereto as Exhibit A (the "Warrant").

      If an Event of Default  shall  occur,  the holder of this Note may declare
the entire unpaid principal balance of this Note, together with accrued interest
thereon,  immediately  due and payable,


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and shall,  in addition to all remedies under this Note,  have all of the rights
under the Loan Agreement and the Warrant.

      No  extension  of time for  payment  shall  release,  modify or affect the
liability of Maker hereunder.

      The rights and  remedies  set forth in this Note may be  exercised  by the
holder  of this Note  during  any  default  by  Maker,  regardless  of any prior
forbearance.

      Maker hereby waives presentment for payment, demand for payment,  protest,
notice of protest and of  dishonor,  and any and all  demands  and notices  that
might otherwise be required by law.

      Lender may convert some or all of the principal  amount of this Promissory
Note  into  shares  of the  common  stock of Maker by  sending a notice to Maker
setting forth the amount of principal of this  Promissory Note Lender desires to
convert into common stock of Maker. If Lender's  election to convert some or all
of the  principal  amount  of this  Promissory  Note is made  prior to or at the
Maturity Date and no Event of Default has occurred,  the conversion  price shall
be four dollars ($4.00) per share.  If Lender's  election to convert some or all
of the  principal  amount  of this  Promissory  Note is made  after  an Event of
Default has occurred, then the conversion price shall be two dollars ($2.00) per
share. Should Maker provide Lender with a written notice of prepayment of all of
the principal and interest due under this  Promissory  Note, then Lender's right
to convert  some or all of the  principal  due under this  Promissory  Note into
common  stock of Maker  shall  lapse  and shall be of no  further  effect if (i)
Lender  fails  to  elect  to  make an  election  to  convert  some or all of the
principal  due under  this  Promissory  Note prior to the date  established  for
prepayment  in the  notice  and (ii)  Maker  prepays  all of the  principal  and
interest due under this Promissory  Note on the date  established for prepayment
in the notice.  Upon such  conversion,  Lender shall  nonetheless be entitled to
receive all accrued and unpaid  interest due on this Promissory Note through the
date of conversion.

      The  aggregate  number  and  shares of common  stock of Maker  subject  to
issuance  upon  conversion  of  some  or all of  this  Promissory  Note  and the
conversion price shall be proportionately  adjusted for any increase,  decrease,
or  change in the  total  outstanding  shares  of the  Borrower's  common  stock
resulting  from  a  stock  dividend,  recapitalization,  merger,  consolidation,
split-up,  combination,  exchange of shares,  issuance of additional  shares, or
similar transaction.

      This Note shall be  governed by the laws of the State of  Delaware,  whose
courts shall have jurisdiction and venue to enforce the terms thereof.


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      Maker hereby  acknowledges that the debt which is represented by this Note
was  incurred by Maker  solely to acquire or carry on a business  or  commercial
enterprise.

      IN WITNESS WHEREOF,  Maker has executed this Note, under seal, the day and
year first above written.

ATTEST:

                                             Ultralife Batteries, Inc.

/s/ John Kavazanjian                         By /s/ Robert W. Fishback    (SEAL)
--------------------                         -----------------------------------
                                             Robert W. Fishback,
                                             Vice President of Finance and
                                             Chief Financial Officer


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