Exhibit 10.1

                                December 15,2000

Ultralife Batteries, Inc.
2000 Technology Parkway
Newark, NY 14513

Ultralife Batteries (UK) Ltd.
18 Nuffield Way
Abingdon, Oxfordshire, OX 14
1TG England

      Re: Second Amendment to Financing Agreements ("Amendment")

Gentlemen:

      Reference is made to the Loan and Security Agreement dated June 15, 2000,
between you and the undersigned (the "Loan Agreement"). All capitalized terms
not otherwise defined herein shall have the meanings given such terms in the
Loan Agreement.

      Borrowers have requested that Lender agree to certain modifications to the
Loan Agreement. Subject to the terms and conditions hereof, the Lender agrees
with the Borrowers as follows:

      (1) Section 9.15 of the Loan  Agreement  is deleted and replaced  with the
following:

          "9.15 Adjusted Net Worth. Borrowers shall, at all times, maintain an
          Adjusted Net Worth of not less than $40,000,000.00."

      (2) In  connection  with the  execution  and  delivery of this  Amendment,
Borrowers  shall  pay to  Lender a fee of  $7,500.00,  which  fee shall be fully
earned and non-refundable on the date hereof.

      (3) In connection with the execution and delivery of this  Amendment,  the
Borrowers  shall  furnish  to the  Lender  certified  copies  of  all  requisite
corporate  action and  proceedings  of the  Borrowers  in  connection  with this
Amendment.

      (4) Each  Borrower  confirms and agrees that (a) all  representations  and
warranties contained in the Loan Agreement and in the other Financing Agreements
are on the date  hereof true and correct in all  material  respects  (except for
changes that have  occurred as  permitted  by the  covenants in Section 9 of the
Loan Agreement),  and (b) it is unconditionally liable for the punctual and full
payment of all Obligations,  including,  without limitation,  all charges, fees,
expenses and costs (including  attorneys' fees and expenses) under the Financing
Agreements, and that Borrowers


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Ultralife Batteries, Inc.
Ultralife Batteries (UK) Ltd.
December 15, 2000
Page 2


have no defenses, counterclaims or setoffs with respect to full, complete and
timely payment of all Obligations.

      (5) Borrowers hereby agree to pay to Lender all reasonable attorney's fees
and costs which have been incurred or may in the future be incurred by Lender in
connection  with the negotiation and preparation of this Amendment and any other
documents  and  agreements  prepared  in  connection  with this  Amendment.  The
undersigned  confirm  that the  Financing  Agreements  remain in full  force and
effect without  amendment or modification of any kind, except for the amendments
explicitly set forth herein.  The undersigned  further confirm that after giving
effect to this Amendment, no Event of Default or events which with notice or the
passage of time or both would  constitute  an Event of Default have occurred and
are continuing. Except as explicitly provided herein, the execution and delivery
of this  Amendment by Lender shall not be construed as a waiver by Lender of any
Event of Default under the Financing Agreements.  This Amendment shall be deemed
to be a Financing  Agreement and, together with the other Financing  Agreements,
constitute the entire agreement  between the parties with respect to the subject
matter hereof and supersedes all prior dealings,  correspondence,  conversations
or communications between the parties with respect to the subject matter hereof.

                  [Remainder of Page Left Intentionally Blank]


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Ultralife Batteries, Inc.
Ultralife Batteries (UK) Ltd.
December 15, 2000
Page 3


      If you accept and agree to the foregoing please sign and return the
enclosed copy of this letter. Thank you.

                                    Very truly yours,

                                    CONGRESS FINANCIAL CORPORATION
                                    (NEW ENGLAND)

                                    By: /s/ Brian Essex
                                        --------------------------------
                                        Name:  Brian Essex
                                        Title: Assistant Vice President

                                    AGREED:

                                    ULTRALIFE BATTERIES, INC.

                                    By: /s/ Robert W. Fishback
                                        --------------------------------
                                        Name:  Robert W. Fishback
                                        Title: VP-Finance & CFO

                                    ULTRALIFE BATTERIES (UK) Ltd.

                                    By: /s/ J. Barrella
                                        --------------------------------
                                        Name:  J. Barrella
                                        Title: Director