Document:

EX-10.49

 

Exhibit 10.49

THE SECURITY REPRESENTED BY THIS INSTRUMENT WAS ORIGINALLY ISSUED ON NOVEMBER 16,
2007, AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED. THE
TRANSFER OF SUCH SECURITY IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE STOCK
PURCHASE AGREEMENT, DATED AS OF OCTOBER 30, 2007, AS AMENDED AND MODIFIED FROM TIME
TO TIME, BY AND AMONG ULTRALIFE BATTERIES, INC. (THE “COMPANY”), WILLIAM
MAHER AND STATIONARY POWER SERVICES, INC., AND THE COMPANY RESERVES THE RIGHT TO
REFUSE THE TRANSFER OF SUCH SECURITY UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED WITH
RESPECT TO SUCH TRANSFER. UPON WRITTEN REQUEST, A COPY OF SUCH CONDITIONS SHALL BE
FURNISHED BY THE COMPANY TO THE HOLDER HEREOF WITHOUT CHARGE.

THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
“ACT”), AND MAY NOT BE OFFERED OR SOLD EXCEPT: (i) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT UNDER THE ACT (ii) TO THE EXTENT APPLICABLE, PURSUANT TO RULE
144 UNDER THE ACT (OR ANY SIMILAR RULE UNDER THE ACT RELATING TO THE DISPOSITION OF
SECURITIES), OR (iii) UPON THE DELIVERY BY THE HOLDER TO THE COMPANY OF AN OPINION
OF COUNSEL, REASONABLY SATISFACTORY TO COUNSEL FOR THE COMPANY, AND AN EXEMPTION
FROM REGISTRATION UNDER THE ACT IS AVAILABLE.

THREE-YEAR SUBORDINATED

CONVERTIBLE PROMISSORY NOTE

			
	$4,000,000
	 	Newark, New York

     FOR VALUE RECEIVED, ULTRALIFE BATTERIES, INC., a Delaware corporation with offices at
2000 Technology Parkway, Newark, New York 14513 (the “Company”), hereby promises to pay to
the order of WILLIAM MAHER, a natural person with an address of 525 Tallahassee Drive, St.
Petersburg, FL 33702 or his registered assigns (“Holder”) the principal sum of $4,000,000,
or such lesser principal amount to which this Note shall have been adjusted in accordance with the
provisions of the Stock Purchase Agreement, together with interest thereon calculated from the date
hereof, in accordance with the provisions of this Note.

     This Note was issued pursuant to the Stock Purchase Agreement, dated as of October 30, 2007
(the “Purchase Agreement”), by and among the Company, Holder and Stationary Power Services,
Inc. and the applicable provisions thereof are hereby incorporated herein in full by reference. The
Purchase Agreement contains terms governing the rights of the Holder of this Note and the Holder is
entitled to the benefits thereof. All capitalized terms used herein and not otherwise defined shall
have the meanings given thereto in the Purchase Agreement.

 

 

     1. Interest. Except as otherwise expressly provided herein, interest shall accrue on the
unpaid principal amount of this Note outstanding from the date hereof until such time as payment
thereof is actually delivered to the Holder (including after acceleration, maturity, or judgment)
at the rate of 5% per annum. All interest shall be calculated on the basis of actual days elapsed
divided by a 365 day year.

     After the occurrence of Event of Default, the Holder may, upon one day’s written notice but
without demand, declare all or any portion of the unpaid principal amount of this Note, any unpaid
and accrued interest thereon and any applicable late fees, to be immediately due and payable and
may otherwise take action to enforce this Note. Upon the occurrence of an Event of Default, at
Holder’s option interest on the outstanding principal hereunder shall accrue at a rate per annum
from time to time equal to the rate of interest then in effect on this Note plus 5% per annum. Any
increase in the interest rate shall be in addition to the Holder’s other available remedies.

     Holder does not intend or expect to pay, nor does Company intend or expect to charge, accept
or collect any interest which shall be in excess of the highest lawful rate allowable under the
laws of the State of New York or the United States of America, whichever is lower. Should any
charges upon the earning of interest be in excess of the highest lawful rate allowable under the
laws of the State of New York or the United States of America, whichever is lower, then any and all
such excess is hereby waived and shall be applied against the remaining principal balance, if any,
and thereafter refunded to Holder.

     2. Payments. Interest shall be due and payable quarterly in arrears of each year that this
Note is outstanding, commencing on January 1, 2008 and continuing on the first day of each calendar
quarter thereafter until the principal hereof shall have become due and payable, and on the
Maturity Date hereof.

     If Holder has not received the full amount of any installment by the end of fifteen (15)
calendar days from the date it is due, Company shall pay a late charge to Holder. The amount of
the late charge will be five percent (5%) of the amount of the payment due. The late charge shall
be due and payable immediately but shall be paid only once on each late payment.

     All unpaid accrued interest and all outstanding principal shall be due and payable in full on
the third anniversary of the Closing (the “Maturity Date”).

     3. Voluntary Prepayments. This Note may be prepaid by the Company in whole or in part at any
time after 60 days prior written notice to Holder (during which period Holder may exercise its
conversion rights hereunder).

     4. Conversion Rights.

     (a) The Holder may convert the outstanding principal amount of this Note (or a portion of such
outstanding principal amount as provided in Section 4(c)) into fully paid and nonassessable shares
of Common Stock of the Company (the “Conversion Shares”) at any time prior to the time the
outstanding principal amount of this Note is paid in full (subject to the notice periods and
conversion rights related thereto described elsewhere in this Note), at the

2

 

Conversion Price (defined below) then in effect (collectively, the “Conversion
Rights”). The initial per share conversion price (the “Conversion Price”) shall be
$15.00. The Conversion Price is subject to adjustment as provided in Section 5.

     (b) The provisions of this Note that apply to conversion of the outstanding principal amount
of this Note also apply to a partial conversion of this Note. The Holder is not entitled to any
rights of a holder of Conversion Shares until the Holder has converted this Note (or a portion
thereof) into Conversion Shares, and only to the extent that this Note is deemed to have been
converted into Conversion Shares under this Section 4.

     (c) To convert all or a portion of this Note, the Holder must (a) complete and sign a notice
of election to convert substantially in the form of Exhibit I hereto (each, a
“Conversion Notice”), (b) surrender the Note to the Company, and (c) furnish appropriate
endorsements or transfer documents if required by the Company. The date on which the Holder
satisfies all of such requirements is the conversion date (the “Conversion Date”). As soon
as practicable, and in any event within 10 business days after the Conversion Date, the Company
will deliver, or cause to be delivered, to the Holder a certificate for the number of whole
Conversion Shares issuable upon such conversion and a check for any fractional Conversion Share
determined pursuant to Section 4(d). The person in whose name the certificate for Conversion Shares
is to be registered shall become the stockholder of record on the Conversion Date and, as of the
Conversion Date, the rights of the Holder as to this Note shall cease as to the portion thereof so
converted; provided, however, that no surrender of a Note on any date when the
stock transfer books of the Company shall be closed shall be effective to constitute the person
entitled to receive the Conversion Shares upon such conversion as the stockholder of record of such
Conversion Shares on such date, but such surrender shall be effective to constitute the person
entitled to receive such Conversion Shares as the stockholder of record thereof for all purposes at
the close of business on the next succeeding day on which such stock transfer books are open;
provided further that such conversion shall be at the Conversion Price in effect on the date that
this Note shall have been surrendered for conversion, as if the stock transfer books of the Company
had not been closed.

     In the case of a partial conversion of this Note, upon such conversion, the Company shall
execute and deliver to the Holder, at the expense of the Company, a new Note in an aggregate
principal amount equal to the unconverted portion of the principal amount.

     (d) No fractional Conversion Shares shall be issued upon exercise of the Conversion Rights.
Instead of any fractional Conversion Share which would otherwise be issuable upon conversion of
this Note, the Company shall calculate and pay a cash adjustment in respect of such fraction
(calculated to the nearest 1/100th of a share) in an amount equal to the same fraction of the
Conversion Price at the close of business on the Conversion Date.

     (e) The issuance of certificates for Conversion Shares upon exercise of any of the Conversion
Rights shall be made without charge to the Holder for such certificates or for any tax in respect
of the issuance of such certificates, and such certificates shall be issued in the name of, or in
such names as may be directed by, the Holder; provided, however, that in the event
that certificates for Conversion Shares are to be issued in a name or names other than the name of
the Holder, such Note, when surrendered for conversion, shall be accompanied by an instrument of

3

 

transfer, in form satisfactory to the Company, duly executed by the Holder or his duly
authorized attorney; and provided further, moreover, that the Company shall not be required to pay
any tax which may be payable in respect of any transfer involved in the issuance and delivery of
any such certificates in a name or names other than that of the Holder, and the Company shall not
be required to issue or deliver such certificates unless or until the person or persons requesting
the issuance thereof shall have paid to the Company the amount of such tax or shall have
established to the satisfaction of the Company that such tax has been paid or is not applicable.

     (f) The Company shall at all times reserve and keep available, free from preemptive rights,
out of its authorized and unissued Common Stock, solely for the purpose of effecting the conversion
of this Note, the full number of Conversion Shares then issuable upon the conversion in full of
this Note. The Company hereby grants Holder piggyback registration rights as more particularly set
forth in the Purchase Agreement and the Registration Rights Agreement entered into pursuant
thereto.

     (g) If the Company or an affiliate of the Company shall at any time after the date hereof and
prior to the conversion of the Note in full issue any rights to subscribe for shares of Common
Stock or any other securities of the Company or of such affiliate to all the stockholders of the
Company, the Holder of the unconverted portion of the Note shall be entitled, in addition to the
shares of Common Stock or other securities receivable upon the Conversion thereof, to receive such
rights at the time such rights are distributed to the other stockholders of the Company, to be
calculated on an as-converted basis.

     5. Adjustments to Conversion Rights.

     (a) General. In order to prevent dilution of the rights granted under this Note, the
Conversion Price and the number of Conversion Shares shall be subject to adjustment from time to
time as provided in this Section 5(a). It is the intention of the Company that the Conversion Price
shall at all times be the lower of (i) the Conversion Price on the date of this Note and (ii) the
Conversion Price determined by adjustment pursuant to the remainder of this Section 5(a). In the
event that at any time the Common Stock of the Company shall be exchanged for, or changed into, a
different kind and/or a number of shares of stock of the Company or of another corporation by
reason of a merger, consolidation, sale of Stocks, recapitalization, reclassification, stock
dividend, stock split-up or combination of shares or otherwise, then, until any further adjustment
is required, there shall be issuable upon the conversion of the Note, in lieu of each share of
Common Stock of the Company or of any other stock theretofore issued pursuant to the provisions of
this Note, the kind and/or number of shares of stock for which each share of Common Stock of the
Company or such other stock shall be so exchanged, or into which each share of Common Stock of the
Company or such other stock shall be so changed and the Conversion Price shall be automatically
adjusted to a new Conversion Price as nearly equivalent as practicable to the adjustment in shares
of stock, if by reason of such merger, consolidation, recapitalization, reclassification or
otherwise the number of issued and outstanding shares of Common Stock of the Company shall have
been exchanged for or changed into such new shares on other than a one-to-one basis. No adjustment
in the Conversion Price shall be made for cash dividends on the shares of Common Stock of the
Company or any other stock issued upon any conversion of the Note.

4

 

     (b) Notices. Immediately upon any adjustment of the Conversion Price, the Company shall give
written notice thereof to the Holder, setting forth in reasonable detail and certifying the
calculation of such adjustment.

     6. Company Right to Compel Conversion. Notwithstanding any other provisions of this Note, the
Company shall have the right, at the Company’s sole discretion, to compel the Holder to convert the
Note at the Conversion Price at any time within five (5) business days after the average “Value
Weighted Average Price” of the Company’s Common Stock, as published by The NASDAQ Stock Market, for
the trailing 30 days exceeds $17.00 per share and subject to the provision that the Conversion
Shares are registered under the Act on a registration statement that has been declared effective by
the SEC. In such event, the Company shall provide the Holder with written notice of conversion,
setting forth the basis upon which the conditions to compel the conversion were satisfied.
Thereafter, the Note shall only represent the right to receive the Conversion Shares and any
accrued but unpaid interest. In the event the Company fails to provide the Holder with written
notice of conversion within the five (5) business day period set forth in the first sentence of
this Section 6, the Company shall be deemed to have waived its right to compel conversion of this
Note at that time and shall be required to satisfy anew the conditions for a compelled conversion.

     7. Subordination. The Holder agrees that the payment of the principal of and the interest on
the Note is expressly subordinated to the payment of all Senior Indebtedness, to the extent and
subject to the conditions set forth in this Section 7. As used herein, the term “Senior
Indebtedness” shall mean the principal of, the interest on and the premium, if any, on all
indebtedness of the Company for money borrowed by it from any financial institution including
banks, savings institutions or insurance companies and similar institutional lenders, and all
renewals, extensions and refundings of any such indebtedness, whether such indebtedness shall have
been incurred prior to, on, or subsequent to the date hereof, unless by the terms of the
instruments creating or evidencing any such indebtedness it is provided that such indebtedness is
not to be considered Senior Indebtedness for the purpose of this Note.

     (a) No interest or principal shall be paid on the Note without the consent of the holders of
all outstanding Senior Indebtedness if, at the date fixed herein for such interest or principal
payment, the Company shall be in default of payment of principal or interest upon such Senior
Indebtedness. In the event any payment of interest or principal hereunder shall be prohibited
pursuant to this Section 7(a), such payment shall be deemed to be deferred until the cure of all
defaults in payment of principal or interest upon the Senior Indebtedness, and the payments hereon
so deferred shall immediately become due and payable, with interest thereon, at the rate of 5% per
annum, upon the cure of such defaults.

     (b) In the event of any dissolution, winding up, liquidation or reorganization of the Company,
whether in bankruptcy, insolvency or receivership proceedings, or upon an assignment for the
benefit of creditors or in any other marshalling of the Stocks and liabilities of the Company the
holders of all Senior Indebtedness shall first be entitled to receive payment in full of such
Senior Indebtedness before the Holder shall be entitled to receive any payment upon the principal
of, the interest on, or the premium, if any, on the indebtedness evidenced by the Note. Upon any
such dissolution, winding up, liquidation or reorganization, any payment or distribution of Stocks
of the Company of any kind or character, whether in cash, property or

5

 

securities, to which the Holder would be entitled, except for the provisions of this
Section 7, shall be made by the liquidating trustee or agent or such person making such payment or
distribution, whether a trustee in bankruptcy, a receiver or liquidating trustee or otherwise,
directly to the Holders of the Senior Indebtedness or their representatives or to the trustee or
trustees under any indenture or indentures under which any instruments evidencing any such Senior
Indebtedness may have been issued, ratably according to the aggregate amounts remaining unpaid on
account of the Senior Indebtedness held or represented by each, to the extent necessary to pay in
full all such Senior Indebtedness remaining unpaid, after giving effect to all concurrent payments
or distributions with respect to such Senior Indebtedness.

     (c) In the event that, notwithstanding the provisions of Section 7(b), upon any such
dissolution, or winding up, liquidation or reorganization, any payment or distribution of Stocks of
the Company of any kind or character, whether in cash, property or securities, shall be received by
the Holder before all Senior Indebtedness is paid in full, such payment or distribution shall be
paid over to the holders of such Senior Indebtedness or their representatives or to the trustee or
trustees under any indenture or indentures referred to in Section 8(b), ratably as aforesaid, for
the application to the payment of all Senior Indebtedness remaining unpaid until all such Senior
Indebtedness shall have been paid in full, after giving effect to any concurrent payment or
distribution with respect to such Senior Indebtedness.

     (d) Subject to the payment in full of all Senior Indebtedness, the Holder to the extent
permitted by law, shall be subrogated to the rights of each holder of Senior Indebtedness (to the
extent of the payments or distributions made to such holder pursuant to the provisions of Sections
7(b) and 7(c)) to receive payments or distributions of Stocks of the Company applicable to the
Senior Indebtedness until the principal of, the interest on, and the premium, if any, on this Note
shall be paid in full, and each holder of Senior Indebtedness by accepting such payments or
distributions shall be deemed to have agreed to said subrogation. No payments or distributions to
the Senior Indebtedness pursuant to the provisions of Sections 7(b) and 7(c) shall, as between the
Company, its creditors, other than the holders of the Senior Indebtedness, and the Holder, be
deemed to be a payment by the Company to or on account of the Note, the provisions of this Section
7 being, and being intended, solely for the purpose of defining the relative rights of the Holder,
on the one hand, and the holders of the Senior Indebtedness, on the other hand; and nothing
contained in this Section 7 or elsewhere in this Note is intended to or shall impair, as between
the Company, the Holder and the other creditors of the Company, other than the holders of Senior
Indebtedness, the obligations of the Company, which is unconditional and absolute, to pay to the
Holder as and when the same shall become due and payable in accordance with the terms herein, or to
affect the relative rights of the Holder and the other creditors of the Company, other than the
holders of Senior Indebtedness, or to prevent the Holder from exercising all of the remedies
otherwise permitted by applicable law upon default as provided for herein, subject to the rights,
if any, under this Section 7 of the holders of the Senior Indebtedness in respect of any cash,
property or securities of the Company received upon the exercise of any such remedy.

     (e) In the event that this Note shall be declared due and payable before the Maturity Date
because of the occurrence of a default hereunder, the Company will give prompt notice in writing of
such happening to the holders of the Senior Indebtedness, and any and all Senior Indebtedness shall
forthwith become immediately due and payable upon demand by the respective holders thereof
regardless of the express maturity dates thereof.

6

 

     8. Events of Default. In the event that there shall be any Event of Default hereunder (other
than subsections (a)(1) and (a)(2))and such Event of Default shall remain uncorrected or unremedied
for a period of more than 30 days after the Holder shall have given the Company notice received
notice of such Event of Default, then the full unpaid principal amount of the Note, together with
any accrued but unpaid interest, may, at the option of the Holder, become immediately due and
payable without further notice by the Holder. An Event of Default described in subsections (a)(1)
and (a)(2) shall be deemed to occur fifteen (15) days after the due date of such installment of
interest or principal is due and payable.

     (a) “Event of Default” as used in this Section 8 shall mean and refer to any of the
following:

     (i) The failure of the Company to pay any installment of interest or principal on the
Note when and as the same shall become due and payable, whether at maturity, by call for
redemption, by declaration or otherwise;

     (ii) The failure of the Company, to pay any installment of interest or principal on
Senior Indebtedness when and as the same shall become due and payable, unless such payment
shall have been deferred or waived by the terms of the instruments evidencing such Senior
Indebtedness or by the holder thereof;

     (iii) The breach of any representation or warranty of the Company or the failure of the
Company to observe and perform all of the covenants and agreements on the part of the
Company contained herein or in the Stock Purchase Agreement;

     (iv) The failure of any representation or warranty made by the Company in the Stock
Purchase Agreement to be truthful, accurate or correct;

     (v) The adjudication of the Company as a bankrupt by a court of competent jurisdiction
or the entry by a court of competent jurisdiction of an order approving a petition seeking
reorganization of the Company under the federal bankruptcy laws or any other applicable law
or statute of the United States of America or any state thereof or any other jurisdiction;

     (vi) The appointment by a court of competent jurisdiction of a trustee or receiver or
receivers of the Company of all or any substantial part of its property upon the application
of any creditor in any insolvency or bankruptcy proceeding or other creditor suit, unless
such appointment or decree or order shall be stayed upon appeal or otherwise;

     (vii) The filing by the Company of a petition involuntary bankruptcy or the making by
the Company of an assignment for the benefit of its creditors or the consenting by the
Company to the appointment of a receiver or receivers for all or any substantial portion of
the property of the Company;

     (viii) The filing by the Company of a petition or answer seeking reorganization under
the federal bankruptcy laws or any other applicable law or statute of the United States of
America or any state thereof or jurisdiction, or the filing by the Company of a petition to
take advantage of any debtor’s act.

7

 

     (b) Upon the occurrence of an Event of Default which shall remain uncorrected or unremedied
for a period of more than 30 days after notice has been given to the Company from the Holder, the
Holder shall at all times have the right to institute any suit, action or proceeding, in equity or
at law, for the enforcement of rights as provided for herein, or in aid of the exercise of any
right or power granted herein. The remedies of the Holder, as provided herein shall be cumulative
and concurrent, and may be pursued singularly, successively or together, at the sole discretion of
the Holder, and may be exercised as often as occasion therefor shall arise.

     (c) The Note shall be the obligation of the Company solely and there shall be no recourse had
for the payment thereof or interest thereon against any stockholder, officer or director of the
Company, either directly or through the Company, by reason of any matter prior to the delivery of
the Note, or against any present or future officer or director of the Company, all such liability
being expressly released by the Holder and by any subsequent holders hereof by the acceptance
hereof and as part of the consideration for the issuance thereof.

     The Holder shall also have any other rights which the Holder may have been afforded under any
contract or agreement at any time and any other rights which such holder may have pursuant to
applicable law. The Company hereby waives diligence, presentment and protest and expressly agrees
that this Note, or any payment hereunder, may be extended from time to time and that the Holder may
accept security for this Note or release security for this Note, all without in any way affecting
the liability of the Company hereunder.

     9. Amendment and Waiver. Except as otherwise expressly provided herein, the provisions of this
Note may be amended and the Company may take any action herein prohibited, or omit to perform any
act herein required to be performed by it, only if the Company has obtained the written consent of
the Holder.

     10. Cancellation. After all principal and accrued interest at any time owed on this Note has
been paid in full, this Note shall be surrendered to the Company for cancellation and shall not be
reissued.

     11. Payments. Unless otherwise expressly provided herein, all payments to be made to the
Holders shall be made in the lawful money of the United States of America in immediately available
funds which shall be delivered to the address designated by the Holder. Time is of the essence
with respect to the terms, covenants and conditions contained herein.

     12. Transfer of Note. This Note may be transferred only in accordance with the terms of the
Stock Purchase Agreement, and the Company shall treat the Person to whom this Note is assigned in
accordance therewith for the purpose of receiving payment and for all other purposes, and the
Company shall not be affected by any notice to the contrary.

     13. Business Days. If any payment is due, or any time period for giving notice or taking
action expires, on a day which is a Saturday, Sunday or legal holiday in the State of New York, the
payment shall be due and payable on, and the time period shall automatically be extended to, the
next business day immediately following such Saturday, Sunday or legal holiday, and interest shall
continue to accrue at the required rate hereunder until any such payment is made.

8

 

     14. Right of Offset. This Note is subject to the Buyer’s rights of offset pursuant to the
provisions of Section 2(e) and Section 8(f) of the Purchase Agreement.

     15. Notices. All notices, demands or other communications to be given or delivered under or by
reason of the provisions of this Note shall be given in accordance with the Purchase Agreement.

     16. New York Law. This Note is intended to be performed in the State of New York and shall be
construed and enforced in accordance with the laws of such State.

     17. Taxes. Company shall pay all filing fees, recording costs, documentary stamp taxes,
intangible or other similar taxes incurred in connection with this Note or security given for its
performance. Company further agrees to pay all costs of collection, including reasonable
attorneys’ fees and litigation costs in case that sums due hereunder are not paid promptly when
due, whether suit is brought or not.

[SIGNATURE PAGE FOLLOWS]

9

 

     IN WITNESS WHEREOF, the Company has executed and delivered this Note on November 16, 2007.

	 	 	 	 	 
	 	ULTRALIFE BATTERIES, INC.

 	 
	 	/s/ Robert W. Fishback
 	 
	 	Robert W. Fishback 	 
	 	Vice President of Finance and

Chief Financial Officer 	 
	 

10

 

EXHIBIT I

FORM OF CONVERSION NOTICE

     The undersigned hereby irrevocably elects to exercise its right, pursuant to the Subordinated
Convertible Promissory Note dated November                     , 2007 (the “Note”) of Ultralife Batteries, Inc. (the
“Company”) in the outstanding principal amount of $4,000,000, which Note is tendered herewith, to
convert $                                        of  the amount outstanding under the Note to                           
             
shares of the
common stock of the Company (the “Shares”), all in accordance with the terms of the Note. The
undersigned requests that a Certificate for such Shares be registered in the name of
                                        , whose address is                                  
       , and that such Certificate be delivered to
                                        , whose address is                               
         , [and that a replacement Note in the principal
amount of $                    , representing the balance of the principal amount outstanding thereunder
after giving effect to this conversion, be issued in the amount of $                                         and delivered to
                   
                   
  , whose address is              
                   
       ].

Dated:                                        

Signature:                                                                  
               

(Signature must conform in all respects to name of holder as specified on the face of the Note.)

                                                                   
             

                                                                                

(Insert Taxpayer Identification, Social Security or

Other Identifying Number of Holder)

11EX-10.50

 

Exhibit 10.50

STOCK PURCHASE AGREEMENT

AMONG

ULTRALIFE BATTERIES, INC.

AND

RESERVE POWER SYSTEMS, INC.

AND

WILLIAM MAHER AND EDWARD BELLAMY

OCTOBER 30, 2007

 

 

TABLE OF CONTENTS

	 	 	 	 	 
	Section	 	Page	 
	SECTION 1. DEFINITIONS
	 	 	1	 
	SECTION 2. PURCHASE AND SALE OF TARGET SHARES
	 	 	6	 
	(a) Basic Transaction
	 	 	6	 
	(b) Purchase Price; Payment
	 	 	6	 
	(c) Closing
	 	 	7	 
	(d) Deliveries at Closing
	 	 	7	 
	SECTION 3
	 	 	8	 
	(a) Sellers’ Representations and Warranties
	 	 	8	 
	(b) Buyer’s Representations and Warranties
	 	 	10	 
	SECTION 4
	 	 	11	 
	(a) Organization, Qualification, and Corporate Power
	 	 	12	 
	(b) Capitalization
	 	 	12	 
	(c) Non-contravention
	 	 	12	 
	(d) Brokers’ Fees
	 	 	12	 
	(e) Title to Assets
	 	 	13	 
	(f) Subsidiaries
	 	 	13	 
	(g) Financial Statements
	 	 	13	 
	(h) Events Subsequent to Most Recent Fiscal Year End
	 	 	13	 
	(i) Undisclosed Liabilities
	 	 	15	 
	(j) Legal Compliance
	 	 	15	 
	(k) Tax Matters
	 	 	15	 
	(l) Real Property
	 	 	17	 
	(m) Intellectual Property
	 	 	20	 
	(n) Tangible Assets
	 	 	23	 
	(o) Inventory
	 	 	23	 
	(p) Contracts
	 	 	23	 
	(q) Notes and Accounts Receivable
	 	 	24	 
	(r) Powers of Attorney
	 	 	25	 
	(s) Insurance
	 	 	25	 
	(t) Litigation
	 	 	25	 
	(u) Product Warranty
	 	 	26	 
	(v) Product Liability
	 	 	26	 
	(w) Employees
	 	 	26	 
	(x) Employee Benefits
	 	 	26	 
	(y) Guaranties
	 	 	27	 
	(z) Environmental, Health, and Safety Matters
	 	 	27	 
	(aa) Certain Business Relationships with Target
	 	 	28	 
	(bb) Customers and Suppliers
	 	 	28	 
	(cc) Disclosure
	 	 	28	 
	SECTION 5
	 	 	28	 
	(a) General
	 	 	28	 
	(b) Notices and Consents
	 	 	28	 

-i-

 

	 	 	 	 	 
	Section	 	Page	 
	(c) Operation of Business
	 	 	29	 
	(d) Preservation of Business
	 	 	29	 
	(e) Full Access
	 	 	29	 
	(f) Notice of Developments
	 	 	29	 
	(g) Exclusivity
	 	 	29	 
	(h) [INTENTIONALLY OMITTED]
	 	 	29	 
	(i) Leases
	 	 	29	 
	(j) Tax Matters
	 	 	30	 
	(k) S Corporation Status
	 	 	30	 
	(l) Employee Benefits and Welfare Matters
	 	 	30	 
	SECTION 6
	 	 	30	 
	(a) General
	 	 	30	 
	(b) Litigation Support
	 	 	30	 
	(c) Transition
	 	 	31	 
	(d) Confidentiality
	 	 	31	 
	(e) Release of Target by Sellers
	 	 	31	 
	SECTION 7
	 	 	32	 
	(a) Conditions to Buyer’s Obligation
	 	 	32	 
	(b) Conditions to Sellers’ Obligation
	 	 	34	 
	SECTION 8
	 	 	35	 
	(a) Survival of Representations and Warranties
	 	 	35	 
	(b) Indemnification Provisions for Buyer’s Benefit
	 	 	35	 
	(c) Indemnification Provisions for Sellers’ Benefit
	 	 	36	 
	(d) Matters Involving Third Parties
	 	 	36	 
	(e) Determination of Adverse Consequences
	 	 	37	 
	(f) Setoff against Holdback Amounts; Priority
	 	 	37	 
	(g) Other Indemnification Provisions
	 	 	38	 
	SECTION 9
	 	 	38	 
	(a) Tax Indemnification
	 	 	38	 
	(b) Cooperation on Tax Matters
	 	 	39	 
	(c) Tax Sharing Agreements
	 	 	40	 
	(d) Certain Taxes and Fees
	 	 	40	 
	(e) Section 338(h)(10) Election
	 	 	40	 
	(f) Tax Adjustment
	 	 	41	 
	(g) Tax Refund
	 	 	41	 
	SECTION 10
	 	 	41	 
	(a) Termination of Agreement
	 	 	41	 
	(b) Effect of Termination
	 	 	42	 
	SECTION 11
	 	 	42	 
	(a) Press Releases and Public Announcements; Confidentiality
	 	 	42	 
	(b) No Third-Party Beneficiaries
	 	 	43	 
	(c) Entire Agreement
	 	 	43	 
	(d) Succession and Assignment
	 	 	43	 
	(e) Counterparts
	 	 	43	 
	(f) Headings
	 	 	43	 
	(g) Notices
	 	 	43	 

-ii-

 

	 	 	 	 	 
	Section	 	Page	 
	(h) Governing Law
	 	 	44	 
	(i) Amendments and Waivers
	 	 	44	 
	(j) Severability
	 	 	44	 
	(k) Expenses
	 	 	45	 
	(l) Construction
	 	 	45	 
	(m) Incorporation of Exhibits, Annexes, and Schedules
	 	 	45	 
	(n) Specific Performance
	 	 	45	 
	(o) Submission to Jurisdiction
	 	 	45	 
	(p) Tax Disclosure Authorization
	 	 	46	 

Attachments to Stock Purchase Agreement

	1.	 	Annex I: Exceptions to Seller’s Representations and Warranties
	 
	2.	 	Annex II: Exceptions to Buyer’s Representations and Warranties
	 
	3.	 	Disclosure Schedule for Target
	 
	4.	 	Exhibit A: Form of Registration Rights Agreement
	 
	5.	 	Exhibit B: Financial Statements of Target
	 
	6.	 	Exhibit C: Form of Post-Closing Agreement

-iii-

 

STOCK PURCHASE AGREEMENT

     This Stock Purchase Agreement (this “Agreement”) is entered into as of October 30, 2007, by
and among Ultralife Batteries, Inc., a Delaware corporation (“Buyer”), Reserve Power Systems, Inc.,
a Florida corporation (“Target”), and William Maher and Edward Bellamy (“Sellers”). Buyer, Target
and Sellers are referred to collectively herein as the “Parties.”

RECITALS

     A. Sellers own all of the outstanding capital stock of Target.

     B. This Agreement contemplates a transaction in which Buyer will purchase from Sellers, and
Sellers will sell to Buyer, all of the outstanding capital stock of Target in return for certain
consideration described below.

     NOW, THEREFORE, in consideration of the premises and the mutual promises herein made, and in
consideration of the representations, warranties, and covenants herein contained, the Parties agree
as follows.

SECTION 1. DEFINITIONS

     “Adverse Consequences” means all actions, suits, proceedings, hearings, investigations,
charges, complaints, claims, demands, injunctions, judgments, orders, decrees, rulings, damages,
dues, penalties, fines, costs, amounts paid in settlement, Liabilities, obligations, Taxes, liens,
actual losses, expenses, and fees, including court costs and attorneys’ fees and expenses.

     “Affiliate” means a person that directly, or indirectly through one or more intermediaries,
controls, or is controlled by, or is under common control with, the person specified.

     “Affiliated Group” means any affiliated group within the meaning of Code Section 1504(a) or
any similar group defined under a similar provision of state, local or foreign law.

     “Basis” means any past or present fact, situation, circumstance, status, condition, activity,
practice, plan, occurrence, event, incident, action, failure to act, or transaction that forms or
could form the basis for any specified consequence.

     “Buyer” has the meaning set forth in the preface above.

     “Closing” has the meaning set forth in Section 2(c) below.

     “Closing Date” has the meaning set forth in Section 2(c) below.

     “COBRA” means the requirements of Part 6 of Subtitle B of Title I of ERISA and Code Section
4980B and of any similar state law.

     “Code” means the Internal Revenue Code of 1986, as amended.

1

 

     “Confidential Information” means any information concerning the businesses and affairs of the
Target, Seller or Buyer, as the context requires, that is not already generally available to the
public.

     “Disclosure Schedule” has the meaning set forth in Section 4 below.

     “Employee Benefit Plan” has the meaning set forth in Section 4(x) below.

     “Employee Pension Benefit Plan” has the meaning set forth in ERISA Section 3(2).

     “Employee Welfare Benefit Plan” has the meaning set forth in ERISA Section 3(1).

     “Employment Agreement” means the form of employment agreement attached as Exhibit C to
this Agreement.

     “Encumbrance Documents” has the meaning set forth in Section 4(l) below.

     “Environmental, Health, and Safety Requirements” shall mean all federal, state, local, and
foreign statutes, regulations, ordinances, and other provisions having the force or effect of law,
all judicial and administrative orders and determinations, all contractual obligations, and all
common law concerning public health and safety, worker health and safety, and pollution or
protection of the environment, including, without limitation, all those relating to the presence,
use, production, generation, handling, transportation, treatment, storage, disposal, distribution,
labeling, testing, processing, discharge, release, threatened release, control, or cleanup of any
hazardous materials, substances, or wastes, chemical substances or mixtures, pesticides,
pollutants, contaminants, toxic chemicals, petroleum products or byproducts, asbestos,
polychlorinated biphenyls, noise, or radiation, each as amended and as now or hereafter in effect.

     “ERISA” means the Employee Retirement Income Security Act of 1974, as amended.

     “ERISA Affiliate” means any Person that is a member of a “controlled group of corporations”
with, or is under “common control” with, or is a member of the same “affiliated service group” with
Target, as defined in Section 414 of the Code.

     “Estoppel Certificates” has the meaning set forth in Section 7(a) below.

     “Fiduciary” has the meaning set forth in ERISA Section 3(21).

     “Financial Statements” has the meaning set forth in Section 4(g) below.

     “GAAP” means United States generally accepted accounting principles as in effect from time to
time, consistently applied.

     “Holdback Amount” has the meaning set forth in Section (b)(ii) below.

     “Improvements” has the meaning set forth in Section 4(l) below.

     “Indemnified Party” has the meaning set forth in Section 8(d) below.

2

 

     “Indemnifying Party” has the meaning set forth in Section 8(d) below.

     “Intellectual Property” means all of the following in any jurisdiction throughout the world:
(a) all inventions (whether patentable or unpatentable and whether or not reduced to practice), all
improvements thereto, and all patents, patent applications, and patent disclosures, together with
all reissuances, continuations, continuations-in-part, revisions, extensions, and reexaminations
thereof, (b) all trademarks, service marks, trade dress, logos, slogans, trade names, corporate
names, Internet domain names, and rights in telephone numbers, together with all translations,
adaptations, derivations, and combinations thereof and including all goodwill associated therewith,
and all applications, registrations, and renewals in connection therewith, (c) all copyrightable
works, all copyrights, and all applications, registrations, and renewals in connection therewith,
(d) all mask works and all applications, registrations, and renewals in connection therewith, (e)
all trade secrets and confidential business information (including ideas, research and development,
know-how, formulas, compositions, manufacturing and production processes and techniques, technical
data, designs, drawings, specifications, customer and supplier lists, pricing and cost information,
and business and marketing plans and proposals), (f) all computer software (including source code,
executable code, data, databases, and related documentation), (g) all advertising and promotional
materials, (h) all other proprietary rights, and (i) all copies and tangible embodiments thereof
(in whatever form or medium).

     “Knowledge” means actual knowledge after reasonable investigation.

     “Lease Consents” has the meaning set forth in Section 7(a) below.

     “Leased Real Property” means all leasehold or subleasehold estates and other rights to use or
occupy any land, buildings, structures, improvements, fixtures, or other interest in real property
held by Target.

     “Leases” means all leases, subleases, licenses, concessions and other agreements (written or
oral), including all amendments, extensions, renewals, guaranties, and other agreements with
respect thereto, pursuant to which Target holds any Leased Real Property, including the right to
all security deposits and other amounts and instruments deposited by or on behalf of Target
thereunder.

     “Liability” means any liability or obligation of whatever kind or nature (whether known or
unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or
unaccrued, whether liquidated or unliquidated, and whether due or to become due), including any
liability for Taxes.

     “Lien” means any mortgage, pledge, lien, encumbrance, charge, or other security interest,
other than (a) liens for Taxes not yet due and payable and (b) other liens arising in the Ordinary
Course of Business and not incurred in connection with the borrowing of money.

     “Material Adverse Effect” or “Material Adverse Change” means any effect or change that would
be materially adverse to the business, assets, condition (financial or otherwise), operating
results, operations, or business prospects of Target, taken as a whole, or on the ability of Seller
to consummate timely the transactions contemplated hereby (regardless of whether or not such

3

 

adverse effect or change can be or has been cured at any time or whether Buyer has knowledge
of such effect or change on the date hereof).

     “Measuring Periods” means the following periods of time: (i) the period commencing on the
Closing Date and ending on December 31, 2007; (ii) the period commencing on January 1, 2008 and
ending on December 31, 2008; (iii) the period commencing on January 1, 2009 and ending on December
31, 2009; and (iv) the period commencing on January 1, 2010 and ending on December 31, 2010. Each
of such Measuring Periods may be referred to individually as a “Measuring Period.”

     “Most Recent Balance Sheet” means the balance sheet contained within the Most Recent Financial
Statements.

     “Most Recent Financial Statements” has the meaning set forth in Section 4(g) below.

     “Most Recent Fiscal Month End” has the meaning set forth in Section 4(g) below.

     “Most Recent Fiscal Year End” has the meaning set forth in Section 4(g) below.

     “Multiemployer Plan” has the meaning set forth in ERISA Section 3(37).

     “Non-Disturbance Agreements” has the meaning set forth in Section 7(a) below.

     “Ordinary Course of Business” means the ordinary course of business consistent with past
custom and practice (including with respect to quantity and frequency).

     “Party” has the meaning set forth in the preface above.

     “Permitted Encumbrances” means with respect to each parcel of Real Property: (a) real estate
taxes, assessments and other governmental levies, fees, or charges imposed with respect to such
Real Property that are (i) not due and payable as of the Closing Date or (ii) that are being
contested in good faith and for which appropriate reserves have been established in accordance with
GAAP; (b) mechanics’ liens and similar liens for labor, materials, or supplies provided with
respect to such Real Property incurred in the Ordinary Course of Business for amounts that are (i)
not due and payable as of the Closing Date or (ii) being contested in good faith and for which
appropriate reserves have been established in accordance with GAAP; (c) zoning, building codes and
other land use laws regulating the use or occupancy of such Real Property or the activities
conducted thereon which are imposed by any governmental authority having jurisdiction over such
Real Property and are not violated by the current use or occupancy of such Real Property or the
operation of Target’s business as currently conducted thereon; and (d) easements, covenants,
conditions, restrictions, and other similar matters of record affecting title to such Real Property
which do not or would not impair the use or occupancy of such Real Property in the operation of
Target’s business as currently conducted thereon.

     “Person” means an individual, a partnership, a corporation, a limited liability company, an
association, a joint stock company, a trust, a joint venture, an unincorporated organization, any
other business entity, or a governmental entity (or any department, agency, or political
subdivision thereof).

4

 

     “Plan Amount” has the meaning set forth in Section 2(b)(ii) below.

     “Post Closing Agreement” means the form of confidentiality, non-solicitation, non-compete and
non-disparagement agreement attached as Exhibit C to this Agreement.

     “Prohibited Transaction” has the meaning set forth in ERISA Section 406 and Code Section 4975.

     “Purchase Price” has the meaning set forth in Section 2(b) below.

     “Real Property” has the meaning set forth in Section 4(l) below.

     “Real Property Laws” has the meaning set forth in Section 4(l) below.

     “Registrable Securities” means those Ultralife Shares issued to Sellers pursuant to Section
2(b)(i).

     “Registration Rights Agreement” means the form of Registration Rights Agreement attached as
Exhibit A to this Agreement.

     “Reportable Event” has the meaning set forth in ERISA Section 4043.

     “Sales” means revenues from sales of lead-acid batteries and associated hardware, determined
in accordance with GAAP, that are achieved by Target in the ordinary course of business.

     “Securities Act” means the Securities Act of 1933, as amended.

     “Securities Exchange Act” means the Securities Exchange Act of 1934, as amended.

     “Sellers” has the meaning set forth in the preface above.

     “Subsidiary” means, with respect to any Person, any corporation, limited liability company,
partnership, association, or other business entity of which (i) if a corporation, a majority of the
total voting power of shares of stock entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers, or trustees thereof is at the time
owned or controlled, directly or indirectly, by that Person or one or more of the other
Subsidiaries of that Person or a combination thereof or (ii) if a limited liability company,
partnership, association, or other business entity (other than a corporation), a majority of
partnership or other similar ownership interest thereof is at the time owned or controlled,
directly or indirectly, by that Person or one or more Subsidiaries of that Person or a combination
thereof and for this purpose, a Person or Persons own a majority ownership interest in such a
business entity (other than a corporation) if such Person or Persons shall be allocated a majority
of such business entity’s gains or losses or shall be or control any managing director or general
partner of such business entity (other than a corporation). The term “Subsidiary” shall include all
Subsidiaries of such Subsidiary.

     “Target” has the meaning set forth in the preface above.

5

 

     “Target Share” means any share of the common stock, par value $0.01 per share, of Target.

     “Tax” or “Taxes” means any federal, state, local, or foreign income, gross receipts, license,
payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental
(including taxes under Code Section 59A), customs duties, capital stock, franchise, profits,
withholding, social security (or similar), unemployment, disability, real property, personal
property, sales, use, transfer, registration, value added, alternative or add-on minimum,
estimated, or other tax of any kind whatsoever, including any interest, penalty, or addition
thereto, whether disputed or not and including any obligations to indemnify or otherwise assume or
succeed to the Tax liability of any other Person.

     “Tax Return” means any return, declaration, report, claim for refund, or information return or
statement relating to Taxes, including any schedule or attachment thereto, and including any
amendment thereof.

     “Third Party Claim” has the meaning set forth in Section 8(d) below.

     “Treasury Regulations” means the Treasury Regulations promulgated under the Code.

     “Ultralife Shares” means shares of common stock, par value $0.10 per share, of Ultralife
Batteries, Inc.

SECTION 2. PURCHASE AND SALE OF TARGET SHARES

     (a) Basic Transaction. On and subject to the terms and conditions of this Agreement, Buyer
agrees to purchase from Sellers, and Sellers agree to sell to Buyer, all of their Target Shares for
the consideration specified below in this Section 2.

     (b) Purchase Price; Payment. The aggregate consideration for the Target Shares shall consist
of (i) a percentage payment calculated as a percentage of Target’s Sales, as described in
sub-section (ii) below; and (ii) a grant of Ultralife Shares as described in subsection (i) below
(together, the “Purchase Price”). On the terms and subject to the conditions set forth herein,
Buyer shall pay the Purchase Price to Sellers as follows:

          (i) At Closing, Buyer shall deliver to each Seller a certificate representing 50,000 Ultralife
Shares.

          (ii) Following the Closing, if Target achieves certain Sales targets during the Measuring
Periods, then Buyer shall deliver payments to Sellers as follows (the “Holdback Amount”):

          (A) Buyer shall deliver the Holdback Amount to Sellers, calculated at the rate of 5% of
Target’s Sales, up to the operating plan amount set by Buyer in consultation with Sellers
(“Plan Amount”) for the remainder of the calendar year following the Closing and for each of
the subsequent three calendar years.

6

 

          (B) Buyer shall deliver the Holdback Amount to Sellers, calculated at the rate of 10%
of the amount by which Target’s Sales exceed the Plan Amount for any of the following
calendar years: 2008, 2009 and 2010.

          (C) The following illustrates how the Holdback Amounts are earned. If the Plan Amount
is set at $5,000,000 for calendar year 2008 and Sales for 2008 are $6,000,000, the Holdback
Amount for 2008 would be calculated on 5% of $5,000,000, plus 10% on $1,000,000 for a total
of $350,000.

          (D) Any payments of Holdback Amounts due from Buyer to Sellers hereunder shall be made
by wire transfer of immediately available funds to such account or accounts as designated by
Sellers within 60 days of the conclusion of the applicable Measuring Period, so long as no
Seller has violated any terms of this Agreement or the Post-Closing Agreement. Buyer shall
distribute any Holdback Amounts paid pursuant to this Section equally to each Seller.

          (E) The following items shall be excluded from Sales for the purpose of calculating the
Holdback Amount pursuant to this Section: (i) Sales made to Buyer or its Subsidiaries
unless Buyer or any Buyer Subsidiary resells the products underlying such Sales to Target
customers in which event the Sales by Buyer or any Buyer Subsidiary shall be included in
Sales for purposes of calculating the Holdback Amount pursuant to this Section but shall
not be included in sales for Stationary Power Systems, Inc. (“SPS”) for purposes of
Section 2(b) of that certain Stock Purchase Agreement dated of even date herewith with
respect to Buyer’s acquisition of SPS, and (ii) any Sale where the gross margin of such Sale
is under 15% unless the average gross margin for all RPS Sales for that year equals or
exceeds the lesser of the gross margin set forth in the applicable operating plan or 25%,
unless otherwise agreed to by Buyer in its sole discretion.

     (c) Closing. The closing of the transactions contemplated by this Agreement (the “Closing”)
shall take place at the offices of Harter Secrest & Emery LLP, in Rochester, New York, commencing
at 10:00 a.m. local time on the second business day following the satisfaction or waiver of all
conditions to the obligations of the Parties to consummate the transactions contemplated hereby
(other than conditions with respect to actions the respective Parties will take at the Closing
itself) or such other date as Buyer and Sellers may mutually determine (the “Closing Date”);
provided, however, that the Closing Date shall be no later than November 30, 2007.

     (d) Deliveries at Closing. At the Closing, (i) Sellers will deliver to Buyer the various
certificates, instruments, and documents referred to in Section 7(a) below, (ii) Buyer will deliver
to Sellers the various certificates, instruments, and documents referred to in Section 7(b) below,
(iii) Sellers will deliver to Buyer stock certificates representing all of their Target Shares,
endorsed in blank or accompanied by duly executed assignment documents, and (iv) Buyer will deliver
to Sellers the consideration specified in Section 2(b) above.

7

 

SECTION 3. TRANSACTION REPRESENTATIONS AND WARRANTIES

     (a) Sellers’ Representations and Warranties. Each Seller represents and warrants to Buyer,
severally and not jointly, that the statements contained in this Section 3(a) are correct and
complete as of the date of this Agreement and will be correct and complete as of the Closing Date
(as though made then and as though the Closing Date were substituted for the date of this Agreement
throughout this Section 3(a)) with respect to himself, except as set forth in Annex I attached
hereto.

          (i) Authorization of Transaction. Seller has full power and authority to execute and deliver
this Agreement and to perform his obligations hereunder. This Agreement constitutes the valid and
legally binding obligation of Seller, enforceable in accordance with its terms and conditions.
Seller need not give any notice to, make any filing with, or obtain any authorization, consent, or
approval of any government or governmental agency in order to consummate the transactions
contemplated by this Agreement. The execution, delivery, and performance of this Agreement and all
other agreements contemplated hereby have been duly authorized by Seller.

          (ii) Non-contravention. Neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Seller is subject, (B) conflict with, result in
a breach of, constitute a default under, result in the acceleration of, create in any party the
right to accelerate, terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument, or other arrangement to which Seller is a party or by which
he is bound or to which any of his assets is subject, or (C) result in the imposition or creation
of a Lien upon or with respect to the Target Shares.

          (iii) Brokers’ Fees. Seller has no Liability or obligation to pay any fees or commissions to
any broker, finder, or agent with respect to the transactions contemplated by this Agreement.

          (iv) Target Shares. Seller holds of record and owns beneficially the number of Target Shares
set forth next to his name in Section 4(b) of the Disclosure Schedule, which constitute all of the
issued and outstanding Target Shares, free and clear of any restrictions on transfer (other than
any restrictions under the Securities Act and state securities laws), Taxes, Liens, options,
warrants, purchase rights, contracts, commitments, equities, claims, and demands. Seller is not a
party to any option, warrant, purchase right, or other contract or commitment that could require
Seller to sell, transfer, or otherwise dispose of any capital stock of Target (other than this
Agreement). Seller is not a party to any voting trust, proxy, or other agreement or understanding
with respect to the voting of any capital stock of Target.

          (v) Investment Representations for Ultralife Shares. Seller acknowledges that any Ultralife
Shares acquired by Seller pursuant to this Agreement shall be acquired by Seller for his own
account, for investment purposes only, and not with a view to or for distributing or reselling such
securities or any part thereof or interest therein. Seller, either alone or together with his
representatives, has such knowledge, sophistication and experience in business and

8

 

financial matters so as to be capable of evaluating the merits and risks of any investment by
him in Ultralife Shares, and has so evaluated the merits and risks of any such investment to his
satisfaction. As of the Closing Date, Seller shall be able to bear the economic risk of an
investment in the Ultralife Shares offered pursuant to this Agreement and shall be able to afford a
complete loss of any such investment. Seller acknowledges that at the time Seller was offered the
Ultralife Shares pursuant to this Agreement, Seller was and, at the date hereof, Seller is, and at
the Closing Date Seller will be, an “accredited investor” as defined in Rule 501 under the
Securities Act. Seller acknowledges that he has been afforded: (A) the opportunity to ask such
questions as he has deemed necessary of, and to receive answers from, representatives of Buyer
concerning the terms and conditions of the offer and sale of any Ultralife Shares offered pursuant
to this Agreement, and the merits and risks of investing in such securities; (B) access to
information about Buyer and Buyer’s financial condition, results of operations, business,
properties, management and prospects sufficient to enable Seller to evaluate his investment; and
(C) the opportunity to obtain such additional information that Buyer possesses or can acquire
without unreasonable effort or expense that is reasonably necessary to permit Seller to make an
informed investment decision with respect to any Ultralife Shares to be acquired by Seller pursuant
to this Agreement. Seller understands and acknowledges that any Ultralife Shares acquired by Seller
pursuant to this Agreement were offered and acquired by him without registration under the
Securities Act in a private transaction pursuant to the exemption from registration under Section 5
of the Securities Act provided by Section 4(2) of the Securities Act and that such securities are
and shall be “restricted securities” as defined in Rule 144 under the Securities Act and thus such
securities shall not be freely transferable by Seller. Seller understands and acknowledges that
except as set forth in Section 3(a)(vi) below, Buyer is not providing Seller with any registration
rights in connection with any Ultralife Shares offered pursuant to this Agreement. Seller
understands and acknowledges that Buyer shall rely on the accuracy and truthfulness of Seller’s
representations herein in order to avail of the exemption from registration under Section 5 of the
Securities Act provided by Section 4(2) of the Securities Act.

          (vi) Registration Rights. Buyer hereby grants Sellers piggyback registration rights as they
relate to any future Registration Statement and covenants to include, to the extent legally
permissible and subject to any limitations imposed by the underwriter or placement agent, if
applicable, Registrable Securities in such Registration Statement. If at any time prior to the
removal of restrictive legends pursuant to Rule 144(k)(a), Buyer proposes to register shares of
Common Stock under the Securities Act other than on Forms S-8, S-4 or any successor forms in
connection with a public offering of such shares for cash (a “Proposed Registration”) and (b) a
Registration Statement covering the resale of all of the Registrable Securities has not been
effective and available for sale thereof by Sellers, Buyer shall at such time promptly give Sellers
written notice of such Proposed Registration. Buyer shall use its best efforts to cause such
Registration Statement to cover the resale of the Registrable Securities, which have not otherwise
been registered or covered under a current effective Registration Statement, which Registration
Statement shall state that in accordance with Rule 416 promulgated under the Securities Act, such
Registration Statement also covers such indeterminate number of additional shares of Common Stock
as may become issuable upon stock splits, stock dividends or similar transactions. The Seller and
the Buyer shall enter into a separate Registration Rights Agreement, in substantially the form
attached hereto as Exhibit A, consistent with the provisions of this

9

 

Section 3(a)(vi), which Registration Rights Agreement shall contain customary representations
and warranties and provisions regarding indemnification and contribution.

     (b) Buyer’s Representations and Warranties. Buyer represents and warrants to Sellers that the
statements contained in this Section 3(b) are correct and complete as of the date of this Agreement
and will be correct and complete as of the Closing Date (as though made then and as though the
Closing Date were substituted for the date of this Agreement throughout this Section 3(b)), except
as set forth in Annex II attached hereto.

          (i) Organization of Buyer. Buyer is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Delaware.

          (ii) Authorization of Transaction. Buyer has full power and authority (including full
corporate or other entity power and authority) to execute and deliver this Agreement and to perform
its obligations hereunder. This Agreement constitutes the valid and legally binding obligation of
Buyer, enforceable in accordance with its terms and conditions. Buyer need not give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any government or
governmental agency in order to consummate the transactions contemplated by this Agreement. The
execution, delivery, and performance of this Agreement and all other agreements contemplated hereby
have been duly authorized by Buyer.

          (iii) Non-contravention. Neither the execution and the delivery of this Agreement, nor the
consummation of the transactions contemplated hereby, will (A) violate any constitution, statute,
regulation, rule, injunction, judgment, order, decree, ruling, charge, or other restriction of any
government, governmental agency, or court to which Buyer is subject or any provision of its
charter, bylaws, or other governing documents or (B) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under any agreement, contract,
lease, license, instrument, or other arrangement to which Buyer is a party or by which it is bound
or to which any of its assets is subject.

          (iv) Brokers’ Fees. Buyer has no Liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by this Agreement for which
any Seller could become liable or obligated.

          (v) Investment. Buyer is not acquiring the Target Shares with a view to or for sale in
connection with any distribution thereof within the meaning of the Securities Act.

          (vi) Access to Information. Buyer has such knowledge of the business and financial affairs of
the Target and possesses a sufficient degree of sophistication, knowledge and experience in
financial and business matters such that Buyer is capable of evaluating the information provided to
Buyer by Sellers and Target about Target’s business, including Target’s assets and liabilities, and
the economic risks of acquiring the Target Shares. Buyer acknowledges and agrees that Target and
Sellers make no further representations or warranties to Buyer regarding the Target or the Target
Shares, other than as set forth in this Agreement. Specifically, Buyer acknowledges and agrees,
that Target and Sellers give no assurances, representations or
warranties as to the continued viability of the Target as a going concern or otherwise or its
future profitability after Buyer’s purchase.

10

 

          (vii) Litigation; Judgments. There are no pending or threatened, suits, actions, grievances or
proceedings against or relating to Buyer, the business or any property or asset of the business of
Buyer that individually or in the aggregate could reasonably be expected to have a Material Adverse
Effect on Buyer’s ability to consummate the transactions contemplated by this Agreement. There is
no unsatisfied or outstanding judgment, decree, injunction, rule or order of any governmental
entity or arbitrator which (i) could reasonably be expected to have a Material Adverse Effect on
Buyer or the business of Buyer or (ii) seeks to enjoin or prohibit the consummation of the
transactions contemplated by this Agreement.

          (viii) Ultralife Shares. The Ultralife Shares, when issued pursuant to Section 2(b)(i), will
be duly authorized, validly issued, fully paid and non assessable shares of common stock of Buyer.
Upon delivery of such shares, Sellers will receive good and unencumbered title to such shares, free
and clear of all liens, restrictions, charges, encumbrances and other security interests of any
kind or nature whatsoever, except for any restrictions existing under applicable securities laws
and the restrictions imposed by this Agreement.

          (ix) Reports and Financial Statements. As of their respective dates, the periodic reports (the
“Reports”) filed by Buyer with the Securities and Exchange Commission (the “Commission”) under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”) complied or will comply in all
material respects with the then applicable published rules and regulations of the Commission with
respect thereto (including, without limitation, rules related to the financial statements included
therein) at the date of their issuance and did not or will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were made, not misleading.
Buyer has filed all reports and filings with the SEC required pursuant to the Securities Act or
1933 or the Exchange Act on a timely basis. Each such report or filing is true, correct and
complete in all material respects and does not contain any untrue statement of a material fact or
omit to state a material fact necessary to make the statements made, in light of the circumstances
under which they were made, not misleading.

SECTION 4. TARGET REPRESENTATIONS AND WARRANTIES

     Sellers jointly and severally represent and warrant to Buyer that the statements contained in
this Section 4 are correct and complete as of the date of this Agreement and will be correct and
complete as of the Closing Date (as though made then and as though the Closing Date were
substituted for the date of this Agreement throughout this Section 4), except as set forth in the
disclosure schedule delivered by Sellers to Buyer on the date hereof and initialed by the Parties
(the “Disclosure Schedule”). Nothing in the Disclosure Schedule shall be deemed adequate to
disclose an exception to a representation or warranty made herein, however, unless the Disclosure
Schedule identifies the exception with particularity and describes the relevant facts in detail.
Without limiting the generality of the foregoing, the mere listing (or inclusion of a copy) of a
document or other item shall not be deemed adequate to disclose an exception to a representation or
warranty made herein (unless the representation or warranty has to do with the

11

 

existence of the document or other item itself). The Disclosure Schedule will be arranged in
paragraphs corresponding to the lettered and numbered paragraphs contained in this Section 4.

     (a) Organization, Qualification, and Corporate Power. Target is a corporation duly organized,
validly existing, and in good standing under the laws of the State of Florida. Target is duly
authorized to conduct business and is in good standing under the laws of each jurisdiction where
such qualification is required. Target has full corporate power and authority and all licenses,
permits, and authorizations necessary to carry on the businesses in which it is engaged and in
which it presently proposes to engage and to own and use the properties owned and used by it.
Section 4(a) of the Disclosure Schedule lists the directors and officers of Target. Sellers have
delivered to Buyer correct and complete copies of the charter and bylaws of Target (as amended to
date). The minute books (containing the records of meetings of the stockholders, the board of
directors, and any committees of the board of directors), the stock certificate books, and the
stock record books of Target are correct and complete. Target is not in default under or in
violation of any provision of its charter or bylaws.

     (b) Capitalization. The entire authorized capital stock of Target consists of                     Target
Shares, of which                      Target Shares are issued and outstanding and no Target Shares are held
in treasury. All of the issued and outstanding Target Shares have been duly authorized, are validly
issued, fully paid, and non-assessable, and are held of record by the respective Seller as set
forth in Section 4(b) of the Disclosure Schedule. There are no outstanding or authorized options,
warrants, purchase rights, subscription rights, conversion rights, exchange rights, or other
contracts or commitments that could require Target to issue, sell, or otherwise cause to become
outstanding any of its capital stock. There are no outstanding or authorized stock appreciation,
phantom stock, profit participation, or similar rights with respect to Target. There are no voting
trusts, proxies, or other agreements or understandings with respect to the voting of the capital
stock of Target.

     (c) Non-contravention. Except as set forth on Section 4(c) of the Disclosure Schedule, neither
the execution and the delivery of this Agreement, nor the consummation of the transactions
contemplated hereby, will (i) violate any constitution, statute, regulation, rule, injunction,
judgment, order, decree, ruling, charge, or other restriction of any government, governmental
agency, or court to which Target is subject or any provision of the charter or bylaws of Target or
(ii) conflict with, result in a breach of, constitute a default under, result in the acceleration
of, create in any party the right to accelerate, terminate, modify, or cancel, or require any
notice under any agreement, contract, lease, license, instrument, or other arrangement to which
Target is a party or by which it is bound or to which any of its assets is subject (or result in
the imposition of any Lien upon any of its assets). Target does not need to give any notice to,
make any filing with, or obtain any authorization, consent, or approval of any government or
governmental agency in order for the Parties to consummate the transactions contemplated by this
Agreement.

     (d) Brokers’ Fees. Target has no Liability or obligation to pay any fees or commissions to any
broker, finder, or agent with respect to the transactions contemplated by this Agreement.

12

 

     (e) Title to Assets. Except as set forth on Section 4(e) of the Disclosure Schedule, Target
has good and marketable title to, or a valid leasehold interest in, the properties and assets used
by Target, located on its premises, or shown on the Most Recent Balance Sheet or acquired after the
date thereof, free and clear of all Liens, except for properties and assets disposed of in the
Ordinary Course of Business since the date of the Most Recent Balance Sheet.

     (f) Subsidiaries. Target has no Subsidiaries.

     (g) Financial Statements. Attached hereto as Exhibit B are the following financial
statements (collectively the “Financial Statements”): (i) an audited balance sheet and statements
of income, changes in stockholders’ equity, and cash flow as of and for the fiscal year ended
December 31, 2006 (the “Most Recent Fiscal Year End”) for Target; and (ii) an unaudited balance
sheet and statements of income, changes in stockholders’ equity, and cash flow (the “Most Recent
Financial Statements”) as of and for the six months ended June 30, 2007 (the “Most Recent Fiscal
Month End”) for Target. The Financial Statements have been prepared from Target’s books and
records, are true, correct and complete in all material respects, are consistent with Target’s
books and records applied on a consistent basis throughout the periods covered thereby, present
fairly the financial condition of Target as of such dates and the results of operations of Target
for such periods, are correct and complete, and are consistent with the books and records of Target
(which books and records are correct and complete).

     (h) Events Subsequent to Most Recent Fiscal Year End. Except as set forth on Section 4(h) of
the Disclosure Schedule, since the Most Recent Fiscal Year End, there has not been any Material
Adverse Change. Without limiting the generality of the foregoing, since that date:

          (i) Target has not sold, leased, transferred, or assigned any of its assets, tangible or
intangible, other than for a fair consideration in the Ordinary Course of Business;

          (ii) Target has not entered into any agreement, contract, lease, or license (or series of
related agreements, contracts, leases, and licenses) either involving more than $10,000 or outside
the Ordinary Course of Business;

          (iii) no party (including Target) has accelerated, terminated, modified, or cancelled any
agreement, contract, lease, or license (or series of related agreements, contracts, leases, and
licenses) involving more than $10,000 to which Target is a party or by which Target is bound;

          (iv) Target has not imposed any Liens upon any of its assets, tangible or intangible;

          (v) Except as set forth on Section 4(h)(v) of the Disclosure Schedule, Target has not made any
capital expenditure (or series of related capital expenditures) either involving more than $10,000
or outside the Ordinary Course of Business;

          (vi) Target has not made any capital investment in, any loan to, or any acquisition of the
securities or assets of, any other Person (or series of related capital

13

 

investments, loans, and acquisitions) either involving more than $10,000 or outside the
Ordinary Course of Business;

          (vii) Except as set forth on Section 4(h)(vii) of the Disclosure Schedule, Target has not
issued any note, bond, or other debt security or created, incurred, assumed, or guaranteed any
indebtedness for borrowed money or capitalized lease obligation either involving more than $5,000
singly or $10,000 in the aggregate;

          (viii) Target has not delayed or postponed the payment of accounts payable and other
Liabilities outside the Ordinary Course of Business;

          (ix) Target has not cancelled, compromised, waived, or released any right or claim (or series
of related rights and claims) either involving more than $10,000 or outside the Ordinary Course of
Business;

          (x) Target has not transferred, assigned, or granted any license or sublicense of any rights
under or with respect to any Intellectual Property;

          (xi) there has been no change made or authorized in the charter or bylaws of Target;

          (xii) Except as set forth on Section 4(h)(xii) of the Disclosure Schedule, Target has not
issued, sold, or otherwise disposed of any of its capital stock, or granted any options, warrants,
or other rights to purchase or obtain (including upon conversion, exchange, or exercise) any of its
capital stock;

          (xiii) Target has not declared, set aside, or paid any dividend or made any distribution with
respect to its capital stock (whether in cash or in kind) or redeemed, purchased, or otherwise
acquired any of its capital stock;

          (xiv) Target has not experienced any damage, destruction, or loss (whether or not covered by
insurance) to its property;

          (xv) Target has not made any loan to, or entered into any other transaction with, any of its
directors, officers, and employees outside the Ordinary Course of Business;

          (xvi) Target has not entered into any employment contract or collective bargaining agreement,
written or oral, or modified the terms of any existing such contract or agreement;

          (xvii) Target has not granted any increase in the base compensation of any of its directors,
officers, and employees outside the Ordinary Course of Business;

          (xviii) Target has not adopted, amended, modified, or terminated any bonus, profit sharing,
incentive, severance, or other plan, contract, or commitment for the benefit of any of its
directors, officers, and employees (or taken any such action with respect to any other Employee
Benefit Plan);

14

 

          (xix) Target has not made any other change in employment terms for any of its directors,
officers, and employees outside the Ordinary Course of Business;

          (xx) Target has not made or pledged to make any charitable or other capital contribution
outside the Ordinary Course of Business;

          (xxi) there has not been any other material occurrence, event, incident, action, failure to
act, or transaction outside the Ordinary Course of Business involving Target;

          (xxii) Target has not discharged a material Liability or Lien outside the Ordinary Course of
Business;

          (xxiii) Target has not made any loans or advances of money;

          (xxiv) Target has not disclosed any Confidential Information; and

          (xxv) Target has not committed to any of the foregoing.

     (i) Undisclosed Liabilities. Target has no Liability (and there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of them giving rise to any Liability), except for (i) Liabilities set forth on the face
of the Most Recent Balance Sheet (rather than in any notes thereto) and (ii) Liabilities which have
arisen after the Most Recent Fiscal Month End in the Ordinary Course of Business (none of which
results from, arises out of, relates to, is in the nature of, or was caused by any breach of
contract, breach of warranty, tort, infringement, or violation of law).

     (j) Legal Compliance. Target and its predecessors and Affiliates, if any, have complied with
all applicable laws (including rules, regulations, codes, plans, injunctions, judgments, orders,
decrees, rulings, and charges thereunder and including the Foreign Corrupt Practices Act, 15 U.S.C.
78dd-1 et seq.) of federal, state, local, and foreign governments (and all agencies thereof), and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim, demand, or notice
has been filed or commenced against any of them alleging any failure so to comply except where the
failure to comply would not have a Material Adverse Effect..

     (k) Tax Matters.

          (i) Target (and any predecessor of Target) has been a validly electing S corporation within
the meaning of Code Section 1361 and Section 1362 at all times during its existence and Target will
be an S corporation up to and including the Closing Date.

          (ii) Target has no potential liability for any Tax under Code Section 1374. Target has not,
in the past 10 years, (A) acquired assets from another corporation in a transaction in which
Target’s Tax basis for the acquired assets was determined, in whole or in part, by reference to the
Tax basis of the acquired assets (or any other property) in the hands of the transferor or (B)
acquired the stock of any corporation that is a qualified subchapter S subsidiary.

          (iii) Target has filed all Tax Returns that it was required to file under applicable laws and
regulations. All such Tax Returns were correct and complete in all respects

15

 

and have been prepared in substantial compliance with all applicable laws and regulations. All
Taxes due and owing by Target (whether or not shown on any Tax Return) have been paid. Target
currently is not the beneficiary of any extension of time within which to file any Tax Return. No
claim has ever been made by an authority in a jurisdiction where Target does not file Tax Returns
that it is or may be subject to taxation by that jurisdiction. There are no Liens for Taxes (other
than Taxes not yet due and payable) upon any of the assets of Target.

          (iv) Target has withheld and paid all Taxes required to have been withheld and paid in
connection with any amounts paid or owing to any employee, independent contractor, creditor,
stockholder, or other third party.

          (v) No Seller or director or officer (or employee responsible for Tax matters) of Target
expects any authority to assess any additional Taxes for any period for which Tax Returns have been
filed. No foreign, federal, state, or local tax audits or administrative or judicial Tax
proceedings are pending or being conducted with respect to Target. Target has not received from any
foreign, federal, state, or local taxing authority (including jurisdictions where Target has not
filed Tax Returns) any (i) notice indicating an intent to open an audit or other review, (ii)
request for information related to Tax matters, or (iii) notice of deficiency or proposed
adjustment for any amount of Tax proposed, asserted, or assessed by any taxing authority against
Target; Disclosure Schedule lists all federal, state, local, and foreign income Tax Returns filed
with respect to Target for taxable periods ended on or after December 31, 2003, indicates those Tax
Returns that have been audited, and indicates those Tax Returns that currently are the subject of
audit. Sellers have delivered to Buyer correct and complete copies of all federal income Tax
Returns, examination reports, and statements of deficiencies assessed against or agreed to by
Target filed or received since December 31, 2003.

          (vi) Target has not waived any statute of limitations in respect of Taxes or agreed to any
extension of time with respect to a Tax assessment or deficiency.

          (vii) Target is not a party to any agreement, contract, arrangement or plan that has resulted
or would result, separately or in the aggregate, in the payment of (i) any “excess parachute
payment” within the meaning of Code Section 280G (or any corresponding provision of state, local or
foreign Tax law) and (ii) any amount that will not be fully deductible as a result of Code 162(m)
(or any corresponding provision of state, local or foreign Tax law). Target has not been a United
States real property holding corporation within the meaning of Code Section 897(c)(2) during the
applicable period specified in Code Section 897(c)(1)(A)(ii). Target has disclosed on its federal
income Tax Returns all positions taken therein that could give rise to a substantial understatement
of federal income Tax within the meaning of Code Section 6662. Target is not a party to or bound by
any Tax allocation or sharing agreement. Target (A) has not been a member of an Affiliated Group
filing a consolidated federal income Tax Return (other than a group the common parent of which was
Target) or (B) has no Liability for the Taxes of any Person (other than Target) under Reg. Section
1.1502-6 (or any similar provision of state, local, or foreign law), as a transferee or successor,
by contract, or otherwise.

          (viii) The unpaid Taxes of Target (A) did not, as of the Most Recent Fiscal Month End, exceed
the reserve for Tax Liability (rather than any reserve for deferred Taxes established to reflect
timing differences between book and Tax income) set forth on the face of

16

 

the Most Recent Balance Sheet (rather than in any notes thereto) and (B) do not exceed that
reserve as adjusted for the passage of time through the Closing Date in accordance with the past
custom and practice of Target in filing their Tax Returns. Since the date of the Most Recent
Balance Sheet, Target has not incurred any liability for Taxes arising from extraordinary gains or
losses, as that term is used in GAAP, outside the Ordinary Course of Business consistent with past
custom and practice.

          (ix) Target will not be required to include any item of income in, or exclude any item of
deduction from, taxable income for any taxable period (or portion thereof) ending after the Closing
Date as a result of any: (A) change in method of accounting for a taxable period ending on or prior
to the Closing Date; (B) “closing agreement” as described in Code Section 7121 (or any
corresponding or similar provision of state, local or foreign income Tax law) executed on or prior
to the Closing Date; (C) intercompany transactions or any excess loss account described in Treasury
Regulations under Code Section 1502 (or any corresponding or similar provision of state, local or
foreign income Tax law); (D) installment sale or open transaction disposition made on or prior to
the Closing Date; or (E) prepaid amount received on or prior to the Closing Date.

          (x) Target has not distributed stock of another Person, or has had its stock distributed by
another Person, in a transaction that was purported or intended to be governed in whole or in part
by Code Section 355 or Section 361.

          (xi) Target has not, since October 3, 2004, (A) granted to any person an interest in a
nonqualified deferred compensation plan (as defined in Code Section 409A) which interest has been
or, upon the lapse of a substantial risk of forfeiture with respect to such interest, will be
subject to the Tax imposed by Code Section 409A, or (B) modified the terms of any nonqualified
deferred compensation plan in a manner that could cause an interest previously granted under such
plan to become subject to the Tax imposed by Code Section 409A. No person has a right to be
indemnified by Target for any Tax imposed by Code Section 409A.

     (l) Real Property.

          (i) Except as set forth on Section 4(l)(i) of the Disclosure Schedule, Target does not own any
Real Property.

          (ii) Section 4(l)(ii) of the Disclosure Schedule sets forth the address of each parcel of
Leased Real Property, and a true and complete list of all Leases for each such Leased Real Property
(including the date and name of the parties to such Lease document). Target has delivered to Buyer
a true and complete copy of each such Lease document, and in the case of any oral Lease, a written
summary of the material terms of such Lease. Except as set forth in Section 4(l)(ii) of the
Disclosure Schedule, with respect to each of the Leases:

          (A) such Lease is legal, valid, binding, enforceable and in full force and effect;

          (B) the transaction contemplated by this Agreement does not require the consent of any
other party to such Lease (except for those Leases for which Lease Consents (as hereinafter
defined) are obtained), will not result in a breach of or default

17

 

under such Lease, and will not otherwise cause such Lease to cease to be legal, valid,
binding, enforceable and in full force and effect on identical terms following the Closing;

          (C) Target’s possession and quiet enjoyment of the Leased Real Property under such
Lease has not been disturbed and there are no disputes with respect to such Lease;

          (D) neither Target nor any other party to the Lease is in breach or default under such
Lease, and no event has occurred or circumstance exists which, with the delivery of notice,
the passage of time or both, would constitute such a breach or default, or permit the
termination, modification or acceleration of rent under such Lease;

          (E) no security deposit or portion thereof deposited with respect to such Lease has
been applied in respect of a breach or default under such Lease which has not been
redeposited in full;

          (F) Target neither owes or will owe in the future any brokerage commissions or finder’s
fees with respect to such Lease;

          (G) the other party to such Lease is not an Affiliate of, and otherwise does not have
any economic interest in, Target;

          (H) Target has not subleased, licensed or otherwise granted any Person the right to use
or occupy such Leased Real Property or any portion thereof;

          (I) Target has not collaterally assigned or granted any other Lien in such Lease or any
interest therein; and

          (J) there are no Liens on the estate or interest created by such Lease.

          (iii) The Leased Real Property identified in Section 4(l)(ii) of the Disclosure Schedule
(collectively, the “Real Property”), comprises all of the real property used or intended to be used
in, or otherwise related to, Target’s business; and Target is not a party to any agreement or
option to purchase any real property or interest therein.

          (iv) All buildings, structures, fixtures, building systems and equipment, and all components
thereof, including the roof, foundation, load-bearing walls and other structural elements thereof,
heating, ventilation, air conditioning, mechanical, electrical, plumbing and other building
systems, environmental control, remediation and abatement systems, sewer, storm and waste water
systems, irrigation and other water distribution systems, parking facilities, fire protection,
security and surveillance systems, and telecommunications, computer, wiring and cable
installations, included in the Real Property (the “Improvements”) are in good condition and repair
and sufficient for the operation of Target’s business. There are no structural deficiencies or
latent defects affecting any of the Improvements and there are no facts or conditions affecting any
of the Improvements which would, individually or in the aggregate, interfere in any respect with
the use or occupancy of the Improvements or any portion thereof in the operation of Target’s
business as currently conducted thereon.

18

 

          (v) There is no condemnation, expropriation or other proceeding in eminent domain, pending or
threatened, affecting any parcel of Real Property or any portion thereof or interest therein. There
is no injunction, decree, order, writ or judgment outstanding, nor any claims, litigation,
administrative actions or similar proceedings, pending or threatened, relating to the ownership,
lease, use or occupancy of the Real Property or any portion thereof, or the operation of Target’s
business as currently conducted thereon.

          (vi) The Real Property is in compliance with all applicable building, zoning, subdivision,
health and safety and other land use laws, including the Americans with Disabilities Act of 1990,
as amended, and all insurance requirements affecting the Real Property (collectively, the “Real
Property Laws”), and the current use and occupancy of the Real Property and operation of Target’s
business thereon does not violate any Real Property Laws. Target has not received any notice of
violation of any Real Property Law and there is no basis for the issuance of any such notice or the
taking of any action for such violation. There is no pending or anticipated change in any Real
Property Law that will materially impair the ownership, lease, use or occupancy of any Real
Property or any portion thereof in the continued operation of Target’s business as currently
conducted thereon.

          (vii) Each parcel of Real Property has direct vehicular and pedestrian access to a public
street adjoining the Real Property, or has vehicular and pedestrian access to a public street via
an insurable, permanent, irrevocable and appurtenant easement benefiting such parcel of Real
Property, and such access is not dependent on any land or other real property interest which is not
included in the Real Property. None of the Improvements or any portion thereof is dependent for its
access, use or operation on any land, building, improvement or other real property interest which
is not included in the Real Property.

          (viii) All water, oil, gas, electrical, steam, compressed air, telecommunications, sewer,
storm and waste water systems and other utility services or systems for the Real Property have been
installed and are operational and sufficient for the operation of Target’s business as currently
conducted thereon. Each such utility service enters the Real Property from an adjoining public
street or valid private easement in favor of the supplier of such utility service or appurtenant to
such Real Property, and is not dependent for its access, use or operation on any land, building,
improvement or other real property interest which is not included in the Real Property.

          (ix) All certificates of occupancy, permits, licenses, franchises, approvals and
authorizations (collectively, the “Real Property Permits”) of all governmental authorities, boards
of fire underwriters, associations or any other entity having jurisdiction over the Real Property
which are required or appropriate to use or occupy the Real Property or operate Target’s business
as currently conducted thereon, have been issued and are in full force and effect. Section 4(l)(ix)
of the Disclosure Schedule lists all material Real Property Permits held by Target with respect to
each parcel of Real Property. Target has delivered to Buyer a true and complete copy of all Real
Property Permits. Target has not received any notice from any governmental authority or other
entity having jurisdiction over the Real Property threatening a suspension, revocation,
modification or cancellation of any Real Property Permit and there is no basis for the issuance of
any such notice or the taking of any such action. The Real Property Permits are transferable to
Buyer without the consent or approval of the issuing governmental authority or entity, no

19

 

disclosure, filing or other action by Target is required in connection with such transfer, and
Buyer shall not be required to assume any additional liabilities or obligations under the Real
Property Permits as a result of such transfer.

          (x) The classification of each parcel of Real Property under applicable zoning laws,
ordinances and regulations permits the use and occupancy of such parcel and the operation of
Target’s business as currently conducted thereon, and permits the Improvements located thereon as
currently constructed, used and occupied. There are sufficient parking spaces, loading docks and
other facilities at such parcel to comply with such zoning laws, ordinances and regulations.
Target’s use or occupancy of the Real Property or any portion thereof or the operation of Target’s
business as currently conducted thereon is not dependent on a “permitted non-conforming use” or
“permitted non-conforming structure” or similar variance, exemption or approval from any
governmental authority.

          (xi) The current use and occupancy of the Real Property and the operation of Target’s business
as currently conducted thereon does not violate any easement, covenant, condition, restriction or
similar provision in any instrument of record or other unrecorded agreement affecting such Real
Property (the “Encumbrance Documents”). Neither Sellers nor Target has received any notice of
violation of any Encumbrance Documents, and there is no basis for the issuance of any such notice
or the taking of any action for such violation.

          (xii) None of the Improvements encroach on any land which is not included in the Real Property
or on any easement affecting such Real Property, or violate any building lines or set-back lines,
and there are no encroachments onto any of the Real Property, or any portion thereof, which
encroachment would interfere with the use or occupancy of such Real Property or the continued
operation of Target’s business as currently conducted thereon.

          (xiii) Each parcel of Real Property is a separate lot for real estate tax and assessment
purposes, and no other real property is included in such tax parcel. There are no Taxes,
assessments, fees, charges or similar costs or expenses imposed by any governmental authority,
association or other entity having jurisdiction over the Real Property (collectively, the “Real
Estate Impositions”) with respect to any Real Property or portion thereof which are delinquent.
There is no pending or threatened increase or special assessment or reassessment of any Real Estate
Impositions for such parcel.

          (xiv) None of the Real Property or any portion thereof is located in a flood hazard area (as
defined by the Federal Emergency Management Agency).

     (m) Intellectual Property.

          (i) Target owns and possesses or has the right to use pursuant to a valid and enforceable,
written license, sublicense, agreement, or permission all Intellectual Property necessary or
desirable for the operation of the businesses of Target as presently conducted and as presently
proposed to be conducted. Each item of Intellectual Property owned or used by Target immediately
prior to the Closing hereunder will be owned or available for use by Target on identical terms and
conditions immediately subsequent to the Closing hereunder. Target has

20

 

taken all necessary and desirable action to maintain and protect each item of Intellectual
Property that Target owns or uses.

          (ii) Target has not interfered with, infringed upon, misappropriated, or otherwise come into
conflict with any Intellectual Property rights of third parties, and none of Sellers and the
directors and officers (and employees with responsibility for Intellectual Property matters) of
Target has ever received any charge, complaint, claim, demand, or notice alleging any such
interference, infringement, misappropriation, or violation (including any claim that Target must
license or refrain from using any Intellectual Property rights of any third party). To the
Knowledge of any Seller and the directors and officers (and employees with responsibility for
Intellectual Property matters) of Target, no third party has interfered with, infringed upon,
misappropriated, or otherwise come into conflict with any Intellectual Property rights of Target.

          (iii) Section 4(m)(iii) of the Disclosure Schedule identifies each patent or registration that
has been issued to Target with respect to any of its Intellectual Property, identifies each pending
patent application or application for registration which Target has made with respect to any of its
Intellectual Property, and identifies each license, sublicense, agreement, or other permission
which Target has granted to any third party with respect to any of its Intellectual Property
(together with any exceptions). Sellers have delivered to Buyer correct and complete copies of all
such patents, registrations, applications, licenses, sublicenses, agreements, and permissions (as
amended to date). Section 4(m)(iii) of the Disclosure Schedule also identifies each material
unregistered trademark, service mark, trade name, corporate name or Internet domain name, computer
software item (other than commercially available off-the-shelf software purchased or licensed for
less than a total cost of $1,000 in the aggregate) and each material unregistered copyright used by
Target in connection with any of its businesses. With respect to each item of Intellectual Property
required to be identified in Section 4(m)(iii) of the Disclosure Schedule:

          (A) Target owns and possesses all right, title, and interest in and to the item, free
and clear of any Lien, license, or other restriction or limitation regarding use or
disclosure;

          (B) the item is not subject to any outstanding injunction, judgment, order, decree,
ruling, or charge;

          (C) no action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand is pending or, to the Knowledge of any Seller and the directors and officers (and
employees with responsibility for Intellectual Property matters) of Target, is threatened
which challenges the legality, validity, enforceability, use, or ownership of the item, and
there are no grounds for the same;

          (D) Target has never agreed to indemnify any Person for or against any interference,
infringement, misappropriation, or other conflict with respect to the item; and

          (E) no loss or expiration of the item is threatened, pending, or reasonably
foreseeable, except for patents expiring at the end of their statutory terms (and

21

 

not as a result of any act or omission by Sellers or Target, including without
limitation, a failure by Sellers or Target to pay any required maintenance fees).

          (iv) Section 4(m)(iv) of the Disclosure Schedule identifies each item of Intellectual Property
that any third party owns and that Target uses pursuant to license, sublicense, agreement, or
permission. Sellers have delivered to Buyer correct and complete copies of all such licenses,
sublicenses, agreements, and permissions (as amended to date). With respect to each item of
Intellectual Property required to be identified in Section 4(m)(iv) of the Disclosure Schedule:

          (A) the license, sublicense, agreement, or permission covering the item is legal,
valid, binding, enforceable, and in full force and effect;

          (B) the license, sublicense, agreement, or permission will continue to be legal, valid,
binding, enforceable, and in full force and effect on identical terms following consummation
of the transactions contemplated hereby;

          (C) no party to the license, sublicense, agreement, or permission is in breach or
default, and no event has occurred which with notice or lapse of time would constitute a
breach or default or permit termination, modification, or acceleration thereunder;

          (D) no party to the license, sublicense, agreement, or permission has repudiated any
provision thereof;

          (E) with respect to each sublicense, the representations and warranties set forth in
subsections (A) through (D) above are true and correct with respect to the underlying
license;

          (F) the underlying item of Intellectual Property is not subject to any outstanding
injunction, judgment, order, decree, ruling, or charge;

          (G) no action, suit, proceeding, hearing, investigation, charge, complaint, claim, or
demand is pending or, to the Knowledge of any Seller and the directors and officers (and
employees with responsibility for Intellectual Property matters) of Target, is threatened
that challenges the legality, validity, or enforceability of the underlying item of
Intellectual Property, and there are no grounds for the same; and

          (H) Target has not granted any sublicense or similar right with respect to the license,
sublicense, agreement, or permission.

          (v) To the Knowledge of any Seller and the directors and officers (and employees with
responsibility for Intellectual Property matters) of Target: (A) Target has not in the past nor
will interfere with, infringe upon, misappropriate, or otherwise come into conflict with, any
Intellectual Property rights of third parties as a result of the continued operation of its
businesses as presently conducted; (B) there are no facts that indicate a likelihood of any of the
foregoing; and (C) no notices regarding any of the foregoing (including, without limitation, any
demands or offers to license any Intellectual Property from any third party) have been received.

22

 

          (vi) Sellers have taken all necessary and desirable action to maintain and protect all of the
Intellectual Property of Target and will continue to maintain and protect all of the Intellectual
Property of Target prior to Closing so as not to adversely affect the validity or enforceability
thereof. To the Knowledge of any Seller, the owners of any of the Intellectual Property licensed to
Target have taken all necessary and desirable action to maintain and protect the Intellectual
Property covered by such license.

          (vii) Sellers have complied in all material respects with and are presently in compliance in
all material respects with all foreign, federal, state, local, governmental (including, but not
limited to, the Federal Trade Commission and State Attorneys General), administrative or regulatory
laws, regulations, guidelines and rules applicable to any Intellectual Property and Sellers shall
take all steps necessary to ensure such compliance until Closing.

     (n) Tangible Assets. Target owns or leases all buildings, machinery, equipment, and other
tangible assets necessary for the conduct of their businesses as presently conducted and as
presently proposed to be conducted. Each such tangible asset is free from defects (patent and
latent), has been maintained in accordance with normal industry practice, is in good operating
condition and repair (subject to normal wear and tear), and is suitable for the purposes for which
it presently is used and presently is proposed to be used.

     (o) Inventory. The inventory of Target consists of raw materials and supplies, manufactured
and purchased parts, goods in process, and finished goods, all of which is merchantable and fit for
the purpose for which it was procured or manufactured, and none of which is slow-moving, obsolete,
damaged, or defective, subject only to the reserve for inventory writedown set forth on the face of
the Most Recent Balance Sheet (rather than in any notes thereto) as adjusted for the passage of
time through the Closing Date in accordance with the past custom and practice of Target.

     (p) Contracts. Section 4(p) of the Disclosure Schedule lists the following contracts and other
agreements to which Target is a party:

          (i) any agreement (or group of related agreements) for the lease of personal property to or
from any Person regardless of amount;

          (ii) any agreement (or group of related agreements) for the purchase or sale of raw materials,
commodities, supplies, products, or other personal property, or for the furnishing or receipt of
services, the performance of which will extend over a period of more than one year, result in a
loss to Target, or involve consideration in excess of $10,000;

          (iii) any agreement concerning a partnership or joint venture;

          (iv) any agreement (or group of related agreements) under which it has created, incurred,
assumed, or guaranteed any indebtedness for borrowed money, or any capitalized lease obligation;

          (v) any agreement concerning confidentiality or non-competition;

23

 

          (vi) any agreement with any Seller and any of Sellers’ Affiliates (other than Target);

          (vii) any profit sharing, stock option, stock purchase, stock appreciation, deferred
compensation, severance, or other plan or arrangement for the benefit of its current or former
directors, officers, and employees;

          (viii) any collective bargaining agreement;

          (ix) any agreement for the employment of any individual on a full-time, part-time, consulting,
or other basis providing annual compensation in excess of $10,000 or providing severance benefits;

          (x) any agreement under which it has advanced or loaned any amount to any of its directors,
officers, and employees outside the Ordinary Course of Business;

          (xi) any agreement under which the consequences of a default or termination could have a
Material Adverse Effect;

          (xii) any agreement under which it has granted any Person any registration rights (including,
without limitation, demand and piggyback registration rights);

          (xiii) any agreement under which Target has advanced or loaned any other Person any amounts;
or

          (xiv) any other agreement (or group of related agreements) the performance of which involves
consideration in excess of $10,000.

Sellers have delivered to Buyer a correct and complete copy of each written agreement (as amended
to date) listed in Section 4(p) of the Disclosure Schedule and a written summary setting forth the
terms and conditions of each oral agreement referred to in Section 4(p) of the Disclosure Schedule.
With respect to each such agreement: (A) the agreement is legal, valid, binding, enforceable, and
in full force and effect; (B) the agreement will continue to be legal, valid, binding, enforceable,
and in full force and effect on identical terms following the consummation of the transactions
contemplated hereby; (C) no party is in breach or default, and no event has occurred which with
notice or lapse of time would constitute a breach or default, or permit termination, modification,
or acceleration, under the agreement; and (D) no party has repudiated any provision of the
agreement.

     (q) Notes and Accounts Receivable. All notes and accounts receivable of Target are reflected
properly on their books and records, are valid receivables subject to no setoffs or counterclaims,
are current and collectible, and will be collected in accordance with their terms at their recorded
amounts, subject only to the reserve for bad debts set forth on the face of the Most Recent Balance
Sheet (rather than in any notes thereto) as adjusted for the passage of time through the Closing
Date in accordance with the past custom and practice of Target. All accounts receivable collected
by Buyer shall be applied on a first in, first out basis. Buyer shall continue Target’s customary
collection practices following Closing and shall provide Sellers with all normal and customary
information relating to the accounts receivable that were in

24

 

existence on the Closing Date, including all normal aging reports, following the Closing. Any
accounts receivable determined by Buyer to be uncollectible shall be reassigned to Sellers,
subject, however, to Buyer’s indemnification rights hereunder.

     (r) Powers of Attorney. There are no outstanding powers of attorney executed on behalf of
Target.

     (s) Insurance. Section 4(s) of the Disclosure Schedule sets forth the following information
with respect to each insurance policy (including policies providing property, casualty, liability,
and workers’ compensation coverage and bond and surety arrangements) to which Target has been a
party, a named insured, or otherwise the beneficiary of coverage at any time within the past 10
years:

          (i) the name, address, and telephone number of the agent;

          (ii) the name of the insurer, the name of the policyholder, and the name of each covered
insured;

          (iii) the policy number and the period of coverage;

          (iv) the scope (including an indication of whether the coverage was on a claims made,
occurrence, or other basis) and amount (including a description of how deductibles and ceilings are
calculated and operate) of coverage; and

          (v) a description of any retroactive premium adjustments or other loss-sharing arrangements.

With respect to each such insurance policy: (A) the policy is legal, valid, binding, enforceable,
and in full force and effect; (B) the policy will continue to be legal, valid, binding,
enforceable, and in full force and effect on identical terms following the consummation of the
transaction contemplated hereby; (C) neither Target nor any other party to the policy is in breach
or default (including with respect to the payment of premiums or the giving of notices), and no
event has occurred which, with notice or the lapse of time, would constitute such a breach or
default, or permit termination, modification, or acceleration, under the policy; and (D) no party
to the policy has repudiated any provision thereof. Target has been covered during the past 10
years by insurance in scope and amount customary and reasonable for the businesses in which they
have engaged during the aforementioned period. Section 4(s) of the Disclosure Schedule describes
any self-insurance arrangements affecting Target.

     (t) Litigation. Section 4(t) of the Disclosure Schedule sets forth each instance in which
Target (i) is subject to any outstanding injunction, judgment, order, decree, ruling, or charge or
(ii) is a party or, to the Knowledge of any Seller and the directors and officers (and employees
with responsibility for litigation matters) of Target, is threatened to be made a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any court or quasi-judicial
or administrative agency of any federal, state, local, or foreign jurisdiction or before any
arbitrator. None of the actions, suits, proceedings, hearings, and investigations set forth in
Section 4(t) of the Disclosure Schedule could result in any Material Adverse Change. None of Seller
and the directors and officers (and employees with responsibility for litigation matters) of

25

 

Target has any reason to believe that any such action, suit, proceeding, hearing, or
investigation may be brought or threatened against Target or that there is any Basis for the
foregoing.

     (u) Product Warranty. Each product manufactured, sold, leased, or delivered by Target has been
in conformity with all applicable contractual commitments and all express and implied warranties,
and Target has no Liability (and there is no Basis for any present or future action, suit,
proceeding, hearing, investigation, charge, complaint, claim, or demand against any of them giving
rise to any Liability) for replacement or repair thereof or other damages in connection therewith,
subject only to the reserve for product warranty claims set forth on the face of the Most Recent
Balance Sheet (rather than in any notes thereto) as adjusted for the passage of time through the
Closing Date in accordance with the past custom and practice of Target. Section 4(u) of the
Disclosure Schedule includes copies of the standard terms and conditions of sale or lease for
Target (containing applicable guaranty, warranty, and indemnity provisions). No product
manufactured, sold, leased, or delivered by Target is subject to any guaranty, warranty, or other
indemnity beyond the applicable standard terms and conditions of sale or lease set forth in Section
4(u) of the Disclosure Schedule.

     (v) Product Liability. Target has no Liability (and there is no Basis for any present or
future action, suit, proceeding, hearing, investigation, charge, complaint, claim, or demand
against any of them giving rise to any Liability) arising out of any injury to individuals or
property as a result of the ownership, possession, or use of any product manufactured, sold,
leased, or delivered by Target.

     (w) Employees. Except as set forth on Section 4(w) of the Disclosure Schedule, to the
Knowledge of Sellers and the directors and officers (and employees with responsibility for
employment matters) of Target, no executive, key employee, or group of employees has any plans to
terminate employment with Target. Target is not a party to or bound by any collective bargaining
agreement, nor has Target experienced any strikes, grievances, claims of unfair labor practices, or
other collective bargaining disputes. Target has not committed any unfair labor practice. None of
Sellers and the directors and officers (and employees with responsibility for employment matters)
of Target has any Knowledge of any organizational effort presently being made or threatened by or
on behalf of any labor union with respect to employees of Target.

     (x) Employee Benefits. Target does not have any employee benefit plans and collective
bargaining, employment or severance agreements or other similar arrangements which Target, or any
ERISA Affiliate, has ever sponsored, maintained, or to which contributions are made or have ever
been made, or for which obligations have been incurred, for the benefit of employees or former
employees of Target or an ERISA Affiliate, including, without limitation, (1) any “employee benefit
plan” (within the meaning of Section 3(3) of ERISA), (2) any profit-sharing, deferred compensation,
bonus, stock option, stock purchase, pension, retainer, consulting, retirement, severance, welfare
or incentive plan, agreement or arrangement, (3) any plan, agreement or arrangement providing for
“fringe benefits” or perquisites to employees, officers, directors or agents, including but not
limited to benefits relating to automobiles, clubs, vacation, child care, parenting, sabbatical,
sick leave, tuition reimbursement, medical, dental, hospitalization, life insurance, disability
insurance and other types of insurance, and (4) any employment agreement. The plans, agreements and
arrangements described in this Section 4(x) are referred to herein as “Employee Benefit Plans.”

26

 

     (y) Guaranties. Target is not a guarantor or otherwise is liable for any Liability or
obligation (including indebtedness) of any other Person.

     (z) Environmental, Health, and Safety Matters.

          (i) Target and its predecessors and Affiliates have complied and are in compliance with all
Environmental, Health, and Safety Requirements.

          (ii) Without limiting the generality of the foregoing, Target and its Affiliates have obtained
and complied with, and are in compliance with, all permits, licenses and other authorizations that
are required pursuant to Environmental, Health, and Safety Requirements for the occupation of their
facilities and the operation of their business; a list of all such permits, licenses and other
authorizations is set forth on Section 4(z) of the Disclosure Schedule.

          (iii) Neither Target nor, to its Knowledge, its predecessors or Affiliates has received any
written or oral notice, report or other information regarding any actual or alleged violation of
Environmental, Health, and Safety Requirements, or any Liabilities or potential Liabilities,
including any investigatory, remedial or corrective obligations, relating to any of them or its
facilities arising under Environmental, Health, and Safety Requirements.

          (iv) To knowledge of Target, none of the following exists at any property or facility owned or
operated by Target: (1) underground storage tanks, (2) asbestos-containing material in any form or
condition, (3) materials or equipment containing polychlorinated biphenyls, or (4) landfills,
surface impoundments, or disposal areas.

          (v) Neither Target nor, to its Knowledge, its predecessors or Affiliates have treated, stored,
disposed of, arranged for or permitted the disposal of, transported, handled, or released any
substance, including without limitation any hazardous substance, or owned or operated any property
or facility (and no such property or facility is contaminated by any such substance) in a manner
that has given or would give rise to Liabilities, including any Liability for response costs,
corrective action costs, personal injury, property damage, natural resources damages or attorney
fees, pursuant to the Comprehensive Environmental Response, Compensation and Liability Act of 1980,
as amended (“CERCLA”), the Solid Waste Disposal Act, as amended (“SWDA”) or any other
Environmental, Health, and Safety Requirements.

          (vi) Neither this Agreement nor the consummation of the transaction that is the subject of
this Agreement will result in any obligations for site investigation or cleanup, or notification to
or consent of government agencies or third parties, pursuant to any of the so-called
“transaction-triggered” or “responsible property transfer” Environmental, Health, and Safety
Requirements.

          (vii) Neither Target nor, to its Knowledge, its predecessors or Affiliates has, either
expressly or by operation of law, assumed or undertaken any Liability, including without limitation
any obligation for corrective or remedial action, of any other Person relating to Environmental,
Health, and Safety Requirements.

          (viii) No facts, events or conditions relating to the past or present facilities, properties
or operations of Target or, to its Knowledge, its predecessors or Affiliates will

27

 

prevent, hinder or limit continued compliance with Environmental, Health, and Safety
Requirements, give rise to any investigatory, remedial or corrective obligations pursuant to
Environmental, Health, and Safety Requirements, or give rise to any other Liabilities pursuant to
Environmental, Health, and Safety Requirements, including without limitation any relating to onsite
or offsite releases or threatened releases of hazardous materials, substances or wastes, personal
injury, property damage or natural resources damage.

     (aa) Certain Business Relationships with Target. None of Sellers, their Affiliates, Sellers’
directors, officers, employees and stockholders and Target’s directors, officers, employees, and
stockholders has been involved in any business arrangement or relationship with Target within the
past 12 months, and none of Sellers, their Affiliates, Sellers’ directors, officers, employees and
stockholders and Target’s directors, officers, employees, and stockholders owns any asset, tangible
or intangible, which is used in the business of Target.

     (bb) Customers and Suppliers.

          (i) Section 4(bb) of the Disclosure Schedule lists the 10 largest customers of Target for each
of the two most recent fiscal years and sets forth opposite the name of each such customer the
percentage of consolidated net sales attributable to such customer. Section 4(bb) of the Disclosure
Schedule also lists any additional current customers that Target anticipates shall be among the 10
largest customers for the current fiscal year.

          (ii) Since the date of the Most Recent Balance Sheet, no supplier of Target has indicated that
it shall stop, or decrease the rate of, supplying materials, products or services to Target, and no
customer listed on Section 4(bb) of the Disclosure Schedule has indicated that it shall stop, or
decrease the rate of, buying materials, products or services from Target.

     (cc) Disclosure. The representations and warranties contained in this Section 4 do not contain
any untrue statement of a material fact or omit to state any material fact necessary in order to
make the statements and information contained in this Section 4 not misleading.

SECTION 5. PRE-CLOSING COVENANTS

     The Parties agree as follows with respect to the period between the execution of this
Agreement and the Closing.

     (a) General. Each of the Parties will use his or its best efforts to take all action and to do
all things necessary, proper, or advisable in order to consummate and make effective the
transactions contemplated by this Agreement (including satisfaction, but not waiver, of the Closing
conditions set forth in Section 7 below).

     (b) Notices and Consents. Sellers will cause Target to give any notices to third parties, and
will cause Target to use its best efforts to obtain any third party consents referred to in Section
4(c) above, the Lease Consents, and the items set forth on Section 5(b) of the Disclosure Schedule.
Each of the Parties will (and Sellers will cause Target to) give any notices to, make any filings
with, and use its best efforts to obtain any authorizations, consents, and

28

 

approvals of governments and governmental agencies in connection with the matters referred to
in Section 3(a)(ii), Section 3(b)(ii), and Section 4(c) above.

     (c) Operation of Business. Sellers will not cause or permit Target to engage in any practice,
take any action, or enter into any transaction outside the Ordinary Course of Business. Without
limiting the generality of the foregoing, Sellers will not cause or permit Target to (i) declare,
set aside, or pay any dividend or make any distribution whatsoever with respect to its capital
stock (whether in cash or in kind) or redeem, purchase, or otherwise acquire any of its capital
stock except distributions to Sellers in an amount approved by Buyer calculated to cover Sellers’
income tax liability resulting from the Sellers’ allocable shares of Target’s earnings through the
Closing Date, or (ii) otherwise engage in any practice, take any action, or enter into any
transaction of the sort described in Section 4(h) above.

     (d) Preservation of Business. Sellers will cause Target to keep its business and properties
substantially intact, including its present operations, physical facilities, working conditions,
insurance policies, and relationships with lessors, licensors, suppliers, customers, and employees.

     (e) Full Access. Sellers will permit, and Sellers will cause Target to permit,
representatives of Buyer (including legal counsel and accountants) to have full access at all
reasonable times, and in a manner so as not to interfere with the normal business operations of
Target, to all premises, properties, personnel, books, records (including Tax records), contracts,
and documents of or pertaining to Target.

     (f) Notice of Developments. Sellers will give prompt written notice to Buyer of any material
adverse development causing a breach of any of the representations and warranties in Section 4
above. Each Party will give prompt written notice to the others of any material adverse development
causing a breach of any of his or its own representations and warranties in Section 3 above. No
disclosure by any Party pursuant to this Section 5(f), however, shall be deemed to amend or
supplement Annex I, Annex II, or the Disclosure Schedule or to prevent or cure any
misrepresentation, breach of warranty, or breach of covenant.

     (g) Exclusivity. Sellers will not (and Sellers will not cause or permit Target to) (i)
solicit, initiate, or encourage the submission of any proposal or offer from any Person relating to
the acquisition of any capital stock or other voting securities, or any substantial portion of the
assets, of Target (including any acquisition structured as a merger, consolidation, or share
exchange) or (ii) participate in any discussions or negotiations regarding, furnish any information
with respect to, assist or participate in, or facilitate in any other manner any effort or attempt
by any Person to do or seek any of the foregoing. Neither Seller will vote his Target Shares in
favor of any such acquisition. Sellers will notify Buyer immediately if any Person makes any
proposal, offer, inquiry, or contact with respect to any of the foregoing.

     (h) [INTENTIONALLY OMITTED]

     (i) Leases. Except to the extent necessary to satisfy the Closing conditions set forth in
Section 7 below, Sellers will not cause or permit any of Target’s Leases to be amended, modified,
extended, renewed or terminated, nor shall Target enter into any new lease, sublease,

29

 

license or other agreement for the use or occupancy of any real property, without the prior
written consent of Buyer.

     (j) Tax Matters. Without the prior written consent of Buyer, Target shall not make or change
any election, change an annual accounting period, adopt or change any accounting method, file any
amended Tax Return, enter into any closing agreement, settle any Tax claim or assessment relating
to Target, surrender any right to claim a refund of Taxes, consent to any extension or waiver of
the limitation period applicable to any Tax claim or assessment relating to Target, or take any
other similar action relating to the filing of any Tax Return or the payment of any Tax, if such
election, adoption, change, amendment, agreement, settlement, surrender, consent or other action
would have the effect of increasing the Tax liability of Target for any period ending after the
Closing Date or decreasing any Tax attribute of Target existing on the Closing Date.

     (k) S Corporation Status. Target and Sellers shall not revoke Target’s election to be taxed
as an S corporation within the meaning of Code Section 1361 and Section 1362. Target and Sellers
shall not take or allow any action, other than the sale of Target’s stock pursuant to this
Agreement, which would result in the termination of Target’s status as a validly electing S
corporation within the meaning of Code Section 1361 and Section 1362.

     (l) Employee Benefits and Welfare Matters. [INTENTIONALLY OMITTED]

SECTION 6. POST-CLOSING COVENANTS

     The Parties agree as follows with respect to the period following the Closing.

     (a) General. In case at any time after the Closing any further action is necessary or
desirable to carry out the purposes of this Agreement, each of the Parties will take such further
action (including the execution and delivery of such further instruments and documents) as any
other Party reasonably may request, all at the sole cost and expense of the requesting Party
(unless the requesting Party is entitled to indemnification therefor under Section 8 below).
Sellers acknowledge and agree that from and after the Closing Buyer will be entitled to possession
of all documents, books, records (including Tax records), agreements, and financial data of any
sort relating to Target.

     (b) Litigation Support. In the event and for so long as any Party actively is contesting or
defending against any action, suit, proceeding, hearing, investigation, charge, complaint, claim,
or demand in connection with (i) any transaction contemplated under this Agreement or (ii) any
fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event,
incident, action, failure to act, or transaction on or prior to the Closing Date involving Target,
each of the other Parties will cooperate with him or it and his or its counsel in the contest or
defense, make available their personnel, and provide such testimony and access to their books and
records as shall be necessary in connection with the contest or defense, all at the sole cost and
expense of the contesting or defending Party (unless the contesting or defending Party is entitled
to indemnification therefor under Section 8 below).

30

 

     (c) Transition. Sellers will not take any action that is designed or intended to have the
effect of discouraging any lessor, licensor, customer, supplier, or other business associate of
Target from maintaining the same business relationships with Target after the Closing as it
maintained with Target prior to the Closing. Sellers shall refer all customer inquiries relating to
the businesses of Target to Buyer from and after the Closing.

     (d) Confidentiality. Each of the parties hereto will treat and hold as such all of the
Confidential Information of the other parties, refrain from using any of the Confidential
Information except in connection with this Agreement, and deliver promptly to such other party or
destroy, at the request and option of disclosing party, all tangible embodiments (and all copies)
of the Confidential Information which are in his, her, or its possession. In the event that any
party is requested or required pursuant to written or oral question or request for information or
documents in any legal proceeding, interrogatory, subpoena, civil investigative demand, or similar
process to disclose any Confidential Information, such party will notify the disclosing party
promptly of the request or requirement so that the disclosing party may seek an appropriate
protective order or waive compliance with the provisions of this Section 6(d). If, in the absence
of a protective order or the receipt of a waiver hereunder, any of receiving parties is, on the
advice of counsel, compelled to disclose any Confidential Information to any tribunal or party in a
proceeding therein or else stand liable for contempt, such party may disclose the Confidential
Information to the tribunal or such person involved in such action; provided, however, that the
disclosing party shall use his, her, or its best efforts to obtain, at the reasonable request of
the disclosing party, an order or other assurance that confidential treatment will be accorded to
such portion of the Confidential Information required to be disclosed as the disclosing party shall
designate. The foregoing provisions shall not apply to any Confidential Information that is
generally available to the public immediately prior to the time of disclosure unless such
Confidential Information is so available due to the actions of a Party, nor shall the foregoing
provisions apply to Buyer to the extent Buyer is required to disclose such information in order to
comply with its disclosure obligations as a publicly-traded company under applicable federal
securities laws and stock exchange rules and listing standards.

     (e) Release of Target by Sellers. Effective at and (only) upon Closing, Sellers (the
“Releasing Party”) hereby irrevocably and unconditionally releases and forever discharges the
Target and its respective successors and assigns (the “Released Parties”) from any and all claims,
charges, complaints, causes of action, damages, agreements and liabilities of any kind or nature
whatsoever, including any claim by Sellers against the Target for indemnification or for advances
with respect to actions or omissions (or claims or allegations thereof) of Sellers prior to the
Closing in their capacities as shareholders, officers, directors or employees of the Target
(“Released Claims”), whether known or unknown and whether at law or in equity, arising from conduct
occurring on or prior to the Closing Date, including without limitation any Released Claims
relating to or arising out of any Seller’s ownership of securities of Target; provided that (i)
nothing contained herein shall release Released Parties from any of their post-Closing obligations
and liabilities to Releasing Party created under this Agreement or constitute a waiver of any
claims that Releasing Party may bring or have for indemnification by the Released Parties under
Section 8, and (ii) this release shall only relate to those claims arising from conduct or
omissions occurring on or before the Closing.

31

 

SECTION 7. CONDITIONS TO OBLIGATION TO CLOSE

     (a) Conditions to Buyer’s Obligation. Buyer’s obligation to consummate the transactions to be
performed by it in connection with the Closing is subject to satisfaction of the following
conditions:

          (i) the representations and warranties set forth in Section 3(a) and Section 4 above shall be
true and correct in all material respects at and as of the Closing Date, except to the extent that
such representations and warranties are qualified by terms such as “material” and “Material Adverse
Effect,” in which case such representations and warranties shall be true and correct in all
respects at and as of the Closing Date;

          (ii) Sellers shall have performed and complied with all of their covenants hereunder in all
material respects through the Closing, except to the extent that such covenants are qualified by
terms such as “material” and “Material Adverse Effect,” in which case Sellers shall have performed
and complied with all of such covenants in all respects through the Closing;

          (iii) Target shall have procured all of the third party consents specified in Section 5(b)
above;

          (iv) no action, suit, or proceeding shall be pending or threatened before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated by this Agreement, (B) cause
any of the transactions contemplated by this Agreement to be rescinded following consummation, (C)
affect adversely the right of Buyer to own the Target Shares and to control Target, or (D) affect
adversely the right of Target to own its assets and to operate its businesses (and no such
injunction, judgment, order, decree, ruling, or charge shall be in effect);

          (v) Sellers shall have delivered to Buyer a certificate to the effect that each of the
conditions specified above in Section 7(a)(i)-(iv) is satisfied in all respects;

          (vi) the Parties shall have received all other authorizations, consents, and approvals of
governments and governmental agencies referred to in Section 3(a)(ii), Section 3(b)(ii), and
Section 4(c) above;

          (vii) Buyer shall have received the resignations, effective as of the Closing, of each
director and officer of Target other than those whom Buyer shall have specified in writing at least
five business days prior to the Closing;

          (viii) Buyer shall have obtained on terms and conditions satisfactory to it any debt or equity
financing it needs in order to consummate the transactions contemplated hereby and fund the working
capital requirements of Target after the Closing;

          (ix) all actions to be taken by the Sellers in connection with consummation of the
transactions contemplated hereby and all certificates, opinions, instruments, and other

32

 

documents required to effect the transactions contemplated hereby shall be satisfactory in
form and substance to Buyer;

          (x) Target shall have obtained and delivered to Buyer a written consent for the assignment of
each of the Leases, and, if requested by Buyer’s lender, a waiver of landlord liens, collateral
assignment of lease or leasehold mortgage from the landlord or other party whose consent thereto is
required under such Lease (the “Lease Consents”), in form and substance satisfactory to Buyer and
Buyer’s lender;

          (xi) [INTENTIONALLY OMITTED]

          (xii) [INTENTIONALLY OMITTED]

          (xiii) no damage or destruction or other change has occurred with respect to any of the Real
Property or any portion thereof that, individually or in the aggregate, would materially impair the
use or occupancy of the Real Property or the operation of Target’s business as currently conducted
thereon;

          (xiv) [INTENTIONALLY OMITTED]

          (xv) Sellers shall have delivered to Buyer copies of the certificate of incorporation of
Target certified on or soon before the Closing Date by the Secretary of State (or comparable
officer) of the jurisdiction of Target’s incorporation;

          (xvi) Sellers shall have delivered to Buyer copies of the certificate of good standing of
Target issued on or soon before the Closing Date by the Secretary of State (or comparable officer)
of the jurisdiction of Target’s organization and of each jurisdiction in which Target is qualified
to do business;

          (xvii) Sellers shall have delivered to Buyer a certificate of the secretary or an assistant
secretary of Target, dated the Closing Date, in form and substance reasonably satisfactory to
Buyer, as to (i) no amendments to the Certificate of Incorporation of Target since the date
specified in clause (xv) above; (ii) the bylaws of Target; and (iii) any resolutions of the board
of directors of Target relating to this Agreement and the transactions contemplated hereby;

          (xviii) Sellers shall have entered into a confidentiality, non-solicitation, non-compete and
non-disparagement agreement (“Post-Closing Agreement”) with Target on terms satisfactory to Buyer,
and such agreement shall be in full force and effect as of the Closing.

          (xix) Any amounts owed by Target to Sellers shall have been paid in full and, at the request
of Buyer, Sellers shall deliver to Target a release to such effect in form and substance
satisfactory to Buyer.

          (xx) Buyer shall have obtained the approval of its lenders of this Agreement and the
transactions contemplated thereby and there shall be no payment default under Buyer’s loan
agreements with its lenders unless waived by Buyer’s lenders;

33

 

          (xxi) Buyer shall have obtained the approval of its board of directors of this Agreement and
the transactions contemplated thereby;

          (xxii) Target and Sellers shall have delivered to Buyer signed copies of the applicable forms
and attachments thereto required in connection with the Section 338(h)(10) Election pursuant to
Section 9(f) below;

          (xxiii) Buyer shall have received from Bonadio and Company, LLP audited Financial Statements
of Target for the year ended December 31, 2006;

          (xxiv) Sellers and Buyer shall have entered into the Registration Rights Agreement; and

          (xxv) Buyer’s acquisition of Stationary Power Services, Inc. shall have been completed as of
the Closing Date.

Buyer may waive any condition specified in this Section 7(a) if it executes a writing so stating at
or prior to the Closing.

     (b) Conditions to Sellers’ Obligation. The obligation of Sellers to consummate the
transactions to be performed by them in connection with the Closing is subject to satisfaction of
the following conditions:

          (i) the representations and warranties set forth in Section 3(b) above shall be true and
correct in all material respects at and as of the Closing Date, except to the extent that such
representations and warranties are qualified by terms such as “material” and “Material Adverse
Effect,” in which case such representations and warranties shall be true and correct in all
respects at and as of the Closing Date;

          (ii) Buyer shall have performed and complied with all of its covenants hereunder in all
material respects through the Closing, except to the extent that such covenants are qualified by
terms such as “material” and “Material Adverse Effect,” in which case Buyer shall have performed
and complied with all of such covenants in all respects through the Closing;

          (iii) no action, suit, or proceeding shall be pending or threatened before any court or
quasi-judicial or administrative agency of any federal, state, local, or foreign jurisdiction or
before any arbitrator wherein an unfavorable injunction, judgment, order, decree, ruling, or charge
would (A) prevent consummation of any of the transactions contemplated by this Agreement or (B)
cause any of the transactions contemplated by this Agreement to be rescinded following consummation
(and no such injunction, judgment, order, decree, ruling, or charge shall be in effect);

          (iv) Buyer shall have delivered to Sellers a certificate to the effect that each of the
conditions specified above in Section 7(b)(i)-(iii) is satisfied in all respects;

34

 

          (v) the Parties shall have received all authorizations, consents, and approvals of governments
and governmental agencies referred to in Section 3(a)(ii), Section 3(b)(ii), and Section 4(c)
above;

          (vi) all actions to be taken by Buyer in connection with consummation of the transactions
contemplated hereby and all certificates, opinions, instruments, and other documents required to
effect the transactions contemplated hereby will be reasonably satisfactory in form and substance
to the Sellers; and

          (vii) Buyer and Sellers shall have entered into the Registration Rights Agreement.

Sellers may waive any condition specified in this Section 7(b) if it executes a writing so stating
at or prior to closing.

SECTION 8. REMEDIES FOR BREACHES OF THIS AGREEMENT

     (a) Survival of Representations and Warranties.

          (i) All of the representations and warranties of the Parties contained in Section 3 of this
Agreement shall survive the Closing hereunder (even if the damaged Party knew or had reason to know
of any misrepresentation or breach of warranty or covenant at the time of Closing) and continue in
full force and effect forever thereafter (subject to any applicable statutes of limitations).

          (ii) Except for those representations and warranties of the Parties contained in Sections
4(a)-(f) (inclusive), (j), (k) and (z) of this Agreement, all of the representations and warranties
of the Parties contained in Section 4 of this Agreement, shall survive the Closing hereunder (even
if the damaged Party knew or had reason to know of any misrepresentation or breach of warranty or
covenant at the time of Closing) and continue in full force and effect for a period of two years
from the Closing Date. This provision shall not extinguish claims that are made within two years of
the Closing Date but that remain unresolved on or after the date that is two years after the
Closing Date.

          (iii) All of the representations and warranties of the Parties contained in Sections 4(a)-(f)
(inclusive), (j), (k) and (z) of this Agreement shall survive the Closing hereunder (even if the
damaged Party knew or had reason to know of any misrepresentation or breach of warranty or covenant
at the time of Closing) and continue in full force and effect until the expiration of any
applicable statutes of limitations (after giving effect to any extensions or waivers) plus 60 days.

     (b) Indemnification Provisions for Buyer’s Benefit.

          (i) In the event Sellers breach (or in the event any third party alleges facts that, if true,
would mean Sellers have breached) any of their representations, warranties, and covenants contained
herein (other than the covenants in Section 2(a) above and the representations and warranties in
Section 3(a) above) and, provided that Buyer makes a written

35

 

claim for indemnification against Sellers pursuant to Section 11(g) below within the survival
period (if there is an applicable survival period pursuant to Section 8(a) above), then Sellers
shall be obligated to indemnify Buyer from and against the entirety of any Adverse Consequences
Buyer may suffer (including any Adverse Consequences Buyer may suffer after the end of any
applicable survival period) resulting from, arising out of, relating to, in the nature of, or
caused by the breach (or the alleged breach).

          (ii) In the event any Seller breaches (or in the event any third party alleges facts that, if
true, would mean any Seller breached) any of his covenants in Section 2(a) above or any of his
representations and warranties in Section 3(a) above, and provided that Buyer makes a written claim
for indemnification against such Seller pursuant to Section 11(g) below within the survival period
(if there is an applicable survival period pursuant to Section 8(a) above), then such Seller shall
indemnify Buyer from and against the entirety of any Adverse Consequences Buyer may suffer
(including any Adverse Consequences Buyer may suffer after the end of any applicable survival
period) resulting from arising out of, relating to, in the nature of, or caused by the breach (or
the alleged breach).

          (iii) Sellers shall indemnify Buyer from and against the entirety of any Adverse Consequences
Buyer may suffer resulting from, arising out of, relating to, in the nature of, or caused by any
occurrence or circumstance related to Target or its business that first arose, in whole or in part,
on or before the Closing Date.

          (iv) NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IN NO EVENT SHALL THE
AGGREGATE LIABILITY OF ANY SELLER TO BUYER UNDER THIS SECTION 8(B) EXCEED THE PURCHASE PRICE.

     (c) Indemnification Provisions for Sellers’ Benefit.

     (i) In the event Buyer breaches (or in the event any third party alleges facts that, if true,
would mean Buyer has breached) any of its representations, warranties, and covenants contained
herein and, provided that any Seller makes a written claim for indemnification against Buyer
pursuant to Section 11(g) below within such survival period (if there is an applicable survival
period pursuant to Section 8(a) above), then Buyer shall indemnify the Seller(s) from and against
the entirety of any Adverse Consequences suffered (including any Adverse Consequences suffered
after the end of any applicable survival period) resulting from, arising out of, relating to, in
the nature of, or caused by the breach (or the alleged breach).

     (ii) Buyer shall indemnify Sellers from and against the entirety of any Adverse Consequences
Sellers may suffer resulting from, arising out of, relating to, in the nature of, or caused by any
occurrence or circumstance related to Target or its business that first arose, in whole or in part,
after the Closing Date.

     (d) Matters Involving Third Parties.

          (i) If any third party shall notify any Party (the “Indemnified Party”) with respect to any
matter (a “Third Party Claim”) which may give rise to a claim for indemnification against any other
Party (the “Indemnifying Party”) under this Section 8, then the Indemnified Party shall promptly
notify each Indemnifying Party thereof in writing; provided, however, that

36

 

no delay on the part of the Indemnified Party in notifying any Indemnifying Party shall
relieve the Indemnifying Party from any obligation hereunder unless (and then solely to the extent)
the Indemnifying Party thereby is prejudiced.

          (ii) Any Indemnifying Party will have the right to defend the Indemnified Party against the
Third Party Claim with counsel of its choice reasonably satisfactory to the Indemnified Party so
long as (A) the Indemnifying Party notifies the Indemnified Party in writing within 15 days after
the Indemnified Party has given notice of the Third Party Claim that the Indemnifying Party will
indemnify the Indemnified Party from and against the entirety of any Adverse Consequences the
Indemnified Party may suffer resulting from, arising out of, relating to, in the nature of, or
caused by the Third Party Claim, (B) the Indemnifying Party provides the Indemnified Party with
evidence reasonably acceptable to the Indemnified Party that the Indemnifying Party will have the
financial resources to defend against the Third Party Claim and fulfill its indemnification
obligations hereunder, (C) the Third Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an adverse judgment with respect to,
the Third Party Claim is not, in the good faith judgment of the Indemnified Party, likely to
establish a precedential custom or practice materially adverse to the continuing business interests
or the reputation of the Indemnified Party, and (E) the Indemnifying Party conducts the defense of
the Third Party Claim actively and diligently.

          (iii) So long as the Indemnifying Party is conducting the defense of the Third Party Claim in
accordance with Section 8(d)(ii) above, (A) the Indemnified Party may retain separate co-counsel at
its sole cost and expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter into any settlement with
respect to the Third Party Claim without the prior written consent of the Indemnifying Party (not
to be withheld unreasonably), and (C) the Indemnifying Party will not consent to the entry of any
judgment or enter into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnified Party (not to be withheld unreasonably).

          (iv) In the event any of the conditions in Section 8(d)(ii) above is or becomes unsatisfied,
however, (A) the Indemnified Party may defend against, and consent to the entry of any judgment or
enter into any settlement with respect to, the Third Party Claim in any manner it reasonably may
deem appropriate (and the Indemnified Party need not consult with, or obtain any consent from, any
Indemnifying Party in connection therewith), (B) the Indemnifying Parties will reimburse the
Indemnified Party promptly and periodically for the costs of defending against the Third Party
Claim (including reasonable attorneys’ fees and expenses), and (C) the Indemnifying Parties will
remain responsible for any Adverse Consequences the Indemnified Party may suffer resulting from,
arising out of, relating to, in the nature of, or caused by the Third Party Claim to the fullest
extent provided in this Section 8.

     (e) Determination of Adverse Consequences. All indemnification payments under this Section 8
and Section 9(a) shall be deemed adjustments to the Purchase Price.

     (f) Setoff against Holdback Amounts; Priority. Any indemnification to which Buyer is entitled
under this Agreement as a result of any Adverse Consequences Buyer may suffer may, at Buyer’s
election, be satisfied by Buyer setting off such indemnification amounts

37

 

against any Holdback Amount due Seller’s hereunder, and Buyer shall seek to satisfy such
indemnification amounts against such Holdback Amounts due to Sellers prior to and before seeking to
satisfy such indemnification amounts against other assets of the Sellers. The exercise by Buyer of
such right of setoff shall not preclude Buyer from pursuing other remedies available to Buyer
against Sellers.

     (g) Other Indemnification Provisions. Buyer and Sellers acknowledge and agree that the
foregoing indemnification provisions in this Section 8 shall be the exclusive remedy of Buyer and
Sellers with respect to Target, Sellers, and the transactions contemplated by this Agreement. The
party entitled to indemnification hereunder shall take all reasonable steps to mitigate all
damages, upon and after becoming aware of any event that could reasonably be expected to give rise
to any such losses that are indemnifiable hereunder. No party shall be entitled to indemnification
to the extent of any insurance, or any tax deduction or benefit actually realized, refund or
credit, or any other benefits actually realized resulting from or which may be claimed as a result
of the facts and circumstances relating to any indemnifiable claim. If any damages are covered by
insurance, the party seeking indemnity hereunder shall use all reasonable efforts to recover the
amount of such losses from the insurer of such insurance, which such recovery shall reduce the
amount of such losses to be indemnified. To the extent either party discharges any claims for
indemnification hereunder, that party shall be segregated to all rights of the other parties
against third parties. Each Seller hereby agrees that he will not make any claim for
indemnification against Target by reason of the fact that he was a director, officer, employee, or
agent of any such entity or was serving at the request of any such entity as a partner, trustee,
director, officer, employee, or agent of another entity (whether such claim is for judgments,
damages, penalties, fines, costs, amounts paid in settlement, losses, expenses, or otherwise and
whether such claim is pursuant to any statute, charter document, bylaw, agreement, or otherwise)
with respect to any action, suit, proceeding, complaint, claim, or demand brought by Buyer against
Sellers (whether such action, suit, proceeding, complaint, claim, or demand is pursuant to this
Agreement, applicable law, or otherwise).

SECTION 9. TAX MATTERS

     The following provisions shall govern the allocation of responsibility as between Buyer and
Sellers for certain tax matters following the Closing Date:

     (a) Tax Indemnification. Sellers shall indemnify Target, Buyer, and each Buyer Affiliate and
hold them harmless from and against without duplication, any loss, claim, liability, expense, or
other damage attributable to (i) all Taxes (or the non-payment thereof) of Target for all Taxable
periods ending on or before the Closing Date and the portion through the end of the Closing Date
for any Taxable period that includes (but does not end on) the Closing Date (“Pre-Closing Tax
Period”), (ii) all Taxes of any member of an affiliated, consolidated, combined or unitary group of
which Target (or any predecessor of Target) is or was a member on or prior to the Closing Date,
including pursuant to Treasury Regulation Section 1.1502-6 or any analogous or similar state,
local, or foreign law or regulation, and (iii) any and all Taxes of any person (other than Target)
imposed on Target as a transferee or successor, by contract or pursuant to any law, rule, or
regulation, which Taxes relate to an event or transaction occurring before the Closing.

38

 

          (i) Responsibility for Filing Tax Returns. Buyer acknowledges that the Target will no longer
be eligible for S corporation status after the Closing Date. Accordingly, a final Form 1120S for
the Target will be required to be prepared for the period January 1, 2007 through the end of the
Closing Date. Such income tax return will be provided by the Sellers allocating income and
expenses to this period according to the closing of the books method, in accordance with Section
1377(a)(2) of the Code. At their expense, Sellers shall prepare or caused to be prepared and file
or caused to be filed all Tax Returns for Target for periods ending on or before the Closing Date.
Sellers shall permit Buyer to review and comment on each such Tax Return described in the preceding
sentence prior to filing. Buyer shall have the right to contest the contents of all such Tax
Returns, and any conflict between Sellers, on the one hand, and Buyer, on the other, with respect
thereto shall be resolved by submitting the disagreement to BDO Seidman LLP (“Auditor”) for
computation, verification or resolution in accordance with the provisions of this Agreement. Buyer
and Sellers shall make readily available to the Auditor all relevant books and records (including
work papers of a party’s independent public accountants) as the Auditor reasonably requests. The
Auditor’s computation or verification of the Tax Returns or resolution of such disputed item or
items thereof (as the case may be), which Buyer and Sellers will instruct the Auditor to deliver to
them within 30 days after submission to the Auditor, will be final and binding upon the parties for
all purposes relating to this Section 9, and the Auditor’ fees and expenses therefor will be borne
by the non-prevailing party or, in the event that each party prevails on some of the issues in
dispute, will be shared proportionately, as determined by the Auditor.

     (b) Cooperation on Tax Matters.

          (i) Buyer, Target, and Sellers shall cooperate fully, as and to the extent reasonably
requested by the other Party, in connection with the filing of Tax Returns pursuant to Section 9(c)
and any audit, litigation or other proceeding with respect to Taxes. Such cooperation shall include
the retention and (upon the other Party’s request) the provision of records and information which
are reasonably relevant to any such audit, litigation or other proceeding and making employees
available on a mutually convenient basis to provide additional information and explanation of any
material provided hereunder. Target and Sellers agree (A) to retain all books and records with
respect to Tax matters pertinent to Target relating to any taxable period beginning before the
Closing Date until the expiration of the statute of limitations (and, to the extent notified by
Buyer or Sellers, any extensions thereof) of the respective taxable periods, and to abide by all
record retention agreements entered into with any taxing authority, and (B) to give the other Party
reasonable written notice prior to transferring, destroying or discarding any such books and
records and, if the other Party so requests, Target or Sellers, as the case may be, shall allow the
other Party to take possession of such books and records.

          (ii) Buyer and Sellers further agree, upon request, to use their best efforts to obtain any
certificate or other document from any governmental authority or any other Person as may be
necessary to mitigate, reduce or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).

          (iii) Buyer and Sellers further agree, upon request, to provide the other party with all
information that either party may be required to report pursuant to Code Section 6043 and all
Treasury Regulations promulgated thereunder.

39

 

          (iv) Buyer shall not without the prior written consent of Sellers file, or cause to be filed,
any amended Tax Return or claim for Tax Refund, with respect to the Target for pre-Closing Tax
Period, to the extent any such filing may adversely affect the liability of the Sellers, unless
advised in writing that such filing is required by law.

     (c) Tax Sharing Agreements. All Tax sharing agreements or similar agreements with respect to
or involving Target shall be terminated as of the Closing Date and, after the Closing Date, Target
shall not be bound thereby or have any liability thereunder.

     (d) Certain Taxes and Fees. All transfer, documentary, sales, use, stamp, registration and
other such Taxes, and all conveyance fees, recording charges and other fees and charges (including
any penalties and interest) incurred in connection with consummation of the transactions
contemplated by this Agreement shall be paid by Sellers when due, and Sellers will, at their own
expense, file all necessary Tax Returns and other documentation with respect to all such Taxes,
fees and charges, and, if required by applicable law, Buyer will, and will cause its Affiliates to,
join in the execution of any such Tax Returns and other documentation.

     (e) Section 338(h)(10) Election.

          (i) At Buyer’s request, Target and Sellers shall join with Buyer in making an election under
Sections 338(h)(10) of the Code and the Treasury Regulations, including Treasury Regulation Section
1.338(h)(10)-1T(c)(1), and any corresponding or similar elections under state, local or foreign Tax
Law (collectively, a “Section 338(h)(10) Election”) with respect to the purchase and sale of the
Target Shares. In such case, Target and Sellers shall include any income, gain, loss, deduction, or
other Tax item resulting from the Section 338(h)(10) Election on their Tax Returns to the extent
required by applicable law.

          (ii) Buyer shall be responsible for the preparation and filing of all forms and documents
required in connection with the Section 338(h)(10) Election. Seller shall execute and deliver to
Buyer such documents or forms as are reasonably requested and are required by any law, rule or
regulation to complete properly the Section 338(h)(10) Election no later than 60 days after the
Closing. For the purposes of executing the Section 338 Election, on or prior to the Closing Date,
Sellers and Buyer will execute two copies of the applicable Internal Revenue Service form and all
attachments required to be filed therewith pursuant to applicable Treasury Regulations.

          (iii) Buyer, not less than 30 days prior to the date the forms required under Section
338(h)(10) of the Code are required to be filed, will provide Sellers with a valuation statement
reflecting, as of the Closing Date, the fair market values of all of the assets and the liabilities
and obligations of the Target. Buyer and Sellers will file, and will cause their Affiliates to
file, all Tax Returns and statements, forms and schedules in connection therewith in a manner
consistent with such valuation and will take no position contrary thereto unless required to do so
by applicable Tax laws.

          (iv) To the extent permitted by state and local law, the principles and procedures of this
section will also apply with respect to Section 338(h)(10) Election or equivalent or comparable
provision under state or local law. Sellers will make any election

40

 

similar to a Section 338(h)(10) Election which is optional under any state or local law, and
will cooperate and join in any election made by Target, Buyer or its Affiliates to effect such an
election so as to treat the transaction as a sale of assets for state and local income Tax
purposes.

     (f) Tax Adjustment. If Buyer makes a Section 338(h)(10) Election, and if such Section
338(h)(10) Election causes Sellers’ after-Tax net proceeds from the sale of Target’s stock to be
less than the after-Tax net proceeds that Sellers would have received had the Section 338(h)(10)
Election not been made, taking into account all appropriate state, federal and local Tax
implications (the “Section 338(h)(10) Election Liability”), then Buyer shall pay to Sellers, in
cash, an aggregate amount determined pursuant to the following scale (the “Tax Adjustment”):

          (i) If the aggregate amount of the Section 338(h)(10) Election Liability is less than or equal
to $25,000, then Buyer shall pay Sellers the aggregate amount of the Section 338(h)(10) Election
Liability.

The amount of the Tax Adjustment shall be paid to each eligible Seller prior to the date that any
Tax return is required to be filed in which the Section 338(h)(10) Election would have an impact on
a Seller’s Tax liability. If a Tax impact would occur in multiple years, only the amount necessary
to pay a Tax Adjustment for each year shall be paid in that year. In order to be entitled to a Tax
Adjustment each Seller shall provide Buyer with a schedule, not later than 30 days before the due
date of the Tax return with respect to which the Tax Adjustment is requested, computing the amount
of the Tax Adjustment. The Tax Adjustment shall reflect the actual calculation of each Seller’s tax
and shall not be based on assumed or hypothetical Tax rates. Buyer shall have the right to contest
the calculation of any requested Tax Adjustment, and any conflict with respect to the calculation
of a Tax Adjustment shall be resolved in accordance with the provisions of Section 9(a)(ii).

     (g) Tax Refund. Any Tax Refund pertaining to the pre-Closing Period (reduced by any Taxes
imposed on the Target as a result of such refund) shall be for the account of, and paid over to the
Seller.

SECTION 10. TERMINATION

     (a) Termination of Agreement. Certain of the Parties may terminate this Agreement as provided
below:

          (i) Buyer and Sellers may terminate this Agreement by mutual written consent at any time prior
to the Closing;

          (ii) Buyer may terminate this Agreement by giving written notice to Sellers on or before the
25th day following the date of this Agreement if Buyer is not satisfied with the results
of its continuing business, legal, environmental, and accounting due diligence regarding Target;

          (iii) Buyer may terminate this Agreement by giving written notice to Sellers at any time prior
to the Closing (A) in the event any Seller has breached any material

41

 

representation, warranty, or covenant contained in this Agreement in any material respect,
Buyer has notified the Seller of the breach, and the breach has continued without cure for a period
of 10 days after the notice of breach or (B) if the Closing shall not have occurred on or before
November 30, 2007, by reason of the failure of any condition precedent under Section 7(a) hereof
(unless the failure results primarily from Buyer itself breaching any representation, warranty, or
covenant contained in this Agreement); and

          (iv) Sellers may terminate this Agreement by giving written notice to Buyer at any time prior
to the Closing (A) in the event Buyer has breached any material representation, warranty, or
covenant contained in this Agreement in any material respect, Sellers have notified Buyer of the
breach, and the breach has continued without cure for a period of 10 days after the notice of
breach or (B) if the Closing shall not have occurred on or before November 30, 2007, by reason of
the failure of any condition precedent under Section 7(b) hereof (unless the failure results
primarily from Sellers breaching any representation, warranty, or covenant contained in this
Agreement).

     (b) Effect of Termination. If any Party terminates this Agreement pursuant to Section 10(a)
above, all rights and obligations of the Parties hereunder shall terminate without any Liability of
any Party to any other Party (except for any Liability of any Party then in breach).

SECTION 11. MISCELLANEOUS

     (a) Press Releases and Public Announcements; Confidentiality.

          (i) No Party shall issue any press release or make any public announcement relating to the
subject matter of this Agreement without the prior written approval of Buyer and Sellers;
provided, however, that any Party may make any public disclosure it believes in
good faith is required by applicable law or any listing or trading agreement concerning its
publicly-traded securities (in which case the disclosing Party will use its reasonable best efforts
to advise the other Parties prior to making the disclosure).

          (ii) Each of the parties hereto will treat and hold as such all of the Confidential
Information of the other parties, refrain from using any of the Confidential Information except in
connection with this Agreement, and deliver promptly to such other party or destroy, at the request
and option of disclosing party, all tangible embodiments (and all copies) of the Confidential
Information which are in his, her, or its possession. In the event that any party is requested or
required pursuant to written or oral question or request for information or documents in any legal
proceeding, interrogatory, subpoena, civil investigative demand, or similar process to disclose any
Confidential Information, such party will notify the disclosing party promptly of the request or
requirement so that the disclosing party may seek an appropriate protective order or waive
compliance with the provisions of this Section 11(a)(ii). If, in the absence of a protective order
or the receipt of a waiver hereunder, any of receiving parties is, on the advice of counsel,
compelled to disclose any Confidential Information to any tribunal or party in a proceeding therein
or else stand liable for contempt, such party may disclose the Confidential Information to the
tribunal or such person involved in such action; provided,

42

 

however, that the disclosing party shall use his, her, or its best efforts to obtain, at the
reasonable request of the disclosing party, an order or other assurance that confidential treatment
will be accorded to such portion of the Confidential Information required to be disclosed as the
disclosing party shall designate. The foregoing provisions shall not apply to any Confidential
Information that is generally available to the public immediately prior to the time of disclosure
unless such Confidential Information is so available due to the actions of a Party, nor shall the
foregoing provisions apply to Buyer to the extent Buyer is required to disclose such information in
order to comply with its disclosure obligations as a publicly-traded company under applicable
federal securities laws and stock exchange rules and listing standards.

     (b) No Third-Party Beneficiaries. This Agreement shall not confer any rights or remedies upon
any Person other than the Parties and their respective successors and permitted assigns.

     (c) Entire Agreement. This Agreement (including the documents referred to herein) constitutes
the entire agreement among the Parties and supersedes any prior understandings, agreements, or
representations by or among the Parties, written or oral, to the extent they relate in any way to
the subject matter hereof, including, but not limited to that certain letter of intent and term
sheet dated as of June 4, 2007, as amended or extended, which letter of intent and term sheet are
hereby terminated.

     (d) Succession and Assignment. This Agreement shall be binding upon and inure to the benefit
of the Parties named herein and their respective successors and permitted assigns. No Party may
assign either this Agreement or any of his, her, or its rights, interests, or obligations hereunder
without the prior written approval of Buyer and Sellers; provided, however, that
Buyer may (i) assign any or all of its rights and interests hereunder to one or more of its
Affiliates and (ii) designate one or more of its Affiliates to perform its obligations hereunder
(in any or all of which cases Buyer nonetheless shall remain responsible for the performance of all
of its obligations hereunder).

     (e) Counterparts. This Agreement may be executed in one or more counterparts (including by
means of facsimile), each of which shall be deemed an original but all of which together shall
constitute one and the same instrument.

     (f) Headings. The section headings contained in this Agreement are inserted for convenience
only and shall not affect in any way the meaning or interpretation of this Agreement.

     (g) Notices. All notices, requests, demands, claims, and other communications hereunder will
be in writing. Any notice, request, demand, claim, or other communication hereunder shall be deemed
duly given (i) when delivered personally to the recipient, (ii) one business day after being sent
to the recipient by reputable overnight courier service (charges prepaid), (iii) one business day
after being sent to the recipient by facsimile transmission or electronic mail, or (iv) four
business days after being mailed to the recipient by certified or registered mail, return receipt
requested and postage prepaid, and addressed to the intended recipient as set forth below:

43

 

	 	 	 	 	 
	 

	 	If to Buyer:
	 	Ultralife Batteries, Inc.
	 

	 	 	 	2000 Technology Parkway
	 

	 	 	 	Newark, NY 14513
	 

	 	 	 	Attention: General Counsel
	 

	 	 	 	Facsimile: (315) 331-7048
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Harter Secrest & Emery LLP
	 

	 	 	 	1600 Bausch & Lomb Place
	 

	 	 	 	Rochester, NY 14604
	 

	 	 	 	Attention: Jeffrey H. Bowen
	 

	 	 	 	Facsimile: (585) 232-2152
	 
	 	 	 	 
	 

	 	If to Sellers:
	 	William Maher
	 

	 	 	 	525 Tallahassee Drive
	 

	 	 	 	St. Petersburg, FL 33702
	 

	 	 	 	Facsimile:
	 
	 	 	 	 
	 

	 	 	 	Edward Bellamy
	 

	 	 	 	4902 113th Avenue North
	 

	 	 	 	Clearwater, FL 33760
	 
	 	 	 	 
	 

	 	With a copy to:
	 	Johnson, Pope, Bokor, Ruppel & Burns, LLP
	 

	 	 	 	911 Chestnut Street
	 

	 	 	 	Clearwater, FL 33756
	 

	 	 	 	Attention: Michael G. Little
	 

	 	 	 	Facsimile: 727-462-0365

Any Party may change the address to which notices, requests, demands, claims, and other
communications hereunder are to be delivered by giving the other Parties notice in the manner
herein set forth.

     (h) Governing Law. This Agreement shall be governed by and construed in accordance with the
domestic laws of the State of New York without giving effect to any choice or conflict of law
provision or rule (whether of the State of New York or any other jurisdiction) that would cause the
application of the laws of any jurisdiction other than the State of New York.

     (i) Amendments and Waivers. No amendment of any provision of this Agreement shall be valid
unless the same shall be in writing and signed by Buyer and Sellers. No waiver by any Party of any
provision of this Agreement or any default, misrepresentation, or breach of warranty or covenant
hereunder, whether intentional or not, shall be valid unless the same shall be in writing and
signed by the Party making such waiver nor shall such waiver be deemed to extend to any prior or
subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any
way any rights arising by virtue of any prior or subsequent such default, misrepresentation, or
breach of warranty or covenant.

     (j) Severability. Any term or provision of this Agreement that is invalid or unenforceable in
any situation in any jurisdiction shall not affect the validity or enforceability of

44

 

the remaining terms and provisions hereof or the validity or enforceability of the offending
term or provision in any other situation or in any other jurisdiction.

     (k) Expenses. Each of Buyer, Sellers and Target will bear his or its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement and the transactions
contemplated hereby; provided, however, that Sellers shall also bear the costs and
expenses of Target (including all of their legal fees and expenses) in connection with this
Agreement and the transactions contemplated hereby in the event that the transactions contemplated
by this Agreement are consummated.

     (l) Construction. The Parties have participated jointly in the negotiation and drafting of
this Agreement. In the event an ambiguity or question of intent or interpretation arises, this
Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of
proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the
provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or law
shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the
context requires otherwise. The word “including” shall mean including without limitation. The
Parties intend that each representation, warranty, and covenant contained herein shall have
independent significance. If any Party has breached any representation, warranty, or covenant
contained herein in any respect, the fact that there exists another representation, warranty, or
covenant relating to the same subject matter (regardless of the relative levels of specificity)
which the Party has not breached shall not detract from or mitigate the fact that the Party is in
breach of the first representation, warranty, or covenant.

     (m) Incorporation of Exhibits, Annexes, and Schedules. The Exhibits, Annexes, and Schedules
identified in this Agreement are incorporated herein by reference and made a part hereof.

     (n) Specific Performance. Each Party acknowledges and agrees that the other Parties would be
damaged irreparably in the event any provision of this Agreement is not performed in accordance
with its specific terms or otherwise is breached, so that a Party shall be entitled to injunctive
relief to prevent breaches of this Agreement and to enforce specifically this Agreement and the
terms and provisions hereof in addition to any other remedy to which such Party may be entitled, at
law or in equity. In particular, the Parties acknowledge that the business of Target is unique and
recognize and affirm that in the event Sellers breach this Agreement, money damages would be
inadequate and Buyer would have no adequate remedy at law, so that Buyer shall have the right, in
addition to any other rights and remedies existing in its favor, to enforce its rights and the
other Parties’ obligations hereunder not only by action for damages but also by action for specific
performance, injunctive, and/or other equitable relief.

     (o) Submission to Jurisdiction. Each of the Parties submits to the jurisdiction of any state
or federal court having jurisdiction in Wayne County, New York, in any action or proceeding arising
out of or relating to this Agreement and agrees that all claims in respect of the action or
proceeding may be heard and determined in any such court. Each Party also agrees not to bring any
action or proceeding arising out of or relating to this Agreement in any other court. Each of the
Parties waives any defense of inconvenient forum to the maintenance of any action or proceeding so
brought and waives any bond, surety, or other security that might be required of

45

 

any other Party with respect thereto. Each Party agrees that a final judgment in any action or
proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any
other manner provided by law or at equity.

     (p) Tax Disclosure Authorization. Notwithstanding anything herein to the contrary, the Parties
(and each Affiliate and Person acting on behalf of any Party) agree that each Party (and each
employee, representative, and other agent of such Party) may disclose to any and all Persons,
without limitation of any kind, the transaction’s tax treatment and tax structure (as such terms
are used in Code Sections 6011 and 6112 and regulations thereunder) contemplated by this agreement
and all materials of any kind (including opinions or other tax analyses) provided to such Party or
such Person relating to such tax treatment and tax structure, except to the extent necessary to
comply with any applicable federal or state securities laws; provided, however,
that such disclosure may not be made until the earlier of date of (A) public announcement of
discussions relating to the transaction, (B) public announcement of the transaction, or (C)
execution of an agreement to enter into the transaction. This authorization is not intended to
permit disclosure of any other information including (without limitation) (A) any portion of any
materials to the extent not related to the transaction’s tax treatment or tax structure, (B) the
identities of participants or potential participants, (C) the existence or status of any
negotiations, (D) any pricing or financial information (except to the extent such pricing or
financial information is related to the transaction’s tax treatment or tax structure), or (E) any
other term or detail not relevant to the transaction’s tax treatment or the tax structure.

46

 

* * * * *

     IN WITNESS WHEREOF, the Parties hereto have executed this Stock Purchase Agreement as of the
date first above written.

	 	 	 	 	 
	 	BUYER:

Ultralife Batteries, Inc.

 	 
	 	/s/ John D. Kavazanjian
 	 
	 	John D. Kavazanjian 	 
	 	Chief Executive Officer 	 
	 
	 	SELLERS:

 	 
	 	/s/ William Maher
 	 
	 	William Maher, Individually 	 
	 	 	 
	 
	 	 	 
	 	 /s/ Edward Bellamy
 	 
	 	Edward Bellamy, Individually 	 
	 	 	 
	 
	 	TARGET:

Reserve Power Systems, Inc.

 	 
	 	/s/ William Maher
 	 
	 	William Maher 	 
	 	President 	 
	 

47

Source: [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00139-of-00352.parquet"}, [{"source": "alea-institute/alea-institute/kl3m-data-edgar-agreements/train-00139-of-00352.parquet"}]]