8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of Earliest Event Reported): December 31, 2010

Ener1, Inc.

__________________________________________

(Exact name of registrant as specified in its charter)

Florida	001-34050	59-2479377
_____________________ (State or other jurisdiction	_____________ (Commission	______________ (I.R.S. Employer
of incorporation)	File Number)	Identification No.)
1540 Broadway, Suite 25C, New York, New York		10036
_________________________________ (Address of principal executive offices)		___________ (Zip Code)

Registrant’s telephone number, including area code: 212 920-3500

Not Applicable

______________________________________________

Former name or former address, if changed since last report

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨  Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨  Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨  Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨  Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 Entry into a Material Definitive Agreement.

On December 31, 2010, Ener1, Inc. (the “Company”) completed a transaction with funds managed by Goldman Sachs Asset Management, L.P. and certain other investors (collectively, the “Investors”), pursuant to a Securities Purchase Agreement (the “Purchase Agreement”) under which the Company sold to the Investors an aggregate of $25,000,000 of senior unsecured notes (the “Notes”), 339,783 shares of the Company’s common stock (the “Common Stock”) and warrants exercisable for 1,019,353 shares of common stock (the “Warrants”), for the aggregate consideration of $25,000,000.  The Notes were issued pursuant to a private placement under Section 4(2) of the Securities Act of 1933, as amended.

Each Note will accrue interest at a rate of 8.25% per annum, and will amortize at a rate of one-tenth of its face amount on a quarterly basis, with the first amortization payment due on April 1, 2011.  An amount equal to the first two amortization payments will be deposited into a blocked account to secure such amortization payments.  Each Note may, at the Company’s election, be repaid in cash or Common Stock, or any combination thereof, provided that stock payments will be valued at 91.75% of the then current market price of the Common Stock, and provided further that the Company must meet certain equity conditions before it is permitted to pay the Notes in Common Stock, including having an effective registration statement covering the resale of the Common Stock to be issued as payment of the Note.  Upon the effectiveness of such registration statement (as further described below), any funds remaining in the blocked account will be released to the Company.  If an amortization payment consists of more than 50% cash, the amount in excess of 50% will be paid together with a premium of 15% of such amount.  The Notes are subject to customary covenants, including covenants pertaining to cash maintenance and certain restrictions on the repayment of indebtedness.  The Notes mature on July 1, 2013; however, the Investors may accelerate all amounts due under the Notes upon an event of default, change of control or certain other major corporate transactions.

The Warrants have a term of five years, an exercise price of $4.68 per share, customary anti-dilution adjustments, and are redeemable at the option of the holder if a fundamental change (as defined in the Warrants) occurs.  The Common Stock and the Warrants are being issued pursuant to an existing shelf registration statement.

The Company will be required to register for resale the maximum number of shares of Common Stock that it is able to issue in repayment of the Notes pursuant to a registration rights agreement (the “Registration Rights Agreement”).  Under the Registration Rights Agreement, the Company is required to file a registration statement covering the resale of the maximum number of shares of Common Stock that it is able to issue in repayment of the Notes within 60 business days after the closing, and to have such registration statement declared effective by the SEC within 90 days after the closing (120 days if such registration statement is subject to a full review by the SEC).  If the Company does not meet these deadlines, the Company may have to pay the liquidated damages specified in the Registration Rights Agreement.  The above description of the Securities Purchase Agreement, the Notes, the Warrants and the Registration Rights Agreement, and the transactions contemplated thereby, is not intended to be complete and is qualified in its entirety by the full text of such documents, all of which are attached as exhibits to this filing and are incorporated herein by reference.

Item 7.01 Regulation FD Disclosure.

On January 3, 2011, the Company issued a press release entitled “ENER1 Completes $25-Million Capital Raise.”  The press release is attached hereto as Exhibit 99.1 and incorporated by reference herein.

This information is furnished pursuant to Item 7.01 of Form 8-K and shall not be deemed to be “filed” for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability under that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing. By filing this report on Form 8-K and furnishing this information, the Company makes no admission as to the materiality of any information in this report that is required to be disclosed solely by reason of Regulation FD.

Item 9.01 Financial Statements and Exhibits.

Exhibit 1.1 Securities Purchase Agreement, dated as of December 31, 2010, by and between Ener1 and the investors party thereto.

Exhibit 1.2 Form of Note.

Exhibit 1.3 Form of Warrant.

Exhibit 1.4 Registration Rights Agreement, dated as of December 31, 2010, by and between Ener1 and the investors party thereto.

Exhibit 99.1 Press release dated January 3, 2011.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	Ener1, Inc.
January 3, 2011	By:	/s/ Charles Gassenheimer
		Name: Charles Gassenheimer
		Title: Chief Executive Officer

Exhibit Index

Exhibit No.	Description
1.1	Securities Purchase Agreement, dated as of December 31, 2010, by and between Ener1 and the investors party thereto.
1.2	Form of Note.
1.3	Form of Warrant.
1.4	Registration Rights Agreement, dated as of December 31, 2010, by and between Ener1 and the investors party thereto.
99.1	Press Release dated January 3, 2011.

EX-1.1

SECURITIES PURCHASE AGREEMENT

This SECURITIES PURCHASE AGREEMENT, dated as of December 31, 2010 (this “Agreement”), is by and between Ener1, Inc., a Florida corporation (the “Company”), and each of the purchasers whose names are set forth on Exhibit A attached hereto (each, a “Purchaser” and, collectively, the “Purchasers”).

In consideration of the mutual covenants made herein, the parties hereto agree as follows:

ARTICLE 1

PURCHASE AND SALE OF SECURITIES

1.1          Purchase and Sale of Securities.

(a)           On the terms and subject to the conditions contained in this Agreement, the Company agrees to issue and sell to each Purchaser, and each Purchaser, severally and not jointly with the other Purchasers, agrees to purchase from the Company, (i) a senior unsecured note in the principal amount set forth opposite such Purchaser’s name on Exhibit A, in substantially the form attached hereto as Exhibit B (each, a “Note” and, collectively with the other notes issued hereunder, the “Notes”), (ii) a five-year warrant substantially in the form attached hereto as Exhibit C exercisable into the number of shares (the “Warrant Shares”) of common stock, par value $0.01 per share, of the Company (the “Common Stock”) set forth opposite such Purchaser’s name on Exhibit A at an exercise price of $4.68 per Warrant Share (subject to adjustment as provided therein) (each, a “Warrant” and, collectively with the other warrants issued hereunder, the “Warrants”) and (iii) the number of shares of Common Stock set forth opposite such Purchaser’s name on Exhibit A (the “Shares” and together with the Notes and the Warrants, the “Securities”). The purchase price to be paid by a Purchaser for the Securities (the “Purchase Price”) shall be equal to the principal amount of the Note being purchased by such Purchaser.

(b)           The Purchasers and the Company agree that the Notes, the Warrants and the Shares (if any) constitute an “investment unit” for purposes of Section 1273(c)(2) of the Internal Revenue Code of 1986, as amended (the “Code”).  The Purchasers and the Company agree that the allocation of the issue price of such investment unit between the Notes and the Warrants in accordance with Section 1273(c)(2) of the Code and Treasury Regulation Section 1.1273-2(h) shall be an aggregate amount of $2,850,000 allocated to the Warrants, $1,375,000 allocated to the Shares and the balance of the Purchase Price allocated to the Notes, and neither the Purchasers nor the Company shall take any position inconsistent with such allocation in any tax return or in any judicial or administrative proceeding in respect of taxes.

(c)           The offer and sale of the Shares (if any) and the Warrants is being made pursuant to a currently effective shelf registration statement on Form S-3 (File No. 333-170470) (the “Registration Statement”), on which at least $100,000,000 of securities are registered and available for sale by the Company as of the date hereof, which registration statement has been declared effective in accordance with the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder (the “Securities Act”), by the United States Securities and Exchange Commission (the “Commission”).

(d)           The offer and sale of the Notes is being made, and in the event that the Company wishes to exercise its right to deliver shares of Common Stock in satisfaction of amounts payable under the Notes (the “Stock Amortization Shares”), such delivery shall be made, in each case in accordance with and in reliance on the exemption from securities registration afforded by Section 4(2) of the Securities Act, including Regulation D (“Regulation D”).

(e)           Contemporaneously with the execution and delivery of this Agreement, the parties hereto are executing and delivering a Registration Rights Agreement, substantially in the form attached hereto as Exhibit D (the “Registration Rights Agreement”), pursuant to which the Company has agreed to provide certain registration rights with respect to Registrable Securities (as defined in the Registration Rights Agreement) under the Securities Act and the rules and regulations promulgated thereunder, and applicable state securities laws.

(f)           Closing.  Subject to the satisfaction or waiver of the conditions set forth in Article 4, the closing of the purchase of the Securities (the “Closing”) shall take place on or before January 15, 2010 (the “Closing Date”) at such place as the parties may agree, provided, that all of the conditions set forth in Article 4 hereof have been satisfied or waived.  On the terms and subject to the conditions contained in this Agreement, at the Closing (x) the Company shall issue and deliver or cause to be delivered to each Purchaser, (i) a Note, (ii) a Warrant and (iii) Shares, in each case as set forth opposite the name of such Purchaser on Exhibit A hereto, and (y) each Purchaser shall deliver to the Company, by wire transfer of immediately available funds, the Purchase Price set forth opposite such Purchaser’s name on Exhibit A hereto.

(g)           Post-Closing; Control Agreement.  The Company covenants and agrees that 26.38% of the Purchase Price (the “Purchase Price Holdback Amount”)payable by each Purchaser is to be deposited into a blocked account (the “Account”) subject to a Control Agreement(as defined below) to secure the first two installment payments under the Notes. The parties hereto shall use their reasonable best efforts to cause and facilitate the execution and delivery of an account control agreement (the “Control Agreement”) by the Company, Liberty Harbor Special Investments, LLC (the “Account Agent”) and Citibank (or such other bank mutually acceptable to the Company and the Account Agent) (the “Account Bank”) that is reasonably satisfactory in form and substance to the parties hereto as soon as practicable after the date hereof but in no event later than ten (10) Business Days after the Closing Date. Without limiting the generality of the foregoing, it is understood and agreed that the Control Agreement shall provide that (i) the Account Bank will comply with all instructions originated by the Account Agent without further consent by the Company, (ii) during the Account Period, the Account Bank will not permit the withdrawal or other disposition of any funds in the Account by the Company without the Account Agent’s prior written consent, (iii) the Account Bank waives any offset rights it may have against the funds in the Account and (iv) the Company has granted to the Account Agent for the benefit of the Purchasers a security interest in the Account and all assets and other property therein with respect to the first two installment payments under the Notes.  The Company shall deposit the Purchase Price Holdback Amount in immediately available funds into the Account no later than one (1) Business Day after the execution and delivery of the Control Agreement and no funds shall be released from the Account other than for the installment payments under the Notes until such date that the registration statement covering the resale of all of the Amortization Shares as contemplated under the Registration Rights Agreement has been declared effective (the “Account Period”).  If the Control Agreement has not been executed and delivered on or before the tenth (10th) Business Day following the Closing Date, the Company shall, at the request of a majority in interest of the Purchasers, deposit the Purchase Price Holdback Amount to an account designated in writing by such Purchasers; provided, however, that, upon the execution and delivery of the Control Agreement, the Purchasers shall deposit the Purchase Price Holdback Amount into the Account no later than three (3) Business Days following the date of such execution and delivery.  During the Account Period, if the Company does not timely make payment of any Installment Amount (as defined in the Notes) or any other amount of cash required to be made pursuant to the Notes, the Account Agent may direct the Account Bank to pay such amount in accordance with the terms and time periods set forth in the Notes.  The Company shall not make any payments or withdrawals of funds from the Account, and shall take all actions to keep the funds in the Account available for the payment of all obligations under the Notes at all times during the Account Period.  From and after the Account Period, the Company shall have no further obligation to keep any funds in the Account and the Control Agreement shall terminate upon the expiration of the Account Period.

2

ARTICLE 2

REPRESENTATIONS AND WARRANTIES

2.1          Representations and Warranties of the Company.  The Company hereby represents and warrants to each Purchaser, as of the date of this Agreement as follows:

(a)           Organization, Good Standing and Power.  The Company is a corporation duly incorporated, validly existing and in good standing under the laws of the State of Florida and has the requisite corporate power to own, lease and operate its properties and assets and to conduct its business as it is now being conducted.  The Company and each Subsidiary (as defined below) is duly qualified as a foreign corporation to do business and is in good standing in every jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing would not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect (as defined below).  For the purposes of this Agreement, “Material Adverse Effect” means any material adverse effect on the business, operations, properties, prospects, or condition (financial or otherwise) of the Company and its Subsidiaries on a consolidated basis and/or any condition, circumstance, or situation that would prohibit or otherwise interfere with the ability of the Company to perform any of its obligations under this Agreement or any of the Transaction Documents (as defined below) in any material respect.

3

(b)           Authorization; Enforcement.  The Company has the requisite corporate power and authority to execute, deliver and perform its obligations under this Agreement, the Notes, the Warrants, the Registration Rights Agreement and the Control Agreement (collectively, the “Transaction Documents”), to issue and deliver the Securities in accordance with the terms hereof, to deliver the Stock Amortization Shares in accordance with the terms hereof and of the Notes and to deliver the Warrant Shares upon exercise of the Warrants.  The execution, delivery and performance of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly and validly authorized by all necessary corporate action, and no further consent or authorization of the Company or its board of directors or shareholders is required.  When executed and delivered by the Company, each of the Transaction Documents shall constitute a valid and binding obligation of the Company, enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by general principles of equity.

(c)           Capitalization.  The authorized capital stock and the issued and outstanding shares of capital stock of the Company as of the date of this Agreement are set forth on Schedule 2.1(c) hereto.  All of the outstanding shares of Common Stock have been duly and validly authorized and are fully paid and non-assessable.  Except as set forth on Schedule 2.1(c), no shares of Common Stock or any other security of the Company are entitled to preemptive rights or registration rights and there are no outstanding options, warrants, scrip, rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities or rights convertible into, any shares of capital stock of the Company.  Except as set forth on Schedule 2.1(c), there are no equity plans, contracts, commitments, understandings, or arrangements by which the Company is or may become bound to issue additional shares of the capital stock of the Company or options, securities or rights convertible into shares of capital stock of the Company.  Except for customary transfer restrictions contained in agreements entered into by the Company in order to sell securities, and except as set forth on Schedule 2.1(c), the Company is not a party to, and it has no knowledge of, any agreement or understanding restricting the voting or transfer of any shares of the capital stock of the Company.

(d)           Issuance of Securities.  The issuance of the Securities, the Warrant Shares and the Stock Amortization Shares has been duly authorized by all necessary corporate action.  The Notes and the Warrants, when issued in accordance with the terms of this Agreement, will be validly issued, free and clear of any Liens (as defined below).  As of the Closing, a number of shares of Common Stock shall have been duly authorized and reserved for issuance which equals or exceeds the sum of (i) 100% of the maximum number of shares of Common Stock issuable as Stock Amortization Shares (assuming a Stock Payment Price (as defined in the Notes) of $2.29375 (appropriately adjusted for any stock split, stock dividend, stock combination, stock buy-back or other similar transaction) as of the Trading Day immediately preceding the Closing Date) and (ii) 100% of the number of shares of Common Stock issuable upon exercise of the Warrants in their entirety at the Exercise Price in effect on the Closing Date (without taking into account any limitations on the exercise of the Warrants).  Upon the issuance and delivery of the Notes in accordance with this Agreement, the offer and sale of the Notes and, if any Stock Amortization Shares are delivered in accordance with the Notes, the issuance and delivery of such Stock Amortization Shares, will constitute transactions exempt from the registration requirements of the Securities Act. The Shares, if and when issued in accordance with the terms of this Agreement, will be validly issued, fully paid and nonassessable, free and clear of any Liens.  The Stock Amortization Shares, when issued in accordance with the terms of the Notes, will be validly issued, fully paid and nonassessable, free and clear of any Liens.  The Warrant Shares, when issued in accordance with the terms of the Warrants, will be validly issued, fully paid and nonassessable, free and clear of any Liens. The offer and sale by the Company of the Shares (if any) and the Warrants have been registered under the Securities Act; the Shares (if any), the Warrants and the Warrant Shares (assuming that the Registration Statement is available at the time of any sale of the Warrant Shares or if not, that the Warrants are exercised pursuant to a “cashless exercise”) are being validly issued pursuant to the Registration Statement; and all of the Shares, Warrant Shares and the Warrants, when issued in accordance with the terms of this Agreement, are freely transferable and freely tradable by the Purchasers without restriction.

4

(e)           No Conflicts.  The execution, delivery and performance of the Transaction Documents by the Company, and the performance by the Company of its obligations under the Transaction Documents (including, without limitation, the issuance of the Securities, the Warrant Shares and the Stock Amortization Shares), do not and will not (i) violate or conflict with any provision of the Company’s Articles of Incorporation (the “Articles”) or By-laws (the “By-laws”), each as amended to date, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, mortgage, deed of trust, indenture, note, bond, license, lease agreement, instrument or obligation to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries’ respective properties or assets are bound, (iii) result in a violation of any foreign, federal, state or local statute, law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or any of its Subsidiaries or by which any property or asset of the Company or any of its Subsidiaries is bound or affected, or (iv) create or impose a lien, mortgage, security interest, charge or encumbrance of any nature (each, a “Lien”) on any property or asset of the Company or its Subsidiaries under any agreement or any commitment to which the Company or any of its Subsidiaries is a party or by which the Company or any of its Subsidiaries is bound or by which any of their respective properties or assets are bound, except, in the case of clauses (ii), (iii) and (iv), for such conflicts, defaults, terminations, amendments, violations, acceleration, cancellations, creations and impositions as would not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect.

(f)           Consents.  No consent, authorization or order of, or any filing or registration with, any court, governmental agency or any regulatory or self-regulatory agency, or any court or to our knowledge, any third party, is required to be obtained by the Company in order for the Company to execute and deliver or perform any of its obligations under the Transaction Documents or to issue the Securities, the Warrant Shares or the Stock Amortization Shares, in each case in accordance with the terms hereof or the Warrant, as the case may be, other than (i) the filing with the Commission of a prospectus supplement pursuant to Rule 424(b) under the Securities Act (the “Prospectus Supplement”) supplementing the base prospectus forming part of the Registration Statement (the “Prospectus”) and (ii) the application(s) to the Principal Market for the listing of the Shares (if any), the Warrant Shares and the Stock Amortization Shares for trading thereon in the time and manner required thereby.  The Company and its Subsidiaries are unaware of any facts or circumstances which might prevent the Company from obtaining or effecting any registration, application or filing described in the preceding sentence.  The Company is not in violation of the listing requirements of the Principal Market and has no knowledge of any facts which would reasonably lead to delisting or suspension of the Common Stock in the foreseeable future.  For purposes of this Agreement, “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

5

(g)           Commission Documents, Financial Statements.  The Common Stock is registered pursuant to Section 12(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Company has filed all reports, schedules, forms, statements and other documents required to be filed by it with the Commission pursuant to the reporting requirements of the Exchange Act (all of the foregoing including information incorporated by reference therein being referred to herein as the “Commission Documents”).  During the two years prior to the date hereof, the Company has timely filed all Commission Documents (all Commission Documents filed prior to the date hereof or prior to the date of the Closing, and all exhibits included therein and financial statements, notes and schedules thereto and documents incorporated by reference therein being hereinafter referred to as the “Public Filings”) complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the Commission promulgated thereunder and other federal, state and local laws, rules and regulations applicable to such documents.  The Public Filings, the Registration Statement, and the Prospectus did not, as of their respective dates (and at the time of filing of any applicable Prospectus Supplement will not), contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.  As of their respective dates, the financial statements of the Company included in the Public Filings complied as to form in all material respects with applicable accounting requirements and the published rules and regulations of the Commission or other applicable rules and regulations with respect thereto.  Such financial statements have been prepared in accordance with generally accepted accounting principles (“GAAP”) applied on a consistent basis during the periods involved (except (i) as may be otherwise indicated in such financial statements or the notes thereto or (ii) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements), and fairly present in all material respects the financial position of the Company and its Subsidiaries as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal year-end audit adjustments).

(h)           Subsidiaries.  Schedule 2.1(h) hereto sets forth each active Subsidiary of the Company, showing the jurisdiction of its incorporation or organization and showing the percentage of each person’s or entity’s ownership of the outstanding stock or other interests of such Subsidiary.  NanoEner, Inc. and EnerFuel, Inc. are not, individually or in the aggregate, “significant subsidiaries” (as such term is defined in Regulation S-X of the Securities Act) of the Company and the assets and the operations of such Subsidiaries are not, individually or in the aggregate, material to the business of the Company.  For the purposes of this Agreement, “Subsidiary” shall mean any corporation or other entity of which at least a majority of the securities or other ownership interest having ordinary voting power (absolutely or contingently) for the election of directors or other persons performing similar functions are at the time owned directly or indirectly by the Company and/or any of its other Subsidiaries.  All of the outstanding shares of capital stock of each active Subsidiary have been duly authorized and validly issued, and are fully paid and nonassessable.  Except as would not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect, there are no outstanding preemptive, conversion or other rights, options, warrants or agreements granted or issued by or binding upon any Subsidiary for the purchase or acquisition of any shares of capital stock of any Subsidiary or any other securities convertible into, exchangeable for or evidencing the rights to subscribe for any shares of such capital stock.  Neither the Company nor any active Subsidiary is subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any shares of the capital stock of any Subsidiary or any convertible securities, rights, warrants or options of the type described in the preceding sentence, except as would not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect.  Neither the Company nor any active Subsidiary is party to, nor has any knowledge of, any agreement restricting the voting, transfer or receipt of distributions on any shares of the capital stock of any Subsidiary.

6

(i)           No Material Adverse Change.  Since December 31, 2009, the Company has not experienced or suffered any event or series of events that, individually or in the aggregate, has had or reasonably would be expected to have a Material Adverse Effect.

(j)           No Undisclosed Liabilities.  Neither the Company nor any Subsidiary has any liabilities or obligations of any nature (absolute, accrued, contingent or otherwise) which are not properly reflected or reserved against in the Company’s financial statements included in the Public Filings to the extent required to be so reflected or reserved against in accordance with GAAP, except for (i) liabilities that have arisen in the ordinary course of business consistent with past practice and that have not had a Material Adverse Effect, and (ii) liabilities that, individually or in the aggregate, have not had and would not reasonably be expected to have or result in a Material Adverse Effect.

(k)           No Undisclosed Events or Circumstances.  Since December 31, 2009, no event or circumstance has occurred or exists with respect to the Company or its Subsidiaries or their respective businesses, properties, prospects, operations or financial condition, that, under applicable law, rule or regulation, requires public disclosure or announcement by the Company but which has not been so publicly announced or disclosed.

(l)           Indebtedness.  Schedule 2.1(l) hereto sets forth all outstanding secured and unsecured Indebtedness of the Company or any Subsidiary, or for which the Company or any Subsidiary has commitments.  The Indebtedness of the Company and its Subsidiaries set forth in Schedule 6.14 of the Noteis a true, correct and accurate description of such Indebtedness as of the date hereof.For the purposes of this Agreement, “Indebtedness” shall include (a) all obligations for borrowed money, (b) all obligations evidenced by bonds, debentures, notes, or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, current swap agreements, interest rate hedging agreements, interest rate swaps, or other financial products, (c) all capital lease obligations, (d) all obligations or liabilities secured by a Lien on any asset of the Company, irrespective of whether such obligation or liability is assumed, (e) any obligation guaranteeing or intended to guarantee (whether directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse) any of the foregoing obligations of any other person or entity and (f) endorsements for collection or deposit.

7

(m)           Title to Assets.  Each of the Company and its Subsidiaries has good and valid title to all of its real and personal property, free and clear of any Liens, except Liens that do not materially affect the value of such property and do not interfere with the use made and proposed to be made of such property by the Company and any of its Subsidiaries.  All material leases to which the Company or any of its Subsidiaries is a party are valid and subsisting and in full force and effect.

(n)           Actions Pending.  There is no action, suit, claim, investigation, arbitration, alternate dispute resolution proceeding or other proceeding before or by the Principal Market, any court, public board, government agency, self-regulatory organization or body (collectively, “Proceedings”) pending or, to the knowledge of the Company, threatened against or affecting the Company, the Common Stock or any Subsidiary that questions the validity of this Agreement or any of the other Transaction Documents or any of the transactions contemplated hereby or thereby or any action taken or to be taken pursuant hereto or thereto.  There are no material Proceedings pending or, to the knowledge of the Company, threatened against or involving the Company, any Subsidiary or any of their respective properties or assets.  No Proceeding described in the Public Filings would, individually or in the aggregate, reasonably be expected, if adversely determined, to have a Material Adverse Effect.  There are no outstanding orders, judgments, injunctions, awards, decrees or investigations of any court, arbitrator or governmental, regulatory body, self-regulatory agency or stock exchange against the Company or any Subsidiary or any officers or directors of the Company or any Subsidiary in their capacities as such, except for those that would not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect.

(o)           Compliance with Law.  Except as would not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect, the Company and its Subsidiaries have been and are presently conducting their respective businesses in accordance with all applicable foreign, federal, state and local governmental laws, rules, regulations and ordinances.  The Company and each of its Subsidiaries have all material franchises, permits, licenses, consents and other material governmental or regulatory authorizations and approvals necessary for the conduct of its business as now being conducted by it.  The Company has complied with all applicable federal and state securities laws in connection with the transactions contemplated by the Transaction Documents.

(p)           Taxes.  The Company and each Subsidiary has timely filed all material federal, state, local and foreign income, franchise and other tax returns, reports and declarations required by any governmental authority (whether foreign, federal, state or local) with jurisdiction over the Company or any Subsidiary and has paid or accrued all taxes shown as due thereon except for any taxes which are being contested in good faith (by appropriate proceedings and in respect of which adequate reserves with respect thereto are maintained in accordance with GAAP) and has set aside on its books provision reasonably adequate for the payment of all taxes for periods subsequent to the periods to which such returns, reports or declarations apply.  All such returns were complete and correct in all material respects and the Company has no knowledge of a material tax deficiency which has been asserted or threatened against the Company or any Subsidiary.  The Company is not under audit by any taxing authority.  The Company has set aside on its books provisions reasonably adequate for the payment of all taxes for periods to which those returns, reports or declarations apply.  There are no unpaid taxes in any material amount claimed to be due by any taxing authority.  For purposes of this Section 2.1(p), taxes shall include any and all interest and penalties.

8

(q)           No General Solicitation; Certain Fees.  Neither the Company, nor any of its Subsidiaries or affiliates, nor any Person acting on its or their behalf, has engaged in any form of general solicitation or general advertising (within the meaning of Regulation D) in connection with the offer or sale of the Notes or the Stock Amortization Shares.  The Company shall be responsible for the payment of any placement agent’s fees, financial advisory fees, or brokers’ commissions (other than for persons engaged by any Purchaser or its investment advisor) relating to or arising out of the transactions contemplated hereby.  The Company shall pay, and hold each Purchaser harmless against, any liability, loss or expense (including, without limitation, attorney’s fees and out-of-pocket expenses) arising in connection with any such claim.  Except as set forth on Schedule 2.1(q), the Company has not employed any broker or finder or incurred any liability for any brokerage or investment banking fees, commissions, finders’ structuring fees, financial advisory fees or other similar fees in connection with the Transaction Documents.

(r)           Disclosure.  Except for the information concerning the transactions contemplated by this Agreement, the Company confirms that neither it nor any other person or entity acting on its behalf has provided any of the Purchasers or their agents or counsel with any information that constitutes or might constitute material, nonpublic information.  Neither this Agreement nor the Schedules hereto nor any other documents, certificates or instruments furnished to the Purchasers by or on behalf of the Company or any Subsidiary in connection with the transactions contemplated by this Agreement contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements made herein or therein, in the light of the circumstances under which they were made herein or therein, not misleading.

(s)           Intellectual Property.  Except as would not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect, the Company and each of the Subsidiaries owns or possesses the rights to all patents, trademarks, domain names (whether or not registered) and any patentable improvements or copyrightable derivative works thereof, websites and intellectual property rights relating thereto, service marks, trade names, copyrights, licenses and authorizations which are necessary for the conduct of its business as now conducted without any conflict, to the Company’s knowledge, with the rights of others.

(t)           Environmental Compliance.  The Company and each of its Subsidiaries have obtained all material approvals, authorization, certificates, consents, licenses, orders and permits or other similar authorizations of all governmental authorities (whether foreign, federal, state or local), or from any other person or entity, that are required under any Environmental Laws.  “Environmental Laws” shall mean all applicable foreign, federal, state and local laws relating to the protection of the environment including, without limitation, all requirements pertaining to reporting, licensing, permitting, controlling, investigating or remediating emissions, discharges, releases or threatened releases of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, materials or wastes, whether solid, liquid or gaseous in nature, into the air, surface water, groundwater or land, or relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of hazardous substances, chemical substances, pollutants, contaminants or toxic substances, material or wastes, whether solid, liquid or gaseous in nature.  The Company and each of its Subsidiaries are also in compliance with all requirements, limitations, restrictions, conditions, standards, schedules and timetables required or imposed under all Environmental Laws, except as would not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect.  Except as would not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect, there are no past or present events, conditions, circumstances, incidents, actions or omissions relating to or in any way affecting the Company or its Subsidiaries that violate or may violate any Environmental Law or that may give rise to any environmental liability, or otherwise form the basis of any claim, action, demand, suit, proceeding, hearing, study or investigation under any Environmental Law, or based on or related to the manufacture, processing, distribution, use, treatment, storage (including without limitation underground storage tanks), disposal, transport or handling, or the emission, discharge, release or threatened release of any hazardous substance.

9

(u)           Books and Records; Internal Accounting Controls.  The books and records of the Company and its Subsidiaries accurately reflect in all material respects the information relating to the business of the Company and the Subsidiaries, the location and collection of their assets, and the nature of all transactions giving rise to the obligations or accounts receivable of the Company or any Subsidiary.  The Company is in material compliance with all provisions of the Sarbanes-Oxley Act of 2002 which are applicable to it.  The Company and its Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management’s general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with GAAP and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management’s general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.  The Company has established disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that information required to be disclosed by the Company in the reports it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Commission’s rules and forms.  The Company’s certifying officers have evaluated the effectiveness of the Company’s disclosure controls and procedures as of the end of the period covered by the Company’s most recently filed periodic report under the Exchange Act (such date, the “Evaluation Date”).  The Company presented in its most recently filed periodic report under the Exchange Act the conclusions of the certifying officers about the effectiveness of the disclosure controls and procedures based on their evaluations as of the Evaluation Date.  Since the Evaluation Date, there have been no changes in the Company’s internal control over financial reporting (as such term is defined in the Exchange Act).

(v)           Material Agreements.  True, complete and correct copies of each material contract of the Company or any of its Subsidiaries required to be filed as an exhibit on a Current Report on Form 8-K, a Quarterly Report on Form 10-Q, or an Annual Report on Form 10-K, in each case pursuant to Item 601(a) and Item 601(b)(10) of Regulation S-K under the Exchange Act (the “Company Material Agreements”), are attached or incorporated as exhibits to the Public Filings.  Each Company Material Agreement is valid and binding on the Company and the Subsidiaries, as applicable, and in full force and effect (except those which have expired or been terminated in accordance with their terms).  The Company and each of its Subsidiaries, as applicable, are in all material respects in compliance with and have in all material respects performed all obligations required to be performed by them to date under each Company Material Agreement.  Neither the Company nor any of its Subsidiaries knows of, or has received notice of, any material violation or default (or any condition which with the passage of time or the giving of notice would cause such a violation of or a default) by any party under any Company Material Agreement.

10

(w)           Transactions with Affiliates.  There are no loans, leases, agreements, contracts, royalty agreements, management contracts or arrangements or other continuing transactions between (a) the Company, any of its Subsidiaries or any of their respective customers or suppliers on the one hand, and (b) on the other hand, any officer, employee, consultant or director of the Company, or any of its Subsidiaries, or any person or entity owning at least 5% of the outstanding capital stock of the Company or any of its Subsidiaries or any member of the immediate family of such officer, employee, consultant, director or shareholder or any corporation or other entity controlled by such officer, employee, consultant, director or shareholder, or a member of the immediate family of such officer, employee, consultant, director or shareholder which, in each case, is required by law, rule or regulation to be disclosed in the Commission Documents or in the Company’s most recently filed definitive proxy statement on Schedule 14A, that is not so disclosed in the Commission Documents or in such proxy statement.

(x)           Employees.  (i)  Neither the Company nor any of its Subsidiaries has any collective bargaining arrangements or agreements covering any of its employees.  There is not currently in force any employment contract, agreement regarding proprietary information, non-competition agreement, non-solicitation agreement, confidentiality agreement, or any other similar contract or restrictive covenant, relating to the right of any officer, employee or consultant to be employed or engaged by the Company or such Subsidiary required to be disclosed in the Commission Documents that is not so disclosed.  The Company and each Subsidiary is in material compliance with all foreign, federal, state and local laws and regulations relating to employment and employment practices, terms and conditions of employment and wages and hours, and employee benefits plans (including, without limitation, the Employee Retirement Income Security Act of 1974, as amended), except where such non-compliance would not, individually or in the aggregate, reasonably be expected to have or result in a Material Adverse Effect.

(ii)           No executive officer of the Company or any of its Subsidiaries (as defined in Rule 501(f) of the Securities Act) has notified the Company or any such Subsidiary that such officer intends to leave the Company or any such Subsidiary or otherwise terminate such officer’s employment with the Company or any such Subsidiary.  No executive officer of the Company or any of its Subsidiaries, to the knowledge of the Company or any of its Subsidiaries, is in violation of any material term of any employment contract, confidentiality, disclosure or proprietary information agreement, non-competition agreement, or any other contract or agreement or any restrictive covenant, and the continued employment of each such executive officer does not subject the Company or any of its Subsidiaries to any liability with respect to any of the foregoing matters.

(y)           Absence of Certain Developments.  Since December 31, 2009, and except as described in the Public Filings, neither the Company nor any of its Subsidiaries has:

11

(i)            issued any stock, bonds or other corporate securities or any right, options or warrants with respect thereto;

(ii)           borrowed any amount in excess of $25 million or incurred or become subject to any other liabilities in excess of $50 million (absolute or contingent) except current liabilities incurred in the ordinary course of business which are comparable in nature and amount to the current liabilities incurred in the ordinary course of business during the comparable portion of its prior fiscal year, as adjusted to reflect the current nature and volume of the business of the Company and its Subsidiaries;

(iii)          discharged or satisfied any Lien in excess of $1 million or paid any obligation or liability (absolute or contingent) in excess of $25 million, other than current liabilities paid in the ordinary course of business;

(iv)          declared or made any payment or distribution of cash or other property to shareholders with respect to its stock, or purchased or redeemed, or made any agreements so to purchase or redeem, any shares of its capital stock;

(v)           sold, assigned or transferred any other tangible assets, or canceled any debts or claims, in each case in excess of $1 million, except in the ordinary course of business;

(vi)          sold, assigned or transferred any patent rights, trademarks, trade names, copyrights, trade secrets or other intangible assets or intellectual property rights in excess of $1 million, or disclosed any proprietary confidential information to any person or entity except to customers in the ordinary course of business or to the Purchasers or their representatives;

(vii)         suffered any losses or waived any rights of value, whether or not in the ordinary course of business, or suffered the loss of any amount of prospective business, which individually or in the aggregate would have a Material Adverse Effect;

(viii)        made any changes in employee compensation except in the ordinary course of business and consistent with past practices;

(ix)           made capital expenditures or commitments therefor that aggregate in excess of $100 million;

(x)           entered into a binding agreement with respect to any material transaction, whether or not in the ordinary course of business;

(xi)           made charitable contributions or pledges in excess of $1 million;

(xii)         suffered any material damage, destruction or casualty loss, whether or not covered by insurance;

(xiii)        experienced any material problems with labor or management in connection with the terms and conditions of their employment;

12

(xiv)        taken any steps to seek protection pursuant to any bankruptcy law (nor does the Company have any knowledge or reason to believe that its creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so);

(xv)         individually and on a consolidated basis, been deemed as of the date hereof, and after giving effect to the transactions contemplated hereby to occur at the Closing, to be Insolvent (as defined below).  For purposes of this Section 2.1(xv), “Insolvent” means, with respect to any Person, that (i) the present fair saleable value of such Person’s assets is less than the amount required to pay such Person’s total Indebtedness, (ii) such Person is unable to pay its debts and liabilities, subordinated, contingent or otherwise, as such debts and liabilities become due, (iii) such Person intends to incur or believes that it will incur debts that would be beyond its ability to pay as such debts mature or (iv) such Person has unreasonably small capital with which to conduct the business in which it is engaged as such business is now conducted and is proposed to be conducted; or

(xvi)        entered into an agreement, written or otherwise, to take any of the foregoing actions.

(z)           Investment Company Act Status.  The Company is not, and as a result of and immediately upon the Closing will not be, an “investment company” or a company “controlled” by an “investment company,” within the meaning of the Investment Company Act of 1940, as amended.

(aa)         Independent Nature of Purchasers.  The Company acknowledges that the obligations of each Purchaser under the Transaction Documents are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under the Transaction Documents.  The Company acknowledges that each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.

(bb)        DTC Status.  The Company’s transfer agent is a participant in and the Common Stock is eligible for transfer pursuant to the Depository Trust Company (“DTC”) Fast Automated Securities Transfer Program.  The name, address, telephone number, fax number, contact person and email of the Company’s transfer agent are set forth on Schedule 2.1(bb).

(cc)         Governmental Approvals.  Except for any filing or other action that may be required under applicable state and/or federal securities laws (which if required, shall be filed on a timely basis), no authorization, consent, approval, license, exemption of, filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, is or will be necessary for, or in connection with, the performance by the Company of its obligations under the Transaction Documents.

13

(dd)        Insurance.  The Company and each of its Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as management of the Company believes to be prudent and customary in the businesses in which the Company and its Subsidiaries are engaged.  Neither the Company nor any such Subsidiary has been refused any material insurance coverage sought or applied for and the Company does not have any reason to believe that it or any Subsidiary will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business at a cost that would not reasonably be expected to have or result in a Material Adverse Effect.

(ee)         Trading Activities.  It is understood and acknowledged by the Company that none of the Purchasers has been asked to agree, nor has any Purchaser agreed, to desist from purchasing or selling, long and/or short, securities of the Company, or “derivative” securities based on securities issued by the Company or to hold the Securities, the Warrant Shares or Stock Amortization Shares for any specified term. The Company further understands and acknowledges that one or more Purchasers may engage in hedging and/or trading activities at various times during the period that the Securities or Stock Amortization Shares, the Warrant Shares are outstanding, including, without limitation, during the periods that the value of the Stock Amortization Shares are being determined and such hedging and/or trading activities, if any, can reduce the value of the existing shareholders’ equity interest in the Company both at and after the time the hedging and/or trading activities are being conducted.

(ff)          Certain Business Practices.  None of the Company or any Company Subsidiary or any director, officer, agent, employee or other person or entity acting for or on behalf of Company or any Subsidiary has violated the U.S. Foreign Corrupt Practices Act of 1977, as amended, or any other anti-bribery or anti-corruption laws applicable to the Company or any Subsidiary.

(gg)        Shell Company Status.  The Company is not currently, and has not been, an issuer of the type described in paragraph (i) of Rule 144 under the Securities Act.

(hh)        Registration Statement.

(i)           The Registration Statement has become effective and is available for the issuance of the Shares (if any), the Warrants and the Warrant Shares thereunder; no stop order suspending the effectiveness of the Registration Statement is in effect, and no proceedings for such purpose are pending before or, to the knowledge of the Company, threatened by the Commission.  Upon issuance and delivery to the Purchasers in accordance with the related Prospectus Supplement, the Shares (if any), the Warrants and the Warrant Shares shall be free of any restriction on transferability under federal securities laws and state “Blue Sky” laws and any certificates or other instruments evidencing or representing the Shares, the Warrants and the Warrant Shares shall be free of any restrictive legend.  The section in the Prospectus entitled “Securities We May Offer” permits the issuance and sale of the Shares and the Warrants hereunder.

(ii)           The Company is in compliance in all material respects with the applicable listing and corporate governance rules and regulations of the NASDAQ Global Market (the “Principal Market”).  The Company has not, in the preceding twelve (12) months, received notice from the Principal Market to the effect that the Company is not in compliance with the listing or maintenance requirements of the Principal Market.  The Company is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.

14

(ii)           No Integrated Offering.  Neither the Company, nor any of its affiliates, nor any person acting on its or their behalf, has directly or indirectly made any offers or sales of any security or solicited any offers to buy any security under circumstances that would cause the offering of the Securities pursuant to this Agreement to be integrated with prior offerings by the Company for purposes of the Securities Act and which, as a result of such integration, would prevent the Company from selling the Securities pursuant to Regulation D and Rule 506 thereof under the Securities Act.

(jj)           Dilutive Effect.  The Company acknowledges that its obligation to issue the Warrant Shares upon exercise of the Warrants in accordance with this Agreement and the Warrants is, in each case, is absolute and unconditional regardless of the dilutive effect that such issuance may have on the ownership interests of other shareholders of the Company.

(kk)         Application of Takeover Protections; Rights Agreement.  The Company and its board of directors have taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Articles of Incorporation or the laws of the State of Florida which is or could become applicable to any Purchaser as a result of the transactions contemplated by this Agreement, including, without limitation, the Company’s issuance of the Securities and any Purchaser’s ownership of the Securities.  Neither the Company nor its Board of Directors has adopted a shareholder rights plan or similar arrangement relating to accumulations of beneficial ownership of Common Stock or a change in control of the Company.

(ll)           Form S-3 Eligibility.  The Company is eligible to register the Stock Amortization Shares for resale by the Purchasers using Form S-3 promulgated under the Securities Act.

(mm)       Off Balance Sheet Arrangements.  There is no transaction, arrangement, or other relationship between the Company and an unconsolidated or other off balance sheet entity that is required to be disclosed by the Company in its Exchange Act filings and is not so disclosed or that otherwise would be reasonably likely to have a Material Adverse Effect.

(nn)        Ranking of Notes.  Except as set forth on Schedule 2.1(nn), no Indebtedness of the Company is senior to or ranks pari passu with the Notes in right of payment, whether with respect of payment of redemptions, interest, damages or upon liquidation or dissolution or otherwise.

(oo)        Manipulation of Price.  The Company has not, and to its knowledge no one acting on its behalf has, (i) taken, directly or indirectly, any action designed to cause or to result in the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of any of the Securities, (ii) sold, bid for, purchased, or paid any compensation for soliciting purchases of, any of the Securities, or (iii) paid or agreed to pay to any person any compensation for soliciting another to purchase any other securities of the Company.

15

(pp)        Transfer Taxes.  On the Closing Date, all stock transfer or other taxes (other than income or similar taxes) which are required to be paid in connection with the sale and transfer of the Securities to be sold to each Purchaser hereunder will be, or will have been, fully paid or provided for by the Company, and all laws imposing such taxes will be or will have been complied with.

(qq)        U.S. Real Property Holding Corporation.  The Company is not, has never been, and so long as any Securities remain outstanding, shall not become, a U.S. real property holding corporation within the meaning of Section 897 of the Internal Revenue Code of 1986, as amended, and the Company shall so certify upon any Purchaser’s request.

(rr)          No Additional Agreements.  The Company does not have any agreement or understanding with any Purchaser with respect to the transactions contemplated by the Transaction Documents other than as specified in the Transaction Documents.

2.2          Representations and Warranties of each Purchaser.  Each Purchaser hereby represents and warrants to the Company, with respect to itself solely and not with respect to any other Purchaser, as follows as of the date hereof:

(a)           Organization and Standing.  Such Purchaser is a legal entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization.

(b)           Authorization and Power.  Such Purchaser has the requisite power and authority to enter into and perform the Transaction Documents and to purchase the Securities being sold to it hereunder.  The execution, delivery and performance of the Transaction Documents by such Purchaser and the consummation by it of the transactions contemplated hereby have been duly authorized by all necessary corporate or partnership action, and no further consent or authorization of such Purchaser or its board of directors, shareholders, members or partners, as the case may be, is required.  This Agreement constitutes the valid and binding obligation of such Purchaser enforceable against such Purchaser in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation, conservatorship, receivership or similar laws relating to, or affecting generally the enforcement of, creditor’s rights and remedies or by general principles of equity.

(c)           No Conflicts.  The execution, delivery and performance by such Purchaser of the Transaction Documents to which it is a party and the consummation by such Purchaser of the transactions contemplated hereby and thereby will not (i) result in a violation of the organizational documents of such Purchaser, (ii) conflict with, or constitute a default (or an event which with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture or instrument to which such Purchaser is a party, or (iii) result in a violation of any law, rule, regulation, order, judgment or decree (including federal and state securities laws) applicable to such Purchaser, except in the case of clauses (ii) and (iii) above, for such conflicts, defaults, rights or violations that would not, individually or in the aggregate, reasonably be expected to have or result in a material adverse effect on the ability of such Purchaser to perform its obligations hereunder.

16

(d)           Certain Fees.  Except as set forth on Schedule 2.2(d), such Purchaser has not employed any broker or finder or incurred any liability for any brokerage or investment banking fees, commissions, finders’ structuring fees, financial advisory fees or other similar fees in connection with the Transaction Documents.

(e)           Accredited Investor.  Such Purchaser is an “accredited investor” (as defined in Rule 501 of Regulation D), and such Purchaser has such experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Securities.  Such Purchaser acknowledges that an investment in the Securities is speculative and involves a high degree of risk and that it has sufficient financial resources to bear the loss of its investment.

(f)            Information.  The Company has provided such Purchaser with information regarding the business, operations and financial condition of the Company and has granted to such Purchaser the opportunity to ask questions of and receive answers from representatives of the Company, its officers, directors, employees and agents concerning the Company and materials relating to the terms and conditions of the purchase and sale of the Securities  hereunder, in order for such Purchaser to make an informed decision with respect to its investment in the Securities.  Neither such information nor any other investigation conducted by such Purchaser or any of its representatives shall modify, amend or otherwise affect such Purchaser’s right to rely on the Company’s representations and warranties contained in this Agreement.

(g)           Limitations on Disposition.  Such Purchaser acknowledges that the Notes and the Stock Amortization Shares have not been and are not being registered under the Securities Act and may not be transferred or resold without registration under the Securities Act or unless pursuant to an exemption therefrom.

(h)           Legend.  Such Purchaser understands that the certificates representing the Notes may bear a restrictive legend in substantially the following form:

“The securities represented by this certificate or issuable upon the exercise hereof have not been registered under the Securities Act of 1933, as amended (the “Securities Act”), or the securities laws of any state, and may not be offered or sold unless a registration statement under the Securities Act and applicable state securities laws shall have become effective with regard thereto, or an exemption from registration under the Securities Act and applicable state securities laws is available in connection with such offer or sale and the holder delivers an opinion of counsel in a form reasonably satisfactory to the issuer that registration is not required under the Securities Act, or unless sold pursuant to Rule 144 under the Securities Act.  The securities represented by this certificate or issuable upon the exercise or exchange hereof may be pledged in connection with a bona fide margin financing or extension of credit.”

17

Notwithstanding the foregoing, it is agreed that the legend set forth above and other restrictive language shall be removed and the Company shall issue a certificate without such legend to the holder of the Notes upon which it is stamped, if, unless otherwise required by state securities laws, (A) the resale or transfer (including, without limitation, a pledge) of any of the Stock Amortization Shares is registered pursuant to an effective registration statement, (B) such Notes have been sold pursuant to Rule 144, subject to receipt by the Company of customary documentation reasonably acceptable to the Company in connection therewith, or (C) such Notes are eligible for resale under Rule 144(b)(1) or any successor provision.  The Company shall be responsible for the fees associated with such issuance.

(i)           Reliance on Exemptions.  Such Purchaser understands that the Securities are being offered and sold to it in reliance upon specific exemptions from the registration requirements of United States federal and state securities laws and that the Company is relying upon the accuracy and completeness of the representations and warranties of such Purchaser set forth in this Agreement in order to determine the availability of such exemptions and the eligibility of such Purchaser to acquire the Securities.

(j)           Non-Affiliate Status; Common Stock Ownership.  Such Purchaser is not an “affiliate” (as such term is defined in Regulation D) of the Company, and such Purchaser’s investment in the Securities is not for the purpose of acquiring, directly or indirectly, control of, and it has no intent to acquire or exercise control of, the Company.

(k)           Qualified Institutional Buyer Status.  Such Purchaser is a “qualified institutional buyer” as that term is defined in Rule 144A of the Securities Act.

ARTICLE 3

COVENANTS OF THE COMPANY

The Company agrees with each Purchaser that the covenants in this Article 3 shall apply to it until all obligations under the Notes have been paid in full.

3.1           Compliance with Laws; Commission.  The Company shall comply in all material respects with all applicable laws, rules, regulations and orders, and shall take all necessary actions as may be required by applicable law, rule and regulation in order to legally and validly issue and deliver the Securities, the Warrant Shares and the Stock Amortization Shares to the Purchasers or their respective transferees.

18

3.2           Registration and Listing.  The Company shall secure the listing of all of the Shares (if any), Warrant Shares and Stock Amortization Shares upon each national securities exchange and automated quotation system, if any, upon which the Common Stock is then listed (subject to official notice of issuance).  The Company shall cause its Common Stock (including all Shares, Warrant Shares and Stock Amortization Shares from time to time issuable under the terms of the Transaction Documents) to continue to be registered under Section 12(b) of the Exchange Act, shall comply in all material respects with its reporting and filing obligations under the Exchange Act.  The Company shall not take any action or file any document (whether or not permitted by the Securities Act or the rules promulgated thereunder) with the effect of terminating or suspending such registration or its reporting and filing obligations under the Exchange Act or Securities Act.  The Company will use commercially reasonable efforts to (i) maintain the listing or trading of its Common Stock and (ii) secure the inclusion for quotation of all of the Registrable Securities on the NASDAQ Global Market or The New York Stock Exchange or if, despite the Company’s best efforts, the Company is unsuccessful in maintaining the listing or trading described in clause (i) above, the NASDAQ Global Select Market, the NASDAQ Capital Market or the NYSE Amex.  The Company shall pay all fees and expenses in connection with satisfying its obligations under this Section 3.2.

3.3           Reporting Status.  From the date of this Agreement until the date on which the Purchasers shall have sold all the Stock Amortization Shares and the Warrant Shares (the “Reporting Period”), the Company shall timely file all reports required to be filed with the Commission pursuant to the Exchange Act, and the Company shall not terminate its status as an issuer required to file reports under the Exchange Act even if the Exchange Act or the rules and regulations thereunder would otherwise permit such termination.

3.4           Financial Information.  The Company agrees to send the following to each Purchaser during the Reporting Period (i) unless the following are filed with the Commission through EDGAR and are available to the public through the EDGAR system, within one (1) Business Day after the filing thereof with the Commission, a copy of its Annual Reports on Form 10-K, its Quarterly Reports on Form 10-Q, any Current Reports on Form 8-K and any registration statements (other than on Form S-8) or amendments filed pursuant to the Securities Act, (ii) on the same day as the release thereof, electronic copies of all press releases issued by the Company or any of its Subsidiaries, and (iii) copies of any notices and other information made available or given to the shareholders of the Company generally, contemporaneously with the making available or giving thereof to the shareholders.

3.5           Pledge of Securities.  The Company acknowledges and agrees that the Securities may be pledged by a Purchaser in connection with a bona fide margin agreement or other loan or financing arrangement that is secured by the Securities. The pledge of Securities shall not be deemed to be a transfer, sale or assignment of the Securities hereunder, and no Purchaser effecting a pledge of Securities shall be required to provide the Company with any notice thereof or otherwise make any delivery to the Company pursuant to this Agreement or any other Transaction Document, including, without limitation, Section 2.2(h) of this Agreement; provided that a Purchaser and its pledgee shall be required to comply with the terms of the legend described in Section 2.2(h) of this Agreement in order to effect a sale, transfer or assignment of Securities to such pledgee, whether by foreclosure or otherwise.  The Company hereby agrees to execute and deliver such documentation as a pledgee of the Securities may reasonably request in connection with a pledge of the Securities to such pledgee by a Purchaser.

3.6           Keeping of Records and Books of Account.  The Company shall keep and cause each of its Subsidiaries to keep adequate records and books of account, in which complete entries will be made, (a) with respect to the Company’s Subsidiaries located in the U.S., in accordance with GAAP consistently applied and (b) with respect to the Company’s Subsidiaries located outside the U.S., in accordance with the applicable law, rule or regulation of the jurisdictions in which such Subsidiaries are located, in each case reflecting all financial transactions of the Company and its Subsidiaries, and in which, for each fiscal year, appropriate reserves for depreciation, depletion, obsolescence, amortization, taxes, bad debts and other purposes in connection with its business shall be made.

19

3.7           Other Agreements.  The Company shall not enter into any agreement the terms of which would restrict or impair the right or ability of the Company to perform its obligations under any Transaction Document, including, without limitation, the Company’s obligation to pay any amounts due under the Notes in cash or shares of common stock.  The Company shall comply in all material respects with each of its obligations, covenants and agreements under the Notes and the other Transaction Documents; provided, that the Company shall comply in all respects with respect to such obligations, covenants and agreements under the Notes and other Transaction Documents which are already qualified by materiality, “material” or similar qualifiers.

3.8           Use of Proceeds.  The proceeds from the sale of the Securities hereunder shall be used by the Company for general corporate purposes.  Notwithstanding anything to the contrary, neither Company nor any of its Subsidiaries may repay any of their outstanding Indebtedness nor redeem or repurchase any of its or its Subsidiaries’ equity securities with the proceeds from the sale of the Securities.

3.9          Disclosure of Transaction.

(a)           Except for press releases and public statements as may upon the advice of outside counsel be required to be made by law or the rules or regulations of the Commission or the principal market on which the Common Stock then trades or is quoted (“Required Disclosures”), the Company shall provide to each Purchaser, before issuing any press release or public statement with respect to the Transaction Documents or the transactions contemplated thereby, a copy of such proposed press release or public statement and shall not issue any such press release or public statement to which such Purchaser reasonably objects within two (2) Business Days of such Purchaser’s receipt thereof.  In the case of any Required Disclosure, the Company shall provide each Purchaser with a copy of such Required Disclosure.  Unless the Company and each Purchaser otherwise agree, the Company shall include in a Required Disclosure only such information that is legally required to be disclosed upon the advice of counsel.  Notwithstanding the foregoing, without the prior written consent of any applicable Purchaser, neither the Company nor any of its Subsidiaries or affiliates shall disclose the name of such Purchaser in any filing, announcement, release or otherwise unless it is obligated, upon the written advice of counsel, to do so in a Required Disclosure; provided, that Purchaser shall have the right to review any such filing, announcement, release or otherwise prior to such disclosure.

(b)           The Company shall on or before 8:30 a.m., New York City time, on the first Business Day after the date of this Agreement (i) issue a press release (the “Press Release”) reasonably acceptable to the Purchasers disclosing all material terms of the transactions contemplated hereby and (ii) file with the Commission a Current Report on Form 8-K (the “Form 8-K”), which shall attach as exhibits all press releases relating to the transactions contemplated by this Agreement and all material Transaction Documents (including without limitation, this Agreement (and all schedules to this Agreement), the form of the Notes, the form of Warrant, the form of Registration Rights Agreement) as exhibits to such filing.  From and after the issuance of the Press Release, no Purchaser shall be in possession of any material, nonpublic information received from the Company, any of its Subsidiaries or any of its respective officers, directors, employees or agents, that is not disclosed in the Press Release.

20

3.10         Disclosure of Material Information.  The Company covenants and agrees that neither it nor any other person or entity acting on its behalf will provide any Purchaser or its agents or counsel with any information that the Company believes constitutes material non-public information without such Purchaser’s consent.  The Company understands and confirms that each Purchaser shall be relying on the foregoing covenant and agreement in effecting transactions in securities of the Company, and based on such covenant and agreement, unless otherwise expressly agreed in writing by such Purchaser: (i) such Purchaser does not have any obligation of confidentiality with respect to any information that the Company provides to such Purchaser; and (ii) such Purchaser shall not be deemed to be in breach of any duty to the Company and/or to have misappropriated any non-public information of the Company, if such Purchaser engages in transactions of securities of the Company, including, without limitation, any hedging transactions, short sales and/or any derivative transactions based on securities of the Company while in possession of such material non-public information.  In the event of a breach of the foregoing covenant by the Company, any Subsidiary, or its each of respective officers, directors, employees and agents, in addition to any other remedy provided herein or in the Transaction Documents, a Purchaser shall have the right to make a public disclosure, in the form of a press release, public advertisement or otherwise, of such material, nonpublic information without the prior approval by the Company, its Subsidiaries, or any of its or their respective officers, directors, employees or agents.  No Purchaser shall have any liability to the Company, its Subsidiaries, or any of its or their respective officers, directors, employees, shareholders or agents for any such disclosure.

3.11         Additional Registration Statements.  Except as may be required under any agreement existing on the date hereof and described on Schedule 3.11 hereto, until the earlier of (i) the Effective Date (as defined in the Registration Rights Agreement) and (ii) the date all of the Registrable Securities may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, the Company will not file a registration statement under the Securities Act other than the registration statement relating to the Registrable Securities.

3.12         Amendments to Charter Documents.  The Company shall not, without the consent of each Purchaser then holding a Note, amend or waive any provision of the Articles or By-laws of the Company whether by merger, consolidation or otherwise in any way that would materially and adversely affect any rights of the holder of the Securities.

21

3.13         Public Information.  At any time during the period commencing from the six (6) month anniversary of the Closing Date and ending at such time that all of the Stock Amortization Shares can be sold either pursuant to a registration statement, or if a registration statement is not available for the resale of all of the Securities, may be sold without the requirement for the Company to be in compliance with Rule 144(c)(1) and otherwise without restriction or limitation pursuant to Rule 144, if the Company shall fail for any reason to satisfy the current public information requirement under Rule 144(c) (a “Public Information Failure”) then, as partial relief for the damages to any Purchaser by reason of any such delay in or reduction of its ability to sell the Stock Amortization Shares (which remedy shall not be exclusive of any other remedies available at law or in equity), the Company shall pay to each such Purchaser an amount in cash equal to one percent (1.0%) of the aggregate Purchase Price of such Purchaser’s Stock Amortization Shares on the day of a Public Information Failure and on every thirtieth day (pro rated for periods totaling less than thirty days) thereafter until the earlier of (i) the date such Public Information Failure is cured and (ii) such time that such public information is no longer required pursuant to Rule 144.  The payments to which a holder shall be entitled pursuant to this Section 3.13 are referred to herein as “Public Information Failure Payments.”  Public Information Failure Payments shall be paid on the earlier of (I) the last day of the calendar month during which such Public Information Failure Payments are incurred and (II) the third Business Day after the event or failure giving rise to the Public Information Failure Payments is cured.  In the event the Company fails to make Public Information Failure Payments in a timely manner, such Public Information Failure Payments shall bear interest at the rate of 1.5% per month (prorated for partial months) until paid in full.

3.14         Closing Documents.  On or prior to fourteen (14) calendar days after the Closing Date, the Company agrees to deliver, or cause to be delivered, to each Purchaser and Schulte Roth & Zabel LLP a complete closing set of the Transaction Documents, Securities and any other document required to be delivered to any party pursuant to Section 4.2 hereof or otherwise.

3.15         Notice of Events of Default.  The Company will immediately notify each Purchaser in writing of the occurrence of any Event of Default (as defined in the Notes) under the Notes.

3.16         Reservation of Shares.  So long as any Purchaser owns any Securities, the Company shall take all action necessary to at all times have authorized, and reserved for the purpose of issuance no less than the sum of (i) 100% of the maximum number of shares of Common Stock issuable as Stock Amortization Shares under the Notes (assuming a Stock Payment Price (as defined in the Notes) of $2.29375 (appropriately adjusted for any stock split, stock dividend, stock combination, stock buy-back or other similar transaction) as of the Trading Day immediately preceding the date of determination) and (ii) 100% of the number of shares of Common Stock issuable upon exercise of the Warrants then outstanding in their entirety at the Exercise Price in effect on the Closing Date (without taking into account any limitations on exercise of the Warrants) (collectively, the “Required Reserved Amount”).  If at any time the number of shares of Common Stock authorized and reserved for issuance is not sufficient to meet the Required Reserved Amount, the Company will promptly take all corporate action necessary to authorize and reserve a sufficient number of shares, including, without limitation, calling a special meeting of shareholders to authorize additional shares, so that the number of authorized shares is sufficient to meet the Required Reserved Amount.

3.17        Register; Transfer Instructions.

(a)           Register.  The Company shall maintain at its principal executive offices (or such other office or agency of the Company as it may designate by notice to each holder of Securities), a register for the Notes and the Warrants, in which the Company shall record the name and address of the Person in whose name the Notes and the Warrants have been issued (including the name and address of each transferee), the principal amount of Notes held by such  Person, and the number of Warrant Shares issuable upon exercise of the Warrants held by such Person.  The Company shall keep the register open and available at all times during business hours for inspection of any Purchaser or its legal representatives.

22

(b)           Transfer Agent Instructions.  Upon exercise of the Warrant by any Purchaser, the Company shall instruct its transfer agent to issue certificates or credit shares to the applicable balance accounts at DTC, registered in the name of such Purchaser or its respective nominee(s), in such amounts as specified from time to time by such Purchaser.  If a Purchaser effects a sale, assignment or transfer of the Warrant Shares, the Company shall permit the transfer and shall promptly instruct its transfer agent to issue one or more certificates or to credit shares to the applicable balance accounts at DTC in such name and in such denominations as specified by such Purchaser to effect such sale, transfer or assignment, without any restrictive legend.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to a Purchaser.  Accordingly, the Company acknowledges that the remedy at law for a breach of its obligations under this Section 3.17(b) will be inadequate and agrees, in the event of a breach or threatened breach by the Company of the provisions of this Section 3.17(b), that a Purchaser shall be entitled, in addition to all other available remedies, to seek an order and/or injunction restraining any breach and requiring immediate issuance and transfer, without the necessity of showing economic loss and without any bond or other security being required.

3.18        Account Agent.

(a)           Each Purchaser hereby (a) appoints Liberty Harbor Special Investments, LLC, as the Account Agent under the Control Agreement, and (b) authorizes the Account Agent (and its officers, directors, employees and agents) to take such action on such Purchaser's behalf in accordance with the terms hereof and thereof.  The Account Agent shall not have, by reason hereof or the Control Agreement, a fiduciary relationship in respect of any Purchaser.  Neither the Account Agent nor any of its officers, directors, employees and agents shall have any liability to any Purchaser for any action taken or omitted to be taken in connection hereof or the Control Agreement except to the extent caused by its own gross negligence or willful misconduct, and each Purchaser agrees to defend, protect, indemnify and hold harmless the Account Agent and all of its officers, directors, employees and agents (collectively, the “Account AgentIndemnitees”) from and against any losses, damages, liabilities, obligations, penalties, actions, judgments, suits, fees, costs and expenses (including, without limitation, reasonable attorneys' fees, costs and expenses) incurred by such Account Agent Indemnitee, whether direct, indirect or consequential, arising from or in connection with the performance by such Account Agent Indemnitee of the duties and obligations of Account Agent pursuant hereto or the Control Agreement.

(b)           The Account Agent shall be entitled to rely upon any written notices, statements, certificates, orders or other documents or any telephone message believed by it in good faith to be genuine and correct and to have been signed, sent or made by the proper Person, and with respect to all matters pertaining to this Agreement or any of the other Transaction Documents and its duties hereunder or thereunder, upon advice of counsel selected by it.

23

(c)           The Account Agent may resign from the performance of all its functions and duties hereunder and under the Control Agreement at any time by giving at least ten (10) Business Days prior written notice to the Company and each holder of the Notes.  Such resignation shall take effect upon the acceptance by a successor Account Agent of appointment as provided below.  Upon any such notice of resignation, the holders of 75% of the outstanding principal under the Notes shall appoint a successor Account Agent.  Upon the acceptance of the appointment as Account Agent, such successor Account Agent shall succeed to and become vested with all the rights, powers, privileges and duties of the retiring Account Agent, and the retiring Account Agent shall be discharged from its duties and obligations under this Agreement and the Control Agreement.  After any Account Agent's resignation hereunder, the provisions of this Section 3.18 shall inure to its benefit. If a successor Account Agent shall not have been so appointed within said ten (10) Business Day period, the retiring Account Agent shall then appoint a successor Account Agent who shall serve until such time, if any, as the holders of 75% of the outstanding principal under the Notes appoint a successor Account Agent as provided above.

3.19         Acknowledgement.  For the avoidance of doubt, the Company hereby acknowledges and agrees that the aggregate principal amount of Notes to be issued hereunder shall reduce the principal amount of Indebtedness allowed pursuant to subclause (C) of the “Permitted Pari Passu Indebtedness” definition set forth in Section 6.14 of the Prior Notes and shall reduce the outstanding aggregate principal amount of Indebtedness that the Company may incur pursuant to Section 4.1(h) of the Prior Notes.

ARTICLE 4

CONDITIONS

4.1          Conditions Precedent to the Obligation of the Company to Close and to Sell the Securities.  The obligation hereunder of the Company to issue and sell the Securities to each Purchaser pursuant to this Agreement is subject to the satisfaction or waiver by the Company, at or before the Closing, of the conditions set forth below.  These conditions are for the Company’s sole benefit and may be waived by the Company at any time in its sole discretion.

(a)           Accuracy of the Purchasers’ Representations and Warranties.  The representations and warranties of such Purchaser shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made at that time, except for representations and warranties that are expressly made as of a particular date, which shall be true and correct in all material respects as of such date.

(b)           Performance by the Purchasers.  Such Purchaser shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Purchasers at or prior to the Closing Date.

(c)           No Injunction.  No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.

24

(d)           Delivery of Purchase Price.  Such Purchaser shall have delivered to the Company the Purchase Price for the Securities purchased by such Purchaser.

(e)           Delivery of Transaction Documents.  The Transaction Documents shall have been duly executed and delivered by such Purchaser to the Company.

4.2          Conditions Precedent to the Obligation of each Purchaser to Purchase the Securities.  The obligation hereunder of each Purchaser to purchase Securities and consummate the transactions contemplated by this Agreement is subject to the satisfaction or waiver, at or before the Closing, of each of the conditions set forth below.  These conditions are for such Purchaser’s sole benefit and may be waived by such Purchaser at any time in its sole discretion.

(a)           Accuracy of the Company’s Representations and Warranties.  The representations and warranties of the Company in this Agreement and the other Transaction Documents shall be true and correct in all respects as of the date when made and as of the Closing Date, except for representations and warranties that speak as of a particular date, which shall be true and correct in all respects as of such date.

(b)           Performance by the Company.  The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company at or prior to the Closing Date.

(c)           Prospectus: Registration Statement.  The Prospectus Supplement shall have been filed with the Commission pursuant to Rule 424(b) under the Securities Act within the applicable time period prescribed for such filing by the rules and regulations under the Securities Act; no stop order suspending the effectiveness of the Registration Statement or any part thereof shall have been issued and no proceeding for that purpose shall have been initiated or, to the Company’s knowledge, threatened by the Commission and no notice of objection by the Commission to the use of the Registration Statement or any post-effective amendment thereto pursuant to Rule 401(g)(2) under the Securities Act shall have been received; and no stop order suspending or preventing the use of the Prospectus shall have been initiated or threatened by the Commission.

(d)           No Suspension, Etc.  The Common Stock (i) shall be designated for quotation or listed on the Principal Market and (ii) shall not have been suspended, as of the Closing Date, by the Commission or the Principal Market from trading on the Principal Market nor shall suspension by the Commission or the Principal Market have been threatened, as of the Closing Date, either (A) in writing by the Commission or the Principal Market or (B) by falling below the minimum listing maintenance requirements of the Principal Market.

(e)           No Injunction.  No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction which prohibits the consummation of any of the transactions contemplated by this Agreement.

25

(f)           No Proceedings or Litigation.  No action, suit or proceeding before any arbitrator or any governmental authority shall have been commenced, and no investigation by any governmental authority shall have been threatened, against the Company or any Subsidiary or any Purchaser, or any of the officers, directors or affiliates of the Company or any Subsidiary or any Purchaser seeking to restrain, prevent or change the transactions contemplated by this Agreement, or seeking damages in connection with such transactions.

(g)           Opinion of Counsel.  Such Purchaser shall have received an opinion(s) of counsel to the Company, dated the Closing Date, in the form reasonably acceptable to such Purchaser.

(h)           Delivery of Securities.  At or prior to the Closing, the Company shall have (i) delivered to such Purchaser certificates representing the Note and Warrant being purchased by such Purchaser and (ii) credited the Shares being purchased by such Purchaser to the account(s) at DTC specified by such Purchaser at least one (1) Business Day prior to the Closing.

(i)           Secretary’s Certificate.  The Company shall have delivered to such Purchaser a certificate, signed by the Secretary of the Company and dated as of the Closing Date, as to (i) the resolutions adopted by its board of directors approving the transactions contemplated hereby, (ii) its charter, as in effect at the Closing Date, (iii) its bylaws, as in effect at the Closing Date, and (iv) the authority and incumbency of the officers executing this Agreement, the Notes or any other documents required to be executed or delivered in connection therewith.

(j)           Officer’s Certificate.  The Company shall have delivered to such Purchaser a certificate signed by an executive officer on behalf of the Company, dated as of the Closing Date, confirming the accuracy of the Company’s representations, warranties and performance of covenants as of the Closing Date and confirming the compliance by the Company with the conditions precedent set forth in paragraphs (a)-(f) and (k)-(n) of this Section 4.2 as of the Closing Date.

(k)           Material Adverse Effect.  No change having a Material Adverse Effect shall have occurred.

(l)           Listing; Listing Application.  The Shares (if any), the Warrant Shares and the Stock Amortization Shares shall have been approved for listing on the Principal Market, subject only to official notice of issuance.  The Common Stock (i) shall be listed on the Principal Market and (ii) shall not have been suspended, as of the Closing Date, by the Commission or the Principal Market from trading on the Principal Market nor shall suspension by the Commission or the Principal Market have been threatened, as of the Closing Date, either (A) in writing by the Commission or the Principal Market or (B) by falling below the minimum listing maintenance requirements of the Principal Market.

(m)           Delivery of Transaction Documents.  The Transaction Documents shall have been duly executed and delivered by the Company to such Purchaser.

(n)           Good Standing.  The Company shall have delivered to such Purchaser a certificate evidencing the formation and good standing of the Company and each of its domestic operating Subsidiaries in such corporation’s state of incorporation issued by the Secretary of State of such state of incorporation as of a date within 10 days of the Closing Date.

26

(o)           Qualification as Foreign Corporation.  The Company shall have delivered to such Purchaser a certificate evidencing the Company’s qualification as a foreign corporation and good standing issued by the Secretary of State (or comparable office) of each jurisdiction in which the Company conducts business and is required to so qualify, as of a date within ten (10) days of the Closing Date.

(p)           Certification as to Number of Shares.  The Company shall have delivered to such Purchaser a letter from the Company’s transfer agent certifying the number of shares of Common Stock outstanding as of a date within five (5) days of the Closing Date.

(q)           Consents.  The Company shall have obtained all governmental, regulatory or third party consents and approvals, if any, necessary for the sale of the Securities.

ARTICLE 5

INDEMNIFICATION

5.1           General Indemnity.  The Company agrees to indemnify and hold harmless each Purchaser and its respective directors, officers, affiliates, members, managers, employees, agents, successors and assigns (collectively, “Indemnified Parties”) from and against any and all losses, liabilities, deficiencies, costs, damages and expenses (including, without limitation, reasonable attorneys’ fees, charges and disbursements) incurred by any Indemnified Party as a result of, arising out of or based upon (i) any inaccuracy in or breach of the Company’s representations or warranties in this Agreement; (ii) the Company’s breach of agreements or covenants made by the Company in this Agreement or any Transaction Document; (iii) any third party claims arising out of or resulting from the transactions contemplated by this Agreement or any other Transaction Document (unless such claim is based upon conduct by such Indemnified Party that constitutes fraud, gross negligence or willful misconduct); or (iv) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement, the Prospectus, any Prospectus Supplement or any preliminary prospectus, or arising out of or based upon any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages, liabilities or judgments are caused by any such untrue statement or omission or alleged untrue statement or omission based upon information relating to any Purchaser furnished in writing to the Company by or on behalf of any Purchaser.

27

5.2           Indemnification Procedure.  With respect to any third-party claims giving rise to a claim for indemnification, the Indemnified Party will give written notice to the Company of such third party claim; provided that the failure of any party entitled to indemnification hereunder to give notice as provided herein shall not relieve the Company of its obligations under this Article 5 except to the extent that the Company is actually materially prejudiced by such failure to give notice.  In case any such action, proceeding or claim is brought against an Indemnified Party in respect of which indemnification is sought hereunder, the Company shall be entitled to participate in and, unless in the reasonable judgment of the Indemnified Party a conflict of interest between it and the Indemnified Party exists with respect to such action, proceeding or claim (in which case the Company shall be responsible for the reasonable fees and expenses of one separate counsel for the Indemnified Parties), to assume the defense thereof with counsel of its choice.  In the event that the Company advises an Indemnified Party that it will not contest such a claim for indemnification hereunder, or fails, within 10 days of receipt of any indemnification notice to notify, in writing, such person or entity of its election to defend, settle or compromise, at its sole cost and expense, any action, proceeding or claim (or discontinues its defense at any time after it commences such defense), then the Indemnified Party may, at its option, defend, settle or otherwise compromise or pay such action or claim.  The Company shall keep the Indemnified Party fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto.  If the Company elects to defend any such action or claim, then the Indemnified Party shall be entitled to participate in such defense with counsel of its choice at its sole cost and expense.  Notwithstanding anything in this Article 5 to the contrary, the Company shall not, without the Indemnified Party’s prior written consent, settle or compromise any claim or consent to entry of any judgment in respect thereof that does not provide for a complete release of the Indemnified Party of any and all liability with respect to any such claim or which constitutes or reflects an acknowledgment of wrongdoing on the part of the Indemnified Party.  The Company will not be liable to any Indemnified Party under this Agreement for any consent, settlement or compromise effected by an Indemnified Party without the Company’s prior written consent.  The indemnification obligations to defend the Indemnified Party required by this Article 5 shall be made by periodic payments of the amount thereof during the course of investigation or defense, as and when bills are received or expense, loss, damage or liability is incurred, so long as the Indemnified Party shall refund such moneys if it is ultimately determined by a court of competent jurisdiction that such party was not entitled to indemnification.  The indemnity agreements contained herein shall be in addition to (a) any cause of action or similar rights of the Indemnified Party against the Company or others, and (b) any liabilities the Company may be subject to pursuant to the law.

5.3           Contribution.  If the indemnification provided for in Section 5.1 is unavailable to any Indemnified Party thereunder in respect of any losses, liabilities, deficiencies, costs, damages or expenses (or actions in respect thereof) referred to in such Section, then the Company shall contribute to the amount paid or payable by such Indemnified Party as a result of such losses, liabilities, deficiencies, costs, damages or expenses (or actions in respect thereof) in such proportion as is appropriate to reflect the relative fault of the Company on the one hand and such Indemnified Party on the other.  The relative fault shall be determined by reference to, among other things, whether any untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company or such Indemnified Party, and such parties’ relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission, or whether such losses, claims, damages or liabilities (or actions in respect thereof) arose out of the action or failure to act of one or more of such parties.

28

ARTICLE 6

MISCELLANEOUS

6.1           Termination.  In the event that the Closing shall not have occurred with respect to a Purchaser on or before five (5) Business Days from the date hereof due to the Company’s or such Purchaser’s failure to satisfy the conditions set forth in Sections 4.1 and 4.2 above (and the nonbreaching party’s failure to waive such unsatisfied condition(s)), the nonbreaching party shall have the option to terminate this Agreement with respect to such breaching party at the close of business on such date without liability of any party to any other party; provided, however, that if this Agreement is terminated pursuant to this Section 6.1, the Company shall remain obligated to reimburse the non-breaching Purchasers for the expenses described in Section 6.2 below.

6.2           Fees and Expenses.  The Company shall reimburse each Purchaser for all costs and expenses reasonably incurred by such Purchaser in connection with the negotiation, drafting and execution of the Transaction Documents and the transactions contemplated thereby (including all legal fees, travel, disbursements and due diligence in connection therewith and all fees incurred in connection with any necessary regulatory filings and clearances); provided, however, that the Company shall have no obligation to reimburse the Purchasers for any such costs and expenses to the extent that they exceed, in the aggregate, $125,000, unless otherwise agreed in writing by the Company.  The Company shall be responsible for its own fees and expenses incurred in connection with the transactions contemplated by this Agreement.  The Company shall pay all fees of its transfer agent, and all stamp taxes and other taxes and duties levied in connection with the delivery of the Securities, the Warrant Shares or Stock Amortization Shares to each Purchaser, unless such delivery is made to a third party at such Purchaser’s direction.  In addition, the prevailing party in any action commenced in connection with the enforcement of this Agreement or any of the other Transaction Documents shall be entitled to receive reasonable attorneys’ fees and court costs.

6.3          Specific Performance; Consent to Jurisdiction; Venue.

(a)           The Company and the Purchasers acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement or the other Transaction Documents were not performed in accordance with their specific terms or were otherwise breached.  It is accordingly agreed that the parties shall be entitled to seek an injunction or injunctions to prevent or cure breaches of the provisions of this Agreement or the other Transaction Documents and to enforce specifically the terms and provisions hereof or thereof without the requirement of posting a bond or providing any other security, this being in addition to any other remedy to which any of them may be entitled by law or equity.

(b)           The parties agree that venue for any dispute arising under this Agreement will lie exclusively in the state or federal courts located in New York County, New York, and the parties irrevocably waive any right to raise forum non conveniens or any other argument that New York is not the proper venue.  The parties irrevocably consent to personal jurisdiction in the state and federal courts in New York County of the state of New York.  The Company and each Purchaser consent to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing in this Section 6.3 shall affect or limit any right to serve process in any other manner permitted by law.  The parties hereby waive all rights to a trial by jury.

29

6.4           Amendment.  No provision of this Agreement may be waived or amended except in a written instrument signed by the Company and Purchasers holding at least a majority of the outstanding principal amount of the Notes; provided that if any Purchaser is materially adversely affected by such waiver or amendment, such waiver or amendment shall not be effective without the written consent of the adversely affected Purchaser.

6.5           Notices.  Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery at the address designated below (if delivered on a Business Day during normal business hours where such notice is to be received), or the first Business Day following such delivery (if delivered other than on a Business Day during normal business hours where such notice is to be received) or (b) on the second Business Day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The addresses for such communications shall be:

If to the Company:	Ener1, Inc.
	1540 Broadway, Suite 25C
	New York, New York  10036
	Attention:  Chief Executive Officer
with a copy to:	Mazzeo Song & Bradham LLP
	708 Third Avenue – 19th Floor
	New York, New York  10017
	Attention:  David S. Song, Esq.
If to any Purchaser:	At the address of such Purchaser set forth on
	Exhibit A to this Agreement
With a copy to (which shall not	Schulte Roth & Zabel LLP
constitute notice):	919 Third Avenue
	New York, New York  10022
	Attention:  Eleazer N. Klein, Esq.

Any party hereto may from time to time change its address for notices by giving written notice of such changed address to the other party hereto.

6.6           Waivers.  No waiver by either party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.  No consideration shall be offered or paid to any Purchaser to amend or waive or modify any provision of this Agreement unless the same consideration is also offered to all of the parties to this Agreement then holding Notes.  This provision constitutes a separate right granted to each Purchaser by the Company and shall not in any way be construed as the Purchasers acting in concert or as a group with respect to the purchase, disposition or voting of Securities or otherwise.

30

6.7           Headings.  The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof.

6.8           Successors and Assigns.  This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns.  The Purchasers may assign the Securities and its rights under this Agreement and the other Transaction Documents and any other rights hereto and thereto without the consent of the Company.  The Company may not assign or delegate any of its rights or obligations hereunder or under any Transaction Document.

6.9           No Third Party Beneficiaries.  This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person or entity.

6.10         Business Day.  As used herein, “Business Day” shall mean any day other than a Saturday, Sunday or other day on which commercial banks in New York City are required or permitted by law to be closed during regular business hours.

6.11         Governing Law.  This Agreement shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any of the conflicts of law principles that would result in the application of the substantive law of another jurisdiction.  This Agreement shall not be interpreted or construed with any presumption against the party causing this Agreement to be drafted.

6.12         Survival.  The covenants, agreements and representations and warranties of the parties under the Transaction Documents shall survive the execution and delivery hereof indefinitely.

6.13         Counterparts.  This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart.  Signature pages to this Agreement may be delivered by facsimile or other means of electronic transmission.

6.14         Publicity.  The Company agrees that it will not disclose, and will not include in any public announcement, the names of any Purchaser without the prior written consent of such Purchaser, which consent shall not be unreasonably withheld or delayed, or unless and until such disclosure is required by law, rule or applicable regulation, and then only to the extent of such requirement.  Notwithstanding the foregoing, each Purchaser consents to being identified in any filings the Company makes with the Commission to the extent required by law or the rules and regulations of the Commission.

31

6.15         Severability.  The provisions of this Agreement are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement and this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible.

6.16         Further Assurances.  From and after the date of this Agreement, upon the request of the Purchasers or the Company, the Company and each Purchaser shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement and the other Transaction Documents

6.17         Independent Nature of Purchasers’ Obligations and Rights.  The rights and obligations of each Purchaser under any Transaction Document are several and not joint with the obligations of any other Purchaser, and no Purchaser shall be responsible in any way for the performance of the obligations of any other Purchaser under any Transaction Document.  Nothing contained herein or in any other Transaction Document, and no action taken by any Purchaser pursuant hereto or thereto, shall be deemed to constitute the Purchaser as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Purchasers are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Documents.  The Company acknowledges that each Purchaser has independently participated in the negotiation of the transaction contemplated hereby with the advice of its own counsel and advisors.  Each Purchaser shall be entitled to independently protect and enforce its rights, including, without limitation, the rights arising out of this Agreement or out of any other Transaction Documents, and it shall not be necessary for any other Purchaser to be joined as an additional party in any proceeding for such purpose.

6.18         Time Is of the Essence.  Time is of the essence with respect to the provisions of this Agreement and each other Transaction Document that specify a time for performance; provided, however, that the foregoing shall not be construed to limit or deprive a party of the benefits of any grace or similar period allowed by this Agreement or any other Transaction Document.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

32

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized officers as of the date first above written.

ENER1, INC.
By:	/s/ Charles Gassenheimer
Name: Charles Gassenheimer
Title: Chief Executive Officer

[SIGNATURE PAGES CONTINUE]

A-1

[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Name of Purchaser: Liberty Harbor Special Investments, LLC

Signature of Authorized Signatory of Purchaser: /s/ Brendan McGovern

Name of Authorized Signatory: Brendan McGovern

Title of Authorized Signatory: Vice President

Email Address of Purchaser: Brendan.Mcgovern@gs.com

Fax Number of Purchaser: (646) 835-3510

Address for Notice of Purchaser: See Schedule A

Address for Delivery of Securities for Purchaser (if not same as address for notice):

______________________________________________________________________________

Purchase Price: $15,925,000

EIN Number:  20-8894164

A-2

[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Name of Purchaser: Goldman Sachs Palmetto State Credit Fund, L.P. (By: Goldman Sachs Asset Management, L.P., its individual manager)

Signature of Authorized Signatory of Purchaser: /s/ Brendan McGovern

Name of Authorized Signatory: Brendan McGovern

Title of Authorized Signatory: Vice President

Email Address of Purchaser: Brendan.Mcgovern@gs.com

Fax Number of Purchaser: (646) 835-3510

Address for Notice of Purchaser: See Schedule A

Address for Delivery of Securities for Purchaser (if not same as address for notice):

______________________________________________________________________________

Purchase Price: $2,275,000

EIN Number:  94-3471213

A-3

[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Name of Purchaser: Whitebox Multi Strategy Partners, L.P.

Signature of Authorized Signatory of Purchaser: /s/ Mark Strefling

Name of Authorized Signatory: Mark Strefling

Title of Authorized Signatory: CLO

Email Address of Purchaser: mstrefling@whiteboxadvisors.com

Fax Number of Purchaser: (612) 253-6001

Address for Notice of Purchaser: 3033 Excelsior Blvd, Minneapolis, MN 55416

Address for Delivery of Securities for Purchaser (if not same as address for notice):

______________________________________________________________________________

Purchase Price: $2,946,667

EIN Number:  __________________

A-4

[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Name of Purchaser: Whitebox Concentrated Convertible Arbitrage Partners, L.P.

Signature of Authorized Signatory of Purchaser: /s/ Mark Strefling

Name of Authorized Signatory: Mark Strefling

Title of Authorized Signatory: CLO

Email Address of Purchaser: mstrefling@whiteboxadvisors.com

Fax Number of Purchaser: (612) 253-6001

Address for Notice of Purchaser: 3033 Excelsior Blvd, Minneapolis, MN 55416

Address for Delivery of Securities for Purchaser (if not same as address for notice):

______________________________________________________________________________

Purchase Price: $1,360,000

EIN Number:  __________________

A-5

[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Name of Purchaser: Pandora Select Partners, L.P.

Signature of Authorized Signatory of Purchaser: /s/ Mark Strefling

Name of Authorized Signatory: Mark Strefling

Title of Authorized Signatory: CLO

Email Address of Purchaser: mstrefling@whiteboxadvisors.com

Fax Number of Purchaser: (612) 253-6001

Address for Notice of Purchaser: 3033 Excelsior Blvd, Minneapolis, MN 55416

Address for Delivery of Securities for Purchaser (if not same as address for notice):

______________________________________________________________________________

Purchase Price: $1,133,333

EIN Number:  __________________

A-6

[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Name of Purchaser: Whitebox Credit Arbitrage Partners, L.P.

Signature of Authorized Signatory of Purchaser: /s/ Mark Strefling

Name of Authorized Signatory: Mark Strefling

Title of Authorized Signatory: CLO

Email Address of Purchaser: mstrefling@whiteboxadvisors.com

Fax Number of Purchaser: (612) 253-6001

Address for Notice of Purchaser: 3033 Excelsior Blvd, Minneapolis, MN 55416

Address for Delivery of Securities for Purchaser (if not same as address for notice):

______________________________________________________________________________

Purchase Price: $906,667

EIN Number:  __________________

A-7

[PURCHASER SIGNATURE PAGES TO SECURITIES PURCHASE AGREEMENT]

IN WITNESS WHEREOF, the undersigned have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

Name of Purchaser: Whitebox Special Opportunities Fund LP, Series B

Signature of Authorized Signatory of Purchaser: /s/ Mark Strefling

Name of Authorized Signatory: Mark Strefling

Title of Authorized Signatory: CLO

Email Address of Purchaser: mstrefling@whiteboxadvisors.com

Fax Number of Purchaser: (612) 253-6001

Address for Notice of Purchaser: 3033 Excelsior Blvd, Minneapolis, MN 55416

Address for Delivery of Securities for Purchaser (if not same as address for notice):

______________________________________________________________________________

Purchase Price: $453,333

EIN Number:  __________________

A-8

EXHIBIT A

SCHEDULE OF PURCHASERS

(1)	(2)	(3)		(4)		(5)		(6)		(7)
Buyer	Address and Facsimile Number	Aggregate Principal Amount of  Notes		Number of  Common Shares		Number of  Warrant Shares		Purchase Price		Legal Representative's Address and Facsimile Number
Liberty Harbor Special Investments, LLC	c/o Goldman Sachs Asset Management 200 West Street New York NY 10282 Attention: Thomas N. Secor Facsimile:  (212) 428-1505 Telephone: (212) 357-7910 E-mail: thomas.secor@gs.com	$	15,925,000		216,442		649,327	$	15,925,000	Schulte Roth & Zabel LLP 919 Third Avenue New York, New York  10022 Attention:  Eleazer Klein, Esq. Facsimile: (212) 593-5955 Telephone:  (212) 756-2376
Goldman Sachs Palmetto State Credit Fund, L.P.	c/o Goldman Sachs Asset Management 200 West Street New York NY 10282 Attention: Thomas N. Secor Facsimile:  (212) 428-1505 Telephone: (212) 357-7910 E-mail: thomas.secor@gs.com	$	2,275,000		30,920		92,761	$	2,275,000	Schulte Roth & Zabel LLP 919 Third Avenue New York, New York  10022 Attention:  Eleazer Klein, Esq. Facsimile: (212) 593-5955 Telephone:  (212) 756-2376
Whitebox Multi Strategy Partners, L.P.	c/o Whitebox Advisors LLC 3033 Excelsior Boulevard Suite 300 Minneapolis MN 55416 United States Attention: Dan Philp                  Mark Strefling, CLO Telephone: (612) 253-6084 E-mail: dphilp@whiteboxadvisors.com	$	2,946,667		40,049		120,148	$	2,946,667

A-9

Whitebox Concentrated Convertible Arbitrage Partners, L.P.	c/o Whitebox Advisors LLC 3033 Excelsior Boulevard Suite 300 Minneapolis MN 55416 United States Attention: Dan Philp                  Mark Strefling, CLO Telephone: (612) 253-6084 E-mail: dphilp@whiteboxadvisors.com	$	1,360,000	18,484	55,453	$	1,360,000
Pandora Select Partners, L.P.	c/o Whitebox Advisors LLC 3033 Excelsior Boulevard Suite 300 Minneapolis MN 55416 United States Attention: Dan Philp                  Mark Strefling, CLO Telephone: (612) 253-6084 E-mail: dphilp@whiteboxadvisors.com	$	1,133,333	15,404	46,211	$	1,133,333
Whitebox Credit Arbitrage Partners, L.P	c/o Whitebox Advisors LLC 3033 Excelsior Boulevard Suite 300 Minneapolis MN 55416 United States Attention: Dan Philp                  Mark Strefling, CLO Telephone: (612) 253-6084 E-mail: dphilp@whiteboxadvisors.com	$	906,667	12,323	36,969	$	906,667
Whitebox Special Opportunities Fund LP, Series B	c/o Whitebox Advisors LLC 3033 Excelsior Boulevard Suite 300 Minneapolis MN 55416 United States Attention: Dan Philp                  Mark Strefling, CLO Telephone: (612) 253-6084 E-mail: dphilp@whiteboxadvisors.com	$	453,333	6,161	18,484	$	453,333
Totals:		$	25,000,000	339,783	1,019,353	$	25,000,000

A-10

EXHIBIT B

FORM OF 8.25% SENIOR UNSECURED PROMISSORY NOTE

B-1

EXHIBIT C

FORM OF WARRANT

C-1

EXHIBIT D

FORM OF REGISTRATION RIGHTS AGREEMENT

D-1

EXHIBIT E

OPINION OF COUNSEL TO COMPANY

E-1

EX-1.2

Exhibit B

ENER1, INC.

8.25% SENIOR NOTE DUE JULY 1, 2013

For value received, ENER1, INC., a Floridacorporation (the “Company”), hereby promises to pay to the order of _______________________ (together with its successors and assigns, the “Holder”), in accordance with the terms hereinafter provided, the principal amount of ________________________ ($______________), together with interest thereon.  This Note (this “Note”) is issued to the Holder pursuant to the Securities Purchase Agreement, dated as of December 31, 2010 (the “Purchase Agreement”), together with other notes issued pursuant to the Purchase Agreement (the “Other Notes” and collectively with this Note, the “Notes”) to the purchasers named in the Purchase Agreement (the “Other Holders” and collectively with the Holder, the “Holders”). Capitalized terms used herein and not otherwise defined have the respective meanings set forth in Section 6.15 of this Agreement or as defined in the Purchase Agreement, as applicable.

All payments to be made in cash under or pursuant to this Note shall be made in United States Dollars by wire transfer of immediately available funds to the Holder’s account, instructions for which are attached hereto as Exhibit A, or at such other place as the Holder may designate from time to time in writing to the Company. The outstanding balance of this Note shall be due and payable on July 1, 2013 (the “Maturity Date”)or at such earlier time provided herein.

ARTICLE 1

1.1.           Payment of Principal and Interest.  On each Installment Date, the Company shall pay to the Holder an amount equal to the Installment Amount due on such Installment Date in accordance with Article 2.  Interest shall accrue on the outstanding principal balance of this Note at an annual rate equal to eight and one-quarter percent (8.25%). Interest shall be computed on the basis of a 365-day year and shall accrue commencing on the Issuance Date. Upon the occurrence of an Event of Default, the Company will pay interest to the Holder on the outstanding principal balance of and unpaid interest on the Note from the date of the Event of Default until such Event of Default is cured (if applicable) at the rate of the lesser of fifteen percent (15%) and the maximum applicable legal rate per annum (“Default Interest”).  For the avoidance of doubt, payment of Default Interest will not defease any obligation of the Company hereunder and will not preclude the exercise by the Holder of any remedy it may have hereunder at law, in equity or otherwise for any Event of Default or other breach.  Except as set forth in Article 2, the Company may not prepay or redeem any portion of the outstanding principal balance of this Note without the prior written consent of the Holder.

1.2.           Payment on Non-Business Days.  Whenever any payment or any advance on payment to be made (whether in cash or Common Shares) shall be due on any day other than a Business Day, such payment shall be due on the next succeeding Business Day and such next succeeding Business Day shall be included in the calculation of the amount of accrued interest payable on such date.

1.3.           Payment at Maturity.  This Note shall mature on the Maturity Date.

1.4.           Replacement.  Upon receipt of a duly executed, notarized and written statement from the Holder with respect to the loss, theft or destruction of this Note (or any replacement hereof), or, in the case of a mutilation of this Note, upon surrender and cancellation of such Note, the Company shall issue a new Note, of like tenor and amount, in lieu of such lost, stolen, destroyed or mutilated Note.

1.5.           Transfer.  Upon a transfer of this Note in accordance with the terms hereof and of the Purchase Agreement, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note (in accordance with Section 1.7), registered as the Holder may request, representing the outstanding principal being transferred by the Holder and, if less than the entire outstanding principal is being transferred, a new Note (in accordance with Section 1.7) to the Holder representing the outstanding principal not being transferred.

1.6.           Note Exchangeable for Different Denominations.  This Note is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Note or Notes (in accordance with Section 1.7 and in principal amounts of at least $10,000) representing in the aggregate the outstanding principal of this Note, and each such new Note will represent such portion of such outstanding principal as is designated by the Holder at the time of such surrender.

1.7.           Issuance of New Notes.  Whenever the Company is required to issue a new Note pursuant to the terms of this Note, such new Note (i) shall be of like tenor with this Note, (ii) shall represent, as indicated on the face of such new Note, the principal remaining outstanding (or in the case of a new Note being issued pursuant to Section 1.5 or Section 1.6, the principal designated by the Holder which, when added to the principal represented by the other new Notes issued in connection with such issuance, does not exceed the principal remaining outstanding under this Note immediately prior to such issuance of new Notes), (iii) shall have an issuance date, as indicated on the face of such new Note, which is the same as the Issuance Date of this Note, (iv) shall have the same rights and conditions as this Note, and (v) shall represent accrued and unpaid Interest of this Note, from the Issuance Date.

2

ARTICLE 2

2.1.           Installment Amount Stock or Cash Payment.

(a)      General.  On each applicable Installment Date, the Company shall pay to the Holder the Installment Amount due on such Installment Date, in Common Shares, subject to the provisions of this Article 2 provided that the Equity Conditions are satisfied or waived by the Holder in writing prior to delivery of the applicable Company Installment Notice (as defined below); provided, however, the Company may at its option following notice to the Holder, pay any Installment amount in cash or in a combination of cash and Common Shares.  The Company shall deliver to the Holder, on a date not less than twenty-four (24) Trading Days, but in no event more than twenty-seven (27) Trading Days, prior to the related Installment Date (the “Installment Notice Date”), a written notice (a “Company Installment Notice”), which shall (i) either (A) confirm that the Installment Amount to be paid on such Installment Date shall be paid entirely in Common Shares or (B) state that the Company elects to pay all or a portion of the Installment Amount in cash, and specify the portion that the Company elects to pay in cash, if any (such amount, the “Cash Payment Amount”), and the portion that the Company elects to pay in Common Shares, if any (such portion a “Stock Payment Amount”), which amounts when added together must equal the applicable Installment Amount and (ii) if applicable, certify that the Equity Conditions are then satisfied (or waived by the Holder in accordance with the terms of this Note).  If (x) the Holder does not timely receive a Company Installment Notice in accordance with this Section 2.1(a) or (y) the Equity Conditions are not satisfied, then the Company must pay the entire Installment Amount in cash. Any Cash Payment Amount shall be paid in accordance with Section 2.1(b) and any Stock Payment Amount shall be paid in accordance with Section 2.1(c). Each Company Installment Notice, when given, shall be irrevocable.

(b)      Mechanics of Cash Payment.  On each Installment Date:  (i) to the extent that the Company elects to pay 50% or less of the applicable Installment Amount in cash, then the Company shall pay to the Holder an amount in cash equal to such percentage of the Installment Amount; or (ii) to the extent that the Company elects (or is deemed to have elected) to pay more than 50% of the applicable Installment Amount in cash (the amount by which the percentage of the Installment Amount the Company elects to pay in cash exceeds 50%, the “Additional Percentage”), then the Company shall pay to the Holder an amount in cash equal to the sum of (x) 50% of the Installment Amount and (y) the IA Additional Cash Payment.

The “IA Additional Cash Payment” shall be determined according to the following formula:

IB = 1.15 × X × P%

For the purposes of the foregoing formula:

IB = IA Additional Cash Payment

X = the Installment Amount payable on the applicable Installment Date

P% = the Additional Percentage.

(c)      Mechanics of Stock Payment.

(i)         To the extent that the Company elects to pay all or any portion of the applicable Installment Amount in Common Shares, the applicable Stock Payment Amount shall be paid as follows:

(1)           twenty-one (21) Trading Days prior to the applicable Installment Date (the “Advance Date”), the Company shall deliver to the Holder a number of Common Shares determined by dividing (x) the Stock Payment Amount for such Installment Date by (y) 91.75% of the average Daily VWAP for the five Trading Days immediately preceding such Advance Date (the “Advance Shares”); and

3

(2)           not later than three (3) Trading Days after such Installment Date, the Company shall deliver an additional number of Common Shares (the “True-Up Shares”), if any, to the Holder equal to the positive difference between (a) the Stock Payment Amount for such Installment Date divided by the Stock Payment Price for such Installment Date and (b) the Advance Shares; provided, however, that if the difference between clauses (a) and (b) is a negative number, then the Holder shall either, in the Holder’s sole discretion, (A) return to the Company such excess number of Common Shares, (B) reduce the number of Advance Shares required to be delivered on the next Advance Date, if any, by such excess number of Common Shares, (C) pay an amount in cash equal to the product of (i) such excess number of Common Shares and (ii) the Stock Payment Price or (D) any combination of (A), (B) and (C).

(ii)        Notwithstanding any other provision of this Section 2.1(c), if the Equity Conditions are neither (x) satisfied nor (y) waived in accordance with the terms of this Note, as applicable, on the Trading Day immediately preceding the Advance Date and/or the Advance Date, or if the Daily VWAP cannot be determined on the Trading Day immediately preceding the Advance Date or there is a Subsequent Equity Conditions Failure (as defined below), or if the Company fails to deliver the Advance Shares to the Holder on the Advance Date, then the Company shall pay to the Holder, not later than three (3) Trading Days after the Installment Date, an amount of cash equal to the IA Non-Stock Base Payment in lieu of such Stock Payment Amount.

The “IA Non-Stock Base Payment” shall be determined according to the following formula:

NS = 1.15 × X × S%

For the purposes of the foregoing formula:

NS = IA Non-Stock Base Payment

X = the Installment Amount payable on the applicable Installment Date

S% = the percentage of the applicable Installment Amount represented by the entire applicable Stock Payment Amount.

(d)       If the Company has elected to deliver a permitted Stock Payment Amount, but at any time thereafter and until the expiration of the Equity Conditions Measuring Period, the Equity Conditions shall no longer be satisfied (a “Subsequent Equity Conditions Failure”), the Company shall promptly send a subsequent notice to the Holder indicating the circumstances surrounding the Equity Conditions Failure.  Upon receipt of such notice, the Holder shall have the option, at any time beginning upon the occurrence of any Equity Conditions Failure and until three (3) Trading Days after receipt of a notice from the Company that such failure has been cured, in its sole discretion, to either (i) waive any such Equity Conditions Failure and accept the Stock Payment Amount and Cash Payment Amount set forth in the Company Installment Notice in accordance with this Section 2.1 or (ii)(A) return any or all Advance Shares, if applicable, that the Holder has not otherwise sold, transferred or disposed of, to the Company and (B) require the Company to pay the Installment Amount in accordance with Section 2.1(c)(ii), other than with respect to that portion of the Installment Amount represented by the product of (I) any Advance Shares not returned to the Company multiplied by (II) the Stock Payment Price.  For the avoidance of doubt, all Advance Shares that the Holder elects to retain pursuant to this subsection (d) shall be subject to the true-up provisions contained in Section (c)(i)(2) above.

4

2.2.       Mechanics for Delivery of Shares.  Whenever the Company is required to issue Common Shares to the Holder hereunder, the Company or its designated agent for the Common Shares (the “Common Stock Transfer Agent”) shall issue and deliver to the Holder’s or its designee’s balance account with DTC such aggregate number of Common Shares to which the Holder shall be entitled, free from any restrictive legend, through DTC’s Deposit/Withdrawal at Custodian (“DWAC”) system.  The Company understands that a delay in the delivery of the Common Shares to the Holder on any date when delivery of such Common Shares is due (a “Delivery Date”) hereunder could result in economic loss to the Holder. In addition to any other rights available to the Holder, if the Company fails to cause the Common Stock Transfer Agent to deliver the Common Shares pursuant to this Note on the Delivery Date or on any date of the Company’s obligation to deliver Common Shares pursuant to clause (ii) below, and if after such date the Holder is required to purchase (in an open market transaction or otherwise) Common Shares to deliver in satisfaction of a sale by the Holder of the Common Shares issuable under this Note that the Holder anticipated receiving from the Company (a “Buy-In”), then the Company shall, within three (3) Business Days after the Holder’s request and in the Holder’s discretion, either (i) pay cash to the Holder in an amount equal to the Holder’s total purchase price (including brokerage commissions and other out of pocket expenses, if any) for the Common Shares so purchased (the “Buy-In Price”) as partial liquidated damages, at which point the Company’s obligation to deliver such Common Shares shall terminate, or (ii) promptly honor its obligation to deliver to the Holder the Common Shares and pay cash to the Holder (as partial liquidated damages) in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of Common Shares, and (B) the Stock Payment Price.  Nothing herein shall limit a Holder’s right to pursue any other remedies available to it hereunder, at law or in equity, including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver Common Shares issuable under this Note as required pursuant to the terms hereof.

2.3.       Fractional Shares.If any fractional Common Share otherwise would be issuable as a result of the issuance of Common Shares under this Note, the Company shall calculate and pay to the Holder a cash adjustment in lieu of such fractional share at a rate equal to the Daily VWAP per share for the Common Shares on the Trading Day that such shares are to due to be delivered to the Holder.

5

2.4.       Prepayment.  The Company may, at its option, pre-pay at any time all but not less than all of this Note for an amount equal to (a) 100% of the outstanding principal balance under this Note at such time of prepayment plus all accrued but unpaid interest thereon (the “Base Prepayment Amount”) plus (b) (i) if such prepayment occurs on or before the 18 month anniversary of the Issuance Date, an amount equal to 10% of the Base Prepayment Amount or (ii) if such prepayment occurs at any time after the 18 month anniversary of the Issuance Date, an amount equal to 5% of the Base Prepayment Amount (the additional amount under clause (b) being referred to as the “Additional Prepayment Amount”).  Any prepayment shall be made pro rata to all holders of Notes based on the then outstanding principal amount of each Note in relation to the then outstanding aggregate principal amount of all Notes.  The Base Prepayment Amount shall be paid in cash and the Additional Prepayment Amount shall be paid in Common Shares provided that the Equity Conditions are satisfied (or waived by the Holder), or, at the Company’s option, following notice to the Holder, in cash or in a combination of cash and Common Shares.  The Company shall deliver written notice of prepayment to the Holder thirty (30) Trading Days prior to the date set by the Company for prepayment (the “Prepayment Date”), which Prepayment Date may not be during the period commencing twenty-five (25) Trading Days prior to any Installment Date.  Such written notice of prepayment shall (i) either (A) confirm that the Additional Prepayment Amount shall be paid entirely in Common Shares or (B) elect to pay the Additional Prepayment Amount in cash or as a combination of cash and Common Share and specify the portion of the Additional Prepayment Amount that will be paid in Common Shares and the portion of the Additional Prepayment Amount that will be paid in cash and (ii) if applicable, certify that the Equity Conditions are satisfied. Such written notice shall be irrevocable upon delivery to the Holder. To the extent that any portion of the Additional Prepayment Amount will be paid in Common Shares, twenty one (21) Trading Days prior to the Prepayment Date (the “Prepayment Advance Date”), the Company shall advance to the Holder a number of Common Shares determined by dividing (x) that portion of the Additional Prepayment Amount to be paid in Common Shares by (y) 91.75% of the average Daily VWAP for the five (5) Trading Days immediately preceding the Prepayment Advance Date (the “Prepayment Advance Shares”). Not later than three (3) Trading Days after the Prepayment Date, the Company shall deliver an additional number of Common Shares, if any, to the Holder equal to the positive difference between (1) that portion of the Additional Prepayment Amount to be paid in Common Shares divided by the Stock Payment Price and (2) the Prepayment Advance Shares; provided, however, that if the difference between clauses (1) and (2) is a negative number, then the Holder shall either, in the Holder’s sole discretion, (A) return to the Company such excess number of Common Shares or (B) pay an amount in cash equal to the product of (i) such excess number of Common Shares and (ii) the Stock Payment Price or (C) any combination of (A) or (B).  The provisions of Section 2.1(c) and (d), Section 2.2 and Section 2.3 shall apply to this Section 2.4 mutatis mutandis.

2.5.       Limitations on Right to Make Stock Payments. The Company shall not effect the payment of any Stock Payment Amount, Additional Prepayment Amount, or other delivery of Common Shares, pursuant to this Note, to the extent that (i) after giving effect to such Stock Payment Amount, Additional Prepayment Amount, or other delivery of Common Shares, the Holder (together with the Holder’s affiliates) would beneficially own in excess of 9.99% (the “Maximum Percentage”) of the number of Common Shares outstanding immediately after giving effect to such payment or delivery and (ii) the Holder delivers written notice of such beneficial ownership at least one (1) Business Day prior to the applicable delivery date for such Stock Payment Amount, Additional Prepayment Amount, or other delivery of Common Shares.  For purposes of the foregoing sentence, the number of Common Shares beneficially owned by the Holder and its affiliates shall include the number of Common Shares issuable to the Holder on the applicable date with respect to which the determination of such sentence is being made, but shall exclude the number of Common Shares which would be issuable upon (A) any subsequent Installment Dates or as an Additional Prepayment Amount under this Note and (B) exercise or conversion of the unexercised or nonconverted portion of any other securities of the Company (including, without limitation, any Other Notes or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein beneficially owned by the Holder or any of its affiliates.  Except as set forth in the preceding sentence, for purposes of this Section 2.5, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act.  For purposes of this Section 2.5, in determining the number of outstanding Common Shares, the Holder may rely on the number of outstanding Common Shares as reflected in (1) the Company’s most recent Form 10-K, Form 10-Q, Form 8-K or other public filing with the Commission, as the case may be, (2) a more recent public announcement by the Company or (3) any other notice by the Company or the Common Stock Transfer Agent setting forth the number of Common Shares outstanding.  For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing to the Holder the number of Common Shares then outstanding.  In any case, the number of outstanding Common Shares shall be determined after giving effect to the delivery of additional Common Shares pursuant to this Note, by the Holder or its affiliates since the date as of which such number of outstanding Common Shares was reported.

6

By written notice to the Company, the Holder may increase or decrease the Maximum Percentage to any other percentage, not in excess of 9.99% or less than 4.99%, specified in such notice; provided, that (x) any such increase will not be effective until the sixty-first (61st) day after such notice is delivered to the Company and (y) any such increase or decrease will apply only to the Holder and not to any Other Holder.  The provisions of this Section 2.5 shall be construed and implemented in a manner otherwise than in strict conformity with the terms of this Section 2.5 to correct this Section 2.5 (or any portion hereof) which may be defective or inconsistent with the intended beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation.

The Company shall not be obligated to issue any shares of Common Stock in respect of this Note, and the Holder shall not have the right to receive any shares of Common Stock in respect of this Note, if and to the extent the issuance of such shares of Common Stock, when added to:

(i) the aggregate number of shares of Common Stock previously issued to the Holders in respect of the Notes and Warrants, plus

(ii) the aggregate number of shares issuable to the Holders upon exercise of the then remaining Warrants, plus

(iii) the aggregate number of shares of Common Stock issued at the Closing to the Holders

7

would exceed that number of shares of Common Stock which the Company may issue in respect of the Notes without breaching the Company's obligations under any applicable rules or regulations of the Principal Market (the “Exchange Cap”), except that such limitation shall not apply in the event that the Company obtains the approval of its shareholders as required by the applicable rules of the Principal Market for issuances of shares of Common Stock in excess of such amount.  Until such approval is obtained, no Holder shall be issued in the aggregate in respect of such Holder’s Note, shares of Common Stock in an amount greater than the product of the Exchange Cap multiplied by a fraction, the numerator of which is the total number of shares of Common Stock issuable in respect of the Note issued to such Holder on the Issuance Date and the denominator of which is the aggregate number of shares of Common Stock issuable in respect of the Notes issued to all of the Holders on the Issuance Date (with respect to each Holder, the “Exchange Cap Allocation”).  In the event that any Holder shall sell or otherwise transfer any of such Holder’s Note, the transferee shall be allocated a pro rata portion of such Holder's Exchange Cap Allocation, and the restrictions of the prior sentence shall apply to such transferee with respect to the portion of the Exchange Cap Allocation allocated to such transferee.  If any Holder’s Note is repaid in full without exhausting such Holder’s Exchange Cap Allocation in full, the remainder of such Holder’s Exchange Cap Allocation shall be allocated to the respective Exchange Cap Allocations of the remaining Holders on a pro rata basis in proportion to the remaining principal outstanding on their respective Notes.

2.6.       Registration; Book-Entry.  The Company shall maintain a register (the “Register”) for the recordation of the names and addresses of the Holders of each Note and the principal amount of the Notes held by such Holders (the “Registered Notes”).  The entries in the Register shall be conclusive and binding for all purposes absent manifest error.  The Company and the Holders of the Notes shall treat each Person whose name is recorded in the Register as the owner of a Note for all purposes, including, without limitation, the right to receive payments of principal and interest, hereunder, notwithstanding notice to the contrary.  A Registered Note may be assigned or sold in whole or in part only by registration of such assignment or sale on the Register.  Upon (i) the Company’s receipt of a request to assign or sell all or part of any Registered Note by a Holder, and (ii) compliance by the Holder with the transfer restrictions contained in the Purchase Agreement, the Company shall record the information contained therein in the Register and issue one or more new Registered Notes in the same aggregate principal amount as the principal amount of the surrendered Registered Note to the designated assignee or transferee pursuant to Section 1.7.  Notwithstanding anything to the contrary in this Section 2.6, a Holder may assign any Note or any portion thereof to an Affiliate of such Holder or a Related Fund of such Holder without delivering a request to assign or sell such Note to the Company and the recordation of such assignment or sale in the Register (a “Related Party Assignment”); provided, that (x) the Company may continue to deal solely with such assigning or selling Holder unless and until such Holder has delivered a request to assign or sell such Note or portion thereof to the Company for recordation in the Register; (y) the failure of such assigning or selling Holder to deliver a request to assign or sell such Note or portion thereof to the Company shall not affect the legality, validity, or binding effect of such assignment or sale and (z) such assigning or selling Holder shall, acting solely for this purpose as a non-fiduciary agent of the Company, maintain a register (the “Related Party Register”) comparable to the Register on behalf of the Company, and any such assignment or sale shall be effective upon recordation of such assignment or sale in the Related Party Register.

2.7.       Disputes. In the event of a dispute as to the number of Common Shares issuable to the Holder under this Note in connection with a Stock Payment Amount or otherwise, the Company shall issue to the Holder the number of Common Shares not in dispute and resolve such dispute in accordance with Section 6.12.

8

ARTICLE 3

3.1.       Company May Consolidate, Etc. on Certain Terms.  Subject to Section 3.3, the Company may consolidate with or amalgamate or merge with or into, or sell, convey or lease all or substantially all of its assets to, any other company; provided that in any such case:

(a)       either the Company shall be the continuing company, or the successor company shall expressly assume the due and punctual payment of the principal of and interest on this Note in accordance with the terms hereof, and the due and punctual performance and observance of all of the covenants and conditions of this Note and the Purchase Agreement to be performed or observed by the Company;

(b)       such continuing or successor company, as the case may be, shall not be in default immediately after such amalgamation, merger, consolidation, sale, conveyance or lease in the performance or observance of any such covenant or condition; and

(c)       such continuing or successor company, as the case may be, is a publicly traded corporation whose common stock is quoted on or listed for trading on a Trading Market.

3.2.       Successor Corporation Substituted. Subject to Section 3.3, in case of any such amalgamation, merger, consolidation, sale, lease or conveyance, and following such an assumption by the successor corporation, such successor corporation shall succeed to and be substituted for the Company, with the same effect as if it had been named herein.  The Holder may require such successor corporation to enter written customary assumption agreements in form and substance reasonably satisfactory to the Holder prior to, or simultaneously with, such amalgamation, merger, consolidation, sale, lease or conveyance, including agreements to deliver to the Holder in exchange for this Note a security of the successor corporation evidenced by a written instrument substantially similar in form and substance to this Note, including having a principal amount and interest rate equal to the principal amount and the interest rate of this Note and having similar ranking to this Note, and satisfactory to the Holder.

3.3.       Change in Control Put.

(a)       No later than five (5) days following the consummation of a Change of Control Transaction, but not prior to the public announcement of such Change of Control Transaction, the Company shall deliver written notice thereof via facsimile and overnight courier to the Holder (a “Change of Control Notice”).  If a Change in Control Transaction occurs, the Holder shall have the right, at its option, to require the Company or its successor to redeem this Note, in whole or in part, for an amount equal to (a) 100% of the outstanding principal balance under this Note being redeemed plus all accrued but unpaid interest thereon (the “Base Redemption Amount”) plus (b) (i) if such redemption occurs on or before the 18 month anniversary of the Issuance Date, an amount equal to 10% of the Base Redemption Amount or (ii) if such redemption occurs at any time after the 18 month anniversary of the Issuance Date, an amount equal to 5% of the Base Redemption Amount (the additional amount under clause (b) being referred to as the “Additional Redemption Amount,” and together with the Base Redemption Amount, the “Redemption Amount”).  The Holder may exercise its rights by sending written notice to the Company (the “Holder Redemption Notice”) within thirty (30) Trading Days following the Change in Control Transaction. If the Holder elects to cause the redemption of this Note, then the Company or its successor shall promptly, but in any event no more than twenty-five (25) Trading Days after the date of such election, pay the redemption price to the Holder. This provision shall similarly apply to successive Change in Control Transactions; provided, that if, upon the occurrence of a Change in Control Transaction, the Holder chooses to redeem less than all of this Note, it shall not have further right to redeem this Note as a result of such Change in Control Transaction.

9

(b)      The Base Redemption Amount and the Additional Redemption Amount shall be paid in cash.  The Company shall deliver written notice to the Holder at least five (5) Trading Days following its receipt of the Holder Redemption Notice specifying the date that the Company will pay the Redemption Amount (which date shall not be later than twenty-five (25) Trading Days after the Holder’s election as set forth in Section 3.3(a)) (the “Redemption Date”).  Such written notice shall be irrevocable upon delivery to the Holder.

ARTICLE 4

4.1.       Covenants.  Until all amounts payable under this Note are paid in full, or unless the Company receives the prior written consent of the Holder:

(a)       Corporate Existence.  The Company shall, and shall cause each of its operating Subsidiaries (as defined in the Purchase Agreement) (except for NanoEner, Inc. and EnerFuel, Inc.) to, maintain in full force and effect its corporate existence, rights and franchises and all licenses and other rights to use property owned or possessed by it and reasonably deemed to be necessary to the conduct of its business; provided, that, the Company shall be permitted to merge any of its wholly-owned operating Subsidiaries with and into the Company (as long as the Company is the surviving entity of such merger) or another operating Subsidiary wholly-owned by the Company.  The Company shall not make, or permit any of its Subsidiaries to make, any change in the nature of its business as described in the Company’s most recent annual report filed on Form 10-K with the Commission that would constitute a material change to the business of the Company and its Subsidiaries taken as a whole.

(b)       Regulatory Compliance.  If any Common Shares to be reserved for the purpose of paying Installment Amounts require registration or listing with or approval of any governmental authority, stock exchange or other regulatory body under any federal or state law or regulation before such shares may be validly issued or delivered in connection with a payment of an Installment Amount, the Company, at its sole cost and expense, in good faith and as expeditiously as possible, shall use its best efforts to secure such registration, listing or approval, as the case may be.

(c)       Issue Taxes. The Company shall pay any and all issue and other taxes, excluding federal, state or local income taxes, that may be paid in respect of any issue or delivery of Common Shares in accordance with this Note, unless the Holder directs the Company to deliver such Common Shares to a third party, in which case the Holder will be responsible for the payment of such taxes.

10

(d)      Equal Treatment of Holders.  No consideration shall be offered or paid to any of the Holders to amend or waive or modify any provision of any of the Notes unless the same consideration is also offered to all of the Holders.  This provision constitutes a separate right granted to each of the Holders by the Company and shall not in any way be construed as the Holders acting in concert or as a group with respect to the purchase, disposition or voting of securities or otherwise.

(e)       Notices.  The Company will immediately notify the Holder of the occurrence of an Event of Default hereunder and shall provide the Holder with prompt written notice (A) with respect to any dividend or distribution upon the Common Shares, (B) with respect to any pro rata subscription offer to holders of Common Shares or (C) for the solicitation of rights to vote with respect to any Change in Control Transaction, dissolution or liquidation, provided in each case that such information shall be disclosed to the public prior to or contemporaneously with delivery of such notice to the Holder.

(f)       Use of Proceeds.  The proceeds from the sale of this Note shall be used by the Company for general corporate purposes, but not for (i) the repayment of any outstanding Indebtedness of the Company or any of its Subsidiaries or (ii) the redemption or repurchase of any of its or its Subsidiaries’ equity securities.

(g)      Rank.  All payments due under this Note (a) shall rank pari passu with all Other Notes and the Permitted Pari Passu Indebtedness and (b) shall be senior to all other Indebtedness of the Company and its Subsidiaries other than Permitted Senior Indebtedness.

(h)      Incurrence of Indebtedness.  So long as this Note is outstanding, the Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, incur or guarantee, assume or suffer to exist any Indebtedness, other than Permitted Indebtedness.

(i)        Existence of Liens.  So long as this Note is outstanding, the Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly, allow or suffer to exist any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries (collectively, “Liens”) other than Permitted Liens.

(j)        Restricted Payments.  Except as permitted in the provisos set forth below, the Company shall not, and the Company shall not permit any of its Subsidiaries to, directly or indirectly: (i) redeem, defease, repurchase, repay or make any sinking fund, defeasance, retirement or similar payment or otherwise make any payment in respect of (in whole or in part, whether by way of open market purchases, tender offers, private transactions or otherwise), all or any portion of any Indebtedness (other than Permitted Senior Indebtedness, this Note and the Other Notes), including, but not limited to, payments in respect of principal of (or premium, if any) or interest on, such Indebtedness, (ii) declare or pay any dividend or make any other payment or distribution on account of the Company’s or any of its Subsidiaries’ equity or equity-linked securities or to the direct or indirect holders of the Company’s or any of its Subsidiaries’ equity or equity-linked securities in their capacity as such, or (iii) make any repayment, redemption, retirement, defeasance, sinking fund or similar payment or purchase or other acquisition for value, or obtain the surrender of, any shares of any class of equity or equity-linked securities of the Company or any of its Subsidiaries or any outstanding warrants, options or other rights for the purchase or acquisition of shares of any class of equity or equity-linked securities of the Company or any of its Subsidiaries, now or hereafter outstanding, provided, however, that the Company may make mandatory scheduled interest payments in respect of Permitted Indebtedness outstanding as of the date hereof to the extent the obligation to make such payments was incurred prior to the date hereof and if at the time such payment is due or is otherwise made or, after giving effect to such payment, no event constituting, or that with the passage of time and without being cured would constitute, an Event of Default has occurred and is continuing; provided, further, that payments of principal or interest with respect to any Permitted Indebtedness may be made solely by the conversion or exchange into the Company's or any of its Subsidiaries’ equity securities.

11

(k)      Transactions with Affiliates.  The Company shall not, nor shall it permit any of its Subsidiaries to, enter into, renew, extend or be a party to, any transaction or series of related transactions (including, without limitation, the purchase, sale, lease, transfer or exchange of property or assets of any kind or the rendering of services of any kind) with any Affiliate, except in the ordinary course of business in a manner and to an extent consistent with past practice and necessary or desirable for the prudent operation of its business, for fair consideration and on terms approved in accordance with the corporate governance requirements of the applicable Trading Market and Florida law by a special committee of the Company’s Board of Directors consisting solely of independent and disinterested directors.

(l)       Cash Maintenance.  The Company shall initially maintain no less than $4,500,000 of cash available in one or more bank accounts located in the United States, such cash to be available to make any cash payments required to be made by the Company pursuant to this Note or any other Transaction Document (as defined in the Purchase Agreement). From and after July 1, 2011, the Company may reduce the amount of cash required to be maintained by $450,000 per calendar quarter. For the avoidance of doubt, (x) the obligations of the Company under this Section 4.1(1) are separate and distinct from the obligations of the Company under Section 4.1(l) of the Prior Notes, (y) the aggregate amount of cash required to be maintained by the Company under Section 4.1(l) of the Prior Notes shall not be applicable in determining if the Company has satisfied its obligations under this Section 4.1(l)and (y) the aggregate amount of cash required to be maintained by the Company under Section 4.1(l) of the Prior Notes shall be in addition to the aggregate amount of cash maintained by the Company under this Section 4.1(1).

12

(m)     Reservation of Authorized Shares.

(i)         Reservation. The Company shall initially reserve out of its authorized and unissued Common Shares a number of Common Shares equal to the maximum number of Common Shares issuable pursuant to this Note assuming the Stock Payment Price is $2.29375 per share (appropriately adjusted for any stock split, stock dividend, stock combination, stock buy-back or other similar transaction).  So long as there remains any amount of principal or interest on this Note outstanding, the Company shall take all action necessary to reserve and keep available out of its authorized and unissued Common Shares, solely for the purpose of effecting the payment of Installment Amounts, the maximum number of Common Shares issuable as shall from time to time be necessary to effect the payment of any amounts due under this Article 4, if such amount should become due and payable assuming the Stock Payment Price is $2.29375 per share (appropriately adjusted for any stock split, stock dividend, stock combination, stock buy-back or other similar transaction) (the “Required Reserve Amount”).  The Required Reserve Amount shall be allocated pro rata among the Holders based on the principal amount of the Notes held by each holder at the Closing (as defined in the Purchase Agreement) or increase in the number of reserved shares, as the case may be (the “Authorized Share Allocation”).  In the event that a Holder shall sell or otherwise transfer any of such Holder’s Notes, each transferee shall be allocated a pro rata portion of such holder’s Authorized Share Allocation.  Any Common Shares reserved and allocated to any Person which ceases to hold any Notes shall be allocated to the remaining Holders of Notes, pro rata based on the principal amount of the Notes then held by such Holders.

(ii)        Insufficient Authorized Shares.  If at any time while the Note remains outstanding the Company does not have a sufficient number of authorized and unreserved Common Shares to satisfy its obligation to reserve for issuance at least a number of Common Shares equal to the Required Reserve Amount (an “Authorized Share Failure”), then the Company shall promptly take all action necessary to increase the Company’s authorized Common Shares to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Note then outstanding, including by acting in accordance with the provisions of Section 3.16 of the Purchase Agreement.  Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall either (i) hold a meeting of its shareholders for the approval of an increase in the number of authorized Common Shares or (ii) obtain such approval by written consent and take all other action reasonably necessary to rectify the Authorized Share Failure.  In connection with such meeting, the Company shall provide each shareholder with a proxy statement and shall use its reasonable best efforts to solicit its shareholders’ approval of such increase in authorized Common Shares and to cause its board of directors to recommend to the shareholders that they approve such proposal.  In connection with such written consent, the Company shall provide each shareholder with an information statement and shall use its reasonable best efforts to solicit its shareholders’ approval of such increase in authorized Common Shares and to cause its board of directors to recommend to the shareholders that they approve such proposal.

ARTICLE 5

5.1.       Events of Default.  Each of the following shall constitute an “Event of Default”:

(a)        the Company shall fail to pay to the Holders any amount of principal, interest or other amounts when and as due under the Notes or any other Transaction Document, or to deliver Common Shares required to be delivered by the Company pursuant to this Note or any other Transaction Document; or

13

(b)        the Company shall fail to observe or perform any other covenant, condition or agreement contained in the Notes or any other Transaction Document, which failure is not cured, if possible to cure, within ten (10) daysafter such failure; or

(c)        any representation or warranty made by the Company in the Notes or any other Transaction Document shall prove to have been false or incorrect or breached in a material respect on the date as of which it was made; or

(d)        the Company or any of its Subsidiaries shall (A) default in any payment of any amount or amounts of principal of or interest on any Indebtedness (other than the Indebtedness under the Notes) the aggregate principal amount of which Indebtedness is in excess of $5,000,000, (B)default in any payment of any amount or amounts of principal of or interest of any Indebtedness contemplated pursuant to clause (iv) of the definition of Permitted Senior Indebtedness or (C) default in the observance or performance of any other agreement or condition relating to any such Indebtedness or contained in any instrument or agreement evidencing, securing or relating thereto, or any other event shall occur or condition exist, as a result of which default or other event or condition the holder or holders or beneficiary or beneficiaries of such Indebtedness or a trustee on their behalf have declared such Indebtedness to be due and payable; or

(e)        the Company or any of its Subsidiaries shall (i) apply for or consent to the appointment of, or the taking of possession by, a receiver, custodian, trustee or liquidator of itself or of all or a substantial part of its property or assets, (ii) make a general assignment for the benefit of its creditors, (iii) commence a voluntary case under the United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic), (iv) file a petition seeking to take advantage of any bankruptcy, insolvency, moratorium, reorganization or other similar law affecting the enforcement of creditors’ rights generally, (v) acquiesce to any petition filed against it in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic), (vi) issue a notice of bankruptcy or winding down of its operations or issue a press release regarding same, (vii) admit in writing its inability to pay its debts generally as they mature, (viii) call a meeting of its creditors with a view to arranging a composition, adjustment or restructuring of its debts, or (ix) take any action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing; or

(f)        a proceeding or case shall be commenced in respect of the Company or any of its Subsidiaries, without its application or consent, in any court of competent jurisdiction, seeking (i) the liquidation, reorganization, moratorium, dissolution, winding up, or composition or readjustment of its debts, (ii) the appointment of a trustee, receiver, custodian, liquidator or the like of it or of all or any substantial part of its assets in connection with the liquidation or dissolution of the Company or any of its Subsidiaries or (iii) similar relief in respect of it under any law providing for the relief of debtors, and such proceeding or case described in clause (i), (ii) or (iii) shall continue undismissed, or unstayed and in effect, for a period of sixty (60) days or any order for relief shall be entered in an involuntary case under United States Bankruptcy Code (as now or hereafter in effect) or under the comparable laws of any jurisdiction (foreign or domestic) against the Company or any of its Subsidiaries or action under the laws of any jurisdiction (foreign or domestic) analogous to any of the foregoing shall be taken with respect to the Company or any of its Subsidiaries; or

14

(g)       except to the extent that Rule 144 is available (without the requirement to be in compliance with Rule 144(c)(1)) for the resale of all of the Registrable Securities (as defined in the Registration Rights Agreement), the failure of the applicable Registration Statement required to be filed on or before the applicable Filing Deadline (as defined in the Registration Rights Agreement) or to be declared effective by the Commission on or prior to the date that is sixty (60) days after the applicable Effectiveness Deadline (as defined in the Registration Rights Agreement), or, while the applicable Registration Statement is required to be maintained effective pursuant to the terms of the Registration Rights Agreement, the effectiveness of the applicable Registration Statement lapses for any reason (including, without limitation, the issuance of a stop order) or is unavailable to any holder of the Notes for sale of all of such holder’s Registrable Securities in accordance with the terms of the Registration Rights Agreement, and such lapse or unavailability continues for a period of ten (10) consecutive days or for more than an aggregate of thirty (30) days in any 365-day period (other than days during an Allowable Grace Period (as defined in the Registration Rights Agreement)); or

(h)       the suspension from trading or failure of the Common Shares to be listed on a Trading Market for a period of five (5) consecutive Trading Days or for more than an aggregate of fifteen (15) Trading Days in any 365-day period; or

(i)        the Company’s (A) failure to deliver the required number of Common Shares deliverable hereunder within ten (10) Business Days after the Company is required to do so pursuant to the terms of this Note or (B) notice, written or oral, to any holder of the Notes, including by way of public announcement or through any of its agents, at any time, of its intention not to comply with a requirement to deliver Common Shares required to be delivered in accordance with the provisions of the Notes, other than pursuant to Section 2.5; or

(j)        the number of Common Shares authorized and reserved for issuance pursuant to the Notes is less than the Required Reserve Amount for a period of more than twenty (20) consecutive days (or more than sixty (60) consecutive days if the Company must seek shareholder approval in order to increase such number); or

(k)       a final non-appealable judgment or judgments for the payment of money aggregating in excess of $1,000,000 are rendered against the Company or any of its Subsidiaries and which judgments are not, within sixty (60) days after the entry thereof, bonded, discharged or stayed pending appeal, or are not discharged within sixty (60) days after the expiration of such stay; provided, however, that any judgment which is covered by insurance or an indemnity from a credit worthy party, determined by the Holder in its reasonable discretion, shall not be included in calculating the $1,000,000 amount set forth above so long as the Company provides the Holder a written statement from such insurer or indemnity provider (which written statement shall be reasonably satisfactory to the Holder) to the effect that such judgment is covered by insurance or an indemnity and the Company will receive the proceeds of such insurance or indemnity within thirty (30) days of the issuance of such judgment; or

15

(l)        any Event of Default (as defined in the Prior Notes) occurs under any Prior Notes.

If an Event of Default with respect to Notes shall have occurred and be continuing, the Holder may declare by written notice to the Company the principal amount of this Note and accrued and unpaid interest thereon (and any other amounts owed by the Company hereunder) to be immediately due and payable (an “Acceleration”).

Upon the occurrence of an Acceleration, the Company shall deliver to the Holder by wire transfer of immediately available funds an amount in cash equal the sum of (x) the entire outstanding principal amount of this Note, all unpaid interest accrued thereon through the effective date of such Acceleration (the “Acceleration Date”) and all other amounts due under this Note and (y) the EOD Base Payment.

The “EOD Base Payment” shall be determined according to the following formula:

EODB = X ×1.15

For purposes of the foregoing formula:

EODB = the EOD Base Payment

X = the entire outstanding principal amount of this Note, all interest on the outstanding principal amount of this Note due through the Acceleration Date and all other amounts due under this Note.

ARTICLE 6

6.1.       Notices.  Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery at the address designated in the Purchase Agreement (if delivered on a Business Day during normal business hours where such notice is to be received), or the first Business Day following such delivery (if delivered other than on a Business Day during normal business hours where such notice is to be received) or (b) on the second Business Day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.  The Company shall promptly notify the Holder of this Note of any notices sent or received, or any actions taken with respect to the Other Notes.

6.2.       Governing Law.  This Note shall be governed by and construed in accordance with the internal laws of the State of New York, without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction.

6.3.       Headings.  Article and section headings in this Note are included herein for purposes of convenience of reference only and shall not constitute a part of this Note for any other purpose.

16

6.4.       Remedies, Characterizations, Other Obligations, Breaches and Injunctive Relief.  The remedies provided in this Note shall be cumulative and in addition to all other remedies available under this Note, at law or in equity (including, without limitation, a decree of specific performance and/or other injunctive relief), no remedy contained herein shall be deemed a waiver of compliance with the provisions giving rise to such remedy and nothing herein shall limit a holder’s right to pursue actual damages for any failure by the Company to comply with the terms of this Note.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach would be inadequate, and agrees that, in the event of any such breach or threatened breach, the Holder shall be entitled, in addition to all other available rights and remedies, at law or in equity, to seek equitable relief, including but not limited to an injunction restraining any such breach or threatened breach, without the necessity of showing economic loss and without any bond or other security being required.

6.5.       Enforcement Expenses.  The Company agrees to pay all costs and expenses of enforcement of this Note, including, without limitation, reasonable attorneys’ fees and expenses.

6.6.       Binding Effect.  The obligations of the Company and the Holder set forth herein shall be binding upon the successors and assigns of each such party, whether or not such successors or assigns are permitted by the terms hereof.

6.7.       Amendments.  No provision of this Note may be modified or amended other than by a written instrument signed by the Company and Holders of a majority of the outstanding principal amount under all of the Notes; provided, however, that no such modification or amendment shall, without the consent of the Holder hereunder, change the stated maturity date of this Note, or reduce the principal amount hereof, or reduce the rate or extend the time of payment of any interest hereon, or reduce any amount payable on redemption or prepayment hereof, or impair or affect the right of the Holder to receive payment of principal (whether in cash or Common Shares) of, and interest on, the Notes or to institute suit for payment thereof, or impair or affect the right of the Holder to receive any other payment provided for under this Note, or modify or amend the definition of “Equity Conditions.”

6.8.       Consent to Jurisdiction.  Each of the Company and the Holder (i) hereby irrevocably submits to the exclusive jurisdiction of the United States District Court sitting in the Southern District of New York and the courts of the State of New York located in New York county for the purposes of any suit, action or proceeding arising out of or relating to this Note and (ii) hereby waives, and agrees not to assert in any such suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of such court, that the suit, action or proceeding is brought in an inconvenient forum or that the venue of the suit, action or proceeding is improper.  Each of the Company and the Holder consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address in effect for notices to it under the Purchase Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing in this Section 6.8 shall affect or limit any right to serve process in any other manner permitted by law. The Company hereby waives any right to trial by jury.

17

6.9.       Parties in Interest.  This Note shall be binding upon, inure to the benefit of and be enforceable by the Company, the Holder and their respective successors and permitted assigns.

6.10.     Failure or Indulgence Not Waiver.  No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder, or course of conduct relating hereto, shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege.

6.11.     Company Waivers.  Except as otherwise specifically provided herein, the Company and all others that may become liable for all or any part of the obligations evidenced by this Note, hereby waive any rights of set-off, presentment, demand, notice of nonpayment, protest and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note.

6.12.     Dispute Resolution.  Upon the request of the Holder, the Company shall promptly deliver a notice providing reasonable support for any determination or arithmetic calculation required to be made hereunder, but in no event later than one (1) Business Day thereafter.  In the case of a dispute as to the determination of the Closing Price, the Cash Payment Amount, the Stock Payment Amount, the IA Additional Cash Payment, the number of Advance Shares, the number of True-Up Shares, the IA Non-Stock Base Payment, the Base Payment Amount, the Additional Prepayment Amount, the number of Prepayment Advance Shares, the Base Redemption Amount, the Additional Redemption Amount, the EOD Base Payment or other similar provision or calculation, the Company shall (i) deliver to the Holder the number of Common Shares and/or the amount of cash, as the case may be, resulting from any such determination or calculation that is not disputed  by the parties on the date on which such shares or cash are required to be delivered hereunder and (ii) submit the disputed determinations or arithmetic calculations, within two (2) Business Days of the receipt, or deemed receipt, by either party of notice (which may be written or oral) from the other party that any such determination or calculation is being disputed, to (a) an independent, reputable investment bank selected by the Company and approved by the Holder or (b) to the Company’s independent, outside accountant, as appropriate.  The Company shall use reasonable best efforts to cause the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than five (5) Business Days from the time it receives the disputed determinations or calculations.  Such investment bank’s or accountant’s determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.  If the determination or calculation of such investment bank or accountant is the same as that of the Company's determination or calculation (with a permitted variance of up to 5%) then the fees of such investment bank or accountant shall be borne by the Holder.  In all other cases, such fees shall be borne by the Company.

18

6.13.     Disclosure.  On or prior to delivery of any notice to the Holder in accordance with the terms of this Note, unless the Company has in good faith determined that such notice does not contain any material, nonpublic information relating to the Company or its Subsidiaries, the Company shall publicly disclose such material, nonpublic information on a Current Report on Form 8-K or otherwise.  Unless mutually agreed in writing between the Company and the Holder, the Holder shall be allowed to presume that all notices to be delivered to the Holder pursuant to this Note do not contain any material, nonpublic information relating to the Company or its Subsidiaries.  Without limiting the generality of the foregoing, contemporaneously with the delivery of any notice required to be delivered by the Company pursuant to Section 2, Section 3.3 or Section 5.1 hereof, including, without limitation, any Company Installment Notice, any notice with respect to a Subsequent Equity Conditions Failure, any notice that the Company has cured a Subsequent Equity Conditions Failure, any notice with respect to any prepayment contemplated pursuant to Section 2.4, any Change of Control Notice or any notice with respect to an Event of Default or Acceleration, the Company shall publicly disclose on a Current Report on Form 8-K all information contained in any such notices, including, without limitation, any election with respect to how payments are to be made pursuant to this Note, the number of any Advance Shares, True-Up Shares or any other Common Shares to be delivered pursuant to the terms of this Note, and the amount of any cash to be paid pursuant to the terms of this Note, provided that to the extent a notice relates to a payment in Common Shares that comprise less than 0.25% of the number of Common Shares then outstanding, the Company shall not be obligated to disclose such information on a Current Report on Form 8-K unless the Company determines in good faith that such payment or knowledge of such payment could reasonably be expected to constitute material nonpublic information relating to the Company or its Subsidiaries.

6.14.     Definitions.  The words “herein”, “hereof”, “hereunder” and words of similar import refer to this Note as a whole and not to any particular Article, Section or other subdivision.  The terms defined in this Note include the plural as well as the singular, and the word “including” shall be deemed to mean “including without limitation.”  All references to a “Section”, unless the context otherwise requires, refer to such parts of this Note.

For the purposes hereof, the following terms shall have the following meanings:

“Affiliate” means, with respect to any Person, any other Person that directly or indirectly controls, is controlled by, or is under common control with, such Person, it being understood for purposes of this definition that “control” of a Person means the power directly or indirectly either to vote 10% or more of the stock having ordinary voting power for the election of directors of such Person or direct or cause the direction of the management and policies  of such Person whether by contract or otherwise.

“Business Day” means any day other than a Saturday, Sunday or other day on which commercial banks in New York City are required or permitted by law to be closed during regular business hours.

“Change in Control Transaction” will be deemed to exist if (i) there occurs any direct or indirect consolidation, merger or other business combination of the Company with or into any other corporation or other person (whether or not the Company is the surviving corporation), or any other corporate reorganization or transaction or series of related transactions in which in any of such events the existing voting shareholders of the Company prior to such event cease to own 50% or more of the voting stock, or corresponding voting equity interests, of the surviving corporation after such event, (ii) any “person” or “group” (as these terms are used for purposes of Section 13(d) and 14(d) of the Exchange Act) (other than Boris Zingarevich and his Affiliates, so long as he and his Affiliates collectively beneficially own less than 70% of the voting equity securities of the Company) is or shall become the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate voting stock of the Company, (iii) Continuing Directors do not constitute at least a majority  of the members of the Company’s Board of Directors or (iv) in one or a series of related transactions, there is a sale or transfer of all or substantially all of the assets of the Company.

19

“Closing Price” means, on any particular date, the last trading price per share of the Common Shares on such date on the principal Trading Market on which the Common Shares are then listed, or if there is no such price on such date, then the last bid price on such Trading Market on such date.

“Common Shares” means shares of the Company’s common stock, par value $0.01 per share.

“Contingent Obligations” means, as to any Person, any direct or indirect liability, contingent or otherwise, of that Person with respect to any Indebtedness, lease, dividend or other obligation of another Person if the primary purpose or intent of the Person incurring such liability, or the primary effect thereof, is to provide assurance to the obligee of such liability that such liability will be paid or discharged, or that any agreements relating thereto will be complied with, or that the holders of such liability will be protected (in whole or in part) against loss with respect thereto.

“Continuing Director” means, on any date, a member of the Board of Directors who (i) was a member of such board on the Issuance Date or (ii) was nominated or elected by at least a majority of the directors who were Continuing Directors at the time of such nomination or election or whose election to the Board of Directors was recommended or endorsed by at least a majority of the directors who were Continuing Directors at the time of such nomination or election.

“Daily VWAP” means the daily volume-weighted average price for the Common Shares on the principal Trading Market on which the Common Shares are then listed during the period beginning at 9:30 a.m. (New York time) (or such other time as such Trading Market publicly announces is the official open of trading), and ending at 4:01 p.m. (New York time) (or one minute after such other time as such Trading Market publicly announces is the official close of trading) as reported by Bloomberg Financial Markets through its “Volume at Price” function (subject to adjustment to reflect dividends, (including cash dividends) stock splits, stock combinations or other similar transactions).

“DTC” means The Depository Trust Company.

20

“Equity Conditions” means that, (1) on each day during the Equity Conditions Measuring Period:  (i) all Common Shares to be issued in connection with the applicable Installment Date (or such other date on or event for which the Equity Conditions are required to be satisfied) shall be eligible for resale by the Holder without restriction and without need for additional registration under any applicable federal or state securities laws, either pursuant to an effective resale registration statement or Rule 144 and if all of the Common Shares to be issued in connection with the applicable Installment Date (or such other date on or event for which the Equity Conditions are required to be satisfied) cannot be freely resold pursuant to Rule 144, the Company shall have no knowledge of any fact that would  reasonably be expected to cause any Registration Statement required pursuant to the Registration Rights Agreement not to be effective and available for the resale of all remaining Registrable Securities; (ii) the Common Shares are designated for listing on a Trading Market and shall not have been suspended from trading on such exchange or market nor shall delisting or suspension by such exchange or market have been pending or, to the knowledge of the Company, threatened either (I) by such exchange nor shall there be any Commission or judicial stop trade order or trading suspension stop order or (II) by falling below the then effective minimum listing maintenance requirements of such exchange or market; (iii) there shall not have occurred and be continuing, unless waived by the Holder, either (A) an Event of Default or (B) an event that with the passage of time or giving of notice would constitute an Event of Default; (iv) the Company has not provided any Holder with any non-public information in breach of Section 3.10 of the Purchase Agreement; (v) none of the Registration Statement (as defined in the Purchase Agreement), the Prospectus (as defined in the Purchase Agreement) nor any Registration Statement (as defined in the Registration Rights Agreement) contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements made therein, in the light of the circumstances under which they were made, not misleading and such Registration Statement and such Prospectus comply with all applicable securities laws as to form and substance; (vi) the Company’s transfer agent for the Common Shares is participating in the DTC Fast Automated Securities Transfer Program; (vii) all Common Shares to be issued in connection with the applicable Installment Date (or such other date on or event for which the Equity Conditions are required to be satisfied) are duly authorized and will be validly issued, fully paid and non-assessable upon issuance and the issuance thereof will not require any further approvals of the Company’s board of directors or shareholders; (viii) no pending, proposed or intended Change of Control Transaction shall have been publicly announced, but not abandoned, terminated or completed prior to the Equity Conditions Measuring Period; (ix) all Common Shares issuable in connection with an Installment Date (or such other date on or event for which the Equity Conditions are required to be satisfied) may be issued in full without violating Section 2.5 or the rules or regulations of any applicable Trading Market, including, without limitation, any listing rule of the NASDAQ Stock Market that would require shareholder approval if the number of Common Shares being issued, when taken together with the number of Common Shares theretofore issued under all of the Notes, exceeds 19.99% of the number of Common Shares outstanding on the Issuance Date and (x) the average trading volume for the Common Shares during the twenty (20) Trading Day period prior to the applicable date of determination is at least 300,000 shares per Trading Day, and (2)(i) with respect to any Advance Date, the arithmetic average of the Daily VWAP for the five Trading Days immediately preceding such Advance Date is at least $2.50 per share (appropriately adjusted for any stock split, stock dividend, stock combination, stock buy-back or other similar transaction after the Issuance Date and on or prior the Advance Date), (ii) with respect to any Prepayment Advance Date, the arithmetic average of the Daily VWAP for the five Trading Days immediately preceding such Prepayment Advance Date is at least $2.50 per share (appropriately adjusted for any stock split, stock dividend, stock combination, stock buy-back or other similar transaction after the Issuance Date and on or prior to the Prepayment Advance Date) and (iii) with respect to any Installment Date, the arithmetic average of the nine lowest Daily VWAPs during the Stock Payment Pricing Period is at least $2.50 per share (appropriately adjusted for any stock split, stock dividend, stock combination, stock buy-back or other similar transaction after the Issuance Date and through the end of such period).

“Equity Conditions Measuring Period” means the period beginning twenty (20) Trading Days prior to the applicable Installment Notice Date (or such other date on or event for which the Equity Conditions are required to be satisfied) and ending on and including the applicable Installment Date (or such other date on or event for which the Equity Conditions are required to be satisfied).

21

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

“GAAP”means United States generally accepted accounting principles, consistently applied.

“Indebtedness” means without duplication:  (a) all obligations for borrowed money; (b) all obligations evidenced by bonds, debentures, notes or other similar instruments and all reimbursement or other obligations in respect of letters of credit, bankers acceptances, current swap agreements, interest rate hedging agreements, interest rate swaps or other financial products; (c) all capital lease obligations; (d) all obligations or liabilities secured by a lien or encumbrance on any asset of the Company, irrespective of whether such obligation or liability is assumed; (e) all obligations for the deferred purchase price of assets; (f) all synthetic leases; (g) any obligation guaranteeing (whether directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse) any of the foregoing obligations of any other person; (h) all indebtedness created or arising under any conditional sale or other title retention agreement, or incurred as financing, in either case with respect to any property or assets acquired with the proceeds of such indebtedness (even though the rights and remedies of the seller or bank under such agreement in the event of default are limited to repossession or sale of such property); and (i) all Contingent Obligations in respect of indebtedness or obligations of others of the kinds referred to in clauses (a) through (h) above.

“Initial Installment Date” means April 1, 2011.

“Installment Amount” means, with respect to (a) any Installment Date other than the Maturity Date, an amount equal to 1/10th of the original principal amount of the Notes plus all accrued but unpaid interest under the Notes, including Default Interest (if any), through and including the applicable Installment Date and (b) the Maturity Date, all outstanding principal and interest, including Default Interest (if any) and other amounts due and payable under the Notes.

“Installment Date” means the Initial Installment Date and each January 1, April 1, July 1 and October 1 subsequent to the Initial Installment Date with the final Installment Date being the Maturity Date.  Notwithstanding anything contained in this Note to the contrary and for all purposes hereunder, the Maturity Date shall be deemed to be an Installment Date.

“Issuance Date” means December31, 2010.

“Permitted Indebtedness” means (i) the Indebtedness evidenced by the Notes and the Other Notes, (ii) Permitted Pari Passu Indebtedness, (iii) Permitted Senior Indebtedness and (iv) in the event that, at any time, Think Global AS or Think Technology AS (collectively, “Think”) becomes a “Subsidiary” of the Company, any Indebtedness of Think (“Think Indebtedness”) not to exceed $50,000,000 in the aggregate at any time outstanding, as long as, in any such case, (x) neither the Company nor any of its Subsidiaries (other than Think) is obligated in any respect, whether as guarantor (whether directly or indirectly guaranteed, endorsed, co-made, discounted or sold with recourse) or otherwise, with respect to any Think Indebtedness and (y) no Think Indebtedness is secured by (and no holder of any such Indebtedness has an existing right, contingent or otherwise, to be secured by) any mortgage, lien, pledge, charge, security interest or other encumbrance upon or in any property or assets (including accounts and contract rights) owned by the Company or any of its Subsidiaries, even though the Company or the Subsidiary that owns such assets or property has not assumed or become liable for the payment of such Indebtedness; provided, however, that the grant by the Company to holders of Think Indebtedness of the right to exchange such Indebtedness for shares of Common Stock shall not be deemed to constitute an obligation or right described in clause (x) or (y) above, respectively, as long as such right to exchange (I) does not entitle a holder of Think Indebtedness to exchange such Indebtedness for shares of Common Stock at a price per share that is less than $4.00 (subject to adjustment for stock splits, stock dividends and similar events) and (II) cannot be exercised until after the eighteen (18) month anniversary of the date on which such Indebtedness is issued.

22

“Permitted Liens” means (i) any Lien for taxes not yet due or delinquent or being contested in good faith by appropriate proceedings for which adequate reserves have been established in accordance with GAAP, (ii) any statutory Lien arising in the ordinary course of business by operation of law with respect to a liability that is not yet due or delinquent, (iii) any Lien created by operation of law, such as materialmen’s liens, mechanics’ liens and other similar liens, arising in the ordinary course of business with respect to a liability that is not yet due or delinquent or that are being contested in good faith by appropriate proceedings, (iv) Liens (A) upon or in any equipment acquired or held by the Company or any of its Subsidiaries to secure the purchase price of such equipment or indebtedness incurred solely for the purpose of financing the acquisition or lease of such equipment, or (B) existing on such equipment at the time of its acquisition, provided that the Lien is confined solely to the property so acquired and improvements thereon, and the proceeds of such equipment, (v) Liens incurred in connection with the extension, renewal or refinancing of the indebtedness secured by Liens of the type described in clauses (i) and (iv) above, provided that any extension, renewal or replacement Lien shall be limited to the property encumbered by the existing Lien and the principal amount of the Indebtedness being extended, renewed or refinanced does not increase, (vi) leases or subleases and licenses and sublicenses granted to others in the ordinary course of the Company’s business, not interfering in any material respect with the business of the Company and its Subsidiaries taken as a whole, (vii) Liens in favor of customs and revenue authorities arising as a matter of law to secure payments of custom duties in connection with the importation of goods, (viii) Liens arising from judgments, decrees or attachments in circumstances not constituting an Event of Default under Section 5.1 and (ix) Liens securing Permitted Senior Indebtedness.

“Permitted Pari Passu Indebtedness” means (i) Indebtedness existing on the date hereof that is pari passu in right of payment with the Notes and is set forth in Schedule 6.14, and (ii) Indebtedness in the form of privately placed or registered unsecured convertible notes (or similar instruments), provided, however, that with respect to Indebtedness permitted under this clause (ii), (A) the maturity date of such Indebtedness will be more than 90 days after the Maturity Date of this Note, (B) except as contemplated in the last proviso in Section 4.1(j), such Indebtedness shall not allow, nor shall the Company or any of its Subsidiaries make in respect thereof, any amortization payments, prepayments or other payments with respect to the outstanding principal amount of such Indebtedness on or prior to the date that this Note is paid in full pursuant to the terms of this Note and (C) the outstanding aggregate principal amount of such Indebtedness shall not exceed $15 million disregarding any amounts set forth on Schedule 6.14 under the heading “Permitted Pari Passu Indebtedness”.

23

“Permitted Senior Indebtedness” means (i) Indebtedness existing on the date hereof that is senior in right of payment to the Notes and set forth in Schedule 6.14, (ii) the principal of (and premium, if any), interest on, and all fees and other amounts (including, without limitation, any reasonable out-of-pocket costs, enforcement expenses (including reasonable out-of-pocket legal fees and disbursements), collateral protection expenses and other reimbursement or indemnity obligations relating thereto) payable by Company and/or its Subsidiaries under or in connection with any working capital facility to be entered into by the Company and/or its Subsidiaries with one or more financial institutions (and on customary terms and conditions), and as long as the outstanding amount of such Indebtedness pursuant to this clause (ii) does not exceed in the aggregate at any time outstanding the lower of the following: (A) $25,000,000 and (B) the sum of (x) seventy-five percent (75%) of the accounts receivable balance securing such Indebtedness and (y) fifty percent (50%) of the book value of the Company's inventory, as disclosed on the Company's most recent balance sheet prepared in accordance with GAAP and filed pursuant to an annual report on Form 10-K or quarterly report on Form 10-Q, (iii) Indebtedness of the Company or any of its Subsidiaries, in an aggregate amount not to exceed $5,000,000 at any time outstanding, which (x) are capital lease obligations, or (y) is incurred solely to finance the acquisition, construction or improvement of any fixed or capital assets, provided that such Indebtedness is incurred prior to or within ninety (90) days after such acquisition or the completion of such construction or improvement; and (iv) Indebtedness owing to the U.S. Department of Energy (“DOE”) in connection with the Advanced Technology Vehicle Manufacturing Incentive Program; provided that the aggregate principal amount of such Indebtedness shall not exceed $300,000,000 at any time outstanding.

“Prior Notes” means the 8.25% Senior Notes Due 2013 issued by the Company pursuant to the Securities Purchase Agreement, dated as of September 2, 2010.

“Registration Rights Agreement” shall have the meaning set forth in the Purchase Agreement.

“Required Holders” means, at any time, the holders of at least a majority of the aggregate principal amount of the Notes outstanding at such time.

“Stock Payment Price” means, with respect to any date when any amount under the Notes is due and payable, that price which shall be computed as 91.75% of the arithmetic average of the nine lowest Daily VWAPs of the Common Shares during the Stock Payment Pricing Period.  All such determinations will be appropriately adjusted for any stock split, stock dividend, stock combination or other similar transaction.

“Stock Payment Pricing Period” means, with respect to any date when any amount under the Notes is due and payable, the twenty (20) Trading Days immediately prior to such date.

“Trading Day” means a day on which the Common Shares are traded on a Trading Market,  or, if a Trading Market is not the principal trading market for the Common Shares, then on the principal securities exchange or securities market on which the Common Shares is then traded; provided that “Trading Day” shall not include any day on which the Common Shares are scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Shares are suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York Time).

“Trading Market” means The New York Stock Exchange, the NASDAQ Stock Market or the NYSE Amex.

[Remainder of Page Left Blank Intentionally]

24

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed by its duly authorized officer as of the date first above indicated.

ENER1, INC.
By:
	Name:	Charles Gassenheimer
	Title:	Chief Executive Officer

Signature Page to Note

EXHIBIT A

WIRE INSTRUCTIONS

Payee: _______________________________________________________________________________________

Bank: ________________________________________________________________________________________

Address: ______________________________________________________________________________________

Bank No.: _____________________________________________________________________________________

Account No.: __________________________________________________________________________________

Account Name: ________________________________________________________________________________

EX-1.3

Exhibit C

ENER1, INC.

Warrant To Purchase Common Stock

Warrant No.: ______

Number of Shares of Common Stock:_____________

Date of Issuance: December 31, 2010 ("Issuance Date")

Ener1, Inc., a Florida corporation (the "Company"), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, [_______________], the registered holder hereof or its permitted assigns (the "Holder"), is entitled, subject to the terms set forth below, to purchase from the Company, at the Exercise Price (as defined below) then in effect, upon surrender of this Warrant to Purchase Common Stock (including any Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, the "Warrant"), at any time or times on or after the date hereof, but not after 11:59 p.m., New York time, on the Expiration Date (as defined below), ______________ (_____________) fully paid nonassessable shares of Common Stock (as defined below)(the "Warrant Shares").  Except as otherwise defined herein, capitalized terms in this Warrant shall have the meanings set forth in Section 16.  This Warrant is one of the Warrants to purchase Common Stock (the "SPA Warrants") issued pursuant to Section 1 of that certain Securities Purchase Agreement, dated as of December 31, 2010 (the "Subscription Date"), by and among the Company and the investors (the "Buyers") referred to therein (the "Securities Purchase Agreement").

1. EXERCISE OF WARRANT.

(a) Mechanics of Exercise.  Subject to the terms and conditions hereof (including, without limitation, the limitations set forth in Section 1(f)), this Warrant may be exercised by the Holder on any day on or after the date hereof, in whole or in part, by (i) delivery to the Company of a written notice, in the form attached hereto as Exhibit A (the "Exercise Notice"), of the Holder's election to exercise this Warrant and (ii) either (A) payment to the Company of an amount equal to the applicable Exercise Price multiplied by the number of Warrant Shares as to which this Warrant is being exercised (the "Aggregate Exercise Price") in cash or by wire transfer of immediately available funds or (B) by notifying the Company at the same time that it delivers the Exercises Notice, that this Warrant is being exercised pursuant to a Cashless Exercise (as defined in Section 1(d)) (such Exercise Notice and, if applicable, the Aggregate Exercise Price are referred to herein as the "Exercise Delivery Documents").  The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder.  Execution and delivery of the Exercise Notice with respect to less than all of the Warrant Shares shall have the same effect as cancellation of the original Warrant and issuance of a new Warrant evidencing the right to purchase the remaining number of Warrant Shares.  On or before the third (3rd) Trading Day following the date on which the Company has received an Exercise Notice (the "Delivery Date") and so long as the Aggregate Exercise Price is paid to the Company contemporaneously with or prior to the Delivery Date, (x) in the event that the Company's transfer agent (the "Transfer Agent") participates in the Depository Trust Company (“DTC”) Fast Automated Securities Transfer program (“FAST”), the Company shall credit such aggregate number of Warrant Shares to which the Holder is entitled pursuant to such exercise to the Holder's or its designee's balance account with DTC, as specified in such Exercise Notice, through its Deposit/Withdrawal at Custodian system and (y) in the event that the Transfer Agent is not a participant in FAST, or if the Warrant Shares are not otherwise eligible for delivery through FAST, or if the Holder so specifies in an Exercise Notice or otherwise in writing on or before the Exercise Date, the Company shall effect delivery of Warrant Shares by delivering to the Holder or its designee physical certificates representing such Warrant Shares, no later than the close of business on such Delivery Date. Upon delivery of the Exercise Delivery Documents, the Holder shall be deemed for all corporate purposes to have become the holder of record of the Warrant Shares with respect to which this Warrant has been exercised, irrespective of the date such Warrant Shares are credited to the Holder's DTC account.  If this Warrant is submitted in connection with any exercise pursuant to this Section 1(a) and the number of Warrant Shares represented by this Warrant submitted for exercise is greater than the number of Warrant Shares being acquired upon an exercise, then the Company shall as soon as practicable and in no event later than three (3) Business Days after any exercise and at its own expense, issue a new Warrant (in accordance with Section 7(d)) representing the right to purchase the number of Warrant Shares purchasable immediately prior to such exercise under this Warrant, less the number of Warrant Shares with respect to which this Warrant is exercised.  No fractional shares of Common Stock are to be issued upon the exercise of this Warrant, but rather the number of shares of Common Stock to be issued shall be rounded up to the nearest whole number.  The Company shall pay any and all taxes which may be payable with respect to the issuance and delivery of Warrant Shares upon exercise of this Warrant unless such Warrant Shares are to be delivered to a person other than the Holder or an affiliate thereof.  

(b) Exercise Price.  For purposes of this Warrant, "Exercise Price" means $4.68, subject to adjustment as provided herein.

- 2 - -

(c) Company's Failure to Timely Deliver Securities.  If the Company shall fail for any reason or for no reason to issue to the Holder within three (3) Trading Days of receipt of the Exercise Delivery Documents, a certificate for the number of shares of Common Stock to which the Holder is entitled and register such shares of Common Stock on the Company's share register or to credit the Holder's balance account with DTC for such number of shares of Common Stock to which the Holder is entitled upon the Holder's exercise of this Warrant, then, in addition to all other remedies available to the Holder, the Company shall pay in cash to the Holder on each day after such thirdBusiness Day that the issuance of such shares of Common Stock is not timely effected an amount equal to 0.5% of the product of (A) the sum of the number of shares of Common Stock not issued to the Holder on a timely basis and to which the Holder is entitled and (B) the Closing Sale Price of the shares of Common Stock on the Trading Day immediately preceding the last possible date which the Company could have issued such shares of Common Stock to the Holder without violating Section 1(a).  In addition to the foregoing, if within three (3) Trading Days after the Company's receipt of the facsimile copy of a Exercise Notice the Company shall fail to issue and deliver a certificate to the Holder and register such shares of Common Stock on the Company's share register or credit the Holder's balance account with DTC for the number of shares of Common Stock to which the Holder is entitled upon the Holder's exercise hereunder, and if on or after such Trading Day the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of shares of Common Stock issuable upon such exercise that the Holder anticipated receiving from the Company (a "Buy-In"), then the Company shall, within three (3) Business Days after the Holder's request and in the Holder's discretion, either (i) pay cash to the Holder in an amount equal to the Holder's total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased (the "Buy-In Price"), at which point the Company's obligation to deliver such certificate (and to issue such Warrant Shares) shall terminate, or (ii) promptly honor its obligation to deliver to the Holder a certificate or certificates representing such Warrant Shares and pay cash to the Holder in an amount equal to the excess (if any) of the Buy-In Price over the product of (A) such number of shares of Common Stock, times (B) the Exercise Price.

(d) Cashless Exercise. Notwithstanding anything contained herein to the contrary, the Holder may, in its sole discretion, exercise this Warrant in whole or in part and, in lieu of making the cash payment otherwise contemplated to be made to the Company upon such exercise in payment of the Aggregate Exercise Price, elect instead to receive upon such exercise the "Net Number" of shares of Common Stock determined according to the following formula (a "Cashless Exercise"):

Net Number = (A x B) - (A x C)

                  B

For purposes of the foregoing formula:

A= the total number of shares with respect to which this Warrant is then being exercised.

B= the average of the Closing Sale Prices of the shares of Common Stock (as reported by Bloomberg) for the five (5) consecutive Trading Days ending on the date immediately preceding the date of the Exercise Notice.

C= the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.

- 3 - -

(e) Disputes.  In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall promptly issue to the Holder the number of Warrant Shares that are not disputed and resolve such dispute in accordance with Section 12.

(f) Limitations on Exercises; Beneficial Ownership.  The Company shall not effect the exercise of this Warrant, and the Holder shall not have the right to exercise this Warrant, to the extent that after giving effect to such exercise, such Person (together with such Person's affiliates) would beneficially own in excess of 9.99% (the “Maximum Percentage”) of the shares of Common Stock outstanding immediately after giving effect to such exercise.  For purposes of the foregoing sentence, the aggregate number of shares of Common Stock beneficially owned by such Person and its affiliates shall include the number of shares of Common Stock issuable upon exercise of this Warrant with respect to which the determination of such sentence is being made, but shall exclude shares of Common Stock which would be issuable upon (i) exercise of the remaining, unexercised portion of this Warrant beneficially owned by such Person and its affiliates and (ii) exercise or conversion of the unexercised or unconverted portion of any other securities of the Company beneficially owned by such Person and its affiliates (including, without limitation, any convertible notes or convertible preferred stock or warrants) subject to a limitation on conversion or exercise analogous to the limitation contained herein.  To the extent that the limitation contained in this Section 1(f)applies, the submission of an Exercise Notice by the Holder shall be deemed to be the Holder’s representation that this Warrant is exercisable pursuant to the terms hereof and the Company shall be entitled to rely on such representation without making any further inquiry as to whether this Section 1(f)applies. The Company shall have no liability to any person if the Holder's determination of whether this Warrant is exercisable pursuant to the terms hereof is incorrect.  Except as set forth in the preceding sentence, for purposes of this paragraph, beneficial ownership shall be calculated in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended.  For purposes of this Warrant, in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (1) the Company's most recent Form 10-K, Form 10-Q, Current Report on Form 8-K or other public filing with the Securities and Exchange Commission, as the case may be, (2) a more recent public announcement by the Company or (3) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding.  For any reason at any time, upon the written or oral request of the Holder, the Company shall within one (1) Business Day confirm orally and in writing to the Holder the number of shares of Common Stock then outstanding.  In any case, the number of outstanding shares of Common Stock shall be determined after giving effect to the conversion or exercise of securities of the Company, including the SPA Warrants, by the Holder and its affiliates since the date as of which such number of outstanding shares of Common Stock was reported.  By written notice to the Company, the Holder may from time to time increase or decrease the Maximum Percentage to any other percentage not in excess of 9.99% specified in such notice; provided that (i) any such increase will not be effective until the sixty-first (61st) day after such notice is delivered to the Company, and (ii) any such increase or decrease will apply only to this Warrant and not to any other SPA Warrants.  The provisions of this paragraph shall be construed and implemented in a manner other than in strict conformity with the terms of this Section 1(f) to correct this paragraph (or any portion hereof) which may be defective or inconsistent with the intended beneficial ownership limitation herein contained or to make changes or supplements necessary or desirable to properly give effect to such limitation.

- 4 - -

(g) Insufficient Authorized Shares.  If at any time while any of the Warrants remain outstanding the Company does not have a sufficient number of authorized and unreserved shares of Common Stock to satisfy its obligation to reserve for issuance upon exercise of the Warrants at least a number of shares of Common Stock equal to 100% (the "Required Reserve Amount") of the number of shares of Common Stock as shall from time to time be necessary to effect the exercise of all of the Warrants then outstanding (an "Authorized Share Failure"), then the Company shall immediately take all action necessary to increase the Company's authorized shares of Common Stock to an amount sufficient to allow the Company to reserve the Required Reserve Amount for the Warrants then outstanding.  Without limiting the generality of the foregoing sentence, as soon as practicable after the date of the occurrence of an Authorized Share Failure, but in no event later than sixty (60) days after the occurrence of such Authorized Share Failure, the Company shall hold a meeting of its shareholders for the approval of an increase in the number of authorized shares of Common Stock.  In connection with such meeting, the Company shall provide each shareholder with a proxy statement and shall use its best efforts to solicit its shareholders' approval of such increase in authorized shares of Common Stock and to cause its board of directors to recommend to the shareholders that they approve such proposal.

2. ADJUSTMENT OF EXERCISE PRICE AND NUMBER OF WARRANT SHARES.  The Exercise Price and the number of Warrant Shares shall be adjusted from time to time as follows:

(a) Adjustment upon Issuance of shares of Common Stock.  If and whenever on or after the Subscription Date the Company issues or sells, or in accordance with this Section 2 is deemed to have issued or sold, any shares of Common Stock (including the issuance or sale of shares of Common Stock owned or held by or for the account of the Company, but excluding shares of Common Stock deemed to have been issued by the Company in connection with any Excluded Securities) for a consideration per share (the "New Issuance Price") less than a price (the "Applicable Price") equal to the Exercise Price in effect immediately prior to such issue or sale or deemed issuance or sale (the foregoing a "Dilutive Issuance"), then immediately after such Dilutive Issuance, the Exercise Price then in effect shall be reduced to an amount equal to an amount obtained by dividing the Exercise Price in effect immediately prior to such Dilutive Issuance by a fraction, the numerator of which shall be the product of (i) the total number of shares of Common Stock outstanding immediately after such Dilutive Issuance multiplied by (ii) the Exercise Price on the date of such Dilutive Issuance, and the denominator of which shall be an amount equal to the sum of (a) the number of shares of Common Stock outstanding immediately prior to such Dilutive Issuance multiplied by such Exercise Price plus (b) the aggregate consideration received by the Company (determined as provided below) for such Dilutive Issuance.  For purposes of determining the adjusted Exercise Price under this Section 2(a), the following shall be applicable:

- 5 - -

(i)           Issuance of Options.  If the Company in any manner grants any Options and the lowest price per share for which one (1) share of Common Stock is issuable upon the exercise of any such Option or upon conversion, exercise or exchange of any Convertible Securities issuable upon exercise of any such Option is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the granting or sale of such Option for such price per share.  For purposes of this Section 2(a)(i), the "lowest price per share for which one (1) share of Common Stock is issuable upon exercise of any such Options or upon conversion, exercise or exchange of any such Convertible Securities issuable upon exercise of such Option" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to any one (1) share of Common Stock upon the granting or sale of the Option, upon exercise of the Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option less any consideration paid or payable by the Company with respect to such one (1) share of Common Stock upon the granting or sale of such Option, upon exercise of such Option and upon conversion, exercise or exchange of any Convertible Security issuable upon exercise of such Option. No further adjustment of the Exercise Price or number of Warrant Shares shall be made upon the actual issuance of such shares of Common Stock or of such Convertible Securities upon the exercise of such Options or upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities.

(ii)          Issuance of Convertible Securities.  If the Company in any manner issues or sells any Convertible Securities and the lowest price per share for which one (1) share of Common Stock is issuable upon the conversion, exercise or exchange thereof is less than the Applicable Price, then such share of Common Stock shall be deemed to be outstanding and to have been issued and sold by the Company at the time of the issuance or sale of such Convertible Securities for such price per share.  For the purposes of this Section 2(a)(ii), the "lowest price per share for which one (1) share of Common Stock is issuable upon the conversion, exercise or exchange" shall be equal to the sum of the lowest amounts of consideration (if any) received or receivable by the Company with respect to one (1) share of Common Stock upon the issuance or sale of the Convertible Security and upon conversion, exercise or exchange of such Convertible Security less any consideration paid or payable by the Company with respect to such one (1) share of Common Stock upon the issuance or sale of such Convertible Security and upon conversion, exercise or exchange of such Convertible Security.  No further adjustment of the Exercise Price or number of Warrant Shares shall be made upon the actual issuance of such shares of Common Stock upon conversion, exercise or exchange of such Convertible Securities, and if any such issue or sale of such Convertible Securities is made upon exercise of any Options for which adjustment of this Warrant has been or is to be made pursuant to other provisions of this Section 2(a), no further adjustment of the Exercise Price or number of Warrant Shares shall be made by reason of such issue or sale.

- 6 - -

(iii)        Change in Option Price or Rate of Conversion.  If the purchase price provided for in any Options, the additional consideration, if any, payable upon the issue, conversion, exercise or exchange of any Convertible Securities, or the rate at which any Convertible Securities are convertible into or exercisable or exchangeable for shares of Common Stock increases or decreases at any time, the Exercise Price and the number of Warrant Shares in effect at the time of such increase or decrease shall be adjusted to the Exercise Price and the number of Warrant Shares which would have been in effect at such time had such Options or Convertible Securities provided for such increased or decreased purchase price, additional consideration or increased or decreased conversion rate, as the case may be, at the time initially granted, issued or sold.  For purposes of this Section 2(a)(iii), if the terms of any Option or Convertible Security that was outstanding as of the date of issuance of this Warrant are increased or decreased in the manner described in the immediately preceding sentence, then such Option or Convertible Security and the shares of Common Stock deemed issuable upon exercise, conversion or exchange thereof shall be deemed to have been issued as of the date of such increase or decrease.  No adjustment pursuant to this Section 2(a) shall be made if such adjustment would result in an increase of the Exercise Price then in effect or a decrease in the number of Warrant Shares.

(iv)    Calculation of Consideration Received.  In case any Option is issued in connection with the issue or sale of other securities of the Company, together comprising one integrated transaction in which no specific consideration is allocated to such Options by the parties thereto, the Options will be deemed to have been issued for a consideration of $0.01.  If any shares of Common Stock, Options or Convertible Securities are issued or sold or deemed to have been issued or sold for cash, the consideration received therefor will be deemed to be the net amount received by the Company therefor.  If any shares of Common Stock, Options or Convertible Securities are issued or sold for a consideration other than cash, the amount of such consideration received by the Company will be the fair value of such consideration, except where such consideration consists of securities, in which case the amount of consideration received by the Company will be the Closing Sale Price of such security on the date of receipt.  If any shares of Common Stock, Options or Convertible Securities are issued to the owners of the non-surviving entity in connection with any merger in which the Company is the surviving entity, the amount of consideration therefor will be deemed to be the fair value of such portion of the net assets and business of the non-surviving entity as is attributable to such shares of Common Stock, Options or Convertible Securities, as the case may be.  The fair value of any consideration other than cash or securities will be determined in good faith by the Board of Directors of the Company within five (5) days after the occurrence of an event requiring valuation.  If the Required Holders disagree with the determination of the Board of Directors and give written notice of such disagreement to the Company within ten (10) days after the occurrence of an event requiring valuation (the "Valuation Event"), the fair value of such consideration will be determined within five (5) Business Days after the tenth day following the Valuation Event by an independent, reputable appraiser jointly selected by the Company and the Required Holders.  The determination of such appraiser shall be final and binding upon all parties absent manifest error and the fees and expenses of such appraiser shall be borne by the Company.

- 7 - -

(v)         Record Date.  If the Company takes a record of the holders of shares of Common Stock for the purpose of entitling them (A) to receive a dividend or other distribution payable in shares of Common Stock, Options or in Convertible Securities or (B) to subscribe for or purchase shares of Common Stock, Options or Convertible Securities, then such record date will be deemed to be the date of the issue or sale of the shares of Common Stock deemed to have been issued or sold upon the declaration of such dividend or the making of such other distribution or the date of the granting of such right of subscription or purchase, as the case may be.

(vii)       Voluntary Adjustment By Company.  The Company may at any time during the term of this Warrant reduce the then current Exercise Price to any amount and for any period of time deemed appropriate by the Board of Directors of the Company.

(b) Adjustment upon Subdivision or Combination of Common Stock.  If the Company at any time on or after the Subscription Date subdivides (by any stock split, stock dividend, recapitalization or otherwise) one (1) or more classes of its outstanding shares of Common Stock into a greater number of shares, the Exercise Price in effect immediately prior to such subdivision will be proportionately reduced and the number of Warrant Shares will be proportionately increased.  If the Company at any time on or after the Subscription Date  combines (by combination, reverse stock split or otherwise) one (1) or more classes of its outstanding shares of Common Stock into a smaller number of shares, the Exercise Price in effect immediately prior to such combination will be proportionately increased and the number of Warrant Shares will be proportionately decreased.  Any adjustment under this Section 2(b) shall become effective at the close of business on the date the subdivision or combination becomes effective.

- 8 - -

(c) Other Events.  If any event occurs of the type contemplated by the provisions of this Section 2 but not expressly provided for by such provisions (including, without limitation, the granting of stock appreciation rights, phantom stock rights or other rights with equity features), then the Company's Board of Directors will make an appropriate adjustment in the Exercise Price and the number of Warrant Shares so as to protect the rights of the Holder; provided that no such adjustment pursuant to this Section 2(c) will increase the Exercise Price or decrease the number of Warrant Shares as otherwise determined pursuant to this Section 2.

3.           RIGHTS UPON DISTRIBUTION OF ASSETS.  If the Company shall declare or make any dividend or other distribution of its assets (or rights to acquire its assets) to holders of shares of Common Stock, by way of return of capital or otherwise (including, without limitation, any distribution of cash, stock or other securities, property or options by way of a dividend, spin off, reclassification, corporate rearrangement, scheme of arrangement or other similar transaction) (a "Distribution"), at any time after the issuance of this Warrant, then, in each such case, the Exercise Price in effect immediately prior to the close of business on the record date fixed for the determination of holders of shares of Common Stock entitled to receive the Distribution shall be reduced, effective as of the close of business on such record date, to a price equal to such Exercise Price minus the value of the Distribution (as determined in good faith jointly by the Company's Board of Directors and the Required Holders) applicable to one (1) share of Common Stock.

4.      FUNDAMENTAL TRANSACTIONS.

(a)       Fundamental Transactions.  The Company shall not enter into or be party to a Fundamental Transaction unless the Successor Entity assumes in writing all of the obligations of the Company under this Warrant and the other Transaction Documents in accordance with the provisions of this Section (4) pursuant to written agreements in form and substance reasonably satisfactory to the Required Holders and approved by the Required Holders prior to such Fundamental Transaction (which approval shall not be unreasonably withheld), including agreements to deliver to each holder of Warrants in exchange for such Warrants a security of the Successor Entity evidenced by a written instrument substantially similar in form and substance to this Warrant, including, without limitation, an adjusted exercise price equal to the value for the shares of Common Stock reflected by the terms of such Fundamental Transaction, and exercisable for a corresponding number of shares of capital stock equivalent to the shares of Common Stock acquirable and receivable upon exercise of this Warrant (without regard to any limitations on the exercise of this Warrant) prior to such Fundamental Transaction, and reasonably satisfactory to the Required Holders.  Upon the occurrence of any Fundamental Transaction, the Successor Entity shall succeed to, and be substituted for (so that from and after the date of such Fundamental Transaction, the provisions of this Warrant referring to the "Company" shall refer instead to the Successor Entity), and may exercise every right and power of the Company and shall assume all of the obligations of the Company under this Warrant with the same effect as if such Successor Entity had been named as the Company herein.  Upon consummation of the Fundamental Transaction, the Successor Entity shall deliver to the Holder confirmation that there shall be issued upon exercise of this Warrant at any time after the consummation of the Fundamental Transaction, in lieu of the shares of the Common Stock (or other securities, cash, assets or other property) issuable upon the exercise of the Warrant prior to such Fundamental Transaction, such shares of the publicly traded Common Stock (or its equivalent) of the Successor Entity (including its Parent Entity) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had this Warrant been converted immediately prior to such Fundamental Transaction, as adjusted in accordance with the provisions of this Warrant.  In addition to and not in substitution for any other rights hereunder, prior to the consummation of any Fundamental Transaction pursuant to which holders of shares of Common Stock are entitled to receive securities or other assets with respect to or in exchange for shares of Common Stock (a "Corporate Event"), the Company shall make appropriate provision to insure that the Holder will thereafter have the right to receive upon an exercise of this Warrant at any time after the consummation of the Fundamental Transaction but prior to the Expiration Date, in lieu of the shares of the Common Stock (or other securities, cash, assets or other property) issuable upon the exercise of the Warrant prior to such Fundamental Transaction, such shares of stock, securities, cash, assets or any other property whatsoever (including warrants or other purchase or subscription rights) which the Holder would have been entitled to receive upon the happening of such Fundamental Transaction had the Warrant been exercised immediately prior to such Fundamental Transaction.  Provision made pursuant to the preceding sentence shall be in a form and substance reasonably satisfactory to the Required Holders.  The provisions of this Section shall apply similarly and equally to successive Fundamental Transactions and Corporate Events and shall be applied without regard to any limitations on the exercise of this Warrant.

- 9 - -

(b)       Notwithstanding the foregoing, in the event of a Fundamental Transaction other than one in which a Successor Entity that is a publicly traded corporation whose stock is quoted or listed for trading on an Eligible Market assumes this Warrant such that the Warrant shall be exercisable for the publicly traded Common Stock of such Successor Entity, at the request of the Holder delivered before the 90th day after such Fundamental Transaction, the Company (or the Successor Entity) shall purchase this Warrant from the Holder by paying to the Holder, within five Business Days after such request (or, if later, on the effective date of the Fundamental Transaction), cash in an amount equal to the Black Scholes Value of the remaining unexercised portion of this Warrant on the date of such Fundamental Transaction.

5. NONCIRCUMVENTION.  The Company hereby covenants and agrees that the Company will not, by amendment of its Articles of Incorporation, Bylaws or through any reorganization, transfer of assets, consolidation, merger, scheme of arrangement, dissolution, issue or sale of securities, or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, and will at all times in good faith carry out all the provisions of this Warrant and take all action as may be required to protect the rights of the Holder.  Without limiting the generality of the foregoing, the Company (i) shall not increase the par value of any shares of Common Stock receivable upon the exercise of this Warrant above the Exercise Price then in effect, (ii) shall take all such actions as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable shares of Common Stock upon the exercise of this Warrant, and (iii) shall, so long as any of the SPA Warrants are outstanding, take all action necessary to reserve and keep available out of its authorized and unissued shares of Common Stock, solely for the purpose of effecting the exercise of the SPA Warrants, 130% of the number of shares of Common Stock as shall from time to time be necessary to effect the exercise of the SPA Warrants then outstanding (without regard to any limitations on exercise).

- 10 - -

6. WARRANT HOLDER NOT DEEMED A SHAREHOLDER.  Except as otherwise specifically provided herein, the Holder, solely in such Person's capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person's capacity as the Holder of this Warrant, any of the rights of a shareholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant.  In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a shareholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.  Notwithstanding this Section 6, the Company shall provide the Holder with copies of the same notices and other information given to the shareholders of the Company generally, contemporaneously with the giving thereof to the shareholders.

7. REISSUANCE OF WARRANTS.

(a) Transfer of Warrant.  If this Warrant is to be transferred, the Holder shall surrender this Warrant to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Warrant (in accordance with Section 7(d)), registered as the Holder may request, representing the right to purchase the number of Warrant Shares being transferred by the Holder and, if less than the total number of Warrant Shares then underlying this Warrant is being transferred, a new Warrant (in accordance with Section 7(d)) to the Holder representing the right to purchase the number of Warrant Shares not being transferred.

(b) Lost, Stolen or Mutilated Warrant.  Upon receipt by the Company of evidence reasonably satisfactory to the Company of the loss, theft, destruction or mutilation of this Warrant, and, in the case of loss, theft or destruction, of any indemnification undertaking by the Holder to the Company in customary form and, in the case of mutilation, upon surrender and cancellation of this Warrant, the Company shall execute and deliver to the Holder a new Warrant (in accordance with Section 7(d)) representing the right to purchase the Warrant Shares then underlying this Warrant.

(c) Exchangeable for Multiple Warrants.  This Warrant is exchangeable, upon the surrender hereof by the Holder at the principal office of the Company, for a new Warrant or Warrants (in accordance with Section 7(d)) representing in the aggregate the right to purchase the number of Warrant Shares then underlying this Warrant, and each such new Warrant will represent the right to purchase such portion of such Warrant Shares as is designated by the Holder at the time of such surrender; provided, however, that no Warrants for fractional shares of Common Stock shall be given.

- 11 - -

(d) Issuance of New Warrants.  Whenever the Company is required to issue a new Warrant pursuant to the terms of this Warrant, such new Warrant (i) shall be of like tenor with this Warrant, (ii) shall represent, as indicated on the face of such new Warrant, the right to purchase the Warrant Shares then underlying this Warrant (or in the case of a new Warrant being issued pursuant to Section 7(a) or Section 7(c), the Warrant Shares designated by the Holder which, when added to the number of shares of Common Stock underlying the other new Warrants issued in connection with such issuance, does not exceed the number of Warrant Shares then underlying this Warrant), (iii) shall have an issuance date, as indicated on the face of such new Warrant which is the same as the Issuance Date, and (iv) shall have the same rights and conditions as this Warrant.

8. NOTICES.  Whenever notice is required to be given under this Warrant, unless otherwise provided herein, such notice shall be given in accordance with Section 6.4 of the Securities Purchase Agreement.  The Company will give written notice to the Holder (i) immediately upon any adjustment of the Exercise Price, setting forth in reasonable detail, and certifying, the calculation of such adjustment and (ii) at least fifteen days prior to the date on which the Company closes its books or takes a record (A) with respect to any dividend or distribution upon the shares of Common Stock, (B) with respect to any grants, issuances or sales of any Options, Convertible Securities or rights to purchase stock, warrants, securities or other property to holders of shares of Common Stock or (C) for determining rights to vote with respect to any Fundamental Transaction, dissolution or liquidation, provided in each case that such information shall be made known to the public prior to or in conjunction with such notice being provided to the Holder.

9. AMENDMENT AND WAIVER.  Except as otherwise provided herein, the provisions of this Warrant 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 a majority of the Holders.

10. GOVERNING LAW.  This Warrant shall be governed by and construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Warrant shall be governed by, the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause or permit the application of the laws of any jurisdictions other than the State of New York.

11. CONSTRUCTION; HEADINGS.  This Warrant shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any person as the drafter hereof.  The headings of this Warrant are for convenience of reference and shall not form part of, or affect the interpretation of, this Warrant.

12. DISPUTE RESOLUTION.  Upon the request of the Holder, the Company shall promptly deliver a notice providing reasonable support for any determination or arithmetic calculation required to be made hereunder, but in no event later than two Business Days thereafter.  In the case of a dispute as to the determination of the Exercise Price or the arithmetic calculation of the Warrant Shares, the Company shall submit the disputed determinations or arithmetic calculations within two (2) Business Days of the receipt by either party of notice from the other party that any such determination or calculation is being disputed, to (a) an independent, reputable investment bank selected by the Company and approved by the Holder or (b) to the Company’s independent, outside accountant, as appropriate.  The Company shall use reasonable best efforts to cause the investment bank or the accountant, as the case may be, to perform the determinations or calculations and notify the Company and the Holder of the results no later than five (5) Business Days from the time it receives the disputed determinations or calculations.  If the determination or calculation of such investment bank or accountant is the same as that of Company’s calculations (with a permitted variance of 5.0%), then the fees of such investment bank or accountant shall be borne by the Holder.  In all other cases, such fees shall be borne by the Company.  Such investment bank's or accountant's determination or calculation, as the case may be, shall be binding upon all parties absent demonstrable error.

- 12 - -

13. REMEDIES, OTHER OBLIGATIONS, BREACHES AND INJUNCTIVE RELIEF.  The remedies provided in this Warrant shall be cumulative and in addition to all other remedies available under this Warrant and the other Transaction Documents, at law or in equity (including a decree of specific performance and/or other injunctive relief), and nothing herein shall limit the right of the Holder right to pursue actual damages for any failure by the Company to comply with the terms of this Warrant.  The Company acknowledges that a breach by it of its obligations hereunder will cause irreparable harm to the Holder and that the remedy at law for any such breach may be inadequate.  The Company therefore agrees that, in the event of any such breach or threatened breach, the holder of this Warrant shall be entitled, in addition to all other available remedies, to an injunction restraining any breach, without the necessity of showing economic loss and without any bond or other security being required.

14. TRANSFER.      This Warrant may be offered for sale, sold, transferred or assigned without the consent of the Company.

15. SEVERABILITY.          If any provision of this Warrant is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Warrant so long as this Warrant as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties.  The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

16. CERTAIN DEFINITIONS.  For purposes of this Warrant, the following terms shall have the following meanings:

(a)  "Approved Stock Plan" means any employee benefit plan which has been approved by the Board of Directors of the Company, pursuant to which the Company's securities may be issued to any employee, officer or director for services provided to the Company.

- 13 - -

(b) "Black Scholes Value" means the value of this Warrant based on the Black and Scholes Option Pricing Model obtained from the "OV" function on Bloomberg determined as of the day of the closing of the applicable Fundamental Transaction for pricing purposes and reflecting (i) a risk-free interest rate corresponding to the U.S. Treasury rate for a period equal to the remaining term of this Warrant as of such date of request, (ii) an expected volatility equal to the 100 day volatility obtained from the HVT function on Bloomberg as of the day immediately following the public announcement of the applicable Fundamental Transaction, (iii) the underlying price per share used in such calculation shall be the sum of the price per share being offered in cash, if any, plus the value of any non cash consideration, if any, being offered in the Fundamental Transaction and (iv) a 365 day annualization factor.

(c) "Bloomberg" means Bloomberg Financial Markets.

(d) "Business Day" means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

(e) "Closing Bid Price" and "Closing Sale Price" means, for any security as of any date, the last closing bid price and last closing trade price, respectively, for such security on the Principal Market, as reported by Bloomberg, or, if the Principal Market begins to operate on an extended hours basis and does not designate the closing bid price or the closing trade price, as the case may be, then the last bid price or last trade price, respectively, of such security prior to 4:00:00 p.m., New York time, as reported by Bloomberg, or, if the Principal Market is not the principal securities exchange or trading market for such security, the last closing bid price or last trade price, respectively, of such security on the principal securities exchange or trading market where such security is listed or traded as reported by Bloomberg, or if the foregoing do not apply, the last closing bid price or last trade price, respectively, of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg, or, if no closing bid price or last trade price, respectively, is reported for such security by Bloomberg, the average of the bid prices, or the ask prices, respectively, of any market makers for such security as reported in the "pink sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.).  If the Closing Bid Price or the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Bid Price or the Closing Sale Price, as the case may be, of such security on such date shall be the fair market value as mutually determined by the Company and the Holder.  If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 12.  All such determinations to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

(f) "Common Stock" means (i) the Company's Common Stock, par value $0.01 per share, and (ii) any share capital into which such Common Stock shall have been changed or any share capital resulting from a reclassification of such Common Stock.

(g) "Convertible Securities" means any stock or securities (other than Options) directly or indirectly convertible into or exercisable or exchangeable for shares of Common Stock.

- 14 - -

(h) "Eligible Market" means the Principal Market, The New York Stock Exchange, Inc., the NYSE Amex, The NASDAQ Global Select Market or The NASDAQ Capital Market.

(i) "Excluded Securities" means any shares of Common Stock issued or issuable: (i) in connection with any Approved Stock Plan in an aggregate amount not to exceed, in any one fiscal year, two percent (2.00%) of the number of shares of Common Stock outstanding at the start of such fiscal year; (ii) upon exercise of the Warrants or pursuant to the Notes issued pursuant to the Securities Purchase Agreement, in each case, as in effect on the Issuance Date; (iii) upon conversion of any Options or Convertible Securities which are outstanding on the day immediately preceding the Subscription Date, provided that the terms of such Options or Convertible Securities are not amended, modified or changed on or after the Subscription Date; (iv) equity securities issued as an "equity kicker" in connection with any direct or indirect non-convertible debt financings, by the Company from a bank or other similar financial institution that is approved by the Board of Directors; provided that the value of the "equity kicker" portion of any such non-convertible debt financing, including warrants, options or other rights to purchase capital stock and other interests convertible into capital stock of the Company, shall not exceed such amounts which are customary in similar transactions and in no event shall such value exceed ten percent (10%) of the value of the non-convertible indebtedness being borrowed; (v) in connection with bona fide, strategic transactions, stock acquisitions, mergers, asset acquisitions, joint ventures or similar transactions approved by the Board of Directors occurring after the Subscription Date in each case with non-affiliated third parties and otherwise on an arm's-length basis; provided that (x) the purpose of such issuance is not to raise capital and (y) a fairness opinion with respect to any acquisition by the Company of a controlling interest in any corporation or other entity is rendered by an investment bank of national recognition and (vi) pursuant to the terms of (I) the Senior Notes Due 2013 issued by the Company pursuant to a Securities Purchase Agreement dated as of September 2, 2010 (II) or the related warrants issued pursuant to such agreement, in each case, as in effect on the Issuance Date.  Notwithstanding the foregoing, any shares of Common Stock issued or issuable in connection with any transaction contemplated by clause (v) above, including without limitation, securities issued in one or more related transactions or that result in similar economic consequences, to raise capital for the Company or its Subsidiaries (regardless of whether such capital is to be used to fund any transaction contemplated by clause (v) above), or that is otherwise attributable to capital raising for the Company or its Subsidiaries (other than nominal amounts of capital) shall not be deemed to be Excluded Securities.

(j) "Expiration Date" means the date sixty (60) months after the Issuance Date, or, if such date falls on a day other than a Business Day or on which trading does not take place on the Principal Market (a "Holiday"), the next date that is not a Holiday.

- 15 - -

(k) "Fundamental Transaction" means that (i) the Company shall, directly or indirectly, in one or more related transactions, (A) consolidate or merge with or into (whether or not the Company is the surviving corporation) another Person, or (B) sell, assign, transfer, convey or otherwise dispose of all or substantially all of the properties or assets of the Company to another Person, or (C) allow another Person to make a purchase, tender or exchange offer that is accepted by the holders of more than the 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the Person or Persons making or party to, or associated or affiliated with the Persons making or party to, such purchase, tender or exchange offer), (D) consummate a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than 50% of the outstanding shares of Common Stock (not including any shares of Common Stock held by the other Person or other Persons making or party to, or associated or affiliated with the other Persons making or party to, such stock purchase agreement or other business combination), or (E) reorganize, recapitalize or reclassify its Common Stock, or (ii) any "person" or "group" (as these terms are used for purposes of Sections 13(d) and 14(d) of the Exchange Act) (other than Boris Zingarevich and his Affiliates, so long as he and his Affiliates collectively beneficially own less than 70% of the aggregate equity securities of the Company) is or shall become the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 50% of the aggregate ordinary voting power represented by issued and outstanding Common Stock.

(l) "Options" means any rights, warrants or options to subscribe for or purchase shares of Common Stock or Convertible Securities.

(m) "Parent Entity" of a Person means an entity that, directly or indirectly, controls the applicable Person and whose common stock or equivalent equity security is quoted or listed on an Eligible Market, or, if there is more than one (1) such Person or Parent Entity, the Person or Parent Entity with the largest public market capitalization as of the date of consummation of the Fundamental Transaction.

(n) "Person" means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity and a government or any department or agency thereof.

(o) "Principal Market" means The NASDAQ Global Market.

(p) "Required Holders" means the holders of the SPA Warrants representing at least a majority of shares of Common Stock underlying the SPA Warrants then outstanding.

(q) "Successor Entity" means the Person (or, if so elected by the Required Holders, the Parent Entity) formed by, resulting from or surviving any Fundamental Transaction or the Person (or, if so elected by the Required Holders, the Parent Entity) with which such Fundamental Transaction shall have been entered into.

(r)  "Trading Day" means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded; provided that "Trading Day" shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time).

- 16 - -

(s) "Weighted Average Price" means, for any security as of any date, the dollar volume-weighted average price for such security on the Principal Market during the period beginning at 9:30:01 a.m., New York time (or such other time as the Principal Market publicly announces is the official open of trading), and ending at 4:01:00 p.m., New York time (or one minute after such other time as the Principal Market publicly announces is the official close of trading) as reported by Bloomberg through its "Volume at Price" functions, or, if the foregoing does not apply, the dollar volume-weighted average price of such security in the over-the-counter market on the electronic bulletin board for such security during the period beginning at 9:30:01 a.m., New York time (or such other time as such market publicly announces is the official open of trading), and ending at 4:01:00 p.m., New York time (or one minute after such other time as such market publicly announces is the official close of trading) as reported by Bloomberg, or, if no dollar volume-weighted average price is reported for such security by Bloomberg for such hours, the average of the highest closing bid price and the lowest closing ask price of any of the market makers for such security as reported in the "pink sheets" by Pink Sheets LLC (formerly the National Quotation Bureau, Inc.).  If the Weighted Average Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Weighted Average Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder.  If the Company and the Holder are unable to agree upon the fair market value of such security, then such dispute shall be resolved pursuant to Section 12.  All such determinations are to be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

[Signature Page Follows]

- 17 - -

IN WITNESS WHEREOF, the Company has caused this Warrant to Purchase Common Stock to be duly executed as of the Issuance Date set out above.

ENER1, INC.

By:

Name:        Charles Gassenheimer

Title:          Chief Executive Officer

EXHIBIT A

EXERCISE NOTICE

TO BE EXECUTED BY THE REGISTERED HOLDER TO EXERCISE THIS

WARRANT TO PURCHASE COMMON STOCK

ENER1, INC.

The undersigned holder hereby exercises the right to purchase _________________ of the shares of Common Stock ("Warrant Shares") of Ener1, Inc., a Florida corporation (the "Company"), evidenced by the attached Warrant to Purchase Common Stock (the "Warrant").  Capitalized terms used herein and not otherwise defined shall have the respective meanings set forth in the Warrant.

1.  Form of Exercise Price.  The Holder intends that payment of the Exercise Price shall be made as:

____________ a "Cash Exercise" with respect to _________________ Warrant Shares; and/or

____________ a "Cashless Exercise" with respect to _______________ Warrant Shares.

2.  Payment of Exercise Price.  In the event that the holder has elected a Cash Exercise with respect to some or all of the Warrant Shares to be issued pursuant hereto, the holder shall pay the Aggregate Exercise Price in the sum of $___________________ to the Company in accordance with the terms of the Warrant.

3.  Delivery of Warrant Shares.  The Company shall deliver to the holder __________ Warrant Shares in accordance with the terms of the Warrant.

Date: _______________ __, ______

Name of Registered Holder

By:
	Name:
	Title:

EX-1.4

REGISTRATION RIGHTS AGREEMENT

REGISTRATION RIGHTS AGREEMENT (this "Agreement"), dated as of December 31, 2010, by and among Ener1, Inc., a Florida corporation, with headquarters located at 1540 Broadway, Suite 25C, New York, NY 10036 (the "Company"), and the investors listed on the Schedule of Buyers attached hereto (each, a "Buyer" and collectively, the "Buyers").

WHEREAS:

A.           In connection with the Securities Purchase Agreement by and among the parties hereto of even date herewith (the "Securities Purchase Agreement"), the Company has agreed, upon the terms and subject to the conditions of the Securities Purchase Agreement, to issue and sell to each Buyer, in addition to other securities, senior unsecured notes of the Company (the "Notes"), pursuant to the terms of which, certain payments of principal and/or accrued but unpaid interest may be satisfied by the delivery of shares of common stock of the Company, par value $0.01 per share (the "Common Stock") (as issued or issuable, collectively, the "Amortization Shares").

B.           In accordance with the terms of the Securities Purchase Agreement, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the "1933 Act"), and applicable state securities laws.

NOW, THEREFORE, in consideration of the premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and each of the Buyers hereby agree as follows:

1.           Definitions.

Capitalized terms used herein and not otherwise defined herein shall have the respective meanings set forth in the Securities Purchase Agreement. As used in this Agreement, the following terms shall have the following meanings:

(a)           "Additional Effective Date" means the date the Additional Registration Statement is declared effective by the SEC.

(b)           "Additional Effectiveness Deadline" means (i) in the event that the Additional Registration Statement is not subject to a full review by the SEC, the date which is sixty (60) calendar days after the Additional Filing Deadline or (ii) in the event that the Additional Registration Statement is subject to a full review by the SEC, ninety (90) calendar days after the Additional Filing Deadline.

(c)           "Additional Filing Date" means the date on which the Additional Registration Statement is filed with the SEC.

(d)           "Additional Filing Deadline" means if Cutback Shares are required to be included in any Additional Registration Statement, the later of (i) the date sixty (60) days after the date substantially all of the Registrable Securities registered under the immediately preceding Registration Statement are sold and (ii) the date six (6) months from the Initial Effective Date or the most recent Additional Effective Date, as applicable.

(e)           "Additional Registrable Securities" means, (i) any Cutback Shares not previously included on a Registration Statement and (ii) any capital stock of the Company issued or issuable with respect to the Cutback Shares as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, without regard to any limitations on the number of Amortization Shares issuable pursuant to the terms of the Notes.

(f)            "Additional Registration Statement" means a registration statement or registration statements of the Company filed under the 1933 Act covering any Additional Registrable Securities.

(g)           "Additional Required Registration Amount" means the aggregate amount of any Cutback Shares (assuming a Stock Payment Price (as defined in the Notes) of $2.29375, such dollar amount being subject to adjustment for stock splits, stock dividends and similar events) not previously included on a Registration Statement, subject to adjustment as provided in Section 2(f).

(h)           "Business Day" means any day other than Saturday, Sunday or any other day on which commercial banks in the City of New York are authorized or required by law to remain closed.

(i)            "Closing Date" shall have the meaning set forth in the Securities Purchase Agreement.

(j)            "Cutback Shares" means any of the Initial Registrable Securities or any of the Additional Registrable Securities not included in all Registration Statements previously declared effective hereunder as a result of a limitation on the maximum number of shares of Common Stock of the Company permitted to be registered by the staff of the SEC pursuant to Rule 415.

(k)           "Effective Date" means the Initial Effective Date and the Additional Effective Date, as applicable.

(l)            "Effectiveness Deadline" means the Initial Effectiveness Deadline and the Additional Effectiveness Deadline, as applicable.

(m)          "Eligible Market" means the Principal Market, The New York Stock Exchange, Inc., NYSE Amex, The NASDAQ Capital Market or The NASDAQ Global Select Market.

2

(n)          "Filing Deadline" means the Initial Filing Deadline and the Additional Filing Deadline, as applicable.

(o)          "Initial Effective Date" means the date that the Initial Registration Statement has been declared effective by the SEC.

(p)          "Initial Effectiveness Deadline" means the date which is (i) in the event that the Initial Registration Statement is not subject to a full review by the SEC, ninety (90) calendar days after the Closing Date or (ii) in the event that the Initial Registration Statement is subject to a full review by the SEC, one-hundred and twenty (120) calendar days after the Closing Date.

(q)          "Initial Filing Date" means the date on which the Initial Registration Statement is filed with the SEC.

(r)           "Initial Filing Deadline" means the date which is sixty (60) Business Days after the Closing Date.

(s)           "Initial Registrable Securities" means (i) the Amortization Shares issued or issuable pursuant to the terms of the Notes and (ii) any capital stock of the Company issued or issuable with respect to the Notes or the Amortization Shares as a result of any stock split, stock dividend, recapitalization, exchange or similar event or otherwise, without regard to any limitations on the number of Amortization Shares issuable pursuant to the terms of the Notes.

(t)           "Initial Registration Statement" means a registration statement or registration statements of the Company filed under the 1933 Act covering the Initial Registrable Securities.

(u)          "Initial Required Registration Amount" means the maximum number of Amortization Shares issued or issuable pursuant to the terms of the Notes as of the Trading Day immediately preceding the applicable date of determination (assuming a Stock Payment Price of $2.29375, such dollar amount being subject to adjustment for stock splits, stock dividends and similar events) and subject to adjustment as provided in Section 2(f), without regard to any limitations on the number of Amortization Shares issuable pursuant to the terms of the Notes.

(v)          "Investor" means a Buyer or any transferee or assignee thereof to whom a Buyer assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9 and any transferee or assignee thereof to whom a transferee or assignee assigns its rights under this Agreement and who agrees to become bound by the provisions of this Agreement in accordance with Section 9.

(w)          "Person" means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization and a government or any department or agency thereof.

(x)           "Principal Market" means The NASDAQ Global Market.

3

(y)           "register," "registered," and "registration" refer to a registration effected by preparing and filing one or more Registration Statements (as defined below) in compliance with the 1933 Act and pursuant to Rule 415, and the declaration or ordering of effectiveness of such Registration Statement(s) by the SEC.

(z)           "Registrable Securities" means the Initial Registrable Securities and the Additional Registrable Securities.

(aa)         "Registration Statement" means the Initial Registration Statement and the Additional Registration Statement, as applicable.

(bb)        "Required Holders" means, at the time of determination, the holders of at least a majority of the Registrable Securities at such time, determined as if all principal and interest amounts under the Notes are satisfied by the delivery of the Amortization Shares (assuming a Stock Payment Price of $2.29375, such dollar amount being subject to adjustment for stock splits, stock dividends and similar events), without regard to any limitations on the number of Amortization Shares issuable pursuant to the terms of the Notes.

(cc)         "Required Registration Amount" means either the Initial Required Registration Amount or the Additional Required Registration Amount, as applicable.

(dd)        "Rule 415" means Rule 415 promulgated under the 1933 Act or any successor rule providing for offering securities on a continuous or delayed basis.

(ee)         "SEC" means the United States Securities and Exchange Commission.

(ff)          "Trading Day" means any day on which the Common Stock is traded on the Principal Market, or, if the Principal Market is not the principal trading market for the Common Stock, then on the principal securities exchange or securities market on which the Common Stock is then traded; provided that "Trading Day" shall not include any day on which the Common Stock is scheduled to trade on such exchange or market for less than 4.5 hours or any day that the Common Stock is suspended from trading during the final hour of trading on such exchange or market (or if such exchange or market does not designate in advance the closing time of trading on such exchange or market, then during the hour ending at 4:00:00 p.m., New York time).

2.           Registration.

(a)           Initial Mandatory Registration.  The Company shall prepare, and, as soon as practicable but in no event later than the Initial Filing Deadline, file with the SEC the Initial Registration Statement on Form S-3 covering the resale of all of the Initial Registrable Securities.  In the event that Form S-3 is unavailable for such a registration, the Company shall use such other form as is available for such a registration on another appropriate form reasonably acceptable to the Required Holders, subject to the provisions of Section 2(e).  The Initial Registration Statement prepared pursuant hereto shall register for resale at least the number of shares of Common Stock equal to the Initial Required Registration Amount determined as of the date the Initial Registration Statement is initially filed with the SEC, subject to adjustment as provided in Section 2(f).  The Initial Registration Statement shall contain (except if otherwise directed by the Required Holders) the "Plan of Distribution" and "Selling Shareholders" sections in substantially the form attached hereto as Exhibit B. The Company shall use its reasonable best efforts to have the Initial Registration Statement declared effective by the SEC as soon as practicable, but in no event later than the Initial Effectiveness Deadline.  By 9:30 a.m. New York time on the Business Day following the Initial Effective Date, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to such Initial Registration Statement.

4

(b)           Additional Mandatory Registrations.  The Company shall prepare, and, as soon as practicable but in no event later than the Additional Filing Deadline, file with the SEC an Additional Registration Statement on Form S-3 covering the resale of all of the Additional Registrable Securities not previously registered on an Additional Registration Statement hereunder.  To the extent the staff of the SEC does not permit all or any part of the Additional Required Registration Amount to be registered on an Additional Registration Statement, the Company shall be obligated, until the expiration of the Registration Period, to file an Additional Registration Statement, on each Additional Filing Deadline, successively seeking to register on each such Additional Registration Statement the maximum number of remaining Additional Registrable Securities until the Additional Required Registration Amount has been registered with the SEC.  In the event that Form S-3 is unavailable for such a registration, the Company shall use such other form as is available for such a registration on another appropriate form reasonably acceptable to the Required Holders, subject to the provisions of Section 2(e).  Each Additional Registration Statement prepared pursuant hereto shall register for resale at least that number of shares of Common Stock equal to the Additional Required Registration Amount determined as of the date such Additional Registration Statement is initially filed with the SEC, subject to adjustment as provided in Section 2(f).  Each Additional Registration Statement shall contain (except if otherwise directed by the Required Holders) the "Plan of Distribution" and "Selling Shareholders" sections in substantially the form attached hereto as Exhibit B.  The Company shall use its reasonable best efforts to have each Additional Registration Statement declared effective by the SEC as soon as practicable, but in no event later than the Additional Effectiveness Deadline.  By 9:30 a.m. New York time on the Business Day following the Additional Effective Date, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to such Additional Registration Statement.

(c)           Allocation of Registrable Securities.  The initial number of Registrable Securities included in any Registration Statement and any increase or decrease in the number of Registrable Securities included therein shall be allocated pro rata among the Investors based on the number of Registrable Securities held by each Investor at the time the Registration Statement covering such initial number of Registrable Securities or increase or decrease thereof is declared effective by the SEC.  In the event that an Investor sells or otherwise transfers any of such Investor's Registrable Securities, each transferee shall be allocated a pro rata portion of the then remaining number of Registrable Securities included in such Registration Statement for such transferor.  Any shares of Common Stock included in a Registration Statement and which remain allocated to any Person which ceases to hold any Registrable Securities covered by such Registration Statement shall be allocated to the remaining Investors, pro rata based on the number of Registrable Securities then held by such Investors which are covered by such Registration Statement.  In no event shall the Company include any securities other than Registrable Securities for resale on any Registration Statement without the prior written consent of the Required Holders.

5

(d)           Legal Counsel.  Subject to Section 5 hereof, the Required Holders shall have the right to select one legal counsel to review and oversee any registration pursuant to this Section 2 ("Legal Counsel"), which shall be Schulte Roth & Zabel LLP or such other counsel as thereafter designated by the Required Holders.  The Company and Legal Counsel shall reasonably cooperate with each other in performing the Company's obligations under this Agreement.

(e)           Ineligibility for Form S-3.  In the event that Form S-3 is not available for the registration of the resale of Registrable Securities hereunder, the Company shall (i) register the resale of the Registrable Securities on another appropriate form reasonably acceptable to the Required Holders and (ii) undertake to register the Registrable Securities on Form S-3 as soon as such form is available, provided that the Company shall maintain the effectiveness of the Registration Statement then in effect until such time as a Registration Statement on Form S-3 covering the Registrable Securities has been declared effective by the SEC.

(f)            Sufficient Number of Shares Registered.  In the event the number of shares available under a Registration Statement filed pursuant to Section 2(a) or Section 2(b) is insufficient to cover all of the Registrable Securities required to be covered by such Registration Statement or an Investor's allocated portion of the Registrable Securities pursuant to Section 2(c), the Company shall amend the applicable Registration Statement, or file a new Registration Statement (on the short form available therefor, if applicable), or both, so as to cover at least the Required Registration Amount as of the Trading Day immediately preceding the date of the filing of such amendment or new Registration Statement, in each case, as soon as practicable, but in any event not later than fifteen (15) days after the necessity therefor arises.  The Company shall use its reasonable best efforts to cause such amendment and/or new Registration Statement to become effective as soon as practicable following the filing thereof.  For purposes of the foregoing provision, the number of shares available under a Registration Statement shall be deemed "insufficient to cover all of the Registrable Securities" if at any time the number of shares of Common Stock available for resale under the Registration Statement is less than the product determined by multiplying (i) the Required Registration Amount as of such time by (ii) 0.90.  The calculation set forth in the foregoing sentence shall be made without regard to any limitations on the number of Amortization Shares issuable pursuant to the terms of the Notes and such calculation shall assume (i) a Stock Payment Price of $2.29375, such dollar amount being subject to adjustment for stock splits, stock dividends and similar events, and (ii) that no redemptions of any Notes outstanding at the time of such calculation occur prior to the Maturity Date (as defined in the Notes).

6

(g)           Effect of Failure to File and Obtain and Maintain Effectiveness of Registration Statement.  If (i) a Registration Statement covering all of the Registrable Securities required to be covered thereby and required to be filed by the Company pursuant to this Agreement (other than Cutback Shares, if any) is (A) not filed with the SEC on or before the applicable Filing Deadline (a "Filing Failure") or (B) not declared effective by the SEC on or before the applicable Effectiveness Deadline, (an "Effectiveness Failure")or (ii) on any day after the applicable Effective Date sales of all of the Registrable Securities required to be included on such Registration Statement cannot be made (other than during an Allowable Grace Period (as defined in Section 3(r)) pursuant to such Registration Statement or otherwise (including, without limitation, because of the suspension of trading or any other limitation imposed by an Eligible Market, a failure to keep such Registration Statement effective, a failure to disclose such information as is necessary for sales to be made pursuant to such Registration Statement, a failure to register a sufficient number of shares of Common Stock or a failure to maintain the listing of the Common Stock) (a "Maintenance Failure") then, as partial relief for the damages to any holder by reason of any such delay in or reduction of its ability to sell the underlying shares of Common Stock (which remedy shall not be exclusive of any other remedies available at law or in equity, including, without limitation, specific performance), the Company shall pay to each holder of Registrable Securities relating to such Registration Statement an amount in cash equal to one percent (1.0%) of the aggregate Purchase Price (as such term is defined in the Securities Purchase Agreement) of such Investor's Registrable Securities included in such Registration Statement on each of the following dates: (i) the day of a Filing Failure; (ii) the day of an Effectiveness Failure; (iii) the initial day of a Maintenance Failure; (iv) on the thirtieth day after the date of a Filing Failure and every thirtieth day thereafter (pro rated for periods totaling less than thirty days) until such Filing Failure is cured; (v) on the thirtieth day after the date of an Effectiveness Failure and every thirtieth day thereafter (pro rated for periods totaling less than thirty days) until such Effectiveness Failure is cured; and (vi) on the thirtieth day after the date of a Maintenance Failure and every thirtieth day thereafter (pro rated for periods totaling less than thirty days) until such Maintenance Failure is cured; provided, however, that (A) no such payment shall be made with respect to any day that occurs after the expiration of the Registration Period, and (B) the aggregate of all such payments made to any such Investor shall not exceed six percent (6.0%) of the aggregate Purchase Price (as such term is defined in the Securities Purchase Agreement) of such Investor's Registrable Securities included in such Registration Statement.  The payments to which a holder shall be entitled pursuant to this Section 2(g) are referred to herein as "Registration Delay Payments."  Registration Delay Payments shall be paid on the earlier of (I) the dates set forth above and (II) the third Business Day after the event or failure giving rise to the Registration Delay Payments is cured.  In the event the Company fails to make Registration Delay Payments in a timely manner, such Registration Delay Payments shall bear interest at the rate of one percent (1.0%) per month (prorated for partial months) until paid in full.

3.           Related Obligations.

At such time as the Company is obligated to file a Registration Statement with the SEC pursuant to Section 2(a), 2(b), 2(e) or 2(f), the Company will use its reasonable best efforts to effect the registration of the Registrable Securities in accordance with the intended method of disposition thereof and, pursuant thereto, the Company shall have the following obligations:

7

(a)           The Company shall promptly prepare and file with the SEC a Registration Statement with respect to the Registrable Securities and use its reasonable best efforts to cause such Registration Statement relating to the Registrable Securities to become effective as soon as practicable after such filing (but in no event later than the Effectiveness Deadline).  The Company shall keep each Registration Statement effective pursuant to Rule 415 at all times until the earlier of (i) the date as of which the Investors may sell all of the Registrable Securities covered by such Registration Statement without restriction or limitation pursuant to Rule 144 and without the requirement to be in compliance with Rule 144(c)(1) (or any successor thereto) promulgated under the 1933 Act or (ii) the date on which the Investors shall have sold all of the Registrable Securities covered by such Registration Statement (the "Registration Period").  The Company shall ensure that each Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall 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 the case of prospectuses, in the light of the circumstances in which they were made) not misleading.  The term "best efforts" shall mean, among other things, that the Company shall submit to the SEC, within two (2) Business Days after the later of the date that (i) the Company learns that no review of a particular Registration Statement will be made by the staff of the SEC or that the staff has no further comments on a particular Registration Statement, as the case may be, and (ii) the approval of Legal Counsel pursuant to Section 3(c) (which approval is promptly sought in accordance with Section 3(c)), a request for acceleration of effectiveness of such Registration Statement to a time and date not later than two (2) Business Days after the submission of such request.  The Company shall respond in writing to comments made by the SEC in respect of a Registration Statement as soon as practicable, but in no event later than fifteen (15) days after the receipt of comments by or notice from the SEC that an amendment is required in order for a Registration Statement to be declared effective.

(b)           The Company shall prepare and file with the SEC such amendments (including post-effective amendments) and supplements to a Registration Statement and the prospectus used in connection with such Registration Statement, which prospectus is to be filed pursuant to Rule 424 promulgated under the 1933 Act, as may be necessary to keep such Registration Statement effective at all times during the Registration Period, and, during such period, comply with the provisions of the 1933 Act with respect to the disposition of all Registrable Securities of the Company covered by such Registration Statement until such time as all of such Registrable Securities shall have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in such Registration Statement.  In the case of amendments and supplements to a Registration Statement which are required to be filed pursuant to this Agreement (including pursuant to this Section 3(b)) by reason of the Company filing a report on Form 10-Q, Form 10-K or any analogous report under the Securities Exchange Act of 1934, as amended (the "1934 Act"), the Company shall have incorporated such report by reference into such Registration Statement, if applicable, or shall file such amendments or supplements with the SEC on the same day on which the 1934 Act report is filed which created the requirement for the Company to amend or supplement such Registration Statement.

8

(c)           The Company shall (A) permit Legal Counsel to review and comment upon (i) a Registration Statement at least five (5) Business Days prior to its filing with the SEC and (ii) all amendments and supplements to all Registration Statements (except for Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and any similar or successor reports) within a reasonable number of days prior to their filing with the SEC, and (B) not file any Registration Statement or amendment or supplement thereto in a form to which Legal Counsel reasonably objects.  The Company shall not submit a request for acceleration of the effectiveness of a Registration Statement or any amendment or supplement thereto without the prior approval of Legal Counsel, which consent shall not be unreasonably withheld.  The Company shall furnish to Legal Counsel, without charge, (i) copies of any correspondence from the SEC or the staff of the SEC to the Company or its representatives relating to any Registration Statement, (ii) unless the following is filed with the SEC through EDGAR and is available to the public through the EDGAR system, promptly after the same is prepared and filed with the SEC, one copy of any Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, if requested by an Investor, and all exhibits and (iii) unless the following is filed with the SEC through EDGAR and is available to the public through the EDGAR system, upon the effectiveness of any Registration Statement, one copy of the prospectus included in such Registration Statement and all amendments and supplements thereto.  The Company shall reasonably cooperate with Legal Counsel in performing the Company's obligations pursuant to this Section 3.

(d)           The Company shall furnish to each Investor whose Registrable Securities are included in any Registration Statement, upon the request of any such Investor without charge,  (i) promptly after the same is prepared and filed with the SEC, at least one copy of such Registration Statement and any amendment(s) thereto, including financial statements and schedules, all documents incorporated therein by reference, if requested by an Investor, all exhibits and each preliminary prospectus, (ii) upon the effectiveness of any Registration Statement, ten (10) copies of the prospectus included in such Registration Statement and all amendments and supplements thereto (or such other number of copies as such Investor may reasonably request) and (iii) such other documents, including copies of any preliminary or final prospectus, as such Investor may reasonably request from time to time in order to facilitate the disposition of the Registrable Securities owned by such Investor.

(e)           The Company shall use its reasonable best efforts to (i) register and qualify, unless an exemption from registration and qualification applies, the resale by Investors of the Registrable Securities covered by a Registration Statement under such other securities or "blue sky" laws of all applicable jurisdictions in the United States, (ii) prepare and file in those jurisdictions such amendments (including post-effective amendments) and supplements to such registrations and qualifications as may be necessary to maintain the effectiveness thereof during the Registration Period, (iii) take such other actions as may be necessary to maintain such registrations and qualifications in effect at all times during the Registration Period, and (iv) take all other actions reasonably necessary or advisable to qualify the Registrable Securities for sale in such jurisdictions; provided, however, that the Company shall not be required in connection therewith or as a condition thereto to (x) qualify to do business in any jurisdiction where it would not otherwise be required to qualify but for this Section 3(e), (y) subject itself to general taxation in any such jurisdiction, or (z) file a general consent to service of process in any such jurisdiction.  The Company shall promptly notify Legal Counsel and each Investor who holds Registrable Securities of the receipt by the Company of any notification with respect to the suspension of the registration or qualification of any of the Registrable Securities for sale under the securities or "blue sky" laws of any jurisdiction in the United States or its receipt of actual notice of the initiation or threatening of any proceeding for such purpose.

9

(f)           The Company shall notify Legal Counsel and each Investor in writing of the happening of any event, as promptly as practicable after becoming aware of such event, as a result of which the prospectus included in a Registration Statement, as then in effect, includes an untrue statement of a material fact or omission to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading (provided that in no event shall such notice contain any material, nonpublic information), and, subject to Section 3(r), promptly prepare a supplement or amendment to such Registration Statement to correct such untrue statement or omission, and upon request deliver ten (10) copies of such supplement or amendment to Legal Counsel and each Investor (or such other number of copies as Legal Counsel or such Investor may reasonably request).  The Company shall also promptly notify Legal Counsel and each Investor in writing (i) when a prospectus or any prospectus supplement or post-effective amendment has been filed, and when a Registration Statement or any post-effective amendment has been declared effective by the SEC (notification of such declaration of effectiveness shall be delivered to Legal Counsel and each Investor by email on the same day on which the Company is notified of such effectiveness by the SEC), (ii) of any request by the SEC for amendments or supplements to a Registration Statement or related prospectus or related information, and (iii) of the Company's reasonable determination that a post-effective amendment to a Registration Statement would be appropriate.  By 9:30 a.m. New York City time on the Business Day following the date any post-effective amendment has become effective, the Company shall file with the SEC in accordance with Rule 424 under the 1933 Act the final prospectus to be used in connection with sales pursuant to such Registration Statement.

(g)           The Company shall use its reasonable best efforts to prevent the issuance of any stop order or other suspension of effectiveness of a Registration Statement, or the suspension of the qualification of any of the Registrable Securities for sale in any jurisdiction and, if such an order or suspension is issued, to obtain the withdrawal of such order or suspension at the earliest possible moment and to notify Legal Counsel and each Investor who holds Registrable Securities being sold of the issuance of such order and the resolution thereof or its receipt of actual notice of the initiation or threat of any proceeding for such purpose.

(h)           If any Investor is required under applicable securities laws to be described in the Registration Statement as an underwriter or an Investor reasonably believes that it could be deemed to be an underwriter of Registrable Securities, at the reasonable request of such Investor, the Company shall furnish to such Investor, on the date of the effectiveness of the Registration Statement and thereafter from time to time on such dates as an Investor may reasonably request (i) a letter, dated such date, from the Company's independent certified public accountants in form and substance as is customarily given by independent certified public accountants to underwriters in an underwritten public offering, addressed to the Investors, and (ii) an opinion, dated as of such date, of counsel representing the Company for purposes of such Registration Statement, in form, scope and substance as is customarily given in an underwritten public offering, addressed to the Investors.

10

(i)            If any Investor is required under applicable securities laws to be described in the Registration Statement as an underwriter or an Investor reasonably believes that it could be deemed to be an underwriter of Registrable Securities, the Company shall make available for inspection by (i) such Investor, (ii) Legal Counsel and (iii) one firm of accountants or other agents retained by the Investors (collectively, the "Inspectors"), all pertinent financial and other records, and pertinent corporate documents and properties of the Company (collectively, the "Records"), as shall be reasonably deemed necessary by each Inspector, and cause the Company's officers, directors and employees to supply all information which any Inspector may reasonably request; provided, however, that each Inspector shall agree to hold in strict confidence and shall not make any disclosure (except to an Investor) or use of any Record or other information which the Company determines in good faith to be confidential, and of which determination the Inspectors are so notified, unless (a) the disclosure of such Records is necessary to avoid or correct a misstatement or omission in any Registration Statement or is otherwise required under the 1933 Act, (b) the release of such Records is ordered pursuant to a final, non-appealable subpoena or order from a court or government body of competent jurisdiction, or (c) the information in such Records has been made generally available to the public other than by disclosure in violation of this Agreement.  Each Investor agrees that it shall, upon learning that disclosure of such Records is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt notice to the Company and allow the Company, at its expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, the Records deemed confidential.  Nothing herein (or in any other confidentiality agreement between the Company and any Investor) shall be deemed to limit the Investors' ability to sell Registrable Securities in a manner which is otherwise consistent with applicable laws and regulations.

(j)            The Company shall hold in confidence and not make any disclosure of information concerning an Investor provided to the Company unless (i) disclosure of such information is necessary to comply with federal or state securities laws, (ii) the disclosure of such information is necessary to avoid or correct a misstatement or omission in any Registration Statement, (iii) the release of such information is ordered pursuant to a subpoena or other final, non-appealable order from a court or governmental body of competent jurisdiction, or (iv) such information has been made generally available to the public other than by disclosure in violation of this Agreement or any other agreement.  The Company agrees that it shall, upon learning that disclosure of such information concerning an Investor is sought in or by a court or governmental body of competent jurisdiction or through other means, give prompt written notice to such Investor and allow such Investor, at the Investor's expense, to undertake appropriate action to prevent disclosure of, or to obtain a protective order for, such information.

(k)           The Company shall use its reasonable best efforts either to (i) cause all of the Registrable Securities covered by a Registration Statement to be listed on each securities exchange on which securities of the same class or series issued by the Company are then listed, if any, if the listing of such Registrable Securities is then permitted under the rules of such exchange or (ii) secure the inclusion for quotation of all of the Registrable Securities on The NASDAQ Global Select Market or (iii) if, despite the Company's reasonable best efforts, the Company is unsuccessful in satisfying the preceding clauses (i) and (ii), to secure the inclusion for quotation on, The New York Stock Exchange, The NASDAQ Capital Market or the NYSE Amex for such Registrable Securities and, without limiting the generality of the foregoing, to use its reasonable best efforts to arrange for at least two market makers to register with the Financial Industry Regulatory Authority, Inc. ("FINRA") as such with respect to such Registrable Securities.  The Company shall pay all fees and expenses in connection with satisfying its obligation under this Section 3(k).

11

(l)            The Company shall cooperate with the Investors who hold Registrable Securities being offered and, to the extent applicable, facilitate the timely preparation and delivery of certificates (not bearing any restrictive legend) representing the Registrable Securities to be offered pursuant to a Registration Statement and enable such certificates to be in such denominations or amounts, as the case may be, as the Investors may reasonably request and registered in such names as the Investors may request.

(m)          If requested by an Investor, the Company shall as soon as practicable (i) incorporate in a prospectus supplement or post-effective amendment such information as an Investor reasonably requests to be included therein relating to the sale and distribution of Registrable Securities, including, without limitation, information with respect to the number of Registrable Securities being offered or sold, the purchase price being paid therefor and any other terms of the offering of the Registrable Securities to be sold in such offering; (ii) make all required filings of such prospectus supplement or post-effective amendment after being notified of the matters to be incorporated in such prospectus supplement or post-effective amendment; and (iii) supplement or make amendments to any Registration Statement if reasonably requested by an Investor holding any Registrable Securities.

(n)           The Company shall use its reasonable best efforts to cause the Registrable Securities covered by a Registration Statement to be registered with or approved by such other governmental agencies or authorities as may be necessary to consummate the disposition of such Registrable Securities.

(o)           The Company shall make generally available to its security holders as soon as practical, but not later than ninety (90) days after the close of the period covered thereby, an earnings statement (in form complying with, and in the manner provided by, the provisions of Rule 158 under the 1933 Act) covering a twelve-month period beginning not later than the first day of the Company's fiscal quarter next following the applicable Effective Date of a Registration Statement.

(p)           The Company shall otherwise use its reasonable best efforts to comply with all applicable rules and regulations of the SEC in connection with any registration hereunder.

(q)           Within two (2) Business Days after a Registration Statement which covers Registrable Securities is declared effective by the SEC, the Company shall cause legal counsel for the Company to deliver to the transfer agent for such Registrable Securities (with copies (for informational purposes only) to the Investors whose Registrable Securities are included in such Registration Statement) confirmation that such Registration Statement has been declared effective by the SEC in the form attached hereto as Exhibit A.

12

(r)            Notwithstanding anything to the contrary herein, at any time after the Effective Date, the Company may delay the disclosure of material, non-public information concerning the Company the disclosure of which at the time is not, in the good faith opinion of the Board of Directors of the Company and its counsel, in the best interest of the Company and, in the opinion of counsel to the Company, otherwise required (a "Grace Period"); provided, that the Company shall promptly (i) notify the Investors in writing of the existence of material, non-public information giving rise to a Grace Period (provided that in each notice the Company will not disclose the content of such material, non-public information to the Investors) and the date on which the Grace Period will begin, and (ii) notify the Investors in writing of the date on which the Grace Period ends; and, provided further, that no Grace Period shall exceed ten (10) consecutive days and during any three hundred sixty five (365) day period such Grace Periods shall not exceed an aggregate of thirty (30) days and the first day of any Grace Period must be at least five (5) Trading Days after the last day of any prior Grace Period (each, an "Allowable Grace Period").  For purposes of determining the length of a Grace Period above, the Grace Period shall begin on and include the date the Investors receive the notice referred to in clause (i) and shall end on and include the later of the date the Investors receive the notice referred to in clause (ii) and the date referred to in such notice.  The provisions of Section 3(g) hereof shall not be applicable during the period of any Allowable Grace Period.  Upon expiration of the Grace Period, the Company shall again be bound by the first sentence of Section 3(f) with respect to the information giving rise thereto unless such material, non-public information is no longer applicable.  Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of an Investor in accordance with the terms of the Securities Purchase Agreement in connection with any sale of Registrable Securities with respect to which an Investor has entered into a contract for sale, prior to the Investor's receipt of the notice of a Grace Period and for which the Investor has not yet settled.

(s)           Neither the Company nor any Subsidiary or affiliate thereof shall identify any Buyer as an underwriter in any public disclosure or filing with the SEC, the Principal Market or any Eligible Market and any Buyer being deemed an underwriter by the SEC shall not relieve the Company of any obligations it has under this Agreement or any other Transaction Document (as defined in the Securities Purchase Agreement); provided, however, that the foregoing shall not prohibit the Company from including the disclosure found in the "Plan of Distribution" section attached hereto as Exhibit B in the Registration Statement.

(t)            Except as set forth on Schedule 3(t) hereto, the Company shall not file any other registration statements until, or grant registration rights to any Person that can be exercised prior to the time that, all Registrable Securities (other than Cutback Shares) are registered pursuant to a Registration Statement that is declared effective by the SEC, provided that this Section 3(t) shall not prohibit the Company from filing amendments (pre-effective and post-effective) to registration statements filed prior to the date of this Agreement; provided that no such amendment shall increase the number of securities registered on a registration statement.Neither the Company nor any of its Subsidiaries has entered, as of the date hereof, nor shall the Company or any of its Subsidiaries, on or after the date of this Agreement, enter into any agreement with respect to its securities, that would have the effect of impairing the rights granted to the Buyers in this Agreement or otherwise conflicts with the provisions hereof.

4.           Obligations of the Investors.

(a)           At least five (5) Business Days prior to the first anticipated Filing Date of a Registration Statement, the Company shall notify each Investor in writing of the information the Company requires from each such Investor if such Investor elects to have any of such Investor's Registrable Securities included in such Registration Statement.  It shall be a condition precedent to the obligations of the Company to complete any registration pursuant to this Agreement with respect to the Registrable Securities of a particular Investor that such Investor shall furnish to the Company such information regarding itself, the Registrable Securities held by it and the intended method of disposition of the Registrable Securities held by it as shall be reasonably required to effect and maintain the effectiveness of the registration of such Registrable Securities and shall execute such documents in connection with such registration as the Company may reasonably request.

13

(b)           Each Investor, by such Investor's acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of any Registration Statement hereunder, unless such Investor has notified the Company in writing of such Investor's election to exclude all of such Investor's Registrable Securities from such Registration Statement.

(c)           Each Investor agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 3(g) or the first sentence of 3(f), such Investor will immediately discontinue disposition of Registrable Securities pursuant to any Registration Statement(s) covering such Registrable Securities until such Investor's receipt of copies of the supplemented or amended prospectus as contemplated by Section 3(g) or the first sentence of 3(f) or receipt of notice that no supplement or amendment is required.  Notwithstanding anything to the contrary, the Company shall cause its transfer agent to deliver unlegended shares of Common Stock to a transferee of an Investor in accordance with the terms of the Securities Purchase Agreement in connection with any sale of Registrable Securities with respect to which an Investor has entered into a contract for sale prior to the Investor's receipt of a notice from the Company of the happening of any event of the kind described in Section 3(g) or the first sentence of 3(f) and for which the Investor has not yet settled.

(d)           Each Investor covenants and agrees that it will comply with the prospectus delivery requirements of the 1933 Act as applicable to it or an exemption therefrom in connection with sales of Registrable Securities pursuant to the Registration Statement.

5.           Expenses of Registration.

All reasonable expenses, other than underwriting discounts and commissions, incurred in connection with registrations, filings or qualifications pursuant to Sections 2 and 3, including, without limitation, all registration, listing and qualifications fees, printers and accounting fees, and fees and disbursements of counsel for the Company shall be paid by the Company.  The Company shall also reimburse the Investors for the actual fees and disbursements of Legal Counsel in connection with registration, filing or qualification pursuant to Sections 2 and 3 of this Agreement which amount shall not exceed $20,000 for each such registration, filing or qualification.

6.           Indemnification.

In the event any Registrable Securities are included in a Registration Statement under this Agreement:

14

(a)           To the fullest extent permitted by law, the Company will, and hereby does, indemnify, hold harmless and defend each Investor, the directors, officers, partners, members, employees, agents, representatives of, and each Person, if any, who controls any Investor within the meaning of the 1933 Act or the 1934 Act (each, an "Indemnified Person"), against any losses, claims, damages, liabilities, judgments, fines, penalties, charges, costs, reasonable attorneys' fees, amounts paid in settlement or expenses, joint or several (collectively, "Claims"), incurred in investigating, preparing or defending any action, claim, suit, inquiry, proceeding, investigation or appeal taken from the foregoing by or before any court or governmental, administrative or other regulatory agency, body or the SEC, whether pending or threatened, whether or not an indemnified party is or may be a party thereto ("Indemnified Damages"), to which any of them may become subject insofar as such Claims (or actions or proceedings, whether commenced or threatened, in respect thereof) arise out of or are based upon:  (i) any untrue statement or alleged untrue statement of a material fact in a Registration Statement or any post-effective amendment thereto or in any filing made in connection with the qualification of the offering under the securities or other "blue sky" laws of any jurisdiction in which Registrable Securities are offered ("Blue Sky Filing"), or the omission or alleged omission to state a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus if used prior to the effective date of such Registration Statement, or contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in light of the circumstances under which the statements therein were made, not misleading, (iii) any violation or alleged violation by the Company of the 1933 Act, the 1934 Act, any other law, including, without limitation, any state securities law, or any rule or regulation thereunder relating to the offer or sale of the Registrable Securities pursuant to a Registration Statement or (iv) any violation of this Agreement (the matters in the foregoing clauses (i) through (iv) being, collectively, "Violations").  Subject to Section 6(c), the Company shall reimburse the Indemnified Persons, promptly as such expenses are incurred and are due and payable, for any legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim.  Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 6(a):  (i) shall not apply to a Claim by an Indemnified Person arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by such Indemnified Person for such Indemnified Person expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto, if such prospectus was timely made available by the Company pursuant to Section 3(d); and (ii) shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld or delayed.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Person and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9.

15

(b)           In connection with any Registration Statement in which an Investor is participating, each such Investor agrees to severally and not jointly indemnify, hold harmless and defend, to the same extent and in the same manner as is set forth in Section 6(a), the Company, each of its directors, each of its officers who signs the Registration Statement and each Person, if any, who controls the Company within the meaning of the 1933 Act or the 1934 Act (each, an "Indemnified Party"), against any Claim or Indemnified Damages to which any of them may become subject, under the 1933 Act, the 1934 Act or otherwise, insofar as such Claim or Indemnified Damages arise out of or are based upon any Violation, in each case to the extent, and only to the extent, that such Violation occurs in reliance upon and in conformity with written information furnished to the Company by such Investor expressly for use in connection with such Registration Statement; and, subject to Section 6(c), such Investor shall reimburse the Indemnified Party for any legal or other expenses reasonably incurred by an Indemnified Party in connection with investigating or defending any such Claim; provided, however, that the indemnity agreement contained in this Section 6(b) and the agreement with respect to contribution contained in Section 7 shall not apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of such Investor, which consent shall not be unreasonably withheld or delayed; provided, further, however, that the Investor shall be liable under this Section 6(b) for only that amount of a Claim or Indemnified Damages as does not exceed the net proceeds to such Investor as a result of the sale of Registrable Securities pursuant to such Registration Statement.  Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of such Indemnified Party and shall survive the transfer of the Registrable Securities by the Investors pursuant to Section 9.

(c)           Promptly after receipt by an Indemnified Person or Indemnified Party under this Section 6 of notice of the commencement of any action or proceeding (including any governmental action or proceeding) involving a Claim, such Indemnified Person or Indemnified Party shall, if a Claim in respect thereof is to be made against any indemnifying party under this Section 6, deliver to the indemnifying party a written notice of the commencement thereof, and the indemnifying party shall have the right to participate in, and, to the extent the indemnifying party so desires, jointly with any other indemnifying party similarly noticed, to assume control of the defense thereof with counsel mutually satisfactory to the indemnifying party and the Indemnified Person or the Indemnified Party, as the case may be; provided, however, that an Indemnified Person or Indemnified Party shall have the right to retain its own counsel with the fees and expenses of not more than one counsel for all such Indemnified Persons or Indemnified Parties to be paid by the indemnifying party, if, in the reasonable opinion of counsel retained by the Indemnified Person or Indemnified Party, as applicable, the representation by such counsel of the Indemnified Person or Indemnified Party and the indemnifying party would be inappropriate due to actual or potential differing interests between such Indemnified Person or Indemnified Party and any other party represented by such counsel in such proceeding.  In the case of an Indemnified Person, legal counsel referred to in the immediately preceding sentence shall be selected by the Investors holding at least a majority in interest of the Registrable Securities included in the Registration Statement to which the Claim relates.  The Indemnified Party or Indemnified Person shall cooperate reasonably with the indemnifying party in connection with any negotiation or defense of any such action or Claim by the indemnifying party and shall furnish to the indemnifying party all information reasonably available to the Indemnified Party or Indemnified Person which relates to such action or Claim.  The indemnifying party shall keep the Indemnified Party or Indemnified Person fully apprised at all times as to the status of the defense or any settlement negotiations with respect thereto.  No indemnifying party shall be liable for any settlement of any action, claim or proceeding effected without its prior written consent, provided, however, that the indemnifying party shall not unreasonably withhold, delay or condition its consent.  No indemnifying party shall, without the prior written consent of the Indemnified Party or Indemnified Person, consent to entry of any judgment or enter into any settlement or other compromise which does not include as an unconditional term thereof the giving by the claimant or plaintiff to such Indemnified Party or Indemnified Person of a release from all liability in respect to such Claim or litigation and such settlement shall not include any admission as to fault on the part of the Indemnified Party.  Following indemnification as provided for hereunder, the indemnifying party shall be subrogated to all rights of the Indemnified Party or Indemnified Person with respect to all third parties, firms or corporations relating to the matter for which indemnification has been made.  The failure to deliver written notice to the indemnifying party within a reasonable time of the commencement of any such action shall not relieve such indemnifying party of any liability to the Indemnified Person or Indemnified Party under this Section 6, except to the extent that the indemnifying party is prejudiced in its ability to defend such action.

16

(d)           The indemnification required by this Section 6 shall be made by periodic payments of the amount thereof during the course of the investigation or defense, as and when bills are received or Indemnified Damages are incurred; provided, that such amounts are subject to return to the indemnifying party by an Indemnified Party or Indemnified Person if it is finally judicially determined (not subject to further appeal) that such Indemnified Party or Indemnified Person is not entitled to indemnification hereunder.

(e)           The indemnity agreements contained herein shall be in addition to (i) any cause of action or similar right of the Indemnified Party or Indemnified Person against the indemnifying party or others, and (ii) any liabilities the indemnifying party may be subject to pursuant to the law.

7.           Contribution.

To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 6 to the fullest extent permitted by law; provided, however, that:  (i) no Person involved in the sale of Registrable Securities which Person is guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the 1933 Act) in connection with such sale shall be entitled to contribution from any Person involved in such sale of Registrable Securities who was not guilty of fraudulent misrepresentation; and (ii) contribution by any seller of Registrable Securities shall be limited in amount to the amount of net proceeds received by such seller from the sale of such Registrable Securities pursuant to such Registration Statement.

8.           Reports Under the 1934 Act.

With a view to making available to the Investors the benefits of Rule 144 promulgated under the 1933 Act or any other similar rule or regulation of the SEC that may at any time permit the Investors to sell securities of the Company to the public without registration ("Rule 144"), the Company agrees to:

(a)           make and keep public information available, as those terms are understood and defined in Rule 144;

(b)           file with the SEC in a timely manner all reports and other documents required of the Company under the 1933 Act and the 1934 Act so long as the Company remains subject to such requirements and the filing of such reports and other documents is required for the applicable provisions of Rule 144; and

17

(c)           furnish to each Investor so long as such Investor owns Registrable Securities, promptly upon request, (i) a written statement by the Company, if true, that it has complied with the reporting requirements of Rule 144, the 1933 Act and the 1934 Act, (ii) a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company, and (iii) such other information as may be reasonably requested to permit the Investors to sell such securities pursuant to Rule 144 without registration.

9.           Assignment of Registration Rights.

The rights under this Agreement shall be automatically assignable by the Investors to any transferee of all or any portion of such Investor's Registrable Securities if:  (i) the Investor agrees in writing with the transferee or assignee to assign such rights, and a copy of such agreement is furnished to the Company within a reasonable time after such assignment; (ii) the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee, and (b) the securities with respect to which such registration rights are being transferred or assigned; (iii) immediately following such transfer or assignment the further disposition of such securities by the transferee or assignee is restricted under the 1933 Act or applicable state securities laws; (iv) at or before the time the Company receives the written notice contemplated by clause (ii) of this sentence the transferee or assignee agrees in writing with the Company to be bound by all of the provisions contained herein; and (v) such transfer shall have been made in accordance with the applicable requirements of the Securities Purchase Agreement.

10.         Amendment of Registration Rights.

Provisions of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Required Holders.  Any amendment or waiver effected in accordance with this Section 10 shall be binding upon each Investor and the Company.  No such amendment shall be effective to the extent that it applies to less than all of the holders of the Registrable Securities.  No consideration shall be offered or paid to any Person to amend or consent to a waiver or modification of any provision of this Agreement unless the same consideration also is offered to all of the parties to this Agreement.

11.         Miscellaneous.

(a)           A Person is deemed to be a holder of Registrable Securities whenever such Person owns or is deemed to own of record such Registrable Securities.  If the Company receives conflicting instructions, notices or elections from two or more Persons with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from such record owner of such Registrable Securities.

18

(b)           Any notices, consents, waivers or other communications required or permitted to be given under the terms of this Agreement must be in writing and will be deemed to have been delivered:  (i) upon receipt, when delivered personally (if delivered on a Business Day during normal business hours where such notice is to be received and, if not, on the next Business Day); (ii) upon receipt (if delivered on a Business Day during normal business hours where such notice is to be received and, if not, on the next Business Day), when sent by facsimile (provided confirmation of transmission is mechanically or electronically generated and kept on file by the sending party); or (iii) one Business Day after timely deposit with a nationally recognized overnight delivery service, in each case properly addressed to the party to receive the same.  The addresses and facsimile numbers for such communications shall be:

If to the Company:

Ener1, Inc.

1540 Broadway, Suite 25C

New York, New York 10036

Telephone: (212) 920-3500

Facsimile: (212) 920-3510

Attention: Chief Executive Officer

With a copy (for informational purposes only) to:

Mazzeo Song & Bradham LLP

708 Third Avenue – 19th Floor

New York, New York 10017

Telephone: (212) 599-0700

Facsimile: (212) 599-8400

Attention: David S. Song, Esq.

If to the Transfer Agent:

Registrar and Transfer Company

10 Commerce Drive

Cranford, New Jersey  07016

Telephone: (800) 368-5948

Facsimile: (908) 497-2318

Attention: Ruby Singh

If to Legal Counsel:

Schulte Roth & Zabel LLP

919 Third Avenue

New York, New York  10022

Telephone: (212) 756-2000

Facsimile: (212) 593-5955

Attention: Eleazer Klein, Esq.

19

If to a Buyer, to its address and facsimile number set forth on the Schedule of Buyers attached hereto, with copies to such Buyer's representatives as set forth on the Schedule of Buyers, or to such other address and/or facsimile number and/or to the attention of such other Person as the recipient party has specified by written notice given to each other party five (5) days prior to the effectiveness of such change.  Written confirmation of receipt (A) given by the recipient of such notice, consent, waiver or other communication, (B) mechanically or electronically generated by the sender's facsimile machine containing the time, date, recipient facsimile number and an image of the first page of such transmission or (C) provided by a courier or overnight courier service shall be rebuttable evidence of personal service, receipt by facsimile or receipt from a nationally recognized overnight delivery service in accordance with clause (i), (ii) or (iii) above, respectively.

(c)           Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

(d)           All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by the internal laws of the State of New York, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of New York or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of New York.  Each party hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in The City of New York, Borough of Manhattan, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law.  EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR ARISING OUT OF THIS AGREEMENT OR ANY TRANSACTION CONTEMPLATED HEREBY.

(e)           If any provision of this Agreement is prohibited by law or otherwise determined to be invalid or unenforceable by a court of competent jurisdiction, the provision that would otherwise be prohibited, invalid or unenforceable shall be deemed amended to apply to the broadest extent that it would be valid and enforceable, and the invalidity or unenforceability of such provision shall not affect the validity of the remaining provisions of this Agreement so long as this Agreement as so modified continues to express, without material change, the original intentions of the parties as to the subject matter hereof and the prohibited nature, invalidity or unenforceability of the provision(s) in question does not substantially impair the respective expectations or reciprocal obligations of the parties or the practical realization of the benefits that would otherwise be conferred upon the parties.  The parties will endeavor in good faith negotiations to replace the prohibited, invalid or unenforceable provision(s) with a valid provision(s), the effect of which comes as close as possible to that of the prohibited, invalid or unenforceable provision(s).

20

(f)            This Agreement, the other Transaction Documents (as defined in the Securities Purchase Agreement) and the instruments referenced herein and therein constitute the entire agreement among the parties hereto with respect to the subject matter hereof and thereof.  There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein and therein.  This Agreement, the other Transaction Documents and the instruments referenced herein and therein supersede all prior agreements and understandings among the parties hereto with respect to the subject matter hereof and thereof.

(g)           Subject to the requirements of Section 9, this Agreement shall inure to the benefit of and be binding upon the permitted successors and assigns of each of the parties hereto.

(h)           The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning hereof.

(i)            This Agreement may be executed in identical counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement.  This Agreement, once executed by a party, may be delivered to the other party hereto by facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

(j)            Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as any other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

(k)           All consents and other determinations required to be made by the Investors pursuant to this Agreement shall be made, unless otherwise specified in this Agreement, by the Required Holders.

(l)            The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent and no rules of strict construction will be applied against any party.

(m)          This Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person.

(n)           The obligations of each Investor hereunder are several and not joint with the obligations of any other Investor, and no provision of this Agreement is intended to confer any obligations on any Investor vis-à-vis any other Investor.  Nothing contained herein, and no action taken by any Investor pursuant hereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated herein.

* * * * * *

21

[Signature Page Follows]

22

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.

COMPANY:
ENER1, INC.
By:	/s/ Charles Gassenheimer
	Name:	Charles Gassenheimer
	Title:	Chief Executive Officer

[Signature Page to Registration Rights Agreement]

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.

BUYERS:
LIBERTY HARBOR SPECIAL
INVESTMENTS, LLC
By:	/s/ Brendan McGovern
	Name:	Brendan McGovern
	Title:	Vice President

[Signature Page to Registration Rights Agreement]

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.

BUYERS:
GOLDMAN SACHS PALMETTO STATE
CREDIT FUND, L.P.
By:  Goldman Sachs Asset Management, L.P., its
investment manager
By:	/s/ Brendan McGovern
	Name: Brendan McGovern
	Title:  Vice President

[Signature Page to Registration Rights Agreement]

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.

BUYERS:
WHITEBOX CREDIT ARBITRAGE
PARTNERS, L.P.
By:	/s/ Mark Strefling
	Name: Mark Strefling
	Title:  CLO

[Signature Page to Registration Rights Agreement]

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.

BUYERS:
PANDORA SELECT PARTNERS,  L.P.
By:	/s/ Mark Strefling
	Name: Mark Strefling
	Title:  CLO

[Signature Page to Registration Rights Agreement]

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.

BUYERS:
WHITEBOX CONCENTRATED
CONVERTIBLE ARBITRAGE PARTNERS,
L.P.
By:	/s/ Mark Strefling
	Name: Mark Strefling
	Title:  CLO

[Signature Page to Registration Rights Agreement]

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.

BUYERS:
WHITEBOX MULTI STRATEGY
PARTNERS, L.P.
By:	/s/ Mark Strefling
	Name: Mark Strefling
	Title:  CLO

[Signature Page to Registration Rights Agreement]

IN WITNESS WHEREOF, each Buyer and the Company have caused their respective signature page to this Registration Rights Agreement to be duly executed as of the date first written above.

BUYERS:
WHITEBOX SPECIAL OPPORTUNITIES
FUND, L.P., SERIES B
By:	/s/ Mark Strefling
	Name: Mark Strefling
	Title:  CLO

[Signature Page to Registration Rights Agreement]

SCHEDULE OF BUYERS

Buyer	Buyer Address and Facsimile Number	Buyer's Representative's Address  and Facsimile Number
Liberty Harbor Master Fund I, L.P.	c/o Goldman Sachs Asset Management 200 West Street New York NY 10282 Attention: Thomas N. Secor Facsimile:  (212) 428-1505 Telephone: (212) 357-7910 E-mail: thomas.secor@gs.com	Schulte Roth & Zabel LLP 919 Third Avenue New York, NY 10022 Attn:  Eleazer Klein, Esq. Facsimile:  (212) 593-5955 Telephone:  (212) 756-2000
Goldman Sachs Palmetto State Credit Fund, L.P.	c/o Goldman Sachs Asset Management 200 West Street New York NY 10282 Attention: Thomas N. Secor Facsimile:  (212) 428-1505 Telephone: (212) 357-7910 E-mail: thomas.secor@gs.com	Schulte Roth & Zabel LLP 919 Third Avenue New York, NY 10022 Attn:  Eleazer Klein, Esq. Facsimile:  (212) 593-5955 Telephone:  (212) 756-2000
Whitebox Multi Strategy Partners, L.P.	c/o Whitebox Advisors LLC 3033 Excelsior Boulevard Suite 300 Minneapolis MN 55416 United States Attention: Dan Philp                  Mark Strefling, CLO Telephone: (612) 253-6084 E-mail: dphilp@whiteboxadvisors.com
Whitebox Concentrated Convertible Arbitrage Partners, L.P.	c/o Whitebox Advisors LLC 3033 Excelsior Boulevard Suite 300 Minneapolis MN 55416 United States Attention: Dan Philp                  Mark Strefling, CLO Telephone: (612) 253-6084 E-mail: dphilp@whiteboxadvisors.com
Pandora Select Partners, L.P.	c/o Whitebox Advisors LLC 3033 Excelsior Boulevard Suite 300 Minneapolis MN 55416 United States Attention: Dan Philp                  Mark Strefling, CLO Telephone: (612) 253-6084 E-mail: dphilp@whiteboxadvisors.com

Buyer	Buyer Address and Facsimile Number	Buyer's Representative's Address  and Facsimile Number
Whitebox Credit Arbitrage Partners, L.P	c/o Whitebox Advisors LLC 3033 Excelsior Boulevard Suite 300 Minneapolis MN 55416 United States Attention: Dan Philp                  Mark Strefling, CLO Telephone: (612) 253-6084 E-mail: dphilp@whiteboxadvisors.com
Whitebox Special Opportunities Fund LP, Series B	c/o Whitebox Advisors LLC 3033 Excelsior Boulevard Suite 300 Minneapolis MN 55416 United States Attention: Dan Philp                  Mark Strefling, CLO Telephone: (612) 253-6084 E-mail: dphilp@whiteboxadvisors.com

SCHEDULE 3(t)

Ener1, Inc. has granted registration rights to JSC VTB Bank (the “Bank”) for all shares of Ener1 common stock pledged to the Bank to secure Ener1 Group, Inc.'s credit obligations under such parties' Facility Agreement dated June 4, 2010. 65,147,303 shares of Ener1 common stock are currently pledged to the Bank.  Ener1 is required to use its commercially reasonable best efforts to register the resale of all such pledged Ener1 common stock under the Securities Act of 1933, as amended, if, following an event of default under the Facility Agreement, it is requested to do so in writing by the collateral agent for the facility.

EXHIBIT A

FORM OF NOTICE OF EFFECTIVENESS

OF REGISTRATION STATEMENT

[                                           ]

[                                           ]

[                                           ]

Attention:  [                  ]

Re: Ener1, Inc.

Ladies and Gentlemen:

[We are][I am] counsel to Ener1, Inc., a Florida corporation (the "Company"), and have represented the Company in connection with that certain Securities Purchase Agreement, dated as of December 31, 2010 (the "Securities Purchase Agreement"), entered into by and among the Company and the buyers named therein (collectively, the "Holders") pursuant to which the Company issued to the Holders senior unsecured notes of the Company (the "Notes"), pursuant to the terms of which, certain payments of principal and/or accrued but unpaid interest may be satisfied by the delivery of shares of common stock of the Company, par value $0.01 per share (the "Common Stock") (as issued or issuable, collectively, the "Amortization Shares").  Pursuant to the Securities Purchase Agreement, the Company also has entered into a Registration Rights Agreement with the Holders (the "Registration Rights Agreement") pursuant to which the Company agreed, among other things, to register the resale of the Registrable Securities (as defined in the Registration Rights Agreement), including the Amortization Shares under the Securities Act of 1933, as amended (the "1933 Act").  In connection with the Company's obligations under the Registration Rights Agreement, on ____________ ___, 2010, the Company filed a Registration Statement on Form S-3 (File No. 333-_____________) (the "Registration Statement") with the Securities and Exchange Commission (the "SEC") relating to the Registrable Securities which names each of the Holders as a selling shareholder thereunder.

In connection with the foregoing, [we][I] advise you that a member of the SEC's staff has advised [us][me] by telephone that the SEC has entered an order declaring the Registration Statement effective under the 1933 Act at [ENTER TIME OF EFFECTIVENESS] on [ENTER DATE OF EFFECTIVENESS] and [we][I] have no knowledge, after telephonic inquiry of a member of the SEC's staff, that any stop order suspending its effectiveness has been issued or that any proceedings for that purpose are pending before, or threatened by, the SEC and the Registrable Securities are available for resale under the 1933 Act pursuant to the Registration Statement.

This letter shall serve as our standing instruction to you that the shares of Common Stock are freely transferable by the Holders pursuant to the Registration Statement.  You need not require further letters from us to effect any future legend-free issuance or reissuance of shares of Common Stock to the Holders as contemplated by the Company's Irrevocable Transfer Agent Instructions dated December 31, 2010.

Very truly yours,

[ISSUER'S COUNSEL]

By:

CC: [LIST NAMES OF HOLDERS]

A-1

EXHIBIT B

SELLING SHAREHOLDERS

The shares of common stock being offered by the selling shareholders are those issuable to the selling shareholders in satisfaction of principal and/or accrued but unpaid interest payments pursuant to the terms of the notes.  For additional information regarding the issuance of those notes, see "Private Placement of Notes" above.  We are registering the shares of common stock in order to permit the selling shareholders to offer the shares for resale from time to time.  Except for the transactions under the Securities Purchase Agreement, including, without limitation, the ownership of the notes issued pursuant to the Securities Purchase Agreement, the selling shareholders have not had any material relationship with us within the past three years.

The table below lists the selling shareholders and other information regarding the beneficial ownership of the shares of common stock by each of the selling shareholders.  The second column lists the number of shares of common stock beneficially owned by each selling shareholder, based on its ownership of the notes, as of ________, 2010, assuming all principal and interest amounts payable under the notes are satisfied by the delivery of shares of common stock pursuant to the terms of the notes, without regard to any limitations on the number of shares of common stock issuable pursuant to the terms of the notes.

The third column lists the shares of common stock being offered by this prospectus by the selling shareholders.

In accordance with the terms of a registration rights agreement with the selling shareholders, this prospectus generally covers the resale of at least the maximum number of shares of common stock issuable in satisfaction of principal and/or accrued but unpaid interest payments pursuant to the terms of the notes (assuming a Stock Payment Price (as defined in the notes) of $2.29375, such dollar amount being subject to adjustment for stock splits, stock dividends and similar events), as of the Trading Day immediately preceding the applicable date of determination.  The fourth column assumes the sale of all of the shares offered by the selling shareholders pursuant to this prospectus.

Under the terms of the notes, a selling shareholder may not receive common stock in satisfaction of principal and/or accrued but unpaid interest payments pursuant to the terms of the notes to the extent such payment would cause such selling shareholder, together with its affiliates, to beneficially own a number of shares of common stock which would exceed 9.99% of our then outstanding shares of common stock following such payment, excluding for purposes of such determination shares of common stock issuable in satisfaction of principal and/or accrued but unpaid interest payments which have not been paid.  The number of shares in the second column does not reflect this limitation.  The selling shareholders may sell all, some or none of their shares in this offering.  See "Plan of Distribution."

Annex I-1

Name of Selling Shareholder	Number of Shares of Common Stock Owned Prior to Offering	Maximum Number of Shares of Common Stock to be Sold Pursuant to this Prospectus	Number of Shares of Common Stock Owned After Offering
Liberty Harbor Master Fund I, L.P.			[0]
Goldman Sachs Palmetto State Credit Fund, L.P.
Whitebox Multi Strategy Partners, L.P.
Whitebox Concentrated Convertible Arbitrage Partners, L.P.
Pandora Select Partners, L.P.
Whitebox Credit Arbitrage Partners, L.P
Whitebox Special Opportunities Fund LP, Series B

Annex I-2

PLAN OF DISTRIBUTION

We are registering the shares of common stock issuable in satisfaction of principal and/or accrued but unpaid interest payments pursuant to the terms of the notes to permit the resale of these shares of common stock by the holders notes from time to time after the date of this prospectus.  We will not receive any of the proceeds from the sale by the selling shareholders of the shares of common stock.  We will bear all fees and expenses incident to our obligation to register the shares of common stock.

The selling shareholders may sell all or a portion of the shares of common stock beneficially owned by them and offered hereby from time to time directly or through one or more underwriters, broker-dealers or agents.  If the shares of common stock are sold through underwriters or broker-dealers, the selling shareholders will be responsible for underwriting discounts or commissions or agent's commissions.  The shares of common stock may be sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined at the time of sale, or at negotiated prices.  These sales may be effected in transactions, which may involve crosses or block transactions,

· on any national securities exchange or quotation service on which the securities may be listed or quoted at the time of sale;

· in the over-the-counter market;

· in transactions otherwise than on these exchanges or systems or in the over-the-counter market;

· through the writing of options, whether such options are listed on an options exchange or otherwise;

· ordinary brokerage transactions and transactions in which the broker-dealer solicits purchasers;

· block trades in which the broker-dealer will attempt to sell the shares as agent but may position and resell a portion of the block as principal to facilitate the transaction;

· purchases by a broker-dealer as principal and resale by the broker-dealer for its account;

· an exchange distribution in accordance with the rules of the applicable exchange;

· privately negotiated transactions;

· short sales;

· sales pursuant to Rule 144;

· broker-dealers may agree with the selling securityholders to sell a specified number of such shares at a stipulated price per share;

Annex I-3

· a combination of any such methods of sale; and

· any other method permitted pursuant to applicable law.

If the selling shareholders effect such transactions by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents may receive commissions in the form of discounts, concessions or commissions from the selling shareholders or commissions from purchasers of the shares of common stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions involved).  In connection with sales of the shares of common stock or otherwise, the selling shareholders may enter into hedging transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging in positions they assume.  The selling shareholders may also sell shares of common stock short and deliver shares of common stock covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales.  The selling shareholders may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares.

The selling shareholders may pledge or grant a security interest in some or all of the notes or shares of common stock owned by them and, if they default in the performance of their secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time pursuant to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act of 1933, as amended, amending, if necessary, the list of selling shareholders to include the pledgee, transferee or other successors in interest as selling shareholders under this prospectus.  The selling shareholders also may transfer and donate the shares of common stock in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial owners for purposes of this prospectus.

The selling shareholders and any broker-dealer participating in the distribution of the shares of common stock may be deemed to be "underwriters" within the meaning of the Securities Act, and any commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions or discounts under the Securities Act.  At the time a particular offering of the shares of common stock is made, a prospectus supplement, if required, will be distributed which will set forth the aggregate amount of shares of common stock being offered and the terms of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting compensation from the selling shareholders and any discounts, commissions or concessions allowed or reallowed or paid to broker-dealers.

Under the securities laws of some states, the shares of common stock may be sold in such states only through registered or licensed brokers or dealers.  In addition, in some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state or an exemption from registration or qualification is available and is complied with.

Annex I-4

There can be no assurance that any selling shareholder will sell any or all of the shares of common stock registered pursuant to the registration statement, of which this prospectus forms a part.

The selling shareholders and any other person participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended, and the rules and regulations thereunder, including, without limitation, Regulation M of the Exchange Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling shareholders and any other participating person.  Regulation M may also restrict the ability of any person engaged in the distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock.  All of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage in market-making activities with respect to the shares of common stock.

We will pay all expenses of the registration of the shares of common stock pursuant to the registration rights agreement, estimated to be $[     ] in total, including, without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities or "blue sky" laws; provided, however, that a selling shareholder will pay all underwriting discounts and selling commissions, if any.  We will indemnify the selling shareholders against liabilities, including some liabilities under the Securities Act, in accordance with the registration rights agreements, or the selling shareholders will be entitled to contribution.  We may be indemnified by the selling shareholders against civil liabilities, including liabilities under the Securities Act, that may arise from any written information furnished to us by the selling shareholder specifically for use in this prospectus, in accordance with the related registration rights agreement, or we may be entitled to contribution.

Once sold under the registration statement, of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our affiliates.

Annex I-5

EX-99.1

Media Contact:	Investor Relations Contact:
Brian Sinderson	Aimee Gordon
Ener1, Inc.	Ener1, Inc.
Phone: 212.920.3500 X117	Phone: 212.920.3500 X106