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MCG DIVERSIFIED, INC.
30 Shelter Rock Road
Danbury, Connecticut 06840
(203) 797-2699

May 6, 2004

To:
Mr. Charles Godels
 
Ms. Marguerite Godels

Re:   Reverse Merger Lock-Up Agreement

Dear Charles and Marguerite:

MCG Diversified, Inc. (the “Company”) plans to enter into a reverse merger
transaction (the “Reverse Merger”) with Electro Energy Inc. (“Electro Energy”),
concurrently with a private offering of a minimum of $4,500,000 of Units, each
Unit consisting of one share of Series A Convertible Preferred Stock and a
warrant to purchase 200 shares of Common Stock (the “Funding Transactions”) of
the Company. The Company will at the closing of the Funding Transactions succeed
to and operate the business of Electro Energy under the current management of
Electro Energy. We currently expect to close these Funding Transactions on or
around May 12, 2004.

You or your affiliates are, or will be at the closing of the Funding
Transactions, a holder of outstanding shares of common stock of the Company (the
“Shares”). It is essential to the success of the Funding Transactions that the
Company and its financial advisors can give comfort to potential investors that
the “after market” for the shares of the Company’s Common Stock will not be
disrupted by a very substantial block of shares being sold in an inappropriate
fashion. Electro Energy has already obtained such comfort, substantially in the
form provided for below, from each of its officers, directors and principal
shareholders.

By signing and returning this agreement in the manner indicated below, each of
you hereby agrees, for yourself and any affiliate owning Shares which you
control, not to, directly or indirectly, publicly sell, contract to sell or
otherwise transfer any of the Shares beneficially owned by you or such affiliate
during the first 30 days following the closing date of the Funding Transactions.
From 30 days, and during each calendar month thereafter, you may each sell your
Shares without restriction hereunder, but in no event may you, as a group, sell
more than 30,000 Shares per month.

If the Company engages an underwriter or placement agent during the 12 months
after the closing date of the Funding Transactions to raise a minimum of
$5,000,000 through the sale of the Company’s Common Stock and/or other equity
securities, in a public offering or private placement, upon notice of commencing
such public offering or private placement, each of you will, if required by the
underwriter or placement agent, refrain from making any sales, transfers or
other dispositions in the course of such offering, but, in any event, for not
more than 90 days.

Because of the importance of the lock-up to the Funding Transactions, if you
fail to execute and return this lock-up agreement to the Company, you may not be
entitled to include any of your Shares in the Registration Statement that the
Company intends to file with the U.S. Securities and Exchange Commission
following the closing of the Funding Transactions. Please note that there can be
no assurance that such Registration Statement will be filed, will become
effective or that any or all of your Shares will be included therein.

       

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By signing and returning this agreement, you further (i) represent and consent
that you have full power and authority to enter into this lock-up agreement and
that, upon request, you will execute any additional documents necessary or
desirable in connection with this lock-up agreement and its enforcement; and
(ii) understand that this lock-up agreement is irrevocable by you, all authority
herein conferred by you or agreed to be conferred by you shall survive your
death or incapacity, and any of your obligations hereunder shall be binding on
you and your heirs, personal representatives, successors and assigns.

In order to enable the aforesaid covenant to be enforced, you hereby consent to
the placing of a legend and/or stop-transfer order with the transfer agent of
the Common Stock with respect to any of the Shares registered in your name or
beneficially owned by you or your affiliates. You further agree to place any
stock certificates representing the Shares you own with the Company’s transfer
agent until such time as this lock-up agreement expires or is terminated.

Whether the Funding Transactions actually occur depends on a number of factors.
Notwithstanding the foregoing, this lock-up agreement will terminate on June 30,
2004, in the event that the Funding Transactions are not completed on or before
such date.

Accordingly, to evidence your agreement to the terms hereof, please date, sign
and return this lock-up agreement to the Company by courier, Federal Express or
fax no later than the close of business on May 7, 2004. If you return your
signed lock-up agreement to the Company by fax, please promptly mail the
executed copy of the lock-up agreement to the Company.

[SIGNATURE PAGE FOLLOWS]

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Acknowledged and Agreed
this 6th day of May, 2004:

/s/ Charles P. Godels
 

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Charles P. Godels
 
 
 
 
 
/s/ Marguerite Godels
 

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Marguerite Godels
 

 

 
RETURN TO THE COMPANY’S COUNSEL,
GREENBERG TRAURIG, LLP BY FAX AND
BY FEDERAL EXPRESS OR OVERNIGHT COURIER TO:

Greenberg Traurig, LLP
200 Park Avenue
New York, New York 10166
Attention: Richard M. Rosier, Esq.
Tel: (212) 801-6849
Fax: (212) 801-6400

Accepted:

MCG DIVERSIFIED, INC.

By:
/s/ Marguerite Godels
 

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Marguerite Godels
President
 

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