Exhibit
10.7




CONVERSION
AGREEMENT





This CONVERSION AGREEMENT (this “Agreement”),
dated as of August 3, 2010 (the “Effective
Date”), is by and between ENER1, INC., a Florida
corporation (the “Company”),
and BZINFIN, S.A., a British Virgin Islands company (the “Lender”).





A.           The
Company and the Lender are parties to an Amended and Restated Line of Credit
Agreement, dated as of August 26, 2009 (the “LOC
Agreement”), pursuant to which the Lender has advanced funds to the
Company. Capitalized terms used herein and not otherwise defined have the
respective meanings set forth in the LOC Agreement.





B.           Subject
to the terms and conditions contained in this Agreement, and as otherwise
provided in the LOC Agreement, the Lender wishes to convert all amounts due and
payable by the Company under the LOC Agreement, totaling $18,355,868 (the “Repayment
Amount”), into common stock of the Company, par value $.01 per share (the
“Common
Stock”).





In consideration of the mutual promises
made herein, and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the Company and the Lender hereby
agree as follows:





1.           CONVERSION;
WARRANTS.





1.1           Conversion of Repayment
Amount; Warrants.  On the terms and subject to the conditions
set forth herein, the Lender agrees to convert the entire Repayment Amount into
shares of Common Stock (the “Conversion”)
on a date that occurs within five (5) Business Days (as such term is defined in
the LOC Agreement) of the Effective Date (the “Conversion
Date”). On the Conversion Date, the Lender shall receive from the Company
a number of shares of Common Stock (the “Conversion
Shares”) equal to the Repayment Amount divided bythe Conversion Price (as defined below). On the Conversion Date, the
Company shall deliver to the Lender one or more certificates representing the
Conversion Shares in such name or names as the Lender shall request in writing.
Upon completion of the Conversion, the LOC Agreement shall be deemed terminated
and of no further force or effect, and neither party shall have any further
liability or obligation thereunder.





1.2           Conversion Price. The
conversion price stated in the LOC Agreement is hereby amended to read, wherever
it appears in the LOC Agreement, $3.40 per share (the “Conversion
Price”).





1.3           Issuance of
Warrants.  In consideration of the agreement by the Lender to
effect the Conversion, the Company will issue to the Lender, on the Conversion
Date and subject to the completion of the Conversion, (A) warrants,
substantially in the form of Exhibit A hereto (the “Class A
Warrants”), entitling the holder thereof to purchase up to 863,806 shares
of Common Stock at an exercise price of $3.40 (subject to adjustment as set
forth in the Class A Warrants) and (B) warrants, substantially in the form of
Exhibit B hereto (the “Class B
Warrants” and, together with the Class A Warrants, the “Warrants”),
entitling the holder thereof to purchase up to 1,457,672 shares of Common Stock
at an exercise price of $4.25 (subject to adjustment as set forth in the Class A
Warrants).  The shares of Common Stock issuable under the Warrants are
referred to herein as the “Warrant
Shares” and, collectively with the Conversion Shares and the Warrants,
are referred to herein as the “Securities”.










2.           REPRESENTATIONS
AND WARRANTIES OF THE LENDER.





The Lender hereby represents and
warrants to the Company that, as of the Effective Date and the Conversion
Date:





2.1                      Authorization;
Enforceability.  The Lender is duly and validly organized,
validly existing and in good standing under the laws of the jurisdiction of its
organization with the requisite corporate power and authority to execute and
deliver this Agreement and to acquire the Securities as contemplated
hereby.  This Agreement constitutes the Lender’s valid and legally
binding obligation, enforceable in accordance with its terms, subject to (i)
applicable bankruptcy, insolvency, fraudulent transfer, reorganization,
moratorium or other similar laws of general application relating to or affecting
the enforcement of creditors’ rights generally and (ii) general principles of
equity.





2.2                      Accredited
Investor.  The Lender (i) is an “accredited investor” as that
term is defined in Rule 501 of Regulation D under the Securities Act of 1933, as
amended (the “Securities
Act”), and (ii) is acquiring the Securities solely for the Lender’s own
account and not with a present view to the public resale or distribution of all
or any part thereof, except pursuant to sales that are registered under, or
exempt from the registration requirements of, the Securities Act and/or sales
registered under the Securities Act.





2.3                      Information.  The
Company has, prior to the Effective Date, provided the Lender with information
regarding the business, operations and financial condition of the Companyand has, prior to the
Effective Date, granted to the Lender the opportunity to ask questions of and
receive answers from representatives of the Company, its officers, directors,
employees and agents concerning the Company in order for the Lender to make an
informed decision with respect to its investment in the Securities.





2.4                      Limitations on
Disposition.  The Lender acknowledges that the Securities 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 and will bear at issuance a restrictive
legend to such effect.




2.5                     
Reliance on
Exemptions.  The Lender understands that the Securities are
being issued to it in reliance upon specific exemptions from the registration
requirements of U.S. federal and state securities laws and that the Company is
relying upon the truth and accuracy of the representations and warranties of the
Lender set forth in this Section 2
in order to determine the availability of such exemptions and the eligibility of
the Lender to acquire the Securities.





2.6No
Conflicts.  The
Lender’s execution and performance of this Agreement do not conflict in any
material respect with any material agreement to which the Lender is a party or
is bound thereby, any material court order or judgment applicable to the Lender
or the constituent documents of the Lender.









3.           REPRESENTATIONS
AND WARRANTIES OF THE COMPANY.  The Company hereby represents
and warrants to the Lender and agrees with the Lender that, as of the Effective
Date and the Conversion Date:





3.1                      Organization, Good Standing
and Qualification.  The Company is duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation or organization and has all requisite power and authority to carry
on its business as now conducted.





3.2                      Authorization;
Consents.  The Company has the requisite corporate power and
authority to enter into and perform its obligations under this Agreement and the
Warrants. All corporate action on the part of the Company by its officers,
directors and shareholders necessary for the authorization, execution and
delivery of, and the performance by the Company of its obligations under, this
Agreement has been taken, and no further consent or authorization of the
Company, its Board of Directors, shareholders, any governmental authority or
organization, or any other person or entity is required.





3.3                      Enforceability.  This
Agreement has been duly executed and delivered by the Company and constitutes
the valid and legally binding obligation of the Company, enforceable against it
in accordance with its terms, subject to (i) applicable bankruptcy, insolvency,
fraudulent transfer, moratorium, reorganization or other similar laws of general
application relating to or affecting the enforcement of creditors’ rights
generally and (ii) general principles of equity.





3.4                     
Due Authorization;
Valid Issuance.  The Conversion Shares are duly authorized and,
when issued and delivered in accordance with the terms hereof, will be validly
issued, fully paid and nonassessable, free and clear of any claims, liens,
obligations or encumbrances of any nature whatsoever other than resale
restrictions as may arise under applicable United States federal and state
securities laws. The Warrants are duly authorized and, when issued and delivered
in accordance with the terms hereof, will be validly issued, free and clear of
any claims, liens, obligations or encumbrances of any nature whatsoever other
than resale restrictions as may arise under applicable United States federal and
state securities laws. The Warrant Shares, when issued and delivered in
accordance with the terms of the Warrants, will be validly issued, fully paid
and nonassessable, free and clear of any claims, liens, obligations or
encumbrances of any nature whatsoever other than resale restrictions as may
arise under applicable United States federal and state securities
laws.





3.5                     
No
Conflicts.  The
Company’s execution and performance of this Agreement do not conflict in any
material respect with any material agreement to which the Company or any of its
subsidiaries is a party or any of them is bound thereby, any material court
order or judgment applicable to the Company or the constituent documents of the
Company.













4.           LIMITATIONS
ON DISPOSITION.  The Lender shall not sell, transfer, assign or
dispose of any Securities unless:




(a)           there
is then in effect an effective registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with such registration statement; or





(b)           the
Lender has notified the Company in writing of any such sale, transfer,
assignment or disposition, and furnished the Company with an opinion of counsel,
reasonably satisfactory to the Company, that such sale, transfer, assignment or
disposition will not require registration of such Securities under the
Securities Act; provided,
however, that no such opinion of counsel will be required (A) if
such sale, transfer, assignment or disposition is made to an Affiliate (as such
term is defined under the Securities Act) of the Lender, (B) if such sale,
transfer, assignment or disposition is made pursuant to Rule 144 under the
Securities Act (“Rule 144”)
and the Lender provides the Company with evidence reasonably satisfactory to the
Company that the proposed transaction satisfies the requirements of Rule 144 or
any successor provision, (C) such Securities are eligible for resale under Rule
144 or any successor provision without regard to any limitation on the number of
such Securities that may be sold or (D) in connection with a bona fide pledge or
hypothecation of any Securities under a loan arrangement with a broker-dealer or
other financial institution.





5. MISCELLANEOUS.





5.1           Survival;
Severability.  The representations, warranties, covenants and
indemnities made by the parties herein shall survive the Conversion
notwithstanding any due diligence investigation made by or on behalf of the
party seeking to rely thereon. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that in such case
the parties shall negotiate in good faith to replace such provision with a new
provision which is not illegal, unenforceable or void, as long as such new
provision does not materially change the economic benefits of this Agreement to
the parties.





5.2           Successors and
Assigns.  The terms and conditions of this Agreement shall
inure to the benefit of and be binding upon the respective successors, heirs and
permitted assigns of the parties.  Nothing in this Agreement, express
or implied, is intended to confer upon any party other than the parties hereto
or their respective successors and permitted assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement. No party may assign its rights or
obligations under this Agreement.





5.3           Injunctive
Relief.  Each party acknowledges and agrees that a breach by
such party of such party’s obligations hereunder will cause irreparable harm to
the other parties and that the remedy or remedies at law for any such breach
will be inadequate and agrees, in the event of any such breach, in addition to
all other available remedies, such other parties shall be entitled to an
injunction restraining any breach and requiring immediate and specific
performance of such obligations without the necessity of showing economic loss
or the posting of any bond. Time is of the essence with respect to the
provisions of this Agreement.










5.4           Governing Law;
Jurisdiction.  This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed entirely within such state. Each party hereby
irrevocably submits to the exclusive jurisdiction of the state and federal
courts sitting in the City and County of New York for the adjudication of any
dispute hereunder or in connection herewith or with any transaction contemplated
hereby, 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 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 contained herein shall
be deemed to limit in any way any right to serve process in any manner permitted
by law.





5.5           Counterparts.  This
Agreement may be executed in any number of counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and the same
instrument.  This Agreement may be executed and delivered by facsimile
or email transmission.





5.6           Headings.  The
headings used in this Agreement are used for convenience only and are not to be
considered in construing or interpreting this Agreement.





5.7           Notices.  Any
notice, demand or request required or permitted to be given by the Company or
the Lender pursuant to the terms of this Agreement shall be in writing and shall
be deemed delivered (i) when delivered personally or by verifiable facsimile
transmission, unless such delivery is made on a day that is not a Business Day,
in which case such delivery will be deemed to be made on the next succeeding
Business Day and (ii) on the next Business Day after timely delivery to an
overnight courier, addressed as follows:





If to the
Company:





Ener1, Inc.


1540 Broadway,
Suite 25C


New York, NY 10036


Attention: Chief Executive Officer


Tel:            (212)
920-3500


Fax:           (212)
920-3510





with a copy to:





Mazzeo Song & Bradham
LLP


708 Third Avenue


New York, New York 10017


Attn:  David S. Song,
Esq.


Tel:     (212)
599-0700


Fax:     (212)
599-8400










If to the
Lender:







BZINFIN, S.A.


Pasea Estate, Road
Town


Tortola, British Virgin
Islands




c/o BUDIN &
PARTNERS


20, rue Senebier


1211 Geneva 12


Switzerland


Attn. Patrick Bittel


Telephone:
+41-22-818-08-08/


Fax :
+41-22-818-08-18





Either
party may change its address for notices in accordance with this Section
5.7.





5.8           Expenses.  Except
as provided in Section 5.9 hereof, the Company and the Lender shall each pay all
costs and expenses that it incurs in connection with the negotiation, execution,
delivery and performance of this Agreement.





5.9           Taxes.  All
payments made by the Company to the Lender under this Agreement (including,
without limitation, the issuance of the Securities in connection with the
Conversion) shall be made free and clear of, and without deduction or
withholding for or on account of, any U.S. federal income taxes (including,
without limitation, withholding taxes).  If any such taxes are
required to be withheld from any amounts payable to the Lender hereunder,
the amounts so payable to the Lender shall be increased to the extent
necessary to yield to the Lender (after payment of all such taxes)
interest or any such other amounts payable hereunder at the rates or in the
amounts specified in this Agreement.  The Company hereby agrees to
indemnify and hold the Lender harmless for any incremental taxes, interest or
penalties that may become payable by the Lender which may result from any
failure by the Company to pay any such tax when due to the appropriate taxing
authority.





5.10           Adjustments.  In
the event of any stock split, subdivision, dividend or distribution payable in
shares of Common Stock (or other securities or rights convertible into, or
entitling the holder thereof to receive directly or indirectly Common Stock),
combination or other similar recapitalization or event occurring after the
Effective Date and prior to the Conversion Date, each reference in this
Agreement or the Warrants to a number of shares of Common Stock or a price per
share shall be amended to appropriately account for such event.





5.11           Entire Agreement;
Amendments.  This Agreement (including the Exhibits referenced
herein and attached hereto) constitutes the entire agreement between or among
the parties with regard to the subject matter hereof and thereof, superseding
all prior agreements or understandings, whether written or oral, between or
among the parties.  Except as expressly provided herein, neither this
Agreement nor any term hereof may be amended except pursuant to a written
instrument executed by the Company and the Lender, and no provision hereof may
be waived other than by a written instrument signed by the party against whom
enforcement of any such waiver is sought.  Any waiver or consent shall
be effective only in the specific instance and for the specific purpose for
which given.


[Signature
Pages to Follow]












IN WITNESS WHEREOF, the undersigned
have executed this Conversion Agreement as of the date first-above
written.





ENER1, INC.








By:
__________________________


Name:


Title:








BZINFIN, S.A.








By:
__________________________


Name:


Title: