**COOPERATION      AGREEMENT**

|   | I. | Astris                Energi, Inc. (ASTRIS) is a Canadian based, publicly traded (ASRNF.OB)                company with corporate offices in Mississauga, Ontario, Canada and                an                affiliated technology center (Astris s.r.o.) located in the Czech                Republic, and |
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|   | II. | ASTRIS                is a world leader in the development and practice of alkaline fuel                cell                (AFC) technology with more than twenty years of progressive experience,                and |
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|   | III. | ASTRIS                is intent on moving towards full commercialization of AFC technology                with                a key next step of developing pilot and then full scale manufacturing                lines, and |
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|   | IV. | Electronic                Machining s.r.l. (ELMA) ia an Italian based privately held company                with                corporate offices and technical development facilities in and around                Roverto, Trento, Italy, and |
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|   | V. | ELMA                has an established record of achievement in research activities and                in the                advancement of manufacturing processes,                and |
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|   | VI. | ELMA                desires to expand its field of interest to become a hydrogen/fuel                cell                center of expertise in                Trento/Italy/Europe. |
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|   | 1. | Cooperation.                ASTRIS and ELMA (together, the Parties) agree to cooperate in the                area of                AFC technology. Such cooperation shall include, but not be limited                to: |
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|   | a. | ASTRIS                will licence the use of AFC technology by, and provide support for                the AFC                technology to, ELMA in the forms of documentation, technical services,                equipment and materials (the “**Confidential                Information**”)                as determined by ASTRIS, with an objective of quickly and continuously                bringing ELMA to an advanced state of AFC technical                readiness. |
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|   | b. | ELMA                will put in place facilities, equipment and personnel whereby a capability                is established for working on specified research and development                tasks                (tasks to be recommended by ASTRIS and mutually agreed to by the                Parties)                related to AFC technology broadly, AFC electrode and stack issues,                AFC                power plant issues, manufacturing and assembly processes for AFC                components and AFC testing equipment for manufactured AFC                products. |
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|   | c. | ASTRIS                and ELMA will work together/cooperatively to develop an AFC marketing                and                sales plan targeted to the Italian market; such a plan to include                educational materials and promotional materials. The intent of the                Parties                is to cooperatively produce demonstration products and install them                across                several appropriately selected market applications (stationary,                transportation, and portable). |
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|   | 2. | Coordination.                The Parties recognize the capabilities of Energie Rinnovabili Italia                srl(ERI), based in Genova Via Sat’Elia 45-52, Italy, a privately held                company focused on energy technology and whose Principal is Dr. Stefano                Palma (an experienced fuel cell practitioner). The Parties agree                to engage                ERI as the coordinator of activity between ASTRIS and                ELMA. |
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|   | 3. | Compensation/Costs.                The Parties agree that ELMA will be the beneficiary of ASTRIS’ licence of                AFC technology and that compensation for such licence is due to ASTRIS                as                the licensor and to ERI as the                coordinator. |
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|  | a. | ELMA                agrees to purchase from ASTRIS at market competitive prices mutually                agreed on between the Parties, goods (products and equipment) and                services                (consultancy based and task specified). ASTRIS agrees to provide                such                goods and services in a prompt and professional manner. See Annex                1 for                further details. |
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|  | b. | All                local ELMA program costs (to include but not limited to personnel                and                facilities) are the sole responsibility of                ELMA. |
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|  | c. | ASTRIS                agrees to compensate ERI (Dr. Stefano Palma) via an award of 50,000                Astris                shares in the form of options (strike price determined by the average                share price of ASTRIS shares in the thirty day period immediately                preceding the effective date of this agreement; vesting period one                year;                term being the shorter of five years or the term of this                agreement). |
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|  | d. | ELMA                agrees to compensate ERI (Dr. Stefano Palma) on terms and conditions                to be                mutually established between ELMA and                ER. |
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|   | 4. | Intellectual                Property.                The Parties agree that all intellectual property created or established                at                ELMA or at ASTRIS as a result of this Agreement shall be owned by                ASTRIS.                ASTRIS and ELMA will establish within three months of the effective                date                of this agreement a formal intellectual property program whereby                discovery                and registration by ASTRIS of intellectual property produced is                facilitated. Such program shall, among other things, describe the                process                by which ELMA shall be compensated via royalties and/or otherwise                recognized for intellectual property that it creates under this Agreement.                ELMA agrees at all times, before and after the termination of this                Agreement, to assist, and shall cause its officers, directors, employees,                representatives, agents and advisors at all times to assist, ASTRIS                or its                designate, at ASTRIS’ expense, to secure ASTRIS’ rights in such                intellectual property rights relating thereto in any and all countries.                The obligations of ELMA out in this section shall survive termination                of                this Agreement indefinitely. |
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|  | 5. | Terms/Conditions.                    The Parties agree as follows regarding the term of this Agreement                    and                    conditions associated with this                    Agreement: |
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|   | a. | Subject                to prior termination of this Agreement pursuant to paragraph f below,                the                term of this Agreement is three years commencing on its effective                date. |
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|   | b. | The                term of this Agreement may be extended for an additional term or                terms                under arrangements and conditions mutually agreed to by the Parties                in                writing. |
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|   | c. | That                so long as this Agreement is effective, ASTRIS’ AFC based technical                development and market development efforts in Italy shall be exclusively                through ER and with ELMA. |
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|   | d. | That                so long as this Agreement is effective, ELMA’s AFC based technical                development and market development relationship will be exclusively                through ERI and with ASTRIS. |
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|   | e. | That                the Parties will negotiate in good faith to expand the role of ELMA                as a                key ASTRIS representative (technically and in a marketing sense)                in                Europe. |
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|   | f. | Provisions                for termination of this Agreement include the                following: |
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|   | I. | Either                party shall have the right to terminate the Agreement upon delivery                or                prior written notice of not less than 60                days. |
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|   | II. | ASTRIS                may terminate this Agreement immediately upon delivery of written                notice                where ELMA is in breach of its obligations under this Agreement and                has                not remedied such default within 15 days of delivery of written notice                by                ASTRIS or ELMA specifying such                breach. |
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|  | 6. | Confidentiality                    and Restricted Use of Confidential Information.                    ELMA shall treat all Confidential Information furnished, or to                    be                    furnished, to ELMA in any medium whatsoever in accordance with                    the                    provisions of this Agreement, and to take, or abstain from taking,                    the                    other actions as set forth in this paragraph. The Confidential                    Information                    shall be used by ELMA solely for the purpose of performing ELMA’s                    obligations under this Agreement and absolutely for no other                    purpose                    whatsoever, and will be kept strictly                    confidential                    by                    ELMA and its officers, directors, employees, representatives,                    agents and                    advisors; provided                    that                    (i) any of such Confidential Information may be disclosed to                    ELMA’s                    officers, directors, employees, representatives, agents and advisors                    who                    need to know such Confidential Information for the purpose of                    performing                    ELMA’s obligations under this Agreement (ii) such Confidential Information                    may be otherwise disclosed to the extent that ASTRIS has expressly                    given                    its prior written consent and (iii) such Confidential Information                    may be                    disclosed to the extent required by law. The obligations set                    out in this                    section shall survive the termination of this Agreement indefinitely. |
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|  | 7. | Public                Announcements. The                parties hereto agree that neither they nor any of their respective                subsidiaries, officers, directors, employees or agents shall disclose                to                any third party or publicly announce this Agreement until such time                as the                parties hereto agree in writing to make such disclosure or announcement                or                unless otherwise required by law or regulation. Any public announcement                concerning the Agreement shall be approved in advance by appropriate                officers of parties hereto. |
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|   | 8. | Survival.                If                this Agreement is terminated in accordance with Section 5 above,                it shall                become void and of no further force and effect, except for the provisions                of Sections 4, 6, 7, 8 and 9 which shall survive such termination                indefinitely; provided that the foregoing shall not relieve any party                from                liability for damages actually incurred as a result of any breach                of                Sections 4, 6, 7, 8 or 9 of this Agreement. |
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|   | 9. | General                Provisions |
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|  | (1) | No                party hereto may transfer or assign its rights or obligations hereunder                without prior written consent of the other party                hereto. |
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|  | (2) | This                Agreement may be executed and delivered in counterparts by facsimile.                An                executed counterpart of this Agreement is transmitted by facsimile                bearing                the signatures of an authorized signing officer shall be as enforceable                as                if an originally executed copy of same had been signed and                delivered. |
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| FOR                ASTRIS:                      |   | FOR                ELMA:                            |
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|                                            |   |                                                |
| /s/                Jiri Nor                     |   | /s/                Massimo Luminari                 |
| Jiri                Nor, Chairman and President |   | Massimo                Luminari, Direttore Generale |
| 15                October, 2004                 |   | 11                October, 2004                     |

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