Exhibit 10.2




Exhibit E to the 




Securities Purchase
Agreement 




SECURITY AGREEMENT 



        THIS
SECURITY AGREEMENT (this “Agreement”) is made and entered into as of
January __, 2004 by ENER1 BATTERY COMPANY, a Florida corporation
(“Guarantor”), in favor of Satellite Asset Management, L.P. (the
“Agent”) and each of the lenders whose names appear on the signature
pages hereof. Such lenders are each referred to herein as a “Secured
Party” and, collectively, as the “Secured Parties”. This
Agreement is being executed and delivered by the Guarantor and the Secured Parties in
connection with that certain Securities Purchase Agreement (the “Purchase
Agreement”) by and between Ener1 Inc., a Florida corporation and parent company
of the Guarantor (the “Borrower”), and each Secured Party. Capitalized
terms used herein and not otherwise defined herein shall have the respective meanings set
forth in the Purchase Agreement. 




W I T N E S S E T H: 



        WHEREAS,
pursuant to the terms of the Purchase Agreement, the Secured Parties have agreed to
purchase from the Borrower, and the Borrower has agreed to sell to the Secured Parties, 5%
Senior Secured Convertible Debentures (the “Debentures”); 



        WHEREAS,
the Guarantor shall derive substantial direct and/or indirect benefits from the
transactions contemplated by the Purchase Agreement and the Debentures; 



        WHEREAS,
it is a condition to the obligation of the Secured Parties to purchase the Debentures that
the Guarantor guaranty the full and timely satisfaction of all of the Obligations (as
hereinafter defined) and, in furtherance thereof, the Guarantor has entered into that
certain Subsidiary Guaranty, dated as of the date hereof (the “Subsidiary
Guaranty”), in favor of the Secured Parties; 



        WHEREAS,
the Obligations are secured by, among other things, that certain Mortgage, Security
Agreement and Assignment of Leases and Rents, dated as of the date hereof (the
“Mortgage”), given by the Guarantor in favor of the Secured Parties; 



        WHEREAS,
it is the intent of the parties hereto that the Obligations be further secured by the
Collateral (as hereinafter defined) in accordance with the terms of this Agreement; and 



        WHEREAS,
pursuant to that certain Intercreditor Agreement, dated as of the date hereof (the
“Intercreditor Agreement”), by and among the Agent and the Secured
Parties, the Secured Parties have designated the Agent as their collateral agent. 



        NOW,
THEREFORE, in consideration of the foregoing, the covenants set forth herein, and other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Agent, Secured Parties and the Guarantor hereby agree as follows. 




ARTICLE I 




COLLATERAL; OBLIGATION
SECURED 



        Section
1.1 Grant and Description. As security for the Borrower’s and Guarantor’s
obligations under this Agreement, the Purchase Agreement, the Debentures, the Mortgage and
the Subsidiary Guaranty (collectively, the “Transaction Documents”), the
Guarantor hereby grants to each Secured Party a continuing first priority security
interest in all of the Guarantor’s right, title and interest in, to and under the
“Collateral,” which shall mean: (A) the Special Proceeds Accounts (as
hereinafter defined), (B) the assets and properties described on Exhibit A hereto,
and (C) the assets and properties described on Exhibit B hereto (the
“Loaned Equipment”). 



        Section
1.2 Financing Statements; Further Assurances. The Guarantor hereby authorizes the
Agent to file, transmit or communicate, as applicable, UCC financing statements and
amendments in order to perfect each Secured Party’s first priority security interest
in the Collateral without the Guarantor’s signature to the extent permitted by
applicable law, provided that the Agent shall concurrently copy the Guarantor on all such
filings. In addition to the foregoing, at any time upon the written request of the Agent,
the Guarantor shall promptly (i) execute (or cause to be executed) and deliver to the
Agent, any and all agreements, financing statements, certificates, instruments and other
documents (the “Additional Documents”) upon which the Guarantor’s
signature may be required and that the Agent may reasonably request in form and substance
satisfactory to the Agent, and/or (ii) perform any acts; in each case, to perfect and
continue perfected or better perfect each Secured Party’s security interest in the
Collateral (whether now owned or hereafter arising or acquired), and in order to fully
consummate all of the transactions contemplated hereby and under the other Transaction
Documents that the Agent reasonably believes to be necessary as a result of any amendment
to the Uniform Commercial Code in effect from time to time in the State of Florida (the
“UCC”), provided, that any Additional Documents that require the
Guarantor to assume any new obligations shall be subject to the review and approval of the
Guarantor, such approval not to be unreasonably withheld or delayed. To the maximum extent
permitted by applicable law, the Guarantor hereby authorizes the Agent to execute any such
Additional Documents in the Guarantor’s name and authorize the Agent to file such
executed Additional Documents in any appropriate filing office, provided, that any
Additional Documents that require the Guarantor to assume any new obligations shall be
subject to the review and approval of the Guarantor, such approval not to be unreasonably
withheld or delayed. The Guarantor also hereby ratifies its authorization for the Agent to
have filed in any jurisdiction the financing statements or amendments thereto filed prior
to the date hereof (if any), copies of which have previously been provided to the
Guarantor. The Guarantor shall not terminate, amend or file any correction statement with
respect to any UCC financing statement filed pursuant to this Agreement without obtaining
the prior written consent of Secured Parties holding at least a majority of the
Registrable Securities into which all of the Debentures then outstanding are convertible
(without regard to any limitation on such conversion). The Guarantor appoints the Agent as
the Guarantor’s attorney-in-fact, with a power of attorney to execute on behalf of
the Guarantor such Additional Documents and other similar instruments as the Agent may
from time to time deem necessary or desirable to protect or perfect the security interest
in the Collateral, provided, that any Additional Documents that require the
Guarantor to assume any new obligations shall be subject to the review and approval of the
Guarantor, such approval not to be unreasonably withheld or delayed. Such power of
attorney is coupled with an interest and shall be irrevocable. 



        Section
1.3 Obligations Secured. The Collateral and the power of collection pertaining
thereto shall secure any and all indebtedness, liabilities and obligations of the
Borrower or the Guarantor to the Secured Parties evidenced by and/or arising pursuant to
this Agreement, the Purchase Agreement, the Subsidiary Guaranty, the Mortgage or the
Debentures, now existing or hereafter arising, whether direct, indirect, related,
unrelated, fixed, contingent, liquidated, unliquidated, joint, several or joint and
several, including, without limitation, the obligations of the Company to repay principal
of the Debentures, to pay interest on the Debentures (including, without limitation,
interest accruing after any bankruptcy, insolvency, reorganization or other similar
filing) and to pay all fees, indemnities, costs and expenses (including attorneys’
fees) provided for in this Agreement, the Purchase Agreement, the Subsidiary Guaranty, the
Mortgage or the Debentures (collectively the “Obligations”). 




ARTICLE II 




COVENANTS 



        Section
2.1 Duties of the Guarantor Regarding Collateral. At all times after the date
hereof, the Guarantor agrees that it shall: 



     (a)    
          Preserve the Collateral in good condition and order (ordinary wear and tear
          excepted) and not permit it to be abused or misused; provided, however, that
          Agent and Secured Parties shall be obligated to exercise reasonable care with
          respect to any Collateral that comes into any of their possession; 



     (b)    
          Not allow any of the Collateral to be affixed to real estate, except for any
          property deemed to be fixtures; 



     (c)    
          Maintain good and complete title to the Collateral subject to Permitted Liens; 



     (d)    
          Keep the Collateral free and clear at all times of all Liens other than
          Permitted Liens; 



     (e)    
          Take or cause to be taken such acts and actions as shall be necessary or
          appropriate to assure that the Secured Parties’ security interest in the
          Collateral shall not become subordinate or junior to the security interests,
          liens or claims of any other Person; 



     (f)    
          Refrain from selling, assigning or otherwise disposing of any of the Collateral
          or moving or removing any of the Collateral (except to the extent permitted
          under and in accordance with Section 2.4 of this Agreement), without
          obtaining the prior written consent of the Secured Parties holding a majority of
          the Registrable Securities into which all of the Debentures then outstanding are
          convertible (without regard to any limitation on such conversion), or until all
          of the Obligations have been fully performed and paid in full; provided,
          however, that concurrently with any disposition permitted by this Section
          2.1(f), (x) the security interest granted hereby shall automatically be
          released from the Collateral so disposed, and (y) the security interest shall
          continue in the Proceeds (as defined in the UCC) of such Collateral or any
          property purchased with such Proceeds; and provided further, that, Agent and
          Secured Parties shall execute and deliver, at the Guarantor’s sole cost and
          expense, any releases or other documents reasonably requested by the Guarantor,
          that is in form and substance reasonably acceptable to the executing party,
          confirming the release of the security interest in that portion of the
          Collateral that is the subject of a disposition permitted by this Section
          2.1(f); 



     (g)    
          Promptly provide to Agent and each Secured Party such financial statements,
          reports, lists and schedules related to the Collateral and any other information
          relating to the Collateral as Agent or such Secured Party may reasonably request
          from time to time; 



     (h)    
          Upon reasonable notice, permit Agent or any Secured Party to inspect all books
          and records of the Guarantor relating to the Collateral at such times and as
          often as Agent or any such Secured Party may reasonably request; and 



     (i)    
          Promptly notify Agent and each Secured Party if any Event of Default (as
          hereinafter defined) occurs. 



        Section
2.2 Other Encumbrances. At all times after the date hereof, the Guarantor shall:
(i) defend its title to, and the Secured Parties’ interest in, the Collateral against
all claims, (ii) take any action necessary to remove any encumbrances on the Collateral
other than Permitted Liens, and (iii) defend the right, title and interest of the Secured
Parties in and to any of the Guarantor’s rights in the Collateral. 



        Section
2.3 Change Name or Location. The Guarantor shall not, except upon 30 days’
prior written notice to Agent and each Secured Party, change its company name or conduct
its business under any name other than that set forth herein or change its jurisdiction of
organization or incorporation, chief executive office, place of business from the current
location. 



        Section
2.4. Special Proceeds Account. Notwithstanding anything contained herein to the
contrary, the Guarantor may, pursuant to an arms’ length transaction and subject to
the restrictions in the Purchase Agreement (including, without limitation, restrictions
relating to transactions with Affiliates), sell any of the Collateral as long as the
Guarantor, concurrently with such sale, (i) uses all or any of the proceeds of such sale
to purchase, pursuant to an arms’ length transaction, other property in which the
Secured Parties have a perfected first priority security interest immediately upon the
consummation of such purchase, and (ii) deposits all of the remaining proceeds of such
sale into one or more Special Proceeds Accounts (as hereinafter defined). In addition to
the foregoing, the Guarantor shall deposit all Special Net Proceeds (as defined in the
Mortgage) that are not used to repay the Obligations into one or more Special Proceeds
Account immediately upon receipt. As used herein, the term “Special Proceeds
Account” means an account (i) that is established at a financial institution that
is reasonably acceptable to the Agent and each Secured Party, and (ii) in which the
Secured Parties have a first priority perfected security interest. In furtherance of the
foregoing, the Guarantor shall not be permitted to sell, assign or otherwise dispose of
any Collateral pursuant to this Section 2.4 unless and until a Special Proceeds Account
that is reasonably acceptable to the Agent and each Secured Party has been established.
From and after the date that is two (2) years after the Closing Date, each Secured Party
shall have the right, but not the obligation, in such Secured Party’s sole
discretion, to apply its Proportionate Loan Share (as defined in the Mortgage) of any
funds contained in a Special Proceeds Account to satisfy all or any of the Obligations
then owing to such Secured Party in any order that such Secured Party deems appropriate. 



        Section
2.5. Loaned Equipment. Guarantor shall deliver, or cause to be delivered, all of
the Loaned Equipment to the premises described on Exhibit A-1 hereto as promptly as
practicable after the date hereof (but in no event later than December 31, 2004).
Guarantor shall, at its sole cost and expense, take all actions reasonably requested by
any Secured Party in order to ensure that such Secured Party has a perfected first
priority security interest in all of the Loaned Equipment, including, without limitation,
entering into a security agreement similar to this Agreement with respect to the Loaned
Equipment and taking such other actions described in Section 1.2 of this Agreement
with respect to the Loaned Equipment. 




ARTICLE III 




EVENTS OF DEFAULT 



        Section
3.1 Events of Default Defined. The occurrence of any of the following events shall
constitute an event of default under this Agreement (each, an “Event of
Default”): 



         (a)       
          The failure of the Guarantor to perform or comply in a material respect with any
          act, duty or obligation required to be performed under this Agreement if such
          failure is not remedied within ten (10) Business Days after the Guarantor
          receives written notice of such failure from any Secured Party, provided,
          that if during such ten Business Day period, the Guarantor is diligently and in
          good faith taking steps to cure such breach, such period will be extended from
          ten Business Days to fifteen (15) Business Days; 



         (b)       
          If any of the representations or warranties of the Guarantor set forth in this
          Agreement shall prove to have been incorrect in any material respect when made,
          or becomes incorrect in any material respect and is not cured within ten (10)
          Business Days after the Guarantor receives written notice from any Secured
          Party, provided, that if during such ten Business Day period, the
          Guarantor is diligently and in good faith taking steps to cure such breach, such
          period will be extended from ten Business Days to fifteen (15) Business Days; 



         (c)       
          If any material portion of the Collateral shall be damaged, destroyed or
          otherwise lost and such damage, destruction or loss is not covered by insurance;
          or 



         (d)       
          If an “Event of Default” as defined in the Debentures, the Purchase
          Agreement, the Subsidiary Guaranty or the Mortgage shall have occurred. 



        Section
3.2 Rights and Remedies Upon Default. If an Event of Default shall have occurred
hereunder, any Secured Party may, at its option, without notice or demand, declare the
Obligations to be immediately due and payable. As to any Collateral, the Agent shall, in
its capacity as collateral agent for the Secured Parties, have the rights and remedies of
any secured creditor under the UCC, such rights to be exercised in such order or manner as
the Secured Parties may determine against the Guarantor. If for any reason the Agent
should be required by law or otherwise to give notice to the Guarantor of the sale of any
Collateral, the Guarantor agrees that any written notice sent by overnight delivery
service not less than ten (10) calendar days before the sale or mailed postage prepaid,
return receipt requested, to the Guarantor’s address listed below not less than
fifteen (15) calendar days before the sale shall be deemed reasonable and adequate. 



        Section
3.3 Allocation of Proceeds. Any funds received by the Agent or a Secured Party
pursuant to this Agreement shall be allocated among and paid to each Secured Party in
accordance with each Secured Party’s Proportionate Loan Share (as defined in the
Mortgage). To the extent that a Secured Party receives greater than its Proportionate Loan
Share, such Secured Party shall promptly remit such overpayment to each other Secured
Party as required to comply with the preceding sentence. Each Secured Party may determine
the order in which to apply funds received by it regardless of the order in which any
other Secured Party applies funds (e.g., a Secured Party may determine to apply funds
first to expenses, second to interest and third to principal and another Secured Party may
determine to apply funds first to interest, second to expenses and third to principal). 




ARTICLE IV 




ADDITIONAL REMEDIES 



        Upon
the occurrence of an Event of Default, the Guarantor shall: 



         (a)       
          Endorse any and all documents evidencing any Collateral to the Agent, or as
          otherwise instructed by the Agent, and notify any payor that said documents have
          been so endorsed and that all sums due and owing pursuant to them should be paid
          directly to the Agent, or as otherwise instructed by the Agent; 



         (b)       
          Turn over to the Agent, or as otherwise instructed by the Agent, copies of all
          documents evidencing any right to collection of any sums due the Guarantor
          arising from or in connection with any of the Collateral; 



         (c)       
          Take any action reasonably required by the Agent with reference to the Federal
          Assignment of Claims Act; and 



         (d)       
          Keep all of its books, records, documents and instruments relating to the
          Collateral in such manner as the Agent may require. 




ARTICLE V 




REPRESENTATIONS AND
WARRANTIES 



        The
Guarantor represents and warrants to the Agent and the Secured Parties as follows: 



        Section
5.1 Title to Collateral. The Guarantor is the owner of and has good and marketable
title to, or has a valid and subsisting leasehold interest in, all of the Collateral. All
of the Additional Collateral (as defined in Exhibit A hereto) is located at the
premises described on Exhibit A-1 hereto. 



        Section
5.2 No Other Encumbrances. The Guarantor has not granted, nor will it grant, a
security interest in the Collateral to any other individual or entity, and such Collateral
is free and clear of any mortgage, pledge, lease, trust, bailment, lien, security
interest, encumbrance, charge or other arrangement (other than the Permitted Liens). 



        Section
5.3 Authority; Enforceability. The Guarantor has the authority and capacity to
perform its obligations hereunder, and this Agreement, when executed and delivered, will
be the valid and binding obligation of the Guarantor enforceable against the Guarantor in
accordance with its terms, except as the enforceability thereof may be limited by
bankruptcy, insolvency or other similar laws of general application affecting the
enforcement of creditors’ rights or general equitable principals, whether
applied in law or equity. 



        Section
5.4 Company Name; Place of Business; Location of Collateral. The Guarantor’s
true and correct company name, all trade name(s) under which it conducts its business, its
jurisdiction of organization or incorporation and each of its chief executive office, its
place(s) of business and the locations of the Collateral or records relating to the
Collateral are set forth in Exhibit C hereto. 



        Section
5.5 Perfection; First Priority Security Interest. Upon the filing of UCC financing
statements with the Secured Transaction Registry (and such other jurisdictions where the
Guarantor may, in the future, become organized or incorporated from time to time), the
security interest in the Collateral granted hereunder shall constitute at all times a
valid first priority security interest (other than with respect to Permitted Liens and
except where the Secured Parties have failed to file necessary continuation statements),
perfected with respect to all Collateral for which the filing of the UCC financing
statements is a valid method of perfection, vested in the Secured Parties, in and upon the
Collateral, free and clear of any liens (other than the Permitted Liens). 




ARTICLE VI 




MISCELLANEOUS 



        Section
6.1 Survival; Severability. The representations, warranties, covenants and
indemnities made by the Guarantor herein shall survive the execution and delivery of this
Agreement 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. 



        Section
6.2 Successors and Assigns. The terms and conditions of this Agreement shall inure
to the benefit of and be binding upon the successors and permitted assigns of the Agent
and the Secured Parties. Each Secured Party may assign its rights hereunder in connection
with any private sale or transfer of the Debentures in accordance with the terms of the
Purchase Agreement, in which case the term “Secured Party” shall be
deemed to refer to such transferee as though such transferee was an original signatory
hereto. The Agent may resign or be replaced in accordance with the terms of the
Intercreditor Agreement, in which case the term “Agent” shall be deemed
to refer to the successor agent as though such agent was an original signatory hereto. The
Guarantor may not assign its rights or obligations under this Agreement. 



        Section
6.3 Governing Law; Jurisdiction. This Agreement shall be governed by and construed
under the laws of the State of Florida applicable to contracts made and to be performed
entirely within the State of Florida. The Guarantor hereby irrevocably submits to the
non-exclusive jurisdiction of the state and federal courts sitting in the City of Miami,
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. The Guarantor 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 the Guarantor 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. 



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



        Section
6.5 Notices. Any notice, demand or request required or permitted to be given by the
Guarantor, the Agent or a Secured Party 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,
(ii) on the next Business Day after timely delivery to an overnight courier and (iii) on
the Business Day actually received if deposited in the U.S. mail (certified or registered
mail, return receipt requested, postage prepaid), addressed as follows: 
















	 	If to the Guarantor:



Ener1 Battery Company

550 Cypress Creek Road

Suite 120

Fort Lauderdale, Florida 33309

Attn:    Kevin P. Fitzgerald

Tel:     954-202-4442

Fax:     954-202-2884



with a copy to:



Gibson, Dunn & Crutcher LLP

1050 Connecticut Avenue N.W.

Washington, DC 20036

Attn:    Stephen I. Glover

Tel:     202-955-8500

Fax:     202-467-0539



If to the Agent:



Satellite Asset Management, L.P.

623 Fifth Avenue, 20th Floor

New York, NY 10022

Attn:    Charles Gassenheimer

Tel:     212-209-2087

Fax:     212- 209-2020



with a copy to:



Duval & Stachenfeld LLP

300 East 42nd Street

New York, NY 10019

Attn:    Robert L. Mazzeo

Tel:     212-883-1700

Fax:     212-883-8883







and if to a Secured Party, to the
address for such Secured Party as shall appear on the signature page to the Purchase
Agreement executed by such Secured Party, or as shall be designated by such Secured Party
in writing to the Guarantor in accordance with this Section 6.5. 



        Section
6.6 Entire Agreement; Amendments. This Agreement and the other Transaction
Documents constitute the entire agreement between 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 Guarantor, the Agent and the Secured Parties holding at least
two-thirds (2/3) of the Registrable Securities into which all of the Debentures then
outstanding are convertible (without regard to any limitation on such conversion), 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. 



        Section
6.7 No Waiver. Neither the Agent nor any Secured Party shall by any act (except as
provided in Section 6.6 above), any failure to act or any delay in acting be deemed
to have (i) waived any right or remedy under this Agreement, any other Transaction
Document or any document, agreement or instrument made, delivered or given in connection
with this Agreement or the other Transaction Documents, or (ii) acquiesced in any Event of
Default or in any breach of any of the terms and conditions of this Agreement, any other
Transaction Document or any document, agreement or instrument made, delivered or given in
connection with this Agreement or the other Transaction Documents. No failure to exercise,
nor any delay in exercising, any right, power or privilege of the Agent or any Secured
Party under this Agreement, any other Transaction Document or any document, agreement or
instrument made, delivered or given in connection with this Agreement or the other
Transaction Documents shall operate as a waiver of any such right, power or privilege. No
single or partial exercise of any right, power or privilege under this Agreement, any
other Transaction Document or any document, agreement or instrument made, delivered or
given in connection with this Agreement or the other Transaction Documents shall preclude
any other or further exercise of any other right, power or privilege. A waiver by the
Agent or a Secured Party of any right or remedy under this Agreement, any other
Transaction Document or any other document or instrument made, delivered or given in
connection with this Agreement or the other Transaction Documents on any one occasion
shall not be construed as a bar to any right or remedy that the Agent or such Secured
Party would otherwise have on any future occasion. 



        Section
6.8 Cumulative Remedies. The rights and remedies provided in this Agreement are
cumulative, may be exercised singly or concurrently, and are not exclusive of any other
rights or remedies provided by law. 



        Section
6.9 Waivers of Jury Trial. The Guarantor hereby irrevocably and unconditionally
waives trial by jury in any legal action or proceeding relating to this Agreement or any
other Transaction Document to which it is a party and for any counterclaim therein. 



        Section
6.10 Compliance with the Purchase Agreement. The Guarantor covenants and agrees
that on and after the date hereof and until all Obligations have been paid and performed
in full, the Guarantor shall take, or will refrain from taking, all actions that are
necessary to be taken or not taken so that no violation of any covenant or agreement of
the Borrower contained in the Purchase Agreement is caused by the actions of the Guarantor
or any of its affiliates. The Guarantor hereby agrees to pay all reasonable out-of-pocket
costs and expenses of the Agent and each Secured Party in connection with the enforcement
of this Agreement and any amendment, waiver or consent relating hereto (including, without
limitation, reasonable legal fees and disbursements). 



        Section
6.11 Waivers. The Guarantor acknowledges that the Obligations arose out of a
commercial transaction and hereby knowingly and intelligently waives any right to require
the Agent or any Secured Party to (i) proceed against any person or entity,
(ii) proceed against any other collateral under any other agreement, (iii) pursue any
other remedy available to the Agent or such Secured Party, or (iv) make presentment,
demand, dishonor, notice of dishonor, acceleration and/or notice of non-payment. 



        The
Guarantor further waives any defense that it may have to the exercise by the Agent or any
Secured Party of its rights under this Agreement, other than the defense that the
Obligations have fully been paid and performed. 



        Section
6.12 Attorney-in-Fact. The Guarantor appoints the Agent its true attorney-in-fact
to perform any of the following powers, which are irrevocable until termination of this
Agreement and may be exercised, from time to time, by the Agent’s officers and
employees or any of them if an Event of Default occurs: (i) to perform any obligation of
the Guarantor hereunder in the Guarantor’s name or otherwise; (ii) to collect by
legal proceedings or otherwise all dividends, interest, principal or other sums now or
hereafter payable upon or on account of the Collateral, to accept other property in
exchange for the Collateral, and any money or property received in exchange for the
Collateral may be applied to the Obligations or held by the Agent under this Agreement;
(iii) to make any compromise or settlement the Agent deems desirable or proper in respect
of the Collateral; and (iv) to insure, process and preserve the Collateral. The foregoing
power of attorney shall take effect only upon an Event of Default. 



        Section
6.13 Cross Default. The Guarantor agrees and acknowledges that a default under the
terms of this Agreement shall constitute a default under the other Transaction Documents,
and a default under any of the other Transaction Documents shall constitute a default
under this Agreement. 



        Section
6.14 Fees and Expenses. On demand by the Agent or any Secured Party, without
limiting any of the terms of any other Transaction Document, the Guarantor is obligated to
pay all reasonable fees, and out-of-pocket costs, and expenses (including, without
limitation, reasonable attorneys’ fees and legal expenses) incurred by the Agent or
such Secured Party in connection with (i) filing or recording any documents (including all
taxes in connection therewith) in public offices; and (ii) paying or discharging any
taxes, counsel fees, maintenance fees, encumbrances, or other amounts in connection with
protecting, maintaining, or preserving the Collateral or defending or prosecuting any
actions or proceedings arising out of or related to the Collateral. 



        Section
6.15 Release. No transfer or renewal, extension, assignment or termination of this
Agreement or of any instrument or document executed and delivered by the Guarantor or any
other obligor to a Secured Party, nor additional advances made by any Secured Party to the
Guarantor, nor the taking of further security, nor the retaking or re-delivery of the
Collateral to the Guarantor by the Agent or any Secured Party nor any other act of the
Agent or any Secured Party shall release the Guarantor from any Obligation, except a
release or discharge executed in writing by each Secured Party with respect to such
Obligation or upon full payment and satisfaction of all Obligations and termination of the
Debentures. At such time the Obligations have been satisfied in full, the Agent and each
Secured Party shall execute and deliver to the Guarantor all assignments and other
instruments as may be reasonably necessary or proper to terminate such Secured
Party’s security interest in the Collateral, subject to any disposition of the
Collateral that may have been made by the Agent or such Secured Party pursuant to
this Agreement. For the purpose of this Agreement, the Obligations shall be deemed to
continue if the Guarantor or the Borrower enters into any bankruptcy or similar proceeding
at a time when any amount paid to the Agent or a Secured Party could be ordered to
be repaid as a preference or pursuant to a similar theory, and shall continue until it is
finally determined that no such repayment can be ordered. 



        Section
6.16 Marshalling and Other Matters. The Guarantor hereby waives, to the extent
permitted by law, the benefit of all appraisement, valuation, stay, extension,
reinstatement and redemption laws now or hereafter in force and all rights of marshalling
in the event of any sale hereunder of the Collateral or any part thereof or any interest
therein. Further, the Guarantor hereby expressly waives any and all rights of redemption
from sale under any order or decree of foreclosure of this Agreement on behalf of the
Guarantor, and on behalf of each and every person acquiring any interest in or title to
the Collateral subsequent to the date of this Agreement and on behalf of all persons to
the extent permitted by applicable law. 




[Signatures Page to
Follow] 












        IN
WITNESS WHEREOF, the Guarantor, the Agent and each Secured Party have duly executed this
Agreement as of the date first written above. 
















	 	GUARANTOR:



ENER1 BATTERY COMPANY, a Florida corporation





By:      _________________________

         Name:

         Title:





AGENT:



SATELLITE ASSET MANAGEMENT, L.P.



By:      _____________________, its general partner





By:      _____________________

         Name:

         Title:





SECURED PARTY:





_______________________________





By:      _________________________

         Name:

         Title:















Exhibit A 



        All
equipment and fixtures existing as of the date hereof associated with the Guarantor’s
operations and located at 1751 West Cypress Creek Road, Ft. Lauderdale, Florida 33309 (as
more specifically described on Exhibit A-1 hereto), including, without limitation,
(i) all of the property listed and described below under the heading “Additional
Collateral”), and (ii) all of the proceeds resulting therefrom. 



        As
used in this Exhibit A, the terms “equipment”, “fixtures” and
“proceeds” shall have the meanings given such terms under the Florida Uniform
Commercial Code, Chapter 671, et seq., Florida Statutes (2002). 




Additional Collateral 



Model SDS299A soft cell degassing and
sealing machine, s/n 299M-B80A 



Model SPF446Q soft pak cell packaging and
assembly machine, s/n 446G-BW6A 



Model ASB469P lithium anode assembly
& insertion into separator bag, s/n 469G-BW3A 



Model CFV472Q cell filling under
vacuum machine, s/n 472G-BW5A 



Model TFW486Q tab welding machine,
s/n 486Q-BW4A 



Model ENC4996B electrode notching and
cutting machine, s/n 499M-BW2A 



Model SPF300P soft cell packaging
& filling machine, s/n 300G-BC2A 



Model EBE292A electrode banking
machine, s/n 292M-A69A 



Model SPF446P soft pak cell packaging
machine, s/n 446G-BC3A 



Model TFT470P tab current collector
folding and trimming unit, s/n 470G-BR0A 



Model TFF471P tab final folding unit,
s/n 471G-BR1A 



Model TTW294P tab to current
collector welding unit, s/n 294G-A73A 



Model PRT473P Pallet return transport
system and auxiliary tools, s/n 473G-BS0A 



Model SDS299A soft pak cell degassing and
sealing machine, s/n 299M-B24A 



Model ASB469P lithium anode assembly
and inserting into separator bag, s/n 469M-BS5A 



Model CFV472P cell filling under
vacuum machine, s/n 472G-BR2A 



Automatic pilot line for cathode materials
with dual loading chambers & hoppers, unserialized 



     (2)    
          Multitherm N7-N17 high frequency induction furnace, in storage, not in use, pend
          install mid 2004 (est), serial nos. 163162 and 163163 



Automatic pilot line for cathode
materials with dual loading chambers & hoppers, unserialized pending final install,
est ready for use 1/04 



Glove Boxes, line #1, quantity –
14, including (2) Mbraun MB300G & (1) MB VOH-200 unserialized 



Glove Box System for lithium
production unserialized 



Glove Boxes, line #2, quantity –
14, including (2) Mbraun MB300G & (1) MB VOH-200 unserialized 



Glove Boxes, line #3, quantity – 17,
including (2) Mbraun MB300G & (1) MB VOH-200 unserialized 



Compressed Argon Supply Units,
quantity (3), s/n 210814, 210930 & 210931 



Mbraun solvent removal &
protection of gas cleaning units, stainless steel, unserialized 




Assembly Line #3
including: 



Model ASB469P lithium anode assembly
and inserting into separator bag, s/n 469G-B77A; Model SPF446Q soft pak cell packaging
& assembly machine s/n 446G-B75A; Model ENC499 electrode notching & cutting
machine, s/n 499M-B74A; Model CVF472Q cell filling under vacuum machine, s/n 472G-B78A;
Model SD299A soft cell degassing & sealing machine, s/n 299M-B76A; Model TFW486 tab
welding machine, s/n 486G-B79A 



Compressed Argon Supply Units
including (6) Sera MV4751 tandem metal membrane argon compressors with pressure vessels,
s/n 1390, 1392, 1393, 1394, 1398 & 1400 




Electrical Feed Throughs
(glove boxes) 



Hirano MG4342 dual side coating
machine including; dryer, ET64 winder, ET6G rewinder, AC Panel, (3) Allen Bradley controls
stations unserialized 



     (2)    
          Model MB150 BG Glove Box Systems, S/n 2208 & BG888 



     (2)    
          Yamato Ovens, s/n 39100027 & 39100028 & Taiyo Chamber Filtration System
          (no s/n) 



scales of various capacities &
(1) moisture analyzer, s/n not available 




Labsys TGA, s/n 3-111074 




Setsys Thermo Gravimetric
Analyzer, s/n 31-111067 




Calvet DSC111 Gas
Measurement Device, s/n 115028 



     (3)     Vacuum
          ovens & vent hoods, storage cabinets, drawers & furniture, unserialized 




Saturn Digisizer 5200
particle analyzer, s/n 130 



Saturn 5200 handling unit, s/n 150 




Pompe Chimche Lab Hood,
unserialized 



Additional equipment including but
not limited to: 




Serialized: 



D4 Endeavor Xray Defractometer, s/n
D42A1A1A1; Thermo Elemental Radio Frequency Generator, s/n 11105; Lindberg Furnace, 240v,
s/n STF55666C; erg Furnace, 240v, s/n STF55666C, Chromolox Heat Control Unit, s/n JOO130;
(3) argon storage tanks, s/n 411056, 411316 & 410391; Micrometrics Generator, s/n 5155
with floor prep station, s/n 1065; Micrometrics Vacuum Prep, model 06-1, s/n 822; Alzeta
Catalydic Oxydizer, s/n JOO130; Ingersoll Rand SSR compressor, s/n A01954U95013; Zeks Air
Dryer, model 100HSBA100, s/n 82281-1; Additional equipment including but not limited to:
Viscicomm Frequency Convertor, s/n 4928 




Unserialized: 



vent hoods, ovens, distiller, storage
vault, coating machinery, industrial sieve, lab furniture, tooling, coulometer,
multimeters, vacuum pumps, magnetic & mechanical stirrers, chillers, radiometers,
process piping, recirculator, impedance measuring unit, automatic catalyst
characterization system, moisture analyzers and other accessories, attachments and
peripherals 










Exhibit A-1 




Description of Property 





Ener1 Battery Company, a Florida
corporation, is the record owner of all that certain lot, piece or parcel of land, with
the buildings, improvements and fixtures thereon, situate, lying and being in Broward
County Florida, and being more particularly described as follows: 





	 	
The
West 1/2 of Lot 40, of FORT LAUDERDALE INDUSTRIAL AIRPARK SECTION 2, according to the map
or plat thereof, as recorded in Plat Book 63, Page 8, of the Public Records of Broward
County, Florida, less the South 5 feet. 








	 	
Together
with appurtenant rights under Joint Use Agreement, recorded in Official Records Book
22595, at Page 204, Public Records of Broward County, Florida. 













B-1 




Exhibit B 




Loaned Equipment 



        All
of the (i) equipment listed and described below under the heading “Loaned
Equipment”), and (ii) all of the proceeds resulting therefrom. 



        As
used in this Exhibit B, the terms “equipment” and “proceeds”
shall have the meanings given such terms under the Florida Uniform Commercial Code,
Chapter 671, et seq., Florida Statutes (2002). 




Loaned Equipment 




      The
Loaned Equipment is located at:




Ener1
Ukraine
c/o Chemical Power Sources Research Laboratory (ONILhit)
Ukrainian State Chemical
Technology University
8 Gagarin Ave.
Dnipropetrovsk 4900, Ukraine



        The
specific Loaned Equipment are as follows: 









	1

 

 



2

 

 



3

 

 

 



4

 

 



5
	Electronic Blocks of High Frequency Induction Furnace

for Oxide Materials Treatment                        

                                                     



Electronic Blocks of High Frequency Induction Furnace

for Oxide Materials Treatment- Electron Resonator (2 

items)                                               



Gas Composition and Pressure Control System for      

Oxide-Sulphide Synthesis                             

                                                     

                                                     



Flow Prep for Gemeni                                 

                                                     

                                                     



Lab Glove Box                                        

                                                     

                                                     
	Model: Gemini

Manufacturer: Micrometrics, USA

Serial Number: 3133



Model Number: N 11/ HR

Manufacturer: Nabertherm, Germany

Serial Numbers: 163160 and 163161



Model Number: E2MO.7

Manufacturer: Edwards High Vacuum

International, England

Serial Number: 0169377192



Model Number: 060 LB

Manufacturer: Micrometrics, USA

Serial Number: 1202



Model Number: MB 150B-G-II

Manufacturer: MBraun, Germany

Serial Number: N/A













C-1 




Exhibit C 




List of Collateral
Locations, Executive Offices and 




Jurisdiction of
Organization or Incorporation of Guarantor 



              




	                              



                              

                              

                              





Collateral Location:          

                              

                              



Jurisdiction of Incorporation:
	Executive Offices:



Ener1 Battery Company

550 West Cypress Creek Road, Suite 120

Ft. Lauderdale, Florida 33309





1751 West Cypress Creek Road, Ft. Lauderdale,  Florida 33309 (other than Loaned
Equipment,  all of which,  as of the date  hereof,  are  located at the address
specified on Exhibit B to the Agreement)



Ener1 Battery Company - State of Florida