Exhibit
      10.42





ENER1,
      INC.


500
      West
      Cypress Creek Road


Fort
      Lauderdale, Florida 33309





October
      1, 2005





Dear
      Mr.
      Grape:





The
      Board
      of Directors of ENER1, INC. (the "Corporation") is pleased to award you an
      option (the "Option") to purchase shares of the common stock, par value $0.01
      per share, of the Corporation (the "Common Stock"). This option agreement (the
      "Agreement") will describe the Option granted to you. Your signature on this
      Agreement is an acknowledgement to us that you have read and understand this
      Agreement and that you agree to abide by its terms.





1.  Grant
      of Option .
      Subject
      to the conditions hereinafter set forth, we grant you the right to purchase one
      million (1,000,000) shares of
      Common
      Stock at $0.49 per share, the current fair market value of a share of Stock.
      On
      October 1 2006, and the following three anniversaries of such date, the right
      to
      purchase the shares of Common Stock shall vest with respect to 250,000 shares.
      Notwithstanding anything to the contrary in this Agreement, the right to
      purchase shares of Common Stock shall not vest on any date unless you are
      employed as of such date by EnerDel, Inc. ("EnerDel"), a subsidiary of the
      Corporation. In
      the
      event of a Change of Control of EnerDel, the right to purchase the shares of
      Common Stock shall vest and shall be fully exercisable immediately. A
      " Change
      in Control "
      shall
      be deemed to occur if any Person shall acquire direct or indirect beneficial
      ownership (whether as a result of stock ownership, revocable or irrevocable
      proxies or otherwise) of securities of EnerDel, pursuant to one or more
      transactions, such that after consummation and as a result of such transaction,
      such Person has direct or indirect beneficial ownership of 50% or more of the
      total combined voting power with respect to the election of directors of the
      issued and outstanding securities of EnerDel. " Person "
      shall
      mean any person, corporation, partnership, joint venture or other entity or
      any
      group (as such term is defined for purposes of Section 13(d) of the Exchange
      Act), other than a Parent or Subsidiary, and "beneficial ownership" shall be
      determined in accordance with Rule 13d-3 under the Exchange Act. Notwithstanding
      the foregoing, for purposes of this Agreement, "Change of Control" shall not
      include any change of control, actual or implicit, resulting from any Person
      or
      Persons gaining 50% or more of the combined voting power for EnerDel (or less
      than 50%, even though such lesser amount may represent effective voting control)
      through an initial public offering by EnerDel or other financing conducted
      by or
      on behalf of EnerDel.





2.  Time
      of Exercise .
      The
      Option may be exercised at any time and from time to time beginning when the
      right to purchase the shares of Stock vests and ending when this Option
      terminates as provided in Section 5 hereof. Notwithstanding anything to the
      contrary in this Agreement, the Option may not be exercised unless
      EnerDel reports revenue of at least $1.5 million for calendar 2005 and $7.0
      million for calendar 2006, as confirmed by review or audit by EnerDel's
      independent registered auditors. If EnerDel's revenue falls short of these
      target(s) for any of the time frames involved by 20% or more, you shall not
      be
      able to exercise any portion of the Option that has vested unless and until
      EnerDel's revenue for subsequent time frames exceeds $6.8 million (which is
      80%
      of the combined target revenue for 2005 and 2006) .








3.  Method
      of Exercise .
      The
      Option shall be exercised by written notice to the Corporation’s Secretary at
      the Corporation's principal place of business. The notice shall set forth the
      number of shares of Common Stock to be acquired and how
      the
      shares of Common Stock to be acquired should be registered (in your name only
      or
      in your name and your spouse's names as community property or as joint tenants
      with right of survivorship).




The
      Corporation shall not be obligated to issue any shares of Common Stock until
      you
      shall have paid the total exercise price for that number of shares of Common
      Stock. The exercise price may be paid in cash or by certified or cashiers'
      check
      or by such other method as permitted by the Board of Directors of the
      Corporation.




Fractional
      shares may not be exercised. Shares of Common Stock will be issued as soon
      as
      practical after exercise.




Notwithstanding
      the above, the Corporation shall not be obligated to deliver any shares of
      Common Stock during any period when the Corporation determines that the
      exercisability of the Option or the delivery of shares hereunder would violate
      any federal, state or other applicable laws, and the Option may be rescinded
      if
      necessary to ensure compliance with federal, state or other applicable
      laws.





4.  Termination
      of Option .
      To the
      extent not exercised, the Option shall terminate upon the first to occur of
      the
      following dates:





(a)
            October
                1, 2015, being ten (10) years from the date of grant;
                or





(b)
            Immediately
                upon the date your employment with EnerDel
                terminates.





5.  Non-Transferability .
      The
      Option cannot be transferred other than (i) by will or the laws of descent
      and
      distribution or (ii)
      on such terms and conditions as the Board of Directors of the Corporation in
      its
      sole discretion shall approve .





6.  Securities
      Laws .  As
      of the
      date hereof, the Option and the shares of Stock underlying the Option have
      not
      been registered under the Securities Act of 1933, as amended (the "Act"). You
      agree that any shares of Common Stock acquired by you under this Agreement
      cannot be sold, transferred, assigned or otherwise hypothecated without
      registration under the Act or unless a valid exemption from registration is
      then
      available under applicable federal and state securities laws and the Corporation
      has been furnished with an opinion of counsel satisfactory in form and substance
      to the Corporation that such registration is not required.





7.  Income
      Taxes .
      To the
      extent required by applicable federal, state, local or foreign law, you shall
      make arrangements satisfactory to the Corporation for the satisfaction of any
      withholding tax obligations that arise by reason of an Option exercise or
      disposition of shares issued as a result of an Option exercise. The Corporation
      shall not be required to issue shares or to recognize the disposition of such
      shares until such obligations are satisfied.




2


The
      Option is intended to qualify as an incentive stock option under
      Section 422 of the Internal Revenue Code of 1986, as amended (the "Code"),
      and will be interpreted accordingly. Section 422 of the Code provides, among
      other things, that you shall not be taxed upon the exercise of a stock option
      that qualifies as an incentive stock option provided that you do not dispose
      of
      the shares of Common Stock acquired upon exercise of such option until the
      later
      of two years after such option is granted to you and one year after such option
      is exercised. Notwithstanding anything to the contrary herein, Section 422
      of
      the Code provides that incentive stock options (including, possibly, the Option)
      shall not be treated as incentive stock options if and to the extent that the
      aggregate fair market value of shares of Common Stock (determined as of the
      time
      of grant) with respect to which such incentive stock options are exercisable
      for
      the first time by you during any calendar year (under all plans of the
      Corporation and its subsidiaries) exceeds $100,000, taking options into account
      in the order in which they were granted. Thus, if and to the extent that any
      shares of Common Stock issued under a portion of the Option exceeds the
      foregoing $100,000 limitation, such shares shall not be treated as issued under
      an incentive stock option pursuant to Section 422 of the Code.




8.  Recapitalization *.* If
      the
      outstanding shares of Common Stock are increased or decreased or changed into
      or
      exchanged for a different number or kind of shares or other securities of Issuer
      by reason of any recapitalization, reclassification, reorganization, stock
      split, reverse split, combination of shares, exchange of shares, stock dividend
      or other distribution payable in capital stock of the Corporation or other
      increase or decrease in such shares effected without receipt of consideration
      by
      the Corporation occurring after the date of this Agreement, an appropriate
      and
      proportionate adjustment shall be made by the Board of Directors of the
      Corporation (i)  in the number and kind of shares of Common Stock issuable
      upon exercise (or vesting) of the Option and (ii) in the exercise price per
      share of the Option.




9.  Limitation
      of Interest .
      Neither
      you nor any beneficiary or other person claiming under or through you shall
      have
      any right, title, interest, or privilege in or to any shares of Common Stock
      allocated or reserved for the purposes of this Agreement except as to such
      shares of Common Stock, if any, as shall have been issued to such person upon
      exercise of the Option or any part of it. Nothing herein shall confer upon
      you
      any right to continue in the Corporation's employ or service nor limit in any
      way the Corporation's right to terminate your employment at any time for any
      reason.




10.  Severability .  In
      the
      event that any provision of this Agreement is declared to be illegal, invalid
      or
      otherwise unenforceable by a court of competent jurisdiction, such provision
      shall be reformed, if possible, to the extent necessary to render it legal,
      valid and enforceable, or otherwise deleted, and the remainder of this Agreement
      shall not be affected except to the extent necessary to reform or delete such
      illegal, invalid or unenforceable provision.




11.  Binding
      Effect .
      The
      rights and obligations described in this Agreement shall inure to the benefit
      of
      and be binding upon both of us, and our respective heirs, personal
      representatives, successors and assigns.





3


12.  Date
      of Grant .
      The
      Option shall be treated as having been granted to you on the date of this
      Agreement even though you may sign it at a later date.





13.  Governing
      Law . This
      Agreement shall be governed, construed, interpreted and administered solely
      in
      accordance with the laws of the state of Florida, without regard to principles
      of conflicts of law.





14.  Headings .  The
      headings preceding the text of the sections hereof are inserted solely for
      convenience of reference, and shall not affect the meaning, construction or
      effect of this Agreement.














Very truly yours,ENER1, INC.By:Name:Its:AGREED AND ACCEPTED:Ulrik
                Grape







4