Timothy E. Coyne
Chief Financial Officer

	Shares	Conversion	Common Shares		Shares	%
Shares outstanding at 6/24/08			29,982,312	Quercus	75,395,313	59.83%
Anticipated issuance 7/1/08 for interest payment			701,199	All others	50,629,470	40.17%

Anticipated shares outstanding July 10, 2008			30,683,511		126,024,783


Common stock
Quercus			1,851,714
All others			28,831,797

Anticipated shares outstanding July 10, 2008			30,683,511

Series A Convertible Preferred	110	40	4,400

Series B Convertible Preferred	5,401	(A)	3,367,971

Warrants
Quercus			32,727,273
All others			15,286,484

Stock options outstanding			3,138,818

Quercus 10% Note		(B)	40,816,327


Fully diluted shares			126,024,783


(A) Conversion at 70% of 10 day VWAP. Assume 70% of 6/24/08 closing price of $0.63.
Number of Series B shares				5,401
Liquidation value per share			$	275

Total liquidation value			$	1,485,275
Share price at 6/24/08	$	0.63
Conversion ratio		70.00%
Conversion price			$	0.44

Shares				3,367,971


(B) Conversion at 70% of 10 day VWAP. Assume 70% of 6/24/08 closing price of $0.63.
Amount outstanding			$	18,000,000
Share price at 6/24/08	$	0.63
Conversion ratio		70.00%
Conversion price			$	0.44

Shares				40,816,327

Exhibit C

ELECTRO ENERGY, INC.

Warrant No. N08-1

WARRANT TO PURCHASE COMMON STOCK

VOID AFTER 5:00 P.M., EASTERN TIME,
ON THE EXPIRATION DATE

July 23, 2008

FOR VALUE RECEIVED, Electro Energy, Inc., a Florida corporation (the “Company”), hereby agrees to sell upon the terms and on the conditions hereinafter set forth, at any time commencing on the date hereof but no later than 5:00 p.m., Eastern Time, on July 22, 2011 (the “Expiration Date”), to The Quercus Trust, or its registered assigns (the “Holder”), under the terms as hereinafter set forth, up to One Million Eight Hundred Seventy-Five Thousand (1,875,000) fully-paid and non-assessable shares of the Company’s Common Stock, par value $.001 per share (the “Common Stock”), at a purchase price per share of $2.75 (the “Warrant Price”), pursuant to the terms and conditions set forth in this warrant (this “Warrant”). The number of shares of Common Stock issued upon exercise of this Warrant (“Warrant Shares”) and the Warrant Price are subject to adjustment in certain events as hereinafter set forth.

1. Exercise of Warrant.

2. Disposition of Warrant Shares and Warrant.

The Company shall remove such legend upon request of the Holder at such time as the Holder is eligible to transfer the Warrant Shares under Rule 144.

5. Capital Adjustments. This Warrant is subject to the following further provisions:

6. Notice to Holders.

(a) Notice of Record Date. In case:

(iii) of any voluntary dissolution, liquidation or winding-up of the Company;

If to the Company:

Electro Energy, Inc.
30 Shelter Rock Road
Danbury, Connecticut 06810
Attention: President

With a copy to:

Duane L. Berlin, Esq.
Lev & Berlin, P.C.
200 Connecticut Avenue, 5th Floor
Norwalk, Connecticut 06854

If to the Holder:

To the address of such Holder set forth on the books and records of the Company.

IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed on its behalf, in its corporate name and by a duly authorized officer, as of the date first written above.

Name: Timothy E. Coyne
Title: Chief Financial Officer

EXHIBIT A

SUBSCRIPTION FORM

Electro Energy, Inc.
30 Shelter Rock Road
Danbury, Connecticut 06810
Attention: President

Dated: _____________________	_________________________________ PRINT WARRANT HOLDER NAME


	_________________________________ Name: Title:

Electro Energy, Inc.
30 Shelter Rock Road
Danbury, Connecticut 06810
Attention: President

EXHIBIT B

ASSIGNMENT FORM

FOR VALUE RECEIVED, ____________________________ hereby sells, assigns and transfers unto

Dated: _____________________	_________________________________ PRINT WARRANT HOLDER NAME


	_________________________________ Name: Title:

Exhibit D

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT, dated as of July 23, 2008 (this “Agreement”), is made by and between Electro Energy, Inc., a Florida corporation, with headquarters located at 30 Shelter Rock Road, Danbury, Connecticut 06810 (the “Company”), and The Quercus Trust (the “Purchaser”).

W I T N E S S E T H:

WHEREAS, upon the terms and subject to the conditions of the Warrant Purchase Agreement, dated as of even date herewith, between the Company and the Purchaser (the “Purchase Agreement”) (capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Purchase Agreement), the Company has agreed to issue and sell to the Purchaser a warrant (the “Warrant”) and an option to purchase an additional warrant (the “Additional Warrant”)(collectively, the “Transaction Warrants”);

WHEREAS, the Company has agreed to issue the Warrant to the Purchaser and to grant an option to purchase the Additional Warrant, and the Transaction Warrants may be exercised for the purchase of shares of Common Stock (the “Registrible Securities”) upon the terms and conditions of the Warrant; and

WHEREAS, in order to induce the Purchaser to execute and deliver the Purchase Agreement and the consideration called for therein, the Company has agreed to provide certain registration rights under the Securities Act of 1933, as amended, and the rules and regulations thereunder, or any similar successor statute (collectively, the “Securities Act”), with respect to the Registrable Securities (as defined below);

NOW, THEREFORE, in consideration of the promises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Purchaser hereby agree as follows:

1. Definitions. As used in this Agreement, the following terms shall have the following meanings:

(a) “Closing Date” means the date of the final closing of the purchase and sale of the Warrant.

(b) “Effective Date” means the date the SEC declares a Registration Statement covering Registrable Securities and otherwise meeting the conditions contemplated hereby to be effective.

(c) “Principal Trading Market” shall mean the Nasdaq Capital Market or other national quotation system, The National Association of Securities Dealers Inc.‘s Over-The-Counter Bulletin Board, the Pink Sheets, or a national securities exchange.

(d) “Register,” “Registered,” and “Registration” refer to a registration effected by preparing and filing a Registration Statement or Statements in compliance with the Securities Act and pursuant to Rule 415 under the Securities Act or any successor rule providing for offering securities on a continuous basis (“Rule 415”), and the declaration or ordering of effectiveness of such Registration Statement by the United States Securities and Exchange Commission (the “SEC”).

(e) “Registrable Securities” means the shares of Common Stock that (i) are issuable upon exercise of the Transaction Warrants and (ii) may be issued as the Periodic Amount, as set forth in Section 2(b) herein, provided that all such shares shall cease to be Registrable Securities at such time as they have been sold under a Registration Statement or pursuant to Rule 144 under the Securities Act or otherwise or at such time as they are eligible to be sold pursuant to Rule 144 (without volume limitations).

(f) “Registration Statement” means a registration statement of the Company under the Securities Act covering Registrable Securities on Form S-3, if the Company is then eligible to file using such form, and if not eligible, on such other appropriate form.

2. Registration.

(a) Mandatory Registration. The Company shall prepare and file with the SEC, as soon as possible after the Closing Date but no later than ninety (90) days after the effective date of a registration statement that covers any portion of the remaining Registrable Securities, as that term is defined in that certain Registration Rights Agreement among the parties hereto, dated December 7, 2007 (the “2007 Registration Rights Agreement”) (the “Required Filing Date”), a Registration Statement registering for resale by the Purchaser a number of shares of Common Stock necessary for the Purchaser to sell the Registrable Securities, but, subject to Section 3 (Rule 415) hereinbelow, in no event less than that number of shares of Common Stock which would be issuable upon exercise of the Warrant and the Additional Warrant, if applicable, at its initial exercise price. The Registration Statement shall state that, in accordance with Rule 416 and 457 under the Securities Act, it also covers such indeterminate number of additional shares of Common Stock as may become issuable upon the exercise of the Warrant and the Additional Warrant, if applicable, to prevent dilution resulting from stock splits or stock dividends. The Company will use its reasonable best efforts to cause such Registration Statement to be declared effective. In addition, the Company shall promptly prepare and file with the SEC (i) such amendments (including post-effective amendments) and supplements to such Registration Statement or (ii) an additional Registration Statement in the event that the original Registration Statement does not cover all of the shares of Common Stock described above (including, without limitation, as a result of the exercise of the Transaction Warrants).

(b) Payments by the Company.

(i) Subject to Section 3 below, if the Registration Statement covering the Registrable Securities is not filed with the SEC by the Required Filing Date, the Company will make payment to the Purchaser in such amounts and at such times as shall be determined pursuant to this Section 2(b).

(ii) If the Purchaser fails to respond to any SEC comment letter regarding any Registration Statement within thirty (30) calendar days of receipt (the “Required Response Date”), then the Company will make payments to the Purchaser in such amounts and at such times as shall be determined pursuant to this Section 2(b).

(iii) The amount (the “Periodic Amount”) to be paid by the Company to the Purchaser shall be determined as of each Computation Date (as defined below) and such Periodic Amount shall be equal to 2% of the outstanding principal amount of that certain 10% Senior Secured Convertible Debenture, issued to the Purchaser on December 7, 2007 (the “Debenture”), for the period from the date following each of the relevant Required Filing Date or the Required Response Date, as the case may be, to the first relevant Computation Date, and thereafter to each subsequent Computation Date (prorated on a daily basis if such period is less than thirty (30) days); provided, however, that such Periodic Amounts shall cease after six (6) months from the initial Computation Date. The parties acknowledge that the failure to comply on a timely basis with the provisions related to both the Required Filing Date and the Required Response Date would result in a maximum payment of twelve (12%) percent of the then outstanding principal amount of the Debenture.

(iv) Each Periodic Amount will be payable by the Company, and at the option of the Company, in cash or in shares of Common Stock (1) on the day after the Required Filing Date or the Required Response Date, as the case may be, and (2) each thirtieth day thereafter.

(v) The parties acknowledge that the damages which may be incurred by the Purchaser if the Registration Statement is not filed by the Required Filing Date or an SEC comment letter has not been responded to by a Required Response Date, may be difficult to ascertain. The parties agree that the Periodic Amounts represent a reasonable estimate on the part of the parties, as of the date of this Agreement, of the amount of such damages.

(vi) Notwithstanding the foregoing, the amounts payable by the Company pursuant to this provision shall not be payable to the extent any delay in the filing of the Registration Statement or any delay in filing a response to an SEC comment letter occurs because of an act of, or a failure to act or to act timely by the Purchaser or its counsel.

(vii) “Computation Date” means (A) the date which is the earlier of (1) thirty (30) days after the Required Filing Date or Required Response Date, as the case may be, or (2) the date after the Required Filing Date on which the Registration Statement is filed (with respect to payments due as contemplated by Section 2(b)(i) hereof) or the date after the Required Response Date on which an SEC comment letter is responded to (with respect to payments due as contemplated by Section 2(b)(ii) hereof), as the case may be, and (B) each date which is the earlier of (1) thirty (30) days after the previous Computation Date or (2) the date after the previous Computation Date on which the Registration Statement is filed (with respect to payments due as contemplated by Section 2(b)(i) hereof) or an SEC comment letter is responded to (with respect to payments due as contemplated by Section 2(b)(ii) hereof), as the case may be.

3. Rule 415.

(b) If any reduction in the number of Registrable Securities included in a Registration Statement is made pursuant to paragraph (a) above or pursuant to Section 3(a) of the 2007 Registration Rights Agreement, then the Purchaser shall have no claim against the Company as a result of such reduction or any event or other delay or breach of this Agreement attributable primarily to the refusal of the Staff or the SEC to permit such registration statement to become effective as a Resale Registration Statement, nor shall any such reduction entitle the Purchaser to require the Company to pay any amount pursuant to Section 2(b) hereof or otherwise provide the basis for any claim by the Purchaser against the Company pursuant to this Agreement, except to the extent the Company fails to comply with this Section 3.

(c) In the event of any reduction in Registrable Securities pursuant to this Section 3, the Purchaser shall have the right, upon delivery of a written request to the Company, to require the Company to file a Resale Registration Statement under Rule 415 within 90 days after its receipt of such request (subject to (i) any restrictions imposed by Rule 415, (ii) the Company’s ongoing efforts to register the Registrible Securities, as that term is defined in the 2007 Registration Rights Agreement or (iii) comments by the Staff or the SEC) for resale by the Purchaser in a manner reasonably acceptable to the Purchaser, and the Company shall following such request use its commercially reasonable efforts to cause such registration statement to be declared and kept effective in the same manner as otherwise contemplated in this Agreement for Registration Statements hereunder (it being understood that the special demand right under this sentence may be exercised by the Purchaser multiple times and with respect to limited amounts of Registrable Securities to the extent limitations are required in order to permit the resale thereof by the Purchaser pursuant to a Resale Registration Statement as contemplated above).

4. Obligations of the Company. In connection with the registration of the Registrable Securities, the Company shall do each of the following:

(a) Prepare promptly, and file with the SEC by the Required Filing Date a Registration Statement with respect to not less than the number of Registrable Securities provided in Section 2(a) above, and thereafter use its reasonable best efforts to cause such Registration Statement relating to Registrable Securities to become effective and keep the Registration Statement effective at all times during the period (the “Registration Period”) continuing until the earlier of (i) the date when the Purchaser may sell all Registrable Securities under Rule 144 without volume or other restrictions or limits or (ii) the date the Purchaser no longer owns any of the Registrable Securities, which Registration Statement (including any amendments or supplements thereto and prospectuses contained therein) shall not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances in which they were made, not misleading;

(b) Prepare and file with the SEC such amendments (including post-effective amendments) and supplements to the Registration Statement and the prospectus used in connection with the Registration Statement as may be necessary to keep the Registration Statement effective at all times during the Registration Period, and, during the Registration Period, comply with the provisions of the Securities Act with respect to the disposition of all Registrable Securities of the Company covered by the Registration Statement until such time as all of such Registrable Securities have been disposed of in accordance with the intended methods of disposition by the seller or sellers thereof as set forth in the Registration Statement;

(c) Permit a single firm of counsel designated by the Purchaser to review, at the Purchaser’s expense, the Registration Statement and all amendments and supplements thereto a reasonable period of time (but not less than three (3) business days) prior to their filing with the SEC, and not file any document in a form to which such counsel reasonably objects, at Purchaser’s expense;

(e) Furnish to Purchaser’s counsel (i) promptly after the same is prepared and publicly distributed, filed with the SEC, or received by the Company, one (1) copy of the Registration Statement, each preliminary prospectus and prospectus, and each amendment or supplement thereto, and (ii) such number of copies of a prospectus, and all amendments and supplements thereto and such other documents, as such Purchaser may reasonably request in order to facilitate the disposition of the Registrable Securities owned by the Purchaser;

(f) As promptly as practicable after becoming aware thereof, notify Purchaser’s counsel of the happening of any event of which the Company has knowledge, as a result of which the prospectus included in the Registration Statement, as then in effect, includes an untrue statement of a material fact or omits to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, and use its best efforts promptly to prepare a supplement or amendment to the Registration Statement or other appropriate filing with the SEC to correct such untrue statement or omission, and deliver a number of copies of such supplement or amendment to the Purchaser as the Purchaser may reasonably request;

(g) As promptly as practicable after becoming aware thereof, notify the Purchaser who holds the Registrable Securities being sold (or, in the event of an underwritten offering, the managing underwriters) of the issuance by the SEC of a Notice of Effectiveness or any notice of effectiveness or any stop order or other suspension of the effectiveness of the Registration Statement at the earliest possible time;

(h) Use its reasonable efforts to secure and maintain the designation of all the Registrable Securities covered by the Registration Statement on the Principal Trading Market within the meaning of Rule 11Aa2-1 of the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the quotation of the Registrable Securities on the Principal Trading Market;

(i) Cooperate with the Purchaser to facilitate the timely preparation and delivery of certificates for the Registrable Securities to be offered pursuant to the Registration Statement and enable such certificates for the Registrable Securities to be in such denominations or amounts as the case may be, as the Purchaser may reasonably request, and, within five (5) business days after a Registration Statement which includes Registrable Securities is ordered effective by the SEC, the Company shall deliver, and shall cause legal counsel selected by the Company to deliver, to the transfer agent for the Registrable Securities (with a copy to Purchaser’s counsel) an appropriate instruction and opinion of such counsel;

(j) For a period of 30 days from the Effective Date, not file a registration statement covering any additional shares of Common Stock (excluding on Form S-4 or Form S-8, or an amendment or supplement to a previously-filed registration statement); and

(k) Take all other reasonable actions necessary to expedite and facilitate disposition by the Purchaser of the Registrable Securities pursuant to the Registration Statement.

5. Obligations of the Purchaser. In connection with the registration of the Registrable Securities, the Purchaser shall have the following obligations:

(a) The Purchaser, by the Purchaser’s acceptance of the Registrable Securities, agrees to cooperate with the Company as reasonably requested by the Company in connection with the preparation and filing of the Registration Statement hereunder, unless the Purchaser has notified the Company in writing of the Purchaser’s election to exclude all of the Purchaser’s Registrable Securities from the Registration Statement; and

(b) The Purchaser agrees that, upon receipt of any notice from the Company of the happening of any event of the kind described in Section 4(f) or 4(g), above, the Purchaser will immediately discontinue disposition of Registrable Securities pursuant to the Registration Statement covering such Registrable Securities until the Purchaser’s receipt of the copies of the supplemented or amended prospectus contemplated by Section 4(f) or 4(g) and, if so directed by the Company, the Purchaser shall deliver to the Company (at the expense of the Company) or destroy (and deliver to the Company a certificate of destruction) all copies in the Purchaser’s possession, of the prospectus covering such Registrable Securities current at the time of receipt of such notice, provided that the Purchaser may retain one archival copy (to the extent such prospectus is not filed with the SEC).

6. Expenses of Registration.

(a) All expenses (other than (i) underwriting discounts and commissions of the Purchaser and (ii) expenses of the Purchaser’s counsel incurred in connection with registrations, filings or qualifications pursuant to Section 4), including, without limitation, all registration, listing, and qualifications fees, printers and accounting fees, the fees and disbursements of counsel for the Company shall be borne by the Company.

(b) The Company has not, as of the date hereof, nor shall the Company on or after the date of this Agreement, enter into any agreement with respect to its securities that is inconsistent with the rights granted to the Purchaser in this Agreement or the Purchase Agreement, except as disclosed therein.

7. Indemnification. After Registrable Securities are included in a Registration Statement under this Agreement:

(a) To the extent permitted by law, the Company will indemnify and hold harmless, the Purchaser, the directors, if any, of the Purchaser, the officers, if any, of the Purchaser (each, an “Indemnified Party”), against any losses, claims, damages, liabilities or expenses (joint or several) incurred (collectively, “Claims”) to which any of them may become subject under the Securities Act, the Exchange Act or otherwise, insofar as such Claims (or actions or proceedings, whether commenced in respect thereof) arise out of or are based upon: (i) any untrue statement or untrue statement of a material fact contained in the Registration Statement or any post-effective amendment thereof or the omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, (ii) any untrue statement or untrue statement of a material fact contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in the light of the circumstances under which the statements therein were made, not misleading or (iii) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation under the Securities Act, the Exchange Act or any state securities law (the matters in the foregoing clauses (i) through (iii) being collectively referred to as “Violations”). The Company shall reimburse the Purchaser for any reasonable legal fees or other reasonable expenses incurred by them in connection with investigating or defending any such Claim. Notwithstanding anything to the contrary contained herein, the indemnification agreement contained in this Section 7(a) shall not (i) apply to any Claims arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company by or on behalf of any Indemnified Party expressly for use in connection with the preparation of the Registration Statement or any such amendment thereof or supplement thereto; (ii) be available to the extent such Claim is based on a failure of the Purchaser to deliver or cause to be delivered the prospectus made available by the Company; or (iii) apply to amounts paid in settlement of any Claim if such settlement is effected without the prior written consent of the Company, which consent shall not be unreasonably withheld. The Purchaser will indemnify the Company, its officers, directors and agents (including legal counsel) (each an “Indemnified Party”) against any claims arising out of or based upon a Violation which occurs in reliance upon and in conformity with information furnished in writing to the Company, by or on behalf of such Purchaser, expressly for use in connection with the preparation of the Registration Statement, subject to such limitations and conditions set forth in this Section 7. The Purchaser shall reimburse the Company for any reasonable legal fees or other reasonable expenses incurred by it in connection with investigating or defending any such Claim. Such indemnity shall remain in full force and effect regardless of any investigation made by or on behalf of the Indemnified Party, and shall survive the offering and transfer of the Registrable Securities by the Purchaser.

8. Contribution. To the extent any indemnification by an indemnifying party is prohibited or limited by law, the indemnifying party agrees to make the maximum contribution with respect to any amounts for which it would otherwise be liable under Section 7 to the fullest extent permitted by law; provided, however, that (a) no contribution shall be made under circumstances where the maker would not have been liable for indemnification under the fault standards set forth in Section 7; (b) no seller of Registrable Securities guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any seller of Registrable Securities who was not guilty of such fraudulent misrepresentation; and (c) except where the seller has committed fraud (other than a fraud by reason of the information included or omitted from the Registration Statement as to which the Company has not given notice as contemplated under Section 4 hereof) or intentional misconduct, contribution by any seller of Registrable Securities shall be limited in amount to the net amount of proceeds received by such seller from the sale of such Registrable Securities.

9. Reports under Securities Act and Exchange Act. With a view to making available to the Purchaser the benefits of Rule 144 promulgated under the Securities Act or any other similar rule or regulation of the SEC that may at any time permit Purchaser to sell securities of the Company to the public without Registration (“Rule 144”), the Company agrees to:

(a) make and keep public information available, as those terms are understood and defined in Rule 144;

(b) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act;

(c) furnish to the Purchaser so long as the Purchaser owns Registrable Securities, promptly upon request, (i) a written statement by the Company that it has complied with the reporting requirements of Rule 144, the Securities Act and the Exchange Act , a copy of the most recent annual or quarterly report of the Company and such other reports and documents so filed by the Company and (iii) such other information as may be reasonably requested to permit the Purchaser to sell such securities pursuant to Rule 144 without Registration.

10. Assignment of the Registration Rights. The rights to have the Company register Registrable Securities pursuant to this Agreement shall be automatically assigned by the Purchaser to any transferee of the Registrable Securities (or all or any portion of any unconverted Debenture) only if the Company is, within a reasonable time after such transfer or assignment, furnished with written notice of (a) the name and address of such transferee or assignee and (b) the securities with respect to which such registration rights are being transferred or assigned.

11. Amendment of Registration Rights. Any provision of this Agreement may be amended and the observance thereof may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the Company and the Purchaser. Any amendment or waiver affected in accordance with this Section 11 shall be binding upon the Purchaser and the Company.

12. Miscellaneous.

(a) A person or entity is deemed to be a purchaser of Registrable Securities whenever such person or entity owns of record such Registrable Securities. If the Company receives conflicting instructions, notices or elections from two or more persons or entities with respect to the same Registrable Securities, the Company shall act upon the basis of instructions, notice or election received from the registered owner of such Registrable Securities.

(b) Notices required or permitted to be given hereunder shall be given in the manner contemplated by the Purchase Agreement, (i) if to the Company or to the Purchaser, to their respective address and the address of their counsel as contemplated by the Purchase Agreement, and (ii) if to any other transferee purchaser, at such address as such purchaser shall have provided in writing to the Company, or at such other address as each such party furnishes by notice given in accordance with this Section 12(b).

(c) Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

(d) This Agreement shall be governed by and interpreted in accordance with the laws of the State of Delaware for contracts to be wholly performed in such state and without giving effect to the principles thereof regarding the conflict of laws. Each of the parties consents to the jurisdiction of the federal courts or the state courts of the State of Delaware in connection with any dispute arising under this Agreement and hereby waives, to the maximum extent permitted by law, any objection, including any objection based on forum non coveniens, to the bringing of any such proceeding in such jurisdictions. To the extent determined by such court, the Company shall reimburse the Purchaser for any reasonable legal fees and disbursements incurred by the Purchaser in enforcement of or protection of any of its rights under this Agreement.

(e) EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH OF THE PARTIES HERETO HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

(f) If any provision of this Agreement shall be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability shall not affect the validity or enforceability of the remainder of this Agreement or the validity or enforceability of this Agreement in any other jurisdiction.

(g) Subject to the requirements of Section 10 of this Agreement, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto.

(h) All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require.

(i) The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning thereof.

(j) This Agreement may be executed in one or more counterparts, each of which shall be deemed an original but all of which shall constitute one and the same agreement. This Agreement, once executed by a party, may be delivered to the other party hereto by telephone line facsimile transmission of a copy of this Agreement bearing the signature of the party so delivering this Agreement.

(k) This Agreement constitutes the entire agreement among the parties hereto with respect to the subject matter hereof. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein. This Agreement supersedes all prior agreements and understandings among the parties hereto with respect to the subject matter hereof. This Agreement may be amended only by an instrument in writing signed by the party to be charged with enforcement thereof.

(l) The Company acknowledges that any failure by the Company to perform its obligations under Section 4(a) hereof, or any delay in such performance could result in loss to the Purchaser, and the Company agrees that, in addition to any other liability the Company may have by reason of such failure or delay, the Company shall be liable for all direct damages caused by any such failure or delay, unless the same is the result of force majeure. Neither party shall be liable for consequential damages.

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written.

Name: Timothy E. Coyne
Title: Chief Financial Officer

Name: David Gelbaum
Title: Trustee

Exhibit E

DEBENTURE AND WARRANT PURCHASE AGREEMENT

Dated as of August 18, 2008

			Page

DEBENTURE AND WARRANT PURCHASE AGREEMENT			1

ARTICLE I PURCHASE AND SALE OF WARRANT			1
	1.1.	Purchase and Sale of Debentures and Warrants	1

ARTICLE II REPRESENTATIONS AND WARRANTIES			2
	2.1.	Representations and Warranties of the Company	2
	2.2.	Representations and Warranties of the Purchaser	3

ARTICLE III COVENANTS			3
	3.1.	Securities Compliance	4
	3.2.	Registration and Listing	4
	3.3.	Inspection Rights	4
	3.4.	Compliance with Laws	4
	3.5.	Keeping of Records and Books of Account	4
	3.6.	Reporting Requirements	5
	3.7.	Other Agreements	5
	3.8.	Use of Proceeds	5
	3.9.	Reporting Status	5
	3.10.	Disclosure of Transaction	5
	3.11.	Amendments	5
	3.12.	Reservation of Shares	5
	3.13.	Transfer Agent Instructions	6
	3.14.	Form S-3 Eligibility	6
	3.19	Board Representation	8

ARTICLE IV CONDITIONS			8
	4.1.	Conditions Precedent to the Obligation of the Company to Close and to Sell the Securities	8
	4.2.	Conditions Precedent to the Obligation of the Purchaser to Close and to Purchase the Securities	9

ARTICLE V CERTIFICATE LEGEND			10
	5.1.	Legend	10

ARTICLE VI INDEMNIFICATION			11
	6.1.	Company Indemnity	11
	6.2.	Indemnification Procedure	12

ARTICLE VII MISCELLANEOUS			13
	7.1	Protective Provisions	13
	7.2	Amendments to Registration Rights Agreements	13
	7.3	Amendments to Existing Warrant	13
	7.4	Amendments to Existing Debenture	14

TABLE OF CONTENTS
(continued)

		Page

7.5	Amendment to Security Agreement	14
7.6	Short Sales	14
7.7	Fees and Expenses	14
7.1.	Specific Performance; Consent to Jurisdiction; Venue	14
7.11	Waivers	16
7.12	Headings	16
7.13	Successors and Assigns	16
7.15	Governing Law	16
7.16	Survival	17
7.17	Counterparts	17
7.18	Publicity	17
7.19	Severability	17
7.20	Further Assurances	17

DEBENTURE AND WARRANT PURCHASE AGREEMENT

This DEBENTURE AND WARRANT PURCHASE AGREEMENT, dated as of August 18, 2008 (this “Agreement”), by and between Electro Energy, Inc., a Florida corporation (the “Company”), and The Quercus Trust (the “Purchaser”).

W I T N E S S E T H:

WHEREAS, the parties hereto entered into that certain Warrant Purchase Agreement, dated July 23, 2008 (the “July, 2008 Warrant Purchase Agreement”).

ARTICLE I

PURCHASE AND SALE OF DEBENTURES AND WARRANTS

1.1. Purchase and Sale of Debentures and Warrants.

(a) Upon the following terms and conditions, and upon each of two (2) of Purchaser’s notifications to the Company that the Comapny has reached a set of business milestones, set forth on Schedule 1.1(a) hereto (each, a “Milestone Set”), the Company shall issue and sell to the Purchaser, and the Purchaser shall purchase from the Company, a 10% Senior Secured Convertible Debenture in the principal amount of Six Hundred Twenty Five Thousand Dollars ($625,000), in the form attached hereto as Exhibit A (each a “Debenture”). The Company and the Purchaser are executing and delivering this Agreement in accordance with and in reliance upon the exemption from securities registration afforded by Section 4(2) of the Securities Act, including Regulation D (“Regulation D”), and/or upon such other exemption from the registration requirements of the Securities Act as may be available with respect to the investment to be made hereunder.

(b) Upon the terms and conditions contained herein, and upon each of two (2) of Purchaser’s notifications to the Company that the Company has reached a Milestone Set , the Company shall issue to Purchaser a Warrant to Purchase Common Stock, in substantially the form attached hereto as Exhibit B (each, a “Warrant”), to purchase up to One Million Five Hundred Sixty-Two Thousand Five Hundred (1,562,500) shares of the Company’s common stock, par value $0.001 per share (the “Common Stock”). Each Warrant shall expire three (3) years following the date of its issuance and shall have an exercise price per share equal to the Warrant Price (as defined in the Warrant).

(c) Purchase Price. Subject to the terms and conditions hereof and upon the Company’s reaching each of the two Milestone Sets, the Company agrees to issue and sell to the Purchaser and, in consideration of and in express reliance upon the representations, warranties, covenants, terms and conditions of this Agreement, the Purchaser agrees to purchase, a Debenture and a Warrant for a purchase price of Six Hundred Twenty-Five Thousand Dollars ($625,000) (the “Purchase Price”), in cash.

(d) Closing. The closing of the purchase and sale of the first of two Debentures and Warrants to be acquired by the Purchaser from the Company under this Agreement shall take place at the offices of Lev & Berlin, P.C., 200 Connecticut Avenue, 5th Floor, Norwalk, Connecticut 06854 at 10:00 a.m., Eastern time, (i) on August 18, 2008; provided, that all of the conditions set forth in Article IV hereof and applicable to the Closing shall have been fulfilled or waived in accordance herewith, or (ii) at such other time and place or on such date as the Purchaser and the Company may agree upon (the “First Closing Date”). The closing of the purchase and sale of the second of two sets of Debentures and Warrants to be acquired by the Purchaser from the Company under this Agreement shall take place at the offices of Lev & Berlin, P.C. at 10:00 a.m., Eastern time, (i) on that date that is within three business days of the Purchaser’s notification to the Seller that the second Milestone Set has been reached, provided that all of the conditions set forth in Article IV hereof and applicable to the Closing shall have been fulfilled or waived in accordance herewith, or (ii) at such other time and place or on such date as the Purchaser and the Company may agree upon (the “Second Closing Date”). Subject to the terms and conditions of this Agreement, at each Closing Date the Company shall deliver or cause to be delivered to the Purchaser a Debenture and a Warrant and any other documents required to be delivered pursuant to Article IV hereof. At each closing, the Purchaser shall deliver the Purchase Price by wire transfer to a bank account designated by the Company.

(e) Underlying Shares. The Company has authorized and has reserved and covenants to continue to reserve, free of preemptive rights and other similar contractual rights of stockholders, a sufficient number of its authorized but unissued shares of Common Stock to effect the conversions of the Debentures and exercises of the Warrants Any shares of Common Stock issuable upon conversion of the Debentures and exercise of the Warrants (and such shares when issued) are herein referred to as the “Underlying Shares.” The Debentures and the Warrants, and the Underlying Shares are sometimes collectively referred to herein as the “Securities.”

ARTICLE II

REPRESENTATIONS AND WARRANTIES

(a) Capitalization. The authorized capital stock of the Company as of the date hereof is set forth on Schedule 2.1(a) hereto.

(c) Ratification of Price Adjusment to Securities. Upon the issuance of a Debenture and a Warrant as provided herein, in accordance with Section 5(d) of the warrant that the Company issued to the Purchaser pursuant to the 2007 Purchase Agreement, on December 7, 2007 (the “2007 Warrant”), the Warrant Price, as that term is defined therein, shall be reduced to $1.25.

(d) Ranking of Securities Issued to KIT Financial, Inc. The $500,000 Senior Secured Convertible Debenture to be issued to KIT Financial, Inc. (“KIT”), or any of its affiliates (the “KIT Debenture”) shall rank in payment and security (i) junior to that certain 10% Senior Secured Convertible Debenture issued to the Purchaser pursuant to the 2007 Purchase Agreement and (ii) pari passu to the Debentures issued to the Purchaser pursuant hereto. .

2.2. Representations and Warranties of the Purchaser. The Purchaser hereby represents and warrants to the Company as follows as of the date hereof and as of the Closing Date that the Purchaser’s representations and warranties that are set forth in Sections 2.2 of the 2007 Purchase Agreement are hereby repeated and incorporated herein by reference. The Purchaser also hereby waives the right of first refual contained in Section 3.18 of the 2007 Purchase Agreement with respect to the issuance and sale by the Company of the KIT Debenture and those certain warrants to purchase the Company’s Stock to be issued to KIT in connection with its purchase of the KIT Debenture.

ARTICLE III

COVENANTS

The Company covenants with the Purchaser as follows, which covenants are for the benefit of the Purchaser and its permitted assignees.

3.1. Securities Compliance. The Company shall notify the Commission in accordance with its rules and regulations, of the transactions contemplated herein and by any of the documents executed in connection herewith, including the Debenture(s) and the Warrant(s) and the Registration Rights Agreement, dated as of the date hereof (the “Transaction Documents”), and shall take all other necessary action and proceedings as may be required and permitted by applicable law, rule and regulation, for the legal and valid issuance of the Securities to the Purchaser, or its subsequent holders.

3.8. Use of Proceeds. The net proceeds from the sale of the Securities hereunder shall be used by the Company for working capital and general corporate purposes, including growth initiatives.

3.10. Disclosure of Transaction. The Company shall issue a press release describing the material terms of the transactions contemplated hereby (the “Press Release”) not later than the second Trading Day following the Closing Date. The Company shall also file with the Commission a Current Report on Form 8-K (the “Form 8-K”) describing the material terms of the transactions contemplated hereby (and attaching as exhibits thereto this Agreement, the form of Debenture and Warrant and the Press Release) as soon as practicable following the Closing Date but in no event more than four (4) Trading Days following the Closing Date, which Press Release and Form 8-K shall be subject to prior review and reasonable comment by the Purchaser. “Trading Day” means any day during which the principal exchange on which the Common Stock is traded shall be open for trading.

3.12. Reservation of Shares. So long as any of the Debentures or Warrants remain outstanding, the Company shall take all action necessary to at all times have authorized and reserved for the purpose of issuance of a sufficient number of shares of Common Stock needed to provide for the issuance of the Underlying Shares.

3.13. Transfer Agent Instructions. The Company shall issue irrevocable instructions to its transfer agent, and any subsequent transfer agent, to issue certificates, registered in the name of the Purchaser, for the Underlying Shares in such amounts as specified from time to time by the Purchaser to the Company upon conversion of the Debentures or exercise of the Warrants in the form of Exhibit D attached to the 2007 Purchase Agreement (the “Irrevocable Transfer Agent Instructions”). Prior to registration of the Underlying Shares under the Securities Act, all such certificates shall bear the restrictive legend specified in Section 5.1 of this Agreement. The Company warrants that no instruction other than the Irrevocable Transfer Agent Instructions referred to in this Section 3.13 will be given by the Company to its transfer agent and that the Underlying Shares shall otherwise be freely transferable on the books and records of the Company as and to the extent provided in this Agreement. If the Purchaser provides the Company with an opinion of counsel, in a generally acceptable form, to the effect that a public sale, assignment or transfer of the Underlying Shares may be made without registration under the Securities Act or the Purchaser provides the Company with reasonable assurances that the Underlying Shares can be sold pursuant to Rule 144 without any restriction as to the number of securities acquired as of a particular date that can then be immediately sold, the Company shall permit the transfer, and, in the case of the Underlying Shares, promptly instruct its transfer agent to issue one or more certificates in such name and in such denominations as specified by the Purchaser and without any restrictive legend.

3.15 Right of First Refusal.

(f) The Purchase Right established by this Section 3.15 shall have no application to any of the following issuances of Purchase Securities (collectively, the “Excluded Securities”):

(i) shares of Common Stock issued or issuable to employees, directors or consultants pursuant to equity holder plans maintained by the Company and registered with the Commission on Form S-8;

(ii) shares of Common Stock issued or issuable upon the exercise or conversion of currently outstanding options, warrants or convertible securities; or

(iii) shares of Common Stock issued or issuable upon any conversion of the Debenture or exercise of the Warrants issued to the Purchaser concurrently with the Debenture; or

3.16 Consultant. The July, 2008 Warrant Purchase Agreement is hereby amended to delete in its entirety Section 3.16 thereof, which relates to Company’s engagement of the services of Mr. Lyle Deitch.

3.17 Prohibition from Exercise, Shareholder Approval. Until the Company has obtained the approval of the transaction and issuance(s) of securities contemplated herein by a majority of the Company’s holders of Common Stock, which the Company shall use its commercially reasonable efforts to obtain as soon as possible, but in no event later than the Company’s next annual meeting, which shall be held no later than October 31, 2008, Purchaser shall not convert either of the Debentures or exercise either of the Warrants to the extent that the aggregate number of shares issuable upon such conversion or exercise, together with (i) any penalty shares issued pursuant to the Registration Rights Agreement between the Company and the original Holder executed in connection with this transaction, and the Registration Rights Agreement dated July 23, 2008, and (ii) shares of Common Stock that may have been issued upon the exercise of the warrant issued to the Purchaser pursuant to that certain Warrant Purchase Agreement dated July 23, 2008, results in an aggregate issuance of that number of shares of Common Stock that, is greater than Nineteen and Nine-Tenth’s percent (19.9%) of the Company’s total number of outstanding shares of Common Stock as of July 23, 2008.

3.18 Withdrawal of Registration Statement. The Company shall promptly withdraw the Registration Statement that the Company submitted to the SEC on July 10, 2008 and shall file a new registration statement within 90 days of Purchaser’s written demand, as set forth in the Registration Rights Agreements, dated December 7, 2007 and July 23, 2008, as amended by Section 7.2 hereof, and with the Registration Rights Agreement dated as of the date hereof.

3.19 Board Representation. In the event that the Purchaser does not exercise its right to appoint one representative to the Company’s Board of Directors pursuant to the terms of the 2007 Purchase Agreement, it shall have the right to appoint an observer of Board proceedings.

ARTICLE IV
CONDITIONS

(d) Delivery of Purchase Price. The Purchase Price for the Securities shall have been delivered to the Company on each Closing Date.

(e) Delivery of Transaction Documents. The Transaction Documents shall have been duly executed and delivered by the Purchaser to the Company.

(g) Debenture and Warrant. At or prior to each Closing Date, the Company shall have delivered to the Purchaser a Debenture and a Warrant (in such denominations as the Purchaser may request).

7.1 Protective Provisions. So long as at least an aggregate of twenty-five percent (25%) of the original principal balances of (i) the Debentures(s) and (ii) the KIT Debenture remain outstanding, consent of the holders of a majority of the outstanding Debenture(s) shall be required for any action (by merger, reclassification or otherwise) that (i) results in the redemption or repurchase of any stock, (ii) results in any merger or other corporate reorganization that results in a change of control of the Company, or any transaction in which all or substantially all of the assets of the Company are sold, (iii) authorizes the issuance of debt in excess of Five Hundred Thousand Dollars ($500,000), (iv) changes the business of the Company, or (v) involves any transaction or compensation arrangements between the Company and its officers and directors. Notwithstanding the foregoing, upon successful and timely completion of both Milestone Sets as set forth herein, and the completion of the transactions contemplated and described herein, the Purchaser will consent to an incentive and compensatory award by the Company of warrants to members of the Company’s management equal to three percent (3%) of the number of outstanding common shares of the Company on a fully-diluted basis at an exercise price and other terms equivalent to those set forth herein, including without limitation repricing and anti-dilution protection. One-third (?) of such award will be made to the CEO and two-thirds (?) will be made to other members of the management team and consultants at the discretion of the CEO, all subject to reasonable approval of the grants by Investor.

7.2 Amendments to Registration Rights Agreements. The registration rights agreements between the Company and the Purchaser, dated December 7, 2007 and July 23, 2008 are hereby amended to provide that the Company shall file a Registration Statement covering all or a portion of the Registrible Securities, as those terms are defined therein, as soon as possible following Purchaser’s written request to do so, but in no event later than ninety (90) days following such written request, subject to the terms and conditions contained therein.

7.3 Amendments to Existing Warrant. That certain warrant issued to the Purchaser pursuant to the July, 2008 Warrant Purchase Agreement (the “Existing Warrant”) is hereby amended as follows: (1) The Warrant Price is reduced to $1.00 per share, (2) Section 5(d) of the Existing Warrant is amended to reduce the minimum price set forth therein to $0.4545 per share and (3) Upon any decrease in the Warrant Price, the number of Warrant Shares shall be increased to the number of shares determined by multiplying the Warrant Price that was in effect immediately prior to such decrease by the number of Warrant Shares issuable upon exercise of the Warrant prior to such decrease and dividing the product by the Warrant Price resulting from the decrease.

7.4 Amendment to Existing Debenture. That certain 10% Senior Secured Convertible Debenture issued by the Company to the Purchaser on December 7, 2007 is hereby amended to permit the Purchaser to convert such debenture at any time following the execution of this Agreement.

7.5 Amendment to Security Agreement. The definition of “Secured Obligations”, contained in that certain Security Agreement between the Purchaser and the Company, dated December 7, 2007, is hereby amended to include the Debentures.

7.6 Short Sales. The Purchaser covenants that neither it nor any affiliate acting on its behalf or pursuant to any understanding with it will pledge, hypothecate, loan or execute any “short sales,” as such term is defined in Rule 200 of Regulation SHO under the Exchange Act, or other hedging transactions with broker-dealers or other financial institutions that may, in turn, engage in “short sales” of the Common Stock, during the twelve (12) month period prior to conversion of the Debenture.

7.7 Fees and Expenses. Except as otherwise set forth in this Agreement and the other Transaction Documents, each party shall pay the fees and expenses of its advisors, counsel, accountants and other experts, if any, and all other expenses, incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement; provided that the Company shall pay all actual, reasonable and necessary attorneys’ fees and expenses (including disbursements and out-of-pocket expenses) incurred by the Purchaser in connection with (i) the preparation, negotiation, execution and delivery of this Agreement and the other Transaction Documents and the transactions contemplated thereunder, which payment shall not exceed $20,000 and shall be made at the Closing, and (ii) any amendments, modifications or waivers of this Agreement or any of the other Transaction Documents. The Company shall also pay all reasonable fees and expenses incurred by the Purchaser in connection with the enforcement of this Agreement or any of the other Transaction Documents, including, without limitation, all reasonable attorneys’ fees and expenses.

7.8 Specific Performance; Consent to Jurisdiction; Venue.

(b) The parties agree that venue for any dispute arising under this Agreement will lie exclusively in the state or federal courts located in California, and the parties irrevocably waive any right to raise forum non conveniens or any other argument that California is not the proper venue. The parties irrevocably consent to personal jurisdiction in the state and federal courts of the State of California. The Company and the Purchaser consent 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 in this Section 7.8 shall affect or limit any right to serve process in any other manner permitted by law. The Company and the Purchaser hereby agree that the prevailing party in any suit, action or proceeding arising out of or relating to the Securities, this Agreement or the other Transaction Documents, shall be entitled to reimbursement for reasonable legal fees from the non-prevailing party. The parties hereby waive all rights to a trial by jury.

7.9 Entire Agreement; Amendment. This Agreement and the Transaction Documents contain the entire understanding and agreement of the parties with respect to the matters covered hereby and, except as specifically set forth herein or in the other Transaction Documents, neither the Company nor the Purchaser makes any representation, warranty, covenant or undertaking with respect to such matters, and they supersede all prior understandings and agreements with respect to said subject matter, all of which are merged herein. No provision of this Agreement may be waived or amended other than by a written instrument signed by the Company and the Purchaser. Any amendment or waiver effected in accordance with this Section 7.4 shall be binding upon the Purchaser (and its permitted assigns) and the Company.

7.10 Notices. Any notice, demand, request, waiver or other communication required or permitted to be given hereunder shall be in writing and shall be effective (a) upon hand delivery by telecopy or facsimile at the address or number designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (b) on the third business day following the date of mailing by express courier service, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur. The addresses for such communications shall be:

	If to the Company:	Electro Energy, Inc. 30 Shelter Rock Road Danbury, Connecticut 06810 Attention: President Tel. No.: (203) 797-2699 Fax No.: (203) 797-2697

	with copies (which copies shall not constitute notice to the Company) to:	Lev & Berlin, P.C. 200 Connecticut Avenue, 5th Floor Norwalk, Connecticut 06854-1940 Attention: Duane L. Berlin, Esq. Tel. No.: (203) 838-8500 Fax No.: (203) 854-1652

	If to the Purchaser:	The Quercus Trust 1835 Newport BlvdA109-PMB 467 Costa Mesa, California 92627 Attn: Mr. David Gelbaum, Trustee

	with copies (which copies shall not constitute notice to the Purchaser) to:	Greenberg Glusker 1900 Avenue of ths Stars 21st Floor Los Angeles, California 90067

Any party hereto may from time to time change its address for notices by giving written notice of such changed address to the other party hereto pursuant to the provisions of this Section 7.10.

7.11 Waivers. No waiver by either party of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of any party to exercise any right hereunder in any manner impair the exercise of any such right accruing to it thereafter.

7.12 Headings. The article, section and subsection headings in this Agreement are for convenience only and shall not constitute a part of this Agreement for any other purpose and shall not be deemed to limit or affect any of the provisions hereof.

7.13 Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and assigns. After the Closing, the assignment by a party to this Agreement of any rights hereunder shall not affect the obligations of such party under this Agreement. Subject to Section 5.1 hereof, the Purchaser may assign the Securities and its rights under this Agreement and the other Transaction Documents and any other rights hereto and thereto without the consent of the Company.

7.14 No Third Party Beneficiaries. Except as contemplated by Article VI hereof, this Agreement is intended for the benefit of the parties hereto and their respective permitted successors and assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other person.

7.15 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws of the State of California, without giving effect to any of the conflicts of law principles which would result in the application of the substantive law of another jurisdiction. This Agreement shall not be interpreted or construed with any presumption against the party causing this Agreement to be drafted.

7.16 Survival. The representations and warranties of the Company and the Purchaser shall survive the execution and delivery hereof and the Closing hereunder.

7.17 Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument and shall become effective when counterparts have been signed by each party and delivered to the other parties hereto, it being understood that all parties need not sign the same counterpart.

7.18 Publicity. The Company agrees that it will not disclose, and will not include in any public announcement, the name of the Purchaser without the consent of the Purchaser, which consent shall not be unreasonably withheld or delayed, or unless and until such disclosure is required by law, rule or applicable regulation, including without limitation any disclosure pursuant to the Registration Statement, and then only to the extent of such requirement.

7.19 Severability. The provisions of this Agreement are severable and, in the event that any court of competent jurisdiction shall determine that any one or more of the provisions or part of the provisions contained in this Agreement shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provision or part of a provision of this Agreement and this Agreement shall be reformed and construed as if such invalid or illegal or unenforceable provision, or part of such provision, had never been contained herein, so that such provisions would be valid, legal and enforceable to the maximum extent possible.

7.20 Further Assurances. From and after the date of this Agreement, upon the request of the Purchaser or the Company, the Company and the Purchaser shall execute and deliver such instruments, documents and other writings as may be reasonably necessary or desirable to confirm and carry out and to effectuate fully the intent and purposes of this Agreement and the other Transaction Documents.

{Signature Page Follows}

IN WITNESS WHEREOF, the parties hereto have caused this Debenture and Warrant Purchase Agreement to be duly executed by their respective authorized officers as of the date first above written.

Timothy E. Coyne
Chief Financial Officer

THE QUERCUS TRUST

THIS DEBENTURE AND ANY SHARES ACQUIRED UPON THE CONVERSION OF THIS DEBENTURE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), AND MAY NOT BE SOLD, PLEDGED, HYPOTHECATED, DONATED OR OTHERWISE TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR WITHOUT DELIVERING AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED.

/s/ David Gelbaum

David Gelbaum
Trustee

EXHIBIT A

(The Debenture)


US$625,000	August __, 2008

10% SENIOR SECURED CONVERTIBLE DEBENTURE

THIS DEBENTURE of Electro Energy, Inc., a Florida corporation (the “Company”), in the aggregate principal amount of Six Hundred Twenty-Five Thousand Dollars (US$625,000).

FOR VALUE RECEIVED, the Company promises to pay to The Quercus Trust, or its registered assigns (the “Holder”), the principal sum of Six Hundred Twenty-Five Thousand Dollars (US$625,000), on or prior to August __, 2013 (the “Maturity Date”), and to pay interest to the Holder on the principal sum at the rate of ten percent (10.0%) per annum. Interest shall accrue daily commencing on the Original Issuance Date (as defined in Section 1 below) in the form of cash or freely-trading shares of Common Stock of the Company, as determined in the Company’s sole discretion, until payment in full of the principal sum, together with all accrued and unpaid interest, has been made or duly provided for. In the event that the Company elects to have the interest on this Debenture payable in Common Stock, the shares of Common Stock shall be valued at the VWAP (as defined below) for the ten (10) days immediately preceding the date that such interest is due. Payment of accrued but unpaid interest shall be payable quarterly commencing December 31, 2008, and shall be payable within thirty (30) days of such interest being due and payable. Interest due and payable hereunder shall be paid to the person in whose name this Debenture (or one or more successor Debentures) is registered on the records of the Company regarding registration and transfers of the Debenture (the “Debenture Register”).

This Debenture is subject to the following additional provisions:

1. Definitions. Capitalized terms used and not otherwise defined herein shall have the meanings given such terms in the Debenture and Warrant Purchase Agreement, dated as of even date herewith, pursuant to which the Debenture was originally issued (the “Purchase Agreement”). As used in this Agreement, the following terms shall have the following meanings:

“Common Stock” shall mean the shares of Common Stock of the Company (as adjusted for any reverse splits, forward splits, combination, reclassification or stock dividend from the date hereof).

“Common Stock Equivalents” shall mean any stock options, warrants, convertible securities, debt instruments or other rights to purchase or acquire shares of Common Stock.

“Conversion Date” shall mean the date upon which the conversion of this Debenture shall be effective.

“Conversion Ratio” means, at any time, a fraction, the numerator of which is the then outstanding principal amount represented by the Debenture plus accrued but unpaid interest thereon, and the denominator of which is the applicable conversion price at such time.

“Market Price” shall mean 70% of the VWAP of the Common Stock for the ten (10) business day period prior to the Conversion Date

“Notice of Conversion” shall have the meaning set forth in Section 4(a) hereof.

“Original Issuance Date” shall mean the date of the first issuance of this Debenture regardless of the number of transfers hereof.

“Principal Trading Market” shall mean the Nasdaq Capital Market or other national securities exchange, The National Association of Securities Dealers Inc.‘s Over-The-Counter Bulletin Board, the Pink Sheets, or another national quotation system.

“Subsequent Financing” shall mean the completion by the Company of one or a series of related debt or equity financing transactions, exclusive of a debt financing for maximum gross proceeds of not more than $25,000,000, by a factor, commercial bank or similar financial institution. Notwithstanding the foregoing, the issuance to KIT Financial, Inc. or its affiliates of convertible debentures in an original aggregate principal amount of not more than $500,000, having a conversion price of $1.00 per share, together with warrants to purchase not more than an aggregate of 1,250,000 shares of the Company’s common stock at an exercise price of $1.00 per share, each having the same terms and conditions as are set forth herein and in the New Debenture and the New Warrant, shall not be considered a Subsequent Financing as defined herein, in the Original Debenture as defined in the Purchase Agreement or in any other agreement, document or instrument between the Company and the Purchaser.

“Transaction Documents” shall mean (i) this Debenture, (ii) the Purchase Agreement and Registration Rights Agreement between the Holder and the Company of even date herewith and (iii) the Warrant to purchase Common Stock issued by the Company to the Holder.

“VWAP” means the daily volume weighted average price of the Common Stock on the Principal Trading Market as reported by Bloomberg Financial L.P. (based on a trading day from 9:30 a.m., Eastern time, to 4:00 p.m., Eastern time) using the VWAP function on the date in question.

2. Denominations of Debenture. The Debenture is exchangeable for an equal aggregate principal amount of the Debenture of different authorized denominations, as requested by the Holder surrendering the same, but shall not be issuable in denominations of less than integral multiplies of Ten Thousand Dollars (US$10,000). No service charge to the Holder will be made for such registration of transfer or exchange.

3. Events of Default and Remedies.

(a) “Event of Default,” when used herein, means any one of the following events (whatever the reason and whether any such event shall be voluntary or involuntary or effected by operation of law or pursuant to any judgment, decree or order of any court, or any order, rule or regulation of any administrative or governmental body):

(i) any default in the payment of the principal of or interest on this Debenture as and when the same shall become due and payable lasting more than three (3) Business Days;

(ii) the Company shall fail to observe or perform any other covenant, agreement or warranty contained in, or otherwise commit any breach of, this Debenture, and such failure or breach shall not have been remedied within thirty (30) Business Days of its receipt of notice of such failure or breach;

(iii) the occurrence of any event or breach or default by the Company under the other Transaction Documents and, if there is a cure period, such failure or breach shall not have been remedied within the cure period provided for therein;

(iv) the Company or any of its subsidiaries shall commence a voluntary case under the United States Bankruptcy Code as now or hereafter in effect or any successor thereto (the “Bankruptcy Code”); or an involuntary case is commenced against the Company under the Bankruptcy Code and the petition is not controverted within thirty (30) days, or is not dismissed within sixty (60) days, after commencement of the case; or a “custodian” (as defined in the Bankruptcy Code) is appointed for, or takes charge of, all or any substantial part of the property of the Company or the Company commences any other proceeding under any reorganization, arrangement, adjustment of debt, relief of debtors, dissolution, insolvency or liquidation or similar law of any jurisdiction whether now or hereafter in effect relating to the Company or there is commenced against the Company any such proceeding which remains undismissed for a period of sixty (60) days; or the Company is adjudicated insolvent or bankrupt; or any order of relief or other order approving any such case or proceeding is entered; or the Company suffers any appointment of any custodian or the like for it or any substantial part of its property which continues undischarged or unstayed for a period of thirty (30) days; or the Company makes a general assignment for the benefit of creditors; or the Company shall fail to pay, or shall state in writing that it is unable to pay its debts generally as they become due; or the Company shall call a meeting of its creditors with a view to arranging a composition or adjustment of its debts; or the Company shall by any act or failure to act indicate its consent to, approval of or acquiescence in any of the foregoing; or any corporate or other action is taken by the Company for the purpose of effecting any of the foregoing;

(v) the Company shall default in any of its obligations under any mortgage, indenture or instrument under which there may be issued, or by which there may be secured or evidenced, any indebtedness of the Company in an amount exceeding One Hundred Thousand Dollars ($100,000.00), whether such indebtedness now exists or shall hereafter be created and such default shall result in such indebtedness becoming or being declared due and payable prior to the date on which it would otherwise become due and payable;

(vi) the Company shall issue a press release, or otherwise make publicly known, that it is not honoring a properly executed and duly delivered Notice of Conversion complying with the terms of any of the Transaction Documents, for any reason whatsoever; and

(vii) The Company fails to issue shares of Common Stock to the Holder or to cause its transfer agent to issue shares of Common Stock upon exercise by the Holder of the conversion rights of the Holder in accordance with the terms of this Debenture, fails to transfer or to cause its transfer agent to transfer any certificate for shares of Common Stock issued to the Holder upon conversion of this Debenture and when required by this Debenture or the other Transaction Documents, and such transfer is otherwise lawful, or fails to remove any restrictive legend or to cause its transfer agent to transfer on any certificate or any shares of Common Stock issued to the Holder upon conversion of this Debenture as and when required by this Debenture or any of the Transaction Documents and such legend removal is otherwise lawful, and any such failure shall continue uncured for ten (10) business days after written notice of such failure.

(b) (i) If (x) any Event of Default (other then under Section 3(a)(iv) above) occurs, and continues beyond a cure period, if any, then the Holder may, by written notice to the Company, accelerate all of the payments due under this Debenture by declaring all amounts so due under this Debenture, or (y) any Event of Default occurs under Section 3(a)(iv), and continues beyond a cure period, if any, then all of the payments due under this Debenture shall automatically accelerate without any action on the part of the Holder, whereupon, in any such case, the same shall become immediately due and payable without presentment, demand, protest or other notice of any kind, all of which are waived by the Company, notwithstanding anything contained herein to the contrary, and the Holder may immediately and without expiration of any additional grace period enforce any and all of its rights and remedies hereunder and all other remedies available to it under applicable law. Such declaration may be rescinded and annulled by the Holder at any time prior to payment hereunder. No such rescission or annulment shall affect any subsequent Event of Default or impair any right consequent thereon. This shall include, but not be limited to the right to temporary, preliminary and permanent injunctive relief without the requirement of posting any bond or undertaking. During the period commencing upon delivery of a notice of an Event of Default and terminating upon the cure of such Event of Default, the Company shall not issue an equity or debt securities or any Common Stock equivalents, including any options, warrants, or convertible debt or convertible equity.

(ii) The Holder may thereupon proceed to protect and enforce its rights either by suit in equity, by action at law and/or by exercise of its rights under the Security Agreement and/or by other appropriate proceedings whether for the specific performance (to the extent permitted by law) of any covenant or agreement contained in this Debenture or in aid of the exercise of any power granted in this Debenture, and proceed to enforce the payment of the Debenture held by it, and to enforce any other legal or equitable right of such Holder.

(iii) Except as expressly provided for herein, the Company specifically (i) waives all rights it may have (A) to notice of nonpayment, notice of default, demand, presentment, protest and notice of protest with respect to any of the obligations hereunder or the shares of Common Stock and (B) notice of acceptance hereof or of any other action taken in reliance hereon, notice and opportunity to be heard before the exercise by the Holder of the remedies of self-help, set-off, or other summary procedures and all other demands and notices of any type or description except for cure periods, if any; and (ii) releases the Holder, its officers, directors, agents, employees and attorneys from all claims for loss or damage caused by any act or failure to act on the part of the Holder, its officers, attorneys, agents, directors and employees except for gross negligence or willful misconduct.

4. Conversion.

(a) The Holder is entitled, at its option, to convert and sell at any time and from time to time subject to restrictions set forth below, until payment in full of this Debenture, the principal amount of this Debenture, plus accrued and unpaid interest hereunder, in whole or in part, into shares of Common Stock. The conversion price shall be $1.00 per share (the “Conversion Price”).

(c) No fraction of shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded to the nearest whole share. To convert this Debenture, on the Conversion Date, the Holder hereof shall deliver written notice thereof, substantially in the form of Exhibit A to this Debenture, with appropriate insertions (the “Conversion Notice”), to the Company at its address as set forth herein.

(d) Subject to Section 1.1(e) of the Purchase Agreement (“Underlying Shares”), the Company shall reserve and keep available out of its authorized but unissued shares of Common Stock, solely for the purpose of effecting the conversion of this Debenture, such number of shares of Common Stock as shall from time to time be sufficient to effect such conversion, based upon the Conversion Price.

(e) The issuance of a certificate or certificates for shares of Common Stock upon conversion of the Debenture shall be made without charge to the Holder for any documentary stamp or similar taxes that may be payable in respect of the issuance or delivery of such certificate, provided that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the issuance and delivery of any such certificate upon conversion in a name other than that of the Holder and the Company shall not be required to issue or deliver such certificates unless or until the person or persons requesting the issuance thereof shall have paid to the Company the amount of such tax or shall have established to the satisfaction of the Company that such tax has been paid.

(f) The portion of this Debenture converted into Common Stock shall be canceled upon conversion.

(g) Each Notice of Conversion shall be given by facsimile to the Company no later than 4:00 p.m., Eastern time, on any Business Day. Any such notice shall be deemed given and effective upon the transmission of such facsimile at the facsimile telephone number specified in the Purchase Agreement (with printed confirmation of transmission). In the event that the Company receives the Notice of Conversion after 4:00 p.m., Eastern time, any such notice shall be deemed to have been given on the next Business Day.

(h) When the Holder elects to convert a part of the Debenture, then the Company shall reissue a new Debenture in the same form as this Debenture to reflect the new principal amount.

(i) If, at the time of issuance of shares of Common Stock upon conversion of this Debenture, no registration statement is in effect with respect to such shares under applicable provisions of the Securities Act, the Company may, at its election, require that (i) the Holder provide written reconfirmation of the Holder’s investment intent to the Company, and (ii) any stock certificate evidencing Common Stock shall bear legends reading substantially as follows:

(j) The conversion price shall be subject to adjustment as set forth below in this Section 4(j).

(i) Adjustment for Stock Splits and Combinations. If the Company shall at any time, or from time to time after the date hereof (the “Original Issue Date”), effect a subdivision of the outstanding Common Stock, the Conversion Price in effect immediately prior thereto shall be proportionately decreased, and conversely, if the Company shall at any time or from time to time after the Original Issue Date combine the outstanding shares of Common Stock, the Conversion Price then in effect immediately before the combination shall be proportionately increased. Any adjustment under this Section 4(j) shall become effective at the close of business on the date the subdivision or combination becomes effective.

(ii) Adjustment for Certain Dividends and Distributions. In the event the Company at any time, or from time to time after the Original Issue Date, shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in additional shares of Common Stock, then and in each such event the Conversion Price then in effect shall be decreased as of the time of such issuance or, in the event such a record date shall have been fixed, as of the close of business on such record date, by multiplying the Conversion Price then in effect by a fraction:

(A) the numerator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date; and

(B) the denominator of which shall be the total number of shares of Common Stock issued and outstanding immediately prior to the time of such issuance or the close of business on such record date plus the number of shares of Common Stock issuable in payment of such dividend or distribution; provided, however, if such record date shall have been fixed and such dividend is not fully paid or if such distribution is not fully made on the date fixed therefor, the Conversion Price shall be recomputed accordingly as of the close of business on such record date and thereafter, the Conversion Price shall be adjusted pursuant to this Section 4(j)(ii)(B) as of the time of actual payment of such dividends or distributions.

(iii) Adjustments for Other Dividends and Distributions. In the event the Company at any time or from time to time after the Original Issue Date shall make or issue, or fix a record date for the determination of holders of Common Stock entitled to receive, a dividend or other distribution payable in securities of the Company other than shares of Common Stock, then and in each such event provision shall be made so that the holders of this Debenture shall receive upon conversion thereof in addition to the number of shares of Common Stock receivable thereupon, the amount of securities of the Company that they would have received had the Debentures been converted into Common Stock on the date of such event and had thereafter, during the period from the date of such event to and including the Conversion Date, retained such securities receivable by them as aforesaid during such period giving application to all adjustments called for during such period under this Section 4(j)(iii).

(k) Notwithstanding the foregoing, the Purchaser may not convert this Debenture or exercise the Warrant to the extent that the aggregate number of shares issuable upon such conversion or exercise, together with (i) any penalty shares issued pursuant to the Registration Rights Agreement between the Company and the original Holder executed in connection with this transaction, and the Registration Rights Agreement dated July 23, 2008, and (ii) shares of Common Stock that may have been issued upon the exercise of the warrant issued to the Purchaser pursuant to that certain Warrant Purchase Agreement dated July 23, 2008 , will exceed 19.9% of the total number of shares of Common Stock outstanding as of July 23, 2008, or will otherwise result in a Change in Control (as defined in Section 9 below), until the Company’s stockholders have approved the transactions described herein in accordance with the rules of the Company’s Principal Trading Market. The Company shall use its best effort to obtain stockholder approval as promptly as possible after the Original Issuance Date, but in no event later than October 31, 2008. Failure to obtain such stockholder approval within such time frame shall constitute an Event of Default hereunder.

5. Registration Rights. The Company is obligated to register the resale of the shares of Common Stock issuable upon conversion of this Debenture pursuant to the terms and conditions contained in the Registration Rights Agreement, as of even date herewith, between the Company and the Holder (the “Registration Rights Agreement”).

6. Ranking; Security.

(a) Subject to the provisions of Section 6(b) herein, this Debenture shall rank senior to any other debt of the Company with respect to any payment of amounts due under this Debenture upon the liquidation, dissolution or otherwise of the Company. Except as set forth herein, so long as there are any obligations outstanding under this Debenture, no indebtedness of the Company is or shall become senior to this Debenture in right of payment, whether with respect of interest, damages or upon liquidation or dissolution or otherwise. The Company will not, directly or indirectly, enter into, create, incur or assume any indebtedness of any kind, on or with respect to any of its property or assets now owned or hereafter acquired or any interest therein or any income or profits therefrom, that is senior in any respect to the Company’s obligations under this Debenture. This Debenture shall be secured pursuant to the terms of the Security Agreement, dated December 7, 2007, among the Company, the Purchaser and the collateral agent named therein, and shall be evidenced by a first priority lien on all of the assets of the Company.

(b) Notwithstanding the foregoing, this Debenture shall rank pari passu as to payment and security with that certain $500,000 10% Senior Secured Convertible Debenture to be issued to KIT Financial, Inc., or any of its affiliates (the “KIT Debenture”).

7. Absolute Payment Obligation. Except as expressly provided herein, no provision of this Debenture shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal of, and interest on, this Debenture at the time, place and rate, and in the coin or currency, herein prescribed. This Debenture is a direct obligation of the Company.

8. Prepayment and Subsequent Financing Conversion.

(a) Optional Prepayment. Commencing fourteen (14) months after the date hereof, the Company shall have the right, by providing thirty (30) days prior written notice to the Holder, to prepay this Debenture without premium or penalty. A condition precedent to prepayment of this Debenture is that the Company is listed on a Principal Trading Market and the registration statement contemplated by the Registration Rights Agreement shall be declared effective by the U.S. Securities and Exchange Commission or the shares of Common Stock issuable upon conversion of the Debenture may be sold pursuant to Rule 144 under the Securities Act without volume limitations.

(b) Subsequent Financing. In the event that the Company shall complete a Subsequent Financing prior to the Maturity Date, and the Holder has not converted this Debenture into the securities issued in a Subsequent Financing or into Common Stock, at the option of such Holder, the principal amount of this Debenture, plus accrued and unpaid interest hereunder, shall become due and payable on the closing of the Subsequent Financing.

9. Change in Control. In the event of a Change in Control (as defined below) during the term of this Debenture, the Holder may elect to (i) have this Debenture redeemed by the Company at 110% of the principal balance then outstanding under this Debenture, together with accrued interest, on or within twenty (20) days following the Change in Control (and the Company shall satisfy the redemption request in cash or freely tradable shares of Common Stock, in the Company’s sole discretion) or (ii) convert the principal amount of this Debenture, plus accrued and unpaid interest hereunder, into freely tradable shares of Common Stock on or within such twenty (20) day period. Such Common Stock shall be valued at the relevant VWAP as of the redemption date or conversion date, as the case may be. A “Change in Control” shall be deemed to have occurred when (a) a third person, including a “group,” as such term is defined in Section 13(d)(3) of the Securities Exchange Act of 1934, other than the Purchaser or its affiliates, becomes (other than as a result of a purchase from the Company) the beneficial owner of shares of the Company having 50% or more of the total number of votes that may be cast for the election of directors of the Company and such beneficial owner continues for five consecutive days, or (b) as a result of, or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election or any combination of the foregoing transactions, the persons who were directors of the Company before such transaction shall cease for any reason to constitute at least a majority of the Board of Directors of the Company or any successor; provided, however, that no Change in Control shall occur pursuant to or as a result of the transactions described in the Purchase Agreement.

10. No Rights of Stockholders. Except as otherwise provided herein or in the Purchase Agreement, this Debenture shall not entitle the Holder to any of the rights of a stockholder of the Company, including without limitation, the right to vote on or consent to any action, to receive dividends and other distributions, or to receive any notice of, or to attend, meetings of stockholders or any other proceedings of the Company, unless and to the extent converted into shares of Common Stock in accordance with the terms hereof.

11. Loss, Theft, Mutilation or Destruction. If this Debenture shall be mutilated, lost, stolen or destroyed, the Company shall execute and deliver, in exchange and substitution for and upon cancellation of a mutilated Debenture, or in lieu of or in substitution for a lost, stolen or destroyed Debenture, a new Debenture for the principal amount of this Debenture so mutilated, lost, stolen or destroyed but only upon receipt of an affidavit of such loss, theft or destruction of such Debenture, and, if requested by the Company, an agreement to indemnify the Company in form reasonably acceptable to the Company.

12. Governing Law; Jurisdiction; Waiver of Jury Trial.

(a) This Debenture shall be governed by and construed and enforced in accordance with the internal laws of the State of Delaware without giving effect to the principles of conflicts of law thereof. Any action to enforce the terms of this Debenture, the Purchase Agreement or any other Transaction Document shall be exclusively brought in the state and/or federal courts in the State of Delaware. Service of process in any action by the Holder to enforce the terms of this Debenture may be made by serving a copy of the summons and complaint, in addition to any other relevant documents, by commercial overnight courier to the Company at its address set forth in the Purchase Agreement. The Company and the Holder (by its acceptance hereof) hereby consent to the jurisdiction of the state and federal courts located in the State of Delaware.

(b) THE COMPANY AND THE HOLDER (BY ITS ACCEPTANCE HEREOF) HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS DEBENTURE OR THE TRANSACTIONS CONTEMPLATED BY THIS DEBENTURE. THE COMPANY AND THE HOLDER (BY ITS ACCEPTANCE HEREOF) HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO DELIVER OR ACCEPT, AS THE CASE MAY BE, THIS DEBENTURE BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION.

13. Notices. Any notice, request, demand, waiver, consent, approval or other communication which is required or permitted to be given to any party hereunder shall be in writing and shall be deemed duly given only if delivered to the party personally or sent to the party by facsimile upon electronic confirmation receipt (promptly followed by a hard-copy delivered in accordance with this Section 13) or three days after being mailed by registered or certified mail (return receipt requested), with postage and registration or certification fees thereon prepaid, or if sent by nationally recognized overnight courier, one day after being mailed, addressed to the party at its address as set forth in Section 7.5 of the Purchase Agreement or such other address as may be designated hereafter by notice given pursuant to the terms of this Section 13.

14. Waiver. Any waiver by the Company or the Holder of a breach of any provision of this Debenture shall not operate as or be construed to be a waiver of any other breach of such provision or of any breach of any other provision of this Debenture. The failure of the Company or the Holder to insist upon strict adherence to any term of this Debenture on one or more occasions shall not be considered a waiver or deprive that party of the right thereafter to insist upon strict adherence to that term or any other term of this Debenture in any other occasion. Any waiver must be in writing.

15. Invalidity. If any provision of this Debenture is held to be invalid, illegal or unenforceable, the balance of this Debenture shall remain in effect, and if any provision is held to be inapplicable to any person or circumstance, it shall nevertheless remain applicable to all other persons and circumstances.

16. Payment Dates. Whenever any payment or other obligation hereunder shall be due on a day other than a Business Day, such payment shall be made on the next following Business Day.

17. Transfer; Assignment. This Debenture may not be transferred or assigned, in whole or in part, at any time, except in compliance by the transferor and the transferee with applicable federal and state securities laws.

18. Fees of Enforcement. In the event either party commences legal action to enforce its rights under this Debenture, the non-prevailing party shall pay all reasonable costs and expenses (including but not limited to reasonable attorney’s fees, accountant’s fees, appraiser’s fees and investigative fees) incurred in enforcing such rights.

IN WITNESS WHEREOF, the Company has caused this instrument to be duly executed by an officer thereunto duly authorized as of the date first above indicated.

{Exhibit A to Debenture is Omitted Intentionally}

SAMPLE

EXHIBIT B
(The Warrant)

WARRANT TO PURCHASE COMMON STOCK

Warrant No. ________

VOID AFTER 5:00 P.M., EASTERN TIME,
ON THE EXPIRATION DATE

August __, 2008

FOR VALUE RECEIVED, Electro Energy, Inc., a Florida corporation (the “Company”), hereby agrees to sell upon the terms and on the conditions hereinafter set forth, at any time commencing on the date hereof but no later than 5:00 p.m., Eastern Time, on August __, 2011 (the “Expiration Date”), to The Quercus Trust, or its registered assigns (the “Holder”), under the terms as hereinafter set forth, up to One Million Five Hundred Sixty-Two Thousand Five Hundred (1,562,500) fully-paid and non-assessable shares of the Company’s Common Stock, par value $.001 per share (the “Common Stock”), at a purchase price per share of $1.00 (the “Warrant Price”), pursuant to the terms and conditions set forth in this warrant (this “Warrant”). The number of shares of Common Stock issued upon exercise of this Warrant (“Warrant Shares”) and the Warrant Price are subject to adjustment in certain events as hereinafter set forth.

This Warrant is issued pursuant to that certain Debenture and Warrant Purchase Agreement, dated as of even date herewith (the “Purchase Agreement”), between the Company and the Holder. Capitalized terms not otherwise defined herein are defined as set forth in the Purchase Agreement.

Exercise of Warrant.

(a) The Holder may exercise this Warrant according to the terms and conditions set forth herein by delivering to the Company, at the address set forth in Section 10 prior to 5:00 p.m., Eastern Time, on the Expiration Date (i) this Warrant, (ii) the Subscription Form attached hereto as Exhibit A (the “Subscription Form”) (having then been duly executed by the Holder) and unless Holder elects to make a “Cashless Exercise” (as defined herein) pursuant to Section 1(b) herein, (iii) cash, a certified check or a bank draft in payment of the purchase price, in lawful money of the United States of America, for the number of Warrant Shares specified in the Subscription Form.

(b) If the Holder elects to make a “Cashless Exercise” the Holder shall receive shares of Common Stock on a net basis such that, without the payment of any funds, the Holder shall surrender this Warrant in exchange for the number of shares of Common Stock equal to the product of (x) the number of shares of Common Stock as to which this Warrant is being exercised, multiplied by (y) a fraction, the numerator of which is the aggregate Fair Market Value (as defined herein) price of such Common Stock less the aggregate then applicable Warrant Price, and the denominator of which is such aggregate Fair Market Value price. “Fair Market Value” means the daily volume weighted average price (“VWAP”) of the Common Stock on the Principal Trading Market for the ten (10) trading days prior to the date of exercise of this warrant as reported by Bloomberg Financial L.P. (based on a trading day from 9:30 a.m., Eastern time, to 4:00 p.m., Eastern time.

(c) This Warrant may be exercised in whole or in part so long as any exercise in part hereof would not involve the issuance of fractional Warrant Shares. If exercised in part, the Company shall deliver to the Holder a new Warrant, identical in form to this Warrant, in the name of the Holder, evidencing the right to purchase the number of Warrant Shares as to which this Warrant has not been exercised, which new Warrant shall be signed by the Chief Executive Officer or President of the Company. The term Warrant as used herein shall include any subsequent Warrant issued as provided herein.

(d) No fractional Warrant Shares or scrip representing fractional Warrant Shares shall be issued upon the exercise of this Warrant, but the number of shares issuable shall be rounded to the nearest whole share

(e) In the event of any exercise of the rights represented by this Warrant, a certificate or certificates for Warrant Shares so purchased, registered in the name of the Holder on the stock transfer books of the Company, shall be delivered to the Holder within a reasonable time after such rights shall have been so exercised. The person or entity in whose name any certificate for Warrant Shares is issued upon exercise of the rights represented by this Warrant shall for all purposes be deemed to have become the holder of record of such Warrant Shares immediately prior to the close of business on the date on which the Warrant was surrendered and payment of the Warrant Price and any applicable taxes was made, irrespective of the date of delivery of such certificate, except that, if the date of such surrender and payment is a date when the stock transfer books of the Company are closed, such person shall be deemed to have become the holder of such shares at the opening of business on the next succeeding date on which the Company’s stock transfer books are open. Except as provided in Section 4 hereof, the Company shall pay any and all documentary stamp or similar issue or transfer taxes payable in respect of the issue or delivery of Warrant Shares on exercise of this Warrant.

(f) Notwithstanding the foregoing, the Holder may not convert this Warrant to the extent that the aggregate number of shares issuable upon such exercise or conversion when combined with (i) any penalty shares issued pursuant to the Registration Rights Agreement between the Company and the original Holder of even date herewith, and (ii) shares of Common Stock that may have been issued upon the exercise of that certain warrant issued to the Holder on July 23, 2008, will exceed 19.9% of the total number of shares of Common Stock outstanding as of July 23, 2008, until the Company’s stockholders have approved the transactions described herein in accordance with the rules of the Company’s Principal Trading Market. The Company shall use its best efforts to obtain stockholder approval as promptly as possible after the issuance date of this Warrant, but in no event later than October 31, 2008.

2. Disposition of Warrant Shares and Warrant.

The Company shall remove such legend upon request of the Holder at such time as the Holder is eligible to transfer the Warrant Shares under Rule 144.

5. Capital Adjustments. This Warrant is subject to the following further provisions:

(ii) As used herein, “Additional Shares” shall mean all shares of Common Stock, or any stock options, warrants, convertible securities or other rights to purchase or acquire shares of Common Stock, issued or deemed to be issued by the Company after the date hereof; provided, however, that issuances or deemed issuances (A) described in subsections (a), (b) or (c) of this Section 5, (B) of Common Stock or options or warrants to purchase Common Stock issued to officers, directors or employees of or consultants to the Company pursuant to any compensation agreement, plan or arrangement, or the issuance of Common Stock upon the exercise of any such options or warrants, (C) of Common Stock upon the conversion of the Debenture issued pursuant to that certain Debenture and Warrant Purchase Agreement dated December 7, 2007 between the Company and The Quercus Trust, and (D) of Common Stock upon the exercise of the Debenture issued pursuant to that certain Warrant Purchase Agreement dated July 23, 2008 between the Company and The Quercus Trust, shall not be deemed issuances of Additional Shares of Common Stock.

(f) Adjustment to Number of Warrant Shares. Upon any decrease in the Exercise Price pursuant to Section 5(d), the number of Warrant Shares shall be increased to that number of shares determined by multiplying the Warrant Price in effect immediately prior to such price decrease by the number of Warrant Shares issuable upon exercise of the Warrant immediately prior to such decrease and dividing the resulting product by the decreased Warrant Price.

(g) Certain Shares Excluded. The number of shares of Common Stock outstanding at any given time for purposes of the adjustments set forth in this Section 5 shall exclude any shares then directly or indirectly held in the treasury of the Company.

(h) Deferral and Cumulation of De Minimis Adjustments. The Company shall not be required to make any adjustment pursuant to this Section 5 if the amount of such adjustment would be less than one percent (1%) of the Warrant Price in effect immediately before the event that would otherwise have given rise to such adjustment. In such case, however, any adjustment that would otherwise have been required to be made shall be made at the time of and together with the next subsequent adjustment which, together with any adjustment or adjustments so carried forward, shall amount to not less than one percent (1%) of the Warrant Price in effect immediately before the event giving rise to such next subsequent adjustment. All calculations under this Section 5 shall be made to the nearest cent or to the nearest one-hundredth of a share, as the case may be, but in no event shall the Company be obligated to issue fractional Warrant Shares or fractional portions of any securities upon the exercise of the Warrant.

(i) Duration of Adjustment. Following each computation or readjustment as provided in this Section 5, the new adjusted Warrant Price and number of Warrant Shares purchasable upon exercise of this Warrant shall remain in effect until a further computation or readjustment thereof is required.

6. Notice to Holders.

(a) Notice of Record Date. In case:

(iii) of any voluntary dissolution, liquidation or winding-up of the Company;

If to the Company:

Electro Energy, Inc.
30 Shelter Rock Road
Danbury, Connecticut 06810
Attention: President

With a copy to:

Duane L. Berlin, Esq.
Lev & Berlin, P.C.
200 Connecticut Avenue, 5th Floor
Norwalk, Connecticut 06854

If to the Holder:

To the address of such Holder set forth on the books and records of the Company.

IN WITNESS WHEREOF, the Company has duly caused this Warrant to be signed on its behalf, in its corporate name and by a duly authorized officer, as of the date first written above.

{Exhibits A and B to the Form of Warrant are Omitted Intentionally}

Schedule 1.1(a): Milestones

MILESTONES

The following are the milestones. No funds shall be required unless and until the Company timely meets its milestones.

MILESTONE #1

Abide by weekly budget attached hereto in all material respects. No expenditures shall be made for Colorado Springs except from revenues from such operation, without the approval of the Investor. The Company shall immediately provide all information, materials and access reasonably requested by the Investor and/or its agents in order to confirm the foregoing.

Complete and approve 2.2Ah cell specification and data sheet NLT 8/3.

Complete and approve 2.2Ah cell process, operating and quality specifications NLT 8/10.

Implement 1000 cell per day input to assembly process to debug and improve yield of equipment through formation NLT 8/10.

Quercus to acquire New Debenture(s) and Warrants for Six Hundred Twenty-Five Thousand Dollars ($625,000) within two (2) calendar days of completion, if timely completed, or upon the execution of definitive transaction documents if completed prior thereto.

MILESTONE #2

Continue to abide by the above budget in all material respects and immediately provide all information, materials and access reasonably requested by the Investor and/or its agents in order to confirm such compliance.

Achieve 2.2Ah cell UN certification NLT 8/31.

Ship 300 sample cells to customers NLT 8/18.

Book orders for 1000 cells NLT 8/31.

Quercus to acquire additional New Debenture(s) and Warrants for Six Hundred Twenty-Five Thousand Dollars ($625,000) within two (2) calendar days of timely completion.

Proof of completion of each milestone to be submitted to Mr. Lyle Deitch.

Budget

{Intentionally Omitted}

Schedule 2.1(a): Capitalization

{Intentionally Omitted}

Exhibit E

ELECTRO ENERGY, INC.

REGISTRATION RIGHTS AGREEMENT

THIS REGISTRATION RIGHTS AGREEMENT, dated as of August, 18, 2008 (this “Agreement”), is made by and between Electro Energy, Inc., a Florida corporation, with headquarters located at 30 Shelter Rock Road, Danbury, Connecticut 06810 (the “Company”), and The Quercus Trust (the “Purchaser”).

W I T N E S S E T H:

WHEREAS, upon the terms and subject to the conditions of the Debenture and Warrant Purchase Agreement, dated as of even date herewith, between the Company and the Purchaser (the “Purchase Agreement”) (capitalized terms not otherwise defined herein shall have the meanings ascribed to them in the Purchase Agreement), the Company has agreed to issue and sell to the Purchaser, upon the Company’s completion of certain business milestones set forth in the Purchase Agreement, up to two (2) 10% Senior Secured Convertible Debentures, each with a face value of $625,000 (each, a “Debenture”) and up to two warrants for the purchase of up to 1,562,500 shares of common stock (each, a “Warrant”)(collectively, the “Securities”);

WHEREAS, the Company has agreed to issue the Debentures and Warrants to the Purchaser, which are convertible or exercisable, respectively, into shares of Common Stock (the “Registrible Securities”) upon the terms and conditions of the Debentures and Warrants; and

1. Definitions. As used in this Agreement, the following terms shall have the following meanings:

(a) “Closing Date” means the date of the final closing of the purchase and sale of the Debenture and Warrant.

(b) “Effective Date” means the date the SEC declares a Registration Statement covering Registrable Securities and otherwise meeting the conditions contemplated hereby to be effective.

(e) “Registrable Securities” means the shares of Common Stock that (i) are issuable upon exercise of the Warrants and Debentures and (ii) may be issued as the Periodic Amount, as set forth in Section 2(b) herein, provided that all such shares shall cease to be Registrable Securities at such time as they have been sold under a Registration Statement or pursuant to Rule 144 under the Securities Act or otherwise or at such time as they are eligible to be sold pursuant to Rule 144 (without volume limitations).

2. Registration.

(a) Demand Registration. The Company shall prepare and file with the SEC, as soon as possible, but no later than ninety (90) days after the Company’s receipt of Purchaser’s written request to file a Registration Statement, (the “Required Filing Date”), a Registration Statement registering for resale by the Purchaser a number of shares of Common Stock necessary for the Purchaser to sell the Registrable Securities, but, subject to Section 3 (Rule 415) hereinbelow, in no event less than that number of shares of Common Stock which would be issuable upon exercise of the Warrant or Warrants, at their initial exercise price and upon conversion of the Debenture or Debentures. The Registration Statement shall state that, in accordance with Rule 416 and 457 under the Securities Act, it also covers such indeterminate number of additional shares of Common Stock as may become issuable upon the exercise of the Warrant or Warrants, and upon conversion of the Debenture or Debentures to prevent dilution resulting from stock splits or stock dividends. The Company will use its reasonable best efforts to cause such Registration Statement to be declared effective. In addition, the Company shall promptly prepare and file with the SEC (i) such amendments (including post-effective amendments) and supplements to such Registration Statement or (ii) an additional Registration Statement in the event that the original Registration Statement does not cover all of the shares of Common Stock described above (including, without limitation, as a result of the exercise of the Warrants or conversion of the Debentures).

(b) Payments by the Company.

3. Rule 415.

4. Obligations of the Company. In connection with the registration of the Registrable Securities, the Company shall do each of the following:

(k) Take all other reasonable actions necessary to expedite and facilitate disposition by the Purchaser of the Registrable Securities pursuant to the Registration Statement.

5. Obligations of the Purchaser. In connection with the registration of the Registrable Securities, the Purchaser shall have the following obligations:

6. Expenses of Registration.

7. Indemnification. After Registrable Securities are included in a Registration Statement under this Agreement:

(a) make and keep public information available, as those terms are understood and defined in Rule 144;

(b) file with the SEC in a timely manner all reports and other documents required of the Company under the Securities Act and the Exchange Act;

12. Miscellaneous.

(c) Failure of any party to exercise any right or remedy under this Agreement or otherwise, or delay by a party in exercising such right or remedy, shall not operate as a waiver thereof.

(g) Subject to the requirements of Section 10 of this Agreement, this Agreement shall inure to the benefit of and be binding upon the successors and assigns of each of the parties hereto.

(h) All pronouns and any variations thereof refer to the masculine, feminine or neuter, singular or plural, as the context may require.

(i) The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning thereof.

{Signature Page Follows}

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed as of the day and year first above written.

COMPANY:

ELECTRO ENERGY INC SC 13D/A