AXION POWER INTERNATIONAL, INC.

AMENDED AND RESTATED INDEPENDENT DIRECTORS' STOCK OPTION PLAN

 

PREAMBLE

 

This Independent Directors Stock Option is intended to promote the interests of
Axion Power International, a Delaware corporation (the "Company"), by providing
the Company's independent directors with a proprietary interest in the Company.
This Plan was first adopted by the Company's board of directors on January 8,
2004 and approved by the shareholders at the Company's 2004 Annual Meeting. On
April 8, 2005, the board of directors voted to amend the Plan, subject to
shareholder ratification at the Company's 2005 Annual Meeting, to increase the
number of shares subject to the Plan from 125,000 to 500,000, and better
accommodate the needs of a company with directors who serve for staggered
three-year terms.

 

ARTICLE I
DEFINITIONS

 

As used herein, the following terms have the meanings hereinafter set forth
unless the context clearly indicates to the contrary:

 

(a)"Board" shall mean the Board of Directors of the Company.

 

(b)"Company" shall mean Axion Power International, Inc.

 

(c)"Date of Grant" shall mean each date after the Effective Date of the Plan on
which Eligible directors are appointed to fill a vacancy on the Board or elected
to serve a regular term by the stockholders of the company.

 

(d)"Fair Market Value" shall mean the closing sales price, or the mean between
the closing high "bid" and low "asked" prices, as the case may be, of the Stock
in the over-the-counter market on the day on which such value is to be
determined, as reported by the National Association of Securities Dealers
Automated Quotation System or successor national quotation service. If the Stock
is listed on a national securities exchange, "Fair Market Value" shall mean the
closing price of the Stock on such national securities exchange on the day on
which such value is to be determined, as reported in the composite quotations
for securities traded on such exchange provided by the National Association of
Securities Dealers or successor national quotation service. In the event no such
quotations are available for the day in question, "Fair Market Value" shall be
determined by reference to the appropriate prices on the next preceding day for
which such prices are reported. In all other events, the Board of Directors in
good faith shall determine "Fair Market Value".

 

(e)"Eligible Director" shall mean any director of the Company who meets the
eligibility requirements for an 'independent director' under Securities and
Exchange Commission Rule 10A-3 and the applicable listing standards of any
national securities exchange or other market where the Company's shares are
quoted or listed for trading.

 

(f)"Option" shall mean an Eligible Director's stock option to purchase stock
granted pursuant to the provisions of Article V hereof.

 

(g)"Optionee" shall mean an Eligible Director to whom an Option has been granted
hereunder.

 

(h)"Option Price" shall mean the price at which an Optionee may purchase a share
of Stock under a Stock Option Agreement.

 

(i)"Plan" shall mean the Ax ion Power International, Inc. Amended and Restated
Independent Directors' Stock Option Plan, as it may be further amended from time
to time.

  

 

 

 

(j)"Stock" shall mean the common stock, par value $.0001 per share, of the
Company or, in the event that the outstanding shares of Stock are hereafter
changed into or exchanged for different stock or securities of the Company or
some other corporation, such other stock or securities.

 

(k)"Stock Option Agreement" shall mean an agreement between the Company and the
Optionee under which the Optionee may purchase Stock in accordance with the
Plan.

 

ARTICLE II
THE PLAN

 

2.1Name. This Plan shall be known as the "Axion Power International, Inc.
Amended Directors' Stock Option Plan."

 

2.2Purpose. The purpose of the Plan is to advance the interests of the Company
and its stockholders by affording Eligible Directors of the Company an
opportunity to acquire or increase their proprietary interests in the Company,
and thereby to encourage their continued service as directors and to provide
them additional incentives to achieve the growth objectives of the Company.

 

2.3Effective Date. The effective date of the Original Plan was February 2, 2004.
The shareholders of the Company subsequently approved the Plan on June 4, 2004.
The Plan was amended by the board of directors on April 8, 2005 and will be
submitted for the approval of the Company's stockholders at the Company's 2005
Annual Meeting. Options may be granted under the Plan prior to the receipt of
such shareholder approval provided, however, that all such Option grants shall
be subject to stockholder approval. If the Company's shareholders do not approve
the Plan, then the Plan and all Options then outstanding hereunder shall
forthwith automatically terminate and be of no force and effect.

 

2.4Termination Date. The Plan shall terminate and no further Options shall be
granted hereunder upon the tenth anniversary of the Effective Date of the Plan.

 

ARTICLE III
PARTICIPANTS

 

Each Eligible Director who has been or is subsequently appointed to fill a
vacancy on the Board or elected to serve as a member of the Board shall
participate in the Plan.

 

ARTICLE IV

SHARES OF STOCK SUBJECT TO PLAN

 

4.1Limitations. Subject to any anti-dilution adjustment pursuant to the
provisions of Section 4.2 hereof, the maximum number of shares of Stock that may
be issued and sold hereunder shall not exceed 500,000 shares of Stock. Shares of
Stock subject to an Option may be either authorized and unissued shares or
shares issued and later acquired by the Company; provided however, the shares of
Stock with respect to which an Option has been exercised shall not again be
available for Option hereunder. If outstanding Options granted hereunder shall
terminate or expire for any reason without being wholly exercised prior to the
end of the period during which Options may be granted hereunder, new Options may
be granted hereunder covering such unexercised shares.

 

4.2Anti-dilution. In the event that the outstanding shares of Stock are changed
into or exchanged for a different number or kind of shares or other securities
of the Company or of another corporation by reason of merger, consolidation,
reorganization, recapitalization, reclassification, combination of shares, stock
split or stock dividend:

 

(a)The aggregate number and kind of shares of Stock for which Options may be
granted hereunder shall be adjusted appropriately;

 

(b)The rights under outstanding Options granted hereunder, both as to the number
of subject shares and the Option price, shall be adjusted appropriately; and

  

 

 

 

(c)Where dissolution or liquidation of the Company or any merger or combination
in which the ·  Company is not a surviving corporation is involved, each
outstanding Option granted hereunder shall terminate, but the Optionee shall
have the right, immediately prior to such dissolution, liquidation, merger or
combination, to exercise his Option, in whole or in part, to the extent that it
shall not have been exercised, without regard to the date on which such Option
would otherwise have become exercisable pursuant to Sections 5.4 and 5.5.

 

The Board shall have the sole authority to determine the manner in which any of
the foregoing adjustments are made and any such adjustment may provide for the
elimination of fractional share interests. The adjustments required under this
Article shall apply to any successor or successors of the Company and shall be
made regardless of the number or type of successive events requiring adjustments
hereunder.

 

ARTICLE V
OPTIONS

 

5.1Option Grant, Number of Shares and Agreement.

 

(a)In connection with the 2004 Annual Meeting of Stockholders, three Eligible
Directors were elected to serve for terms of more than one year and the
provisions of the original Plan were unclear with respect to the Options
issuable to those Eligible Directors. To resolve certain ambiguities arising
from the adoption of the Original Plan, which contemplated the annual election
of directors, and the subsequent adoption of bylaws that provide for the
election of directors for staggered three-year terms, the Company has previously
treated the three Eligible Directors as holders of multiple grants under the
Original plan. In connection with the amendment of the Plan, the multiple grants
are hereby rescinded and Eligible Directors who have been elected for term of
more than one-year are granted the options specified in the following table:

 

Eligible Director New Option Grants Vesting Dates Robert Averill 16,000 shares
at $2.50 8,000 shares at 2006 and 2007 Annual Meetings Glenn Patterson 8,000
shares at $2.50 2006 Annual Meeting Joseph Souccar 8,000 shares at $2.50 2006
Annual Meeting

 

(b)Each Eligible Director who is appointed by the board of directors to fill a
vacancy arising from the resignation of a director or an increase in the number
of directors shall automatically receive on the date of his appointment an
option to purchase $20,000 worth of the Corporation's common stock as partial
compensation for serving as a director during the period between the date of
such appointment and the next annual meeting of stockholders.

 

(c)Each Eligible Director who is elected for a regular term as a director of the
Company at an annual meeting of stockholders (or any adjournment thereof) shall
automatically receive on the date of his election an option to purchase $20,000
worth of the Company's common stock for each year of contemplated service. Each
Option granted under the Plan shall be evidenced by a written Stock Option
Agreement, dated as of the Date of Grant and executed by the Company and the
Optionee, stating the Option's duration, time of exercise, and exercise price.
The terms and conditions of the Option shall be consistent with the Plan.

 

5.2Option Price. The Option price of the Stock subject to each Option shall be
the Fair Market Value of the Stock on its Date of Grant.

 

5.3Vesting of Options and Exercise Period. Options shall vest on the first
anniversary of the date of grant, provided that in the event Options for more
than $20,000 worth of the Company's common stock are granted to Eligible
Directors who have been elected to serve for terms of more than one year, such
Options shall vest ratably over the period of appointment. All Options granted
pursuant to the plan shall be exercisable for a period of four years after the
applicable vesting date.

 

 

 

 

5.4Option Exercise.

 

(a)Any Option granted under the Plan shall become exercisable in full on the
first anniversary of the Date of Grant, provided that the Eligible Director has
not voluntarily resigned or been removed "for cause" as a member of the Board of
Directors on or prior to the first anniversary of the Date of Grant. An Option
shall remain exercisable after its exercise date at all times during the
exercise period, regardless of whether the Optionee continues to serve as a
member of the Board.

 

(b)An Option may be exercised at any time or from time to time during the term
of the Option as to any or all full shares which have become exercisable in
accordance with this Section, but not as to less than 25 shares of Stock unless
the remaining shares of Stock that ate so exercisable are less than 25 shares of
Stock. The Option price is to be paid in full in cash upon the exercise of the
Option. The holder of an Option shall not have any of the rights of a
Stockholder with respect to the shares of Stock subject to the Option until such
shares of Stock have been issued or transferred to him upon the exercise of his
Option.

 

(c)An Option shall be exercised by written notice of exercise of the Option,
with respect to a specified number of shares of Stock, delivered to the Company
at its principal office, and by cash payment to the Company at said office of
the full amount of the Option price for such number of shares.

 

5.5Nontransferability of Option. Options may not be transferred by an Optionee
otherwise than by will or the laws of descent and distribution. During his
lifetime, an Optionee shall be the only person entitled to exercise his Options.
An Option held by a deceased Optionee may be exercised by his personal
representative or heirs.

 

ARTICLE VI

STOCK CERTIFICATES

 

The Company shall not be required to issue or deliver any certificate for shares
of Stock purchased upon the exercise of any Option granted hereunder or any
portion thereof unless, in the opinion of counsel to the Company, there has been
compliance with all applicable legal requirements. An Option granted under the
Plan may provide that the Company's obligation to deliver shares of Stock upon
the exercise thereof may be conditioned upon the receipt by the Company of a
representation as to the investment intention of the holder thereof in such form
as the Company shall determine to be necessary or advisable solely to comply
with the provisions of the Securities Act of 1933, as amended, or any other
federal, state or local securities laws.

 

ARTICLE VII

TERMINATION, AMENDMENT AND MODIFICATION OF PLAN

 

The Board may at any time terminate the Plan, and may at any time and from time
to time and, in any respect amend or modify the Plan, No suspension,
termination, modification or amendment of the Plan may, without the consent of
the person to whom an Option shall theretofore have been granted, affect the
rights of such person under such Option.

 

ARTICLE VII

RELATIONSHIP TO OTHER COMPENSATION PLANS

 

The adoption of the Plan shall neither affect any other stock option, incentive
or other compensation plans in effect for the Company or any of its
subsidiaries, nor shall the adoption of the Plan preclude the Company from
establishing any other forms of incentive or other compensation plan for
directors of the Company.

 

ARTICLE VIII
MISCELLANEOUS

 

8.1Plan Binding on Successors. The Plan shall be binding upon the successor and
assigns of the Company.

 

 

 

 

8.2Singular, Plural; Gender. Whenever used herein, nouns in the singular shall
include the plural, and the masculine pronoun shall include the feminine gender.

 

8.3Headings, etc., No Part of Plan. Headings of articles and paragraphs hereof
are inserted for convenience and reference, and do not constitute a part of the
Plan.

 

IN WITNESS WHEREOF, this Independent Directors' Stock Option Plan of Axion Power
International, Inc. has been executed this 8th day of April 2005.

 

/s/ Thomas Granville Thomas Granville, chief executive officer

 

 

 

AMENDMENT NO. 1 TO AXION POWER INTERNATIONAL, INC. AMENDED AND RESTATED
INDEPENDENT DIRECTORS’ STOCK OPTION PLAN

 

 

 

This Amendment No. 1 (“Amendment”) to the Axion Power International, Inc.
Amended and Restated Independent Directors’ Stock Option Plan (“Plan”) amends
Section 4.1 of the Plan as set forth below. Except as amended below, the
entirety of the Plan remains in full force and effect as set forth in the
original Plan. The Amendment was approved by Axion Power International, Inc.’s
Board of Directors on October 17, 2012, pursuant to Article VII of the Plan
which provides that the Board may amend the Plan.

 

1. Section 4.1 of the Plan is hereby amended by replacing “500,000” in the
second line thereof with “1,000,000”. Except as amended by this paragraph 1.,
the Plan remains in full force and effect as originally stated.

 

IN WITNESS WHEREOF, this Amendment No. 1 to Independent Directors’ Stock Option
Plan of Axion Power International, Inc. has been executed this 1st day of
November, 2012.

  

/s/ Charles R. Trego Charles R. Trego
Chief Financial Officer