EXECUTIVE EMPLOYMENT AGREEMENT

This Executive Employment Agreement is entered into and effective this 29th day
of December 2006 between Axion Power International, Inc., a Delaware
corporation, having a place of business at 3601 Clover Lane, New Castle
Pennsylvania (the “Company”) and Edward Buiel of New Castle, Pennsylvania, (the
“Executive”).

WHEREAS, the Company is engaged in the ongoing development of a novel technology
for a supercapacitor/battery hybrid that replaces the lead-based negative
electrode in a lead-acid battery with a highly permeable nanoporous carbon
electrode; and

WHEREAS, the Company is desirous of making appropriate arrangements for the long
term management and continued development of its technology; and

WHEREAS, the Company is desirous of retaining the Executive to serve as its Vice
President and Chief Technology Officer on the conditions set forth herein for
the entire term of this Agreement, and

WHEREAS, in such capacity, the Executive will have access to all of the business
methods and confidential information relating to the Company and its business
activities including, but not limited to, its proprietary techniques and
technologies, its operational and financial matters, its business and financial
and development plans, its personnel training and development programs and its
industry relationships.

NOW THEREFORE, in consideration of the promises and of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:

1. Executive Representations and Warranties. The Executive represents and
warrants to the Company that he is free to accept employment hereunder and that
he has no prior or other obligations or commitments of any kind to anyone that
would in any way hinder or interfere with his acceptance of, or the full,
uninhibited and faithful performance of this Agreement, or the exercise of his
best efforts as an officer of the Company.

2. Employment and Duties. The Company shall employ the Executive as its Vice
President and Chief Technology Officer, or such other comparable executive
capacity as the Board of Directors of the Company shall specify from time to
time. The Executive will work from the Company's office in New Castle
Pennsylvania. If an electrode manufacturing plant or corporate headquarters
facility is established elsewhere in the Northeast the Executive will work from
the newly established facility, provided that regular travel to the Company’s
New Castle facilities will be expected. The Executive’s initial responsibilities
shall include all of the duties and responsibilities described below:

·  
Collaborate with the Senior Management Team in the development of an overall
business plan for Axion. This should include the development of operational
plans and modifications to existing battery production lines to produce Axion’s
e3 Supercell with minimal capital expenditure.

 
 
 

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·  
Work to identify profitable product lines for value added lead-acid battery
products that will augment the lead acid battery products already being built at
New Castle and,

·  
Develop a commercialization strategy for Axion hybrid devices that includes
activated carbon supply, electrode production, negative electrode assembly, and
device assembly.

·  
Ensure that proper testing, reports, product evaluation, and any other necessary
R&D activities are conducted effectively and efficiently.

·  
Work to assure that manufacturing operations achieve business plan goals. This
cooperative endeavor includes ensuring all necessary functions are planned
appropriately and are completed when necessary.

·  
Write and distribute to the BOD a monthly report outlining the key events and
challenges that need to be overcome so that Axion can meet its established
goals. Include status with respect to goals; important test results; product
improvement opportunities; key commercialization status and challenges; resource
requirements; general organizational health, and any other key information that
is deemed of interest to the BOD.

·  
Provide coaching and training for all Axion employees to ensure Axion goals are
achieved and that clear consistent communication is maintained at all times.

·  
Collaborate with the Management Team to develop effective manufacturing
processes and line extensions in support of new value-add lead-acid battery
products and line extensions, assuring market feedback is incorporated into all.

·  
Ensure process quality and proper quality control measures are adopted for all
product development and manufacturing efforts.

·  
Support fund raising activities whereever necessary.

·  
Support, encourage, and lead intellectual property development within the
organization.

·  
Ensure that all elements of a safety program are developed and ensure that a
safe working environment is maintained for all employees at all times.

In addition, the Executive shall, perform such other mutually agreeable
functions and duties as the Board of Directors or chief executive officer may
entrust, delegate or assign to him from time to time.

3. Conduct of Executive. During the entire Term of this Agreement, the Executive
shall devote his full business time, effort, skill and attention to the affairs
of the Company and its subsidiaries, will use his best efforts to promote the
interests of the Company, and will discharge his responsibilities in a diligent
and faithful manner, consistent with sound business practices. During the entire
Term of this Agreement, the Executive shall agree to serve as a member of the
Company’s
 
 
 

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Board of Directors if appointed to such position by the board of directors or
elected to such position by the shareholders of the Company. In furtherance of
the foregoing:

(a) The Executive understands and agrees that he owes the Company a fiduciary
duty, without limiting any other obligations or requirements that are imposed on
the Executive by this Employment Agreement or by law. As such, the Executive
shall occupy a position of and commit to the highest degree of trust, loyalty,
honesty and good faith in all of his dealings with and on behalf of the Company.

(b) The Executive represents that his employment by the Company will not
conflict with any obligations which he has to any other person, firm or entity.
The Executive specifically represents that he has not brought to the Company,
and he will not bring to the Company, any materials or documents of a former or
present employer, or any confidential information or property of any other
person, firm or entity.

(c) The Executive shall not, without disclosure to and approval of the Board of
Directors of the Company, directly or indirectly, assist or have an active
interest in (whether as a principal, stockholder, lender, employee, officer,
director, partner, consultant or otherwise) in any person, firm, partnership,
association, corporation or business organization, entity or enterprise that
competes with or is engaged in a business which is substantially similar to the
business of the Company except that ownership of not more than 1% of the
outstanding securities of any class of any publicly-held corporation shall not
be deemed a violation of this sub-paragraph 3(c).

(d) The Executive shall promptly disclose to the directors of the Company, in
accordance with the Company’s policies, full information concerning any
interests, direct or indirect, he holds (whether as a principal, stockholder,
lender, Executive, director, officer, partner, consultant or otherwise) in any
business which, as reasonably known to the Executive purchases or provides
services or products to the Company or any of its subsidiaries, provided that
the Executive need not disclose any such interest resulting from ownership of
not more than 1% of the outstanding securities of any class of any publicly-held
corporation.

(e) The Executive shall not disclose to any person or entity (other than to the
Company’s Board of Directors or to others as required, in his judgment, in the
due performance of his duties under this Agreement) any confidential or secret
information with respect to the business or affairs of the Company or any of its
subsidiaries or affiliates.

For a period of one year after termination for cause, the Executive shall not
engage in any business or activity that seeks to develop or commercialize a
lead-acid battery/supercapacitor hybrid device technology that would be directly
competitive with the business of the Company, including the activities described
above. Notwithstanding the generality of the foregoing, nothing in this
Agreement shall be deemed to preclude the Executive from participating in other
business opportunities if and to the extent that (i) such business opportunities
are not directly competitive with the business of the Company, (ii) the
Executive’s activities with respect to such opportunities do not have a material
adverse
 
 
 

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effect on the performance of the Executive’s duties hereunder, and (iii) the
Executive’s activities with respect to such opportunity have been fully
disclosed in writing to the Company’s Board of Directors.

4. Conditions of Employment.

(a) Term of Employment. Unless terminated earlier in accordance with the
provisions of this Agreement, the Company agrees to employ the Executive for a
four-year period commencing on December 30, 2006 and terminating on December 29,
2010 (the “Term”). On or before September 30, 2010, the Company and the
Executive shall open negotiations for a mutually acceptable renewal contract. In
the absence of a renewal contract, this agreement shall be automatically renewed
for an additional two-year term.

(b) Place of Employment. The Executive shall occupy offices at the Company’s New
Castle facilities. The Executive may be required to relocate from this business
location should a carbon electrode or corporate headquarters facility be
established at some future time in the Northeastern United States. The Executive
expressly agrees that regular travel shall be necessary as part of his duties.

(c) Ownership of Company Records and Reports. The Executive shall not, except in
the performance of his duties hereunder, at any time or in any manner make or
cause to be made any copies, pictures, duplicates, facsimiles, or other
reproductions or recordings or any abstracts or summaries of any reports,
studies, memoranda, correspondence, manuals, records, plans or other written or
otherwise recorded materials of any kind whatever belonging to or in the
possession of the Company, or of any subsidiary or affiliate of the Company,
including but not limited to materials describing or in any way relating to the
Company’s business activities including, but not limited to, its proprietary
techniques and technologies, its operational and financial matters, its business
and financial and development plans, its personnel training and development
programs and its industry relationships. The Executive shall have no right,
title or interest in any such material, and the Executive agrees that, except in
the performance of his duties hereunder, he will not, without the prior written
consent of the Company remove any such material from any premises of the
Company, or any subsidiary or affiliate of the Company, and immediately upon the
termination of his employment for any reason whatsoever Executive shall return
to the Company all such material in his possession.

(d) Company's Trade Secrets. Without the prior written consent of the Company,
the Executive shall not at any time (whether during or after his employment with
the Company) use for his own benefit or purposes or for the benefit or purposes
of any other person, firm, partnership, association, corporation or business
organization, entity or enterprise, or disclose in any manner to any person,
firm, partnership association, corporation or business organization, entity or
enterprise, except in the performance of his duties hereunder, any trade
secrets, or any information data, know-how or knowledge constituting trade
secrets belonging to, or relating to the affairs of the Company, or any
subsidiary, former subsidiary, or affiliate of the Company.

(e) Inventions, Copyrights. Trademarks. The Executive shall promptly disclose to
the Company (and to no one else) all improvements, discoveries, ideas and
inventions that
 
 
 

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    may be of significance to the Company, or any subsidiary or affiliate of the
Company, made or conceived alone or in conjunction with others (whether or not
patentable, whether or not made or conceived at the request of or upon the
suggestion of the Company or any subsidiary or affiliate of the Company during
or out of his usual hours of work or in or about the premises of the Company or
elsewhere) while in the employ of the Company or of any subsidiary or affiliate
of the Company, or made or conceived within one year after the termination of
his employment by the Company or of any subsidiary or affiliate of the Company
if resulting from, suggested by or relating to such employment. All such
improvements, discoveries, ideas and inventions shall be the sole and exclusive
property of the Company and are hereby assigned to the Company. At the request
of the Company and at its cost, the Executive shall assist the Company, or any
person or persons from time to time designated by it, to obtain the copyright,
trademark and/or grant of patents in the United States and/or in such other
country or countries as may be designated by the Company, covering such
improvements, discoveries, ideas and inventions and shall in connection
therewith and in connection with the defense of any patents execute such
applications, statements or other documents, furnish such information and data
and take all such other action (including, but not limited to, the giving of
testimony) as the Company may from time to time reasonably request.

5. Compensation. The Company shall compensate the Executive for all services to
be rendered by him during the Term as follows:

(a) The Executive shall receive a salary of $14,000 per month for services
rendered during the first year of its term. The increase in the Executive’s
salary to $14,000 per month shall be retroactive to October 1, 2006. The
Executive’s Salary shall be reviewed on a annual basis and subject to
renegotiation based on the performance of the Executive and the Company.

(b) The Executive shall participate in any executive compensation plans adopted
by the shareholders of the Company; provided, however, that the discretionary
authority to determine the level of the Executive’s participation therein and
the terms and conditions of such participation shall remain vested in the
Compensation Committee of the Board of Directors and the Compensation Committee
shall have the authority to adjust such participation upward or downward from
time to time in its sole discretion.

(c) The Executive shall participate, without cost to the Executive, in the
Company's standard employee benefit programs, including but not limited to
medical and hospitalization insurance and group life insurance, as in effect
from time to time. The Executive will be required to obtain Key Man Life
Insurance. The company will bear the full cost of this insurance policy.

(d) The Executive shall be entitled to an automobile allowance of $500 per
month, plus reimbursement at the maximum allowable rate under applicable income
tax rules for all reasonable business use of the automobile.

(e) During the Term of this Agreement, the Company will reimburse the Executive
for all reasonable business expenses incurred by him on behalf of the Company in
the
 
 
 

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    performance of his duties hereunder upon presentation of vouchers, receipts
or other evidence of such expenses in accordance with the policies of the
Company, and provided that the Executive shall incur no costs or expenses that
exceed two thousand dollars without prior authorization of the Company.

(f) Notwithstanding any other provision of this Agreement, it is agreed that the
Executive shall be entitled to receive such incentive bonuses, stock options and
other benefits as the Compensation Committee of the Board of Directors may grant
from time to time.

(g) Notwithstanding the general provisions of the Company’s Policy Manual
relating to vacations, the Executive shall be entitled to a total of four (4)
weeks of paid vacation per year. Except for the 4-week time period herein
specified, all other provisions of the Policy Manual relating to vacation
scheduling will be applicable to vacation time allocated to the Executive
hereunder.

6. Restricted Stock Grant. Simultaneously with the execution of this Agreement,
the Executive shall be entitled to receive and the Company shall instruct its
transfer agent to issue to the Executive 250,000 shares of the Company’s
authorized and previously unissued common stock (the “Grant Shares”) which
shall, upon issuance, be subject to all of the following terms and conditions:

(a) The Grant Shares shall be issued to the Executive under the Company’s
Incentive Stock Plan for the sole purpose of providing the Executive with a
tangible incentive to put forth maximum efforts for the success of the Company
and its business in the future. In the event that the Executive’s employment
with the Company is terminated by the Executive without cause or by the Company
with cause prior to the third anniversary of the date of this Agreement, then
all Grant Shares shall be immediately forfeit without further action by the
Company or the Executive.

(b) Absolute and unrestricted ownership of the Grant Shares shall vest in the
Executive on December 29, 2009. During the period between the issue date and the
vesting date, the Executive shall be entitled to receive any and all dividends
or other distributions payable with respect to the grant shares and shall be
entitled to exercise all voting and other shareholders rights with respect to
such shares. Executive shall not, however, be entitled to sell, transfer,
hypothecate or otherwise encumber the grant shares until they are fully vested.

(c) Notwithstanding the provisions of subparagraphs (a) and (b) absolute and
unrestricted ownership of all Grant Shares shall immediately vest in the
Executive in the event that the Executive’s employment with the Company is
terminated by the Company without cause. Furthermore, all unvested Grant Shares
shall vest in the Executive immediately prior to the consummation of (i) any
merger, consolidation or similar business combination transaction where the
Company is not the surviving entity, (ii) any sale of all or substantially all
of the Company’s assets where the proceeds are intended for distribution to the
stockholders, or (iii) any other transaction or series of transactions whereby
any person, entity or group acting in concert acquires direct or indirect
ownership of more than 20% of the Company’s outstanding voting securities.
 
 
 

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7. Grant of Stock Purchase Option. The Company acknowledges that the Executive
has agreed to devote substantially all of his business time and effort to the
Company during the entire Term of this Agreement. In recognition of the
opportunity costs associated with such actions, the Executive is hereby granted
an option to purchase 100,000 shares of the Company’s common stock at an
exercise price of $3.75 (U.S.) per share. The foregoing option shall vest
proportionally at the end of the third and fourth years of this contract. If the
Executive's employment is terminated by the Company without cause (as defined in
Section 8) or terminated by the Executive for good reason (as defined in Section
8), all unvested options shall immediately vest and become exercisable. In all
other cases, all unvested options shall immediately terminate. Notwithstanding
the generality of the foregoing, rights represented by vested options shall not
be affected by the termination of the Executive’s employment because of the
disability or death of the Executive. From and after the vesting dates, the
vested options may be exercised at any time or from time to time, in whole or in
part, for a period of five years. The option agreement attached hereto as
“Exhibit A” shall be executed concurrently with this agreement.

8. Termination of Employment.

(a) This Agreement and the compensation payable to Executive hereunder shall
terminate and cease to accrue forthwith upon Executive's death.

(b) If the Executive's employment is terminated (i) other than for cause (as
defined below) by the Company or (ii) by the Executive for good reason (as
defined below), the Company shall pay to Executive an aggregate severance amount
equal to 50% of the Executive's annual base salary in effect as of the date of
such termination (i.e., six months' base salary and such amount being referred
to as the "Severance Amount"). The Severance Amount may be paid in a single lump
sum amount, provided that payment of the Severance Amount shall be contingent
upon the Executive signing a suitable release and waiver agreement.

(c) For the purposes of this agreement, "cause" for termination by the Company
shall exist upon (i) the conviction of the Executive of, or the entry of a
pleading of guilty or nolo contendere by the Executive to, any crime involving
moral turpitude that may reasonably adversely reflect on the Company or any
felony; (ii) willful misconduct in connection with the Executive's duties or
willful failure to use reasonable effort to perform substantially his
responsibilities in the best interest of the Company, provided that "willful
misconduct" and "willful failure to perform" shall not include actions or
inactions on the part of the Executive that were taken or not taken in good
faith by the Executive; or (iii) fraud, material dishonesty, or gross misconduct
in connection with the Company perpetuated by the Executive.

(d) For the purposes of this agreement, "good reason" for termination by the
Executive shall exist upon (i) a material change in the reporting
responsibilities of the Executive to someone other than the Chief Executive
Officer or the Board; (ii) a substantial diminution of the Executive's
responsibilities; (iii) any reduction in the Executive's level of compensation
without the approval of the Executive; or (iv) a transfer of the Executive's
work location for purposes of performing his duties hereunder to a location
other than the Northeastern United States.
 
 
 

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(e) At the end of the initial term of this agreement, the Executive’s employment
may be terminated by either party for any reason, or for no reason, upon written
notice given not less than 90 days prior to of the termination date.

(f) The Executive shall retain the right to voluntarily terminate his employment
hereunder at any time on 60 days’ written notice. Upon such a voluntary
termination of the employment relationship, all future compensation that the
Executive is entitled to receive and all future benefits for which the Executive
is eligible shall cease and terminate as of the date of termination. The
Executive shall be entitled to pro rata salary through the date of such
termination, but the Executive shall not be entitled to any individual bonuses
or individual incentive compensation not yet paid at the date of such
termination.

(g) Notwithstanding the termination of the Executive’s employment hereunder, the
provisions of Paragraphs 3, 6, 7, 8 and 9 shall survive such termination.

9. Specific Performance. If any portion of this Agreement is found by a court of
competent jurisdiction to be too broad to permit enforcement of such restriction
to its full extent, then such restriction shall be enforced to the maximum
extent permitted by law, and the Executive hereby consents and agrees that such
scope may be judicially modified accordingly in any proceeding brought to
enforce such restriction. All provisions of this Agreement are severable, and
the unenforceability or invalidity of any single provision hereof shall not
affect any remaining provision. The Executive acknowledges and agrees that the
Company's remedy at law for any breach of any of his obligations hereunder would
be inadequate, and agrees and consents that temporary and permanent injunctive
relief may be granted in any proceeding that may be brought to enforce any
provision of this Agreement without the necessity of proof of actual damage and
without any bond or other security being required. Such remedies shall not be
exclusive and shall be in addition to any other remedy which the Company may
have.

10. Miscellaneous.

(a) The failure of a party to insist on any occasion upon strict adherence to
any Term of this Agreement shall not be considered to be a waiver or deprive
that party of the right thereafter to insist upon strict adherence to that Term
or any other Term of this Agreement. Any waiver must be in writing.

(b) All notices and other communications under this Agreement shall be in
writing and shall be delivered personally or mailed by registered mail, return
receipt requested, and shall be deemed given when so delivered or mailed, to a
party at such address as a party may, from time to time, designate in writing to
the other party.

(c) This Agreement shall be assigned to and inure to the benefit of, and be
binding upon, any successor to substantially all of the assets and business of
the Company as a going concern, whether by merger, consolidation, liquidation or
sale of substantially all of the assets of the Company or otherwise.
 
 
 

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(d) This Agreement constitutes the entire Agreement between the parties
regarding the above matters, and each party acknowledges that there are no other
written or verbal Agreements or understandings relating to such subject matter
between the Executive and the Company or between the Executive and any other
individuals or entities other than those set forth herein. No amendment to this
Agreement shall be effective unless it is in writing and signed by both the
parties hereto.

(e) Paragraph 6 of this Agreement shall be construed in accordance with the
General Corporation Law of Delaware. All other provision of this Agreement shall
be construed according to the laws of the Commonwealth of Pennsylvania
pertaining to Agreements formed and to be performed wholly within the State of
Pennsylvania. In the event action is brought to enforce any provisions of this
Agreement, the prevailing party shall be entitled to reasonable legal fees as
fixed by the court. The Executive represents and warrants that he has reviewed
this Agreement in detail with his legal and other advisors, as he considers
appropriate, and that he fully understands the consequences to him of its
provisions. The Executive is relying on his own judgment and the judgment of his
advisors with respect to this Agreement.

(f) In the event a dispute arises out of, in connection with, or with respect to
this Agreement, or any breach thereof, such dispute shall, on the written
request of one party delivered to the other party, be submitted to and settled
by binding arbitration before a single arbitrator conducted in New Castle,
Pennsylvania. The party against whom the arbitrator’s award is rendered shall
pay all costs and expenses of such arbitration, unless the arbitrator shall
specifically allocate costs in a different manner because the award is not
entirely in favor of either party

(g) This Agreement may be executed in any number of counterparts, which will
each be deemed to be an original for all purposes hereof.

IN WITNESS WHEREOF, the parties have signed this agreement intending to be bound
thereby.

By:
Axion Power International, Inc
 
Executive
   
Thomas G. Granville
 
Edward Buiel
   
Chief executive officer
     

 

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NONQUALIFIED STOCK OPTION AGREEMENT

AXION POWER INTERNATIONAL, INC.
(The Options Represented Hereby Are Not Presently Exercisable)

THIS OPTION AGREEMENT (“Option Agreement”) is dated and delivered effective as
of December 30, 2006, in New Castle, Pennsylvania between AXION POWER
INTERNATIONAL, INC., a Delaware corporation (hereinafter called the “Company”)
and Edward Buiel (hereinafter called “Optionee”):

R E C I T A L S

The Company and the Optionee have entered into an employment agreement that
requires the Company to grant the Optionee an option to purchase 100,000 shares
of the Company’s common stock at a price of $3.75 per share as partial
consideration for the services to be rendered under the agreement.

The Compensation Committee of the Board of Directors (the “Committee”) has
determined that it would be in the best interests of the Company and its
stockholders to grant the option provided for herein (the “Option”) as an
inducement to serve as an employee of the Company and to provide Optionee with a
proprietary interest in the future of the Company;

NOW THEREFORE, in consideration of the mutual covenants hereinafter set forth,
the parties hereto agree as follows:

1. Grant of the Option. The Company hereby grants to Optionee the right and
option to purchase, on the terms and conditions hereinafter set forth, all or
any part of an aggregate of 100,000 shares (the “Stock”) of the presently
authorized but unissued common stock, par value $.0001 per share, of the Company
(the “Common Stock”). The purchase price of the Stock subject to this Option
shall be $3.75 per share.

2. Vesting of the Option. As long as the Optionee remains an employee of the
Company, the option granted hereby shall vest at the rate of 50,000 shares per
year commencing on December 29, 2009. If the Optionee’s employment is terminated
by the Company without cause or terminated by the Optionee for good reason, all
unvested options shall immediately vest and become exercisable. In all other
cases, all unvested options shall immediately terminate. From and after the
vesting dates, the vested options may be exercised at any time or from time to
time, in whole or in part, for a period of five years. Notwithstanding the
generality of the foregoing, rights represented by vested options shall not be
affected by the termination of the Optionee’s employment because of the
disability or death of the Optionee

3. Exercise of Option.

(a) Vested Options may only be exercised by the Optionee who shall have the
right to exercise such Option in whole or in part, at any time or from time to
time during the period commencing on a vesting date and terminating on the sixth
anniversary of such vesting date. The
 
 
 

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Option is not transferable or assignable by the Optionee other than by will, as
a result of the laws of descent and distribution or pursuant to a Qualified
Domestic Relations Order. If the Option is transferred by will, as a result of
the laws of descent and distribution or pursuant to a Qualified Domestic
Relations Order, the transferee shall have all of the rights, powers and
privileges that the Optionee would have had in the absence of such a transfer.

(b) This Option may be exercised by written notice of intent to exercise the
Option delivered to the Company at its principal office no fewer than five days
in advance of the effective date of the proposed exercise. Such notice shall be
accompanied by this Agreement, shall specify the number of shares of Common
Stock with respect to which the Option is being exercised and shall specify the
proposed effective date of such exercise. Such notice shall also be accompanied
by payment in full to the Company at its principal office of the option price
for the number of shares of the Common Stock with respect to which the Option is
then being exercised. The payment of the option price shall be made in cash or
by certified check, bank draft, or postal or express money order payable to the
order of the Company or, with the consent of the Committee, in whole or in part
in Common Stock which is owned by the Optionee and valued at its Fair Market
Value on the date of exercise. Any payment in shares of Common Stock shall be
effected by delivery of such shares to the Secretary of the Company, duly
endorsed in blank or accompanied by stock powers duly executed in blank,
together with any other documents or evidence as the Secretary of the Company
shall require from time to time.

(c) Upon the Company’s determination that the Option has been validly exercised
as to any of the Stock, the Secretary of the Company shall issue a certificate
or certificates in the Optionee’s name for the number of shares set forth in his
written notice. However, the Company shall not be liable to the Optionee for
damages relating to any delays in issuing the certificate(s) to him, any loss of
the certificate(s), or any mistakes or errors in the issuance of the
certificate(s) or in the certificate(s) themselves.

3. Term of Employment. This Option shall not grant to Optionee any right to
continue serving as an employee of the Company.

4. Notices; Deliveries. Any notice or delivery required to be given under the
terms of this Option Agreement shall be addressed to the Company in care of its
Secretary at its principal office, 3601 Clover Lane, New Castle, Pennsylvania,
and any notice or delivery to be given to Optionee shall be addressed to him at
such address as the Optionee may hereafter designate in writing. Any such notice
or delivery shall be effective as of the date of receipt.

5. Disputes. As a condition of the granting of the Option hereby, the Optionee
and his heirs and successors agree that any dispute or disagreement which may
arise hereunder shall be determined by the Committee in its sole discretion and
judgment, and that any such determination and any interpretation by the
Committee of the terms of this Option shall be final and shall be binding and
conclusive, for all purposes, upon the Company, Optionee, his heirs and personal
representatives.

6. Legend on Certificates. The certificate(s) representing the shares of Stock
purchased by exercise of this Option will be stamped or otherwise imprinted with
a legend in such form as the Company or its counsel may require with respect to
any applicable restrictions on the sale or transfer
 
 
 

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of such shares and the stock transfer records of the Company will reflect
stop-transfer instructions with respect to such shares.

7. Miscellaneous.

(a) All decisions of the Committee upon any questions arising under the Plan or
under this Option Agreement shall be conclusive.

(b) Nothing herein contained shall affect Optionee’s right to participate in and
receive benefits from and in accordance with the then current provisions of any
pension, insurance or other employee welfare plan or program of the Company.

(c) Optionee agrees to make appropriate arrangements with the Company for
satisfaction of any applicable federal, state or local income tax, withholding
requirements or like requirements, including the payment to the Company at the
time of exercise of the Option of all such taxes and requirements.

(d) Whenever the term “Optionee” is used herein under circumstances applicable
to any other person or persons to whom this Option, in accordance with the
provisions hereof, may be transferred, the word “Optionee” shall be deemed to
include such person or persons.

(e) Notwithstanding any of the other provisions hereof, Optionee agrees that he
will not exercise this Option and that the Company will not be obligated to
issue any of the Stock pursuant to this Option Agreement, if the exercise of the
Option or the issuance of such shares of Common Stock would constitute a
violation by the Optionee or by the Company of any provision of any law or
regulation of any governmental authority or na-tional securities exchange. Upon
the acquisition of any Stock pursuant to the exercise of the Option herein
granted, Optionee will enter into such written representations, warranties and
agreements as the Company may reasonably request in order to comply with
applicable securities laws or with this Agreement.

(f) This Agreement shall be binding upon and inure to the benefit of any
successor or successors of the Company. The interpretation, performance and
enforcement of this Option Agreement shall be governed by the laws of the State
of Delaware.

IN WITNESS WHEREOF, the Company has, as of the date and place first above
written, caused this Agreement to be executed on its behalf and the Optionee has
hereunto set his hand as of the date and place first above written, which date
is the date of grant of this Option.

By:
Axion Power International, Inc
 
Optionee
   
Thomas G. Granville
 
Edward Buiel
   
Chief executive officer