<PAGE>
                                                                   Exhibit 10.42

                              TERMINATION AGREEMENT

This Termination Agreement ("Agreement"), is made and entered into as of
December 31, 2001, by and between Ilion Technology Corporation, a Delaware
corporation ("Ilion") (formerly named Pacific Lithium Limited and formerly a New
Zealand corporation) and Lithium Technology Corporation, a Delaware corporation
("LTC").

                                    RECITALS

      WHEREAS, Ilion and LTC have entered into an Agreement and Plan of Merger
dated as of January 19, 2000 ("LTC-Ilion Merger Agreement") and the Bridge Loan
Financing Agreements (as defined in the LTC-Ilion Merger Agreement) as amended
by Amendment Agreement No. 1 dated as of March 31, 2000, Amendment Agreement No.
2 dated as of May 4, 2000, Amendment Agreement No. 3 dated as of June 6, 2000
and Amendment Agreement No. 4 dated as of February 2, 2001 and related
agreements (collectively the "LTC-Ilion Agreements");

      WHEREAS, LTC, Ilion, GAIA Akkumulatorenwerke GmbH ("GAIA") and Arch Hill
Capital ("Arch") have entered into a Letter of Intent relating to a merger
between GAIA and LTC (the "LTC-GAIA Merger"), an equity investment (the
"Financing") in LTC by new investors (the "Investors") and related transactions;

      WHEREAS, it is a condition to the LTC-GAIA Merger that Ilion and LTC enter
into this Agreement and terminate the LTC-Ilion Agreements on the terms and
conditions set forth herein.

      NOW, THEREFORE, in consideration of these premises and the mutual
agreements contained in this Agreement, Ilion and LTC agree as follows:

1.    TERMINATION OF LTC-ILION AGREEMENTS

      1.1   On December 31, 2001 (the "Closing"):

      (a)   All LTC-Ilion Agreements and all rights and obligations of the
parties thereto under all of the existing LTC-Ilion Agreements shall terminate
and shall be superceded by the terms of this Agreement, provided that the
parties hereby acknowledge, ratify and affirm that any and all Improvements (as
such term is defined in the License and Option Agreement dated as of October 1,
1999 between LTC and Ilion) made, discovered, developed or acquired by Ilion or
LTC at any time from and after October 1, 1999 shall belong to Ilion, and Ilion
shall have exclusive right, title and interest thereto.

      (b)   All promissory notes issued from LTC to Ilion through December 31,
2001 ($5,249,000 in total consisting of $5,149,000 outstanding as of December 3,
2001 and $100,000 issued between December 3, 2001 and December 31, 2001) which
Ilion acknowledges and agrees are all of the promissory notes issued from LTC to
Ilion through December 31, 2001 and no further amounts are due and owing by LTC
to Ilion (the "Ilion Notes") shall be sold and converted as follows:

            (i)   In consideration of all of the aggregate benefits to Ilion
      pursuant to this Section 1, Ilion shall sell to the Investors $3,949,000
      in principal of Ilion Notes pursuant
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      to the terms of a Note Purchase and Sale Agreement attached hereto as
      Exhibit A.

            (ii)  $1,300,000 of Ilion Notes shall be converted into 13,000,000
      shares of LTC Common Stock (the "Conversion Shares") and LTC shall deliver
      to Ilion a stock certificate for 13,000,000 shares of LTC Common Stock.

      1.2   Upon the Closing, the warrant (the "Warrant") to purchase shares of
LTC common stock (the "Warrant Shares") issued to Ilion pursuant to the Bridge
Loan Financing Agreements shall be amended as set forth in the Warrant Amendment
Agreement attached hereto as Exhibit B (the "Warrant Amendment").

      1.3   Upon the Closing, LTC and Ilion shall enter into License Agreements
in the forms attached hereto as Exhibit C-1 and Exhibit C-2.

      1.4   The Closing of the transactions contemplated by this Agreement shall
take place on December 31, 2001 at such time and place agreed to by the parties.

2.    REPRESENTATIONS AND WARRANTIES OF ILION

      Ilion hereby represents and warrants to LTC as follows:

      2.1   Organization; Power and Authority. Ilion (a) is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and (b) has all requisite corporate power and authority and all
authorizations, licenses and permits necessary to own, lease and operate its
properties, to carry on its business as presently conducted and as proposed to
be conducted and to enter into and carry out the transactions contemplated by
this Agreement.

      2.2   Authorization of the Agreement. The execution, delivery and
performance by Ilion of this Agreement has been duly authorized by all requisite
corporate action on the part of Ilion, and this Agreement constitutes a legal,
valid and binding obligation of Ilion, enforceable against Ilion in accordance
with its terms, except to the extent that enforceability may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
by general principles of equity.

      2.3   No Conflict. The execution, delivery and performance by Ilion of
this Agreement and the consummation by Ilion of the transactions contemplated
hereby will not (a) violate any provision of law, statute, rule or regulation,
or any ruling, writ, injunction, order, judgment or decree of any court,
administrative agency or other governmental body applicable to Ilion, or any of
its properties or assets, (b) conflict with or result in any breach of any of
the terms, conditions or provisions of, or constitute (with due notice or lapse
of time, or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of any
encumbrance upon any of the properties or assets of Ilion under any material
contract to which Ilion is a party or (c) violate the Certificate of
Incorporation or the Bylaws of Ilion.
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      2.4   Investment Representations.

            (a)   Disclosure Documents Ilion has received and reviewed (but
disclaims any responsibility or view as to the accuracy or adequacy of) LTC's
Form 10-KSB dated December 31, 2000, Form 10-QSB dated March 31, 2001, Form
10-QSB dated June 30, 2001, Form 10-QSB dated September 30, 2001, Form 8-K dated
February 14, 2001, and Form 8-K dated December 12, 2001 (collectively, the
"Disclosure Documents").

            (b)   Investment Representation.

                  (i)   Ilion is generally familiar with the business of LTC and
      has had an opportunity to review the Disclosure Documents and to have all
      of Ilion's questions related thereto satisfactorily answered.

                  (ii)  Ilion acknowledges that the Conversion Shares and
      Warrant Shares (collectively, the "Shares") are speculative and involve a
      high degree of risk and Ilion represents that it is able to sustain the
      loss of the entire amount of its investment.

                  (iii) Ilion has previously invested in unregistered securities
      and has sufficient financial and investing expertise to evaluate and
      understand the risks of the Shares.

                  (iv)  Ilion has received from LTC, and is relying on, no
      representations (except as set forth in this Agreement) or projections
      with respect to LTC's business and prospects.

                  (v)   Ilion is an "accredited investor" within the meaning of
      Regulation D under the Securities Act of 1933 (the "Securities Act").

                  (vi)  Ilion is acquiring the Shares for investment purposes
      only without intent to distribute the same, and acknowledges that the
      Shares have not been registered under the Securities Act and applicable
      state securities laws, and accordingly, constitute "restricted securities"
      for purposes of the Securities Act and such state securities laws.

                  (vii) Ilion acknowledges that it will not be able to transfer
      the Shares except upon compliance with the registration requirements of
      the Securities Act and applicable state securities laws or exemptions
      therefrom.

                  (viii) The certificates and/or instruments evidencing the
      Shares will contain the following legend:

      THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
      UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE SOLD,
      TRANSFERRED, ASSIGNED, PLEDGED, OR HYPOTHECATED ABSENT AN EFFECTIVE
      REGISTRATION THEREOF UNDER SUCH ACT OR COMPLIANCE WITH RULE 144
      PROMULGATED UNDER SUCH ACT, OR UNLESS THE COMPANY HAS RECEIVED AN OPINION
      OF COUNSEL, IN FORM AND SUBSTANCE REASONABLY SATISFACTORY TO THE
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      COMPANY AND ITS COUNSEL AND FROM ATTORNEYS REASONABLY ACCEPTABLE TO THE
      COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.


3.    REPRESENTATIONS AND WARRANTIES OF LTC

      LTC hereby represents and warrants to Ilion as follows:

      3.1   Organization and Good Standing; Power and Authority; Qualifications.
LTC (a) is a corporation duly organized, validly existing and in good standing
under the laws of the Delaware and (b) has all requisite corporate power and
authority and all authorizations, licenses and permits necessary to own, lease
and operate its properties, to carry on its business as presently conducted and
as proposed to be conducted and to enter into and carry out the transactions
contemplated by this Agreement.

      3.2   Authorization of the Agreement. The execution, delivery and
performance by LTC of this Agreement has been duly authorized by all requisite
corporate action on the part of LTC, and this Agreement constitutes a legal,
valid and binding obligation of LTC, enforceable against LTC in accordance with
its terms, except to the extent that enforceability may be limited by
bankruptcy, insolvency or similar laws affecting creditors' rights generally or
by general principles of equity.

      3.3   No Conflict. The execution, delivery and performance by LTC of this
Agreement and the consummation by LTC of the transactions contemplated hereby
will not (a) violate any provision of law, statute, rule or regulation, or any
ruling, writ, injunction, order, judgment or decree of any court, administrative
agency or other governmental body applicable to LTC, or any of its properties or
assets, (b) conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute (with due notice or lapse of time, or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of any encumbrance upon any of
the properties or assets of LTC under any material contract to which LTC is a
party or (c) violate the Certificate of Incorporation or the Bylaws of LTC.

      3.4   No Undisclosed Liabilities. LTC does not have any liabilities or
obligations (whether or not absolute or contingent) and none of its assets is
subject to any liabilities or obligations which are not fairly reflected in the
Disclosure Documents, other than liabilities incurred in the ordinary course of
business consistent with past practice or other than those set forth on Schedule
3.4.

      3.5.  Litigation. There is no lawsuit, claim, action, investigation or
proceeding pending or, to the knowledge of LTC, threatened against LTC or any of
LTC's affiliates, directors, officers or agents relating to LTC or its business
other than those set forth on Schedule 3.5. LTC is not in default under any
judgment, order, injunction, rule or decree of any governmental entity or
judicial authority.

      3.6.  Disclosure Documents. All of the Disclosure Documents have been duly
filed by LTC, were in compliance with all applicable requirements and were
complete and correct in all
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material respects as of the date at which the information was furnished, and
contained no untrue statement of a material fact nor omitted to state a material
fact required to be included therein or necessary in light of the circumstances
under which it was made in order to make the statements made therein not
misleading.

4.    REGISTRATION RIGHTS

      4.1   Demand Registration of Shares.

            (a)   At any time after April 30, 2002 and prior to April 30, 2004,
Ilion or any Permitted Transferee holding in the aggregate at least 50% of the
Shares may demand registration under the Securities Act of the Shares. The
registration requested pursuant to this Section 4.1(a) is referred to herein as
the "Demand Registration".

            (b)   Number of Demand Registrations; Notice. Ilion (for the
purposes of Sections 4.1(b) to 4.9, inclusive, a reference to the "Ilion" shall
include any Permitted Transferee holding in the aggregate at least 50% of the
Shares) shall be entitled to one Demand Registration. Subject to the limitations
contained in the following paragraphs of this Section 4.1, after the receipt of
such Demand Registration, (i) LTC will be obligated and required to include in
such Demand Registration all Shares with respect to which LTC shall receive from
Ilion the written request of Ilion for inclusion in such Demand Registration,
and (ii) LTC will use its best efforts in good faith to effect promptly the
registration of such Shares.

            (c)   Restrictions on Demand Registration. LTC will not be obligated
to effect a Demand Registration within one hundred twenty (120) days after the
effective date of a registration statement in which Shares of Ilion are included
pursuant to the exercise of "piggyback rights" pursuant to Section 4.2 hereof.
LTC may postpone for a period not exceeding ninety (90) days the filing or the
effectiveness of a registration statement for a Demand Registration if LTC
provides Ilion with written notice that in LTC's good faith judgment such Demand
Registration might have an adverse effect on any proposal or plan by LTC to
engage in any acquisition of assets (other than in the ordinary course of
business) or any merger, consolidation, tender offer, public offering or similar
transaction, provided that, in such event, Ilion will be entitled to withdraw
such Demand Registration request and that, if such request is withdrawn, such
Demand Registration will not be considered the one (1) Demand Registration to
which Ilion is entitled.

      4.2   Participation in Registered Offerings ("Piggyback Rights" for
Shares). If LTC proposes or is required to register any of its shares or other
equity securities for public sale for cash under the Securities Act (other than
on Forms S-4 or S-8 or similar registration forms), it will at each such time or
times give written notice to Ilion of its intention to do so. Upon the written
request of Ilion given within twenty (20) days after receipt of any such notice,
LTC shall use its best efforts to cause to be included in such registration any
Shares held by Ilion or Shares obtainable upon exercise of the Warrants and
requested to be registered under the Securities Act and any applicable state
securities laws; provided, that if the managing underwriter advises that less
than all of the shares to be registered should be offered for sale so as not
materially and adversely to affect the price or salability of the offering being
registered by LTC, Ilion (but not
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LTC to the extent it desires to include shares for its own account) shall reduce
the number of their Shares to be included in the registration statement as
required by the underwriter to the extent requisite of all prospective sellers
of the securities proposed to be registered (other than LTC) on a pro rata basis
according to the amounts of securities proposed to be registered by all
prospective sellers to permit the sale or other disposition (in accordance with
the intended method of disposition thereof as aforesaid) by the prospective
seller or sellers of the securities so registered. The registration requested
pursuant to this Section 4.2 is referred to herein as the "Piggyback
Registration".

      4.3   Obligations of Ilion. It shall be a condition precedent to the
obligation of LTC to register any Shares pursuant to this Section 4 that Ilion
shall furnish to LTC such information regarding the Shares held and the intended
method of disposition thereof and other information concerning Ilion as LTC
shall reasonably request and as shall be required in connection with the
registration statement to be filed by LTC. If after a registration statement
becomes effective LTC advises Ilion that LTC considers it appropriate to amend
or supplement the applicable registration statement, Ilion shall suspend further
sales of the Shares until LTC advises Ilion that such registration statement has
been amended or supplemented.

      4.4   Registration Proceedings. Whenever LTC is required by the provisions
of this Section 4 to effect the registration of the Shares under the Securities
Act, LTC shall:

            (i)   Prepare and file with the SEC a registration statement with
                  respect to such securities and use its best efforts to cause
                  such registration statement to become and remain effective;

            (ii)  Prepare and file with the SEC such amendments to such
                  registration statement and supplements to the prospectus
                  contained therein as may be necessary to keep such
                  registration statement effective;

            (iii) Furnish to Ilion and to the underwriters of the securities
                  being registered such reasonable number of copies of the
                  registration statement, preliminary prospectus, final
                  prospectus and such other documents as such underwriters may
                  reasonably request in order to facilitate the public offering
                  of such securities;

            (iv)  Use its best efforts to register or qualify the securities
                  covered by such registration statement under such state
                  securities or Blue Sky Laws of such jurisdictions as Ilion may
                  reasonably request within twenty (20) days following the
                  original filing of such registration statement, except that
                  LTC shall not for any purpose be required to execute a general
                  consent to service of process or to qualify to do business as
                  a foreign corporation in any jurisdiction wherein it is not so
                  qualified;

            (v)   Notify Ilion, promptly after it shall receive notice thereof,
                  of the time when such registration statement has become
                  effective or a supplement to
<PAGE>
                  any prospectus forming a part of such registration statement
                  has been filed;

            (vi)  Notify Ilion promptly of any request by the SEC for the
                  amending or supplementing of such registration statement or
                  prospectus or for additional information; and

            (vii) Prepare and promptly file with the SEC and promptly notify
                  Ilion of the filing of such amendment or supplement to such
                  registration statement or prospectus as may be necessary to
                  correct any statements or omissions if, at the time when a
                  prospectus relating to such securities is required to be
                  delivered under the Securities Act, any event shall have
                  occurred as the result of which any such prospectus or any
                  other prospectus as then in effect would include an untrue
                  statement of a material fact or omit to state any material
                  fact necessary to make the statements therein, in light of the
                  circumstances in which they were made, not misleading.
                  Notwithstanding any provision herein to the contrary, LTC
                  shall not be required to amend, supplement, or update a
                  prospectus contained in any registration statement if to do so
                  would result in an unduly burdensome expense to LTC.

      4.5   Expenses. With respect to the inclusion of the Shares in a
registration statement pursuant to this Section 4, all registration expenses,
fees, costs and expenses of and incidental to such registration, inclusion and
public offering in connection therewith shall be borne by LTC; provided,
however, that Ilion shall bear their own professional fees and pro rata share of
the underwriting discount and commissions. The fees, costs and expenses of
registration to be borne by LTC shall include, without limitation, all
registration, filing, printing expenses, fees and disbursements of counsel and
accountants for LTC, fees and disbursements of counsel for the underwriter or
underwriters of such securities (if LTC and/or selling security holders are
required to bear such fees and disbursements), and all legal fees and
disbursements and other expenses of complying with state securities or Blue Sky
Laws of any jurisdiction in which the securities to be offered are to be
registered or qualified.

      4.6   Indemnification of Ilion. Subject to the conditions set forth below,
in connection with any registration of the Shares pursuant to this Section 4,
LTC agrees to indemnify and hold harmless Ilion, any underwriter for the
offering and each of their officers and directors and agents and each other
person, if any, who controls Ilion or the underwriter (each, and "Ilion
Indemnified Party"), within the meaning of Section 15 of the Securities Act, as
follows:

            (i)   Against any and all loss, claim, damage and expense whatsoever
                  arising out of or based upon (including, but not limited to,
                  any and all expense whatsoever reasonably incurred in
                  investigating, preparing or defending any litigation,
                  commenced or threatened, or any claim whatsoever based upon)
                  any untrue or alleged untrue statement of a material fact
                  contained in any preliminary prospectus (if used prior to the
                  effective date of the registration statement), the
                  registration statement or the prospectus (as
<PAGE>
                  from time to time amended and supplemented), or in any
                  application or other document executed by LTC or based upon
                  written information furnished by LTC filed in any jurisdiction
                  in order to qualify LTC's securities under the securities laws
                  thereof, or the omission or alleged omission therefrom of a
                  material fact required to be stated therein or necessary to
                  make the statements therein not misleading, or any other
                  violation of applicable federal or state statutory or
                  regulatory requirements or limitations relating to action or
                  inaction by LTC in the course of preparing, filing, or
                  implementing such registered offering; provided, however, that
                  the indemnity agreement contained in this section shall not
                  apply to any loss, claim, damage, liability or action arising
                  out of or based upon any untrue or alleged untrue statement or
                  omission made in reliance upon and in conformity with any
                  information furnished in writing to LTC by or on behalf of
                  Ilion expressly for use in connection therewith or arising out
                  of any action or inaction of Ilion;

            (ii)  Subject to the proviso contained in Subsection (i) above,
                  against any and all loss, liability, claim, damage and expense
                  whatsoever to the extent of the aggregate amount paid in
                  settlement of any litigation, commenced or threatened, or of
                  any claim whatsoever based upon any untrue statement or
                  omission (including, but not limited to, any and all expense
                  whatsoever reasonably incurred in investigating, preparing or
                  defending against any such litigation or claim) if such
                  settlement is effected with the written consent of LTC; and

            (iii) In no case shall LTC be liable under this indemnity agreement
                  with respect to any claim made against any Ilion Indemnified
                  Party unless LTC shall be notified, by letter or by facsimile
                  confirmed by letter, of any action commenced against such
                  Ilion Indemnified Party, promptly after such person shall have
                  been served with the summons or other legal process giving
                  information as to the nature and basis of the claim. The
                  failure to so notify LTC, if prejudicial in any material
                  respect to LTC's ability to defend such claim, shall relieve
                  LTC from its liability to the indemnified person under this
                  Section 4, but only to the extent that LTC was prejudiced. The
                  failure to so notify LTC shall not relieve LTC from any
                  liability which it may have otherwise than on account of this
                  indemnity agreement. LTC shall be entitled to participate at
                  its own expense in the defense of any suit brought to enforce
                  any such claim, but if LTC elects to assume the defense, such
                  defense shall be conducted by counsel chosen by it, provided
                  such counsel is reasonably satisfactory to the Ilion
                  Indemnified Party in any suit so brought. In the event LTC
                  elects to assume the defense of any such suit and retain such
                  counsel, the Ilion Indemnified Party in the suit, shall, after
                  the date they are notified of such election, bear the fees and
                  expenses of any counsel thereafter retained by them, as well
                  as any other expenses thereafter incurred by them in
<PAGE>
                  connection with the defense thereof; provided, however, that
                  the Ilion Indemnified Party reasonably believe that there may
                  be available to them any defense or counterclaim different
                  than those available to LTC or that representation of such
                  Ilion Indemnified Party by counsel for LTC presents a conflict
                  of interest for such Ilion Indemnified Party shall be entitled
                  to defend such suit with counsel of their own choosing and LTC
                  shall bear the fees, expenses and other costs of such separate
                  counsel.

      4.7   Indemnification of LTC. Ilion agrees to indemnify and hold harmless
LTC, each underwriter for the offering, and each of their officers and directors
and agents and each other person, if any, who controls LTC and the underwriter
within the meaning of Section 15 of the Securities Act and any other stockholder
selling securities pursuant to the Registration Statement against any and all
such losses, liabilities, claims, damages and expenses as are indemnified
against any person by LTC under Section 4.6 (i), (ii), and (iii) above;
provided, however, that such indemnification by Ilion hereunder shall be limited
to any losses, liabilities, claims, damages, or expenses to the extent caused by
any untrue statement of a material fact or omission of a material fact (required
to be stated therein or necessary to make statements therein not misleading), if
any made (or in settlement of any litigation effected with the written consent
of such sellers, alleged to have been made) in any preliminary prospectus, the
registration statement or prospectus or any amendment or supplement thereof or
in any application or other document in reliance upon, and in conformity with,
written information furnished in respect of such seller by or on behalf of such
seller expressly for use in any preliminary prospectus, the registration
statement or prospectus or any amendment or supplement thereof or in any such
application or other document or arising out of any action or inaction of such
seller in implementing such registered offering. Notwithstanding the foregoing,
the indemnification obligation of Ilion shall not exceed the purchase price of
the Shares paid by Ilion. In case any action shall be brought against LTC, or
any other person so indemnified, in respect of which indemnity may be sought
against any seller, such seller shall have the rights and duties given to LTC,
and each other person so indemnified shall have the rights and duties given to
Ilion, by the provisions of Section 4.6. The person indemnified agrees to notify
the sellers promptly after the assertion of any claim against the person
indemnified in connection with the sale of securities.

      4.8   Contribution. If the indemnification provided for in Sections 4.6
and 4.7 above are unavailable or insufficient to hold harmless an indemnified
party in respect of any losses, claims, damages or liabilities (or actions in
respect thereof) referred to therein, then each indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages or liabilities (or actions in respect thereof)
in such proportion as is appropriate to reflect the relative fault of the
indemnified party, on one hand, and such indemnifying party, on the other hand,
in connection with the statements or omissions which resulted in such losses,
claims, damages, or liabilities (or actions in respect thereof). The relative
fault shall be determined by reference to, among other things, whether the
untrue or alleged untrue statement of a material fact or the omission or alleged
omission to state a material fact relates to information supplied by the
indemnified party, on one hand, or such indemnifying party, on the other hand,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. No person who has
committed
<PAGE>
fraudulent misrepresentation (within the meaning of the Securities Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages or liabilities (or actions in respect
thereof referred to above in this Section shall be deemed to include any legal
or other expenses reasonably incurred by such indemnified party in connection
with investigating or defending any such action or claim.

      4.9   Registration Rights to Be Granted. If LTC shall grant to GAIA or
Arch registration rights having terms more favorable than the rights granted
pursuant to this Section 4, this Section 4 shall be deemed amended to include
such more favorable terms.

      4.10  Assignment of Registration Rights. The right to have LTC register
Shares pursuant to this Agreement shall be automatically assignable to any
transferee of all or any portion of the Shares if: (a) Ilion agrees in writing
with the transferee or assignee to assign such rights, and a copy of such
agreement is furnished to LTC within a reasonable time after such assignment,
(b) LTC is, within a reasonable time after such transfer or assignment,
furnished with written notice of (i) the name and address of such transferee or
assignee, and (ii) the securities with respect to which such registration rights
are being transferred or assigned, (c) following such transfer or assignment,
the further disposition of such securities be the transferee or assignee is
restricted under the Securities Act and applicable state securities laws and,
(d) at or before the time LTC receives the written notice contemplated by clause
(b) of this sentence, the transferee or assignee agrees in writing with LTC to
be bound by all of the provisions contained herein (the foregoing a "Permitted
Transferee").

5.    BOARD OF DIRECTORS OF LTC

      After the Closing and from time to time as requested by Ilion, LTC shall
take all appropriate actions to nominate or remove or replace, and in each case
LTC shall use its best efforts to act in accordance with the request from Ilion
to cause the election, removal or replacement of, one person designated by Ilion
to the Board of Directors of LTC provided that Ilion is (i) is the beneficial
owner of at least 1% of LTC's Common Stock then outstanding during the two year
period after the Closing or (ii) is the beneficial owner of at least 5% of LTC's
Common Stock then outstanding at any time after the Closing.

6.    MAACOR

      The MAACOR II equipment previously on loan to Ilion from LTC (a) will be
available for pickup by LTC at the Burlington, MA plant on Sunday, January 6,
2002 so that it can be placed in services at LTC's plant on Monday, January 7,
2002; (b) Ilion will be given access to 12 of the 32 channels for 24 hours each
day until Ilion's own equipment has been delivered and commissioned/placed in
service; and (c) an Ilion employee will be allowed on site at LTC to do Ilion's
testing, and an appropriate security protocol will be set up.
<PAGE>
7.    ILION OWNERSHIP PERCENTAGE.

If after the Closing of the LTC-GAIA Merger and Financing (the "GAIA Closing")
the Coversion Shares and the Warrant Shares do not equal at least 9.0% of the
Capital Stock of LTC on a fully diluted basis, then LTC shall issue to Ilion
Warrants to purchase LTC Common Stock (the "New Warrant Shares") having the same
terms as the Warrant and Warrant Amendment so that the Coversion Shares, the
Warrant Shares and the New Warrant Shares equal 9.0% of the Capital Stock of LTC
on a fully diluted basis immediately after the GAIA Closing.

8.    MISCELLANEOUS

      8.1   Releases of Ilion. LTC hereby releases and forever discharges all
claims, losses, liabilities, damages and legal, accounting, investigation and
other expenses whatsoever that LTC or any of LTC's affiliates directors,
officers or agents may have or allege arising out of or based upon the LTC-Ilion
Agreements, the transactions contemplated thereby or any relationships created
thereunder ("LTC Claims"), and agrees promptly to indemnify and to hold harmless
Ilion and each of Ilion's affiliates, directors, officers and agents against any
and all LTC Claims asserted by any shareholder of LTC or any third party.

      8.2   Release of LTC. Ilion hereby releases and forever discharges all
claims, losses, liabilities, damages and legal, accounting, investigation and
other expenses whatsoever that Ilion or any of LTC's affiliates, directors,
officers or agents may have or allege arising out of or based upon the LTC-Ilion
Agreements, the transactions contemplated thereby or any relationships created
thereunder ("Ilion Claims"), and agrees promptly to indemnify and to hold
harmless LTC and each of LTC's affiliates, directors, officers and agents
against any and all Ilion Claims asserted by any shareholder of LTC or any third
party.

      8.3   Notices. Except as otherwise provided herein, all notices, requests,
demands, consents, instructions or other communications to or upon the LTC or
Ilion under this Agreement shall be by telecopy or in writing and telecopied,
mailed or delivered to each party at the telecopier number or its address as
provided below (or to such other telecopy number or address as the recipient of
any notice shall have notified the other in writing). All such notices and
communications shall be effective (a) when sent by Federal Express or other
overnight service of recognized standing, on the Business Day following the
deposit with such service; (b) when mailed, by registered or certified mail,
first class postage prepaid and addressed as aforesaid through the United States
Postal Service, upon receipt; (c) when delivered by hand, upon delivery; and (d)
when telecopied, upon confirmation of receipt to the following:

            Lithium Technology Corporation
            5115 Campus Drive
            Plymouth Meeting, PA  19462-1129
            Attention David J. Cade
            Fax:  610-940-6091
<PAGE>
            with a copy to:

            Gallagher, Briody & Butler
            155 Village Blvd.
            Princeton, NJ  08540
            Attention:  Thomas P. Gallagher
            Fax:  609-452-6000

            Ilion Technology Corporation
            Royal & Sun Alliance Centre
            Level 23
            48 Shortland Street
            Auckland, New Zealand
            Attention:  Robin Johannink
            Fax:  011-64-9-306-1371

            with a copy to

            Jones Young
            ASB Bank Centre
            Level 14
            135 Albert Street
            Auckland, New Zealand
            Attention:  Keith Young
            Fax:  011-64-9-367-8799

      8.2   Nonwaiver. No failure or delay on either LTC or Ilion's part in
exercising any right hereunder shall operate as a waiver thereof or of any other
right nor shall any single or partial exercise of any such right preclude any
other further excise thereof or of any other right.

      8.3   Amendments and Waivers. This Agreement may not be amended or
modified, nor may any of its terms be waived, except by written instruments
signed by the LTC and Ilion. Such waiver or consent under any provision hereof
shall be effective only in the specific instances for the purpose for which
given.

      8.4   Assignments. This Agreement shall be binding upon and inure to the
benefit of Ilion and the LTC and their respective successors and assigns.

      8.5   Partial Invalidity. If at any time any provision of this Agreement
is or becomes illegal, invalid or unenforceable in any respect under the law of
any jurisdiction, neither the legality, validity or enforceability of the
remaining provisions of this Agreement nor the legality, validity or
enforceability of such provision under the law of any other jurisdiction shall
in any way be affected or impaired thereby.
<PAGE>
      8.6   Headings. Headings in this Agreement are for convenience of
reference only and are not part of the substance hereof or thereof.

      8.7   Entire Agreement. This Agreement constitutes and contains the entire
agreement of the LTC and Ilion and supersedes any and all prior agreements,
negotiations, correspondence, understandings and communications among the
parties, whether written or oral, respecting this Termination Agreement.

      8.8   Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York without reference to conflicts
of law rules.

      8.9   Jurisdiction. Any suit, action or proceeding seeking to enforce any
provision of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby may be brought in the courts
of the State of New York located in the County of New York and the federal
courts of the United States of America located in such State and County. Each of
the parties (i) consents to the exclusive jurisdiction of such courts (and of
the appropriate appellate courts therefrom) in any such suit, action or
proceeding, (ii) irrevocably waives, to the fullest extent permitted by Law, any
objection which it may now or hereafter have to the laying of the venue of any
such suit, action or proceeding in any such court or that any such suit, action
or proceeding which is brought in any such court has been brought in an
inconvenient forum, (iii) will not attempt to deny or defeat such personal
jurisdiction by motion or other request for leave from any such court, and (iv)
will not bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any other court. Process in any such suit,
action or proceeding may be served on any party anywhere in the world, whether
within or without the jurisdiction of any such court. Without limiting the
foregoing, each party agrees that service of process on such party as provided
in Section 8.1 will be deemed effective service of process on such party.

      8.10  JURY TRIAL. EACH OF LTC AND ILION, TO THE FULLEST EXTENT PERMITTED
BY APPLICABLE LAW, HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY AS TO
ANY ISSUE.

      8.11  Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but such counterparts
shall together constitutes but one and the same agreement.
<PAGE>
      The parties hereto have caused this Agreement to be duly executed by their
respective authorized officers as of the day and year first above written.

                                    ILION TECHNOLOGY CORPORATION


                                    By:   /s/ Robin T. Johannink
                                        --------------------------------------
                                          Robin T. Johannink
                                          Chairman and Chief Executive Officer


                                    LITHIUM TECHNOLOGY CORPORATION


                                    By:   /s/ David J. Cade
                                        --------------------------------------
                                          David J. Cade
                                          Chairman and Chief Executive Officer