<PAGE>
                                                                   Exhibit 10.47

                         Lithium Technology Corporation
                                5115 Campus Drive
                         Plymouth Meeting, PA 19462-1129

                                December 31, 2001

Arch Hill Capital N.V.
Parkweg 2
2585 JJ's-Gravenhage


Dear Sirs:

We refer to the Letter of Intent dated December 5, 2001 (the "LOI") between
Lithium Technology Corporation ("LTC"), Arch Hill Capital ("Arch Hill") and GAIA
Akkumulatorenwerke GmbH ("GAIA") which contemplates (i) a merger between LTC and
GAIA (the "Merger") on terms to be set forth in a definitive Merger Agreement
(the "Merger Agreement"), (ii) a financing of $7,000,000 (the "Financing") of
which up to $800,000 will be used by the new investors (the "Investors") to
purchase the Notes held by Ilion (the "Ilion Notes") and $6,200,000 will be used
by the new investors to purchase new LTC Notes (the "New LTC Notes") and (iii) a
termination of the current agreements (the "LTC-Ilion Agreements") between LTC
and Ilion Technology Corporation ("Ilion").

         1. Pending the closing of the Merger and Financing, LTC wishes to
borrow from Arch Hill, and Arch Hill has agreed to lend to LTC, short term
funding in the amounts set forth herein for working capital purposes of LTC.

         2. LTC will issue to Arch Hill promissory notes (the "Notes") in the
form attached hereto as Exhibit A for each amount advanced under this Letter
Agreement which Notes shall be convertible into shares of LTC Common Stock (the
"Shares") on the terms set forth in the Notes.

         3. The issuance of the Notes will take place on the dates set forth
below or on such other dates Arch Hill and LTC may agree (each a "Closing Date")
(each time of disbursement is referred to herein as a "Closing"). At each
Closing, LTC will deliver to Arch Hill a Note against receipt by LTC of the
following amount to be disbursed at such Closing as follows:


                  (a)      eighty thousand dollars ($80,000) advanced by Arch
                           Hill to LTC prior to the date of this Letter
                           Agreement which LTC acknowledges receipt of; and

                  (b)      two hundred thousand dollars ($200,000) advanced by
                           Arch Hill to LTC on the date of this Letter Agreement
                           which LTC acknowledges receipt of; and
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                  (c)      each amount advanced from time to time by Arch Hill
                           to LTC from time to time to fund the payment of LTC's
                           operating and administrative expenses pending the
                           Closing in such amounts and on such dates as agreed
                           to by Arch Hill and LTC.

         4. The entire principal balance and all other sums due and payable
under this Note shall be payable on the earlier of (i) the closing date of the
Financing, and (ii) March 31, 2002 (the "Maturity Date").


         5. LTC hereby represents and warrants to Arch Hill that:

                  LTC has full legal right, power and authority (including the
due authorization by all necessary corporate action) to enter into this Letter
Agreement, the Notes and any other agreement or document necessary to perform
its obligations hereunder without the need for the consent of any other person
or entity; and this Letter Agreement has been duly executed and delivered and
constitute the legal, valid and binding obligation of Arch Hill against it 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.

         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 (as
defined below), other than liabilities incurred in the ordinary course of
business consistent with past practice or other than those set forth on Schedule
5A.

         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 5B. LTC is not in default under any judgment, order,
injunction, rule or decree of any governmental entity or judicial authority.

         6. Arch Hill hereby represents and warrants to LTC that:

                  Arch Hill has full legal right, power and authority (including
the due authorization by all necessary corporate action) to enter into this
Letter Agreement to perform its obligations hereunder without the need for the
consent of any other person or entity; and this Letter Agreement has been duly
executed and delivered and constitute the legal, valid and binding obligation of
the Arch Hill against it 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.

         Arch Hill has had the opportunity to review 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").

         Arch Hill or Arch Hill's designated representatives have had the
opportunity to conduct a satisfactory initial due diligence investigation of LTC
and have had an opportunity to review the
<PAGE>
Disclosure Documents and to have all of their questions related thereto
satisfactorily answered. Notwithstanding the foregoing LTC and Ilion acknowledge
that Arch Hill expects to perform a further due diligence investigation of LTC
as Arch Hill and LTC move toward closing, inter alia, the merger transaction,
all as more accurately described in that certain Letter of Intent dated December
5, 2001, as extended, between LTC, Arch Hill and GAIA Akkumulatorenwerke GmbH.
However, Arch Hill acknowledges and agrees that the extent of due diligence
performed to date of LTC is sufficient to make an investment with respect to the
Notes and Shares being purchased hereunder.

         Arch Hill acknowledges that the Shares are speculative and involve a
high degree of risk and Arch Hill represents that it is able to sustain the loss
of the entire amount of its investment.

         Arch Hill (or its members and/or officers) has previously invested in
unregistered securities and has sufficient financial and investing expertise to
evaluate and understand the risks of the Shares.

         Arch Hill has received from LTC, and is relying on, no representations
except as set forth in this Agreement, the Disclosure Documents or, the 3-Year
Preliminary Budget and the Income/Expense Budget prepared by LTC or projections
with respect to LTC's business and prospects which Arch Hill acknowledges are
forward-looking documents that involve risks and uncertainties that could cause
actual results to differ materially from those projected in the budgets and
projections.

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

         Arch Hill 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.

         Arch Hill 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.

         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 COMPANY AND ITS COUNSEL AND FROM ATTORNEYS REASONABLY ACCEPTABLE TO
         THE COMPANY AND ITS COUNSEL, THAT SUCH REGISTRATION IS NOT REQUIRED.
<PAGE>
         7. REGISTRATION RIGHTS

                  7.1 Demand Registration of Shares.

                  (a) Demand Registration. At any time after April 30, 2002 and
prior to the April 30, 2004, Arch Hill or any Permitted Transferee (as herein
defined) 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 7.1(a) is referred to herein as the "Demand
Registration".

                  (b) Number of Demand Registrations; Notice. Arch Hill ( for
the purposes of Sections 7.1(b) to 7.9, inclusive, a reference to the "Arch
Hill" 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 7.1, 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 Arch Hill the written request of Arch Hill 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 Arch
Hill are included pursuant to the exercise of "piggyback rights" pursuant to
Section 7.2 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 Arch Hill 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, Arch Hill
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 Arch Hill is entitled.

                  7.2 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 Arch Hill of its intention to do so. Upon
the written request of Arch Hill 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 Arch Hill 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, Arch
Hill (but not 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
<PAGE>
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 7.2 is referred
to herein as the "Piggyback Registration".

                  7.3 Obligations of Arch Hill. It shall be a condition
precedent to the obligation of LTC to register any Shares pursuant to this
Section 7 that Arch Hill shall furnish to LTC such information regarding the
Shares held and the intended method of disposition thereof and other information
concerning Arch Hill 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 Arch Hill that LTC
considers it appropriate to amend or supplement the applicable registration
statement, Arch Hill shall suspend further sales of the Shares until LTC advises
Arch Hill that such registration statement has been amended or supplemented.

                  7.4 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 Arch Hill 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 Arch Hill 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 Arch Hill, promptly after it shall receive
                           notice thereof, of the time when such registration
                           statement has become effective or a supplement to any
                           prospectus forming a part of such registration
                           statement has been filed;

                  (vi)     Notify Arch Hill promptly of any request by the SEC
                           for the amending or supplementing of such
                           registration statement or prospectus or for
                           additional information; and
<PAGE>
                  (vii)    Prepare and promptly file with the SEC and promptly
                           notify Arch Hill 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.

                  7.5 Expenses. With respect to the inclusion of the Shares in a
registration statement pursuant to this Section 7, 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 Arch Hill 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.

                  7.6 Indemnification of Arch Hill. Subject to the conditions
set forth below, in connection with any registration of the Shares pursuant to
this Section 7, LTC agrees to indemnify and hold harmless Arch Hill, any
underwriter for the offering and each of their officers and directors and agents
and each other person, if any, who controls Arch Hill or their underwriter
(each, an "Arch Hill 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 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
<PAGE>
                           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 Arch Hill
                           expressly for use in connection therewith or arising
                           out of any action or inaction of Arch Hill;

                  (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
                           Arch Hill Indemnified Party person unless LTC shall
                           be notified, by letter or by facsimile confirmed by
                           letter, of any action commenced against such Arch
                           Hill 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 7, 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 Arch Hill 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 Arch Hill 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 connection
                           with the defense thereof; provided, however, that if
                           the Arch Hill 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 sellers, the Arch Hill
                           Indemnified Party by counsel for LTC presents a
                           conflict of interest for such counsel, then the Arch
                           Hill 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.
<PAGE>
                  7.7 Indemnification of LTC. Arch Hill 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 7.6 (i), (ii) and (iii)
above; provided, however, that such indemnification by Arch Hill 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 Arch Hill shall not exceed the purchase price of the Shares paid
by Arch Hill. 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 Arch Hill,
by the provisions of Section 7.6. 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.

                  7.8 Contribution. If the indemnification provided for in
Sections 7.6 and 7.7 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 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.
<PAGE>
                  7.9 Registration Rights to be Granted. If LTC shall grant to
anyone other than Arch Hill registration rights having terms more favorable than
the rights granted pursuant to this Section 7, this Section 7 shall be deemed
amended to include such more favorable terms.

                  7.10 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) Arch Hill 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 1933 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").

         8. This Letter Agreement shall for all purposes be governed by, and in
accordance with, the laws of the State of New York, without regard to its
conflicts of law principles.

         9. This Letter Agreement, and the other writings referred to herein or
therein or delivered pursuant hereto or thereto and which form a part hereof or
thereof (the "writings") contain the entire agreement among the parties with
respect to this Interim Financing Letter Agreement or the writings and supersede
all prior and contemporaneous arrangements or understandings with respect
thereto.

         10. All notices, requests, consents and other communications hereunder
to any party shall be deemed to be sufficient if contained in a written
instrument delivered in person or sent by nationally recognized overnight
courier or first class registered or certified mail, return receipt requested,
postage prepaid, addressed to such party at the respective addresses set forth
above.

         11. This Letter Agreement may only be amended in writing signed by LTC
and Arch Hill. This Agreement may be executed in counterparts and each
counterpart shall have the same force and effect as an original and shall
constitute an effective, binding agreement on the part of each of the
undersigned.

         12. Prior to March 31, 2002, provided Arch Hill is not otherwise in
breach of this Letter Agreement, LTC will not encourage, solicit or initiate
discussions or negotiations contemplating a financing transaction with any
person other than Arch Hill or the Investors in the Financing without the prior
written consent of Arch Hill.
<PAGE>
                                       Very truly yours,


                                       LITHIUM TECHNOLOGY CORPORATION


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



Accepted and agreed as of
the date first written above:
ARCH HILL CAPITAL N.V


By:      /s/ H. H. Van Andel
   --------------------------
      H. H. Van Andel
      Chief Executive Officer