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                        LITHIUM TECHNOLOGY CORPORATION

                       INCENTIVE STOCK OPTION AGREEMENT
                          [FOR GRANTS TO EMPLOYEES]


         LITHIUM TECHNOLOGY CORPORATION, a Delaware corporation (the
"Company"), hereby grants to _______ (the "Optionee"), an Incentive Stock
Option (the "Option") to purchase a total of _______ shares of the Company's
Common Stock, at the price set forth herein, and subject to the terms,
definitions and provisions of the 2002 Stock Incentive Plan (the "Plan")
adopted by the Company, which is incorporated herein by reference. The terms
defined in the Plan shall have the same defined meanings herein.

         1.       NATURE OF THE OPTIONS. The Incentive Stock Option is
intended to qualify as an "incentive stock option" as defined in Section 422
of the Internal Revenue Code of 1986, as amended (the "Code").  The shares
underlying the Option are hereinafter referred to as the "Shares".

         2.       EXERCISE PRICE.  The exercise price of the Option is $
per share for each share subject to the Option.

         3.       TERMS OF OPTIONS. This Option is granted in connection with
the Optionee's employment by the Company. Subject to provisions contained
elsewhere in this Agreement, the Option may be exercised cumulatively as set
forth below after the vesting date set forth below, until the day preceding
the tenth anniversary of the date hereof (the "Termination Date"):

                  VESTING DATE                                NUMBER OF OPTIONS



         4.       ADMINISTRATION.  The Plan is administered by a committee of
the Board (the "Committee" as defined in the Plan). All determinations and
acts of the Committee as to any matters concerning the Plan, including
interpretations or constructions of this Option and of the Plan, shall be
conclusive and binding on the Optionee and any parties claiming through the
Optionee.

         5.       EXERCISE. Unless the Optionee ceases to be employed by the
Company or a direct or indirect subsidiary thereof, the right of the Optionee
to purchase Shares hereunder, subject to any installment requirements set
forth above, may be exercised in whole or in part at any time after the
accrual of such respective installment and prior to the Termination Date,
except as otherwise provided herein. The Option may not be exercised for a
fraction of a share. Notwithstanding the foregoing, the Optionee's right to
exercise the Option shall be subject to Shareholder approval of the

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Plan and shall be limited by the number of shares of Company Common Stock
available for issuance pursuant to Awards granted under the Plan.

         6.       NOTICE OF EXERCISE. The Option shall be exercisable by
written notice (the "Notice") which shall state the election to exercise the
Option and the number of Shares in respect of which the Option is being
exercised, and such other representations and agreements as to the Optionee's
investment intent with respect to such Shares as may be required by the
Company pursuant to the provisions of the Plan. Such written notice shall be
signed by the Optionee and shall be delivered in person or by certified mail
to the President of the Company. The written notice shall be accompanied by
payment in full of the exercise price in cash, or in any other manner approved
by the Committee, including payment by surrender of shares of Common Stock of
the Company at their fair market value on the date of delivery.

         7.       DELIVERY OF CERTIFICATES. As soon as practicable after
receipt of the Notice and payment, and subject to the next two paragraphs, the
Company shall, without transfer or issue tax or other incidental expense to
the Optionee, deliver to the Optionee a certificate or certificates for the
shares of Common Stock so purchased. Such delivery shall be made (a) at the
offices of the Company at 5115 Campus Drive, Plymouth Meeting, Pennsylvania
19462, (b) at such other place as may be mutually acceptable to the Company
and the Optionee, or (c) by certified mail addressed to the Optionee at the
Optionee's address shown in the records of the Company.

         8.       WITHHOLDING. The Company shall have the right to withhold an
appropriate number of shares of Common Stock (based on the fair market value
thereof on the date of exercise) for payment of taxes required by law or to
take such other action as may be necessary in the opinion of the Company to
satisfy all tax withholding obligations.

         9.       COMPLIANCE WITH LAWS. The Company may postpone the time of
delivery of certificate(s) for shares of Common Stock for such additional time
as the Company shall deem necessary or desirable to enable it to comply with
the requirements of any securities exchange upon which the Common Stock may be
listed, or the requirements of the Securities Act of 1933, as amended, the
Securities Exchange Act of 1934, as amended, any rules or regulations of the
Securities and Exchange Commission promulgated thereunder, or any applicable
state laws relating to the authorization, issuance or sale of securities.

         10.      NON-TRANSFERABLE OPTIONS. During the Optionee's lifetime,
this Option shall be exercisable only by the Optionee and neither this Option
nor any right hereunder may be sold, pledged, assigned, hypothecated,
transferred or disposed of in any manner otherwise than by will or by the laws
of descent or distribution on the terms set forth in Section 13. The terms of
this Option Agreement shall be binding upon the executors, administrator,
heirs, successors and assigns of Optionee.

         11.      DEATH OF OPTIONEE. In the event of the death of Optionee
during the term of the Option and while an employee of the Company and having
been employed continuously as an employee since the date of grant of the
Option, the Option may be exercised, at any time within twelve (12) months
unless otherwise provided in an agreement with the Company following the date
of death, by the Optionee's estate or by a person who acquired the right to
exercise the Option by

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bequest or inheritance but only to the extent of the right to exercise that
had accrued at the date of death. If Optionee's estate or a person who
acquired the right to exercise the Option by bequest or inheritance does not
exercise such portion of Optionee's Option which has vested and which the
Optionee was entitled to exercise in the time specified herein, the Option
shall terminate.

         12.      TERMINATION OF EMPLOYMENT.

         (a)      If Optionee's employment by the Company or its direct or
indirect subsidiaries terminates for any reason other than by reason of death
or disability or "for cause" as defined in Section 12(b) below, all currently
exercisable installments of this Option shall remain exercisable for a period
of three (3) months unless otherwise provided in an agreement with the Company
from the date of termination and, to the extent not exercised, shall
terminate. All other non-vested installments of this Option shall immediately
and automatically terminate.

         (b)      If Optionee's employment by the Company or its direct or
indirect subsidiaries terminates by virtue of a termination for cause (as
defined in Optionee's Employment Agreement, if applicable or as set forth
below) the Committee shall have the right to terminate the Option, upon the
date of termination of employment, whether vested or not, in their sole
discretion, without prior notice to Optionee. If Employee is not employed
pursuant to an Employment Agreement as of the date of termination, cause shall
mean the substantial breach or continuous neglect by Employee of his
employment obligations, or willful misconduct by Employee in the performance
of such obligations which occurs or persists after notice and an opportunity
to cure.

         13.      DISABILITY OF OPTIONEE. If Optionee is unable to continue
his employment or association with the Company as a result of his disability
(as such condition is defined in the Plan), Optionee may, but only within
twelve (12) months unless otherwise provided in an agreement with the Company
from the date of exercise such portion of the Option which has vested to the
extent he was entitled to exercise it at the date of such disability, and such
portion of the Option which has not vested shall terminate. If Optionee does
not exercise such portion of the Option which has vested and which Optionee
was entitled to exercise within the time specified herein, this Option shall
terminate.

         14.      NON-DILUTION. In the event of any change in the outstanding
Common Stock by reason of a stock split, stock dividend, combination or
reclassification of shares, recapitalization, merger or similar event, the
Committee shall adjust proportionally (a) the number of Shares of Stock (i)
available for issuance under the Plan and (ii) covered by outstanding Awards
denominated in stock or units of stock; (b) the exercise and grant prices
dated to outstanding Awards; and (c) the appropriate Fair Market Value and
other price determinations for such Awards as the Committee in its sole
discretion may in good faith determine to be equitably required in order to
prevent dilution or enlargement of the rights of Participants. Moreover, in
the event of any such transaction or event, the Committee may provide in
substitution for any or all outstanding Awards under the Plan such alternative
consideration as it may in good faith determine to be equitable under the
circumstances and may require in connection therewith the surrender of all
Awards so replaced. The Committee may also make or provide for such
adjustments in the number of Shares specified in Section 3 of the Plan as the
Committee in its sole discretion may in good faith determine to be appropriate
in order to reflect any such transaction or event. In the event of any other
change affecting the Common Stock or any distribution (other than normal cash
dividends) to holders of Common Stock, such adjustments in the number and kind
of shares and the exercise, grant and conversion prices of the affected Awards

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as may be deemed equitable by the Committee, including adjustments to avoid
fractional shares, shall be made to give proper effect to such event. Upon the
occurrence of a "change in control", as defined in the Plan, of the Company,
each Option shall at the discretion of the Committee either be cancelled in
exchange for a payment in cash of any amount equal to the excess, if any, of
the Change in Control price over the exercise price for such Option, or be
fully exercisable regardless of the exercise schedule otherwise applicable to
such Option and all restricted shares of Stock and all SARs shall become
nonforfeitable and be immediately transferable or payable, as the case may be,
subject however to Paragraph 9(b) of the Plan. In the event of a corporate
merger, consolidation, acquisition of property or stock, separation,
reorganization or liquidation not constituting a change in control, the
Committee may terminate this Option, authorize the assumption of this Option
or substitute a new stock option for this Option, whether or not in a
transaction to which Section 424(a) of the Internal Revenue Code applies. The
judgment of the Committee with respect to any matter referred to in this
paragraph shall be conclusive and binding upon the Optionee and any parties
claiming through the Optionee.

         15.      REGISTRATION ON FORM S-8. The Company hereby agrees that in
the event that during the term Options are exercisable, the Company causes to
be filed with the Securities and Exchange Commission a registration statement
on Form S-8 (or equivalent form as may be in effect at such time) the Optionee
may include in such registration statement all shares underlying options
granted to Optionee under the Plan. The Company covenants that it will keep
such registration statement current and effective while the Optionee or his
guardian or estate has the right to exercise any of the options granted
hereunder. The Company also hereby agrees that in the event that during the
term the Company causes to be filed with the Securities and Exchange
Commission a registration statement on a form other than Form S-8, Optionee
shall have "piggyback" registration rights to include in such registration
statement all the options and shares underlying options granted to Optionee
under the Plan, subject to a reasonable cutback in the inclusion of such
options and shares if the Board or the Company's underwriter determines that
such cutback is necessary to prevent an adverse effect on the Company's
offering.

         16.      NON-COMPETITION.

                  (a)      As consideration in part for the grant of the
Options, Optionee agrees that, for a period commencing on the date hereof and
ending one year after the termination of his employment with the Company for
any reason, Optionee shall not, anywhere in North America, directly or
indirectly:

                           (i)      solicit or attempt to solicit business of
any customers of the Company (including prospective customers solicited by the
Company) for products or services the same or similar to those offered, sold,
produced or under development by the Company during the term of this
employment therewith or dealt in by Optionee during his employment with the
Company;

                           (ii)     otherwise divert or attempt to divert from
the Company any business whatsoever;

                           (iii)    solicit or attempt to solicit for any
business endeavor any employee of the Company;

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                           (iv)     interfere with any employment relationship
or other business relationship between the Company and any other individual,
person, or other entity;

                           (v)      use the name of the Company or a name
similar thereto; or

                           (vi)     render any services as an officer,
director, employee, partner, consultant or otherwise to, or have any interest
as a stockholder, partner, lender or otherwise in, any person which is engaged
in activities which, if performed by an Optionee would violate this Section
16.

                  (b)      Optionee agrees that during the term of Optionee's
employment with the Company, Optionee will not, anywhere in North America,
directly or indirectly, as an independent contractor or otherwise, engage in
any activity for or on behalf of any person or entity in a competitive line of
business to that carried on by the Company, or engage in any manner in the
design, development, manufacturing, assembling, installing and/or marketing of
rechargeable lithium battery technology or other technology competitive with
the business carried on by the Company or dealt in by Optionee during his or
her employment with the Company.

                  (c)      If during the one year period commencing on the
termination of Optionee's employment with the Company for any reason,
Optionee, directly or indirectly engages, anywhere in North America, as an
independent contractor or otherwise, in any activity for or on behalf of any
person or entity in a competitive line of business to that carried on by the
Company during the term of Optionee's employment therewith, or engages in any
manner in the design, development, manufacturing, assembling, installing,
and/or marketing of rechargeable lithium battery technology or other
technology competitive with the business carried on by the Company during the
term of Optionee's employment therewith or dealt in by Optionee during
Optionee's employment with the Company, all the non-exercised vested and
unvested options held by Optionee shall terminate immediately, notwithstanding
any other provisions to the contrary contained herein.

                  (d)      The provisions contained in paragraphs (b) and (c)
of this Section 16 shall not prevent Optionee from purchasing or owning up to
five percent (5%) of the voting securities of any corporation, the securities
of which are publicly-traded.

         17.      CONFIDENTIALITY.

                  (a)      Optionee understands and acknowledges that as a
                  result of Optionee's employment with the Company, and
                  involvement with the business of the Company, Optionee is or
                  shall necessarily become informed of, and have access to,
                  confidential information of the Company including, without
                  limitation, inventions, patents, patent applications, trade
                  secrets, technical information, know-how, plans,
                  specifications, marketing plans and information, pricing
                  information, identity of customers and prospective customers
                  and identity of suppliers, and that such information, even
                  though it may have been or may be developed or otherwise
                  acquired by Optionee, is the exclusive property of the
                  Company to be held by Optionee in trust and solely for the
                  Company's benefit. Optionee shall not at any time, either
                  during or subsequent to Optionee's employment hereunder,
                  reveal, report, publish, transfer or otherwise

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                  disclose to any person, corporation or other entity, or use,
                  any of the Company's confidential information, without the
                  written consent of the Company's Board of Directors, except
                  for use on behalf of the Company in connection with the
                  Company's business, and except for such information which
                  legally and legitimately is or becomes of general public
                  knowledge from authorized sources other than Optionee.

                  (b)      Upon termination of Optionee's employment with the
Company for any reason, Optionee shall promptly deliver to the Company all
drawings, manuals, letters, notes, notebooks, reports and copies thereof and
all other materials, including, without limitation, those of a secret or
confidential nature, relating to the Company's business which are in
Optionee's possession or control. The Company shall reimburse Optionee for any
packing or moving costs reasonably incurred by Optionee in connection with the
foregoing delivery.

         For purposes of this Section 17 and Section 16, the term "Company"
includes the Company and other predecessor corporation, and affiliates
(including, without limitation, distributors, licensees, franchisees,
subsidiaries and joint ventures).

         18.      REMEDIES AND SURVIVAL. Because the Company does not have an
adequate remedy at law to protect its interest in its trade secrets,
privileged, proprietary or confidential information and similar commercial
assets, or its business from Optionee's competition, the Company shall be
entitled to injunctive relief, in addition to such other remedies and relief
that would, in the event of a breach or a threatened breach of the provisions
of Sections 16 and 17, be available to the Company. The Company shall not be
required to plead or prove the inadequacy of damages. The provisions of
Sections 16 and 17 and this Section 18 shall survive any termination of
Optionee's employment with the Company for any reason whatsoever.

         19.      FAILURE TO PAY. If, upon tender of delivery thereof, the
Optionee fails to accept delivery of and pay or have paid for all or any part
of the number of shares of Common Stock specified in the Notice, the
Optionee's right to exercise this Option with respect to such undelivered and
unpaid for shares may be terminated by the Company.

         20.      RESTRICTIONS ON TRANSFER OF SHARES UNDERLYING OPTIONS. The
issuance of the Shares upon the exercise of the Option and the transfer or
resale of such Shares shall be subject to such restrictions as are, in the
opinion of the Company's counsel, required to comply with the Securities Act
of 1933, as amended, and the rules and regulations promulgated thereunder, and
the certificate(s) representing such shares shall, if it is deemed advisable
by the Company's counsel, bear a legend to such effect.

         21.      NO RIGHTS OF SHAREHOLDER. Neither the Optionee nor any
person or persons entitled to exercise the Optionee's rights under this Option
in accordance herewith shall have any rights to dividends or to Common Stock
subject to this Option, except to the extent that a certificate for such
shares shall have been issued upon the exercise of this Option as provided
herein.

         22.      NOTICES. Each notice relating to this Option shall be in
writing and delivered in person or by certified mail to the proper address.
All notices to the Company shall be addressed to it at its offices at 5115
Campus Drive, Plymouth Meeting, Pennsylvania 19462, attention of the

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Committee, c/o the Company's Secretary. All notices to the Optionee or other
person or persons then entitled to exercise any rights with respect to this
Option shall be addressed to the Optionee or such other person or persons at
the Optionee's address shown in the records of the Company or the location at
which the Optionee is employed by the Company. Anyone to whom a notice may be
given under this Option may designate a new address by notice to that effect.

         23.      NO RIGHT TO EMPLOYMENT. Neither the adoption of the Plan nor
the granting of this Option confers on the Optionee any right to continued
employment by the Company (or any of its direct or indirect subsidiaries) or
in any way interferes with or alters any of the Company's (and its direct and
indirect subsidiaries') rights to terminate the employment by the Company of
the Optionee at any time, with or without cause, and without liability
therefor. This Option shall not be deemed a part of the Optionee's regular,
recurring compensation for any purpose, including, without limitation, for the
purposes of any termination indemnity or severance pay law of any
jurisdiction.

         24.      GOVERNING LAW. This Option and all determinations made and
actions taken pursuant hereto, to the extent not otherwise governed by the
Internal Revenue Code of 1986, as amended from time to time, or the securities
laws of the United States, shall be governed by and construed under the laws
of the State of Delaware.

         IN WITNESS WHEREOF, LITHIUM TECHNOLOGY CORPORATION has caused this
Option to be executed by its officers as of the _____ day of __________.

                                    LITHIUM TECHNOLOGY CORPORATION

                                    By:
                                       ------------------------------------
                                       Name:
                                       Title:


ACCEPTED AND AGREED:

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