Document:

Executive Employment Agreement of Edward Buiel

    EXECUTIVE
      EMPLOYMENT AGREEMENT

    

    This
      Executive Employment Agreement is entered into this ___ day of September 2005
      and effective as of September , 2005, between Axion Power International, Inc.,
      a
      Delaware corporation, having a place of business at 100 Caster Avenue,
      Woodbridge, Ontario Canada (the “Company”) and Edward Buiel of <City>,
<State>, (the “Executive”).

    

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

    

    WHEREAS,
      the
      Company is desirous of making appropriate arrangements for the management of
      its
      business affairs; and

    

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

    

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

    

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

    

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

    

    2. Employment
      and Duties.
      The
      Company shall employ the Executive as it’s Chief of Research and Development, or
      such other comparable executive capacity as the Board of Directors of the
      Company shall specify from time to time. The company has recently budgeted
      the
      sum of $150,000 for the purpose of establishing a carbon electrode manufacturing
      facility in upstate New York at a site that will be selected by the Executive
      and the Company’s Chief Executive Officer. Pending the establishment of the
      planned electrode facility, the Executive will work from the Company's office
      in
      the Toronto Metropolitan Area. When the electrode facility has been installed
      and placed in service, the Executive will work from the newly established
      electrode facility, provided that regular travel to the Company’s Toronto
      facilities will be expected. The Executive’s initial responsibilities shall
      include all of the duties and responsibilities of the Chief of Research and
      Development as described in a more detailed job description that will be
      negotiated between the Executive and the Board of Directors, as the same may
      be
      amended from time to time. In addition, the Executive shall, perform such other
      mutually agreeable functions and duties as the Board of Directors may entrust
      or
      delegate to him from time to time.

    

    3. Conduct
      of Executive.
      During
      the entire Term of this Agreement, the Executive shall devote his full business
      time, effort, skill and attention to the affairs of the Company and its
      subsidiaries, will use his best efforts to promote the interests of the Company,
      and will discharge his responsibilities in a diligent and faithful manner,
      consistent with sound business practices. During the entire Term of this
      Agreement, the Executive shall agree to serve as a member of the Company’s Board
      of Directors if appointed to such position by the board of directors or elected
      to such position by the shareholders of the Company. In furtherance of the
      foregoing:

    

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

    

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

    

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

    

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

    

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

    

    For
      a
      period of one year after termination for cause, the Executive shall not engage
      in any business or activity that is directly competitive with the business
      of
      the Company, including the activities described above. Notwithstanding the
      generality of the foregoing, nothing in this Agreement shall be deemed to
      preclude the Executive from participating in other business opportunities if
      and
      to the extent that (i) such business opportunities are not directly competitive
      with the business of the Company, (ii) the Executive’s activities with respect
      to such opportunities do not have a material adverse effect on the performance
      of the Executive’s duties hereunder, and (iii) the Executive’s activities with
      respect to such opportunity have been fully disclosed in writing to the
      Company’s Board of Directors.

    

    4. Conditions
      of Employment.

    

    (a) Term
      of Employment.
      Unless
      terminated earlier in accordance with the provisions of this Agreement, the
      Company will employ the Executive for a three-year period commencing on
      September , 2005 and terminating on August 31, 2008 (the “Term”). Not less than
      90 days before the termination of this Agreement, the Company and the Executive
      shall open negotiations for a suitable contract renewal. In the absence of
      a
      renewal contract, this agreement shall be automatically renewed for an
      additional two-year term.

    

    (b) Place
      of Employment.
      The
      Executive shall occupy offices at the Company’s planned electrode facility in
      upstate New York and pending completion of the planned facility, the Executive
      shall work from the Company’s executive office in the Toronto Metropolitan Area
      which will be maintained for his use by the Company at the Company’s expense.
      The Executive shall not be required to relocate from any other business location
      maintained by the Company although the Executive expressly agrees that regular
      travel shall be necessary as part of his duties. It may be decided that the
      Executive will permanently locate at the Toronto office.

    

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

    

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

    

    (e) Inventions,
      Copyrights. Trademarks.
      The
      Executive shall promptly disclose to the Company (and to no one else) all
      improvements, discoveries, ideas and inventions that may be of significance
      to
      the Company, or any subsidiary or affiliate of the Company, made or conceived
      alone or in conjunction with others (whether or not patentable, whether or
      not
      made or conceived at the request of or upon the suggestion of the Company or
      any
      subsidiary or affiliate of the Company during or out of his usual hours of
      work
      or in or about the premises of the Company or elsewhere) while in the employ
      of
      the Company or of any subsidiary or affiliate of the Company, or made or
      conceived within one year after the termination of his employment by the Company
      or of any subsidiary or affiliate of the Company if resulting from, suggested
      by
      or relating to such employment. All such improvements, discoveries, ideas and
      inventions shall be the sole and exclusive property of the Company and are
      hereby assigned to the Company. At the request of the Company and at its cost,
      the Executive shall assist the Company, or any person or persons from time
      to
      time designated by it, to obtain the copyright, trademark and/or grant of
      patents in the United States and/or in such other country or countries as may
      be
      designated by the Company, covering such improvements, discoveries, ideas and
      inventions and shall in connection therewith and in connection with the defense
      of any patents execute such applications, statements or other documents, furnish
      such information and data and take all such other action (including, but not
      limited to, the giving of testimony) as the Company may from time to time
      reasonably request.

    

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

    

    (a) The
      Executive shall receive a salary of $10,000 per month for services rendered
      during the period commencing on September , 2005 and terminating in March,
      2006.
      Thereafter, the Executive’s Salary shall be reviewed on a bi-annual basis and
      the amount of such Salary shall be subject to renegotiation on the basis of
      the
      performance of the Executive and the performance of the Company.

    

    (b) The
      Company’s capital budget for the processing and fabrication equipment required
      for the Company’s proposed carbon electrode manufacturing facility has been
      fixed at $100,000. If the Executive is able to purchase suitable used equipment
      on more advantageous terms, the Executive will be entitled to receive a one-time
      cash bonus equal to fifteen percent (15%) of the cost savings.

    

    (c) When
      the
      Company’s proposed carbon electrode manufacturing facility has been installed,
      completed shake-down tested and is ready to commence production, the Executive
      will be entitled to receive a one-time cash bonus of $10,000.

    

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

    

    (e) The
      Executive shall participate, without cost to the Executive, in the Company's
      standard employee benefit programs, including but not limited to medical and
      hospitalization insurance and group life insurance, as in effect from time
      to
      time.

    

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

    

    (g) During
      the Term of this Agreement, the Company will reimburse the Executive for all
      reasonable business expenses incurred by him on behalf of the Company in the
      performance of his duties hereunder upon presentation of vouchers, receipts
      or
      other evidence of such expenses in accordance with the policies of the Company,
      and provided that the Executive shall incur no costs or expenses that exceed
      five thousand dollars without prior authorization of the Company.

    

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

    

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

    

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

    

    (a) The
      Grant
      Shares shall be issued to the Executive under the Company’s Incentive Stock Plan
      for the sole purpose of providing the Executive with a tangible incentive to
      put
      forth maximum efforts for the success of the Company and its business in the
      future. In the event that the Executive’s
      employment with the Company is terminated by the Executive without cause or
      by
      the Company with cause prior
      to the
      first anniversary of the date of this Agreement, then all Grant Shares that
      have
      not previously vested pursuant to sub-paragraphs (b) and (c) hereof shall be
      immediately forfeit without further action by the Company or the
      Executive.

    

    (b) Absolute
      and unrestricted ownership of the Grant Shares shall vest in the Executive
      over
      the one-year period commencing on the effective date of this Agreement, at
      the
      rate of 500 shares per month. No consideration shall be given to partial
      periods.

    

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

    

    7. 
      Grant of
      Stock Purchase Option. The
      Company acknowledges that the Executive has agreed to devote substantially
      all
      of his business time and effort to the Company during the entire Term of this
      Agreement. In recognition of the opportunity costs associated with such actions,
      the Executive is hereby granted an option to purchase 90,000 shares of the
      Company’s common stock at an exercise price of $4.00 (U.S.) per share.
The
      foregoing options shall vest at the rate of 2,500 shares per month commencing
      on
      October , 2005. If the Executive's employment is terminated by the Company
      without
      cause
      (as
      defined in Section 8) or terminated by the Executive for good
      reason
      (as
      defined in Section 8), all unvested options shall immediately vest and become
      exercisable. In all other cases, all unvested options shall immediately
      terminate.
      Notwithstanding
      the generality of the foregoing, rights represented by vested options shall
      not
      be affected by the termination of the Executive’s employment because of the
      disability or death of the Executive. From
      and
      after the vesting dates, the vested options may be exercised at any time or
      from
      time to time, in whole or in part, for a period of five years. The option
      agreement attached hereto as “Exhibit A” shall be executed concurrently with
      this agreement.

    

    8. Termination
      of Employment.

    

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

    

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

    

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

    

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

    

    (e) Upon
      execution of this agreement, the Company shall deposit the sum of $60,000 in
      a
      segregated escrow account at _____________ bank for the purpose of securing
      the
      Company’s severance payment obligations hereunder. On each three-month
      anniversary of the date of this agreement, provided there has been no default
      by
      the Company, $15,000 of the escrow account principal shall be released to the
      Company and the Executive’s right to severance compensation shall thereafter be
      an unsecured claim against the Company with respect to the amounts so
      released.

    

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

    

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

    

    10. Miscellaneous.

    

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

    

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

    

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

    

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

    

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

    

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

    

    (g) In
      the
      event a dispute arises out of, in connection with, or with respect to this
      Agreement, or any breach thereof, such dispute shall, on the written request
      of
      one party delivered to the other party, be submitted to and settled by binding
      arbitration before a single arbitrator conducted in Toronto, Ontario, Canada
      in
      accordance with Arbitrations Act (Ontario). The award of such arbitrator shall
      be final other than appeals under sections 45(2) and 45(3) of the Arbitration
      Act of Ontario and may be entered by any party hereto in any court of competent
      jurisdiction. The party against whom the arbitrator’s award is rendered shall
      pay all costs and expenses of such arbitration, unless the arbitrator shall
      specifically allocate costs in a different manner because the award is not
      entirely in favor of either party

    

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

    

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

    

    Axion
      Power International, Inc. Executive

    

    

    

    By:    

    John
      L.
      Petersen, Chairman  Edward
      Buiel

    

    
      
        
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    NONQUALIFIED
      STOCK OPTION AGREEMENT

    

    AXION
      POWER INTERNATIONAL, INC.

    (The
      Options Represented Hereby Are Not Presently Exercisable)

    

    THIS
      OPTION AGREEMENT
      (“Option
      Agreement”) is dated and delivered effective as of September , 2005, in
      Woodbridge, Ontario, Canada between AXION
      POWER INTERNATIONAL, INC.,
      a
      Delaware corporation (hereinafter called the “Company”) and Edward
      Buiel
      (hereinafter called “Optionee”):

    

    R
      E C I T A L S

    

    The
      Company and the Optionee have entered into an employment agreement that requires
      the Company to grant the Optionee an option to purchase 90,000 shares of the
      Company’s common stock at a price of $4.00 per share as partial consideration
      for the services to be rendered under the agreement.

    

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

    

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

    

    1. Grant
      of the Option.
      The
      Company hereby grants to Optionee the right and option to purchase, on the
      terms
      and conditions hereinafter set forth, all or any part of an aggregate of 90,000
      shares (the “Stock”) of the presently authorized but unissued common stock, par
      value $.0001 per share, of the Company (the “Common Stock”). The purchase price
      of the Stock subject to this Option shall be $4.00 per share.

    

    2. Vesting
      of the Option.
      As long
      as the Optionee remains an employee of the Company, the option granted hereby
      shall vest at the rate of 2,500 shares per month commencing on September 30,
      2005. If the Optionee’s employment is terminated by the Company
      without
      cause
      or
      terminated by the Optionee for good
      reason,
      all
      unvested options shall immediately vest and become exercisable. In all other
      cases, all unvested options shall immediately terminate.
      From
      and after the vesting dates, the vested options may be exercised at any time
      or
      from time to time, in whole or in part, for a period of five years. Notwithstanding
      the generality of the foregoing, rights represented by vested options shall
      not
      be affected by the termination of the Optionee’s employment because of the
      disability or death of the Optionee

    

    

    

    

    3. Exercise
      of Option.

    

    (a) Vested
      Options may only be exercised by the Optionee who shall have the right to
      exercise such Option in whole or in part, at any time or from time to time
      during the period commencing on a vesting date and terminating on the sixth
      anniversary of such vesting date. The Option is not transferable or assignable
      by the Optionee other than by will, as a result of the laws of descent and
      distribution or pursuant to a Qualified Domestic Relations Order. If the Option
      is transferred by will, as a result of the laws of descent and distribution
      or
      pursuant to a Qualified Domestic Relations Order, the transferee shall have
      all
      of the rights, powers and privileges that the Optionee would have had in the
      absence of such a transfer.

    

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

    

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

    

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

    

    4. Notices;
      Deliveries.
      Any
      notice or delivery required to be given under the terms of this Option Agreement
      shall be addressed to the Company in care of its Secretary at its principal
      office, 100 Caster Avenue, Woodbridge, Ontario Canada L4L 5Y9, and any notice
      or
      delivery to be given to Optionee shall be addressed to him at such address
      as
      the Optionee may hereafter designate in writing. Any such notice or delivery
      shall be effective as of the date of receipt.

    

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

    

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

    

    7. Miscellaneous.
      

    

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

    

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

    

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

    

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

    

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

    

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

    

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

    

    

    

    

    Axion
      Power International, Inc. Optionee

    

    

    By:    

    John
      L.
      Petersen, Chairman  Edward
      BuielExhibit 4.1

 

GRUPO AEROPORTUARIO DEL PACÍFICO, S.A. DE C.V.

(the
“Company”)

 

 

 

Fixed Minimum Capital: $16,019,823,119.00

Total Capital: $16,019,823,119.00

 

Represented
by: 476,850,000 Series “B”
Shares

                          84,150,000
Series “BB” Shares

Total: 561,000,000 Shares

 

 

Certificate Number:           

 

Term: 100 years                                                                  Domicile:
Mexico City, Federal District

 

 

THIS CERTIFICATE REPRESENTS
476,850,000 SERIES “B”, CLASS I, COMMON NOMINATIVE SHARES, WITHOUT STATEMENT OF
PAR VALUE OF THE FIXED CAPITAL, FULLY SUBSCRIBED AND PAID, OF THE TOTAL
476,850,000 SHARES SERIES “B” WHICH ARE DEPOSITED BEFORE S.D. INDEVAL, S.A. DE
C.V., INSTITUCIÓN PARA EL DEPÓSITO DE VALORES, PURSUANT TO ARTICLE 74 OF THE
MEXICAN SECURITIES MARKET LAW.

 

ARTICLE FOURTH.
    NATIONALITY.  The Company is Mexican. Any foreign person
who, at the time of incorporation or afterwards, acquires an interest or share
in the Company shall, upon such single fact, be considered as Mexican with
regards to the actions or rights acquired from the Company; the goods, rights,
concessions, participations or interests of which the Company is the legal
holder; and the rights and obligations arising from the agreements to which the
Company is a party, and therefore, it shall be understood that such foreign
person agrees not to invoke the protection of its government, otherwise, under
penalty of forfeiting in favor of the Mexican Nation the rights or goods that
had been acquired.

 

The Company was incorporated
by means of public deed number 44,340 dated May 28, 1998, granted before Mr.
Emiliano Zubiría Maqueo, Notary Public No. 25 of Mexico City, Federal District,
registered in the Public Register of Commerce of Mexico City, Federal District,
under mercantile file number 238,578, on June 25, 1998.

 

By means of the General
Extraordinay Shareholders Meeting held on February 2, 2006. the Company
approved to convert the total variable capital of the Company in fixed capital
and the reduction of the number of shares of the Company from 16,019,823,119
shares to 561,000,000 shares of which 476,850,000 are Series “B” shares and
84,150,000 are Series “BB” shares.

 

By means of the General
Ordinary and Extraordinary Shareholders Meeting held on February 7, 2006, the
Company approved to amend in its entirety their by-laws.

 

 

Mexico
City, Federal District, on February 7, 2006

 

 

	
   

  	
   

  	
   

  
	
  Director

  	
   

  	
  Director

  
	
   

  	
   

  	
   

  

 

 

MAIN RIGHTS AND DUTIES OF
SHAREHOLDERS

 

Corporate Capital. The
Corporate capital shall be variable. The minimum fixed corporate capital not
subject to retirement is $16,019,823,119.00 (Sixteen billion nineteen million
eight hundred and twenty-three thousand one hundred and nineteen Mexican Pesos
00/100) represented by 561,000,000 (five hundred and sixty-one million)
ordinary, registered Class I shares without statement of par value, subscribed
and paid in full. The variable part of the corporate capital shall not exceed
ten times the sum of the minimum fixed part of the corporate capital not
subject to retirement, and shall be represented by ordinary, registered  Class II shares without statement of par
value, which shall mention the year of issue and be numbered from one onward,
as per the issue in each year, and shall have such other characteristics as
determined by the shareholders meeting that approves their issuance. Both
classes of the Company’s corporate capital shall be divided into two series of
shares as follows:

 

1.             Series
“B” shares, freely acquired, which may represent up to 100% (one hundred
percent) of the corporate capital. The Series “B” shares may be acquired by any
national or foreign person, including individuals, companies or entities
defined as investors under Article 2 of the Foreign Investment Act (“Ley de Inversión Extranjera”), except for foreign
governments; and

 

2.             Series
“BB” shares, freely acquired, which may represent up to 15% (fifteen percent)
of the corporate capital, and which may be acquired by any national or foreign
person, including individuals, enterprises or entities defined as investors
under Article 2 of the Foreign Investment Act (“Ley de
Inversión Extranjera”). The Series “BB” shares shall be subject to
the following rules:

 

(a)           The
Series “BB” shareholders shall be entitled to appoint 4 (four) members of the
Company’s Board of Directors and their substitutes by the vote of the majority
of the shares which represent such series and shall have the rights and powers
established in Articles Ten, Eleven, Fifteen, Seventeen, Twenty Two, Twenty
Six, Twenty Eight, Thirty and Forty-five hereinafter;

 

(b)           Prior
to conversion into “B” series shares, the “BB” series may only be transferred
to the extent that (i) the holder of such series “BB” shares is the Federal
Government or any decentralized body of the federal public administration or
majority state-participation company, or (ii) are transmitted to a Related
Person that is not a natural person, who fulfills the requirements established
in item 3.2 of the notice and bases of the bidding process of the titles
representing the corporate capital of the Company, as published in the Federal
Official Gazette (“Diario Oficial de la
Federación”), on February 25, 1999, and amended by publication in
the Federal Official Gazette on July 9, 1999, and the Ministry of
Communications and Transport (“Secretaría de
Comunicaciones y Transportes”) is notified 15 (fifteen) business
days in advance of such circumstance, proving compliance with the
aforementioned requirements (in the understanding that if Nacional Financiera,
S.N.C. keeps less than 51% (fifty one percent) of the  Company’s corporate capital, it will also
require the favorable vote of at least 51% (fifty one percent) of the corporate
capital of the Company). In all cases, once the series “BB” shares are
transmitted and therefore converted into Series “B” shares, the percentage
mentioned in paragraph 2 hereinabove, shall be reduced in the proportion of
series “BB” shares converted into series “B”, and such percentage may only be
increased again with the approval of an extraordinary shareholders meeting.

 

(c)           The
series “BB” shares may be converted into series “B” shares after a period of 15
(fifteen) years following the execution date of the Technical Assistance and
Technologic Transfer Agreement between the Company and the holders of series 

 

 

 

“BB” shares (the “Strategic Shareholder”) provided. an
extraordinary shareholders meeting, with the approving vote of the shareholders
representing at least 51% (fifty one percent) of the Series “B” shares not held
by the Strategic Shareholder or a person related to the Strategic Shareholder
decides to undertake such conversion and at the same time to not renew the
Technical Assistance Agreement. However, if upon expiration of the
aforementioned 15 (fifteen) year period, the Strategic Shareholder has series
“BB” shares representing less than 7.65% (seven point sixty five percent) of
the Company’s corporate capital, then such shares shall necessarily be
converted to series “B” shares. The series “BB” shares may be transferred via
conversion to series “B” shares before the expiration of such 15 (fifteen) year
period in the cases and under the terms provided in the first paragraph of
Article Eleven of these articles of incorporation.

 

If consequent to such conversion, any
shareholder exceeds the limits of individual share holding established in
Article Ten below, such shareholder shall have a period of 30 (thirty) calendar
days to sell the excess participation and, otherwise, the Company shall be
authorized to amortize the shares exceeding such authorized individual
participation, at the book value according to the last audited financial
statements approved by a shareholders meeting, or to acquire such shares
pursuant to Article Nine hereof.

 

Pursuant
to Article 111 of the General Corporation and Partnership Law (“Ley General de Sociedades Mercantiles”), all of the shares
of the Company shall be registered.

 

The Company may issue
unsubscribed shares of any kind which form the corporate capital and which
shall be kept in the Company’s Treasury of the to be delivered to the extent
that they are acquired and become outstanding. Moreover, the Company may issue
unsubscribed shares under the terms and conditions provided in Article 81 of
the Stock Market Law.

 

Within the
corresponding series, all the ordinary shares shall grant equal rights and
obligations to their holders. The certificates and titles which cover such
shares shall comply with all of the requirements established in Article 125 of
the General Corporation and Partnership Law; they may represent one or more
shares and shall be signed by a member of the Board of Directors appointed by
the Series “B” shareholders and by one appointed by the Series “BB”
shareholders and shall contain an exact transcription of this Article, as well
as of Articles Ten, Eleven, Twelve, Thirteen and Fourteen hereof.

 

With
regards to shares deposited before a securities deposit institution, the
Company may deliver several titles, or a single tile, to such institution
covering part or all of the shares in the issue and deposit, issued for
securities deposit, and they may have coupons attached or not, pursuant to
article 74 of the Stock Market Law. The Company shall issue the corresponding
titles within 90 (ninety) calendar days after the date when the corresponding
issuance or exchange was agreed.

 

 

Limits of Share Holding. The share of any
corporation, partnership or individual in the corporate capital of the Company,
shall be subject to the following rules, it being understood that these rules
shall not  apply to the participation (i)
of the Federal Government, (ii) of Nacional Financiera, S.N.C., either directly
or as a trustee, (iii) of securities deposit institutions or (iv) of financial
entities or other authorized entities which obtain or keep third-party
securities on account, it being also understood that this exception does not apply
to the stock share each beneficiary has directly or indirectly in the Company:

 

 

 

1.
The participation of Series “B” shareholders, either individually or jointly
with the Persons Related to them, shall not exceed 10% (ten percent) of the
corporate capital of the Company being negotiated unless the events provided in
the Twelfth or Fourteenth Article hereof occur.

 

2.
The individual participation of Series “BB” shareholders in the shares
representing such series shall not have any limitation whatsoever; however,
such series shall only represent 15% (fifteen percent) of the corporate capital
under the terms of the Sixth Article hereof.

 

3.
Series “BB” shareholders may also hold series “B” shares, it being understood
that while they keep shares representing series “BB”, they may only keep a
maximum total participation in the Company’s corporate capital of 20% (twenty
percent).

 

The
limits of participation established in this Article shall not be exceeded
either directly or through the organization of trusts, agreements,
incorporation of entities or corporate bylaws, pyramid schemes or any other
kind of mechanism which grant a higher participation than the maximum
established.

 

For
the purposes of this Article and these articles of incorporation, a Related Person
in respect of a specific person shall mean (i) such companies that are
controlled, or are subject to the same Control of or which have Control on the
relevant shareholder (“Control” shall mean (a) share holding of more than 35%
(thirty five percent) of the corporate capital with voting rights, (b) the
contractual rights of a person of appointing the majority of the members of the
Board of Directors, (c) the right of a person to veto the decisions of the
majority shareholders in business reserved to the extraordinary shareholders
meeting, either as derived from a contract or due to holding shares of a
special series, or (d) the person  that
concentrates more than 15% (fifteen percent) of the sales of such shareholder);
(ii) any subsidiary of the Related Person; (iii) blood relations or relations
by marriage in direct line to the up to a fourth grade, in ascending or
descending line, to any shareholder with 5% (five percent) or more of the
corporate capital shares or to the Persons Related to such shareholder (the
“Relevant Shareholder”).

 

Transmission of Series “BB” Shares. The shares
representing the Series “may be transferred to any third party, with the
previous conversion thereof into series “B” of the corresponding class,
according to the following rules: (i) 51% (fifty one percent) of the Series
“BB” shares may be 10 (ten) years after 
the purchase date of the corresponding shares of the series “BB” (the
“Ten Year Waiting Period”); y (ii) 49% (forty nine percent) of the series “BB”
shares may be transferred after 3 (three) years from the date of the initial
public offering of the shares that represent the Corporation’s corporate
capital Company (the “Three Year Waiting Period”) or after a waiting period of
five years (the “Five Year Waiting Period”) from the execution date of the
Participation Agreement executed with the Strategic Shareholder, which ever
happens first. At the end of the Ten Year Waiting Period, the series “BB”
shareholder or shareholders may annually transfer, one-fifth of such 51% (fifty
one percent) of the series “BB” shares of the corporate capital that they hold,
and at the end of the Three Year Waiting Period or the Five Year Waiting
Period, as the case may be, such series “BB” shareholder(s) may transfer 49%
(forty nine percent) of their series “BB” share holding, without restriction,
directly or indirectly.

 

If
upon expiration of the Waiting Periods referred to in this Article, the
shareholders holding shares of the series “BB” want to convert them to series
“B” shares for their further transfer, they shall communicate their decision to
the Company’ Board of Directors

 

 

 

 

 

which
within the 15 (fifteen) following business days, shall make the related
exchange of stock certificates, in accordance with these articles of
incorporation.

 

Amendment to the limits of participation. Any amendment
to the provisions established in the Seventh, Tenth, Eleventh and Twelfth
Articles of these articles of incorporation and to the share distribution
established in the Sixth Article hereinabove, shall require the affirmative
vote of the shares representing 85% (eighty five percent) of the corporate
capital.

 

If
the Company lists its shares in the securities market and approves an amendment
to the articles of incorporation to eliminate the limitation on the share
holding provided in Article Ten of these articles of incorporation in order for
one person individually or jointly with Related Persons, to acquire a
significant part of the Company’s corporate capital that represents Control
thereon (a “Controller Shareholder”), such Controller Shareholder shall require
the previous approval of the Board of Directors to acquire a share percentage
in excess of the participation limits established in Article Ten hereof. Such
authorization shall only be granted subject to the Controller Shareholder’s
obligation to make a public offering, so entitling the other shareholders to
sell their participation and be dissociated from the Company. Such Controller
Shareholder shall make the public offering within 30 (thirty) business days
following the approval of the Board of Directors, at the highest price of (i)
the Market Price (as defined hereinafter); or (ii) the book value of the share
according to the last quarterly report filed with the Mexican National Banking
and Securities Commission and the Mexican Stock Exchange prior to the offering
(except when such book value has been modified in keeping with the criteria
governing the determination of relevant information). In this case, the most
recent financial information available to the Company shall be taken into
consideration unless the Mexican National Banking and Securities Commission
authorizes a different price in its decision authorizing the public stock
offering. In such event, the Controller Shareholder shall be entitled to vote
its entire participation after the mentioned public offer.

 

For
effects of the immediately preceding paragraph, “Market Price” means the
average price calculated from the volume of operations made during the last 30
(thirty) days during which shares of the Company were negotiated, previous to
the date of the offering, during a period not longer than 6 (six) months. If
the number of days during which the shares were negotiated during the
aforementioned period is less than thirty, the days during which the shares had
been effectively negotiated shall be taken into consideration. In the event
that the shares are not negotiated in such period, the book value of the shares
shall be taken into consideration. In the event that the offer comprises more
than one series of shares, the average calculated referred to in the present
paragraph, shall be made per each of the series that are intended to be
cancelled, taking as value for the negotiation for the public offering of all
of the series the highest average.

 

On
the other hand, any amendment to the obligation to make the public offering
referred to in the immediately preceding paragraph shall require the
affirmative vote of shares representing at least 95% (ninety five percent) of
the Company’s corporate capital.

 

Increases and Decreases of Corporate capital. Excepting the
increases and decreases of equity provided in the Article Nine herein,
increases or decreases of the Company’s minimum fixed equity not subject to
retirement shall be approved by the extraordinary shareholders meeting, subject
to these articles of incorporation and the General Corporation and Partnership
Law.

 

 

 

Increases
and decreases of the variable part of the corporate capital may be approved by
an ordinary shareholders meeting in compliance with the voting requirements
established in these articles of incorporation; the minutes shall be officially
registered by notary public, it being unnecessary to file the same in the
Public Commercial Registry.

 

The
shares the Company issues under the terms and conditions of Article 81 of the
Stock Market Law and that must be kept in the Treasury to be delivered as they
are acquired may be offered for purchase and payment by the Board of Directors,
subject in its case, to the forms the shareholders meeting resolves. In all
cases, the following shall be taken into account: 1. The issuance must be made
for the purpose of making a public offering in observance of the Stock Market
Law; and 2. To facilitate the public stock offering, an express waiver shall be
made in the extraordinary shareholders meeting that decides the issue of
unsubscribed stock, of the pre-emptive right referred to in Article 132 of the
General Corporation and Partnership Law. There being a quorum under these
articles of incorporation, the agreement reached shall produce effects and bind
even those shareholders who did not attend the meeting; therefore, the Company
shall be free to float the shares without making the notice referred to in
article 132 of the General Corporation and Partnership Law. If a minority
representing at least 25% (twenty five percent) of the corporate capital votes
against issue of the unsubscribed shares, such stock issue shall not take
place.

 

Subject
to the limits established in Articles Six and Ten hereof, in the event of an
equity increase, the shareholders shall have the pre-emptive right to acquire
such increase proportionally to the number of shares that each when such
increase is decided, pursuant to Article 132 of the General Corporation and Partnership
Law as established hereinafter, unless: (a) the subscription offer is made
pursuant to Article 81 of the Stock Market Law, or, (b) the issue is of
debenture bonds pursuant to Article 210 bis of the General Law of Negotiable
Instruments and Credit Operations.

 

The
pre-emptive right established in this Article shall be exercised by
subscription of the shares issued to represent the increase, within 15
(fifteen) business days after the publication date of the decision by the
shareholders meeting authorizing the equity increase in the Mexican Federal
Official Gazette and a major newspaper of the company domicile, and the payment
in the terms approved by such meeting.

 

Notwithstanding
the foregoing, if in the corresponding meeting all the corporate capital shares
were represented, such period of 15 (fifteen) business days shall commence from
the date when such meeting takes place and the shareholders shall be deemed
notified of the decision at such time. In this case publication of the related
decisions shall not be required.

 

Equity
increases may be made in any of the cases referred to in Article 116 of the
General Corporation and Partnership Law, by payment in cash or in kind, or by
capitalization of the Company’s debts or reserves or of any net equity account.
Because the Company’s stock certificates do not contain the par value, the
issue of new certificates shall not be necessary the event of equity increases
resulting from the capitalization of stock premiums, capitalization of
undivided profits or capitalization of valuation or revaluation reserves unless
the shareholders meeting that approves such increase so requires and under the
terms of articles 81 of the Stock Market Law and article 210 bis of the General
Law of Negotiable Instruments and Credit Operations.

 

No
new shares shall be issued until the shares previously issued have been paid in
full.

 

 

 

 

All
increase or decrease of the variable part of the corporate capital shall be
registered in the Book of Equity Variations that for such purposes shall be
kept by the Company.

 

The
corporate capital may be diminished through the agreement of the general
shareholders meeting in accordance with the rules provided in this article, as
web as: (i) in the events of separation referred to in Article 206 of the
General Corporation and Partnership Law; or (ii) consequent to the stock
buyback under section I of Article 14-Bis-3 of the Stock Market Law. The
decrease in the minimum fixed part of the equity shall require the decision of
the general extraordinary shareholders meeting and the consequent amendment to
Article Six hereof, in which case it shall be made in compliance with the
provisions of Article 9 of the General Corporation and Partnership Law, unless
the equity reduction is solely for purposes of absorbing losses.

 

A corporate capital reduction consequent to the
exercise by a shareholder holding variable-equity shares of his right to retire
all or part of his contribution represented by such shares, shall be subject to
articles 220 and 221 of the General Corporation and Partnership Law, and the
reimbursement of the shares retired shall be paid as follows:

 

1. The lower value between: (i) 95% (ninety five
percent) of the exchange list value, obtained from the average weighted price
calculated on the trading volume during the 30 (thirty) days when the Company’s
securities were listed prior to the effective date of the stock retirement,
during a minimum period of 6 (six) months, or (ii) the book value of the
Company’s shares, according to the related general balance approved by the
general ordinary shareholders meeting corresponding to the annual period
immediately preceding the year in which the separation is to produce its
effects.

 

If the number of days the stock was negotiated during
the period specified in the above paragraph is less than thirty, the days when
it was effectively negotiated shall be take. If the shares are not negotiated
in said period, their book value shall be taken.

 

2. Reimbursement of the retirement shall be
immediately due and payable by the Company from the day after the general
ordinary shareholders meeting is held, that approved the general balance of the
annual period in which the retirement becomes effective.

 

The
corporate capital may be decreased in order to absorb losses, to reimburse the
shareholders for their contributions or to release them from payments not yet
made, as well as in the cases provided in Article 206 of the General
Corporation and Partnership Law and section I of Article 14-Bis-3 of the Stock
Market Law. If pursuant to the aforementioned section, the Company acquired in
the stock exchange shares representing its own corporate capital, the Company
shall consequently decrease the corporate capital on the same date as per said
article without holding a shareholders meeting.

 

Corporate
capital decreases to absorb losses or for reimbursement to the shareholders,
shall be made proportionally in the minimum fixed part and in the variable part
of the equity, as well as in both series of shares.

 

The
corporate capital shall not, under any circumstances, be decreased below the
minimum and the decrease of the variable part of the corporate capital shall be
registered in the Corporate Capital Variations Register that shall be kept by
the Company for such purposes.

 

Participation of Subsidiaries. The Subsidiaries of the Company shall not, directly or indirectly,
invest in the shares of the Company or of any other company of which the
Company is a subsidiary,

 

 

 

 

 

except if such Subsidiaries acquire shares of the
Company to fulfill the stock sale options or plans that are established or that
may be given to or designed for the employees or officers of such companies or
of the Company, provided the number of shares acquired with such purpose does
not exceed 15% (fifteen percent) of the Company’s total shares outstanding. For
purposes of this Article, the term Subsidiary shall have the meaning
established for such purposes by the accounting rules generally accepted in
Mexico, recognized and issued by the Consejo Mexicano para la
Investigación y Desarrollo de Normas de Información Financiera, A.C.

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