-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IrgzODsgNDqmwxdT46EBAJEBFwpfgAtu2Gl3ccKSthD5qUvTNbBMDGNkzhXq1vi0 A2roiSLdLIrnB5DZhxIgeA== 0001019687-08-004505.txt : 20081014 0001019687-08-004505.hdr.sgml : 20081013 20081010212248 ACCESSION NUMBER: 0001019687-08-004505 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 4 FILED AS OF DATE: 20081014 DATE AS OF CHANGE: 20081010 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: Axion Power International, Inc. CENTRAL INDEX KEY: 0001028153 STANDARD INDUSTRIAL CLASSIFICATION: MISCELLANEOUS ELECTRICAL MACHINERY, EQUIPMENT & SUPPLIES [3690] IRS NUMBER: 650774638 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-54375 FILM NUMBER: 081119428 BUSINESS ADDRESS: STREET 1: 100 CASTER AVENUE CITY: WOODBRIDGE STATE: A6 ZIP: L4L 5Y9 BUSINESS PHONE: 905-264-1991 MAIL ADDRESS: STREET 1: 100 CASTER AVENUE CITY: WOODBRIDGE STATE: A6 ZIP: L4L 5Y9 FORMER COMPANY: FORMER CONFORMED NAME: TAMBORIL CIGAR CO DATE OF NAME CHANGE: 19961204 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: Second Amended Trust for the Benefit of the Stockholders of Mega-C Power Corporation, Jeffrey L. Hartman, Trustee CENTRAL INDEX KEY: 0001287055 IRS NUMBER: 000000000 FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 510 W. PLUMB LANE, SUITE B CITY: RENO STATE: NV ZIP: 89509 BUSINESS PHONE: 775-324-2800 MAIL ADDRESS: STREET 1: 510 W. PLUMB LANE, SUITE B CITY: RENO STATE: NV ZIP: 89509 FORMER COMPANY: FORMER CONFORMED NAME: TRUST FOR THE BENEFIT OF SHAREHOLDERS OF MEGA C POWER CORP DATE OF NAME CHANGE: 20040414 SC 13D 1 megac_13d-031207.txt SCHEDULE 13D UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 SCHEDULE 13D UNDER THE SECURITIES EXCHANGE ACT OF 1934 (AMENDMENT NO. ________)* AXION POWER INTERNATIONAL, INC. ------------------------------- (Name of Issuer) COMMON STOCK, $0.0001 par value per share ----------------------------------------- (Title of Class of Securities) 05460x 10 9 --------------- (CUSIP Number) JEFFREY L. HARTMAN, ESQ. 510 W. Plumb Lane, Suite B Reno, NV 89509 775.324.2800 ---------------------------------------------------------- Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) March 12, 2007 ------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of ss.ss.240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box. |_| NOTE: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule.13d-7 for other parties to whom copies are to be sent. * The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). CUSIP No. 398502104 Page 2 of 6 - -------------------------------------------------------------------------------- 1. Names of Reporting Persons. Second Amended Trust for the Benefit of the Stockholders of Mega-C Power Corporation, Jeffrey L. Hartman, Trustee - -------------------------------------------------------------------------------- 2. Check the Appropriate Box if a Member of a Group (See Instructions) (a) |_| (b) |_| - -------------------------------------------------------------------------------- 3. SEC Use Only - -------------------------------------------------------------------------------- 4. Source of Funds (See Instructions) SC - -------------------------------------------------------------------------------- 5. Check if Disclosure of Legal Proceedings Is Required Pursuant to Items 2(d) or 2(e) |_| - -------------------------------------------------------------------------------- 6. Citizenship or Place of Organization UNITED STATES - -------------------------------------------------------------------------------- Number of Shares | 7. Sole Voting Power Beneficially | Owned by | 4,440,502 Each Reporting | ---------------------------------------------------- Person With: | 8. Shared Voting Power | | 0 | --------------------------------------------------- | 9. Sole Dispositive Power | | 4,440,502 | ---------------------------------------------------- | 10. Shared Dispositive Power | | 0 - -------------------------------------------------------------------------------- 11. Aggregate Amount Beneficially Owned by Each Reporting Person 4,440,502 - -------------------------------------------------------------------------------- 12. Check if the Aggregate Amount in Row (11) Excludes Certain Shares (See Instructions) |_| - -------------------------------------------------------------------------------- 13. Percent of Class Represented by Amount in Row (11) 17.2% - -------------------------------------------------------------------------------- 14. Type of Reporting Person (See Instructions) OO - -------------------------------------------------------------------------------- ITEM 1. SECURITY AND ISSUER This statement relates to the Common Stock, $0.0001 par value per share (the "Shares"), of Axion Power International, Inc. (the "Issuer"), and the principal executive offices of such entity are located at 3601 Clover Lane, New Castle, Pennsylvania 16105. ITEM 2. IDENTITY AND BACKGROUND This Statement is filed by the Second Amended Trust for the Benefit of the Stockholders of Mega-C Power Corporation, Jeffrey L. Hartman, Trustee (the "Trust"), a trust established under agreement governed by the laws of the State of Nevada created pursuant to the Plan of Reorganization, as amended, of Mega-C Power Corporation as approved by the United States Bankruptcy Court for the District of Nevada in case number 04-50962-GWZ (the "Plan"). Jeffrey L. Hartman (the "Trustee") is the sole trustee of the Trust. The Trust possesses the sole voting and dispository control over the Shares, except that 685,002 of the Shares have been pledged as security for loans in an aggregate principal amount of $2,055,000 made to the Trust in November 2006 by five lenders to facilitate implementation of the Plan. Both the Trust's business address and the Trustee's business address are 501 West Plumb Lane, Suite B, Reno, Nevada 89509. The Trustee's principal occupation is attorney-at-law and he is a United States citizen. Neither the Trust nor the Trustee has been convicted in a criminal proceeding in the last 5 years (excluding traffic violations or similar misdemeanors), nor has either been party to any proceeding, jurisdiction or order concerning any violation of federal or state securities laws. ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION The 4,440,502 shares that constitute the corpus of the Trust were transferred to the Trust pursuant to the express terms of a Reorganization Agreement between Tamboril Cigar Company, Axion Power Corporation and the holders of 100% of the then issued and outstanding securities of Axion Power Corporation in connection with a business combination transaction that closed on December 31, 2003.. ITEM 4. PURPOSE OF TRANSACTION The Trust is an irrevocable grantor trust organized on December 31, 2003 pursuant to an agreement between Tamboril Cigar Company as grantor and Benjamin Rubin as the initial trustee. A copy of the Trust agreement, as amended, is filed as an exhibit to this filing (the "Trust Agreement"). Trustee is a successor trustee under the Trust Agreement. Consistent with the terms of the Trust Agreement, the Trust intends to sell or transfer Shares to pay the expenses of the Trust and to distribute Shares to claimants of or interest holders in Mega-C Power Corporation. The foregoing may include, without limitation, transferring Shares to William Leonard as Trustee for the Mega-C Liquidation Trust (inclusive of any successor trustee(s), the "Liquidation Trust") in order to fund expenses of that trust or allowed creditor claims. To the extent consistent with the terms and purposes of the Trust Agreement, the Trust may, from time to time, retain or sell all or a portion of the Shares in the open market or in privately negotiated transactions based on its assessment of various factors including, among other things, applicable legal requirements and restrictions, the availability of Shares for purchase and the price levels of such Shares, general market and economic conditions; on-going evaluation of the Issuer's business, financial condition, operations and prospects; the relative attractiveness of alternative business and investment opportunities; the actions of the management and the Board of Directors of the Issuer; and other future developments, and potentially others. Except as set forth above, the Trust has no present plans or intentions which would result in or relate to any of the transactions described in subparagraphs (a) through (j) of Item 4 of Schedule 13D. ITEM 5. INTEREST IN SECURITIES OF THE ISSUER (a) The Trust beneficially owns 4,440,502 Shares, all of which are issued and outstanding, representing 17.2% of the Issuer's outstanding Common Stock based on the 25,875,850 shares of Common Stock reported as issued and outstanding as of August 1, 2008, in the Issuer's most recently available filing stating a definitive number of shares outstanding; (b) The Trust, by and through the Trustee, holds the sole voting and dispository power over all Shares beneficially owned by it, provided that (i) the Trustee's power to effect dispositions of the Trust corpus is subject to the supervision of the U.S. Bankruptcy Court and the express terms of the Trust Agreement, and (ii) 685,002 of the Shares have been pledged as security for certain loans in an aggregate principal amount of $2,055,000 made to the Trust in November 2006 by five lenders to facilitate implementation of the Plan. 3 (c) On August 20, 2008, the Trust transferred 750,000 Shares to the Liquidation Trust under the terms of the Trust Agreement. In addition, between September 8 and September 30, 2008, the Trust sold an aggregate of 194,500 Shares in private resales to separate purchasers in five transactions at a purchase price of $1.10 per Share on the terms and conditions set forth in the form of Stock Purchase Agreement filed as an exhibit hereto. Other than as set forth in this paragraph, the Trust has conducted no transactions in Shares in the last sixty days. (d) No other person is known to have the specific right to receive or the power to direct the receipt of dividends from, or the proceeds from the sale of, the Shares, except that the Trust Agreement requires the Trustee to sell Trust assets to the extent necessary to satisfy the claims of Mega-C Power Corporation's creditors. As a result of the pending Chapter 11 proceeding, the U.S. Bankruptcy Court will have the authority to make such orders respecting the sale of Issuer's shares as it deems appropriate under the circumstances. (e) Not applicable. ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER The Trust Agreement contains detailed descriptions of the Trustee's rights, powers and responsibilities with respect to the retention, distribution and sale of the Issuer's common stock. The complete text of the Trust Agreement is filed as an exhibit hereto and incorporated herein by this reference. The Trust has entered into Stock Purchase Agreements with five (5) purchasers of Shares, the form of which is filed as an exhibit hereto and incorporated herein by this reference. Other than with respect to the identity of the purchaser, the number of Shares purchased and the effective date, the Stock Purchase Agreements entered into by the purchasers are identical in all material respects. The Trust has also pledged an aggregate of 685,002 Shares to five non-institutional lenders as security for the repayment of loans in an aggregate principal amount of $2,055,000 made to the Trust in November 2006 to facilitate implementation of the Plan. A copy of the form of 8% Non-Negotiable Non-Recourse Promissory Note executed by the Trust in favor of each of such lenders and under which the applicable Shares have been pledged is filed as an exhibit to hereto and incorporated herein by reference. Other than with respect to the identity of the lender, the dollar amount of the loan and the effective date, the Promissory Notes entered into by the Trust and the lenders are identical in all material respects. Other than with respect to the foregoing documents, the Trust is not party to any agreement, contract or understanding with respect to securities of the Issuer. ITEM 7. MATERIAL TO BE FILED AS EXHIBITS The following documents relate to the potential future acquisition or disposition of Shares and are being filed as exhibits to this Statement: EXHIBIT NO. DESCRIPTION 99.1 Second Amended and Restated Trust Agreement for the Benefit of the Shareholders of Mega-C Power Corporation 99.2 Form of Stock Purchase Agreement 99.3 Form of 8% Non-Negotiable Non-Recourse Promissory Note 4 SIGNATURE After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. October 10, 2008 - ---------------------------- Date /s/ Jeffrey L. Hartman - ---------------------------- Signature Jeffrey L. Hartman, Trustee - ---------------------------- Name/Title 5 EX-99.1 2 megac_13d-ex9901.txt SECOND AMENDED TRUST AGREEMENT Exhibit 99.1 SECOND AMENDED AND RESTATED TRUST AGREEMENT FOR THE BENEFIT OF THE SHAREHOLDERS OF MEGA-C POWER CORPORATION This Second Amended and Restated Trust Agreement for the Benefit of the Shareholders of Mega-C Power Corporation (the "SAT Agreement"), dated as of this 21st day of November, 2006, by and between Axion Power International, Inc., as grantor, Sally Fonner, as Trustee of the Trust for the Benefit of the Shareholders of Mega-C Power Corporation (the "Shareholders Trust") and William N. Noall, in his capacity as Chapter 11 Trustee for Mega-C Power Corporation ("Noall" or "Chapter 11 Trustee"), is entered solely to facilitate the implementation of (a) the Second Plan of Reorganization filed with the Bankruptcy Court (as defined below) in the Bankruptcy Case (as defined below) on November 1, 2006, for Mega-C Power Corporation Jointly Proposed by William N. Noall, Chapter 11 Trustee, Axion Power International, Inc., Axion Power Corporation; Robert Averill, Joseph Picirrilli, Canadian Consultants Bureau, LLC, James Smith, James Eagan, Joseph Souccar, Glenn Patterson, Igor Filipenko, Ron Bibace, Kirk Tierney and Thomas Granville (the "Plan") that provides for this amendment of the Shareholders Trust and the preservation and distribution of Trust Assets (as defined below) by the Trustee, all for the benefit of the holders of Allowed Equity Securities as defined in the Plan (collectively, the "Beneficiaries"); and (b) the investigation, prosecution and/or compromise of objections or other contests to Claims and Equity Securities, as well as prosecution, settlement or waiver as the successor to and representative of the Debtor's bankruptcy estate of any and all Litigation Claims, claims and causes of action that are or become part of the Trust Assets pursuant to the Plan by the Trustee, as successor to and representative of the Debtor's bankruptcy estate in accordance with section 1123(b)(3)(B) of the United States Bankruptcy Code, 11 U.S.C. ss.101-1330, as amended (the "Bankruptcy Code"), as required by the Plan.(1) WHEREAS, Axion Power International, Inc., formerly known as Tamboril Cigar Company ("Axion"), as grantor, formed the Shareholders Trust pursuant to the Trust Agreement for the Benefit of the Shareholders of Mega-C Power Corporation dated December 31, 2003 (the "Trust Agreement"); and WHEREAS, pursuant to a Succession Agreement Pursuant to the Provisions of the Trust Agreement for the Benefit of the Shareholders of Mega-C Power Corporation, dated March 24, 2004, Sally Fonner ("Fonner") became the successor Trustee of the Shareholders Trust and has continued to serve in that capacity since; and WHEREAS, on April 6, 2004, an involuntary petition for relief under chapter 11 of the Bankruptcy Code was filed against Mega-C Power Corporation ("Debtor" or "Mega-C"), a Nevada corporation, in the United States Bankruptcy Court for the District of Nevada ("Bankruptcy Court") as case number BK-N-04-50962-GWZ (the "Bankruptcy Case"); and WHEREAS, on May 13, 2004, the Bankruptcy Court entered an order granting Debtor relief under chapter 11 of the Bankruptcy Code; and WHEREAS, on February 26, 2005, Axion, as grantor, and Fonner, as trustee, executed the First Amended and Restated Trust Agreement for the Benefit of the Shareholders of Mega-C Power Corporation (the "Amended Trust Agreement"); and (1) Terms not otherwise defined in this SAT Agreement shall have the meanings as provided for in the Plan. WHEREAS, on March 2, 2005, the Bankruptcy Court entered its Order Approving U.S. Trustee's Appointment of Chapter 11 Trustee, appointing Noall as the Chapter 11 Trustee of the Debtor's case; and WHEREAS, on February 1, 2006, the Bankruptcy Court entered its Order Approving Motion to Approve Settlement Agreement With Axion Et Al. Pursuant to Fed. R. Bankr. Pro. 9019; and WHEREAS, the Plan was confirmed by the Bankruptcy Court on November 8, 2006 in accordance with the Order Confirming Plan of Reorganization for Mega-C Power Corporation Jointly Proposed by William M. Noall, Chapter 11 Trustee; Axion Power International, Inc.; Axion Power Corporation; Robert Averill, Joseph Picirrilli, Canadian Consultants Bureau, LLC, James Smith, James Eagan, Joseph Souccar, Glenn Patterson, Igor Filipenko, Ron Bibace, Kirk Tierney and Thomas Granville (the "Confirmation Order"); and WHEREAS, the Plan and the Confirmation Order provide for this amendment of the Shareholders Trust on the Effective Date; and WHEREAS, the Trust Agreement and the Amended Trust Agreement expressly provide for amendment at any time for the purpose of modifying the terms, conditions, and provisions thereof or incorporating different terms, conditions and provisions that are not inconsistent with the intent of the parties and requested by Axion, as grantor, and Fonner, as Trustee; and WHEREAS, the Mega-C Liquidation Trust Agreement (the "Liquidation Trust Agreement") was executed on the Effective Date, the Liquidation Trust was created, and William Leonard was appointed as the Liquidation Trust Trustee; NOW, THEREFORE, in consideration thereof, the parties hereto agree as follows: ARTICLE I ESTABLISHMENT OF TRUST 1.1 CREATION AND NAME. The Second Amended Shareholders Trust is hereby created, in accordance with P. 6.4 ET SEQ. of the Plan, which supersedes, replaces and amends the Trust Agreement and the Amended Trust Agreement, and which is deemed effective on the Effective Date. 1.2 DECLARATION OF SECOND AMENDED SHAREHOLDERS TRUST. In order to declare the terms and conditions of the Second Amended Shareholders Trust, and in consideration of the Plan and the Confirmation Order under the Bankruptcy Code, Axion, the Trustee and Chapter 11 Trustee have executed this SAT Agreement, effective on the Effective Date of the Plan, as defined therein. The Trustee on behalf of the Second Amended Shareholders Trust shall have and hold all rights, title and interest in the Trust Assets; nevertheless, under and subject to the obligations under the Plan, including the obligation to fund the Liquidation Trust, and to make disbursements for the benefit of the holders of Allowed Equity Securities of Mega-C. 1.3 PURPOSE OF SECOND AMENDED SHAREHOLDERS TRUST. The purpose of the Second Amended Shareholders Trust is to hold and effectuate an orderly distribution of the Trust Assets in accordance with the Plan, which includes payment in full of all Allowed Unclassified Claims (including reserves for all Unclassified Claims incurred but not yet Allowed) and Allowed Claims, and the establishment of all Operating Reserves and Disputed Claims Reserves as required by the Plan to assure payment of all Claims as required by the Plan and the Confirmation Order; to distribute the Axion Settlement Shares to Axion on the Effective Date; to investigate, prosecute and/or compromise objections or other contests to Claims to cooperate in good faith with the Liquidation Trustee and Equity Securities; to pursue, litigate, settle or waive, as a successor to and representative of the Debtor's bankruptcy estate, any and all claims and causes of action that are or become part of the Second Amended Shareholders Trust; and to distribute in accordance with the Plan the Trust Assets to holders of Allowed Equity Securities of the Debtor, with no objective or authority to engage in any trade or business. In furtherance of these purposes, the Trustee shall be responsible for transferring to the Liquidation Trust sufficient Plan Funding Shares to meet the Liquidation Trust obligations as required by the Plan and establishing the appropriate reserve accounts, and to perform all obligations specified for the SAT Trustee under the Plan and this SAT Agreement. In the event of any inconsistency between the recitation of the duties and powers of the Trustee as set forth in the SAT Agreement and the Plan, the provisions of the Plan shall govern. 1.4 ACCEPTANCE OF TRUST. The Trustee accepts the trust imposed by this SAT Agreement and agrees to observe and perform that trust, on and subject to the terms and conditions set forth in this SAT Agreement, until her successor is appointed as provided herein as required by Section 6.2 of this SAT Agreement and paragraph 6.4.2 of the Plan. Upon acceptance of appointment, the successor trustee accepts the trust imposed by this SAT Agreement and agrees to observe and perform that trust, on and subject to the terms and conditions set forth in this SAT Agreement and the Plan. ARTICLE II DEFINITIONS The capitalized terms used but not defined in this SAT Agreement shall have the meanings given to them in the Plan. 2.1 AXION SETTLEMENT SHARES means the 2,127,500 shares of the Axion Stock allocated from the Shareholder Trust to Axion pursuant to the Plan, minus up to 627,500 shares required to fund the reasonably necessary fees and costs of the Shareholder Trust up to the Effective Date. 2.2 BENEFICIARIES means those holders of Allowed Equity Securities of Mega-C who are entitled to distributions of the Trust Assets pursuant to the Plan. 2.3 TRUST BOARD means the board that is to be created pursuant to paragraph 6.4.2 of the Plan for the purpose of selecting a successor trustee to Fonner and advising and/or directing the Trustee with respect to actions and decisions affecting the Second Amended Shareholders Trust. 2.4 TRUST ASSETS include the following assets to be irrevocably transferred to the Second Amended Shareholders Trust: (a) the balance of the Plan Funding Shares after the funding of the Liquidation Trust as provided for in paragraph 6.3 of the Plan for the benefit of the Beneficiaries; and (b) any Cash, Litigation Claims or Plan Funding Shares delivered to the Liquidation Trust Trustee which remain after payment in full of all Allowed Unclassified Claims, Effective Date cash conditions and Allowed Priority Claims and Allowed General Unsecured Claims, and which shall be delivered to the Second Amended Shareholders Trust for distribution, in accordance with the Plan and P. 4.5 of the Liquidation Trust Agreement. 2.5 TRUST EXPENSES means all reasonable costs, expenses and fees incurred or to be incurred (as estimated by the Trustee in consultation with the Trust Board) by the Trustee in the administration of duties or as contemplated pursuant to this SAT Agreement. 2.6 TRUSTEE means Fonner and her successor, as selected by the Trust Board. ARTICLE III DISTRIBUTION OF TRUST ASSETS 3.1 DISTRIBUTION TO AXION. On the Effective Date, the Trustee shall distribute the Axion Settlement Shares to Axion. 3.2 DISTRIBUTION TO BENEFICIARIES. Only after payment of all Allowed Unclassified Claims and Allowed Claims and the establishment of the Operating Reserves and Disputed Claims Reserves by the Liquidation Trustee and establishment of an Expense Reserve and a Disputed Interest Reserve by the Trustee, shall distributions to Beneficiaries of Plan Funding Shares be made in accordance with Articles 4, 5 6 and 8 of the Plan, in proportion to the Beneficiaries' Allowed Equity Securities in the Debtor. 3.3 EXPENSE RESERVE. Before the Initial Distribution to Beneficiaries, as defined in the Plan and pursuant to section 3.2 of this SAT Agreement, the Trustee shall establish an expense reserve ("Expense Reserve") from the Trust Assets for the payment of all reasonable administrative expenses, debts, charges, liabilities and obligations with respect to the Second Amended Shareholders Trust, including (i) all costs and expenses, including the payment of professionals retained by the Trustee, incurred in connection with any litigation, including the Litigation Claims and the objections to Disputed Claims and Disputed Equity Securities; (ii) the Trustee's compensation as provided in this SAT Agreement; (iii) all costs, expenses and/or reserves incurred or set aside in connection with indemnifying the Trustee as provided in this SAT Agreement and/or necessary to secure appropriate insurance with respect to such obligations; (iv) all fees and expenses, including those of professionals and other agents and employees retained by the Second Amended Shareholders Trust, incurred in connection with the Trustee's duties and obligations, including fees incurred in connection with holding, collecting upon, liquidating, or otherwise disposing of the Trust Assets, all applicable taxes and all expenses of effectuating distributions hereunder and under the Plan; (v) all fees and expenses, including those of professionals and other agents and employees retained by the Trustee, incurred in connection with winding up the Second Amended Shareholders Trust, rendering accountings, and storing and disposing of books, records and files; and (vi) all reasonable fees and expenses of the Trust Board, including those of professionals and other agents and employees retained by the Trust Board, as provided in this SAT Agreement, but excluding any professionals, agent or employees retained by individual members of the Trust Board. The fees, costs and expenses of administering the Second Amended Shareholders Trust shall be satisfied in full before final distribution of the Trust Assets to the Beneficiaries. 3.4 FUNDING THE EXPENSE RESERVE. The Expense Reserve shall be funded from time to time by the Trustee out of the Trust Assets consisting of Plan Funding Shares, the net proceeds of sale of Plan Funding Shares, or Cash received from the Liquidation Trust. Any balance remaining in the Expense Reserve after payment of all expenses, debts, charges, liabilities and obligations of the Second Amended Shareholders Trust, shall be distributed to Beneficiaries, as provided in section 3.2 of the SAT Agreement and the Plan. Any monies deposited in the Expense Reserve shall be invested in interest-bearing deposits or investments that satisfy the requirements of the Trustee's fiduciary duties, and the interest earned shall be credited to the Expense Reserve. 3.5 INCREASE OF EXPENSE RESERVE. If at any time, the Trustee, in its sole discretion, determines that the funds in the Expense Reserve are or may become insufficient, the Trustee, in its sole discretion, may from time to time add assets to the Expense Reserve in such amount or amounts as the Trustee, in its sole discretion, determines to be necessary or advisable to satisfy all current and anticipated obligations of the Second Amended Shareholders Trust. In no event shall the Trustee be required to use personal funds or assets for such purposes. 3.6 DISPUTED INTEREST RESERVE. If an Equity Security is disputed, the Trustee will withhold an amount of Plan Funding Shares and thereby establish a Disputed Interest Reserve, consisting of Plan Funding Shares equal to the aggregate amount of Plan Funding Shares as provided for in the Plan that would have been distributed on a Distribution Date on account of a Disputed Equity Security or as otherwise provided by the Plan or the Final Order. 3.7 DELIVERY OF CERTIFICATES. As a condition to the distribution of Plan Funding Shares from the Second Amended Shareholders Trust, each Equity Security Holder must have an Allowed Equity Security. In addition, solely in order to facilitate the distribution of Plan Funding Shares in consideration for Allowed Equity Securities, Equity Security Holders who either attached to or claimed in their proof of Equity Security that they possess Equity Securities, shall be required to deliver their Stock Certificates to the Trustee. No distribution of Plan Funding Shares shall be made to or on behalf of any such Equity Security Holders unless and until the instrument evidencing their Equity Securities is received by the Trustee, the unavailability of such instrument is reasonably established to the satisfaction of the Trustee, or the Bankruptcy Court orders a distribution despite the lack of a certificate. In the event any Equity Security Holder seeks to establish the unavailability of a Stock Certificate, the Trustee, shall, within thirty (30) business days after receipt of the Equity Security Holder's evidence of unavailability and statement of indemnity of the Trustee and the Second Amended Shareholders Trust (i) provide the Equity Security Holder, in writing with a detailed description regarding the non-acceptance of such evidence and statement of indemnity; or (ii) deliver to the Equity Security Holder its Pro Rata share of Plan Funding Shares. Any such Equity Security Holder who fails to deliver or cause to be delivered its Stock Certificate, fails to execute and deliver an affidavit of loss and indemnity reasonably satisfactory to the Trustee or fails to obtain a Final Order ordering a distribution despite the lack of a Stock Certificate prior to the first anniversary of the Effective Date, shall be deemed to have forfeited all rights and claims with respect to such Equity Security and shall not participate in any distribution under this SAT Agreement or the Plan, and all property in effect of such forfeited distribution, shall be distributed to Allowed Equity Security Holders as provided for in the Plan and this SAT Agreement. This delivery of Share Certificates is not an exchange for Axion stock, but simply a means to collect the cancelled Stock Certificates of the dissolved Debtor pursuant to paragraph 5.2.3 of the Plan. 3.8 FRACTIONAL EQUITY SECURITIES. Notwithstanding any other provision of the Plan or this SAT Agreement, no payments or distributions under or pursuant to the Plan or on account of fractions of Plan Funding Shares will be made on account of Allowed Equity Securities. When any distribution of or on account of a fraction of any Plan Funding Shares to any holder of an Allowed Equity Security would otherwise be required, the actual payment or distribution will reflect a rounding of such fraction to the nearest whole number (up or down). 3.9 MANNER OF DISTRIBUTIONS. All distributions to Beneficiaries to be made by the Trustee from the Second Amended Shareholders Trust to its Beneficiaries shall be made by first class United States mail, with postage fully prepaid. Distributions are deemed made on the date of mailing. 3.10 ADDRESSES FOR DISTRIBUTIONS. Distributions to holders of Allowed Equity Securities shall be made by the Trustee from the Second Amended Shareholders Trust as follows: (i) at the addresses set forth on the proofs of interest on file with the Bankruptcy Court, or at the last known address of such holders if the Debtor or Noall has been notified of a change of address; or (ii) at the addresses set forth in any written notices of address changes delivered to the Trustee. If any Beneficiary's distribution is returned as undeliverable, no further distributions to such Beneficiary shall be made unless and until the Trustee is notified by the Beneficiary of its then-current address, at which time all missed distributions shall be made to such Beneficiary. Plan Funding Shares in respect of undeliverable distributions shall be returned to the Second Amended Shareholders Trust until such distributions are claimed. All claims for undeliverable distributions shall be made on or before the second anniversary of the Effective Date. After such date, all unclaimed Plan Funding Shares shall revert to the Second Amended Shareholders Trust and the Interest of any holder or successor to such holder with respect to such property shall be discharged and forever barred notwithstanding any federal or state escheate laws to the contrary. Nothing contained in the Plan or the SAT Agreement shall require the Trustee to attempt to locate any holder of an Allowed Equity Security. 3.11 MODIFICATION OF TREATMENT. The Trustee has the right to modify the treatment of any Allowed Equity Security in any manner adverse only to the holder thereof upon the prior written consent obtained after the Effective Date of the holder of the Allowed Equity Security whose treatment is being adversely affected. ARTICLE IV TRUST ADMINISTRATION 4.1 CONSULTATION WITH THE TRUST BOARD. The Trustee shall regularly consult with the Trust Board when carrying out the purposes of the SAT Agreement and shall obtain approvals or recommendations of the Trust Board as required under this SAT Agreement. 4.2 STATEMENTS. The Trustee shall maintain a record of the names and addresses of all Equity Security Holders as of the Record Date for purposes of mailing Distributions to them. The Trustee may rely on the name and address set forth in the proofs of Equity Security regarding Equity Security Holders as of the Record Date as being true and correct unless and until notified in writing by the holder of the Equity Security Holder. 4.3 REPORTS. Beginning on the date that is no later than 90 days after the Effective Date, and no later than 30 days at the end of each six month period thereafter, the Trustee shall file with the Bankruptcy Court and serve on the Office of the United States Trustee, the Liquidation Trustee, and any Creditor or holder of an Equity Security who makes written request, a written report and account showing (i) the assets, liabilities, receipts and disbursements of the Second Amended Shareholders Trust at the end of the period being reported; (ii) any changes in the Trust Assets or to the allowance of Disputed Equity Security Interests which have not been previously reported; (iii) a general description of the activities of the Second Amended Shareholders Trust; (iv) the amount and calculation of net litigation recoveries received during the period reported; (iv) the amount of compensation paid to the Trustee for the period reported; and (v) any other information as the Trustee deems appropriate for inclusion or as reasonably requested by parties to whom such reports are to be submitted. The Trustee, as in its sole discretion deems advisable, may submit similar reports for any interim period. In addition, the Trustee shall [may?] establish and maintain a web site for the Second Amended Shareholders Trust, which will contain the information set forth in this section on the status the Second Amended Shareholders Trust, a copy of the Trustee's most recent report, periodic reports from the Trust Board and any other information the Trustee, in its discretion, and the Trust Board, in its discretion, deem necessary or appropriate. 4.4 RECORD DATE. The Record Date for determining the Beneficiaries of the Second Amended Shareholders Trust shall be the Bar Date. After the Record Date, the Trustee and the Second Amended Shareholders Trust shall have no obligation to recognize any transfer of any Equity Security Interest or the right as a Beneficiary and shall be entitled instead to recognize, and deal with, for all purposes under the Plan and this SAT Agreement, those Beneficiaries existing as of the Effective Date. 4.5 TAX FILINGS AND NOTICES. The Trustee shall prepare and provide to, or file with, the appropriate parties such notices, tax returns and other filings, including all federal, state and local tax returns for the Shareholders Trust and the Second Amended Shareholders Trust, as may be required under the Internal Revenue Code, the Plan, or as may be required by applicable law of other jurisdictions including, if required under applicable law, notices required to report interest or dividend income. The Trustee shall, when specifically requested by a Beneficiary in writing, provide such Beneficiary with such tax information as is reasonably necessary for the preparation by such Beneficiary of its income tax return. 4.6 COMPLIANCE WITH SECURITIES LAWS AND COOPERATION WITH AXION. The Trustee shall file with the Securities and Exchange Commission and other applicable federal and state governmental agencies the necessary reports and other documents and take any other actions necessary to comply with United States federal or state securities laws. The Trustee shall cooperate with Axion, at Axion's expense, with respect to Axion's filings with the Securities and Exchange Commission or any other federal and state governmental agencies. 4.7 AXION RIGHT OF FIRST REFUSAL. Axion shall have a right of first refusal on any proposed disposition of Plan Funding Shares by the Trustee that is neither an open market resale at prevailing prices or effected in connection with an underwritten transaction involving a sale to the general public. Provided however, the Trustee shall consult with Axion from time to time regarding any anticipated disposition of Plan Funding Shares so as not to necessarily negatively affect the value of Axion shares in the public market, and at least thirty (30) days before a disposition of more than 750,000 shares of Axion stock, notify Axion in writing (the "Notice") of the Trustee's intention to dispose of more than 750,000 shares of Axion stock in one transaction (or in multiple transactions if Trustee knows or reasonably believes that the sales are to or for the benefit of a single entity or multiple affiliated entities). The date of the Notice shall be the "Notice Date." After the Notice Date, Axion may inform the Trustee that Axion shall exercise its right to acquire all or a portion of the shares which are the subject of the Notice only as follows: (a) If the amount of shares referred to in the Notice is more than 750,000 but less than 1,000,000, Axion shall have the right to advise the Trustee in writing within five (5) days of the Notice Date of its commitment to buy all of said shares, and Axion shall conclude for cash the share purchase transaction within ten (10) days of the Notice Date. (b) If the amount of shares referred to in the Notice is between 1,000,000 and 2,000,000, Axion shall have the right to advise the Trustee in writing within ten (10) days of the Notice Date of its commitment to buy all of said shares, and Axion shall conclude for cash the share purchase transaction within fifteen (15) days of the Notice Date. (c) If the amount of shares referred to in the Notice is more than 2,000,000, Axion shall have the right to advise the Trustee in writing within twenty (20) days of the Notice Date of its commitment to buy all of said shares, and Axion shall conclude for cash the share purchase transaction within twenty-five (25) days of the Notice Date. With each Notice, the Trustee shall provide Axion with the Trustee's best estimate of the minimum and maximum consideration that the Trustee anticipates receiving from the proposed disposition. As the condition to the exercise by Axion of its right of first refusal, Axion agrees to pay the minimum consideration that the Trustee estimates receiving from the proposed disposition. If Axion does not timely exercise its right to purchase shares described in a particular Notice as provided herein, then it shall have no further rights to acquire the shares that are the subject of the Notice, provided however, that the Trustee concludes the proposed disposition for no less than the minimum consideration within 30 days of the last day Axion had to exercise the right of first refusal or else the Plan Funding Shares the subject of the Notice will be subject to a new right of first refusal as provided for herein. If Axion exercises its right to purchase the shares described in a particular Notice but fails to conclude the transaction within the time provided herein, the sole remedy of the Trustee shall be the right to seek damages from Axion for the difference between the exercise price and the proceeds ultimately received by Trustee from the sale of said Axion shares. 4.8 RIGHT TO VOTE AXION SHARES. The Trustee shall proportionally have the right to vote the shares of Plan Funding Shares held by the Second Amended Shareholders Trust, whether or not held in a Disputed Equity Security Reserve, in an amount equal to the lesser of the number of shares of Axion common stock held by the Second Amended Shareholders Trust or number of shares of Axion common stock held by the Founders and their spouses and dependents on the record date for determining the identity of equity security holders entitled to vote at any meeting of Axion's equity security holders. ARTICLE V GENERAL POWERS, RIGHTS AND OBLIGATIONS OF THE TRUSTEE 5.1 APPOINTMENT OF TRUSTEE. On the Effective Date, Fonner and, upon completion of the procedures described in the Plan and this SAT Agreement, her successor, shall upon approval of the Bankruptcy Court become the Trustee of the Second Amended Shareholders Trust. 5.2 LEGAL TITLE. The Trustee shall hold legal title to the Trust Assets. 5.3 GENERAL POWERS. Except as otherwise provided in this SAT Agreement or the Plan, and subject to the retained jurisdiction of the Bankruptcy Court as provided in this SAT Agreement and the Plan, but without prior or further authorization, the Trustee may control and exercise authority over the Trust Assets, over the acquisition, management and disposition thereof and over the management and conduct of the business and purposes of the Second Amended Shareholders Trust, including objections to allowance of Claims and Equity Security Interests and the prosecution of any and all litigation, to the same extent as if the Trustee were the sole owner of the Trust Assets in its own right. No person dealing with the Trustee shall be obligated to inquire into the Trustee's authority in connection with the acquisition, management or disposition of Trust Assets or the business and purposes of the Second Amended Shareholders Trust. In addition and except as expressly limited in the SAT Agreement, the Plan or the Confirmation Order, the Trustee shall have the power to take any and all actions as are necessary or advisable to effectuate the purposes of the Second Amended Shareholders Trust, including, without limitation, the power and authority: (i) to accept the Trust Assets; (ii) to distribute and withhold distribution of the Plan Funding Shares in accordance with the terms of the Plan and this SAT Agreement; (iii) to sell, transfer or dispose of Plan Funding Shares as the Trustee, in its discretion, deems necessary to fund and satisfy the expenses of the Second Amended Shareholders Trust, including the Expense Reserve and the Disputed Interest Reserve in accordance with the Plan, upon consultation with Axion prior to any anticipated disposition of Plan Funding Shares so as not to necessarily negatively affect the value of Axion shares in the public market; (iv) to request that Axion file such amendments to the registration statement for the Plan Funding Shares as may be necessary or desirable under the circumstances; (v) to investigate proofs of claim and proofs of interest filed as of the Record Date and to object to or contest those proofs of claim or interest the Trustee deems should be disallowed; (vi) to defend the interests of those holders of Equity Securities the Trustee determines should be Allowed Equity Securities; (vii) to prosecute the Litigation Claims transferred from the Liquidation Trust and objections to Claims and Equity Security Interests; (viii) to compromise the Litigation Claims transferred from the Liquidation Trust and objections to Equity Security Interests without notice and a hearing and without approval of the Bankruptcy Court; (ix) to sell, convey, transfer, assign, liquidate, collect or abandon the Litigation Claims transferred from the Liquidation Trust; (x) to engage in all acts that would constitute ordinary course of business in performing the obligations of a trustee under a trust of this type; (xi) to establish the funds, reserves and accounts within the Second Amended Shareholders Trust as deemed by the Trustee, in its discretion, to be useful in carrying out the purposes of the Second Amended Shareholders Trust; (xii) to sue and be sued and to participate, as a party or otherwise, in any judicial, administrative, arbitration or other proceeding; (xiii) in accordance with this SAT Agreement, to indemnify (and to purchase insurance indemnifying) the Trustee, the Trust Board, and the employees, agents and representatives of the Trust, the Trustee and the Trust Board to the fullest extent that a corporation organized under the laws of the state of Nevada is from time to time entitled to indemnify its directors, officers, employees, agents and representatives; (xiv) subject to approval of the Bankruptcy Court, to delegate any or all of the discretionary power and authority herein conferred at any time with respect to all or any portion of the Trust to any one or more reputable individuals or recognized institutional advisors or investment managers without liability for any action taken or omission made because of such delegations, except for such liability as provided in this SAT Agreement; (xv) to consult with the Liquidation Trust Trustee at such time and with respect to such issues relating to the conduct of the Second Amended Shareholders Trust as the Trustee considers appropriate; (xvi) in connection with any Distribution to a minor, to transfer and pay over all or any portion of the property to the minor, or to a guardian of the minor's property, whenever appointed, without requiring ancillary guardianship, or to the minor's parent or the person with whom the minor resides, or to any custodian under any Uniform Gifts to Minors Action or Uniform Transfer to Minors Act, without any obligations to see to the use or application of the Distributions or to make inquiry with respect to any other property available for the use of the minor, the receipt by such minor, guardian, parent, person or custodian to be a complete discharge as to such transfer or payment; (xvii) to employ legal counsel, accountants, experts, brokers or other professionals on a contingency basis or otherwise, subject to Bankruptcy Court approval prior to the Effective Date and thereafter without Bankruptcy Court approval; (xviii) to exercise offsets as provided by law; (xix) to estimate Equity Security Interests for the purposes of Distribution, as the Trustee deems advisable; (xx) to request that Axion register the Plan Funding Shares at Axion's sole cost and expense; (xxi) to cause any investments of Trust Assets to be registered and held in the Trustee's name, as Trustee for the Second Amended Shareholders Trust, or in the name of a nominee without increase or decrease of liability with respect thereto; (xxii) to seek such orders, judgments, injunctions and rulings, as the Trustee deems necessary to carry out the intentions and purposes of the Second Amended Shareholders Trust and to give full effect to the provisions of the Plan; (xxiii) consistent with the Plan, to perform any act authorized, permitted or required under any instrument, contract, agreement, claim or cause of action constituting or relating to the Trust Assets, whether in the nature of an approval, consent, demand or notice hereunder or otherwise, unless such act would require the consent of the Beneficiaries in accordance with the express provisions of this SAT Agreement; (xxiv) to perform such other actions and undertake such other conduct as the Trustee believes is necessary to carry out the purposes and intent of the Second Amended Shareholders Trust; (xxv) subject to the express limitations contained herein and in the Plan, the Trustee shall have, and may exercise with respect to the Trust Assets, or any part thereof, and to the administration and distribution of the Trust Assets, all powers now or hereafter conferred on trustees by the laws of the State of Nevada. The powers conferred herein in no way limit any power conferred on the Trustee by any other provision of this SAT Agreement but shall be in addition thereto; provided however, that these powers are conferred and may be exercised only and solely within the limitations and for the limited purposes imposed and expressed in the Plan and this SAT Agreement; (xxvi) to carry out any duty or obligation imposed by the Plan or this SAT Agreement, including reporting and maintenance of a web site for the Second Amended Shareholders Trust. (xxvii) To transfer to Axion any choses in action transferred to the Second Amended Shareholders Trust pursuant to the Settlement Agreement or the Plan. The Trustee shall not at any time, on behalf of the Second Amended Shareholders Trust or the Beneficiaries, engage in any trade or business, and the Trustee shall not use or dispose of any part of the Trust Assets in furtherance of any trade or business. The Trustee shall not sell property to or borrow property from the Trust. 5.4 RETENTION OF ATTORNEYS, ACCOUNTANTS AND OTHER PROFESSIONALS. Subject to the approval of the Trust Board, the Trustee may retain professionals to aid in the performance of its responsibilities pursuant to the Plan and this SAT Agreement, including attorneys and accountants and such experts, advisors, consultants, investigators, appraisers, auctioneers or other professionals as are advisable to carry out the purposes of the Second Amended Shareholders Trust. Subject to the approval of the Trust Board, the Trustee may commit the Second Amended Shareholders Trust and shall pay all such persons or entities reasonable compensation from the Trust Assets for services rendered and expenses incurred. 5.5 COMPENSATION OF TRUSTEE. The Trustee shall be paid from the Trust Assets: (i) a base fee consisting of hourly fee of $200.00 for services rendered or such other reasonable amount as determined by the Bankruptcy Court; and (ii) reimbursement of all reasonable and necessary expenses incurred. All payments in respect of compensation and reimbursement for expenses shall be made to the Trustee without any further need for Bankruptcy Court approval. The reasonableness of the Trustee's fees and expenses shall include overall effective rates including the time and hourly rates charged by the Trustee's employees. 5.6 COMPENSATION OF TRUSTEE'S EMPLOYEES AND RETAINED PROFESSIONALS. The Trustee's employees and professionals retained on behalf of the Second Amended Shareholders Trust shall be paid from the Trust Assets as follows: (i) the Trustee's employees shall be paid reasonable compensation, subject to the approval of the Trust Board, on such periodic basis as the Trustee deems appropriate and approved by the Trust Board; (ii) the professionals retained by the Second Amended Shareholders Trust shall submit monthly billing statements to the Trustee and the Trust Board, for review. The Trustee and the Trust Board shall have 15 days after receipt of the statements to object by serving an objection setting forth the precise nature of the objection and the amount at issue on the Trustee's professional. At the expiration of the 15 day period, the Trustee shall promptly pay that portion of the monthly billing statements to which no objection has been made. The parties shall attempt to consensually resolve objections, if any, to any monthly statement. If the parties are unable to reach a consensual resolution of any such objection, the party who received an objection to its fees may seek payment of such fees by filing a motion with the Bankruptcy Court and providing notice to the Trustee and the Trust Board. Any professional who fails to submit a monthly statement shall be ineligible to receive further payment of fees and expenses as provided in this SAT Agreement until the monthly statement is submitted. 5.7 STANDARD OF CARE; EXCULPATION. The Trustee accepts and undertakes to discharge the Second Amended Shareholders Trust upon the terms and conditions of this SAT Agreement and the Plan. The Trustee shall exercise those rights and powers granted by this SAT Agreement and the Plan. The Trustee shall use the same degree of care and skill in the exercise of the Trustee's powers and responsibilities as a prudent person would exercise or use under the circumstances in the conduct of its own affairs. Neither the Trustee, nor any of the Trustee's officers, directors, employees, agents or professionals, shall be liable to any Beneficiary or the Second Amended Shareholders Trust or to any other third party other than for proven acts of gross negligence or willful misconduct in the exercise or performance of duties under this SAT Agreement and the Plan, or in the case of the Trustee's officers, directors, employees, agents or professionals proven acts of gross negligence or willful misconduct in the exercise or performance of its duties on behalf of the Trustee or the Trust. The Trustee may consult with and rely on the advice of legal counsel and such other experts, advisors, consultants, or other professionals and shall be fully protected in respect of any action taken or suffered by the Trustee in good faith in accordance with such advice. 5.8 BOND REQUIREMENT; EXERCISE OF POWERS. The Trustee shall not be required to furnish a bond to secure the performance of the Trustee's duties and obligations. Except as otherwise expressly provided in this SAT Agreement, Plan or Confirmation Order, the Trustee shall not be required to procure authorization from the Bankruptcy Court in the exercise of any power conferred upon the Trustee by this SAT Agreement. 5.9. TRANSFEREE LIABILITIES. If any liability shall be asserted against the Second Amended Shareholders Trust or the Trustee as the transferee of the Trust Assets, on account of any claimed liability of or through the Debtor or the Beneficiaries, the Trustee may use such part of the Trust Assets as may be necessary in contesting any such claimed liability and in payment, compromise, settlement and discharge thereof on terms reasonably satisfactory to the Trustee in its discretion. In no event shall the Trustee be required to use the Trustee's personal funds or assets for such purposes. 5.10. INDEMNIFICATION. The Trustee, any of its officers, directors, employees, agents, and professionals, and any professionals or independent contractors of the Second Amended Shareholders Trust (collectively, the "Indemnified Parties"), shall be indemnified by and receive reimbursement from the Second Amended Shareholders Trust against and from any and all loss, liability or damage, including payment of attorneys' fees and other defense costs, which the Trustee or the other Indemnified Parties may incur or sustain other than as a result of proven acts of gross negligence or willful misconduct in the exercise or performance of its duties under this SAT Agreement and under the Plan. The Trustee may reserve from Trust Assets a reasonable amount for purposes of funding any future indemnification liability and costs. The Trustee may purchase with assets of the Trust, such insurance as it reasonably believes, in the exercise of its judgment and discretion, adequately insures that the Trustee and the other Indemnified Parties shall be indemnified against any such loss, liability or damage pursuant to this Section. Expenses (including attorneys' fees) and other costs of the Trustee and the other Indemnified Parties' defense (unless resulting from the applicable Indemnified Party's gross negligence or willful misconduct) shall be paid by the Second Amended Shareholders Trust. The terms of this section shall continue to apply to any former Indemnified Party. The expenses Indemnified Parties incurred in defending an action or proceeding shall be paid by the Second Amended Shareholders Trust as incurred and in advance of the final disposition of the action or proceeding upon receipt of an undertaking by or on behalf of Indemnified Party to repay the amount if it is ultimately determined by the Bankruptcy Court that the Indemnified Party is not entitled to be indemnified by the Trust. The provisions of this Section do not affect any rights to advancement of expenses that Indemnified Parties may be entitled under any contract or otherwise. 5.11. NO IMPLIED DUTIES. The Trustee shall not manage, control, use, sell, dispose, collect or otherwise deal with the Second Amended Shareholders Trust or the Trust Assets or otherwise take any action hereunder except as expressly provided herein, and no implied duties or obligations shall be read into this SAT Agreement against the Trustee. The Trustee nevertheless agrees that it will promptly take such actions as may be necessary to duly discharge any liens or encumbrances on the Trust Assets, or any portion thereof which result from claims against the Trustee not related to (i) the ownership or administration of the Trust Assets, (ii) any other transaction pursuant to this SAT Agreement, or (iii) any document included in the Trust Assets. 5.12 NO PERSONAL LIABILITY. Persons dealing with the Second Amended Shareholders Trust shall look solely to the Second Amended Shareholders Trust or the Trust Assets for the enforcement of any claims against the Second Amended Shareholders Trust or to satisfy any liability incurred by the Trustee to such persons in carrying out the terms of this Trust, and neither the Trustee, nor any of its officers, directors, employees, agents, professionals or independent contractors of the Trustee or the Trust, shall have any personal liability or individual obligation to satisfy any such liability. 5.13. BANKRUPTCY COURT APPROVAL. The Trustee and/or the Trust Board shall have, in either's sole discretion, the right to seek approval of the Bankruptcy Court for any proposed transaction. 5.14. RELIANCE BY TRUSTEE. The Trustee may rely, and shall be fully protected personally in acting upon any resolution, statement, certificate, instrument, opinion, report, notice, request, consent, order or other instrument or document that it has no reason to believe to be other than genuine and to have been signed or presented other than by a proper party or parties or, in the case of facsimile transmissions, to have been sent other than by the proper part or parties, in each case without obligation to satisfy itself that the same was given in good faith and without responsibility for errors in delivery, transmission or receipt. In the absence of its bad faith, willful misconduct, gross negligence, willful disregard of its duties or material breach of this SAT Agreement, the Trustee may rely as to the truth of statements and correctness of the facts and opinions expressed therein and shall be fully protected personally in acting thereon. The Trustee may consult with legal counsel and shall be fully protected in response of any action taken or suffered by it in accordance with the written opinion of legal counsel. Except as otherwise required by the Plan, the Trustee may at any time seek instructions from the Bankruptcy Court concerning any aspect of administration of the Second Amended Shareholders Trust or disposition of the Trust Assets, including but not limited to establishing the Expense Reserve, Disputed Interest Reserve, and making Distributions. ARTICLE VI THE TRUST BOARD 6.1 ESTABLISHMENT OF TRUST BOARD. On the Effective Date, the Trust Board shall be established, using the procedure described in the Plan. Prior to appointment, the members of the Trust Board shall disclose to the Bankruptcy Court, Trustee and all other members of the Trust Board any and all Claims or Equity Securities held, owned or asserted by that member personally, by any relative or other entity with which they are employed, associated or affiliated, and whether any Claim or Equity Security Interest that is held by them personally, by any relative or other entity with which they are employed, associated or affiliated, has been sold, transferred or otherwise assigned, disposed of or satisfied by any entity other than the Liquidation Trust or the Second Amended Shareholders Trust. 6.2 GENERAL POWERS. The Trust Board shall have the power to take any and all actions as are necessary or advisable to effectuate the purposes of the Second Amended Shareholders Trust, including, without limitation, the power and authority: (i) as soon as practicable but in no event later than 30 days after the Effective Date, to select the successor Trustee to Fonner, based on a majority vote of the members of the Trust Board to be approved by the Bankruptcy Court upon motion brought by the Trust Board as provided for in section 6.7 below; (ii) to remove the Trustee as provided in this Article; (iii) in the event of death, dissolution, resignation or removal of the Trustee, to select a replacement Trustee as provided in this Article; (iv) to make recommendations to, advise and consult with the Trustee; (v) to regularly communicate the status of the Second Amended Shareholders Trust to the holders of Equity Securities; (vi) to take any and all actions not inconsistent with this SAT Agreement and the Plan that further, promote and advance the purposes of the Second Amended Shareholders Trust and on matters arising in the administration and disposition of Trust Assets and to seek a Bankruptcy Court ruling or intervention in this regard 6.3 COMPOSITION; REPLACEMENT. The Trust Board shall consist of five members who are Equity Security Holders. In the case of inability to serve or unwillingness of any member of the Trust Board to serve, such member shall be replaced by designation and majority vote of the remaining members of the Trust Board upon consultation with the Trustee. The Trust Board or the Trustee, may, in their discretion, seek Bankruptcy Court approval upon written motion by a majority of the members of the Trust Board or the Trustee and upon notice and a hearing to the Trustee, the Liquidation Trustee and all Equity Security Holders whose interests have not yet been disallowed. 6.4 BY-LAWS. The Trust Board may govern its proceedings through the adoption of by-laws, which the Trust Board may adopt by majority vote. No provision of such by-laws shall supersede any express provision of the Plan or this SAT Agreement. 6.5 ADVICE AND DIRECTION TO THE TRUSTEE. The Trust Board shall provide advice, instruction and direction on matters arising in the administration and the disposition and distribution of Trust Assets and the purposes of the Second Amended Shareholders Trust. 6.6 RESIGNATION AND REMOVAL OF TRUSTEE. Fonner shall serve as Trustee until a successor Trustee is chosen by the Trust Board as provided for in section 6.2 above and approved by the Bankruptcy Court. Any successor Trustee may resign by giving written notice of its resignation to the Trust Board, the Bankruptcy Court and the Liquidation Trustee. Unless the Bankruptcy Court orders otherwise, (i) such resignation shall become effective on the date a successor is appointed as provided herein; and (ii) the Trustee shall be entitled to compensation in accordance with the SAT Agreement through the effective date of the Trustee's resignation. Unless the Bankruptcy Court orders otherwise, within fifteen (15) days of giving such notice of resignation, the Trustee shall serve a formal final accounting upon the Bankruptcy Court and, upon the effective date of such resignation, the Trustee shall be discharged from the performance of any further duties, except as provided herein. If the Trustee at any time resigns or is removed, or dies or becomes incapable of action, or is a debtor under the Bankruptcy Code or is adjudged to be insolvent, a vacancy shall be deemed to exist and a successor Trustee shall be appointed as provided herein. The Trustee Governing Board may, upon supermajority vote, remove the Trustee for cause, including but not limited to breach of any obligation imposed by this SAT Agreement. If the requisite approval is not obtained, the Trustee may be removed by order of the Bankruptcy Court for cause shown upon written motion by any member of the Trust Board and upon notice and a hearing to the Trustee, the Liquidation Trustee and all Equity Security Holders whose interests have not yet been disallowed. 6.7 APPOINTMENT OF SUCCESSOR TRUSTEE. In the event of the death (in the case of a Trustee that is a natural person), dissolution (in the case of a Trustee that is not a natural person), resignation, or removal of the Trustee, the members of the Trust Board shall, by majority vote, designate a person to serve as successor Trustee, subject to Bankruptcy Court approval upon written motion by the Trust Board and upon notice and a hearing to the Trustee, the Liquidation Trustee and all Equity Security Holders whose interests have not yet been disallowed. Every successor Trustee appointed hereunder shall execute, acknowledge and deliver to the Bankruptcy Court and to the predecessor Trustee an instrument accepting the appointment, and thereupon the successor Trustee, without any further act, deed or conveyance, shall become vested with all the rights, powers, trusts and duties of the predecessor Trustee. 6.8 COMPENSATION. Each member of the Trust Board shall be entitled to compensation of $100.00 per hour for the time expended by the member in carrying out the member's duties, and to reimbursement of the member's reasonable and necessary expenses. The compensation and reimbursement of expenses of the Trust Board members shall be paid out of Trust Assets. Each member of the Trust Board shall serve upon the Trustee a monthly statement of hours spent and expenses incurred in carrying out the member's duties. Upon review of the propriety of the amounts sought and consensual resolution of any disputes as to the amounts sought, the Trustee shall promptly pay 100 percent of the monthly statement. If a member of the Trust Board fails to submit a monthly statement, the member shall be ineligible to receive payment of fees and expenses as provided herein for such month. 6.9 STANDARD OF CARE; EXCULPATION. Neither the Trust Board nor any of its members, designees, counsel, financial advisors or any duly designated agent or representative of any such party shall be liable for the act, default or misconduct of any other member of the Trust Board, nor shall any member be liable for anything other than such member's own gross negligence or willful misconduct. The Trust Board may, in connection with the performance of its duties, consult with the Trustee's counsel, accountants or other professionals, and shall not be liable for anything done or omitted or suffered to be done in accordance with such advice or opinions. If the Trust Board determines not to consult with counsel, accountants or other professionals, it shall not be deemed to impose any liability on the Trust Board or its members. 6.10 TERMINATION OF THE TRUST BOARD. Upon the certification by the Trustee that all Trust Assets have been distributed, abandoned or otherwise dispose of, the members of the Trust Board shall resign their positions, whereon they shall be discharged from further duties and responsibilities and the Trust Board will be dissolved. ARTICLE VII COORDINATION WITH LIQUIDATION TRUST 7.1 OBJECTIONS TO CLAIMS AND INTERESTS. The Second Amended Shareholders Trust shall be entitled to pursue objections to Claims and Interests. The Trustee and the Liquidation Trustee may, but are under no obligation to, enter into arrangements for the joint prosecution of their respective claims, the sharing of litigation costs and/or recoveries and any other arrangements that are mutually acceptable to each such party. Neither the Liquidation Trust nor the Second Amended Shareholders Trust shall have the right to release any party on behalf of the other except by Final Order of the Bankruptcy Court. 7.2 COORDINATION OF POUROVER. The Trustee will coordinate with the Liquidation Trustee for the pourover of Trust Assets from the Liquidation Trust, including Litigation Claims. The Trustee and the Liquidation Trustee may, but are under no obligation to, enter into arrangements for the joint prosecution or coordination of transfer of the Litigation Claims, the sharing of litigation costs and/or recoveries and any other arrangements that are mutually acceptable to each such party. Neither the Liquidation Trust nor the Second Amended Shareholders Trust shall have the right to release any party on behalf of the other except by Final Order of the Bankruptcy Court. ARTICLE VIII RETENTION OF JURISDICTION 8.1 RETENTION OF JURISDICTION. Pursuant to the Plan and Confirmation Order, the Bankruptcy Court shall retain jurisdiction to hear and determine all matters arising out of, and related to Litigation Claims, objections to Claims and Interests, and any other claims or causes of action that are Trust Assets; and any disputes arising in connection with the interpretation, implementation or enforcement of the Trust. 8.2 EXCLUSIVE JURISDICTION. The Bankruptcy Court shall have exclusive jurisdiction over the Second Amended Shareholders Trust, the Trust Assets, and resolution of any and all disputes, litigation and claims objections, whether or not specifically delineated in this SAT Agreement. ARTICLE IX RIGHTS OF BENEFICIARIES The interests of the Beneficiaries (the "Beneficial Interests") shall not be represented by any certificates and shall be evidenced only by this SAT Agreement. Beneficial Interests may not be transferred or assigned except by will or the laws of intestacy. Beneficiaries shall have no title to, right to, possession of, management of, or control of the Second Amended Shareholders Trust or the Trust Assets. The Beneficiaries' sole right hereunder shall be the contingent right to receive a Pro Rata share of the Trust Assets as provided for in the Plan and Confirmation Order, payable as provided herein. Each Beneficiary shall take and hold its Beneficial Interest subject to all the terms and provisions of this SAT Agreement, the Plan and the Confirmation Order. The interest of a Beneficiary is hereby declared and shall be in all respects personal property. Upon the death of an individual who is a Beneficiary, his or her interest shall pass as personal property to his or her legal representative and such death shall not terminate or affect the validity of this SAT Agreement or the Second Amended Shareholders Trust. Upon the merger, consolidation or other similar transaction involving a Beneficiary that is not an individual, such Beneficiary's interest shall be transferred by operation of law and such transaction shall not terminate or affect the validity of this SAT Agreement or the Trust. No widower, widow, heir or devisee of any individual who may be a Beneficiary and no bankruptcy trustee, receiver or similar person of any Beneficiary shall have any right, statutory or otherwise (including any right of dower, homestead or inheritance, or of partition, as applicable), in any property whatever forming a part of the Second Amended Shareholders Trust or the Trust Assets, but the whole title to the Second Amended Shareholders Trust and the Trust Assets shall be vested in the Trustee, and the sole interest of the Beneficiaries shall be the rights and benefits given to such persons under this SAT Agreement and the Plan. ARTICLE X TERMINATION 10.1 DURATION. After distribution of the Trust Assets delivered to Second Amended Shareholders Trust, the Second Amended Shareholders Trust shall be dissolved and its affairs terminated. 10.2 IRREVOCABILITY OF SECOND AMENDED SHAREHOLDERS TRUST. The Second Amended Shareholders Trust is irrevocable except as expressly provided for in this Trust Agreement or the Plan, and may be amended upon the fulfillment of the following three conditions: (i) majority vote of the Trust Board, (ii) the consent of the Trustee and (iii) upon approval by the Bankruptcy Court on motion filed by the Trust Board or the Trustee, after a hearing on notice to the Trust Board, the Trustee and the holders of Equity Securities whose interests have not been disallowed. 10.3 CONTINUANCE OF SECOND AMENDED SHAREHOLDERS TRUST FOR WINDING UP. After the termination of the Second Amended Shareholders Trust and for the purpose of liquidating and winding up the affairs of the Second Amended Shareholders Trust, the Trustee shall continue to act in such capacity until all applicable duties under the Plan and this SAT Agreement have been fully performed. Upon distribution of all of the Trust Assets, the Trustee shall hold the books, records and files delivered to or created by the Trustee for a period of two years from the date of the Final Distribution. The Second Amended Shareholders Trust shall pay all costs and expenses associated with the storage of such documents. Except as otherwise specifically provided herein, upon the Final Distribution of all of the Trust Assets, the Trustee shall have no further duties or obligations hereunder except (i) to account and report as provided in this section; and (ii) to perform such other acts as may be required by law or as set forth in the Plan. 10.4 ACCOUNTING. Upon termination of the Second Amended Shareholders Trust, the Trustee shall file an accounting with the Bankruptcy Court setting forth the amount it has collected and disbursed, and the fees and expenses incurred in administering the Second Amended Shareholders Trust, including, without limitation, the fees and expenses incurred by the Trustee and the Trustee's professionals, if any, and shall seek the issuance and entry of any orders necessary to approve such accounting and to discharge the Trustee from any and all liability for acting as Trustee under the Plan and this SAT Agreement. ARTICLE XI MISCELLANEOUS 11.1 FILING AND INSPECTION OF DOCUMENTS. This SAT Agreement shall be filed or recorded in the office of the Secretary of State of the State of Nevada, or in such other office or offices as the Trustee may determine to be necessary or desirable. The Trustee shall file or record any instrument that relates to any change in the office of Trustee in the same place or places where the original Trust Agreement has been filed or recorded. A copy of this Trust Agreement and all amendments thereto shall be maintained by the Trustee and shall be available at all times for inspection during regular business hours upon reasonable notice by any Beneficiary. 11.2 NO ASSOCIATION, PARTNERSHIP OR JOINT VENTURE. This SAT Agreement is not intended to create and shall not be interpreted AS creating an association, partnership or joint venture of any kind. 11.3 REQUIREMENT OF UNDERTAKING. The Trustee may request any Bankruptcy Court to require, and any Bankruptcy Court may in its discretion require, in any suit for the enforcement of any right or remedy herein, or in any suit against the Trustee for any action taken or omitted by it as Trustee, the filing by any party in such suit of an undertaking to pay the costs of such suit and such Bankruptcy Court may in its discretion assess reasonable costs, including reasonable attorneys' fees, against any party in such suit, having due regard to the merits and good faith of the claims or defenses made by such party; PROVIDED, HOWEVER, that the provisions of this paragraph 11.3 shall not apply to any suit by the Trustee. 11.4 LAWS AS TO CONSTRUCTION. This SAT Agreement shall be governed by and construed in accordance with the laws of the State of Nevada without regard to choice of law, except to the extent those laws confer jurisdiction over the Second Amended Shareholders Trust in any court other than the Bankruptcy Court. 11.5 JURISDICTION. The Bankruptcy Court shall have sole and exclusive jurisdiction to enforce this SAT Agreement in order to effectuate the provisions of the Plan and to resolve any dispute that may arise among the parties or which may arise in connection with the administration of the Trust, specifically including any action that may be brought against the Trustee for any reason related to the Second Amended Shareholders Trust. 11.6 SEVERABILITY. In the event any provision of this SAT Agreement or its application to any person or circumstance shall be finally determined by the Bankruptcy Court to be invalid or unenforceable to any extent, the remainder of this SAT Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid or enforceable, shall not be affected thereby, and each provision of this SAT Agreement shall be valid and enforced to the fullest extent permitted by law. 11.7 NOTICES. (i) Any notice or other communication by the Second Amended Shareholders Trust to the Beneficiaries shall be deemed to have been sufficiently given, for all purposes, if given by being deposited, postage prepaid, in an official depository of the United States Postal Service addressed to such parties at their respective addresses as determined in accordance with this SAT Agreement. (ii) All notices, requests, consents or other communications to the Second Amended Shareholders Trust required or permitted under this SAT Agreement shall be in writing (including facsimile or other similar telecommunication media) and shall be (as elected by the person giving such notice) hand delivered by messenger or courier service, telecommunicated or mailed by registered, certified or overnight mail (postage prepaid), return receipt requested, to the Trustee, __________________, facsimile ___________, with a copy to ________________, Esq., or to such other address as the Trustee or any successor Trustee may designate by notice to the Beneficiaries; and to the Trust Board by delivery to each member at the address designated by that member in writing. (iii) All notices, requests, consents or other communications by the Trustee required or permitted under the SAT Agreement shall be in writing and shall be sent first-class mail postage prepaid, overnight mail or facsimile, as the Trustee or any successor Trustee may determine. (iv) Each notice, request, consent or other communication described herein shall be deemed delivered (i) on the date delivered if by personal delivery, (ii) on the date telecommunicated with confirmed answer back if telecommunicated, (iii) on the date upon which the return receipt is signed or delivery is refused, as the case may be, if mailed, or (iv) upon mailing. 11.8 INSTRUCTIONS FROM BANKRUPTCY COURT. The Trustee may, in its sole discretion, apply to the Bankruptcy Court for instructions in connection with any issue which may arise in the administration of the Second Amended Shareholders Trust, for an order approving the settlement or compromise of any claim asserted by, or judgment in favor of, the Second Amended Shareholders Trust or to settle judicially the final account of Trustee upon its resignation or removal or upon the termination of this Trust. 11.9 NO SUITS BY INTEREST HOLDERS. No Interest Holder shall have any right by virtue of any provision of this SAT Agreement to institute any action or proceeding in law or in equity against any party other than the Trustee on or under or with respect to the Trust Assets. IN WITNESS WHEREOF, the parties hereto have executed this Trust Agreement or caused this Trust Agreement to be duly executed as of the day and year first written. MEGA-C POWER CORPORATION, AXION POWER INTERNATIONAL, INC., a Nevada corporation, a Delaware corporation, By: /S/ WILLIAM M. NOALL By: /S/ THOMAS GRANVILLE ----------------------------------------- ------------------------- WILLIAM M. NOALL, ESQ. in his capacity as Name: Thomas Granville CHAPTER 11 TRUSTEE Title: Chief Executive Officer SALLY FONNER, Trustee of the Trust for the Benefit of WILLIAM LEONARD, Trustee of the Mega-C Liquidation the Shareholders of Mega-C Power Corporation, Trust By: /S/ SALLY FONNER By: /S/ WILLIAM LEONARD ---------------------- ----------------------- SALLY FONNER WILLIAM LEONARD EX-99.2 3 megac_13d-ex9902.txt STOCK PURCHASE AGREEMENT Exhibit 99.2 STOCK PURCHASE AGREEMENT This Stock Purchase Agreement (the "Agreement") is made as of ____________, 2008, by and between Jeffrey L. Hartman, Trustee for The Second Amended And Restated Trust For The Benefit Of The Shareholders Of Mega-C Power Corporation (the "Seller"), and _______________________ (the "Purchaser") with respect to the purchase by the Purchaser of shares of Common Stock of Axion Power International, Inc., a Delaware corporation (the "Company"), currently held by the Seller. 1. SALE OF STOCK. 1.1 Subject to the terms and conditions of this Agreement, on the Closing Date the Seller will and hereby does sell and transfer to the Purchaser ____________ shares of the Company's Common Stock (the "Shares") at a purchase price of $1.10 per share for an aggregate purchase price of $___________. The term "Shares" refers to the purchased Shares and all securities received in replacement of the Shares or as stock dividends or splits, all securities received in replacement of the Shares in a recapitalization, merger, reorganization, exchange or the like, and all new, substituted or additional securities or other properties to which the Purchaser is entitled by reason of the Purchaser's ownership of the Shares. 1.2 The closing of the purchase and sale of the Shares hereunder (the "Closing") shall occur simultaneously with the execution of this Agreement by the parties (the "Closing Date"). At such Closing, upon receipt of the consideration for the Shares, the Seller does hereby sell, assign and transfer unto the Purchaser all of the Seller's right, title and interest in and to the Shares. The Seller agrees to submit its executed original stock certificate representing the Shares being transferred hereunder, along with a fully executed copy of this Agreement, to the Company to effect the transfer hereunder. Both the Seller and the Purchaser agree to take such further actions and provide such further information and documentation as may be reasonably necessary to effect the transactions set forth herein. 2. SELLER REPRESENTATIONS. In connection with the sale of the Shares, the Seller represents to the Purchaser the following: 2.1 The Seller currently owns all right, title and interest in and to the Shares, free of all liens and encumbrances, other than restrictions on transfer imposed by applicable federal and state securities laws. 2.2 The Seller is selling the Shares for its own benefit and not as part of any any "distribution" within the meaning of the Securities Act of 1933, as amended (the "Securities Act"), by the Company. The Seller has not used any means of general soliciation or advertising in connection with the offer or sale of the Shares to the Purchaser. 3. INVESTMENT REPRESENTATIONS. In connection with the purchase of the Shares, the Purchaser represents to the Seller and to the Company the following: 3.1 The Purchaser is acquiring the Shares for its own account and for investment purposes only. -1- 3.2 The Purchaser is not acquiring the Shares with a view to dividing its participation with others or with a view to or in connection with any offering or distribution in violation of Section 5 of the Securities Act of 1933, as amended (the "Act"), or any applicable federal or state securities laws, rules or regulations. 3.3 The Purchaser has no contract, undertaking, arrangement or agreement with any person to sell or transfer to any such person or to have any such person sell for the Purchaser all or any of said Shares, and the Purchaser is not engaged in and does not within the foreseeable future, plan to engage in any venture with any person relative to the sale or transfer of any of the said Shares. 3.4 The Purchaser has no present obligation, indebtedness or commitment, nor are any circumstances in existence, which will compel the Purchaser to secure funds by the sale of any of the said Shares, nor is the Purchaser a party to any plan or undertaking which would require or contemplate that proceeds from the sale of all or a part of said Shares be utilized in connection therewith. 3.5 The Purchaser does not anticipate acquiring the Shares for sale or other distribution upon the occurrence or non-occurrence of some predetermined event or upon the lapse of any particular period of time. 3.6 The Purchaser has not been induced to acquire the Shares by the use of advertisements or any form of public solicitation by the Company, Seller, or their respective agents or representatives, and the Purchaser has not and does not intend to pay any commission or other remuneration to any person in connection with its acquisition of the Shares. 3.7 The Shares will be held by the Purchaser subject to all applicable provisions of the Act, the Rules and Regulations of the Securities and Exchange Commission thereunder, and all applicable state securities laws, rules and/or regulations thereunder. 3.8 The Purchaser understands that the Shares have not been registered under the Act, or under the securities laws of any state, and that the Shares cannot be sold unless they are subsequently registered under the Act and/or applicable state securities laws or unless exemptions from such registration provisions are available. Purchaser understands that the certificates representing the Shares and any and all securities issued in replacement therefor or exchanged therefor shall bear the following legend, or one substantially similar thereto: THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED PURSUANT TO THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS, AND MAY NOT BE TRANSFERRED UNLESS THEY ARE SO REGISTERED OR, IN THE OPINION OF COUNSEL ACCEPTABLE TO THIS CORPORATION, SUCH TRANSFER IS EXEMPT FROM REGISTRATION. 3.9 The Purchaser understands that, although an exemption from registration under Rule 144 under the Act may become available for certain resales of the Shares, various significant conditions of Rule 144 must be satisfied prior to any sale in reliance thereon. -2- The Purchaser understands that ownership of the Shares involves substantial risk. The Purchaser acknowledges that the Purchaser has evaluated such risk and has determined that the Shares are suitable investments. The Purchaser is sophisticated in financial and business matters and is capable of evaluating the merits and risks of an investment of this type and of protecting its own interests in connection with this transaction. 3.10 The Purchaser understands that the Company and the Seller are relying on the accuracy of the representations made herein and, but for the representations made hereunder, Seller would not sell the Shares, the Company would not consent to the transfer thereof. 3.11 The Purchaser is aware of the Company's business affairs and financial condition and has acquired sufficient information about the Company (including the Company's public filings under the Act and the Securities Exchange Act of 1934, as amended, as such are available without charge on the website of the U.S. Securities and Exchange Commission) to reach an informed and knowledgeable decision to acquire the Shares. 4. ADDITIONAL PROVISIONS. 4.1 RESTRICTIVE LEGEND. The certificate or certificates representing the Shares shall bear a legend which prohibits the transfer of the securities unless they are registered or such registration is not required in the opinion of counsel for the Company. 4.2 STOP-TRANSFER NOTICES. The Purchaser agrees that, in order to ensure compliance with the restrictions referred to herein, the Company may issue appropriate "stop transfer" instructions to its transfer agent, if any, and that, if the Company transfers its own securities, it may make appropriate notations to the same effect in its own records. 4.3 REFUSAL TO TRANSFER. The Company shall not be required (i) to transfer on its books any Shares that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Shares or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Shares shall have been so transferred. 4.4 PURCHASER INDEMNITIES. The Purchaser hereby agrees to indemnify and hold harmless the Seller and the Company from and against any and all losses, costs, liabilities and expenses arising out of or related to the transfer by the Seller to the Purchaser or the resale or distribution by the Purchaser of any portion of the Shares in violation of the Act or any applicable state securities laws or any written agreements covering the Shares. The Purchaser further agrees to defend, indemnify and hold harmless the Company and the Company's legal counsel, Andrews Kurth LLP, and their respective officers, directors, employees, agents, and partners, from and against any and all damages, losses, costs, liabilities and expenses (including reasonable attorneys' fees) arising out of or related to any breach of the representations, warranties or covenants of the Purchaser under this Stock Purchase Agreement. 5. MISCELLANEOUS. 5.1 This Agreement may be amended by written agreement between the Seller and the Purchaser. -3- 5.2 Any notice, demand or request required or permitted to be given under this Agreement shall be in writing and shall be deemed sufficient when delivered personally or sent by telecopy or forty-eight (48) hours after being deposited in the U.S. mail, as certified or registered mail, with postage prepaid, and addressed, if to the Company, at its principal place of business, attention the President, and if to the Seller or the Purchaser, at the addresses as shown on the signature page hereto or such address as a party may notify the other party and the Company of not less than 10 days in advance. 5.3 The rights and benefits of this Agreement shall inure to the benefit of, and be enforceable by successors and assigns of the parties. 5.4 This Agreement and all acts and transactions pursuant hereto and the rights and obligations of the parties hereto shall be governed, construed and interpreted in accordance with the laws of the State of Nevada, without giving effect to principles of conflicts of law. 5.5 This Agreement may be executed in two or more counterparts, each of which shall be deemed an original and all of which together shall constitute one instrument. 5.6 This Agreement constitutes the entire agreement between the parties hereto pertaining to the subject matter hereof, and any and all other written or oral agreements existing between the parties hereto are expressly canceled. 5.7 Each party hereto agrees that it shall at all times keep confidential and not divulge, furnish or make accessible to anyone any confidential information, knowledge or data concerning or relating to the business or financial affairs of the other party (or the Company) to which such party has been or shall become privy by reason of this Agreement, discussions or negotiations relating to this Agreement, the performance of its obligations hereunder or the ownership of Shares purchased hereunder. 5.8 The Company, its agents, representatives and legal counsel shall be intended third-party beneficiaries of all applicable terms of this Agreement. Furthermore, the parties expressly agree that the Company may delay or refuse to transfer of the Shares to the Purchaser hereunder in the event that the Company believes that such transfer would violate applicable federal or state securities laws, and that the Company's legal counsel may rely upon the representations of the parties set forth herein in connection with any opinion of counsel delivered to the Company and/or its transfer agent in connection with the tranasctions contemplated hereby. -4- IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first set forth above. SELLER: PURCHASER: Second Amended and Restated Trust [ ] for the Benefit of the Shareholders of Mega-C Power Corporation By: By: ---------------------------------------- ------------------------ Jeffrey L. Hartman, Trustee Address: Address: 501 West Plumb Lane, Suite B Reno, NV 89509 --------------------------- Fax: (775) 324-1818 --------------------------- --------------------------- -5- EX-99.3 4 megac_13d-ex9903.txt 8% NON-NEGOTIABLE NON-RECOURSE PROMISSORY NOTE EXHIBIT 99.3 MATURITY DATE: NOVEMBER ___, 2008 TRUST FOR THE BENEFIT OF THE SHAREHOLDERS OF MEGA-C POWER CORPORATION 8% NON-NEGOTIABLE NON-RECOURSE PROMISSORY NOTE - -------------------------------------------------------------------------------- NOVEMBER ___, 2006 $__________ STC-_____ Execution Date Principal Amount Note Number - -------------------------------------------------------------------------------- THIS NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR THE SECURITIES LAWS OF ANY STATE AND MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 AND ANY APPLICABLE STATE SECURITIES LAWS OR AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS THEREOF. For value received, the Trust for the Benefit of the Shareholders of Mega-C Power Corporation and by the Second Amended Shareholders Trust subsequent to the effective date of SECOND AMENDED PLAN OF REORGANIZATION FOR MEGA-C POWER CORPORATION JOINTLY PROPOSED BY WILLIAM N. NOALL. CHAPTER 11 TRUSTEE, ET. al, filed with the United States Bankruptcy Court for the District of Nevada ("Bankruptcy Court") on November 1, 2006 as may be amended by the Bankruptcy Court pursuant to Section I 127(a) of the Bankruptcy Code prior to confirmation thereof ("Plan")(1) in In re Mega-C Power Corporation, a Nevada corporation ("Mega-C"), being Case No. BK-N-04- 50962-GWZ (the "Trust") promises to pay to ___________________ ( "HOLDER") the sum _________________________ ($___________) on or before November _____, 2008 (the "MATURITY DATE"), unless this promissory note (the "Note") has been repaid earlier pursuant to the terms hereof. The following is a statement of the respective obligations and rights of the Trust and Holder and the conditions to which this Note is subject, and to which Holder hereof, by his acceptance of this Note, expressly agrees. SECTION I HOLDER'S UNDERSTANDINGS AND REPRESENTATIONS The Holder expressly acknowledges and represents that: 1.1 The loan evidenced by this Note (the "LOAN") is one of a series of loans in the maximum aggregate principal amount of Three Million Dollars (collectively the "LOANS"). Each of the Loans has been made on substantially identical terms and conditions and all rights of Holder set forth herein are and shall be shared ratably and without priority by all Holders who have made Loans to the Trust. 1.2 The Loan is being made by Holder for the express purpose of providing sufficient cash to permit payment of Interim Awards as defined in Section 4(a)(iv) and (v) of the Settlement Agreement dated December 2004, and satisfy the other effective date cash conditions of the Plan as an alternative and/or supplement to the selling of up to 1 million shares ("AXION SHARES") of the common stock of Axion Power International, Inc. ("AXION") that were previously designated for that purpose by an express order of the U.S. Bankruptcy Court for the District of Nevada (the "Court") in Mega-C's Chapter 11 Bankruptcy case (Case No. BK-N-04-50962 GWZ) entered on February 1, 2006 and as provided for in the Plan. 1.3 On the effective date of the Plan, the corpus of the Trust will consist of 5,700,000 Axion Shares that have been previously designated as "Plan Funding Shares" by the Plan. Up to one million (1,000,000) of the Plan Funding Shares were designated in the Settlement Agreement to be sold prior to the Effective Date of the Plan. To the extent that such Plan Funding Shares were not sold, such Plan ______________ (1) All defined terms in this Note to the extent not defined herein, will be as defined in the Plan. 1 Funding Shares shall be available to serve as collateral for the Loans (the "Security Shares") which Security Shares pledged shall be the sole recourse for this Note and the Loan, including any interest thereon. For each Three Dollars ($3.00) of the Loan, Holder shall receive a security interest in 1 (one) Security Share, 1.4 The rights of Holder with respect to the Security Shares are in all events senior and superior to the rights of the holders of Allowed Claims of Mega-C, the Liquidation Trust and the holders of Allowed Equity Securities of Mega-C. In no event shall Holders have any rights to collect against or otherwise interfere with the remaining Plan Funding Shares which have not been pledged as Security Shares, which shall be treated in accordance with the terms and conditions of the Plan. 1.5 Holder has received and reviewed the following documents that Axion has recently filed with the Securities and Exchange Commission (the "SEC"): a. Annual Report on Form 10-KSB for the fiscal year ended December 31, 2005; b. Proxy Statement for the 2006 Annual Meeting of Stockholders; and c. Quarterly Report on Form 10-QSB for the three months ended March 31, 2006, 1.6 Holder has been afforded an opportunity to review the files and business records of the Trust and Axion and has been given the opportunity to ask questions of and receive answers from the Trustee and the officers and directors of Axion with respect to the terms of this agreement, the business and financial condition of Axion and any other matters that the bolder considered material to his investment decision and all such questions have been answered to his full satisfaction; 1.7 Holder has been afforded an opportunity to review the Plan and the accompanying Disclosure Statement and has been given the opportunity to ask questions and receive answers regarding the Plan and any other matters that Holder considered material to his investment decision and all such questions have been answered to his full satisfaction; 1.8 Holder has made the loan evidenced hereby without being furnished any offering literature or prospectus other than the documents specified above; 1.9 Holder has SUFFICIENT financial and other RESOURCES to provide for his anticipated FINANCIAL needs and has no need for liquidity with respect to his investment in the loan; and 1.10 Holder understands and acknowledges that his investment in the Loan is, by nature, highly speculative. 1.11 Holder is making the Loan for investment purposes and has no agreement, arrangement or understanding with any person to participate in the subdivision or subsequent distribution of the Loan or any interest therein; 1.12 Holder is an "accredited investor" as defined in Rule 501 of SEC Regulation D. 1.13 This Note is a non-negotiable, non-recourse promissory note. SECTION II HOLDER'S AGREEMENTS Holder expressly agrees that: 2.1 Within two business days after the execution date above set forth, Holder shall transfer the sum of ________________________ Dollars ($__________) by bank wire transfer to a lawyer's escrow account 2 maintained for that purpose by Mark R. Dolan, Esq., the designated closing agent for the transactions contemplated hereby. 2.2 The funds transferred to Mr. Dolan by Holder shall be retained in a non-interest-bearing lawyers trust account until (i) the Court has entered an order confirming the Plan; (ii) as a condition to the confirmation of the Plan, the Court has amended the Plan and approved the Trust entering into this Note and the other notes evidencing the Loans to the Trust as an alternative to the sale of the Security Shares as provided for in the Settlement Agreement; and (iii) no stay pending appeal has been ordered prior to disbursement of the funds AS set forth in Section 2.4 below. Upon satisfaction of the above conditions, the proceeds shall be transferred as set forth in Section 2.4 below. 2.3 In the event that the condition set forth in Section 2.2 has not been satisfied within 30 days of the Execution Date above set forth, then Mr. Dolan shall promptly refund to Holder the amounts deposited with him by Holder, provided that Mr. Dolan shall be entitled to withhold an amount sufficient to pay any and all inbound and outbound bank wire fees incurred by him in connection with receiving and disbursing Holder's funds. 2.4 Within 13 calendar days following entry of an order confirming the Plan, and provided the conditions in paragraph 2.2 are satisfied, Mr. Dolan shall transfer all amounts held in escrow to William Noall, Esq. ("Noah"), Mega-C's Chapter 11 Trustee, by bank wire transfer to an account maintained for that purpose by Noall pursuant to the Settlement Agreement and Plan, provided that Mr. Dolan shall be entitled to withhold an amount sufficient to pay any and all inbound and outbound bank wire FEES incurred by him in connection with receiving and disbursing the Holder's funds. 2.4 Contemporaneous with the receipt of the funds by Noall, the Trust shall deliver to the Holder this Note together with Security Shares properly legended to indicate the security interest of Holder therein. SECTION III TRUST'S OBLIGATIONS The Trust expressly agrees that: 3.1 The Trust shall pay Holder simple interest on the principal amount above set forth at the rate of EIGHT PERCENT (8%) per annum from the date the Holder's funds are released to Noah l pursuant to Section 2.4 until the Maturity Date. The Trust shall not be obligated to pay the Holder any interest during the period between the date hereof and the date Holder's funds are released to Noall pursuant to Section 2.4. Accrued interest shall be paid on the Maturity Date of this Note, or, in case of early payment, on that date. 3.2 The Trust may at its sole discretion, prepay all or any part of the outstanding principal and accrued interest under this Note at any time. The Trust shall use its best efforts to liquidate Plan Funding Shares as soon as possible in order to pay the debts to all Holders, provided however, the Trust has no obligation to liquidate Plan Funding Shares at a price per share (after commissions and costs of sale) which IS less than that necessary to pay in full the obligations due Holders. Upon payment of all or any portion of this Note, Holder shall release and deliver to the Trust A proportionate number of the Security Shares pledged to this Note. Holder acknowledges that the priority of payment among the Holders shall be in the sole discretion of the Trust. 3.3 On the first day of August, 2007, and the first day of January, 2008 (the "Conversion Dates) Holder, in satisfaction of all amounts due and outstanding under the Note, may exchange this Note based upon the face amount of the Note for a commensurate number of the Security Shares pledged to Holder at a purchase price (the "Purchase Price") equal to 65% of the average closing price of the Axion Shares as reported on the OTC Bulletin Board or any other NASD approved trading exchange which trades Axion's common stock for the 20 trading days immediately preceding the relevant Conversion Date; provided that prior to making such 3 an election, the pledged Security Shares shall have been registered under the Securities Act of 1933 and in advance of making such an election Holder shall receive a copy of the current prospectus included in the effective registration statement for the Axion Shares (which includes the pledged Security Shares). Any Holder electing to convert his Note shall notify the Trust in writing between five (5) and ten (10) days prior to any Conversion Date identified above which is relevant to such election. SECTION IV DEFAULT AND REMEDIES Holder and the Trust expressly agrees that: 4.1 An "Event of Default" shall occur if: a. the Trust shall default in the payment of the principal and interest of this Note at the Maturity Date; b. the Trust shall default in the due observance or performance of any material covenant, condition or agreement on the part of the Trust to be observed or performed pursuant to the terms hereof and such default shall continue for thirty (30) days after the date of written notice specifying such default; 4.2 If an Event of Default occurs under Section 4.1, Holder's sole remedies areto either exercise conversion rights against the Security Shares only in the same manner provided in Section 3.3, but without any restriction or limitation to convert on the Conversion Dates or to foreclose upon the Security Shares as provided for under applicable Nevada law. SECTION V MISCELLANEOUS 5.1 Upon receipt of evidence satisfactory to the Trust of the loss, theft, destruction or mutilation of this Note, and of indemnity reasonably satisfactory to the Trust if lost, stolen or destroyed, and upon surrender and cancellation of this Note if mutilated, and upon reimbursement of the Trust's reasonable incidental expenses, the Trust shall execute and deliver to Holder a new Note of like date, tenor and denomination. 5.2 The Trust hereby waives presentment, demand, notice of nonpayment, protest and all other demands and notices in connection with the delivery, acceptance, performance or enforcement of this Note. 5.3 Any notice, approval, request, authorization, direction or other communication under this Note shall be given in writing and shall be deemed to have been delivered and given for all purposes (i) on the delivery date if delivered personally to the party to whom the same is directed or transmitted by facsimile to the facsimile number set forth on the signature page of this Note (or to such other facsimile number as may be communicated to the notifying party in writing) with confirmation of receipt, (ii) one (1) business day after deposit with a commercial overnight carrier, with written verification of receipt, or (iii) three (3) business days after the mailing date, whether or not actually received, if sent by U.S. mail, return receipt requested, postage and charges prepaid, at the address of the party set forth on the signature page of this Note (or at such other address as may be communicated to the notifying party in writing). 5.4 This Note may not be pledged, sold, assigned or transferred without the express written consent of the Trust, which may be withheld in its sole discretion; provided, however, that any such transfer shall only be made in compliance with applicable federal and state securities laws. Any pledge, sale, assignment or transfer in violation of the foregoing shall be null and void. 4 5.5 All headings used herein are used for convenience only and shall not be used to construe or interpret this Note. Except where otherwise indicated, all references herein to Sections refer to Sections hereof. 5.6 All of the covenants, stipulations, promises, and agreements in this Note shall bind and inure to the ' benefit of the parties' respective successors and assigns, whether so expressed or not. 5.7 This Note shall be governed by the laws of the State of Nevada, and the laws of such state (other than conflicts of laws principles) shall govern the construction, validity, enforcement and interpretation hereto except to the extent federal laws otherwise govern the validity, construction, enforcement and interpretation hereof. 5.8 Any payment on this Note shall be due and payable in lawful money of the United States of America, at the address of Holder AS shown on the books of the Trust, in funds which are or will be available for next business day use by Holder. In any case where the payment of principal and interest hereon is due on a non-business Day, the Trust shall be entitled to delay such payment until the next succeeding business day, but interest shall continue to accrue until the payment is, in fact, made. IN WITNESS WHEREOF, this Note has been executed by the parties and issued to Holder on this____ day of November, 2006. Trust for the Benefit of the Shareholders of Mega-C Power Corporation By: 1268 Bayshore Boulevard ------------------------------ Dunedin Florida 34698 Its: Sally A. Fonner, Trustee (727) 239-7314 (telephone) (727) 734-4617 (facsimile) SALLY@SALLVFONNER.COM (e-mail) Holder ------------------- By: ------------------- ------------------------------ Email: ------------------- 5 -----END PRIVACY-ENHANCED MESSAGE-----