EXHIBIT 10.4
AMENDED AND RESTATED TRUST AGREEMENT
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This Amended and Restated Trust Agreement (the
"Agreement") of the Digital Angel Share Trust, a Delaware statutory trust
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(the "Trust") is made and entered into as of June 30, 2003, between
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Wilmington Trust Company, a Delaware banking corporation (acting hereunder
not in its individual capacity but solely as trustee hereunder, the
"Trustee"), and Applied Digital Solutions, Inc., a corporation organized
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under the laws of Missouri ("ADS").
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RECITALS
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A. This Agreement was originally entered into as of March
1, 2002 between the Trustee and ADS for the purpose of securing certain debt
obligations of ADS and its affiliates to IBM Credit LLC.
B. As of the date hereof, ADS has borrowed the sum of
$10,500,000 from certain lenders described herein, for the purpose, in part,
of repaying in full, the obligations of ADS and the Trust to IBM Credit.
C. In consideration of such new loan, and in order to
secure and facilitate the payment of the Obligations according to their
terms, ADS has agreed to continue the deposit with the Trustee the MAS
Stock, to continue to be held in trust hereunder on the terms and conditions
set forth herein.
AGREEMENT
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NOW THEREFORE, in consideration of the premises and the
mutual covenants herein contained, the parties hereto hereby agree as
follows:
ARTICLE I.
DEFINITIONS
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"Act" means the Delaware Business Trust Act, 12 Del. C.
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Sections 3801 et seq.
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"ADS" is defined in the introductory paragraph of this
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Agreement.
"Advisory Board" means the Advisory Board prescribed by
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Section 4.01.
"Advisory Board Member" means the member of the Advisory
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Board.
"Affiliate" of any Person means a Person that, directly or
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indirectly, through one or more intermediaries, controls, is controlled by
or is under common control with the first mentioned Person. A Person shall
be deemed to control another Person if such first Person possesses directly
or indirectly the power to direct, or cause the direction of, the management
and policies of the second Person, whether through the ownership of voting
securities, by contract or otherwise.
"Bankruptcy Decision" means, with respect to a specified
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entity, any of the following actions: (a) filing any voluntary petition in
bankruptcy on behalf of such entity, (b) consenting to the filing of any
involuntary petition in bankruptcy against such entity, (c) filing any
petition seeking, or consenting to, reorganization or relief under any
applicable federal, state or foreign law relating to bankruptcy or
insolvency, on behalf of such entity, (d) consenting to the appointment of a
receiver, liquidator, assignee, trustee, sequestrator (or other similar
official) of such entity or a substantial part of the property of such
entity, (e) making any assignment for the benefit of creditors on behalf of
such entity, (f) admitting in writing the inability of such entity to pay
its debts generally as they become due, or (g) taking any action by such
entity in furtherance of any of the foregoing actions.
"Certificate of Trust" means the Certificate of Trust of
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the Trust filed under the Act with the Delaware Secretary of State on March
1, 2002, as such Certificate of Trust may be amended or restated from time
to time.
"Closing Date" is defined in the Securities Purchase
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Agreement.
"Credit Documents" means the Securities Purchase
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Agreement, the Debentures, the Warrants, the Registration Rights Agreement,
the Pledge Agreement (each of the foregoing, as defined in the Securities
Purchase Agreement) and all dated as of June 30, 2003, and any instruments,
documents, guarantees, schedules of assignment, contracts and similar
agreements, including schedules, attachments, exhibits and ancillary
documentation or other supporting documents, executed by or on behalf of
ADS, and delivered to any Purchaser, pursuant to the Securities Purchase
Agreement or otherwise, and all amendments, supplements and other
modifications to the foregoing from time to time.
"Delaware Secretary of State" means the office of the
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Secretary of State of the State of Delaware.
"Fair Market Value" means, on any date specified, the
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average of the daily Market Price of a share of MAS Stock during the 10
consecutive trading days before such date, except that, if on any such date
the shares of MAS Stock are not listed or admitted for trading on any
national securities exchange or quoted in the over-the-counter market, Fair
Market Value shall be the Market Price on such date.
"Final Payment Date" means the date on which all Obligations
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have been paid and satisfied in full.
"Final Payment Notice" means the written notice from each
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Purchaser to the Trustee stating that the Final Payment Date has occurred.
"IBM Credit" is defined in Recital A.
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"Indemnified Trustee Person(s)" is defined in Section 6.06.
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"Independent Agent" shall initially mean the law firm of
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Xxxxxxx Xxxxxxxxx LLP, New York, New York, and any successor law firm
thereto, or any law firm located in Xxx Xxxx,
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Xxx Xxxx and designated as such in writing by all of the Purchasers who are
then Holders of Debentures or Warrants, acting through any partner (or
equivalent title) thereof.
"Market Price" means, on any date specified, an amount per
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share of MAS Stock equal to (i) the last reported sale price of such MAS
Stock, regular way, on such date or, in case no such sale takes place on
such date, the average of the closing bid and asked prices thereof regular
way on such date, in either case as officially reported on the principal
national securities exchange on which such MAS Stock is then listed or
admitted for trading, (ii) if such MAS Stock is not then listed or admitted
for trading on any national securities exchange but is designated as a
national market system security by the NASD, the last reported trading price
of the MAS Stock on such date, (iii) if there shall have been no trading on
such date or if the MAS Stock is not so designated, the average of the
closing bid and asked prices of the MAS Stock on such date as shown by the
NASD automated quotation system, or (iv) if such MAS Stock is not then
listed or admitted for trading on any national exchange or quoted in the
over-the-counter market, the fair value thereof (as of a date which is
within 10 days of the date as of which the determination is to be made)
determined in good faith by the Board of Directors of the issuer of such MAS
Stock.
"MAS" means Medical Advisory Systems, Inc., a Delaware
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corporation, subsequently re-named "Digital Angel Corporation".
"MAS Stock" means the common stock, par value $.005 per
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share, of MAS, and any stock into which such common stock shall have been
changed, any stock resulting from any reclassification of such common stock,
any other shares of stock issued or issuable with respect thereto (whether
by way of a stock dividend or stock split or in exchange for or upon
conversion of such shares or otherwise in connection with a combination of
shares, recapitalization, merger, consolidation or other corporate
reorganization), and all other stock of any class or classes (however
designated) of MAS (or its successors) the holders of which have the right,
without limitation as to amount, either to all or to a share of the balance
of current dividends or liquidating dividends after the payment of dividends
and distributions on any shares entitled to preference.
"Merger Agreement" means that Agreement and Plan of Merger
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by and among ADS, Digital Angel Corporation, a Delaware corporation, MAS,
and Acquisition Subsidiary, Inc., a Delaware corporation, dated as of
November 1, 2001.
"Obligations" means the obligations of ADS under the
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Credit Documents to (i) pay interest as set forth in the Debentures, (ii)
pay principal as set forth in the Debentures, (iii) honor conversion or
exchange notices pursuant to the Debentures, (iv) honor Warrant exercises as
set forth therein, and (v) otherwise perform ADS' covenants contained in the
various Credit Documents.
"Person" means an individual, a corporation, an
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association, a partnership, an estate, a trust, a limited liability company
and any other entity or organization, governmental or otherwise.
"Purchaser" means the Persons who are Holders of the
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Debentures at any time ("Holder" as defined in the Debenture).
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"Registration Rights Agreement" means that certain
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Registration Rights Agreement between MAS and ADS, dated as of March 27,
2002 and attached hereto as Exhibit A.
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"Required Amount of Cash" means (a) the Trigger Amount or
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such other amount as is then due and payable by the Trust under the Credit
Documents, minus (b) the amount of cash then in the Trust Estate, plus (c)
the costs of liquidating sufficient shares of MAS Stock held in the Trust
Estate to generate net proceeds equal to the amount produced by subtracting
clause (b) from clause (a).
"Trigger Amount" means the amount stated in a Trigger
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Notice as owed but not timely paid by ADS under the Credit Documents.
"Trigger Event" means any Event of Default by ADS under
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the Debentures (or any of them) or the Pledge Agreement, as defined therein.
"Trigger Notice" means a written notice from any Purchaser
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to the Trustee stating that there has been and is continuing a Trigger
Event, specifying the Trigger Amount.
"Trust" means the Delaware statutory business trust formed
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pursuant to this Agreement and known as "Digital Angel Share Trust," which
was formed as of March 1, 2002, under the Act pursuant to the filing of the
Certificate of Trust.
"Trustee" means Wilmington Trust Company, not in its
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individual capacity, but solely as a trustee hereunder, and any successor
trustee appointed in accordance with Section 3807 of the Act and Section 6.04.
"Trust Estate" is defined in Article III.
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ARTICLE II.
GENERAL
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Section 2.01. Formation of the Trust.
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(a) The Trust created hereby shall be known as "Digital
Angel Share Trust," in which name the Trustee may conduct the affairs of the
Trust, make and execute contracts and other instruments on behalf of the
Trust and xxx and be sued on behalf of the Trust. ADS hereby appoints
Wilmington Trust Company as trustee of the Trust effective as of the date
hereof, to have all the rights, powers and duties set forth herein and in
the Act. Wilmington Trust Company hereby agrees to hold the Trust Estate as
Trustee on behalf of the Trust upon the terms and conditions set forth
herein. The Trustee is hereby authorized to file the Certificate of Trust
with the Delaware Secretary of State pursuant to Section 3810 of the Act.
(b) It is the intention of the parties hereto that the Trust
constitute a business trust under the Act and that this Trust Agreement
constitute the governing instrument of the
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Trust. Effective as of the date hereof, the Trustee shall have all rights,
powers and duties set forth herein and in the Act with respect to
accomplishing the purposes of the Trust.
Section 2.02. Name, Principal Office, and Name and Address
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of Trustee as Agent for Service of Process.
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(a) The principal place of business and office of the Trust
shall be c/o Wilmington Trust Company, Xxxxxx Square North, 0000 Xxxxx
Xxxxxx Xxxxxx, Xxxxxxxxxx, XX 00000-0000, Attention: Corporate Trust
Administration. The Trustee is hereby designated to accept service of
process on behalf of the Trust at the address provided in the preceding
sentence. The Trustee may change the address set forth in this Section 2.02
upon written notice to each Advisory Board Member.
(b) The Trust shall be located and administered in, and all
bank accounts of the Trust maintained in, the State of Delaware. Payments
shall be received by the Trust only in the State of Delaware and payments
will be made by the Trust only from the State of Delaware.
Section 2.03. Purpose. The purpose of the Trust is to own,
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vote (subject to Section 4.04) and dispose of the Trust Estate as directed
in writing by the Advisory Board and with the ultimate objective of securing
and facilitating the repayment and satisfaction of the Obligations in
accordance with the terms and conditions of the Credit Documents. In
furtherance of such purpose, the Trust shall act as pledgeholder under the
Credit Documents, this Agreement and any other agreement, document or
instrument necessary or incidental thereto, and shall make all filings
required under Federal securities laws or otherwise in connection with its
ownership of the MAS Stock held in the Trust Estate. Pursuant to specific
instruction from ADS, or as otherwise provided in Article V hereof, the
Trustee shall timely honor all requests for exchange of any principal amount
of any Debenture into shares of MAS Stock and for the exercise of any
Warrant into shares of MAS Stock. The Trust will not conduct activities
other than those contemplated by this Section 2.03, and, except as required
in furtherance of its purpose, the Trust shall not: (i) have any property,
rights or interests, whether real or personal, tangible or intangible, (ii)
incur any legal liability or obligation, whether fixed or contingent,
matured or unmatured, or (iii) subject any of the Trust Estate to any
mortgage, lien, security interest or other claim or encumbrance.
Section 2.04. Certain Covenants Relating to the Separateness
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of the Trust. The Trust shall maintain its separate existence and,
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specifically, shall conduct its affairs in accordance with, and ADS agrees
that it will not take any actions in its dealings with the Trust or with
other Persons (including creditors of ADS) that are inconsistent with, the
following:
(a) The Trust shall maintain its books, records and bank
accounts separate from those of any other Person.
(b) The Trust shall not commingle or pool any of its funds
or other assets with those of any other Person, and it shall, through the
Trustee, hold all of its assets in its own name.
(c) The Trust, through the Trustee, shall conduct its own
business in its own name and shall not operate, or purport to operate,
collectively as a single or consolidated business entity with respect to
any Person.
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(d) The Trust has done, or caused to be done, and shall do,
all things necessary to observe all Delaware statutory business trust
formalities and other organizational formalities, and preserve its existence
(subject to Article VII and the other express provisions hereof), and it
shall not, nor will it permit any Affiliate or constituent party to, amend,
modify or otherwise change this Agreement in a manner which would adversely
affect the existence of the Trust as a special purpose entity.
(e) The Trust shall not have any employees.
(f) Except pursuant to the Credit Documents, the Trust does
not, and shall not, (i) guarantee, become obligated for, or hold itself or
its credit out to be responsible for or available to satisfy, the debts or
obligations of any other Person or (ii) control the decisions or actions
respecting the daily business or affairs of any other Person.
(g) The Trust shall, at all times, hold itself out to the
public as an entity separate and distinct from any other Person and shall
correct any known misunderstanding regarding its separate identity.
(h) The Trust shall not identify itself as a division or
agent of any other Person.
(i) The Trust shall maintain its assets in such a manner
that it will not be costly or difficult to segregate, ascertain or identify
its individual assets from those of any other Person.
(j) The Trust shall not use its separate existence to abuse
creditors or to perpetrate a fraud, injury, or injustice on creditors in
violation of applicable law.
(k) The Trust shall not be consensually merged or legally
consolidated with any other Person.
Section 2.05. Creditors of ADS. Except pursuant to the Credit
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Documents, to the fullest extent permitted by applicable law, no creditor of
ADS or any of its Affiliates shall have any right to obtain possession of,
or otherwise exercise legal or equitable remedies with respect to, the Trust
Estate.
ARTICLE III.
CONTRIBUTION
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Section 3.01. Continuation of Assignment. On the Closing
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Date, the Trust shall (a) retain all of its right, title and interest in
15,000,000 shares of MAS Stock, and (b) transfer the remaining 4,600,000
shares of MAS Stock which the Trust now owns of record in whatever manner
it is directed in writing by ADS. The Trustee acknowledges its continuing
record ownership and possession of the 15,000,000 shares of MAS Stock,
which shall constitute the initial trust estate (including all income on
and proceeds of such initial trust estate, the "Trust Estate"). The Trustee
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hereby declares that it will hold the Trust Estate in trust on the terms
and conditions set forth herein. For clarity, the same 15,000,000 shares
of MAS Stock constituting
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the Trust Estate shall serve concurrently as the shares issuable to a
Purchaser on exchange of a Debenture, issuable to a Purchaser as payment of
interest on or principal of a Debenture, shares issuable to a Purchaser on
exercise of a Warrant, and as collateral under the Pledge Agreement in the
case of an Event of Default under a Debenture or the Pledge Agreement.
Section 3.02. Legal Title to Trust Property. Legal title
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to the Trust Estate shall be vested at all times in the Trust as a separate
legal entity except where applicable law in any jurisdiction requires title
to any part of the Trust Estate to be vested in a trustee or trustees, in
which case legal title shall be deemed to be vested in the Trustee, a
co-trustee and/or a separate trustee, as the case may be.
Section 3.03. Beneficial Owner. ADS shall be deemed to be
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the beneficial owner of the Trust Estate.
ARTICLE IV.
TRUST GOVERNANCE
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Section 4.01. Advisory Board.
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(a) General. The Trustee shall act upon and in accordance
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with this Agreement and the written instructions of the Advisory Board,
which shall initially consist of Xxxxx Xxxxxxxxx, Chief Executive Officer of
ADS, who shall be replaced when and if another Person shall become Chief
Executive Officer of ADS, and thereafter such successor Chief Executive
Officer shall become the Advisory Board Member, who shall be similarly
replaced by the next successive Chief Executive Officer of ADS and so forth
until the dissolution of this Trust. The Trustee shall be entitled to rely
on the most recent public filing of ADS with the Securities and Exchange
Commission as to the identity of the Chief Executive Officer, or may request
and rely upon an incumbency certificate from the Secretary of ADS.
(b) Meetings. The Advisory Board shall meet as needed.
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(c) Action by Written Consent. Any action required or
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permitted to be taken at any meeting of the Advisory Board may be taken
without a meeting if the requisite number of Advisory Board Members consents
thereto in writing, and the writing or writings are filed with the minutes
or proceedings of the Advisory Board.
(d) Compensation. The Advisory Board shall serve without
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compensation from the Trust.
(e) Advisory Board Member Liability. To the full extent
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permitted by applicable law currently or hereafter in effect, no Advisory
Board Member will be personally liable, for breach of fiduciary duty or
otherwise, to the Trust, the Trustee, any Purchaser or ADS for or with
respect to any acts or omissions in the performance of his or her duties as
an Advisory Board Member. No repeal or modification of this Section 4.01(e)
will adversely affect any right or protection of an Advisory Board Member
existing prior to such repeal or modification.
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(f) Indemnification. Each person who is or was or had agreed
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to become an Advisory Board Member will be indemnified by the Trust to the
full extent permitted by applicable law as currently or hereafter in effect
and will be entitled to advancement of expenses in connection therewith. The
right of indemnification and of advancement of expenses provided in this
Section 4.01(f): (i) will not be exclusive of any other rights to which any
Person seeking indemnification or advancement of expenses may otherwise be
entitled, including without limitation pursuant to any contract approved by
a majority of all Advisory Board Members (whether or not the Advisory Board
Members approving such contract are or are to be parties to such contract or
similar contracts), and (ii) will be applicable to matters otherwise within
its scope whether or not such matters arose or arise before or after the
date of this Agreement. Any amendment or repeal of, or addition of any
provision inconsistent with, this Section 4.01(i) will not adversely affect
any right or protection existing hereunder, or arising out of the facts
occurring, prior to such amendment, repeal, or adoption and no such
amendment, repeal, or adoption will affect the legality, validity, or
enforceability of any contract entered into or right granted prior to the
effective date of such amendment, repeal, or adoption. If so determined by
the Advisory Board, the Trust may obtain insurance to support its
indemnification obligations hereunder, the cost of which shall be paid from
the Trust Estate.
Section 4.02. Major Decisions. The following actions shall
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require the unanimous vote of the Advisory Board Members:
(a) (i) filing any voluntary petition in bankruptcy on behalf
of the Trust, (ii) consenting to the filing of any involuntary petition in
bankruptcy against the Trust, (iii) filing any petition seeking, or
consenting to, reorganization or relief under any applicable federal, state
or foreign law relating to bankruptcy or insolvency, on behalf of the Trust,
(iv) consenting to the appointment of a receiver, liquidator, assignee,
trustee, sequestrator (or other similar official) of the Trust or a
substantial part of the property of the Trust, (v) making any assignment for
the benefit of creditors on behalf of the Trust, (vi) admitting in writing
the Trust's inability to pay its debts generally as they become due, or
(vii) taking any action by the Trust in furtherance of any of the foregoing
actions;
(b) determining to liquidate or dissolve the Trust;
(c) approving the merger, consolidation, sale or transfer
of all or a substantial amount of assets or other change in control
transaction involving the Trust, provided that in no event may any of the
aforementioned activities occur with any entity that may seek bankruptcy
protection or if such merger, consolidation, sale or transfer would
undermine the solvency of the Trust;
(d) except as permitted or required pursuant to Article V,
approving the payment or making of any distributions from the Trust;
(e) approving amendments to the constituent documents of the
Trust or the Credit Documents; or
(f) voting the MAS Stock in favor of a Bankruptcy Decision
with respect to MAS or any of its direct or indirect subsidiaries if, at the
time such Bankruptcy Decision is
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implemented or is to be implemented, (i) a Bankruptcy Decision has been made
with respect to ADS or any of its direct or indirect subsidiaries, or (ii)
any borrower under the Credit Documents is in default under or with respect
to any obligation for borrowed money, including the Credit Documents,
regardless of whether such default has been declared.
Section 4.03. Voting Rights with Respect to the MAS Stock.
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Except as otherwise specified in this Section, prior to such time as the MAS
Stock has been sold or otherwise released by the Trust, the Trustee shall
exercise the right to vote such MAS Stock as instructed in writing by the
Advisory Board in accordance with the terms hereof. After delivery of the
Final Payment Notice, ADS shall have the right to direct the Trustee with
respect to the voting of all MAS Stock then in the Trust Estate.
ARTICLE V.
MAS STOCK LIQUIDATIONS; FINAL DISTRIBUTION
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Section 5.01. Release of MAS Stock Upon Exchange of
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Debentures or Exercise of Warrants. From time to time, when the Trustee
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receives a Notice of Exchange from a Purchaser with respect to a Debenture
or a Notice of Exercise from a Purchaser with respect to a Warrant, the
Trustee shall promptly take such actions as are requested by the Purchaser
in such Notice as may be necessary to cause MAS and its transfer agent to
transfer the requisite number of shares of MAS Stock from the Trust to the
account designated by the Purchaser for such purpose, in accordance with the
provisions of the Debentures and the Warrants via the Depository Trust
Company DWAC system, if possible. The Trustee shall immediately notify ADS
and the Independent Agent of such Notice of Exchange or Notice of Exercise.
The Trustee shall act upon any such request upon receipt of a confirmatory
instruction from the Independent Agent, and without the need for any such
confirmatory instruction from ADS or the Advisory Board. The Trustee is
further authorized to similarly transfer shares of MAS Stock from the Trust
to the Purchasers upon the direction of ADS as payment of interest on, or
repayment of principal of, the Debentures, at the discretion of ADS, but
with ADS being subject to the various conditions precedent thereto as set
forth in the Debentures. ADS shall immediately notify Purchasers'
Representative of any such ADS notice. The Trustee shall be entitled to rely
on any written notice from any Purchaser or ADS to take any such action
which such notice states that all conditions precedent to such action have
been met, without further inquiry of any Person, other than the Independent
Agent with respect to any written notice from any Purchaser.
Section 5.02. MAS Stock Liquidations. From time to time,
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when any sums are due and payable under the Credit Documents, upon receipt
of a Trigger Notice and a confirmatory instruction from the Independent
Agent, the Trustee shall promptly take action to liquidate the amount of MAS
Stock held in the Trust Estate required in order to generate the Required
Amount of Cash. Such action may include the sale of some or all of the MAS
Stock held in the Trust Estate in private transactions or on a national
stock exchange or quotation system, utilizing the registration rights
available pursuant to the Registration Rights Agreement where necessary. In
effecting such sale(s) of MAS Stock, the Trustee is authorized as
pledgeholder under the Pledge Agreement to release a sufficient number of
shares of MAS Stock to facilitate such sale and will endeavor not to sell
shares of MAS Stock in a manner which would disrupt an orderly market or is
reasonably likely to have an adverse impact on the market
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price of MAS Stock and will use commercially reasonable efforts to maximize
the per share value realized for such MAS Stock. From the proceeds of such
MAS Stock liquidations and all other cash then held in the Trust Estate, the
Trustee shall (i) pay the fees and expenses incurred by it in accomplishing
such liquidations, and (ii) distribute to the Purchasers, pro-rata in
accordance with the original principal amounts of their respective
Debentures (except if one of the Debentures shall not then be outstanding,
pro-rata to the remaining Purchasers) as set forth in the Securities
Purchase Agreement (or in a certificate executed by all Purchasers and
delivered to the Trustee for such purpose, in which case the distribution
provisions of the latest dated such certificate shall control) the amounts
due and payable under the Credit Documents. Any excess proceeds shall remain
in the Trust Estate. The Trustee may rely, without investigation, on each
Purchaser's written instructions to it as to the place and method of
delivery to such Purchaser of any such funds.
Section 5.03. Final Distribution. Upon receipt of the Final
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Payment Notice, the Trust shall be dissolved pursuant to Article VII.
Section 5.04. Trust Expenses. In the event ADS fails to pay
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the compensation or reimbursement due the Advisory Board Members pursuant to
Section 4.01(d), any indemnification amount or expense advance payable
pursuant to Section 4.01(f), the Trustee's fees and expenses as provided in
Section 6.07, or any indemnification amount payable pursuant to Section 6.06
within 5 business days after demand, the Trustee is hereby authorized to
liquidate such amount of MAS Stock held in the Trust Estate as is necessary
to pay such amounts. Payment in satisfaction of the Trustee's fees and
expenses as provided in Section 6.07 shall be made in full prior to any
other payment or distribution permitted or required hereunder.
ARTICLE VI.
CONCERNING THE TRUSTEE AND THE INDEPENDENT AGENT
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Section 6.01. General.
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(a) In the exercise or administration of the Trust hereunder,
the Trustee, at the expense of ADS (paid as specified in Section 6.07), may
(i) act directly or through agents or attorneys pursuant to agreements
entered into with any of them, and the Trustee shall not be liable for the
default or misconduct of such agents or attorneys if such agents or
attorneys shall have been selected by the Trustee with reasonable care; and
(ii) consult with counsel, accountants and other skilled Persons to be
selected with reasonable care and employed by the Trustee, and it shall not
be liable for anything done, suffered or omitted in good faith by it in
accordance with the advice or opinion of any such counsel, accountants or
other skilled Persons if such advice or opinion pertains to such matters as
the Trustee may reasonably presume to be within the scope of such counsel's,
accountant's or other skilled Person's area of expertise.
(b) Except as expressly provided herein, (i) in accepting
the Trust hereby created, Wilmington Trust Company acts solely as Trustee
hereunder and not in its individual capacity, and (ii) all Persons having
any claim against the Trustee or the Trust by reason of the transactions
contemplated by this Agreement shall look only to the Trust's property for
payment or satisfaction thereof.
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(c) The Trustee will administer the business and affairs of
the Trust in accordance with the terms of the Act and this Agreement;
provided, however, that the Trustee undertakes to perform only such duties
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as are specifically set forth in this Agreement and as the Trustee may be
duly directed from time to time in writing by the appropriate parties
specified herein. The Trustee shall not have any duty or obligation to
manage, control, use, sell, dispose of or otherwise deal with the Trust or
to otherwise take or refrain from taking any action under this Agreement
except as expressly required by the terms hereof or as expressly provided in
written instructions from the appropriate parties specified herein, and no
implied duties or obligations shall be read into this Agreement against the
Trustee. Wilmington Trust Company nevertheless agrees that it will, at its
own cost and expense (and not at the expense of the Trust), promptly take
all action as may be necessary to discharge any liens on any part of the
Trust Estate which are attributable to actions by or claims against
Wilmington Trust Company that are not related to the ownership of any part
of the Trust Estate or the administration of the Trust Estate or the
transactions contemplated by this Agreement.
(d) The Trustee shall not be required to take any action
under this Agreement if the Trustee shall reasonably determine or shall have
been advised by counsel that such action is contrary to the terms of this
Agreement or is otherwise contrary to applicable law.
(e) Whenever the Trustee is unable to decide between
alternative courses of action permitted or required by the terms of this
Agreement, or is unsure as to the application, intent, interpretation or
meaning of any provision hereof, the Trustee may give notice (in such form
as shall be appropriate under the circumstances) to the Advisory Board
Members requesting written instructions as to the course of action to be
adopted, and, to the extent the Trustee acts in good faith in accordance
with any such appropriate instruction received, the Trustee shall not be
liable on account of such action or inaction to any Person. If the Trustee
shall not have received appropriate instructions within ten days of such
notice (or within such shorter period of time as reasonably may be specified
in such notice or may be necessary under the circumstances), it may, but
shall be under no duty to, take or refrain from taking such action which is
consistent, in its view, with this Agreement and the Trust's purpose (as set
forth in Section 2.03), and the Trustee shall have no liability to any
Person for any such action or inaction.
(f) In no event whatsoever shall the Trustee be liable for
any representation, warranty, covenant, agreement, indebtedness or other
obligation of the Trust; provided, however, the foregoing shall in no event
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whatsoever relieve the Trustee from any liability resulting from the
Trustee's bad faith, willful misconduct or gross negligence.
(g) The Trustee may rely upon and shall incur no liability
to anyone in acting upon any signature, instrument, notice, resolution,
request, consent, order, certificate, report, opinion, bond or other
document or paper reasonably believed by it to be genuine and reasonably
believed by it to be signed by the proper party or parties. The Trustee may
accept a certified copy of a resolution of the board of directors or other
governing body of any Person as conclusive evidence that such resolution has
been duly adopted by such body and that the same is in full force and
effect. As to any fact or matter the manner of ascertainment of which is not
specifically prescribed herein, the Trustee may for all purposes hereof rely
on a certificate, signed by the president or any vice president or by the
treasurer or any assistant treasurer or the
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secretary or any assistant secretary or any trust officer (or equivalent
position) of the relevant party, as to such fact or matter, and such
certificate shall constitute full protection to the Trustee for any action
taken or omitted to be taken by it in good faith reliance thereon.
(h) The Trustee shall not be required to take any action that
is inconsistent with the purposes of the Trust set forth in Section 2.03.
(i) The Trustee shall not have any responsibility or
liability for or with respect to the genuineness, value, sufficiency or
validity of the Trust Estate. The Trustee shall in no event assume or incur
any liability, duty or obligation to any Person other than as expressly
provided for herein, and in no event shall the Trustee have any implied
duties or obligations hereunder.
(j) The Trustee shall incur no liability if, by reason of
any provision of any future law or regulation thereunder, the Trustee shall
be prevented or forbidden from doing or performing any act or thing which
the terms of this Agreement provide shall or may be done or performed.
(k) No provision of this Agreement shall require the Trustee
to expend or risk its personal funds, or otherwise incur any financial
liability in the performance of its rights or powers hereunder, if the
Trustee shall have reasonable grounds for believing that repayment of such
funds or adequate indemnity against such risk or liability is not reasonably
assured or provided to it.
(l) The Trustee shall not be liable for the default or
misconduct of the Advisory Board and shall not be liable for any act or
omission taken at the direction of the Advisory Board.
(m) Every provision of this Agreement relating to the Trustee
shall be subject to the provisions of this Section 6.01.
Section 6.02. Acceptance of the Trust. The Trustee declares
-----------------------
that it accepts the trust created hereunder and agrees to perform its duties
under this Agreement and the Act but only upon the terms of this Agreement.
Section 6.03. Authority and Duties of the Trustee.
-----------------------------------
(a) The Trustee is authorized and directed to execute and
deliver this Agreement, and to execute and deliver on behalf of the Trust,
the Credit Documents and any other document or instrument attached as an
Exhibit to, contemplated by, or necessary or incidental hereto, in such form
as the Advisory Board shall approve, as evidenced conclusively by the
Trustee's execution thereof. The execution and delivery of, and performance
of the terms of any other document or instrument necessary or incidental
hereto shall be deemed not to conflict with or constitute a breach or
default under this Agreement. The Trustee shall have only such authority and
shall perform such duties as are expressly set forth in this Agreement.
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(b) Upon the written instruction of the appropriate party
specified herein, the Trustee shall execute, acknowledge, deliver, file or
record any document or instrument necessary or appropriate to carry out the
provisions of this Agreement in such form as is provided to it.
(c) The Trustee shall have the power and authority to
execute, deliver, acknowledge and file all necessary documents and to
maintain all necessary records of the Trust as required by the Act.
(d) In the performance of its duties under this Agreement,
the Trustee may rely on any document believed by it to be genuine and to
have been signed or presented by the proper Person. The Trustee need not
investigate any fact or matter stated in any such document, but the Trustee,
in its discretion, may make further inquiry or investigation.
(e) The Trustee shall cause to be prepared and filed such
securities law and tax filings and returns relating to the Trust, and shall
make such tax elections as may from time to time be required or appropriate
under any applicable Federal, state or local tax statute or rule or
regulation thereunder, in accordance with the Advisory Board's written
instructions; provided that the Trustee shall not make any tax elections
with respect to the Trust that are inconsistent with the income tax
characterization of the Trust as stated in Section 9.06.
(f) Subject to the provisions of any applicable
confidentiality agreement to which the Trust is or becomes a party, the
Trustee shall furnish to the Advisory Board, promptly upon receipt thereof,
duplicates or copies of all reports, notices, requests, demands,
certificates, financial statements and any other instruments furnished to
the Trustee hereunder; provided that the Trustee shall not be required to
--------
furnish the Advisory Board with a copy of any such materials if the Trustee
determines that such Person has otherwise received such copies, unless such
Person so requests.
Section 6.04. Resignation of the Trustee.
--------------------------
(a) The Trustee may resign by giving 30 days' prior written
notice to the Advisory Board. In the case of the resignation of the Trustee,
the Advisory Board shall appoint a Person to serve as successor Trustee,
provided that such Person shall in all respects satisfy the requirements of
Section 3807 of the Act, or any successor provision, and shall be a bank or
trust company incorporated and doing business within the United States of
America, whose business shall consist at least in part of serving as trustee
in arrangements comparable to those contemplated hereby and having a
combined capital and surplus of at least $50,000,000, if there be such an
institution willing, able and legally qualified to perform the duties of the
Trustee hereunder upon reasonable or customary terms. The appointment of the
successor Trustee shall take effect concurrently with (i) the resignation of
the former Trustee and (ii) the ratification of this Agreement, and no
resignation of a Trustee shall be effective absent the concurrent
appointment of a successor Trustee.
(b) If a successor Trustee shall not have been appointed
within 30 days after such notice of resignation, the Trustee or the Advisory
Board may apply to any court of competent jurisdiction to appoint a
successor Trustee to act until such time as a successor shall have been
appointed as above provided.
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(c) Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation to which substantially all the corporate trust
business of the Trustee may be transferred, shall, subject to such
corporation satisfying in all respects the requirements set forth in Section
6.04(a), be the Trustee hereunder without further action.
(d) Upon the substitution of the Person serving as Trustee,
the successor Trustee shall file an amendment to the Certificate of Trust
with the Secretary of State in accordance with the provisions of Section
3810 of the Act, indicating the change in the Trustee.
Section 6.05. Liability.
---------
(a) The Trustee shall not be personally liable under any
circumstances, except (i) for its own bad faith, willful misconduct or gross
negligence, and (ii) for taxes, fees or other charges on, based on or
measured by any fees, commissions or compensation received by the Trustee in
connection with any of the transactions contemplated by this Agreement.
(b) The provisions of this Agreement, to the extent that
they restrict the duties and liabilities of the Trustee otherwise existing
at law or in equity, replace such other duties or liabilities of the Trustee
to the extent permissible under law or in equity.
(c) The Trustee shall not be liable for the default or
misconduct of the Advisory Board or ADS.
(d) The Trustee shall not be liable for voting (or refraining
from voting) the MAS Stock held in the Trust Estate so long as such shares
are voted (or not voted) in accordance with and as required by Section 4.04.
Section 6.06. Indemnification. ADS shall indemnify, pay,
---------------
protect, and hold harmless each of the Trustee, its officers, directors,
employees, shareholders and agents (collectively the "Indemnified Trustee
-------------------
Persons" or individually an "Indemnified Trustee Person") from and against
------- --------------------------
any and all liabilities, obligations, losses, damages, claims, actions,
judgments, suits, proceedings, taxes, costs, expenses and disbursements of
any kind or nature whatsoever including, without limitation, all reasonable
legal fees, third party costs and expenses of defense, appeal and settlement
of any and all suits, actions, or proceedings instituted against such
Indemnified Trustee Person and all reasonable third party costs of
investigation in connection therewith that may be imposed on, incurred by,
or asserted against an Indemnified Trustee Person relating to or arising out
of any action or inaction on the part of the Trust or an Indemnified Trustee
Person in respect of the Trust. If any action, suit, or proceeding shall be
pending against one or more Indemnified Trustee Persons relating to or
arising out of any action or inaction of the Indemnified Trustee Person or
Indemnified Trustee Persons, ADS shall have the right to assume the defense
of the Indemnified Trustee Person or Indemnified Trustee Persons in which
case such defense shall be conducted by counsel chosen by ADS and reasonably
satisfactory to the Indemnified Trustee Person or Indemnified Trustee
Persons and Purchasers' Representative; provided, however, that if an
-------- -------
Indemnified Trustee Person is advised by its counsel that due to actual or
potential conflicting interests representation by the same
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counsel would be inappropriate under applicable standards of professional
conduct, such Indemnified Trustee Person may, at the expense of ADS, employ
separate counsel of its choice with respect to all matters as to which such
conflicting interests arise in any such action. The indemnities contained in
this Section shall survive the resignation of the Trustee, termination of
the Trust or the termination of this Agreement.
Section 6.07. Fees and Expenses. The Trustee's fees (as
-----------------
detailed on Exhibit D) and all reasonable out-of-pocket expenses,
---------
disbursements and advances incurred or made by the Trustee, in its capacity
as Trustee hereunder, including, without limitation, the costs and expenses
of the winding up, liquidation and termination of the Trust, shall be paid
by ADS promptly upon written request therefor.
Section 6.08. Concerning the Independent Agent. The
--------------------------------
Independent Agent shall be subject to the same rights and protections,
subject to the same limitations thereon, as the Trustee pursuant to Section
6.01, 6.05(a), (b) or (c) (including at the end of (c) "any Purchaser") and
6.06, except that such indemnification shall be the joint and several
liability of ADS and every Purchaser, as if every reference therein to the
Trustee were to the Independent Agent. The Independent Agent shall be
entitled to receive its customary hourly fees for its services hereunder,
which shall be paid by ADS upon delivery of an invoice therefore, and
failing such payment, by the Purchasers, jointly and severally.
ARTICLE VII.
DISSOLUTION AND LIQUIDATION OF THE TRUST
----------------------------------------
Section 7.01. Dissolution of the Trust. The Trust shall be
------------------------
dissolved, wound up and terminated upon delivery by the several Purchasers
of the Final Payment Notice, as provided in Section 5.03.
Section 7.02. Liquidation of the Trust. In connection with
------------------------
the dissolution of the Trust, the assets of the Trust shall be liquidated at
the written direction of ADS and applied as follows: (i) first, to pay the
costs and expenses of the winding up, liquidation and termination of the
Trust, including all amounts owed to the Trustee, (ii) second, to establish
reserves to the extent required by the Act and any applicable law, in each
case, in the order of priority provided by law, and (iii) third, to ADS.
Section 7.03. Termination of the Trust.
------------------------
(a) The Trust (and this Agreement) shall be deemed terminated
when all of the Trust's assets shall have been disposed of and distributed
as provided herein.
(b) Upon the winding up of the Trust and its termination,
the Trustee shall cause the Certificate of Trust to be canceled by filing a
certificate of cancellation with the Delaware Secretary of State in
accordance with the provisions of Section 3810 of the Act.
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ARTICLE VIII.
NOTICES
-------
Section 8.01. Notices. All notices, demands, consents or
-------
requests required or permitted under this Agreement must be in writing, and
shall be delivered by facsimile, courier or first class mail, postage
prepaid, addressed as follows. Each notice hereunder must be delivered to
the Trustee, ADS, each Advisory Board Member and Purchasers' Representative.
(i) If to the Trustee, as set forth in Section 2.01.
(ii) If to ADS:
Applied Digital Solutions, Inc.
000 Xxxxx Xxxx Xxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Debenture Department
Facsimile: (000) 000-0000
with an e-mail copy to: xxxxxxxxxx@xxxx.xxx
(iii) If to the Advisory Board Members:
c/o ADS
(iv) If to a Purchasers' Representative:
Midsummer Capital
000 Xxxxxxx Xxx.
00xx Xxxxx
Xxx Xxxx, XX 00000
Facsimile: 000-000-0000
Attention: Xxxxx Xxxxxxx
ARTICLE IX.
MISCELLANEOUS PROVISIONS
------------------------
Section 9.01. Entire Agreement. This Agreement (including,
----------------
without limitation, the exhibits hereto) supercedes all prior agreements,
written or oral, among the parties hereto relating to the transactions
contemplated hereby, and each of the parties hereto represents and warrants
to the others that this Agreement constitutes the entire agreement among the
parties hereto relating to the transactions contemplated hereby.
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Section 9.02. Governing Law.
-------------
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT
REGARD TO CONFLICTS OF LAWS PRINCIPLES).
(b) The parties hereto hereby declare that it is their
intention that this Agreement shall be regarded as made under the laws of
the State of Delaware and that the laws of said State shall be applied in
interpreting its provisions in all cases where legal interpretation shall be
required. Each of the parties hereto agrees (a) that this Agreement involves
at least $100,000.00, and (b) that this Agreement has been entered into by
the parties hereto in express reliance upon 6 Del. C. section 2708. Each of
the parties hereto hereby irrevocably and unconditionally agrees (a) to be
subject to the jurisdiction of the courts of the State of Delaware and of
the federal courts sitting in the State of Delaware, and (b)(1) to the
extent such party is not otherwise subject to service of process in the
State of Delaware, to appoint and maintain an agent in the State of Delaware
as such party's agent for acceptance of legal process, and (2) that, to the
fullest extent permitted by applicable law, service of process may also be
made on such party by prepaid certified mail with a proof of mailing receipt
validated by the United States Postal Service constituting evidence of valid
service, and that service made pursuant to (b)(1) or (2) above shall, to the
fullest extent permitted by applicable law, have the same legal force and
effect as if served upon such party personally within the State of Delaware.
Section 9.03. Effect; Third Party Beneficiaries. Except as
---------------------------------
otherwise specified herein, this Agreement shall be binding upon and inure
to the benefit of the parties and their respective legal representatives,
successors and assigns. Each Purchaser (and their respective assignees) is
an intended third party beneficiary hereof and shall be entitled to enforce
this Agreement against the parties hereto as if it were a party hereto. Each
present and former (and future) member of the Advisory Board is an intended
third party beneficiary hereof and shall be entitled to enforce Sections
4.01 (e) and (f) of this Agreement against the parties hereto as if it were
a party hereto.
Section 9.04. Severability of Provisions. If any term,
--------------------------
provision, covenant or condition of this Agreement, or the application
thereof to either party or any circumstance, is held to be unenforceable,
invalid or illegal (in whole or in part) for any reason (in any relevant
jurisdiction), the remaining terms, provisions, covenants and conditions of
this Agreement, modified by the deletion of the unenforceable, invalid or
illegal portion (in any relevant jurisdiction), will continue in full force
and effect, and such unenforceability, invalidity or illegality will not
otherwise affect the enforceability, validity or legality of the remaining
terms, provisions, covenants and conditions of this Agreement so long as
this Agreement as so modified continues to express, without material change,
the original intentions of the parties as to the subject matter hereof and
the deletion of such portion of this Agreement will not substantially impair
the respective expectations or reciprocal obligations of the parties or the
practical realization of the benefits that would otherwise be conferred upon
the parties. The parties will endeavor in good faith negotiations to replace
the prohibited or unenforceable provision with a valid provision, the
economic effect of which comes as close as possible to that of the
prohibited or unenforceable provision.
Section 9.05. Amendments, Waivers, Etc. This Agreement may
------------------------
not be amended, discharged or terminated nor may any provision hereof be
waived unless such
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amendment, discharge, termination or waiver is in writing and signed by the
Trustee and ADS, with the prior unanimous written consent of the Advisory
Board.
Section 9.06. Tax Characterization.
--------------------
(a) Each of the parties hereto recognizes and intends that,
for United States federal, state and local income tax purposes the Trust
will not be treated as an association taxable as a corporation.
(b) To the extent that any of the parties hereto is required
to report any item of income, gain, loss, deduction or credit relating to
the Trust for United States federal, state or local income tax purposes,
such party shall report such item in a manner consistent with the
characterization intended by this Section 9.06 and shall not take any
contrary position on any tax return or report relating to the United States
federal, state or local income taxes or take any other action that is
inconsistent with such characterization.
Section 9.07. Counterparts. This Agreement may be executed
------------
in any number of counterparts, each of which shall be deemed to be an
original, but all such counterparts shall together constitute but one and
the same instrument.
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IN WITNESS WHEREOF, the undersigned have executed this
Agreement as of the date above first written.
WILMINGTON TRUST COMPANY
as Trustee
By: /s/ Xxxx St. Xxxxxx
--------------------------------
Name: Xxxx St. Xxxxxx
Title: Assistant Vice President
APPLIED DIGITAL SOLUTIONS, INC.,
as Beneficial Owner
By: /s/ Xxxxx Xxxxxxxxx
--------------------------------
Name: Xxxxx Xxxxxxxxx
Title: CEO
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