59
TRUST AGREEMENT
Dated as of __________, 2000
between
NOVA PHARMACEUTICAL, INC.
and
FARMERS AND MERCHANTS BANK of LONG BEACH
Establishing the formers
Creditor Protection Trust
Effective as of , 2000
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TABLE OF CONTENTS
ARTICLE I
Creation of Trust
Section 1.1. Establishment of Trust 1
Section 1.2. Purpose 1
Section 1.3. Accounts 1
ARTICLE II
General Duties of the Parties
Section 2.1. General Duties of Company 2
Section 2.2. General Duties of Trustee 2
ARTICLE III
Investment, Administration and
Disbursement of Trust Fund
Section 3.1. Investment Powers of Trustee 3
Section 3.2. Valuation of Trust Fund 3
Section 3.3. Administrative Powers of Trustee 4
Section 3.4. Dealings with Trustee 5
Section 3.5. Distributions from Trust Fund 5
Section 3.6 Payments by the Company.. 5
Section 3.7. Insolvency or Bankruptcy 6
ARTICLE IV
Settlement of Accounts,
Enforcement of Trust and Legal Proceedings
Section 4.1. Settlement of Accounts of Trustee 6
Section 4.2. Determination of Interests
in the Trust Fund, Enforcement of
Trust and Legal Proceedings 7
ARTICLE V
Taxes, Expenses and Compensation
of Trustee
Section 5.1. Taxes 7
Section 5.2. Expenses and Compensation 8
ARTICLE VI
For Protection of Trustee
Section 6.1. Evidence of Action by Company 8
Section 6.2. Advice of Counsel 8
Section 6.3. Fiduciary Responsibility 8
Section 6.4. No Duty to Advance Funds
or to Administer the Plans 9
Section 6.5. Indemnification 9
ARTICLE VII
Resignation and Removal of Trustee
Section 7.1. Resignation of Trustee 9
Section 7.2. Removal of Trustee 9
Section 7.3. Appointment of Successor Trustee 9
Section 7.4. Transfer of Fund to Successor 10
ARTICLE VIII
Duration and Termination
of Trust and Amendment
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Section 8.1. Duration and Termination 10
Section 8.2. Distribution upon Termination 10
Section 8.3. Amendment 10
ARTICLE IX
Indemnification
Section 9.1. Indemnification 11
ARTICLE X
Miscellaneous
Section 10.1. Laws of California to Govern 11
Section 10.2. Company's Liability
Not Limited to Trust Assets 11
Section 10.3. Rights of Beneficiaries 11
Section 10.4. Titles and Headings Not to Control 12
Section 10.5. Interpretation of the Trust Agreement 12
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THIS AGREEMENT dated as of _________, 2000 by and between Nova
Pharmaceutical, Inc., a Delaware corporation (the "Company"), and
Farmers and Merchants Bank of Long Beach, a corporation having trust
powers under the laws of the state of California (the "Trustee
W I T N E S S E T H:
WHEREAS, the Company desires to establish an irrevocable trust, subject
to the claims of its creditors, designed to qualify as a "grantor
trust" for federal income tax purposes, to be known as the Nova
Pharmaceutical, Inc. Creditor Protection Trust (the "Trust"), and the
Trustee is willing to serve as trustee thereof;
NOW, THEREFORE, the Company hereby establishes a trust with the
Trustee, and the Trustee hereby agrees to accept its appointment as
trustee thereof, subject to the following terms and conditions:
Creation of Trust
Section I.1. Establishment of Trust. The Company hereby establishes
with the Trustee and the Trustee hereby accepts an irrevocable trust
initially consisting of cash in the amount of one dollar (the "Initial
Contribution").
Section I.2. Purpose. The purpose of the Trust is to assist the
Company in meeting its obligations under those certain structured
repayment agreements listed on Appendix A hereto ("Agreements") and to
pay those trade obligations listed on Appendix B hereto.
Notwithstanding the foregoing, the Company may elect to include under
the Trust obligations payable under any other structured payment
agreement, contract, plan, agreement or trade payable (which, together
with the agreements and obligations listed on Appendix A and B shall
hereafter be collectively referred to as the "Obligations").
Section I.3. Accounts. The assets of the Trust shall be maintained
in one general account ("General Account") for the benefit of all
creditors who are parties to or beneficiaries under any Agreement or
are creditors listed currently or in the future on Addendum B
("Creditors"). All of the earnings or proceeds of any assets of the
Trust shall be maintained in the General Account for the purposes of
the Trust and payment of expenses of the Trustee and its fees. The
Trustee shall maintain records for the General Account.
General Duties of the Parties
Section 2.1. General Duties of Company. The Company shall provide the
Trustee with a copy of each Agreement and with copies of all amendments
thereto or addition Agreements for which payments are to be made from
the Trust. In addition, The Company shall from time to time certify
to the Trustee the names and specimen signatures of the persons
appointed by the Board of Directors of the Company to act on behalf of
the Company in connection with the Trust. The Company shall, upon
request of the Trustee, furnish the Trustee with such reasonable
information as is necessary or appropriate for the Trustee to carry out
its responsibilities under this Agreement, and the Trustee shall be
entitled to rely on the information received from the Company. The
Company shall furnish the Trustee with such information as the Trustee
shall reasonably request to carry out the intent and purposes of the
Trust, and the Trustee shall be entitled to rely on the information
received from the Company.
In addition to the Initial Contribution, the Company shall make such
other contributions as shall from time to time be authorized by due
corporate action. Any such payments made by the Company may be in
cash, Common Stock issued by the Company, ("Nova Stock") or by letter
of credit as the Company may determine. The Company shall keep
accurate books and records with respect to the obligation owed to each
Creditor and shall provide copies of such books and records to the
Trustee at any time as the Trustee shall request.
Section 2.2. General Duties of Trustee. The Trustee shall hold all
payments and property received by it hereunder, together with the
income and gains therefrom and additions thereto (the "Trust Fund").
Unless otherwise directed by the Company, the Trustee shall invest any
cash at its discretion in any marketable short and medium term fixed
income securities, United States Treasury Bills, other short and medium
term government obligations, commercial paper or money market instru-
63
ments ("Short-Term Investments"), or may maintain cash balances
consistent with the liquidity needs of the Trust as determined by the
Trustee. The Trustee shall manage, invest and reinvest the Trust Fund,
collect the income thereon, and make distributions therefrom, all as
hereinafter provided. The Trustee shall be responsible only for the
property actually received by it hereunder and not for any amount which
the Company is required to contribute to the Trust Fund hereunder. The
Trustee shall have no duty or authority to compute any amount to be
contributed to the Trust Fund or to bring any action or proceeding to
enforce the collection of any contribution required to be made to the
Trust Fund. The rights, duties and obligations of the Trustee
hereunder shall be solely as set forth herein, without regard to the
terms of any of the Agreements or any other document which is not part
of this Agreement.
Investment, Administration and
Disbursement of Trust Fund
Section 3.1. Investment Powers of Trustee. Subject to the
provisions of Sections 2.2, and 8.2 hereof, the Trustee shall have,
with respect to the Trust Fund, the power:
(a) To invest and reinvest the Trust Fund as a single fund or, to the
extent directed by the Company. Except as otherwise directed by the
Company in writing, the Trustee shall invest the Trust Fund, without
distinction between principal and income, in Short-Term Investments;
provided, that, the Trustee shall hold (i) any securities of the
Company or other property contributed to the Trust until it determines
in its sole discretion to sell such securities and (ii) any letter of
credit contributed to the Trust until replaced or drawn upon. The
Trustee shall have the authority in its sole discretion to determine
the quantity and timing of its disposition of the Nova Stock, although
it is anticipated that it will be sold as the Trustee determines
necessary or appropriate to meet the liquidity needs of the Trust over
the term of the Trust and as the market for Nova Stock permits;
(b) To participate in any plan of reorganization, consolidation,
merger, combination, liquidation or other similar plan or oppose any
such plan or any action thereunder, or any contract, mortgage,
purchase, sale or other action by any person or corporation;
(c) To deposit any property with any protective, reorganization or
similar committee, to delegate discretionary power to any such
committee and to pay and agree to pay part of the expenses and
compensation of any such committee and any assessments levied with
respect to any property so deposited;
(d) To exercise all conversion and subscription rights pertaining to
any property;
(e) To organize under the laws of any state a corporation for the
purpose of acquiring and holding title to any property which it is
authorized to acquire under this Agreement and to exercise with respect
thereto any or all of the powers set forth in this Agreement;
(f) To borrow against the cash surrender value of any insurance
contract for the purpose of paying the premiums on such contract; and
(g) Generally to do all acts, whether or not expressly authorized, not
inconsistent with the terms of this Agreement which the Trustee may
deem necessary or desirable for the investment of the Trust Fund.
Section 3.2. Valuation of Trust Fund. As soon as practicable after
the last bank business day of each calendar quarter and as of such
other dates as may be specified by the Company or as determined by the
Trustee, the Trustee shall report to the Company the assets held in the
Trust Fund as of such day and shall determine and include in such
report the fair market value as of such day of each such asset. In
determining such fair market values, the Trustee shall use such market
quotations and other information as are available to it and as may in
its discretion be appropriate. The report of any such valuation shall
not constitute a representation by the Trustee that the amounts
reported as fair market values would actually be realized upon the
liquidation of the Trust Fund. The Trustee shall not be accountable to
the Company or to any other person on the basis of any such valuation,
but its accountability shall be in accordance with the provisions of
Article VI hereof.
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Section 3.3. Administrative Powers of Trustee. The Trustee shall have
the power in its discretion:
(a) Except as otherwise provided pursuant to the terms of
this Agreement, to exercise all voting rights with respect
to the shares of stock, including Nova Stock, held in the
Trust Fund and to grant proxies, discretionary or
otherwise;
(b) To cause any shares of stock to be registered and held in the name
of one or more of its nominees, or one or more nominees of any
system for the central handling of securities, without increase or
decrease of liability;
(c) To collect and receive any and all money and other property due to
the Trust Fund and to give full discharge therefor;
(d) To settle, compromise, or submit to arbitration any claims, debts
or damages due or owing to or from the Trust; to commence or defend
suits or legal proceedings whenever, in its judgment, any interest
of the Trust requires it; and to represent the Trust in all suits
or legal proceedings in any court of law or equity or before any
other body or tribunal, insofar as such suits or proceedings relate
to any property forming part of the Trust Fund or to the
administration of the Trust Fund; and
(e) To hold uninvested for not more than four business days, without
liability for interest thereon, any moneys received by it until the
same shall be invested or disbursed;
(f) To determine how all receipts and disbursements shall be credited,
charged or apportioned as between income and principal, and the
decision of the Trustee shall be final and not subject to question
by any beneficiary of the Trust;
(g) To hold property of the Trust in its own name or in the name of a
nominee or nominees, without disclosure of the Trust, or in bearer
form so that it will pass by delivery, but no such holding shall
relieve the Trustee of its responsibility for the safe custody and
disposition of the Trust in accordance with the provisions of this
Agreement. The Trustee's books and records shall at all times show
that such property is part of the Trust and the Trustee shall be
absolutely liable for any loss occasioned by the acts of its
nominee or nominees with respect to securities registered in the
name of the nominee or nominees;
(h) To employ in the management of the Trust suitable agents, without
liability, subject to subparagraph (g) above, for any loss
occasioned by any such agents selected by the Trustee with the
care, skill, prudence and diligence under the circumstances then
prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims;
(i) To make, execute and deliver, as Trustee, any deeds, conveyances,
leases, mortgages, contracts, waivers or other instruments in
writing that the Trustee may deem necessary or desirable in the
exercise of its powers under this Agreement; and
(j) Generally to do all acts, whether or not expressly authorized,
which the Trustee may deem necessary or desirable for the
protection of the Trust Fund.
Section 3.4. Dealings with Trustee. Persons dealing with the Trustee
shall be under no obligation to see to the proper application of any
money paid or property delivered to the Trustee or to inquire into the
Trustee's authority as to any transaction.
Section 3.5. Distributions from Trust Fund. The Trustee shall make
distributions from the Trust Fund at such time or times and to such
person or persons, including the Trustee as provided under Section
5.2, (i) as the Company shall direct (whether expressly as to any
Creditor or pursuant to a payment schedule delivered to the Trustee by
the Company) or (ii) as is expressly provided elsewhere in this
Agreement. The Trustee shall be entitled (i) to assume that any
condition with respect to payment of any benefit shall have been
satisfied by the intended recipient thereof or (ii) to rely on the
written statement of an intended recipient that all conditions or
events required to be satisfied or to have occurred prior to
commencement of payment have been satisfied or have occurred. The
Trustee shall also make distributions in accordance with any order of
a court of competent jurisdiction issued in conjunction with a
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successful challenge by a person having an interest in the Trust Fund
made in accordance with the applicable provisions of any Plan.
Section 3.6. Payments by the Company. The Company reserves the
right to pay any Obligation directly to a Creditor rather than have
all or part of an Obligation paid by the Trustee. The Trustee shall
notify the Company at any time that the Trust Fund is not capable of
meeting any Obligation and the Company shall make a determination in
its sole discretion whether to discharge the Obligation by direct
payment to the Creditor, contribute more assets to the Trust in order
to facilitate the Trust discharging such Obligation, or direct the
Trustee to defer payment until the Trust's liquidity is restored and
payment can be made by the Trustee from the Trust Fund. In the event
of direct payment by the Company of any Obligation, the Company shall
advise the Trustee in writing of any adjustments to be made in the
balances or timing of any Obligations listed on Appendix A or B.
Section 3.7. Insolvency or Bankruptcy. The assets of the Trust shall
be subject to the claims of the Company's creditors only in the event
that the Company is a debtor in proceedings under the U.S. Bankruptcy
Code ("Bankruptcy") or is unable to pay its debts as they become due
("Insolvency"). The chief executive officer or other person serving
as the principal executive officer of the Company (the "Chief
Executive Officer") of the Company and the chief financial officer or
other person serving as the principal financial officer of the Company
(the "Chief Financial Officer") shall be obligated to notify the
Trustee promptly upon the occurrence of the Insolvency or Bankruptcy
of the Company, and, upon receipt of such notice, the Trustee shall
thereupon immediately suspend all payments hereunder for the duration
of such Insolvency or Bankruptcy. If the Trustee receives written
allegations of the Company's Insolvency, it shall suspend payments
hereunder immediately and shall demand that the Company's Board of
Directors, Chief Executive Officer or the Chief Financial Officer
certify whether the Company is Insolvent. The Trustee may accept a
certified resolution of the Board of Directors or a certificate of the
Chief Executive Officer or the Chief Financial Officer of the Company
attesting that the Company is not in a state of Insolvency as
determinative of the solvency of the Company and, if such resolution
or certificate is delivered, may recommence making payments hereunder.
Until such a resolution or certificate is delivered, the Trustee shall
continue to suspend payments. While payments from the Trust Fund are
suspended under this Section 3.6, whether due to notice from the
Company or pending certification of the Company's solvency, the
Trustee shall hold the Trust Fund as set forth in this Agreement,
unless and until otherwise specifically directed by a court having
jurisdiction over the Trust Fund.
ARTICLE IV
Settlement of Accounts,
Enforcement of Trust and Legal Proceedings
Section 4.1. Settlement of Accounts of Trustee. The Trustee shall
keep full accounts of all investments, receipts and disbursements and
other transactions hereunder. Its financial statements, books and
records with respect to the Trust Fund shall be open to inspection by
the Company or its representatives upon reasonable notice at all
reasonable times during business hours of the Trustee.
The Trustee shall render to the Company monthly statements of its
receipts and disbursements as Trustee hereunder. Within 30 days after
the close of each year or any termination of the duties of the
Trustee, the Trustee shall prepare, sign and mail in duplicate to the
Company an account of its acts and transactions as Trustee hereunder.
If the Company finds the annual account to be correct, the Company
shall sign the instrument of settlement annexed to one counterpart of
the account and return such counterpart to the Trustee, whereupon the
account shall become an account stated as between the Trustee and the
Company. If within ninety (90) days after receipt of the account or
any amended account the Company has not signed and returned a
counterpart to the Trustee, nor filed with the Trustee notice of any
objection to any act or transaction of the Trustee, the account or
amended account shall become an account stated as between the Trustee
and the Company. If any objection has been filed, and if the Company
is satisfied that it should be withdrawn or if the account is adjusted
to its satisfaction, the Company shall in writing filed with the
Trustee signify its approval of the account, and it shall become an
account stated as between the Trustee and the Company.
When an account becomes an account stated, such account shall be
finally settled, and the Trustee shall be completely discharged and
66
released, as if such account had been settled and allowed by a
judgment or decree of a court of competent jurisdiction in an action
or proceeding in which the Trustee, the Company, and all persons
having or claiming to have any interest in the Trust Fund or under the
Plan were parties.
The Trustee or the Company shall have the right to apply at any time
to a court of competent jurisdiction for judicial settlement of any
account of the Trustee not previously settled as hereinabove provided.
In any such action or proceeding it shall be necessary to join as
parties only the Trustee and the Company (although the Trustee may
also join other parties as it deems appropriate), and any judgment or
decree entered therein shall be conclusive.
Section 4.2. Determination of Interests in the Trust Fund,
Enforcement of Trust and Legal Proceedings. The interests of each
person in the Trust Fund shall be determined in accordance with the
terms of the Agreement between each such person and the Company. The
Trustee shall have no duty to question any direction given to the
Trustee by the Board or any committee thereof or by the authorized
representative of the Company, including any direction advising the
Trustee as to the interests of any person under any Agreement or
Obligation. The Company shall have authority to enforce this
Agreement on behalf of all persons claiming any interest in the Trust
Fund, provided that a written request is received by the Company from
a Creditor to enforce this Agreement and the Company declines to
enforce this Agreement, the Creditor who made such request may enforce
this Agreement individually or as part of a class, in which case the
Company shall be obligated to reimburse such beneficiary for all
expenses incurred in pursuing such action. Except as otherwise
provided in this Section 4.2, in any action or proceeding affecting
the Trust Fund the only necessary parties shall be the Company and the
Trustee, and no other person shall be entitled to any notice or
process.
Taxes, Expenses and Compensation
of Trustee
Section 5.1. Taxes. Any taxes on the Trust Fund or the income
thereof or which the Trustee is required to pay shall be paid by the
Company.
Section 5.2. Expenses and Compensation. The Trustee shall be paid
such compensation for its services as Trustee as shall be agreed on
between the Company and Trustee (the "Fees") from the Trust, and pay
the Trustee's expenses of management and administration of the Trust,
including, but not limited to, compensation of counsel, record-keeping
expenses, investment management fees, computer time charges, data
retrieval and input costs, and charges for time expended by personnel
of the Trustee in fulfilling the Trustee's duties. The payment of such
compensation and expenses shall have priority over payments to be made
under this Agreement to beneficiaries of the Trust. If the Trust is
unable to pay such fees and expenses, the Company, upon receipt of
notice from the Trustee, shall promptly pay any such compensation and
expenses directly to the Trustee.
ARTICLE VI
For Protection of Trustee
Section 6.1. Evidence of Action by Company. Pursuant to Section 2.1
the Company shall certify to the Trustee the name or names of any
persons or persons authorized to act for the Company. Until the
Company notifies the Trustee that any such person is no longer
authorized to act for it, the Trustee may continue to rely on the
authority of such person.
The Trustee may rely upon any certificate, notice or direction
purporting to have been signed on behalf of the Company which the
Trustee believes to have been signed by any person or persons
authorized to act for the Company.
Communications to the Trustee shall be sent to the Trustee's principal
office or to such other address as the Trustee may specify. No
communication shall be binding upon the Trust Fund or the Trustee
until it is received by the Trustee.
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Communications to the Company shall be sent to the Company's principal
office or to such other address as the Company may specify.
Section 6.2. Advice of Counsel. The Trustee may consult with any
legal counsel, including counsel to the Company, with respect to the
construction of this Agreement, its duties hereunder, or any act which
it proposes to take or omit, and shall not be liable for any action
taken or omitted in good faith pursuant to such advice.
Section 6.3. Fiduciary Responsibility. The Trustee shall carry out
its duties hereunder solely in the best interests of the Creditors and
their beneficiaries, and shall use the care, skill, prudence and
diligence under the circumstances then prevailing that a prudent man
acting in a like capacity and familiar with such matters would use in
the conduct of an enterprise of like character and with like aims.
The Trustee shall not be liable for any act or failure to act under
this Agreement, if any such action were taken or omitted, as the case
may be, in good faith or in accordance with the express provisions of
this Agreement.
The Trustee's duties and obligations shall be limited to those
expressly imposed upon it by this Agreement.
The Company at any time may employ as agent (to perform any act, keep
any records or accounts, or make any computations required of the
Company by this Agreement or the Plan) the corporation serving as
Trustee hereunder. Nothing done by said corporation as such agent
shall affect its responsibility or liability as Trustee hereunder.
Section 6.4. No Duty to Advance Funds or to Administer the
Agreements. The Trustee shall have no obligation to advance its own
funds for the purposes of fulfilling its responsibilities under this
Agreement, and its obligation to incur expenses shall at all times be
limited to amounts in the Trust available to be applied toward such
expenses. The Trustee shall not be responsible in any respect for
administering the Agreements.
Section 6.5. Indemnification. The Company agrees to indemnify the
Trustee for, and hold it harmless against, and defend it against any
and all liabilities, losses, costs or expenses (including reasonable
attorneys' fees) of whatsoever kind and nature which may be imposed
on, incurred by or asserted against it at any time by reason of (i)
accepting any property contributed to the Trust in the Company's
discretion or retaining such property as an investment for the Trust
Fund at the Company's direction, or (ii) carrying out in good faith
the responsibilities delegated to it under this Agreement, or by
reason of any act or failure to act under this Agreement, if any such
action were taken or omitted, as the case may be, in good faith or in
accordance with the express provisions of this Agreement; provided
that, with respect to subclause (ii), the Trustee shall not be
indemnified against any liability or expense for any action or
inaction taken or omitted by the Trustee which, under the
circumstances, the Trustee knows or has reason to know constitutes a
violation of the law or a breach of its fiduciary duties.
ARTICLE VII
Resignation and Removal of Trustee
Section 7.1. Resignation of Trustee. The Trustee may resign upon 90
days' written notice to the Company.
Section 7.2. Removal of Trustee. The Company, by action of its Board
of Directors, may remove the Trustee upon 90 days' valid written
notice to the Trustee, or upon shorter notice if acceptable to the
Trustee.
In the event the Trustee resigns or is removed, the Trustee shall have
a right to have its accounts settled as provided in Section 4.1
hereof.
Section 7.3. Appointment of Successor Trustee. The appointment of a
successor to the Trustee shall take effect upon delivery to the
Trustee of (a) a duly executed instrument in writing appointing such
successor, and (b)an acceptance in writing, executed by such
successor, both acknowledged in the same form as this Agreement.
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All of the provisions set forth herein with respect to the Trustee
shall relate to each successor with the same force and effect as if
such successor had been originally named as a Trustee hereunder.
If a successor is not appointed within 60 days after the Trustee gives
notice of its resignation pursuant to Section 7.1, the Trustee may
apply to any court of competent jurisdiction for appointment of a
successor.
Section 7.4. Transfer of Fund to Successor. Upon the resignation or
removal of the Trustee and appointment of a successor and after the
final account of the Trustee has been settled as provided in Article
IV, the Trustee shall transfer and deliver the Trust Fund to such
successor.
ARTICLE VIII
Duration and Termination
of Trust and Amendment
Section 8.1. Duration and Termination. The Trust shall terminate
upon the earliest of (a)full payment of all Obligations, (b)the
expiration of three years from the date this Trust is established, or
(c) a change in applicable law occurs which requires it to be amended
in a way that would substantially frustrate its purpose.
Section 8.2. Distribution upon Termination. Upon termination of this
Trust, the Trustee shall liquidate the Trust Fund and, after its final
account has been settled as provided in Article IV, shall distribute
the net balance thereof to the person or persons having an interest
therein. The Trustee shall make such distribution as the Company
shall direct (whether expressly as to any Creditor or pursuant to an
Agreement or payment schedule delivered to the Trustee by the
Company). Distributions pursuant to this Section 8.2 shall be made in
cash. Any assets of the Trust remaining after all such payments have
been made shall continue to be held in the Trust pending the Company's
providing a supplemental Addendum A or B naming additional Creditors.
When all liabilities of the Trust to all Creditors and all the
Trustee's Fees and expenses have been fully satisfied and all funds
distributed, the Trustee shall be relieved from all further liability.
The powers of the Trustee hereunder shall continue so long as any
assets of the Trust Fund remain in its hands.
Section 8.3. Amendment. By a duly executed, written instrument
delivered to the Trustee and acknowledged in the same form as this
Agreement, the Company shall have the right at any time and from time
to time to amend this Agreement in whole or in part, except that (i)
the duties and responsibilities of the Trustee shall not be increased
without the Trustee's written consent, and (ii) no amendment hereto
shall be made which provides for the return of the Trust Funds to the
Company or provides for the Company to have control over the
disposition of the Nova Stock held in the Trust. Any such amendment
shall become effective upon (i)delivery to the Trustee of the written
instrument of amendment, together with a certified copy of the resolu-
tion of the Board or the committee thereof authorizing such amendment,
and (ii)endorsement by the Trustee on such instrument upon receipt
thereof, together with any required consent thereto.
ARTICLE IX
Indemnification
Section 9.1. Indemnification. The Company agrees, to the extent
permitted by law, to indemnify and hold the Trustee harmless from and
against any liability that it may incur in the administration of the
Trust, unless arising from the Trustee's own gross negligence or
willful breach of its obligations under this Agreement. The Trustee
shall not be required to give any bond or any other security for the
faithful performance of its duties under this Agreement, except as
required by law.
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ARTICLE X
Miscellaneous
Section 10.1. Laws of California to Govern This Agreement and the
Trust hereby created shall be construed and regulated by the laws of
the State of California, except as otherwise provided by federal law.
Section 10.2. Company's Liability Not Limited to Trust Assets.
Nothing provided in this Agreement shall relieve the Company of its
liabilities to pay its Creditors any amounts due under any Agreement
or other Obligation except to the extent such liabilities are met by
application of Trust assets.
Section 10.3. Rights of Beneficiaries. Neither the Creditors nor any
other beneficiary hereunder shall have any right, title or interest in
the Trust Fund other than as a general, unsecured creditor of the
Company. Neither the Creditors nor any other beneficiary shall be
able to alienate, assign, or otherwise encumber any interest such
person has under any Agreement and no such interest shall be subject
to lien, levy, attachment or other encumbrance. Nothing in this
Agreement shall alter, limit or otherwise restrict the Company's
obligations under any Agreement or Obligation except to the extent
that distributions hereunder satisfy such underlying obligations.
Section 10.4. Titles and Headings Not to Control. The titles to
Articles and headings of Sections in this Agreement are placed herein
for convenience of reference only and in case of any conflict the text
of this Agreement, rather than such titles or headings, shall control.
Section 10.5. Interpretation of the Trust Agreement. This Trust is
intended to be (a) classified as a grantor trust as defined in section
671 et seq. of the Code. Accordingly, all provisions of this Agreement
shall be interpreted in a manner that satisfies the requirements that
must be met in order that the Trust be so classified.
IN WITNESS WHEREOF, Nova Pharmaceutical, Inc. and Farmers and Merchants
Bank of Long Beach have caused this Agreement to be executed by their
duly authorized officers and their respective seals to be hereunto
affixed as of the day and year first above written.
NOVA PHARMACEUTICAL, INC.
By__________________________________
Title: Vice President and Chief Financial Officer
Attest:
________________________
FARMERS AND MERCHANTS BANK of
LONG BEACH
By_________________________________
Title:
Attest:
________________________
STATE OF CALIFORNIA )
ss.:
COUNTY OF ________________ )
On this ___st day of _________, 2000, before me came [Robert Eggering],
to me known, who, being by me duly sworn, did depose and say that [he
70
resides at ______________________________, California ______] ; and
that [he is Chief Financial Officer] of Nova Pharmaceutical, Inc., the
corporation described in and which executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by order
of the board of directors of said corporation, and that[he signed his
name thereto by like order.
____________________________
Notary Public
STATE OF CALIFORNIA )
ss.:
COUNTY OF LOS ANGELES )
On this _____ day of July, 1997, before me came, to me known, who,
being by me duly sworn, did depose and say that he resides at; and that
he is of Farmers and Merchants Bank, of Long Beach, the
corporation described in and which executed the foregoing instrument;
that he knows the seal of said corporation; that the seal affixed to
said instrument is such corporate seal; that it was so affixed by order
of the board of directors of said corporation, and that he signed his
name thereto by like order.
____________________________
Notary Public