Document:

Indenture Supplement

EXHIBIT 10.9

EXECUTION COPY

 

 

 

	
 

INDENTURE SUPPLEMENT

 

 

CENDANT MOBILITY CLIENT-BACKED

RELOCATION RECEIVABLES FUNDING LLC

(formerly known as Apple Ridge Funding LLC),

as Issuer,

 

JPMORGAN CHASE BANK, NATIONAL ASSOCIATION,

 

as Indenture Trustee,

 

and

 

THE BANK OF NEW YORK

 

as Paying Agent, Authentication Agent and 

 

Transfer Agent and Registrar

 

 

SERIES 2005-1 INDENTURE SUPPLEMENT

 

Dated as of January 31, 2005

 

 

	
 

	 	 	 
	

	 

	
 

ARTICLE I CREATION OF THE SERIES 2005-1 NOTES

 

	 	
Section 1.01. Designation
	
1

	
 

ARTICLE II DEFINITIONS

 

	 	
Section 2.01. Definitions.
	
2

	
 

ARTICLE III SERVICING FEE; INCREASES AND REDUCTIONS 

IN THE SERIES OUTSTANDING AMOUNT

 

	 	
Section 3.01. Servicing Fee
	
12

	 	
Section 3.02. Increases and Reductions in the Series Outstanding AmounT
	
13

	
 

ARTICLE IV RIGHTS OF SERIES 2005-1 NOTEHOLDERS AND 

ALLOCATION AND APPLICATION OF POOL COLLECTIONS

 

	 	
Section 4.01. Pool Collections and Allocations.
	
14

	 	
Section 4.02. Determination of Interest and Monthly Interest.
	
15

	 	
Section 4.03. Determination of Principal Distribution
	
16

	 	
Section 4.04. Application of Series 2005-1 Collections
	
16

	 	
Section 4.05. Distribution Account
	
17

	 	
Section 4.06. Series 2005-1 Principal Subaccount
	
18

	 	
Section 4.07. Investment Instructions
	
19

	 	
Section 4.08. Series 2005-1 Pre-Funding Subaccount.
	
19

	
 

ARTICLE V DELIVERY OF SERIES 2005-1 NOTES; 

DISTRIBUTIONS; REPORTS TO SERIES 2005-1 NOTEHOLDERS

 

	 	
Section 5.01. Delivery and Payment for the Series 2005-1 Notes; Denominations
	
20

	 	
Section 5.02. Registration; Registration of Transfer and Exchange; Transfer Restrictions.
	
20

	 	
Section 5.03. Definitive Notes
	
23

	 	
Section 5.04. Distributions
	
23

	 	
Section 5.05. Reports and Statements to Series 2005-1 Noteholders.
	
23

	
 

ARTICLE VI AMORTIZATION EVENTS

 

	 	
Section 6.01. Series 2005-1 Amortization Events
	
24

	
 

ARTICLE VII OPTIONAL REDEMPTION OF SERIES 2005-1 

NOTES

 

	 	
Section 7.01. Optional Redemption of Series 2005-1 Notes.
	
26

	
 

ARTICLE VIII MISCELLANEOUS PROVISIONS

 

	 	
Section 8.01. Ratification of Agreement
	
27

	 	
Section 8.02. Counterparts
	
27

	 	
Section 8.03. Governing Law
	
27

 

	 

 

	 	 	 
	

	 

 

	
EXHIBITS

 
	 
	
EXHIBIT A

 
	
Form of Series 2005-1 Note

 

	
EXHIBIT B

 
	
Form of Monthly Payment Instructions and Notification to the Indenture Trustee and Paying Agent

 

	
EXHIBIT C

 
	
Form of Monthly Statement

 

	
          EXHIBIT D    

 
	
Form of Pre-Funding Account Withdrawal Instruction

 

	

 

 

	 	 	 
	

	 

SERIES 2005-1 INDENTURE SUPPLEMENT, dated as of January 31, 2005 (as amended, modified, restated or supplemented from time to time, the “Indenture Supplement”), by and among CENDANT MOBILITY CLIENT-BACKED RELOCATION RECEIVABLES FUNDING LLC (formerly known as Apple Ridge Funding LLC), a limited liability company organized under the laws of the State of Delaware, as Issuer (together with its permitted successors and assigns, the “Issuer”), JPMORGAN CHASE BANK, NATIONAL ASSOCIATION, a national banking association, as Indenture Trustee (together with its permitted successors and assigns, the “Indenture Trustee”), and THE BANK OF NEW YORK, a New York state banking corporation, as paying agent, authentication agent and transfer agent and registrar (together with its permitted successors and assigns, “BNY”).

 

Pursuant to Section 2.10 of the Master Indenture, dated as of April 25, 2000 (as amended, modified, restated or supplemented from time to time, the “Indenture” and together with the Indenture Supplement, the “Agreement”), by and among the Issuer, the Indenture Trustee and BNY, the Issuer may issue one or more Series of Notes the Principal Terms of which shall be set forth in an indenture supplement to the Indenture. In accordance with the terms of the Indenture, the Issuer hereby creates a Series of Notes and specifies the Principal Terms of such Series of Notes in this Indenture Supplement.

 

GRANTING CLAUSE

 

The Issuer hereby Grants to the Indenture Trustee, for the benefit of the Holders of the Series 2005-1 Notes, all of the Issuer’s right, title and interest, whether now owned or hereafter acquired, in, to and under: (i) the Series 2005-1 Principal Subaccount, (ii) the Distribution Account (to the extent of Series 2005-1 Collections on deposit therein), (iii) the Series 2005-1 Pre-Funding Subaccount, (iv) all accounts, money, chattel paper, investment property, instruments, documents, deposit accounts, letters of credit, letter-of-credit rights, general intangibles, goods, oil, gas and other minerals consisting of, arising from, or relating to any of the foregoing and (v) all proceeds of the foregoing.

 

 

ARTICLE I  

CREATION OF THE SERIES 2005-1 NOTES

 

 

Section 1.01.  Designation.

 

 

(a)  There is hereby created a Series of Notes to be issued pursuant to the Indenture and this Indenture Supplement to be known as the “Cendant Mobility Client-Backed Relocation Receivables Funding LLC Secured Variable Funding Notes, Series 2005-1” or the “Series 2005-1 Notes.”

 

 

(b)  In the event that any term or provision contained herein shall conflict with or be inconsistent with any term or provision contained in the Indenture, the terms and provisions of this Indenture Supplement shall be controlling.

 

 

	 
	 	 	 
	

	 

ARTICLE II  

DEFINITIONS

 

 

Section 2.01.  Definitions.

 

 

(a)  Whenever used in this Indenture Supplement, the following words and phrases shall have the following meanings, and the definitions of such terms are applicable to the singular as well as the plural forms of such terms and the masculine as well as the feminine and neuter genders of such terms.

 

 

“Additional Interest” shall have the meaning set forth in Section 4.02(b).

 

“Administrative Agent" shall mean CALYON Corporate and Investment Bank, in its capacity as “Administrative Agent” and “Lead Arranger” for the Purchasers. 

 

“Administrative Agent Fee Letter” means that certain fee letter dated as of the date hereof between the Issuer and the Administrative Agent.

 

“Alternate Base Rate” shall have the meaning set forth in the Note Purchase Agreement.

 

“Amortization Event” shall have the meaning set forth in Section 6.01.

 

“Amortization Period” shall mean the period commencing at the earliest to occur of (a) the close of business on the Commitment Termination Date, (b) the close of business on the Scheduled Amortization Date and (c) the close of business on the Business Day immediately preceding the day on which an Amortization Event has occurred, and ending on the date on which (x) the Series Outstanding Amount shall have been paid in full, together with all accrued interest thereon, and (y) all amounts owed to the Administrative Agent, the Managing Agents and the Purchasers under the Indenture Supplement and the Note Purchase Agreement shall have been paid in full.

 

“Applicable Stress Factor” shall mean, as of any date of determination, 2.25; provided that (i) if the Default Ratio for the Monthly Period preceding the first day of the Interest Period in which such date occurs exceeded 3.0%, or the Three Month Average Default Ratio for the Monthly Period preceding the first day of the Interest Period in which such date occurs exceeded 2.5%, then the Applicable Stress Factor used in the calculation of the Loss Reserve Ratio shall be 2.5, or (ii) if the Dilution Ratio for the Monthly Period preceding the first day of the Interest Period in which such date occurs exceeded 1.25%, or the Three Month Average Dilution Ratio for the Monthly Period preceding the first day of the Interest Period in which such date occurs exceeded 0.75%, then the Applicable Stress Factor used in the calculation of the Dilution Reserve Ratio shall be 2.5. The Applicable Stress Factor calculated as of any Distribution Date shall continue until (but not including) the next succeeding Distribution Date.

 

“Appraised Value Home” shall mean a Home purchased by an Originator if the owner of the Home is unsuccessful at contracting to sell the Home prior to the purchase of the 

 

	 
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Home by the applicable Originator and as to which the purchase price is generally determined by the average of two or more independent appraisals.

 

“Average Days in Inventory” shall mean, for any Monthly Period, the average number of days the Homes have been owned by each Originator as of the close of business on the last day of such Monthly Period.

 

“Average Days Outstanding” shall mean, as of the end of any Monthly Period, the sum of:

 

(a)    the product of (i) a fraction, the numerator of which is the aggregate Unpaid Balance of Unsold Home Receivables (net of Advance Payments relating thereto) as of the end of such Monthly Period and the denominator of which is the Aggregate Receivable Balance as of the end of such Monthly Period, multiplied by (ii) the Average Days in Inventory for such Monthly Period, plus

 

(b)    the product of (i) a fraction, the numerator of which is the aggregate Unpaid Balance of Billed Receivables and Unbilled Receivables (net of Advance Payments relating thereto) as of the end of such Monthly Period, and the denominator of which is the Aggregate Receivable Balance as of the end of such Monthly Period, multiplied by (ii) the sum of (A) the average number of days as of the end of such Monthly Period it took to bill Unbilled Receivables once they became billable plus (B) the average number of days Billed Receivables have been outstanding as of the end of such Monthly Period.

 

For the purposes of the foregoing calculation, Unbilled Receivables are deemed to be billable (x) if the Receivable was previously an Unsold Home Receivable, upon the subsequent sale of the Home by the applicable Originator and (y) if such Receivable relates to services that are not related to Home sales, upon disbursement.

 

“Base Rate Tranche” shall have the meaning set forth in the Note Purchase Agreement.

 

“Change in Control” shall mean either that (x) the Issuer ceases to be a wholly-owned subsidiary of CMSC or (y) any of CMSC, CMF, the Transferor, CRESG or the Issuer ceases to be a wholly-owned subsidiary of Cendant Corporation.

 

“Commercial Paper Notes” shall have the meaning set forth in the Note Purchase Agreement.

 

“Commitment Termination Date” shall have the meaning set forth in the Note Purchase Agreement.

 

“Committed Purchaser” shall have the meaning set forth in the Note Purchase Agreement.

 

“Conduit Purchaser” shall have the meaning set forth in the Note Purchase Agreement.

 

	 
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“CP Rate” shall have the meaning set forth in the Note Purchase Agreement.

 

“CP Tranche” shall have the meaning set forth in the Note Purchase Agreement.

 

‘CRESG” shall have the meaning set forth in the Note Purchase Agreement.

 

“Decrease” shall have the meaning set forth in Section 3.02(b).

 

“Decrease Date” shall have the meaning set forth in Section 3.02(b).

 

“Default Ratio” shall mean, for any Monthly Period, the quotient, expressed as a percentage,  of (a) the sum of (i) the aggregate Unpaid Balance of the Receivables that have become Defaulted Receivables in accordance with clause (a) or (c) of the definition of Defaulted Receivable during such Monthly Period plus (ii) the Aggregate Employer Balance of each Employer (reduced by any Advance Payments) whose Receivables have become Defaulted Receivables in accordance with clause (b) of the definition of Defaulted Receivables during such Monthly Period, divided by (b) the aggregate Unpaid Balance of the Billed Receivables generated during the fifth Monthly Period preceding such Monthly Period.

 

“Determination Date” shall mean, with respect to any Distribution Date, the second Business Day preceding such Distribution Date.

 

“Dilution Ratio” shall mean, for any Monthly Period, the quotient, expressed as a percentage, of (a) the aggregate amount of reductions to the Unpaid Balances of the Billed Receivables due to offsets, chargebacks, credits, adjustments, rebates and other Originator Dilution Adjustments, Seller Dilution Adjustments and Servicer Dilution Adjustments occurring during such Monthly Period divided by (b) the aggregate Unpaid Balance of the Billed Receivables generated during the fifth Monthly Period preceding such Monthly Period.

 

“Dilution Reserve Ratio” shall mean, as of any date of determination, the product, expressed as a percentage, of:

 

(a)    the greater of:

 

(i)    the product of (A) the Applicable Stress Factor multiplied by (B) the average of the Dilution Ratios for the three Monthly Periods preceding the first day of the Interest Period in which such date occurs, and

 

(ii)    the highest Dilution Ratio for any Monthly Period over the twelve Monthly Periods preceding the first day of the Interest Period in which such date occurs, multiplied by

 

	 
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(b)    a fraction, the numerator of which is the sum of:

 

(i)    the aggregate Unpaid Balance of the Billed Receivables generated during the five Monthly Periods preceding the first day of the Interest Period in which such date occurs plus

 

(ii)    the aggregate Unpaid Balance of the Unbilled Receivables as of the end of the Monthly Period preceding the first day of the Interest Period in which such date occurs,

 

and the denominator of which is the aggregate Unpaid Balance of the Billed Receivables as of the end of such Monthly Period, multiplied by

 

(c)    a fraction, the numerator of which is equal to the sum of:

 

(i)    the aggregate Unpaid Balance of the Billed Receivables as of the end of such Monthly Period plus 

 

(ii)    the aggregate Unpaid Balance of the Unbilled Receivables as of the end of such Monthly Period plus 

 

(iii)    the greater of (A) the product of 3.5 multiplied by the average of the Monthly Loss on Sale for such Monthly Period and the two immediately preceding Monthly Periods and (B) 10% of the aggregate Unpaid Balance of Unsold Home Receivables relating to Appraised Value Homes as of the end of such Monthly Period,

 

and the denominator of which is equal to the aggregate Unpaid Balance of Eligible Receivables as of the end of such Monthly Period minus the Aggregate Adjustment Amount on such date.

 

The Dilution Reserve Ratio calculated as of any Distribution Date shall continue until (but not including) the next succeeding Distribution Date. 

 

“Distribution Date” shall mean, (i) during the Series 2000-1 Amortization Period, the fifteenth day of each calendar month, or if such fifteenth day is not a Business Day, the next succeeding Business Day, and (ii) thereafter, the sixteenth day of each calendar month, or if such sixteenth day is not a Business Day, the next succeeding Business Day.

 

“Eurodollar Rate” shall have the meaning set forth in the Note Purchase Agreement.

 

“Eurodollar Rate Margin” shall have the meaning set forth in the Fee Letter.

 

“Eurodollar Tranche” shall have the meaning set forth in the Note Purchase Agreement.

 

“Facility Fee” shall have the meaning set forth in the Fee Letter.

 

“Federal Funds Rate” shall have the meaning set forth in the Note Purchase Agreement.

 

“Fee Letter” shall mean that certain Fee Letter executed by and between the Issuer, the Managing Agents and the Administrative Agent in connection with the Note Purchase 

 

	 
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Agreement, as the same may be amended, supplemented or otherwise modified from time to time.

 

“Final Stated Maturity Date” shall mean the earlier of (a) the Distribution Date occurring in January, 2010 and (b) the Distribution Date occurring in the ninth Monthly Period following the Monthly Period in which the Amortization Period commenced.

 

“Increase” shall mean any funding by the Purchasers pursuant to the Note Purchase Agreement which increases the Series Outstanding Amount.

 

“Increase Date” shall mean the date on which any Increase is funded.

 

“Initial Series Outstanding Amount” shall mean, with respect to the Series 2005-1 Notes, $50,000,000.

 

“Interest Period” shall mean, with respect to each Tranche:

 

(a)    initially the period commencing on the date such Tranche is funded and ending on and excluding the next succeeding Distribution Date; and

 

(b)    thereafter each period commencing on and including a Distribution Date and ending and excluding the succeeding Distribution Date.

 

“Interest Shortfall” shall have the meaning set forth in Section 4.02(b).

 

“Liquidity Provider Agreement” shall have the meaning set forth in the Note Purchase Agreement.

 

“Liquidity Provider” shall have the meaning set forth in the Note Purchase Agreement.

 

“Loss Reserve Ratio” shall mean, as of any date of determination, the greatest of:

 

(a)    the percentage equivalent of the product of:

 

(i)    the Applicable Stress Factor multiplied by

 

(ii)    the highest Three Month Average Default Ratio for any Monthly Period over the twelve Monthly Periods preceding the first day of the Interest Period in which such date occurs, multiplied by

 

(iii)    a fraction, the numerator of which is the sum of (A) the aggregate Unpaid Balance of the Billed Receivables generated over the five Monthly Periods preceding the first day of the Interest Period in which such date occurs plus (B) the aggregate Unpaid Balance of the Unbilled Receivables as of the end of the Monthly Period preceding the first day of the Interest Period in which such date occurs, and the denominator of which is the aggregate Unpaid Balance of the Billed Receivables as of the end of such Monthly Period, multiplied by

 

	 
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(iv)    a fraction, the numerator of which is equal to the sum of (A) the aggregate Unpaid Balance of Billed Receivables as of the end of the Monthly Period preceding the first day of the Interest Period in which such date occurs plus (B) the aggregate Unpaid Balance of Unbilled Receivables as of the end of such Monthly Period plus (C) the greater of (1) the product of 3.5 multiplied by the average of the Monthly Loss on Sale for such Monthly Period and the two immediately preceding Monthly Periods and (2) 10% of the aggregate Unpaid Balance of Unsold Home Receivables relating to Appraised Value Homes as of the end of such Monthly Period, and the denominator of which is equal to the aggregate Unpaid Balance of Eligible Receivables as of the end of such Monthly Period minus the Aggregate Adjustment Amount on such date; 

 

(b)    the product of (i) the Applicable Stress Factor multiplied by (ii) the highest Default Ratio for any Monthly Period over the three Monthly Periods preceding the first day of the Interest Period in which such date occurs; and 

 

(c)    2.5%.

 

The Loss Reserve Ratio calculated as of any Distribution Date shall continue until (but not including) the next succeeding Distribution Date. 

 

“Managing Agent” shall have the meaning set forth in the Note Purchase Agreement.

 

“Minimum Enhancement Percentage” shall mean, for any Distribution Date and continuing until (but not including) the next succeeding Distribution Date, (i) 8.0% so long as the Average Days Outstanding as of the end of the preceding Monthly Period is less than 100 days, (ii) 9.0% if the Average Days Outstanding as of the end of the preceding Monthly Period is greater than or equal to 100 days but less than 120 days and (iii) otherwise, 10.0%.

 

“Monthly Interest” shall have the meaning set forth in Section 4.02(b).

 

“Monthly Loss on Sale” shall equal, for any Monthly Period, for all Homes sold during such Monthly Period, the aggregate of the amounts, if any, by which the purchase price of each such Home paid by CMF or CMSC, as applicable, exceeded the sale price for such Home received by the Servicer (the amount of any such excess with respect to a Home being a “Loss”). The Monthly Loss on Sale for any Monthly Period shall be based on the gross Losses for such Monthly Period without regard to any gains on the sale of other Homes during such Monthly Period.

 

“Monthly Period” shall mean the period from and including the first day of a calendar month to and including the last day of such calendar month.

 

“Monthly Principal” shall have the meaning set forth in Section 4.03.

 

“Monthly Program Fees” shall mean for any Distribution Date the aggregate Facility Fee and Program Fee payable to the Managing Agents under Section 2.03(c) of the Note Purchase Agreement.

 

	 
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“Monthly Servicing Fee” shall have the meaning set forth in Section 3.01.

 

“Net Credit Losses” shall mean, for any Monthly Period, an amount equal to the excess, if any, of the estimated losses to be incurred in respect of all Receivables written off by the Servicer in accordance with the Credit and Collection Policy during such Monthly Period over an amount equal to all amounts recovered during such Monthly Period in respect of Receivables written off by the Servicer in accordance with the Credit and Collection Policy during prior Monthly Periods, which amounts exceed the amounts that the Servicer estimated would be recovered in respect of such Receivables. For the avoidance of doubt, “Net Credit Losses” includes the portion of any Receivable which has been written off as uncollectible by the Servicer net of any recoveries thereon.

 

“Note Interest Rate” shall mean, as of any date, the sum of the weighted average of the Series 2005-1 Tranche Rates.

 

“Note Purchase Agreement” shall mean that certain Note Purchase Agreement dated as of even date herewith (as the same may be amended, restated, supplemented or otherwise modified from time to time) among the Issuer, the Servicer, the Purchasers, the Managing Agents and the Administrative Agent. 

 

“Otherwise Released Collections” shall have the meaning set forth in Section 4.01(d).

 

“Outstanding Tranche Amount” shall mean, with respect to any Tranche, the portion of the Series Outstanding Amount designated by a Managing Agent as allocable to such Tranche.

 

“Pro Rata Share” shall have the meaning set forth in the Note Purchase Agreement. 

 

“Program Fee” shall have the meaning set forth in the Fee Letter.

 

“Purchaser Group” shall have the meaning set forth in the Note Purchase Agreement. 

 

“Purchasers” shall have the meaning set forth in the Note Purchase Agreement. 

 

“QIB” shall have the meaning set forth in Section 5.02(b).

 

“Rating Agency” shall mean each of Standard & Poor’s Ratings Services, Moody’s Investors Service and Fitch, Inc.

 

“Rating Agency Condition” as used in the Indenture with respect to this Indenture Supplement or the Series 2005-1 Notes shall mean, with respect to any action, that each of the Managing Agents shall have consented to such action. 

 

“Redemption Price” shall mean, with respect to any Distribution Date, after giving effect to any deposits and distributions otherwise to be made on such Distribution Date, 

 

	 
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the sum of (i) the Series Outstanding Amount on such Distribution Date plus (ii) Monthly Interest for such Distribution Date and any Monthly Interest previously due but not distributed to the Series 2005-1 Noteholders plus (iii) all Monthly Program Fees plus (iv) any other amounts owed to the Administrative Agent, the Managing Agents and the Purchasers pursuant to this Indenture Supplement or the Note Purchase Agreement.

 

“Required Amount” shall mean, for any Distribution Date, the sum of (a) the Monthly Interest for such Distribution Date plus (b) any Additional Interest previously accrued and not reimbursed, plus (c) the sum, without duplication, of (i) the Monthly Servicing Fee to be distributed on such Distribution Date plus (ii) any Monthly Servicing Fee previously accrued and not paid plus (iii) the Monthly Program Fees to be distributed on such Distribution Date plus (iv) any Monthly Program Fees previously accrued and not paid plus (v) any expenses and other amounts which are payable under Section 4.04(b)(iv), as notified to the Indenture Trustee, the Issuer and the Servicer by the relevant Managing Agent or the Administrative Agent no later than the Business Day preceding the related Determination Date.

 

“Required Managing Agents” shall have the meaning set forth in the Note Purchase Agreement.

 

“Required Overcollateralization Amount” shall mean, as of any date of determination, the amount by which the Series 2005-1 Required Enhancement Amount on such date exceeds the amount on deposit in the Series 2005-1 Principal Subaccount on such date.

 

“Revolving Period” shall mean the period beginning on the Series 2005-1 Closing Date and ending upon the commencement of the Amortization Period.

 

“Rule 144A” shall mean Rule 144A under the Securities Act.

 

“Scheduled Amortization Date” shall mean January 31, 2010.

 

“Securities Act” shall mean the Securities Act of 1933, as amended.

 

“Series Outstanding Amount” shall mean, as of any date of determination, an amount equal to (i) the Initial Series Outstanding Amount plus (ii) the aggregate amount of all Increases minus (iii) the aggregate amount of all Decreases minus (iv) without duplication, the aggregate amount of all Monthly Principal previously paid to the Series 2005-1 Noteholders.

 

“Series Percentage” shall mean, with respect to any date of determination, the percentage equivalent (which percentage shall never exceed 100%) of a fraction calculated as follows:

 

(a)    during the Revolving Period, the numerator of the fraction will be the Series 2005-1 Required Asset Amount as of the close of business on the immediately preceding day, and the denominator of the fraction will be the greater of (i) the Adjusted Aggregate Receivable Balance as of the end of the prior Monthly Period (or, if a Servicer Default has occurred, as of the end of the immediately preceding day), and (ii) the sum of the numerators used to determine the Series Percentage for each Series of Notes (including the Series 2005-1 Notes) Outstanding at the close of business on the immediately preceding day; and

 

	 
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(b)    during the Amortization Period, the numerator of the fraction will be the Series 2005-1 Required Asset Amount as of the close of business on the last day of the Revolving Period, and the denominator of the fraction will be the sum of the numerators used to determine the Series Percentage for each Series of Notes (including the Series 2005-1 Notes) Outstanding at the close of business on the immediately preceding day.

 

“Series 2000-1 Amortization Period” shall mean the period commencing on January 31, 2005 and ending on the date on which the Series 2000-1 Notes have been paid in full and all other amounts owed under the Series 2000-1 Supplement have been paid in full. 

 

“Series 2000-1 Notes” shall mean the $400,000,000 Notes, Series 2000-1, issued by the Issuer under the Indenture on April 25, 2000.

 

“Series 2000-1 Principal Subaccount” shall mean the “Series 2000-1 Principal Subaccount” established under the Series 2000-1 Supplement for the benefit of the holders of the Series 2000-1 Notes.

 

“Series 2000-1 Supplement” shall mean the Indenture Supplement dated as of April 25, 2000 and relating to the Series 2000-1 Notes.

 

“Series 2005-1” shall mean the Series of Notes the terms of which are specified in this Indenture Supplement.

 

“Series 2005-1 Allocated Adjusted Aggregate Receivable Balance” shall mean, as of any date of determination, the lower of (a) the Series 2005-1 Required Asset Amount as of such date and (b) the product of (i) the Adjusted Aggregate Receivable Balance as of the end of the prior Monthly Period multiplied by (ii) the percentage equivalent of a fraction, the numerator of which is the Series 2005-1 Required Asset Amount as of such date and the denominator of which is the sum of (x) the Series 2005-1 Required Asset Amount as of such date plus (y) the aggregate Required Asset Amount with respect to each other Series of Notes as of such date.

 

“Series 2005-1 Asset Amount Deficiency” shall occur, on any date of determination, if and to the extent the Series 2005-1 Allocated Adjusted Aggregate Receivable Balance as of such date is less than the Series 2005-1 Required Asset Amount as of such date; provided, that during the Series 2000-1 Amortization Period, a Series 2005-1 Asset Amount Deficiency shall be calculated as if (i) the “Series Outstanding Amount” for Series 2000-1 were equal to the outstanding principal amount of the Series 2000-1 Notes minus the sum of any amounts on deposit in the Series 2000-1 Principal Subaccount and (ii) the “Series Outstanding Amount” for Series 2005-1 were equal to the outstanding principal amount of the Series 2005-1 Notes minus the sum of any amounts on deposit in the Series 2005-1 Pre-Funding Subaccount. 

 

“Series 2005-1 Closing Date” shall mean January 31, 2005.

 

“Series 2005-1 Collections” shall have the meaning set forth in Section 4.01(b).

 

“Series 2005-1 Note” shall mean each Note executed by the Issuer and authenticated by the Authentication Agent, substantially in the form of Exhibit A, and any replacement Note in exchange therefor.

 

	 
	 	 	 
	

	 

“Series 2005-1 Noteholder” shall mean each Person in whose name a Series 2005-1 Note is registered in the Note Register, which shall initially be each Managing Agent on behalf of the Purchasers in the related Purchaser Group.

 

“Series 2005-1 Pre-Funding Subaccount” shall have the meaning set forth in Section 4.08(a).

 

“Series 2005-1 Principal Subaccount” shall have the meaning set forth in Section 4.06(a).

 

“Series 2005-1 Required Asset Amount” shall mean, as of any date of determination, an amount equal to the sum of (a) the Series Outstanding Amount on such date plus (b) the Required Overcollateralization Amount on such date.

 

“Series 2005-1 Required Enhancement Amount” shall mean, as of any date of determination, an amount equal to the greater of (i) the Series Outstanding Amount on such date multiplied by the Minimum Enhancement Percentage on such date and (ii) an amount equal to the product of (A) the Series Outstanding Amount on such date multiplied by (B) the quotient of (1) the sum of (w) the Loss Reserve Ratio on such date plus (x) the Dilution Reserve Ratio on such date plus (y) the Yield Reserve Ratio on such date plus (z) the Servicing Reserve Ratio on such date divided by (2) one minus the sum of (w) the Loss Reserve Ratio on such date plus (x) the Dilution Reserve Ratio on such date plus (y) the Yield Reserve Ratio on such date plus (z) the Servicing Reserve Ratio on such date; provided, however, that after the declaration or occurrence of an Amortization Event, the Series 2005-1 Required Enhancement Amount shall equal the Series 2005-1 Required Enhancement Amount in effect on the date of the declaration or occurrence of such Amortization Event.

 

“Series 2005-1 Tranche Rate” shall mean, at any time during an Interest Period (i) with respect to any CP Tranche, the CP Rate, (ii) with respect to any Eurodollar Tranche, the sum of the Eurodollar Rate plus the Eurodollar Rate Margin, and (iii) with respect to any Base Rate Tranche, the Alternate Base Rate, as applicable, provided, however, that, if any principal or interest on the Series 2005-1 Notes is not paid in full when the same shall have become required to be paid, or if any Amortization Event has occurred and is continuing, then the Series 2005-1 Tranche Rate shall be the Alternate Base Rate plus two percent (2.0%) with respect to such deficiency or with respect to any interest accrued on the Series 2005-1 Notes after the occurrence of such Amortization Event.

 

“Servicing Fee” shall have the meaning set forth in the Transfer and Servicing Agreement.

 

“Servicing Fee Rate” shall mean 0.75% per annum.

 

“Servicing Reserve Ratio” shall mean, as of any date of determination, the quotient, expressed as a percentage, of (a) the product of (i) the Applicable Stress Factor multiplied by (ii) the Servicing Fee Rate multiplied by (iii) Average Days Outstanding as of the end of the Monthly Period preceding the first day of the Interest Period in which such date occurs, divided by (b) 360.

 

	 
	 	 	 
	

	 

“Stated Amount” shall mean $550,000,000 as such amount may be reduced or increased from time to time pursuant to Section 3.02.

 

“Three Month Average Default Ratio” shall mean, for any Monthly Period, the average of the Default Ratios for that Monthly Period and each of the two immediately preceding Monthly Periods.

 

“Three Month Average Dilution Ratio” shall mean, for any Monthly Period, the average of the Dilution Ratios for that Monthly Period and each of the two immediately preceding Monthly Periods.

 

“Tranche” shall have the meaning set forth in the Note Purchase Agreement.

 

“Transaction Documents” shall mean the “Transaction Documents” as defined in the Indenture but shall also include the Note Purchase Agreement, the Fee Letter and the Series 2005-1 Notes.

 

“Transfer Date” shall mean the Business Day immediately preceding each Distribution Date and each Decrease Date.

 

“Yield Reserve Ratio” shall mean, as of any date of determination, the quotient expressed as a percentage, of (a) the product of (i) the sum of (A) the product of (1) 2.25 multiplied by (2) the one-month Eurodollar Rate as of the last Business Day of the immediately preceding Monthly Period plus (B) 0.75% multiplied by (ii) 2.25 multiplied by the Average Days Outstanding as of the end of the immediately preceding Monthly Period divided by (b) 360.

 

 

(b)  Each capitalized term defined herein shall relate to the Series 2005-1 Notes and no other Series of Notes issued by the Issuer, unless the context otherwise requires. All capitalized terms used herein and not otherwise defined herein have the meanings ascribed to them in the Indenture, the Transfer and Servicing Agreement, the Receivables Purchase Agreement or the Purchase Agreement. 

 

 

(c)  The words “hereof,” “herein” and “hereunder” and words of similar import when used in this Indenture Supplement shall refer to this Indenture Supplement as a whole and not to any particular provision of this Indenture Supplement; references to any Article, subsection, Section or Exhibit are references to Articles, subsections, Sections and Exhibits in or to this Indenture Supplement unless otherwise specified; and the term “including” means “including without limitation.”

 

 

ARTICLE III  

SERVICING FEE; INCREASES AND REDUCTIONS IN THE SERIES OUTSTANDING AMOUNT

 

 

Section 3.01.  Servicing Fee. The Transfer and Servicing Agreement sets forth the full compensation that the Servicer is entitled to receive for its servicing activities. The share of the Servicing Fee allocable to the Series 2005-1 Noteholders with respect to any Distribution 

 

	 
	 	 	 
	

	 

Date (the “Monthly Servicing Fee”) shall be equal to the product of (a) the Servicing Fee Rate multiplied by (b) the weighted average over the related Monthly Period of the daily sums of the Aggregate Employer Balances for each Employer under the Pool Relocation Agreements multiplied by (c) the average Series Percentage during such Monthly Period. The remainder of the Servicing Fee shall be paid by the noteholders of other Series (as provided in the Indenture Supplement related to such other Series) or the Issuer and in no event shall the Indenture Trustee or the Series 2005-1 Noteholders be liable for the share of the Servicing Fee to be paid by the Noteholders of such other Series or the Issuer. To the extent that the Monthly Servicing Fee is not paid in full pursuant to the preceding provisions of this Section 3.01 and Section 4.04, it shall be paid by the Issuer. The Monthly Servicing Fee shall be payable from Series 2005-1 Collections pursuant to, and subject to the priority of payments set forth in, Section 4.04. 

 

 

Section 3.02.  Increases and Reductions in the Series Outstanding Amount.

 

 

(a)  At any time during the Revolving Period, so long as the Commitment Termination Date shall not have occurred, the Series Outstanding Amount may be increased from time to time by the funding of Increases subject to the terms and conditions set forth in the Note Purchase Agreement; provided, that, after giving effect thereto, the Series Outstanding Amount may not exceed the Stated Amount. Whenever the Issuer wishes to make an Increase, the Issuer shall give the Indenture Trustee, the Paying Agent and the Managing Agents prior written notice of such Increase not less than two (2) Business Days prior to the proposed Increase Date.

 

 

(b)  In the event that the Issuer reduces the Series Outstanding Amount of the Series 2005-1 Notes in accordance with the Note Purchase Agreement (each such reduction, a “Decrease”), it shall give prompt written notice of such Decrease to the Managing Agents, the Indenture Trustee and the Paying Agent not less than three (3) Business Days prior to the effective date (each such date, a “Decrease Date”) of such reduction. All accrued and unpaid interest on the amount of such Decrease, together with the principal amount of such Decrease, shall be due and owing as of the related Decrease Date.

 

 

(c)  The Series 2005-1 Notes shall evidence the outstanding indebtedness owed from time to time by the Issuer thereunder. Each Managing Agent, on behalf of the Purchasers in the related Purchaser Group, shall be and is hereby authorized to record on the grid attached to its Series 2005-1 Note held by it on behalf of the Purchasers in the related Purchaser Group (or at its option, in its internal books and records) the date and amount of the initial funding of its Pro Rata Share of the Initial Series Outstanding Amount and the date and amount of each Increase, the amount of each repayment of the principal amount represented by such Series 2005-1 Note, the portions of its Series 2005-1 Note that are from time to time allocated to the CP Tranche, any Base Rate Tranche and any Eurodollar Tranche, and any reductions to the Stated Amount; provided, that failure to make any recordation on the grid or records or any error in recordation shall not adversely affect any Purchaser’s rights with respect to its right to receive principal and interest under a Series 2005-1 Note. 

 

	 
	 	 	 
	

	 

 

ARTICLE IV  

RIGHTS OF SERIES 2005-1 NOTEHOLDERS AND ALLOCATION AND APPLICATION OF POOL COLLECTIONS

 

 

Section 4.01.  Pool Collections and Allocations.

 

 

(a)  Allocation of Pool Collections. Funds on deposit in the Collection Account in accordance with Section 8.04 of the Indenture shall be allocated and distributed to Series 2005-1 as set forth in the Indenture and this Article IV.

 

 

(b)  Allocation of Pool Collections to Series 2005-1. Prior to the close of business on each Transfer Date, the Servicer shall allocate to Series 2005-1 an amount (such amount, the “Series 2005-1 Collections”) equal to the product of (i) the amount of Pool Collections deposited in the Collection Account during the preceding Monthly Period (less any amounts permitted to be withdrawn pursuant to Sections 3.02(c)(vi), 3.12 and 3.14(b) of the Transfer and Servicing Agreement) multiplied by (ii) the Series Percentage for such Distribution Date.

 

 

(c)  Allocation of Series 2005-1 Collections. Prior to the close of business on each Transfer Date, the Servicer shall direct the Indenture Trustee to allocate Series 2005-1 Collections in the amounts and according to the priority set forth below pursuant to Section 8.04 of the Indenture:

 

 

(i)  From the Collection Account to the Distribution Account for distribution in accordance with Section 4.04(b), an amount equal to the Required Amount for the next succeeding Distribution Date and if the amount of the Series 2005-1 Collections then on deposit in the Distribution Account exceeds the Required Amount for such Distribution Date, such Series 2005-1 Collections shall be distributed therefrom in accordance with the remaining provisions of this Section 4.01(c);

 

 

(ii)  During the Revolving Period, and during the Amortization Period after the Series 2005-1 Notes have been paid in full, to the Distribution Account for distribution to the Managing Agents on behalf of the holders of the Series 2005-1 Notes, an amount equal to any other amounts (other than principal and interest owed under the Series 2005-1 Notes) owed by the Issuer pursuant to the Note Purchase Agreement;

 

 

(iii)  During the Revolving Period, (A) if any other Series of Notes is in its Amortization Period and the Indenture Supplement related to such amortizing Series of Notes requires the Issuer to transfer such remaining Series 2005-1 Collections to pay the principal of such other Series of Notes, all remaining Series 2005-1 Collections to the applicable Series Account with respect to such amortizing Series of Notes; provided, that if more than one other Series of Notes is amortizing and the related Indenture Supplement of each such amortizing Series of Notes requires the Issuer to transfer such remaining Series 2005-1 Collections to pay the principal of such other Series of Notes, pro rata to the applicable Series Account of each such other amortizing Series of Notes based on their respective Series Percentages; and (B)if no transfer of the remaining Series 2005-1 Collections is required pursuant to clause (A), all remaining Series 2005-1 Collections to 

 

	 
	 	 	 
	

	 

the Issuer free and clear of the lien of the Indenture and without compliance with Section 12.01(b) of the Indenture; provided, however, with respect to clause (A) and (B), if (x) a Series 2005-1 Asset Amount Deficiency has occurred and is continuing, or (y) the application of funds to the payment of the principal of another Series of Notes or the release of funds to the Issuer would result in a Series 2005-1 Asset Amount Deficiency or would otherwise result in the occurrence of an event that, with the passage of time or the giving of notice or both, would become an Amortization Event, or (z) the Issuer has so directed by written notice given to the Indenture Trustee and the Managing Agents in connection with a Decrease or optional redemption of the Series 2005-1 Notes, all remaining Series 2005-1 Collections shall be transferred to the Series 2005-1 Principal Subaccount.

 

 

(iv)  On any Decrease Date during the Revolving Period, (i) to the Series 2005-1 Principal Subaccount, the amount of the applicable Decrease and (ii) if such date is other than a Distribution Date, to the Distribution Account for distribution to the Managing Agents on behalf of the holders of the Series 2005-1 Notes, all (x) accrued and unpaid interest on the amount of such Decrease (which amount shall be due and owing as of such date) together with (y) if such Decrease Date is other than an Distribution Date, all funding losses, expenses and liabilities owed under Section 2.09 of the Note Purchase Agreement in connection with any such Decrease. 

 

 

(v)  During the Amortization Period, to the Series 2005-1 Principal Subaccount, the Series 2005-1 Collections on each Deposit Date; provided, however, that the aggregate amount deposited into the Series 2005-1 Principal Subaccount pursuant to this clause on any Deposit Date shall not exceed the Series Outstanding Amount on the immediately preceding Business Day.

 

 

(d)  Prior to the close of business (i) on each Deposit Date when a Series 2005-1 Asset Amount Deficiency has occurred and (ii) on each Deposit Date during the Amortization Period, the Issuer shall deposit Pool Collections allocated to other Series in the Series 2005-1 Principal Subaccount to the extent those Pool Collections would otherwise have been released to the Issuer under the terms of the Indenture Supplement related to such Series (“Otherwise Released Collections”). If Series 2005-1 and any other Series are simultaneously in their respective Amortization Periods or otherwise simultaneously requiring such payments, such Otherwise Released Collections shall be allocated ratably between each such Series of Notes (including Series 2005-1) based on their respective Series Percentages.

 

 

Section 4.02.  Determination of Interest and Monthly Interest.

 

 

(a)  The amount of interest distributable from the Distribution Account with respect to the Series 2005-1 Notes on any Distribution Date shall be an amount equal to the sum of the Monthly Interest for such Distribution Date, plus any Interest Shortfall and any Additional Interest as determined under Section 4.02(b). The monthly interest for any Tranche shall be an amount equal to the product of (i) a fraction, the numerator of which is the actual number of days during the Interest Period then ending such Tranche was outstanding and the denominator of which is 360, multiplied by (ii) the Series 2005-1 Tranche Rate in effect with respect to the related Tranche and multiplied by (iii) the daily average Outstanding Tranche Amount of the 

 

	 
	 	 	 
	

	 

related Tranche during the related Interest Period. The amount of interest allocable to the Tranches of any Purchaser Group and due to the Purchasers in the related Purchaser Group shall be determined by each Managing Agent and notified by each Managing Agent to the Administrative Agent, the Servicer, the Issuer, the Paying Agent and the Indenture Trustee in accordance with the procedures set forth in the Note Purchase Agreement.

 

 

(b)  The “Monthly Interest” for any Distribution Date shall mean the sum of the aggregate unpaid amount, if any, of all unpaid interest determined for each Tranche under Section 4.02(a). On the Determination Date preceding each Distribution Date, the Servicer shall determine the excess (the “Interest Shortfall”), if any, of (x) the Monthly Interest for such Distribution Date over (y) the aggregate amount of funds allocated and available to pay such Monthly Interest on such Distribution Date. If the Interest Shortfall with respect to any Distribution Date is greater than zero, then on each subsequent Distribution Date until such Interest Shortfall is fully paid, an additional amount (“Additional Interest”) equal to the product of (A) a fraction, the numerator of which is the actual number of days in the related Interest Period and the denominator of which is 360, multiplied by (B) the applicable Series 2005-1 Tranche Rate multiplied by (C) such Interest Shortfall (or the portion thereof that has not been paid to the Series 2005-1 Noteholders from other funds) shall be payable as provided herein with respect to the Series 2005-1 Notes. Notwithstanding anything herein to the contrary, Additional Interest shall be payable or distributed only to the extent permitted by applicable law. From and after the calculation of any Interest Shortfall, Monthly Interest shall be calculated without duplication of any amounts included in the calculation of Additional Interest. 

 

 

Section 4.03.  Determination of Principal Distribution. On any Distribution Date and any Decrease Date for any Tranche (i) during the Revolving Period, if there are funds on deposit in the Series 2005-1 Principal Subaccount, and (ii) during the Amortization Period, the Trustee shall distribute from the Series 2005-1 Principal Subaccount, for application to reduce the Series Outstanding Amount, an amount of principal (the “Monthly Principal”), equal to the lesser of (a) the amount on deposit in the Series 2005-1 Principal Subaccount and (b) the Series Outstanding Amount. All Monthly Principal and all Decreases shall be paid to the Purchaser Groups ratably in accordance with their Pro Rata Shares as set forth in the Note Purchase Agreement.

 

 

Section 4.04.  Application of Series 2005-1 Collections. On each Distribution Date and, if different, on each Decrease Date, as applicable, the Servicer shall instruct the Indenture Trustee in writing (such writing to be substantially in the form of Exhibit B unless otherwise agreed) to apply amounts on deposit in the Collection Account (and any subaccount thereof):

 

 

(a)  On each Decrease Date (if such Decrease Date is not a Distribution Date), to withdraw from the amounts on deposit in the Distribution Account an amount equal to the amount of interest then due and owing on the Series 2005-1 Notes in accordance with Section 3.02(b), and to pay such interest to the Series 2005-1 Noteholders pursuant to Section 5.04. 

 

 

(b)  On each Distribution Date, to transfer amounts on deposit in the Distribution Account in the following order of priority:

 

	 
	 	 	 
	

	 

 

(i)  An amount equal to the sum of (A) Monthly Interest, if any, for such Distribution Date plus (B) any Interest Shortfall previously accrued and not reimbursed plus (C) any Additional Interest previously accrued and not paid shall be paid to the Series 2005-1 Noteholders on such Distribution Date pursuant to Section 5.04;

 

 

(ii)  An amount equal to the Monthly Program Fees for such Distribution Date shall be distributed to each Managing Agent (ratably in accordance with the amounts owing to each Purchaser Group);

 

 

(iii)  An amount equal to the sum of (A) the Monthly Servicing Fee for such Distribution Date plus (B) any Monthly Servicing Fee previously accrued and not paid pursuant to this Section 4.04(b)(iii) shall be distributed to the Servicer;

 

 

(iv)  An amount equal to any out-of-pocket costs and expenses of the Administrative Agent and the Managing Agents relating to enforcement against the Issuer shall be distributed to the Administrative Agent and the Managing Agents (ratably in accordance with the amounts owing to each such Person);

 

 

(v)  If a Series 2005-1 Asset Amount Deficiency has occurred and is continuing an amount necessary to eliminate such Series 2005-1 Asset Amount Deficiency shall be distributed to the Series 2005-1 Principal Subaccount;

 

 

(vi)  During the Amortization Period, to the Series 2005-1 Principal Subaccount, for application to reduce the Series Outstanding Amount; and

 

 

(vii)  An amount equal to all increased costs, fees, expenses and other amounts payable to the Administrative Agent, the Managing Agents and the Purchasers pursuant to the Indenture Supplement and the Note Purchase Agreement shall be distributed to each such Person (ratably in accordance with the amounts owing to each such Person).

 

 

(c)  To transfer from the Series 2005-1 Principal Subaccount to the Series 2005-1 Noteholders, (i) on each Decrease Date, an amount equal to the amount of the relevant Decrease and (ii) on each Distribution Date when funds are on deposit in the Series 2005-1 Principal Subaccount, an amount equal to the Monthly Principal for such Distribution Date, in each case for payment to the Series 2005-1 Noteholders on such Decrease Date or Distribution Date, as applicable, pursuant to Section 5.04 (ratably in accordance with the amounts owing to each Series 2005-1 Noteholder).

 

 

Section 4.05.  Distribution Account.

 

 

(a)  All Series 2005-1 Collections which are distributed to the Distribution Account in accordance with the terms of this Indenture Supplement, together with all proceeds, earnings, income, revenue, dividends and distributions thereof, shall be held therein for the benefit of the Series 2005-1 Noteholders. The Indenture Trustee shall, in accordance with the Indenture, possess all right, title and interest in all monies, instruments, investment property and other property credited from time to time to the Distribution Account (and any subaccount thereof) and in all proceeds, earnings, income, revenue, dividends and distributions thereof. The 

 

	 
	 	 	 
	

	 

Distribution Account shall be under the sole dominion and control of the Indenture Trustee for the benefit of the Noteholders. Pursuant to the authority granted to the Servicer in Article III of the Transfer and Servicing Agreement, the Servicer shall have the power, revocable by the Indenture Trustee, to instruct the Indenture Trustee to make withdrawals and payments from the Distribution Account for the purposes of making the payments required under Section 4.04.

 

 

(b)  Series 2005-1 Collections which are on deposit in the Distribution Account shall be invested in accordance with Section 4.01 of the Transfer and Servicing Agreement and Section 6.13 of the Indenture. The Indenture Trustee shall bear no responsibility or liability for any losses resulting from investment or reinvestment of any funds in accordance with this Section 4.05(b) nor for the selection of Eligible Investments, except with respect to investments on which the institution acting as Indenture Trustee is an obligor. 

 

 

Section 4.06.  Series 2005-1 Principal Subaccount.

 

 

(a)  The Issuer, for the benefit of the Series 2005-1 Noteholders, shall establish and maintain with the Indenture Trustee or its nominee in the name of the Indenture Trustee, the Series 2005-1 Principal Subaccount, which shall be a subaccount of the Collection Account (the “Series 2005-1 Principal Subaccount”). The Indenture Trustee shall possess all right, title and interest in all monies, instruments, investment property and other property credited from time to time to the Series 2005-1 Principal Subaccount (and any subaccount thereof) and in all proceeds, earnings, income, revenue, dividends and distributions thereof for the benefit of the Series 2005-1 Noteholders. The Series 2005-1 Principal Subaccount shall be under the sole dominion and control of the Indenture Trustee for the benefit of the Series 2005-1 Noteholders. Pursuant to the authority granted to the Servicer in Article III of the Transfer and Servicing Agreement, the Servicer shall have the power, revocable by the Indenture Trustee, to instruct the Indenture Trustee to make withdrawals and payments from the Series 2005-1 Principal Subaccount for the purposes of making the payments required under Section 4.04.

 

 

(b)  Funds on deposit in the Series 2005-1 Principal Subaccount shall be invested in accordance with Section 4.01 of the Transfer and Servicing Agreement and Section 6.13 of the Indenture. The Indenture Trustee shall bear no responsibility or liability for any losses resulting from investment or reinvestment of any funds in accordance with this Section 4.06(b) nor for the selection of Eligible Investments, except with respect to investments on which the institution acting as Indenture Trustee is an obligor.

 

 

(c)  The Indenture Trustee shall withdraw and transfer funds on deposit in the Series 2005-1 Principal Subaccount on each Business Day during the Revolving Period to, or at the direction of, the Issuer if no Series 2005-1 Asset Amount Deficiency has occurred and is continuing and no event that with the passage of time or the giving of notice could become an Amortization Event, including a Series 2005-1 Asset Amount Deficiency, would result from such withdrawal. Any such transfer to the Issuer shall be made free and clear of the lien of the Indenture and without compliance with Section 12.01(b) of the Indenture. It is expressly understood that, during the Amortization Period, the Indenture Trustee shall not withdraw funds on deposit in the Series 2005-1 Principal Subaccount except to fund payments of Monthly Principal under Section 4.03 and, after the Series 2005-1 Notes have been paid in full, to fund any other payments owed under Section 4.01(c) in the order of priority set forth therein.

 

	 
	 	 	 
	

	 

 

Section 4.07.  Investment Instructions. Any investment instructions required to be given to the Indenture Trustee pursuant to the terms hereof must be given to the Indenture Trustee no later than 11:00 a.m. (New York City time) on the date such investment is to be made. If the Indenture Trustee receives such investment instruction later than such time, the Indenture Trustee may, but shall have no obligation to, make such investment. If the Indenture Trustee is unable to make an investment required in an investment instruction received by the Indenture Trustee after 11:00 a.m. (New York City time) on such day, such investment shall be made by the Indenture Trustee on the next succeeding Business Day. In no event shall the Indenture Trustee be liable for any investment not made pursuant to investment instructions received after 11:00 a.m. (New York City time) on the day such investment is requested to be made.

 

 

Section 4.08.  Series 2005-1 Pre-Funding Subaccount.

 

 

(a)  The Issuer, for the benefit of the Series 2005-1 Noteholders, shall establish and maintain with the Indenture Trustee or its nominee in the name of the Indenture Trustee, the Series 2005-1 Pre-Funding Subaccount, which shall be a subaccount of the Collection Account (the “Series 2005-1 Pre-Funding Subaccount”). The Indenture Trustee shall possess all right, title and interest in all monies, instruments, investment property and other property credited from time to time to the Series 2005-1 Pre-Funding Subaccount (and any subaccount thereof) and in all proceeds, earnings, income, revenue, dividends and distributions thereof for the benefit of the Series 2005-1 Noteholders. The Series 2005-1 Pre-Funding Subaccount shall be under the sole dominion and control of the Indenture Trustee for the benefit of the Series 2005-1 Noteholders. Pursuant to the authority granted to the Servicer in Article III of the Transfer and Servicing Agreement, the Servicer shall have the power, revocable by the Indenture Trustee, to instruct the Indenture Trustee to make withdrawals and payments from the Series 2005-1 Pre-Funding Subaccount for the purposes of making the payments required under this Section 4.08. Any such instructions shall be in writing substantially in the form of Exhibit D. 

 

 

(b)  Funds on deposit in the Series 2005-1 Pre-Funding Subaccount shall be invested in accordance with Section 4.01 of the Transfer and Servicing Agreement and Section 6.13 of the Indenture. The Indenture Trustee shall bear no responsibility or liability for any losses resulting from investment or reinvestment of any funds in accordance with this Section 4.08(b) nor for the selection of Eligible Investments, except with respect to investments on which the institution acting as Indenture Trustee is an obligor.

 

 

(c)  During the Series 2000-1 Amortization Period, the proceeds of all Increases made under the Note Purchase Agreement shall be deposited into the Series 2005-1 Pre-Funding Subaccount. Unless a Series 2005-1 Amortization Event has occurred and is continuing, the Indenture Trustee shall withdraw and transfer funds on deposit in the Series 2005-1 Pre-Funding Subaccount on each Business Day during the Series 2000-1 Amortization Period to, or at the direction of, the Issuer so long as no Series 2005-1 Asset Amount Deficiency has occurred and is continuing and no Series 2005-1 Asset Amount Deficiency would result from such withdrawal; provided, further that the amount of any such permitted withdrawal on any Business Day shall not exceed the dollar amount of Pool Collections which, since the last such withdrawal, were set aside in the Series 2000-1 Principal Subaccount in order to pay principal on the Series 2000-1 Notes (including without duplication any such funds which were subsequently 

 

	 
	 	 	 
	

	 

distributed to pay principal on the Series 2000-1 Notes). Any such transfer to the Issuer shall be made free and clear of the lien of the Indenture and without compliance with Section 12.01(b) of the Indenture. It is expressly understood that, unless and until the date on which the amount on deposit in the Series 2000-1 Principal Subaccount is equal to the outstanding principal amount of the Series 2000-1 Notes (or, if earlier, the date on which the Series 2000-1 Amortization Period has ended), the Indenture Trustee shall not withdraw funds on deposit in the Series 2005-1 Pre-Funding Subaccount except as described above in this Section 4.08(c); provided, that if a Series 2005-1 Amortization Event has occurred prior to the end of the Series 2000-1 Amortization Period, then all amounts on deposit in the Series 2005-1 Pre-Funding Subaccount shall be transferred to the Series 2005-1 Principal Subaccount to be distributed to the Series 2005-1 Noteholders in accordance with the preceding sections of this Article IV. 

 

 

ARTICLE V  

DELIVERY OF SERIES 2005-1 NOTES; DISTRIBUTIONS; REPORTS TO SERIES 2005-1 NOTEHOLDERS

 

 

Section 5.01.  Delivery and Payment for the Series 2005-1 Notes; Denominations. The Issuer shall execute and the Authentication Agent shall authenticate the Series 2005-1 Notes in accordance with Section 2.03 of the Indenture. The Indenture Trustee shall deliver the Series 2005-1 Notes to or upon the order of the Issuer when so authenticated.

 

 

Section 5.02.  Registration; Registration of Transfer and Exchange; Transfer Restrictions.

 

 

(a)  The Series 2005-1 Notes have not been registered under the Securities Act or any state securities law. None of the Issuer, the Servicer, the Transfer Agent and Registrar or the Indenture Trustee is obligated to register the Series 2005-1 Notes under the Securities Act or any other securities or “Blue Sky” laws or to take any other action not otherwise required under the Agreement to permit the transfer of the Series 2005-1 Notes without registration.

 

 

(b)  No transfer of any Series 2005-1 Note or any interest therein (including, without limitation, by pledge or hypothecation) shall be made except in compliance with the restrictions on transfer set forth in this Section 5.02 (including the applicable legend to be set forth on the face of such Series 2005-1 Note as provided in Exhibit A), in a transaction exempt from the registration requirements of the Securities Act and applicable state securities or “Blue Sky” laws (i) to a person who the transferor reasonably believes is a “qualified institutional buyer” within the meaning thereof in Rule 144A (a “QIB”) and (B) that is aware that the resale or other transfer is being made in reliance on Rule 144A.

 

 

(c)  Each Purchaser and each Holder of the Series 2005-1 Notes, by its acceptance thereof, will be deemed to have acknowledged, represented to and agreed with the Issuer and, in the case of any transferee of any Purchaser, such Purchaser as follows:

 

 

(i)  It understands that the Series 2005-1 Notes may be offered and may be resold by such Purchaser only to QIBs and subject to the restrictions of Rule 144A.

 

	 
	 	 	 
	

	 

 

(ii)  It understands that the Series 2005-1 Notes have not been and will not be registered under the Securities Act or any state or other applicable securities law and that no Series 2005-1 Note, or any interest or participation therein, may be offered, sold, pledged or otherwise transferred unless registered pursuant to, or exempt from registration under, the Securities Act and any other applicable securities law.

 

 

(iii)  It acknowledges that none of the Issuer, the Servicer, the Administrative Agent or any Purchaser or any person representing the Issuer, the Servicer, the Administrative Agent, any Managing Agent or any Purchaser has made any representation to it with respect to the Issuer (except, as to the Issuer, the representations by the Issuer in the Transaction Documents) or the offering or sale of any Series 2005-1 Note. It has had access to such financial and other information concerning the Issuer and the Series 2005-1 Notes as it has deemed necessary in connection with its decision to purchase the Series 2005-1 Notes.

 

 

(iv)  It acknowledges that each Series 2005-1 Note will bear a legend to the following effect unless the Issuer determines otherwise, consistent with applicable law:

 

“THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE OR ANY INTEREST OR PARTICIPATION HEREIN, MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) TO THE ISSUER OR (2) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT (A “QIB”) PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE, IS DEEMED TO REPRESENT THAT IT IS EITHER A QIB PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB.

 

PRIOR TO PURCHASING THIS NOTE, PURCHASERS SHOULD CONSULT COUNSEL WITH RESPECT TO THE AVAILABILITY AND CONDITIONS OF EXEMPTION FROM THE RESTRICTION ON RESALE OR TRANSFER. THE ISSUER HAS NOT AGREED TO REGISTER THE NOTE UNDER THE SECURITIES ACT, TO QUALIFY THE NOTES UNDER THE SECURITIES LAWS OF ANY STATE OR TO PROVIDE REGISTRATION RIGHTS TO ANY PURCHASER.

 

AS SET FORTH HEREIN, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF.”

 

 

(v)  If it is acquiring the Series 2005-1 Notes, or any interest or participation therein, as a fiduciary or agent for one or more investor accounts, it represents that it has sole investment discretion with respect to such account and that it 

 

	 
	 	 	 
	

	 

has full power to make the acknowledgements, representations and agreements contained herein on behalf of each such account.

 

 

(vi)  It (1) is a QIB, (2) is aware that the sale to it is being made in reliance on Rule 144A and if it is acquiring such Series 2005-1 Note or any interest or participation therein for the account of another QIB, such other QIB is aware that the sale is being made in reliance on Rule 144A and (3) is acquiring such Series 2005-1 Note or any interest or participation therein for its own account or for the account of a QIB.

 

 

(vii)  It is purchasing such Series 2005-1 Note for its own account, or for one or more investor accounts for which it is acting as fiduciary or agent, in each case for investment, and not with a view to, or for offer or sale in connection with, any distribution thereof in violation of the Securities Act, subject to any requirements of law that the disposition of its property or the property of such investor account or accounts be at all times within its or their control and subject to its or their ability to resell such Series 2005-1 Note, or any interest or participation therein, as described herein, in the Indenture and in the Note Purchase Agreement.

 

 

(viii)  It agrees that if in the future it should offer, sell or otherwise transfer such Series 2005-1 Note or any interest or participation therein, it will do so only (A) to the Issuer (B) pursuant to Rule 144A to a person who it reasonably believes is a QIB in a transaction meeting the requirements of Rule 144A, purchasing for its own account or for the account of a QIB, whom it has informed that such offer, sale or other transfer is being made in reliance on Rule 144A.

 

 

(ix)  It acknowledges that the Issuer, the Administrative Agent, the Purchasers and others will rely on the truth and accuracy of the foregoing acknowledgments, representations and agreements, and agrees that if any of the foregoing acknowledgments, representations and agreements deemed to have been made by it are no longer accurate, it shall promptly notify the Issuer.

 

 

(x)  With respect to any foreign purchaser claiming an exemption from United States income or withholding tax, that it has delivered to the Paying Agent a true and complete Form W-8 BEN or Form W-8-ECI, indicating such exemption.

 

 

(xi)  It acknowledges that transfers of such Series 2005-1 Note or any interest or participation therein shall otherwise be subject in all respects to the restrictions applicable thereto contained in the Agreement and the Note Purchase Agreement.

 

Any transfer, resale, pledge or other transfer of the Series 2005-1 Notes contrary to the restrictions set forth above and in the Indenture shall be deemed void ab initio by the Transfer Agent and Registrar.

 

 

(d)  Notwithstanding anything to the contrary herein, so long as and provided that the relevant Liquidity Agreement contains a provision which requires such Liquidity Providers to acknowledge and agree with the provisions of Section 5.02(c) hereof, each Conduit Purchaser may at any time sell or grant, to one or more Liquidity Providers party to any Liquidity Agreement, participating interests or security interests in the Series 2005-1 Notes 

 

	 
	 	 	 
	

	 

without notice to the Issuer or any other action to be taken on the part of such Conduit Purchaser, the related Liquidity Provider, the Administrative Agent or the applicable Managing Agent on behalf of such Conduit Purchaser.

 

 

(e)  Notwithstanding anything to the contrary contained herein, the Series 2005-1 Notes and this Indenture Supplement may, with the prior written consent of the Required Managing Agents, be amended or supplemented to modify the restrictions on and procedures for resale and other transfers of the Series 2005-1 Notes to reflect any change in applicable law or regulation (or the interpretation thereof) or in practices relating to the resale or transfer of restricted securities generally. Each Noteholder shall by its acceptance of a Series 2005-1 Note have agreed to any such amendment or supplement.

 

 

Section 5.03.  Definitive Notes. The Series 2005-1 Notes, upon original issuance, will be issued in definitive, fully registered form, authenticated and delivered in substantially the form attached hereto as Exhibit A. The Series 2005-1 Notes will constitute Definitive Notes within the meaning of the Indenture.

 

 

Section 5.04.  Distributions.

 

 

(a)  On each Decrease Date and each Distribution Date, the Paying Agent shall distribute to each Series 2005-1 Noteholder of record on the related Record Date such Series 2005-1 Noteholder’s pro rata share of amounts on deposit in the Distribution Account as are payable to the Series 2005-1 Noteholders pursuant to Section 4.04.

 

 

(b)  Distributions to the Series 2005-1 Noteholders hereunder shall be made (i) by wire transfer of immediately available funds and (ii) without presentation or surrender of any Series 2005-1 Note or the making of any notation thereon.

 

 

Section 5.05.  Reports and Statements to Series 2005-1 Noteholders.

 

 

(a)  On each Distribution Date, the Paying Agent shall forward to the Series 2005-1 Noteholders a statement substantially in the form of Exhibit C prepared by the Servicer and delivered to the Paying Agent. The Paying Agent shall have no liability for the Servicer’s failure to provide such statement to it.

 

 

(b)  On or before January 31 of each calendar year, beginning with calendar year 2006, the Paying Agent shall furnish or cause to be furnished to each Person who at any time during the preceding calendar year was a Series 2005-1 Noteholder, a statement prepared by the Servicer containing the information required to be contained in the statement to Series 2005-1 Noteholders, as set forth in paragraph (a) above, aggregated for such calendar year or the applicable portion thereof during which such Person was a Series 2005-1 Noteholder, together with such other information as is required to be provided by an issuer of indebtedness under the Code. Such obligation of the Paying Agent shall be deemed to have been satisfied to the extent that substantially comparable information shall be provided by the Paying Agent pursuant to any requirements of the Code as from time to time in effect.

 

	 
	 	 	 
	

	 

 

ARTICLE VI  

AMORTIZATION EVENTS

 

 

Section 6.01.  Series 2005-1 Amortization Events. Upon the occurrence and continuance of any of the following events:

 

 

(a)  failure on the part of the Issuer to pay principal of and interest on the Series 2005-1 Notes in full on or before the Final Stated Maturity Date, or to pay Monthly Principal or the amount of any Decrease to the extent required under Section 4.03, or to pay accrued interest on the Series 2005-1 Notes in full on any Distribution Date, or to pay accrued Monthly Program Fees on any Distribution Date, and such failure remains unremedied for one Business Day; or

 

 

(b)  failure on the part of the Issuer to maintain its separate existence as required by Section 3.07 of the Indenture or duly to perform or observe any covenant set forth in Section 3.03(a), (c), (d), (e), (f), (g), (h), (i) or (j) of the Indenture, which failure continues unremedied for a period of ten calendar days; or

 

 

(c)  failure on the part of the Issuer duly to perform or observe any other covenants or agreements of the Issuer set forth in the Note Purchase Agreement, the Indenture or this Indenture Supplement, which failure continues unremedied for a period of 30 days, in each case, after the date on which written notice of such failure, requiring the same to be remedied, has been given to the Issuer by the Indenture Trustee, or to the Issuer and the Indenture Trustee by the Required Managing Agents; or

 

 

(d)  any representation or warranty made by the Issuer in the Note Purchase Agreement, this Indenture Supplement or the Indenture proves to have been incorrect in any material respect when made, and continues to be incorrect in any material respect for a period of 30 days after the date on which written notice of such failure, requiring the same to be remedied, shall have been given to the Issuer by the Indenture Trustee, or to the Issuer and the Indenture Trustee by the Required Managing Agents; or

 

 

(e)  a Servicer Default; or

 

 

(f)  a CMSC Purchase Termination Event under the Purchase Agreement, an ARSC Purchase Termination Event under the Receivables Purchase Agreement or a Transfer Termination Event under the Transfer and Servicing Agreement; or

 

 

(g)  other than an Event of Default described in clause (v) below, an Event of Default with respect to the Series 2005-1 Notes; or

 

 

(h)  a Series 2005-1 Asset Amount Deficiency, which Series 2005-1 Asset Amount Deficiency continues for any two consecutive Business Days after actual knowledge thereof by the Servicer or the Issuer or upon the next succeeding Distribution Date, whichever is earlier; or

 

	 
	 	 	 
	

	 

 

(i)  the amount on deposit in the Marketing Expenses Account is less than the Required Marketing Expenses Account Amount for any five consecutive Business Days after actual knowledge thereof by the Servicer or upon the next succeeding Distribution Date, whichever is earlier; or

 

 

(j)  the Average Days in Inventory for Appraised Value Homes equals or exceeds one hundred fifty (150) days for any Monthly Period; or

 

 

(k)  the average of the Average Days in Inventory for Appraised Value Homes for any Monthly Period and for the immediately preceding five Monthly Periods equals or exceeds one hundred twenty (120) days; or

 

 

(l)  the Average Days in Inventory for Homes other than Appraised Value Homes equals or exceeds sixty (60) days for any Monthly Period; or

 

 

(m)  the average of the Average Days in Inventory for Homes other than Appraised Value Homes for any Monthly Period and for the immediately preceding five Monthly Periods equals or exceeds forty (40) days; or

 

 

(n)  the Default Ratio for any Monthly Period exceeds 5.0%, or the Three Month Average Default Ratio for any Monthly Period exceeds 4.0%; or

 

 

(o)  the Dilution Ratio for any Monthly Period exceeds 1.5%, or the Three Month Average Dilution Ratio for any Monthly Period exceeds 1.0%; or

 

 

(p)  Net Credit Losses for any Monthly Period exceed $750,000 and for any twelve consecutive Monthly Periods exceed $1,500,000; or

 

 

(q)  the failure to vest and maintain in the Indenture Trustee a perfected first priority security interest in the Pledged Assets; or

 

 

(r)  either (i) the Internal Revenue Service files notice of a lien pursuant to Section 6323 of the Internal Revenue Code with respect to any of the ARSC Purchased Assets, and such Lien has not been released within five days or, if released, proved to the satisfaction of the Rating Agencies, or (ii) the PBGC files, or indicates its intention to file a notice of a lien pursuant to Section 4068 of ERISA with respect to any of the Pledged Assets; or

 

 

(s)  any of the Purchase Agreement, the Receivables Purchase Agreement, the Transfer and Servicing Agreement, the Note Purchase Agreement, the Performance Guarantees, the Indenture, this Indenture Supplement or any related documents cease, for any reason, to be in full force and effect, other than in accordance with its terms; or

 

 

(t)  a failure on the part of CMSC, as the Servicer, to cooperate with the transfer of the servicing to a successor Servicer following the delivery of a Termination Notice pursuant to the Transfer and Servicing Agreement, which failure is determined by the Required Managing Agents to be material and continues unremedied for a period of ten calendar days after the date on which written notice of such failure, requiring the same to be remedied, has been 

 

	 
	 	 	 
	

	 

given to the Issuer by the Indenture Trustee, or to the Issuer and the Indenture Trustee by the Required Managing Agents; or

 

 

(u)  an Event of Bankruptcy shall occur with respect to the Issuer, the Transferor, Cendant Corporation, CRESG, CMSC or CMF; or

 

 

(v)  an Event of Default arising from a determination that the Issuer is required to be registered under the Investment Company Act of 1940; or

 

 

(w)  a Change of Control shall have occurred; 

 

then, (i) in the case of any event described in clauses (a) through (g), (i), (n) through (t), or (w), an “Amortization Event” will be deemed to have occurred only if, after the applicable grace period, if any, set forth in such clauses, either the Indenture Trustee (at the direction of the Required Managing Agents) or the Required Managing Agents, in each case by notice then given in writing to the Issuer and the Servicer (and to the Indenture Trustee if given by the Series 2005-1 Noteholder) declare that an Amortization Event has occurred as of the date of such notice, (ii) in the case of any event described in clauses (h), (j), (k), (l) and (m), an Amortization Event will occur at the close of business on the fifth Business Day following the actual knowledge of the Issuer or the Servicer of such event without any notice or other action on the part of the Indenture Trustee or the Series 2005-1 Noteholder unless prior to that time the Required Managing Agents by notice then given in writing to the Issuer, the Servicer and the Indenture Trustee declare that an Amortization Event will not result from the occurrence of such event and (iii) in the case of any event described in clauses (u) or (v), an Amortization Event shall occur immediately upon the occurrence of such event without any notice or other action on the part of the Indenture Trustee or the Series 2005-1 Noteholders.

 

In addition to the foregoing, if an Amortization Event has occurred, then, at the written direction of the Required Managing Agents, the Indenture Trustee, as assignee of the Transferor and the Issuer with respect to the Lockboxes, may give Termination Notices to the Lockbox Banks in accordance with Section 9.06 of the Transfer and Servicing Agreement. 

 

 

ARTICLE VII  

OPTIONAL REDEMPTION OF SERIES 2005-1 NOTES

 

 

Section 7.01.  Optional Redemption of Series 2005-1 Notes.

 

 

(a)  On any Business Day, subject to the provisions of Section 7.01(b) below, the Issuer shall have the option to redeem the Series 2005-1 Notes, at a redemption price equal to (i) if such day is a Distribution Date, the Redemption Price for such Distribution Date or (ii) if such day is not a Distribution Date, the Redemption Price for the immediately succeeding Distribution Date. 

 

 

(b)  The Issuer shall give the Servicer, the Administrative Agent, the Managing Agents and the Indenture Trustee at least thirty (30) days (or such lesser number of days as may be agreed to by the Managing Agents and the Indenture Trustee at such time) prior 

 

	 
	 	 	 
	

	 

written notice of the date on which the Issuer intends to exercise such optional redemption. Not later than 12:00 noon, New York City time, on such day the Issuer shall deposit into (a) the Series 2005-1 Principal Subaccount in immediately available funds the excess of the principal portion of the Redemption Price over the amount, if any, on deposit in the Series 2005-1 Principal Subaccount and (b) the Distribution Account in immediately available funds the excess of the remaining portions of the Redemption Price over the amount, if any, of the Monthly Interest, Monthly Program Fees and other amounts on deposit in the Distribution Account which are allocable to Series 2005-1 and available for the payment of such amounts. Such redemption option is subject to payment in full of the Redemption Price. Upon payment and distribution of the Redemption Price and the reduction in the Series Outstanding Amount to zero, the Series 2005-1 Notes shall be cancelled, the Series 2005-1 Noteholders shall have no further obligations to fund under the Note Purchase Agreement and the Series 2005-1 Noteholders shall have no further interest in the Pledged Assets. The Redemption Price shall be distributed as set forth in Section 4.04.

 

 

ARTICLE VIII  

MISCELLANEOUS PROVISIONS

 

 

Section 8.01.  Ratification of Agreement. As supplemented by this Indenture Supplement, the Indenture is in all respects ratified and confirmed and the Indenture as so supplemented by this Indenture Supplement shall be read, taken and construed as one and the same instrument.

 

 

Section 8.02.  Counterparts. This Indenture Supplement may be executed in two or more counterparts, and by different parties on separate counterparts, each of which shall be an original, but all of which shall constitute one and the same instrument.

 

 

Section 8.03.  Governing Law. THIS INDENTURE SUPPLEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, INCLUDING §5-1401 OF THE NEW YORK GENERAL OBLIGATIONS LAW, BUT OTHERWISE WITHOUT REGARD TO CONFLICT OF LAW PRINCIPLES.

 

	

	 	 	 
	

	

IN WITNESS WHEREOF, the undersigned have caused this Indenture Supplement to be duly executed and delivered by their respective duly authorized officers on the day and year first above written.

 

 

 

	 	
CENDANT MOBILITY CLIENT-BACKED         

RELOCATION RECEIVABLES FUNDING LLC,         

as Issuer

 

By: /s/ Elizabeth R. Cohen            

	 	
Name: Elizabeth R. Cohen

Title: Vice President and Assistant Treasurer

 

	 	
 

JPMORGAN CHASE BANK,

NATIONAL ASSOCIATION,

as Indenture Trustee

 

By: /s/ Daniel C. Brown

	 	
Name: Daniel C. Brown

Title: Vice President

 

	 	
 

THE BANK OF NEW YORK,

as Paying Agent, Authentication Agent

and Transfer Agent and Registrar

 

By: /s/ Catherine Murray   

	 	
Name: Catherine Murray

Title: Assistant Treasurer

 

	 
	 	 	 
	

	 

 

EXHIBIT A

 

FORM OF VARIABLE FUNDING NOTE

 

 

THIS NOTE HAS NOT BEEN AND WILL NOT BE REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR ANY STATE SECURITIES LAW. THE HOLDER HEREOF, BY PURCHASING THIS NOTE, AGREES THAT THIS NOTE OR ANY INTEREST OR PARTICIPATION HEREIN, MAY BE REOFFERED, RESOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IN COMPLIANCE WITH THE SECURITIES ACT AND OTHER APPLICABLE LAWS AND ONLY (1) TO THE ISSUER OR (2) PURSUANT TO RULE 144A UNDER THE SECURITIES ACT TO A PERSON THAT THE HOLDER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF RULE 144A UNDER THE SECURITIES ACT (A “QIB”) PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF A QIB, WHOM THE HOLDER HAS INFORMED, IN EACH CASE, THAT THE REOFFER, RESALE, PLEDGE OR OTHER TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A UNDER THE SECURITIES ACT. EACH NOTE OWNER BY ACCEPTING A BENEFICIAL INTEREST IN THIS NOTE, IS DEEMED TO REPRESENT THAT IT IS EITHER A QIB PURCHASING FOR ITS OWN ACCOUNT OR A QIB PURCHASING FOR THE ACCOUNT OF ANOTHER QIB.

 

PRIOR TO PURCHASING ANY INTEREST IN THE NOTE, PURCHASERS SHOULD CONSULT COUNSEL WITH RESPECT TO THE AVAILABILITY AND CONDITIONS OF EXEMPTION FROM THE RESTRICTION ON RESALE OR TRANSFER. THE ISSUER HAS NOT AGREED TO REGISTER THE NOTE UNDER THE SECURITIES ACT, TO QUALIFY THE NOTE UNDER THE SECURITIES LAWS OF ANY STATE OR TO PROVIDE REGISTRATION RIGHTS TO ANY PURCHASER.

 

AS SET FORTH HEREIN, THE OUTSTANDING PRINCIPAL AMOUNT OF THIS NOTE AT ANY TIME MAY BE LESS THAN THE AMOUNT SHOWN ON THE FACE HEREOF. THE SERIES OUTSTANDING AMOUNT WILL BE REDUCED FROM TIME TO TIME BY DISTRIBUTIONS ON THE SERIES 2005-1 NOTES ALLOCABLE TO PRINCIPAL. IN ADDITION, THE SERIES OUTSTANDING AMOUNT MAY BE INCREASED SUBJECT TO CERTAIN TERMS AND CONDITIONS SET FORTH IN THE INDENTURE SUPPLEMENT AND THE NOTE PURCHASE AGREEMENT. ACCORDINGLY, FOLLOWING THE INITIAL ISSUANCE OF THE NOTE, THE OUTSTANDING AMOUNT OF THIS NOTE MAY BE DIFFERENT FROM THE INITIAL OUTSTANDING AMOUNT SHOWN ON THE FACE HEREOF. ANYONE ACQUIRING THIS NOTE MAY ASCERTAIN THE CURRENT OUTSTANDING PRINCIPAL BALANCE OF THIS NOTE BY INQUIRY OF THE PAYING AGENT. ON THE DATE OF THE INITIAL ISSUANCE OF THE NOTE, THE PAYING AGENT IS THE BANK OF NEW YORK.

 

	 
	 	 	 
	

	 

 
THE HOLDER OF THIS NOTE BY ITS ACCEPTANCE HEREOF, AND EACH HOLDER OF A BENEFICIAL INTEREST IN THIS NOTE BY THE ACQUISITION OF A BENEFICIAL INTEREST THEREIN, COVENANTS AND AGREES THAT IT WILL NOT AT ANY TIME INSTITUTE AGAINST THE ISSUER, APPLE RIDGE SERVICES CORPORATION OR CENDANT MOBILITY FINANCIAL CORPORATION OR JOIN IN ANY INSTITUTION AGAINST THE ISSUER, APPLE RIDGE SERVICES CORPORATION OR CENDANT MOBILITY FINANCIAL CORPORATION OF ANY BANKRUPTCY PROCEEDINGS UNDER ANY UNITED STATES FEDERAL OR STATE BANKRUPTCY OR SIMILAR LAW IN CONNECTION WITH ANY OBLIGATIONS RELATING TO THE NOTE OR THE INDENTURE.

THE HOLDER OF THIS NOTE BY ACCEPTANCE OF THIS NOTE AND EACH HOLDER OF A BENEFICIAL INTEREST IN THIS NOTE, BY THE ACQUISITION OF A BENEFICIAL INTEREST THEREIN, AGREE TO TREAT THE NOTE AS INDEBTEDNESS OF THE ISSUER FOR APPLICABLE FEDERAL, STATE, AND LOCAL INCOME AND FRANCHISE TAX LAW AND FOR PURPOSES OF ANY OTHER TAX IMPOSED ON OR MEASURED BY INCOME.

 

	  
	 	 	 
	

	 

 

REGISTERED

 

No. R-[__] 

 

 

CENDANT MOBILITY CLIENT-BACKED RELOCATION RECEIVABLES FUNDING LLC

 

 

SECURED VARIABLE FUNDING NOTE, SERIES 2005-1

 

 

Cendant Mobility Client-Backed Relocation Receivables Funding LLC (formerly known as Apple Ridge Funding LLC), a Delaware limited liability company (herein referred to as the “Issuer”), for value received, hereby promises to pay to [______________], as a Managing Agent for the benefit of its Purchaser Group under the Note Purchase Agreement, or its assigns, subject to the following provisions, a principal sum of [_________________] DOLLARS ($[____________]), or such greater or lesser amount as determined in accordance with the Indenture, on the earlier of the Final Stated Maturity Date and the Redemption Date, if any. The Issuer will pay interest on the Note with respect to each Interest Period in accordance with Section 4.02 of the Indenture Supplement. Such principal of and interest on this Note shall be paid in the manner specified on the reverse hereof.

The principal of and interest on this Note are payable in such coin or currency of the United States of America as at the time of payment is legal tender for payment of public and private debts.

Reference is made to the further provisions of this Note set forth on the reverse hereof, which shall have the same effect as though fully set forth on the face of this Note.

Unless the certificate of authentication hereon has been executed by the Authentication Agent whose name appears below by manual signature, this Note shall not be entitled to any benefit under the Indenture referred to on the reverse hereof, or be valid or obligatory for any purpose.    

 

This Note is one of a Series of Notes , Series 2005-1, as more fully described on the reverse side hereof.

 

	

 

	 	 	 
	

	

IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed, manually or in facsimile, by its Authorized Officer.

 

 

	 	
CENDANT MOBILITY CLIENT-BACKED RELOCATION RECEIVABLES FUNDING LLC,

as Issuer

 

By: 

	 	
Name: 

 

Title:

	 	
 

 

 

Date: January [__], 2005

 

 

	

 

	 	 	 
	

	

AUTHENTICATION AGENT’S CERTIFICATE OF AUTHENTICATION

 

 

This is one of the Notes designated above and referred to in the within-mentioned Indenture.

	 	
BANK OF NEW YORK, 

not in its individual capacity but 

solely as Authentication Agent

 

By: 

	
 
	
 

Name: 

 

Title:

	 	
 

 

 

Date: January [__], 2005

	 
	 	 D-2	 
	

	 

 

[REVERSE OF NOTE]

 

 

This duly authorized Note of the Issuer (herein called the “Note”) is designated as one of its Secured Variable Funding Notes, Series 2005-1 (herein called the “Series 2005-1 Notes”), and is issued under a Master Indenture dated as of April 25, 2000 (such indenture, as amended, and as supplemented by the Series 2005-1 Indenture Supplement dated as of January [__], 2005 among the parties to the Master Indenture (the “Indenture Supplement”), is herein called the “Indenture”), between the Issuer, JPMorgan Chase Bank, N.A. (successor by merger to Bank One, National Association), as indenture trustee (the “Indenture Trustee,” which term includes any successor Indenture Trustee under the Indenture), and The Bank of New York, as paying agent, authentication agent and transfer agent and registrar. The respective rights and obligations of the Issuer, the Indenture Trustee and the Holder of the Note are set forth in the Indenture. This Note is subject to all terms of the Indenture. All terms used in the Note that are not defined herein shall have the meanings assigned to them in or pursuant to the Indenture, as supplemented or amended.

Payments of interest on and principal of this Note due and payable on any Distribution Date shall be made by wire transfer to the registered Holder of this Note (or one or more predecessor Notes) on the Note Register as of the close of business on each Record Date (the “Registered Holder”). Any reduction in the principal amount of this Note (or any one or more predecessor Notes) effected by any payments made on any Distribution Date shall be binding upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof, whether or not noted hereon. 

As provided in the Indenture, the Series 2005-1 Notes may be redeemed in whole, but not in part, on the Redemption Date, if any.

As provided in the Indenture and subject to certain limitations set forth therein, the transfer of this Note may be registered on the Note Register upon surrender of this Note for registration of transfer at the office or agency designated by the Issuer pursuant to the Indenture, duly endorsed by, or accompanied by a written instrument of transfer in form satisfactory to the Transfer Agent and Registrar duly executed by, the Holder hereof or his attorney-in-fact duly authorized in writing, and such other documents as the Transfer Agent and Registrar may reasonably require, and thereupon one or more new Notes of the same Series of authorized denominations and in the same aggregate principal amount will be issued to the designated transferee or transferees. No service charge will be charged for any registration of transfer or exchange of this Note, but the Issuer or the Transfer Agent and Registrar may require payment of a sum sufficient to cover any tax or other governmental charge that may be imposed in connection with any such registration of transfer or exchange.

Each Noteholder by acceptance of this Note covenants and agrees that no recourse may be taken, directly or indirectly, with respect to the obligations of the Issuer or the Indenture Trustee on the Notes or under the Indenture or any certificate or other writing delivered in connection therewith, against (i) the Indenture Trustee in its individual capacity, (ii) any owner of a beneficial interest in the Issuer or (iii) any partner, owner, beneficiary, agent, officer, 

 

	 
	 	 	 
	

	 

director or employee of the Indenture Trustee in its individual capacity, any holder of a beneficial interest in the Issuer or the Indenture Trustee or of any successor or assign of the Indenture Trustee in its individual capacity, except as any such Person may have expressly agreed and except that any such partner, owner or beneficiary shall be fully liable, to the extent provided by applicable law, for any unpaid consideration for stock, unpaid capital contribution or failure to pay any installment or call owing to such entity.

Prior to the due presentment for registration of transfer of this Note, the Issuer, the Indenture Trustee, the Paying Agent, the Authentication Agent, the Transfer Agent and Registrar and any agent of the foregoing shall treat the Person in whose name this Note (as of the day of determination or as of such other date as may be specified in the Indenture) is registered as the owner hereof for all purposes, whether or not this Note be overdue, and neither the Issuer, the Indenture Trustee, the Paying Agent, the Authentication Agent, the Transfer Agent and Registrar nor any such agent of the foregoing shall be affected by notice to the contrary.

The Indenture permits, with certain exceptions as therein provided, the amendment thereof and the modification of the rights and obligations of the Issuer and the rights of the Holders of the Series 2005-1 Notes and other notes issued under the Indenture at any time by the Issuer and the Indenture Trustee with the consent of the Majority Investors. The Indenture also contains provisions permitting the Holders of Series 2005-1 Notes representing specified percentages of the Series Outstanding Amount, on behalf of the Holder of this Note, to waive compliance by the Issuer with certain provisions of the Indenture and certain past defaults under the Indenture and their consequences. Any such consent or waiver shall be conclusive and binding upon the Holder of this Note and upon all future Holders of this Note and of any Note issued upon the registration of transfer hereof or in exchange hereof or in lieu hereof whether or not notation of such consent or waiver is made upon this Note. The Indenture also permits, subject to the conditions set forth in the Indenture, the Indenture Trustee to amend or waive certain terms and conditions set forth in the Indenture without the consent of Holders of any notes issued thereunder or without the consent of holders of any Series of notes not affected thereby.

The term “Issuer” as used in this Note includes any successor to the Issuer under the Indenture.

The Notes are issuable only in registered form in denominations as provided in the Indenture, subject to certain limitations therein set forth.

This Note and the Indenture shall be governed by and construed in accordance with the laws of the State of New York, including Section 5-1401 of the New York General Obligations Law, but otherwise without regard to its conflict of law principles.

No reference herein to the Indenture and no provision of this Note or of the Indenture shall alter or impair the obligation of the Issuer, which is absolute and unconditional, to pay the principal of and interest on this Note at the times, place, and rate, and in the coin or currency herein prescribed.

	 
	 	 	 
	

	 

Anything herein to the contrary notwithstanding, except as expressly provided in the Transaction Documents, neither the owner of a beneficial interest in the Issuer, nor any of its partners, beneficiaries, agents, officers, directors, employees or successors or assigns shall be personally liable for, nor shall recourse be had to any of them for, the payment of principal of or interest on, or performance of, or omission to perform, any of the covenants, obligations or indemnifications contained in this Note or the Indenture. The Holder of this Note by the acceptance hereof agrees that, except as expressly provided in the Transaction Documents, the Holder shall have no claim against any of the foregoing for any deficiency, loss or claim therefrom; provided, however, that nothing contained herein shall be taken to prevent recourse to, and enforcement against, the assets of the Issuer for any and all liabilities, obligations and undertakings contained in the Indenture or in this Note.

	  
	 	 	 
	

	 

ASSIGNMENT

 

 

Social Security or taxpayer I.D. or other identifying number of assignee

 

 

                                                                                          

 

FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers unto 

 

 

                                                                                          

 

(name and address of assignee)

 

 

the within Note and all rights thereunder, and hereby irrevocably constitutes and appoints attorney, to transfer said Note on the books kept for registration thereof, with full power of substitution in the premises.

 

 

 

Dated:                                                                                           *                                    

Signature Guaranteed:

 

* NOTE: The signature to this assignment must correspond with the name of the registered owner as it appears on the face of the within Note in every particular, without alteration, enlargement or any change whatsoever.DOR Securities Purchase Agreement

 

 

SECURITIES PURCHASE AGREEMENT

 

This Securities Purchase Agreement (this "Agreement") is dated as of February 1, 2005, among DOR BioPharma, Inc., a Delaware corporation (the "Company"), and the investors identified on the signature pages hereto (each, an "Investor" and collectively, the "Investors").

 

WHEREAS, subject to the terms and conditions set forth in this Agreement and pursuant to Section 4(2) of the Securities Act (as defined below) and Rule 506 promulgated thereunder, the Company desires to issue and sell to each Investor, and each Investor, severally and not jointly, desires to purchase from the Company certain securities of the Company, as more fully described in this Agreement.

 

NOW, THEREFORE, IN CONSIDERATION of the mutual covenants contained in this Agreement, and for other good and valuable consideration the receipt and adequacy of which are hereby acknowledged, the Company and the Investors agree as follows:

 

ARTICLE I.  

 

DEFINITIONS

 

1.1  Definitions. In addition to the terms defined elsewhere in this Agreement, for all purposes of this Agreement, the following terms shall have the meanings indicated in this Section 1.1:

 

"Action" means any action, suit, inquiry, notice of violation, proceeding (including any partial proceeding such as a deposition) or investigation pending or threatened in writing against or affecting the Company, any Subsidiary or any of their respective properties before or by any court, arbitrator, governmental or administrative agency, regulatory authority (federal, state, county, local or foreign), stock market, stock exchange or trading facility.

 

"Affiliate" means any Person that, directly or indirectly through one or more intermediaries, controls or is controlled by or is under common control with a Person, as such terms are used in and construed under Rule 144.

 

“AMEX” means the American Stock Exchange.

 

"Business Day" means any day except Saturday, Sunday and any day that is a federal legal holiday or a day on which banking institutions in the State of New York are authorized or required by law or other governmental action to close.

 

"Closing" means the closing of the purchase and sale of the Securities pursuant to Article II.

 

"Closing Date" means the Business Day immediately following the date on which all the conditions set forth in Sections 5.1 and 5.2 hereof are satisfied, or such other date as the parties may agree.

 

"Commission" means the Securities and Exchange Commission.

 

"Common Stock" means the common stock of the Company, par value $.001 per share, and any securities into which such common stock may hereafter be reclassified. 

 

"Common Stock Equivalents" means any securities of the Company or any Subsidiary which entitle the holder thereof to acquire Common Stock at any time, including without limitation, any debt, preferred stock, rights, options, warrants or other instrument that is at any time convertible into or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock or other securities that entitle the holder to receive, directly or indirectly, Common Stock.

 

"Company Counsel" means Edwards & Angell, LLP.

 

"Disclosure Materials" has the meaning set forth in Section 3.1(h) hereof.

 

"Discussion Time" has the meaning set forth in Section 3.2(h) hereof.

 

"Effective Date" means the date that the Registration Statement required by Section 2(a) of the Registration Rights Agreement is first declared effective by the Commission.

 

"Exchange Act" means the Securities Exchange Act of 1934, as amended.

 

"First Notice" has the meaning set forth in Section 4.2 hereof.

 

"GAAP" has the meaning set forth in Section 3.1(h) hereof.

 

"Intellectual Property Rights" has the meaning set forth in Section 3.1(o) hereof.

 

"Investment Amount" means, with respect to each Investor, the investment amount indicated below such Investor's name on the signature page of this Agreement.

 

"Investor Party" has the meaning set forth in Section 4.7 hereof.

 

"Investors" shall mean the parties listed on Schedule 1 attached hereto. 

 

"Lien" means any lien, charge, encumbrance, security interest, right of first refusal or other restrictions of any kind.

 

"Losses" shall have the meaning set forth in Section 4.7 hereof.

 

"Material Adverse Effect" has the meaning set forth in Section 3.1(b) hereof. 

 

"Material Permits" has the meaning set forth in Section 3.1(m) hereof.

 

"New York Courts" has the meaning set forth in Section 6.8 hereof.

 

"Notice of Acceptance" has the meaning set forth in Section 4.2(c) hereof.

 

"Per Unit Purchase Price" equals $0.45.

 

"Person" means an individual or corporation, partnership, trust, incorporated or unincorporated association, joint venture, limited liability company, joint stock company, government (or an agency or subdivision thereof) or other entity of any kind.

 

"Proceeding" means an action, claim, suit, investigation or proceeding (including, without limitation, an investigation or partial proceeding, such as a deposition), whether commenced or threatened.

 

"Registration Statement" means a registration statement meeting the requirements set forth in the Registration Rights Agreement and covering the resale by the Investors of the Shares and the Warrant Shares.

 

"Registration Rights Agreement" means the Registration Rights Agreement, dated as of the date of this Agreement, among the Company and the Investors, in the form of Exhibit B hereto.

 

"Rule 144" means Rule 144 promulgated by the Commission pursuant to the Securities Act, as such Rule may be amended from time to time, or any similar rule or regulation hereafter adopted by the Commission having substantially the same effect as such Rule.

 

“Securities” means the Shares, the Warrants and the Warrant Shares.

 

"Securities Act" means the Securities Act of 1933, as amended.

 

"SEC Reports" has the meaning set forth in Section 3.1(h) hereof.

 

"Shares" means the shares of Common Stock issued or issuable to the Investors pursuant to this Agreement.

 

"Short Sales" means, without limitation, all "short sales" as defined in Rule 3b-3 of the Exchange Act.

 

"Subsidiary" means any "significant subsidiary" as defined in Rule 1-02(w) of the Regulation S-X promulgated by the Commission under the Exchange Act.

 

"Trading Day" means (i) a day on which the Common Stock is traded on a Trading Market (other than the OTC Bulletin Board), or (ii) if the Common Stock is not listed on a Trading Market, a day on which the Common Stock is traded in the over-the-counter market, as reported by the OTC Bulletin Board, or (iii) if the Common Stock is not quoted on the OTC Bulletin Board, a day on which the Common Stock is quoted in the over-the-counter market as reported by the National Quotation Bureau Incorporated (or any similar organization or agency succeeding to its functions of reporting prices); provided, that in the event that the Common Stock is not listed or quoted as set forth in (i), (ii) and (iii) hereof, then Trading Day shall mean a Business Day.

 

"Trading Market" means whichever of the New York Stock Exchange, the AMEX, the NASDAQ National Market, the NASDAQ SmallCap Market or OTC Bulletin Board on which the Common Stock is listed or quoted for trading on the date in question.

 

"Transaction Documents" means this Agreement, the Warrants, the Registration Rights Agreement, and any other documents or agreements executed in connection with the transactions contemplated hereunder.

 

"Warrants" means the Common Stock purchase warrants in the form of Exhibit A, which are issuable to the Investors at the Closing.

 

"Warrant Shares" means the shares of Common Stock issuable upon exercise of the Warrants.

 

ARTICLE II.  

 

PURCHASE AND SALE

 

2.1  Closing. Subject to the terms and conditions set forth in this Agreement, at the Closing the Company shall issue and sell to each Investor, and each Investor shall, severally and not jointly, purchase from the Company, the Shares and the Warrants representing such Investor’s Investment Amount. The Closing shall take place at the offices of Edwards & Angell, LLP, 750 Lexington Avenue, New York, New York 10022 on the Closing Date or at such other location or time as the parties may agree.

 

2.2  Closing Deliveries. (a)  At the Closing, the Company shall deliver or cause to be delivered to each Investor the following (the “Company Deliverables”):

 

(i)  a certificate evidencing a number of Shares equal to such Investor’s Investment Amount divided by the Per Unit Purchase Price, registered in the name of such Investor;

 

(ii)  a Warrant, registered in the name of such Investor, pursuant to which such Investor shall have the right to acquire the number of shares of Common Stock equal to 75% of the number of Shares issuable to such Investor pursuant to Section 2.2(a)(i);

 

(iii)  the legal opinion of Company Counsel, in agreed form, addressed to the Investors; and

 

(iv)  this Agreement and the Registration Rights Agreement, duly executed by the Company.

 

(b)  At the Closing, each Investor shall deliver or cause to be delivered to the Company the following:

 

(i)  its Investment Amount, in United States dollars and in immediately available funds, by wire transfer to an account designated in writing by the Company for such purpose; and

 

(ii)  this Agreement and the Registration Rights Agreement, duly executed by such Investor.

 

ARTICLE III.  

 

REPRESENTATIONS AND WARRANTIES

 

3.1  Representations and Warranties of the Company. The Company hereby makes the following representations and warranties to each Investor:

 

(a)  Subsidiaries. The Company has no direct or indirect Subsidiaries other than as specified in the SEC Reports. Except as specified in the SEC Reports or in Schedule 3.1(a), the Company owns, directly or indirectly, all of the capital stock of each Subsidiary free and clear of any and all Liens, other than restrictions on transfer under applicable securities laws, and all the issued and outstanding shares of capital stock of each Subsidiary are validly issued and are fully paid, non-assessable and free of preemptive and similar rights. 

 

(b)  Organization and Qualification. Each of the Company and each Subsidiary is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization (as applicable), with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and each Subsidiary is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, would not, individually or in the aggregate, have or reasonably be expected to result in (i) a material and adverse effect on the legality, validity or enforceability of any Transaction Document, (ii) a material and adverse effect on the results of operations, assets, prospects, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole, or (iii) a material adverse impairment to the Company's ability to perform on a timely basis its obligations under any Transaction Document (any of (i), (ii) or (iii), a "Material Adverse Effect").

 

(c)  Authorization; Enforcement. The Company has the requisite corporate power and authority to enter into and to consummate the transactions contemplated by each of the Transaction Documents and otherwise to carry out its obligations thereunder. The execution and delivery of each of the Transaction Documents by the Company and the consummation by it of the transactions contemplated thereby have been duly authorized by all necessary action on the part of the Company and no further action is required by the Company in connection therewith other than the filings referred to in Section 3.1(e) hereof and required pursuant to Section 4.5 hereof. Each Transaction Document has been (or upon delivery will have been) duly executed by the Company and, when delivered in accordance with the terms hereof, will constitute the valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except (i) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law. 

 

(d)  No Conflicts. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated thereby do not and will not (i) conflict with or violate any provision of the Company's or any Subsidiary's certificate or articles of incorporation, bylaws or other organizational or charter documents, or (ii) conflict with, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, or give to others any rights of termination, amendment, acceleration or cancellation (with or without notice, lapse of time or both) of, any agreement, credit facility, debt or other instrument (evidencing a Company or Subsidiary debt or otherwise) or other understanding to which the Company or any Subsidiary is a party or by which any property or asset of the Company or any Subsidiary is bound or affected, or (iii) result in a violation of any law, rule, regulation, order, judgment, injunction, decree or other restriction of any court or governmental authority to which the Company or a Subsidiary is subject (including federal and state securities laws and regulations), or by which any property or asset of the Company or a Subsidiary is bound or affected; except in the case of each of clauses (ii) and (iii), such as would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect.

 

(e)  Filings, Consents and Approvals. The Company is not required to obtain any consent, waiver, authorization or order of, give any notice to, or make any filing or registration with, any court or other federal, state, local or other governmental authority or other Person in connection with the execution, delivery and performance by the Company of the Transaction Documents, other than (i) the filing with the Commission of one or more Registration Statements in accordance with the requirements Registration Rights Agreement, (ii) filings required by state securities laws, and the timely filing of a Notice of Sale of Securities on Form D with the Commission, (iii) the filings required in accordance with Section 4.5, and (iv) those that have been made or obtained prior to the date of this Agreement.

 

(f)  Issuance of the Securities. The Securities have been duly authorized and, when issued and paid for in accordance with the Transaction Documents, will be duly and validly issued, fully paid and nonassessable, free and clear of all Liens, other than restrictions on transfer under applicable securities laws. The Company has reserved from its duly authorized capital stock the shares of Common Stock issuable pursuant to this Agreement and the Warrants in order to issue the Shares and the Warrant Shares.

 

(g)  Capitalization. The number of shares and type of all authorized, issued and outstanding capital stock of the Company, and all shares of Common Stock reserved for issuance under the Company’s various option and incentive plans, is set forth in the SEC Reports. As of the date hereof, the authorized capital stock of the Company consists of (i) 100,000,000 shares of Common Stock, of which as of the date hereof, 42,070,601 shares are issued and outstanding, and (ii) 4,600,000 shares of preferred stock, no shares of which are outstanding. Except as set forth in Schedule 3.1(g), no securities of the Company are entitled to preemptive or similar rights, and no Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents, and there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exchangeable for, or giving any Person any right to subscribe for or acquire, any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock, or securities or rights convertible or exchangeable into shares of Common Stock. Except as set forth in Schedule 3.1(g), the issue and sale of the Securities will not, immediately or with the passage of time, obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Investors) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under such securities.

 

(h)  SEC Reports; Financial Statements. The Company has filed all reports required to be filed by it under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the 12 months preceding the date hereof (or such shorter period as the Company was required by law to file such reports) (the foregoing materials being collectively referred to herein as the "SEC Reports" and, together with the Schedules to this Agreement (if any), the "Disclosure Materials") on a timely basis or has timely filed a valid extension of such time of filing and has filed any such SEC Reports prior to the expiration of any such extension. As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Securities Act and the Exchange Act and the rules and regulations of the Commission promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Reports comply in all material respects with applicable accounting requirements and the rules and regulations of the Commission with respect thereto as in effect at the time of filing. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved ("GAAP"), except as may be otherwise specified in such financial statements or the notes thereto and except that unaudited financial statements may not contain all footnotes required by GAAP, and fairly present in all material respects the financial position of the Company and its consolidated Subsidiaries as of and for the dates thereof and the results of operations and cash flows for the periods then ended, subject, in the case of unaudited statements, to normal, year-end audit adjustments disclosed therein. 

 

(i)  Material Changes. Since the date of the latest audited financial statements included within the SEC Reports, except as specifically disclosed in the SEC Reports, (i) there has been no event, occurrence or development that has had or that would reasonably be expected to result in a Material Adverse Effect, (ii) the Company has not incurred any liabilities (contingent or otherwise) other than (A) trade payables, accrued expenses, and other liabilities incurred in the ordinary course of business consistent with past practice and (B) liabilities not required to be reflected in the Company's financial statements pursuant to GAAP or required to be disclosed in filings made with the Commission, (iii) the Company has not altered its method of accounting or the identity of its auditors, (iv) the Company has not declared or made any dividend or distribution of cash or other property to its stockholders or purchased, redeemed or made any agreements to purchase or redeem any shares of its capital stock, and (v) except as set forth in Schedule 3.1(i) the Company has not issued any equity securities to any officer or director, except pursuant to existing Company stock option plans. The Company does not have pending before the Commission any request for confidential treatment of information.

 

(j)  Litigation. There is no Action which (i) adversely affects or challenges the legality, validity or enforceability of any of the Transaction Documents or the Securities or (ii) except as specifically disclosed in the SEC Reports, would, if there were an unfavorable decision, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. Neither the Company nor any Subsidiary, nor any director or officer thereof (in his or her capacity as such), is or has been the subject of any Action involving a claim of violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty, except as specifically disclosed in the SEC Reports. There has not been, and to the knowledge of the Company, there is not pending any investigation by the Commission involving the Company or any current or former director or officer of the Company (in his or her capacity as such). The Commission has not issued any stop order or other order suspending the effectiveness of any registration statement filed by the Company or any Subsidiary under the Exchange Act or the Securities Act.

 

(k)  Labor Relations. No material labor dispute exists or, to the actual knowledge of the executive officers or directors of the Company, is imminent with respect to any of the employees of the Company.

 

(l)  Compliance. Neither the Company nor any Subsidiary (i) is in default under or in violation of (and no event has occurred that has not been waived that, with notice or lapse of time or both, would result in a default by the Company or any Subsidiary under), nor has the Company or any Subsidiary received notice of a claim that it is in default under or that it is in violation of, any indenture, loan or credit agreement or any other agreement or instrument to which it is a party or by which it or any of its properties is bound (whether or not such default or violation has been waived), (ii) is in violation of any order of any court, arbitrator or governmental body, or (iii) is or has been in violation of any statute, rule or regulation of any governmental authority, including without limitation all foreign, federal, state and local laws relating to taxes, environmental protection, occupational health and safety, product quality and safety and employment and labor matters, except in each case as would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect. The Company is in compliance with the applicable effective requirements of the Sarbanes-Oxley Act of 2002, as amended, and the rules and regulations thereunder, except where such noncompliance would not have or reasonably be expected to result in a Material Adverse Effect. 

 

(m)  Regulatory Permits. The Company and the Subsidiaries possess all certificates, authorizations and permits issued by the appropriate federal, state, local or foreign regulatory authorities necessary to conduct their respective businesses as described in the SEC Reports, except where the failure to possess such permits would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect ("Material Permits"), and neither the Company nor any Subsidiary has received any notice of proceedings relating to the revocation or modification of any Material Permit.

 

(n)  Title to Assets. The Company and the Subsidiaries have good and marketable title in fee simple to all real property owned by them that is material to their respective businesses and good and marketable title in all personal property owned by them that is material to their respective businesses, in each case free and clear of all Liens, except for Liens as do not materially affect the value of such property and do not materially interfere with the use made and proposed to be made of such property by the Company and the Subsidiaries. Any real property and facilities held under lease by the Company and the Subsidiaries are held by them under valid, subsisting and enforceable leases of which the Company and the Subsidiaries are in compliance, except as would not, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect.

 

(o)  Patents and Trademarks. The Company and the Subsidiaries have, or have rights to use, all patents, patent applications, trademarks, trademark applications, service marks, trade names, copyrights, licenses and other similar rights that are necessary or material for use in connection with their respective businesses as described in the SEC Reports and which the failure to so have would, individually or in the aggregate, have or reasonably be expected to result in a Material Adverse Effect (collectively, the "Intellectual Property Rights"). Neither the Company nor any Subsidiary has received a written notice that the Intellectual Property Rights used by the Company or any Subsidiary violates or infringes upon the rights of any Person where such infringement would have or could reasonably be expected to have a Material Adverse Effect. Except as set forth in the SEC Reports, to the actual knowledge of the executive officers and directors of the Company, all such Intellectual Property Rights are enforceable and there is no existing infringement by another Person of any of the Intellectual Property Rights.

 

(p)  Insurance. The Company and the Subsidiaries are insured by insurers of recognized financial responsibility against such losses and risks and in such amounts as are prudent and customary in the businesses in which the Company and the Subsidiaries are engaged. The Company has no reason to believe that it will not be able to renew its existing insurance coverage as and when such coverage expires or to obtain similar coverage from similar insurers as may be necessary to continue its business on terms consistent with market for the Company’s line of business.

 

(q)  Transactions With Affiliates and Employees. Except as set forth in the SEC Reports, none of the officers or directors of the Company and, to the knowledge of the Company, none of the employees of the Company is presently a party to any transaction with the Company or any Subsidiary (other than for services as employees, officers and directors), including any contract, agreement or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any officer, director or such employee or, to the knowledge of the Company, any entity in which any officer, director, or any such employee has a substantial interest or is an officer, director, trustee or partner.

 

(r)  Internal Accounting Controls. The Company and the Subsidiaries maintain a system of internal accounting controls sufficient to provide reasonable assurance that (i) transactions are executed in accordance with management's general or specific authorizations, (ii) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability, (iii) access to assets is permitted only in accordance with management's general or specific authorization, and (iv) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. The Company has established disclosure controls and procedures (as defined in Exchange Act rules 13a-15(e) and 15d-15(e)) for the Company and designed such disclosure controls and procedures to ensure that material information relating to the Company, including its Subsidiaries, is made known to the certifying officers by others within those entities, particularly during the period in which the Company’s Form 10-KSB or 10-QSB, as the case may be, is being prepared. 

 

(s)  Solvency. Based on the financial condition of the Company as of the Closing Date (and assuming the Closing shall have occurred), the Company’s assets constitute sufficient capital to enable the Company to carry on its business for the current fiscal year as now conducted and as currently proposed to be conducted through May 2005. 

 

(t)  Certain Fees. Except as may be payable to MidSouth Capital, Inc. by the Company, no brokerage or finder's fees or commissions are or will be payable by the Company to any broker, financial advisor or consultant, finder, placement agent, investment banker, bank or other Person with respect to the transactions contemplated by this Agreement. The Investors shall have no obligation with respect to any fees payable to MidSouth Capital, Inc. or with respect to any claims (other than such fees or commissions owed by an Investor pursuant to written agreements executed by such Investor which fees or commissions shall be the sole responsibility of such Investor) made by or on behalf of other Persons for fees of a type contemplated in this Section that may be due in connection with the transactions contemplated by this Agreement. 

 

(u)  Certain Registration Matters. Assuming the accuracy of the Investors’ representations and warranties set forth in Section 3.2(b)-(e), no registration under the Securities Act is required for the offer and sale of the Shares and Warrant Shares by the Company to the Investors under the Transaction Documents. The Company has not granted or agreed to grant to any Person any rights (including "piggy-back" registration rights) to have any securities of the Company registered with the Commission or any other governmental authority that have not been satisfied.

 

(v)  Listing and Maintenance Requirements. Except as specified in the SEC Reports, the Company has not, in the two years preceding the date hereof, received notice from any Trading Market to the effect that the Company is not in compliance with the listing or maintenance requirements thereof. The issuance and sale of the Securities under the Transaction Documents does not contravene the rules and regulations of the Trading Market on which the Common Stock is currently listed or quoted, and no approval of the shareholders of the Company thereunder is required for the Company to issue and deliver to the Investors the maximum number of Securities contemplated by Transaction Documents.

 

(w)  Investment Company. The Company is not, and is not an Affiliate of, an “investment company” within the meaning of the Investment Company Act of 1940, as amended.

 

(x)  Application of Takeover Protections. The Company has taken all necessary action, if any, in order to render inapplicable any control share acquisition, business combination, poison pill (including any distribution under a rights agreement) or other similar anti-takeover provision under the Company's Certificate of Incorporation (or similar charter documents) or the laws of its state of incorporation that is or could become applicable to the Investors as a result of the Investors and the Company fulfilling their obligations or exercising their rights under the Transaction Documents, including without limitation the Company's issuance of the Securities and the Investors' ownership of the Securities.

 

(y)  No Additional Agreements. The Company does not have any agreement or understanding with any Investor with respect to the transactions contemplated by the Transaction Documents other than as specified in the Transaction Documents.

 

(z)  Disclosure. Upon the filing of the initial Current Report on Form 8-K required under Section 4.5, the Investors will not have received from the Company or any Person acting on its behalf any information that the Company believes constitutes material, non-public information concerning the Company. If such Current Report is not filed by February 2, 2005, then the Company confirms that it has not disclosed any potentially material non-public information to any Investor concerning the Company. The Company understands and confirms that the Investors will rely on the foregoing representations and covenants in effecting transactions in securities of the Company. All written disclosures provided to the Investors regarding the Company, its business and the transactions contemplated hereby, furnished by or on behalf of the Company (including the Company’s representations and warranties set forth in this Agreement) are true and correct and do not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements made therein, in light of the circumstances under which they were made, not misleading.

 

3.2  Representations and Warranties of the Investors. Each Investor hereby, for itself and for no other Investor, represents and warrants to the Company as follows:

 

(a)  Organization; Authority. Such Investor is an entity duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization with the requisite corporate or partnership power and authority to enter into and to consummate the transactions contemplated by the applicable Transaction Documents and otherwise to carry out its obligations thereunder. The execution, delivery and performance by such Investor of the transactions contemplated by this Agreement has been duly authorized by all necessary corporate or, if such Investor is not a corporation, such partnership, limited liability company or other applicable like action, on the part of such Investor. Each of this Agreement and the Registration Rights Agreement has been duly executed by such Investor, and when delivered by such Investor in accordance with terms hereof, will constitute the valid and legally binding obligation of such Investor, enforceable against it in accordance with its terms, except (i) as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally the enforcement of, creditors'’ rights and remedies or by other equitable principles of general application affecting enforcement of creditors’ rights generally, (ii) as limited by laws relating to the availability of specific performance, injunctive relief or other equitable remedies and (iii) insofar as indemnification and contribution provisions may be limited by applicable law.

 

(b)  Investment Intent. Such Investor is acquiring the Securities as principal for its own account for investment purposes only and not with a view to or for distributing or reselling such Securities or any part thereof, without prejudice, however, to such Investor's right at all times to sell or otherwise dispose of all or any part of such Securities in compliance with applicable federal and state securities laws. Subject to the immediately preceding sentence, nothing contained herein shall be deemed a representation or warranty by such Investor to hold the Securities for any period of time. Such Investor is acquiring the Securities hereunder in the ordinary course of its business. Such Investor does not have any agreement or understanding, directly or indirectly, with any Person to distribute any of the Securities.

 

(c)  Investor Status. At the time such Investor was offered the Securities, it was, and at the date hereof it is, and on each date on which it exercises the Warrants it will be, an "accredited investor" as defined in Rule 501(a) under the Securities Act. Such Investor is not required to be registered as a broker-dealer under Section 15 of the Exchange Act.

 

(d)  General Solicitation. Such Investor is not purchasing the Securities as a result of any advertisement, article, notice or other communication regarding the Securities published in any newspaper, magazine or similar media or broadcast over television or radio or presented at any seminar or any other general solicitation or general advertisement.

 

(e)  Access to Information. Such Investor acknowledges that it has reviewed the Disclosure Materials and has been afforded (i) the opportunity to ask such questions as it has deemed necessary of, and to receive answers from, representatives of the Company concerning the terms and conditions of the offering of the Shares and the merits and risks of investing in the Securities; (ii) access to information about the Company and the Subsidiaries and their respective financial condition, results of operations, business, properties, management and prospects sufficient to enable it to evaluate its investment; and (iii) the opportunity to obtain such additional information that the Company possesses or can acquire without unreasonable effort or expense that is necessary to make an informed investment decision with respect to the investment. Neither such inquiries nor any other investigation conducted by or on behalf of such Investor or its representatives or counsel shall modify, amend or affect such Investor's right to rely on the truth, accuracy and completeness of the Disclosure Materials and the Company's representations and warranties contained in the Transaction Documents.

 

(f)  Limited Ownership.Based upon the representations of the Company set forth in Section 3.1(g) hereof, the purchase by such Investor of the Securities issuable to it at the Closing (including the Underlying Shares that would be issuable in respect of such Securities) will not result in such Investor acquiring, or obtaining the right to acquire immediately upon the Closing, in excess of 19.999% of the Common Stock or the voting power of the Company outstanding prior to the Closing. Such Investor is not an officer or director of the Company or any Subsidiary thereof.

 

(g)  Independent Investment Decision. Such Investor has independently evaluated the merits of its decision to purchase Securities pursuant to this Agreement, such decision has been independently made by such Investor and such Investor confirms that it has only relied on the advice of its own business and/or legal counsel and not on the advice of any other Investor’s business and/or legal counsel in making such decision.

 

(h)  Short Sales. Such Investor has not directly or indirectly, nor has any Person acting on behalf of or pursuant to any understanding with such Investor, executed any Short Sales in the securities of the Company since the date that such Investor was first contacted regarding an investment in the Company ("Discussion Time").

 

(i)  Residency. Such Investor is a resident of that jurisdiction specified as the address that the Investor is to receive notices hereunder on the signature pages hereto. 

 

The Company acknowledges and agrees that each Investor does not make or has not made any representations or warranties with respect to the transactions contemplated hereby other than those specifically set forth in this Section 3.2.

 

ARTICLE IV.  

 

OTHER AGREEMENTS OF THE PARTIES

 

4.1  (a)Securities may only be disposed of in compliance with state and federal securities laws. In connection with any transfer of the Securities other than pursuant to an effective registration statement, to the Company, to an Affiliate of an Investor or in connection with a pledge as contemplated in Section 4.1(b), the Company may require the transferor thereof to provide to the Company an opinion of counsel selected by the transferor, reasonably acceptable to the Company, the form and substance of which opinion shall be reasonably satisfactory to the Company, to the effect that such transfer does not require registration of such transferred Securities under the Securities Act. 

 

(b)    Certificates evidencing the Securities will contain the following legend, until such time as they are not required under Section 4.1(c):

 

[NEITHER THESE SECURITIES NOR THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES HAVE BEEN REGISTERED] [THESE SECURITIES HAVE NOT BEEN REGISTERED] WITH THE SECURITIES AND EXCHANGE COMMISSION OR THE SECURITIES COMMISSION OF ANY STATE IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND, ACCORDINGLY, MAY NOT BE OFFERED OR SOLD EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH APPLICABLE STATE SECURITIES LAWS AS EVIDENCED BY A LEGAL OPINION OF COUNSEL TO THE TRANSFEROR TO SUCH EFFECT, THE SUBSTANCE OF WHICH SHALL BE REASONABLY ACCEPTABLE TO THE COMPANY. [THESE SECURITIES AND THE SECURITIES ISSUABLE UPON EXERCISE OF THESE SECURITIES] [THESE SECURITIES] MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT SECURED BY SUCH SECURITIES.

 

The Company acknowledges and agrees that an Investor may from time to time pledge, and/or grant a security interest in some or all of the Securities pursuant to a bona fide margin agreement with a registered broker-dealer or grant a security interest in some or all of the Securities to a financial institution that is an "accredited investor" as defined in Rule 501(a) under the Securities Act and who agrees to be bound by the provisions of this Agreement and the Registration Rights Agreement and, if required under the terms of such agreement or account, such Investor may transfer pledged or secured Securities to the pledgees or secured parties. Such a pledge or transfer would not be subject to approval or consent of the Company and no legal opinion of legal counsel to the pledgee, secured party or pledgor shall be required in connection with the pledge, but such legal opinion may be required in connection with a subsequent transfer following default by the Investor transferee of the pledge. No notice shall be required of such pledge. At the appropriate Investor’s expense, the Company will execute and deliver such reasonable documentation as a pledgee or secured party of Securities may reasonably request in connection with a pledge or transfer of the Securities including the preparation and filing of any required prospectus supplement under Rule 424(b)(3) of the Securities Act or other applicable provision of the Securities Act to appropriately amend the list of Selling Stockholders thereunder.

 

(c)    Certificates evidencing the Shares and Warrant Shares shall not contain any legend (including the legend set forth in Section 4.1(b)): (i) following a sale of such Securities pursuant to an effective registration statement (including the Registration Statement), or (ii) following a sale of such Shares or Warrant Shares pursuant to Rule 144 (assuming the transferor is not an Affiliate of the Company), or (iii) while such Shares or Warrant Shares are eligible for sale under Rule 144(k). Following such time as restrictive legends are not required to be placed on certificates representing Shares or Warrant Shares pursuant to the preceding sentence, the Company will, no later than three Trading Days following the delivery by an Investor to the Company or the Company's transfer agent of a certificate representing Shares or Warrant Shares containing a restrictive legend, deliver or cause to be delivered to such Investor a certificate representing such Shares or Warrant Shares that is free from all restrictive and other legends. The Company may not make any notation on its records or give instructions to any transfer agent of the Company that enlarge the restrictions on transfer set forth in this Section.

 

4.2  Preemptive Rights. If at any time prior to the one year anniversary of the Closing Date, the Company proposes to issue any equity Common Stock or Common Stock Equivalents (collectively, “New Issue Securities”), the Company shall first offer the New Issue Securities to the Investors in accordance with the following provisions:

 

(a)  The Company shall give a written notice to each Investor (the “First Notice”) stating (i) its intention to issue the New Issue Securities, (ii) the number and description of the New Issue Securities proposed to be issued and (iii) the proposed purchase price (calculated as of the proposed issuance date) and the other terms and conditions upon which the Company is proposing to offer the New Issue Securities.

 

(b)  Transmittal of the First Notice to the Investors by the Company shall constitute an offer by the Company to sell each Investor up to his, her or its proportionate number (based upon his, her or its percentage ownership of the total number of issued and outstanding shares of Common Stock) of the New Issue Securities for the price and upon the terms and conditions set forth in the First Notice. For a period of five (5) Business Days after receipt of the of the First Notice to the Investors, each Investor shall have the option, exercisable by written notice to the Company, to accept ("Notice of Acceptance") the Company’s offer as to all or any part of such Investor’s proportionate number of the New Issue Securities. If two or more types of New Issue Securities are to be issued or New Issue Securities are to be issued together with other types of securities, including, without limitation, debt Securities, in a single transaction or related transactions, the rights to purchase New Issue Securities granted to the Investors under this Section must be exercised to purchase all types of New Issue Securities and such other securities in the same proportion as such New Issue Securities and other securities are to be issued by the Company. 

 

(c)  The Company shall have thirty (30) Business Days after the date of the First Notice to offer, issue, sell or exchange all or any part of the New Issue Securities as to which a Notice of Acceptance has not been given by the Investors, but only upon terms and conditions that are not more favorable to the acquiring person or persons or less favorable to the Company than those set forth in the First Notice. 

 

(d)  The preemptive rights contained in this Section shall not apply to the issuance and sale by the Company, from time to time hereafter, of (i) shares of Common Stock or Common Stock Equivalents to employees, officers, or directors of, or consultants to, the Company, as compensation for their services to the Company or any of its direct or indirect Subsidiaries pursuant to arrangements approved by the Board of Directors of the Company, (ii) the issuance of the Securities pursuant to the Transaction Documents and the issuance and exercise of the warrants issuable to MidSouth Capital, Inc. pursuant to its engagement letter with the Company in connection with the offering subject to this Agreement, (iii) shares of Common Stock issued and sold in a firm commitment underwritten public offering (which shall not include an equity line of credit or similar financing arrangement) resulting in net proceeds to the Company of in excess of $15,000,000 or (iv) shares of Common Stock issued as consideration for the acquisition of another company or business in which the shareholders of the Company do not have a majority ownership interest, which acquisition has been approved by the Board of Directors of the Company or (v) shares of Common Stock issuable upon the exercise of outstanding Common Stock Equivalents (but not amendments thereto).

 

4.3  Integration. The Company shall not, and shall use its best efforts to ensure that no Affiliate of the Company shall, sell, offer for sale or solicit offers to buy or otherwise negotiate in respect of any security (as defined in Section 2 of the Securities Act) that would be integrated with the offer or sale of the Securities in a manner that would require the registration under the Securities Act of the sale of the Securities to the Investors, or that would be integrated with the offer or sale of the Securities for purposes of the rules and regulations of any Trading Market in a manner that would require stockholder approval of the sale of the securities to the Investors.

 

4.4  Subsequent Registrations. Other than pursuant to the Registration Statement, prior to the Effective Date, the Company may not file any registration statement (other than on Form S-8) with the Commission with respect to any securities of the Company.

 

4.5  Securities Laws Disclosure; Publicity. By 9:00 a.m. (New York time) on February 2,3, 2005, the Company will file a Current Report on Form 8-K disclosing the material terms of the Transaction Documents (and attach as exhibits thereto the Transaction Documents), and on the Closing Date the Company will file an additional Current Report on Form 8-K to disclose the Closing. In addition, the Company will make such other filings and notices in the manner and time required by the Commission and the Trading Market on which the Common Stock is listed. Notwithstanding the foregoing, the Company shall not publicly disclose the name of any Investor, or include the name of any Investor in any filing with the Commission (other than the Registration Statement and any exhibits to filings made in respect of this transaction in accordance with periodic filing requirements under the Exchange Act) or any regulatory agency or Trading Market, without the prior written consent of such Investor, except to the extent such disclosure is required by law or Trading Market regulations, in which case the Company shall provide the Investors with prior notice of such disclosure.

 

4.6  Limitation on Issuance of Future Priced Securities. During the six months following the Closing Date, the Company shall not issue any “Future Priced Securities” as such term is described by NASD IM-4350-1.

 

4.7  Indemnification of Investors. In addition to the indemnity provided in the Registration Rights Agreement, the Company will indemnify and hold the Investors and their directors, officers, shareholders, partners, employees and agents (each, an "Investor Party") harmless from any and all losses, liabilities, obligations, claims, contingencies, damages, costs and expenses, including all judgments, amounts paid in settlements, court costs and reasonable attorneys' fees and costs of investigation (collectively, "Losses") that any such Investor Party may suffer or incur as a result of or relating to any misrepresentation, breach or inaccuracy of any representation, warranty, covenant or agreement made by the Company in any Transaction Document. In addition to the indemnity contained herein, the Company will reimburse each Investor Party for its reasonable legal and other expenses (including the cost of any investigation, preparation and travel in connection therewith) incurred in connection therewith, as such expenses are incurred. 

 

4.8  Non-Public Information. The Company covenants and agrees that neither it nor any other Person acting on its behalf will provide any Investor or its agents or counsel with any information that the Company believes constitutes material non-public information, unless prior thereto such Investor shall have executed a written agreement regarding the confidentiality and use of such information. The Company understands and confirms that each Investor shall be relying on the foregoing representations in effecting transactions in securities of the Company. 

 

4.9  Use of Proceeds. The net proceeds from the offer and sale of the Securities will be used to advance the pre-clinical and clinical development of the Company’s drug candidates, including the hiring of contract research organizations and sponsoring of research to support these development activities. A portion of the net proceeds shall also be used for general corporate purposes, including the maintenance of in-licensed patent rights and proprietary intellectual property patent applications and patents. No portion of the net proceeds will be used to redeem outstanding securities of the Company. 

 

4.10  No Net Short Position. Each Investor covenants that neither it nor any Affiliates acting on its behalf or pursuant to any understanding with it will execute any Short Sales during the period from the Discussion Time until prior to the time that the transactions contemplated by this Agreement are first publicly announced as described in Section 4.5 hereof. Additionally, each Investor understands and acknowledges, severally and not jointly with any other Investor, that the Commission currently takes the position that coverage of short sales of the Common Stock "against the box" prior to the Effective Date of the Registration Statement with the Warrant Shares issuable hereunder is a violation of Section 5 of the Securities Act, as set forth in Item 65, Section 5 under Section A, of the Manual of Publicly Available Telephone Interpretations, dated July 1997, compiled by the Office of Chief Counsel, Division of Corporation Finance. 

 

ARTICLE V.

  

CONDITIONS PRECEDENT

 

5.1  Conditions Precedent to the Obligations of the Investors to Purchase Securities. The obligation of each Investor to acquire Securities at the Closing is subject to the satisfaction or waiver by such Investor, at or before the Closing, of each of the following conditions:

 

(a)  Representations and Warranties. The representations and warranties of the Company contained herein shall be true and correct in all material respects as of the date when made and as of the Closing as though made on and as of such date;

 

(b)  Performance. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by it at or prior to the Closing;

 

(c)  No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents;

 

(d)  Adverse Changes. Since the date of execution of this Agreement, no event or series of events shall have occurred that reasonably would be expected to have or result in a (i) an adverse effect on the legality, validity or enforceability of any Transaction Document, or (ii) a material and adverse effect on the results of operations, assets, business or condition (financial or otherwise) of the Company and the Subsidiaries, taken as a whole; 

 

(e)  No Suspensions of Trading in Common Stock; Listing. Trading in the Common Stock shall not have been suspended by the Commission or any Trading Market (except for any suspensions of trading of not more than one Trading Day solely to permit dissemination of material information regarding the Company) at any time since the date of execution of this Agreement, and the Common Stock shall have been at all times since such date listed for trading on a Trading Market; 

 

(f)  AMEX Listing. The Company shall have prepared and filed with the AMEX any notice or other filing required under the rules and regulations of the AMEX to list the Shares and the Warrant Shares on the AMEX and the Shares and Warrant Shares shall have been approved for listing on the AMEX; 

 

(g)  Company Deliverables. The Company shall have delivered to such Investor the Company Deliverables;

 

(h)  Minimum Subscriptions. The aggregate of all Purchasers' Investment Amounts shall not be less than $3,000,000; and 

 

(i)  Timing. The Closing shall occur no later than twenty-four (24) hours after AMEX has approved the listing of the Shares and the Warrant Shares. 

 

5.2  Conditions Precedent to the Obligations of the Company to sell Securities. The obligation of the Company to sell Securities at the Closing is subject to the satisfaction or waiver by the Company, at or before the Closing, of each of the following conditions:

 

(a)  Representations and Warranties. The representations and warranties of each Investor contained herein shall be true and correct in all material respects as of the date when made and as of the Closing Date as though made on and as of such date;

 

(b)  Performance. Each Investor shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by the Transaction Documents to be performed, satisfied or complied with by such Investor at or prior to the Closing;

 

(c)  No Injunction. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or endorsed by any court or governmental authority of competent jurisdiction that prohibits the consummation of any of the transactions contemplated by the Transaction Documents;

 

(d)  Minimum Subscriptions. The aggregate of all Purchasers' Investment Amounts shall not be less than $3,000,000; and  

 

(e)  Timing. The Closing shall occur no later than twenty-four (24) hours after AMEX has approved the listing of the Shares and the Warrant Shares. 

 

 

ARTICLE VI.  

 

MISCELLANEOUS

 

6.1  Fees and Expenses. Each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of the Transaction Documents. The Company shall pay all stamp and other taxes and duties levied in connection with the sale of the Securities.

 

6.2  Entire Agreement. The Transaction Documents, together with the Exhibits and Schedules thereto, contain the entire understanding of the parties with respect to the subject matter hereof and supersede all prior agreements, understandings, discussions and representations, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules. 

 

6.3  Notices. Any and all notices or other communications or deliveries required or permitted to be provided hereunder shall be in writing and shall be deemed given and effective on the earliest of (a) the date of transmission, if such notice or communication is delivered via facsimile (provided the sender receives a machine-generated confirmation of successful transmission) at the facsimile number specified in this Section prior to 6:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile at the facsimile number specified in this Section on a day that is not a Trading Day or later than 6:30 p.m. (New York City time) on any Trading Day, (c) the Trading Day following the date of mailing, if sent by U.S. nationally recognized overnight courier service, or (d) upon actual receipt by the party to whom such notice is required to be given. The address for such notices and communications shall be as follows:

 

If to the Company:          DOR BioPharma Inc.

1691 Michigan Ave.

Suite 435

Miami, Florida 33139

Attn: President

Facsimile: (305) 534-3383

With a copy to:          Edwards & Angell, LLP

350 E. Las Olas Boulevard

Suite 1150

Fort Lauderdale, FL 33301-4215

Attn: Leslie J. Croland, P.A.

Facsimile: (954) 727-2601

If to an Investor:             To the address set forth under such Investor's name on the signature pages hereof; or such other address as may be designated in writing hereafter, in the same manner, by such Person.

 

6.4  Amendments; Waivers; No Additional Consideration. No provision of this Agreement may be waived or amended except in a written instrument signed by the Company and the Investors holding a majority of the Shares. No waiver of any default with respect to any provision, condition or requirement of this Agreement shall be deemed to be a continuing waiver in the future or a waiver of any subsequent default or a waiver of any other provision, condition or requirement hereof, nor shall any delay or omission of either party to exercise any right hereunder in any manner impair the exercise of any such right. No consideration shall be offered or paid to any Investor to amend or consent to a waiver or modification of any provision of any Transaction Document unless the same consideration is also offered to all Investors who then hold Securities.

 

6.5  Construction. The headings herein are for convenience only, do not constitute a part of this Agreement and shall not be deemed to limit or affect any of the provisions hereof. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party. This Agreement shall be construed as if drafted jointly by the parties, and no presumption or burden of proof shall arise favoring or disfavoring any party by virtue of the authorship of any provisions of this Agreement or any of the Transaction Documents.

 

6.6  Successors and Assigns. This Agreement shall be binding upon and inure to the benefit of the parties and their successors and permitted assigns. The Company may not assign this Agreement or any rights or obligations hereunder without the prior written consent of the Investors. Any Investor may assign any or all of its rights under this Agreement to any Person to whom such Investor assigns or transfers any Securities, provided such transferee agrees in writing to be bound, with respect to the transferred Securities, by the provisions hereof that apply to the "Investors."

 

6.7  No Third-Party Beneficiaries. This Agreement is intended for the benefit of the parties hereto and their respective successors and permitted assigns and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as otherwise set forth in Section 4.7 (as to each Investor Party).

 

6.8  Governing Law. All questions concerning the construction, validity, enforcement and interpretation of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of New York, without regard to the principles of conflicts of law thereof. Each party agrees that all Proceedings concerning the interpretations, enforcement and defense of the transactions contemplated by this Agreement and any other Transaction Documents (whether brought against a party hereto or its respective Affiliates, employees or agents) may be commenced exclusively in the state and federal courts sitting in the City of New York, Borough of Manhattan (the “New York Courts”). Each party hereto hereby irrevocably submits to the exclusive jurisdiction of the New York Courts for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein (including with respect to the enforcement of the any of the Transaction Documents), and hereby irrevocably waives, and agrees not to assert in any Proceeding, any claim that it is not personally subject to the jurisdiction of any such New York Court, or that such Proceeding has been commenced in an improper or inconvenient forum. Each party hereto hereby irrevocably waives personal service of process and consents to process being served in any such Proceeding by mailing a copy thereof via registered or certified mail or overnight delivery (with evidence of delivery) to such party at the address in effect for notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof. Nothing contained herein shall be deemed to limit in any way any right to serve process in any manner permitted by law. Each party hereto hereby irrevocably waives, to the fullest extent permitted by applicable law, any and all right to trial by jury in any legal proceeding arising out of or relating to this Agreement or the transactions contemplated hereby. If either party shall commence a Proceeding to enforce any provisions of a Transaction Document, then the prevailing party in such Proceeding shall be reimbursed by the other party for its reasonable attorneys’ fees and other costs and expenses incurred with the investigation, preparation and prosecution of such Proceeding.

 

6.9  Survival. The representations, warranties, agreements and covenants contained herein shall survive the Closing and the delivery of the Shares and Warrants.

 

6.10  Execution. This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that both parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile signature page were an original thereof.

 

6.11  Severability. If any provision of this Agreement is held to be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Agreement shall not in any way be affected or impaired thereby and the parties will attempt to agree upon a valid and enforceable provision that is a reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Agreement.

 

6.12  Rescission and Withdrawal Right. Notwithstanding anything to the contrary contained in (and without limiting any similar provisions of) the Transaction Documents, whenever any Investor exercises a right, election, demand or option under a Transaction Document and the Company does not timely perform its related obligations within the periods therein provided, then such Investor may rescind or withdraw, in its sole discretion from time to time upon written notice to the Company, any relevant notice, demand or election in whole or in part without prejudice to its future actions and rights.

 

6.13  Replacement of Securities. If any certificate or instrument evidencing any Securities is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation thereof, or in lieu of and substitution therefor, a new certificate or instrument, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction and customary and reasonable indemnity, if requested. The applicants for a new certificate or instrument under such circumstances shall also pay any reasonable third-party costs associated with the issuance of such replacement Securities. If a replacement certificate or instrument evidencing any Securities is requested due to a mutilation thereof, the Company may require delivery of such mutilated certificate or instrument as a condition precedent to any issuance of a replacement.

 

6.14  Remedies. In addition to being entitled to exercise all rights provided herein or granted by law, including recovery of damages, each of the Investors and the Company will be entitled to specific performance under the Transaction Documents. The parties agree that monetary damages may not be adequate compensation for any loss incurred by reason of any breach of obligations described in the foregoing sentence and hereby agrees to waive in any action for specific performance of any such obligation the defense that a remedy at law would be adequate.

 

6.15  Payment Set Aside. To the extent that the Company makes a payment or payments to any Investor pursuant to any Transaction Document or an Investor enforces or exercises its rights thereunder, and such payment or payments or the proceeds of such enforcement or exercise or any part thereof are subsequently invalidated, declared to be fraudulent or preferential, set aside, recovered from, disgorged by or are required to be refunded, repaid or otherwise restored to the Company, a trustee, receiver or any other person under any law (including, without limitation, any bankruptcy law, state or federal law, common law or equitable cause of action), then to the extent of any such restoration the obligation or part thereof originally intended to be satisfied shall be revived and continued in full force and effect as if such payment had not been made or such enforcement or setoff had not occurred.

 

6.16  Independent Nature of Investors' Obligations and Rights. The obligations of each Investor under any Transaction Document are several and not joint with the obligations of any other Investor, and no Investor shall be responsible in any way for the performance of the obligations of any other Investor under any Transaction Document. The decision of each Investor to purchase Securities pursuant to the Transaction Documents has been made by such Investor independently of any other Investor. Nothing contained herein or in any Transaction Document, and no action taken by any Investor pursuant thereto, shall be deemed to constitute the Investors as a partnership, an association, a joint venture or any other kind of entity, or create a presumption that the Investors are in any way acting in concert or as a group with respect to such obligations or the transactions contemplated by the Transaction Document. Each Investor acknowledges that no other Investor has acted as agent for such Investor in connection with making its investment hereunder and that no Investor will be acting as agent of such Investor in connection with monitoring its investment in the Securities or enforcing its rights under the Transaction Documents. Each Investor shall be entitled to independently protect and enforce its rights, including without limitation the rights arising out of this Agreement or out of the other Transaction Documents, and it shall not be necessary for any other Investor to be joined as an additional party in any proceeding for such purpose. The Company acknowledges that each of the Investors has been provided with the same Transaction Documents for the purpose of closing a transaction with multiple Investors and not because it was required or requested to do so by any Investor.

 

 

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

 

SIGNATURE PAGES FOLLOW]

 

 

 

 

IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase Agreement to be duly executed by their respective authorized signatories as of the date first indicated above.

 

 

                          DOR BIOPHARMA, INC.

  

                    By: /s/ Michael T. Sember    

                    Name: Michael T. Sember

        Title:   President & Chief Executive Officer

 

 

 

 

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

 

SIGNATURE PAGES FOR INVESTORS FOLLOW]

 

 

 

 

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement as of the date first written above.

 

 

 

        [INVESTOR]

        By:__/s/ Brendon O'neil___________________________________

        Name:  Brendon O'neil        

        Title:  Principal, Enable Growth Partners

 

              Investment Amount:  $ 270,000_________________

 

        Address for Notice:  One Ferry Building, Suite 255

                   San Francisco, Ca 94111

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement as of the date first written above.

 

 

 

        [INVESTOR]

        By:__/s/ Mitchell P. Kopin____________________________

        Name:  Mitchell P. Kopin        

        Title:    Cranshire Capital, L.P.

 

              Investment Amount:  $_135,000______________

 

        Address for Notice:  666 Dundee Road, Suite 1901

                   Northbrook, IL 60062

 

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement as of the date first written above.

 

 

 

        [INVESTOR]

        By: /s/ Stephen D. Friend_________________________________

        Name:  Stephen D. Friend        

        Title:   Managing Director, Castle Creek Healthcare Partners, Icn.

 

              Investment Amount:          $_135,000________________

 

        Address for Notice:  111 West Jackson Blvd., Suite 2020

                   Chicago, IL 60604    

 

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement as of the date first written above.

 

 

 

        [INVESTOR]

        By:__/s/ Bruce Bernstein_________________________

        Name:  Bruce Bernstein        

        Title:  Managing Partner, Omicron Master Trust

 

              Investment Amount:   $_225,000________________

 

        Address for Notice:  650 Fifth Avenue

                   New York, NY 10019

 

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement as of the date first written above.

 

 

 

        [INVESTOR]

        By:_/s/ Keith Goodman_________________________

        Name:  Keith Goodman    

        Title:  Manager of the General Partner, Nite Capital, L.P.

 

              Investment Amount:    $ 270,000_________________

 

        Address for Notice:  100 E. Cook Avenue, Suite 206

                   Libertyville, IL 60048

 

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement as of the date first written above.

 

 

 

        [INVESTOR]

        By:_/s/ Nathan Fischel___________________________

        Name:  Nathan Fischel , M.D.         

        Title:    Managing Member of the Investment Manager, C.C. Life Science FUnd

 

              Investment Amount:        $_135,000________________

 

        Address for Notice:  345 N. Maple Drive, Suite 206

                   Beverly Hills, CA 90210

 

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement as of the date first written above.

 

 

 

        [INVESTOR]

        By:_/s/ Jeffrey Smith______________________________

        Name:  Jeffrey Smith        

        Title:   Authorized Signatory, Portside Growth and Opportunity Fund

 

              Investment Amount:      $__540,000_______________

 

        Address for Notice:  666 Third Avenue, 26th Floor

                   New York, NY 10017

 

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement as of the date first written above.

 

 

 

        [INVESTOR]

        By:__/s/ Elliot Bossen___________________________________

        Name:  Elliot Bossen         

        Title:  Managing Member, Silverback Life Sciences Ltd.

 

              Investment Amount:   $_199,800________________

 

        Address for Notice:  1414 Raleigh Road, Suite 250

                   Chapel Hill, NC 27517

 

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement as of the date first written above.

 

 

 

        [INVESTOR]

        By:_/s/ Elliot Bossen____________________________________

        Name: Elliot Bossen

        Title:  Managing Member, Silverback Master Ltd.

 

              Investment Amount:          $_799,200________________

 

        Address for Notice:  1414 Raleigh Road, Suite 250

                   Chapel HIll, NC 27517

                

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement as of the date first written above.

 

 

 

        [INVESTOR]

        By:__/s/_Brian Davidson______________________________

        Name: Brian Davidson        

        Title:  Authorized Signatory, SF Capital Partners

 

              Investment Amount:    $_999,000________________

 

        Address for Notice:  3600 South Lake Drive

                   St. Francis, WI 53235

 

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement as of the date first written above.

 

 

 

        [INVESTOR]

        By: /s/ Alexander Myrianthopoulos                 

        Name: Alexander Myrianthopoulos        

        Title:

 

              Investment Amount:  $  4,995_________________

 

        Address for Notice:  545 South 8th Street

                   Lindenhurst, NY 11757

 

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement as of the date first written above.

 

 

 

        [INVESTOR]

        By: /s/ Vasili Myrianthopoulos and Elizabeth Myrianthopoulos

        Name:  Vasili Myrianthopoulos        

        Title:

 

              Investment Amount:  $_20,250________________

 

        Address for Notice:  545 South 8th Street

                   Lindenhurst, NY 11757

 

 

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement as of the date first written above.

 

 

 

        [INVESTOR]

        By: /s/ Steven Mark                    

        Name: Steven Mark        

        Title:

 

              Investment Amount:  $_36,000________________

 

        Address for Notice:  First New York Securities

                                                                   850 Third Avenue 17th Floor

                   New York, NY 10022

 

 

 

IN WITNESS WHEREOF, the parties have executed this Securities Purchase Agreement as of the date first written above.

 

 

 

        [INVESTOR]

        By: /s/ Lloyd Brokaw                            

        Name: Lloyd Brokaw        

        Title:

 

              Investment Amount:  $ 9,000______    

 

        Address for Notice:  First New York Securities

                   850 Third Avenue 17th Floor

                   New York, NY 10022

                

 

 

 

 

 

 

 

SCHEDULE 1

Enable Growth Partners LP

Cranshire Capital, L.P.

Castle Creek Healthcare Partners, LLC

Omicron Master Trust

Nite Capital, LP

CC LifeScience Ltd.

Portside Growth and Opportunity Fund

Silverback Life Sciences Master Ltd.

Silverback Master Ltd. 

SF Capital Partners Ltd.

Alexander Myrianthopoulos

Vasili and Elizabeth Myrianthopoulos JTWROS

Steven Mark IRA

Lloyd Brokaw IRA

 

 

 

 

SCHEDULE 3.1(a)

 

Enteron Pharmaceuticals, Inc - The Company owns 89.13% of the issued and outstanding shares of such Subsidiary’s common stock.

Corporate Technology Development, Inc. - The Company owns 100% of the issued and outstanding shares of such Subsidiary’s common stock.

Oral Solutions, Inc. - The Company owns 85% of the issued and outstanding shares of such Subsidiary’s common stock.

Formulation Technologies, Inc. - The Company owns 100% of the issued and outstanding shares of such Subsidiary’s common stock.

Intero Corp. - The Company owns 100% of the issued and outstanding shares of such Subsidiary’s common stock.

Magyer Pharmaceuticals - The Company owns 100% of the issued and outstanding shares of such Subsidiary’s common stock.

Rx Eyes, Inc. - The Company owns 80% of the issued and outstanding shares of such Subsidiary’s common stock.

Orasomal Technologies, Inc. - The Company owns 75.3% of the issued and outstanding shares of such Subsidiary’s common stock.

Wisconsin Genetics, Inc. - The Company owns 100% of the issued and outstanding shares of such Subsidiary’s common stock.

Innovaccines Corp. - The Company owns 100% of the issued and outstanding shares of such Subsidiary’s common stock.

Endorex Newco, LTD - The Company owns 80.1% of the issued and outstanding shares of such Subsidiary’s common stock.

Institute for Drug Research, Inc.

 

 

 

 

SCHEDULE 3.1(g)

 

Investors in the Company’s Private Placement of March 3, 2004 received preemptive rights until March 15, 2005 (the "March Placement"), allowing them to purchase a percentage of future offerings proportionate to their ownership of all shares of Common Stock outstanding as of the date notice is given, as further described in Exhibit 99.3 to the Current Report on Form 8-K filed with the Securities and Exchange Commission on March 4, 2004. For the placement contemplated herein, the following investors have waived that preemptive right:

RHP Master Fund, Ltd.

Provident Premier Master Fund, Ltd

 

 

 

 

SCHEDULE 3.1(i)

 

The Company granted options to Michael Sember and Evan Myrianthopoulos to purchase 2,650,000 shares of Common Stock, which is in excess of the amount of shares reserved for issuance under the Company’s Amended and Restated Omnibus Incentive Plan (the “Plan”). The Company intends to seek shareholder approval at its next annual meeting of shareholders of an amendment to the Plan to increase the number of shares of Common Stock available for issuance under the Plan. 

 

 

 

 

SCHEDULE 3.1(u)

 

The Company has granted George B. McDonald registration rights pursuant to a Stock Purchase Agreement dated as of June 16, 2004, and an Amendment to October 1, 2001 Consulting Agreement Between Enteron Pharmaceuticals, Inc. and Dr. George B. McDonald, to register an aggregate of 600,000 shares of the Company’s Common Stock.

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