Exhibit 10.5
 
[Neurologix Letterhead]
 

 
November 8, 2007
 
Via Facsimile & Federal Express
 
DaimlerChrysler Corporation Master Retirement Trust
1000 Chrysler Drive
Auburn Hills, MI  48326-2766

Re:
Proposed Series D Stock Financing

 
Ladies and Gentlemen:
 
Reference is made to the (i) Stock and Warrant Subscription Agreement
(“Subscription Agreement”), dated as of May 10, 2006, by and among Neurologix,
Inc. (“Company”), General Electric Pension Trust (“GE”), DaimlerChrysler
Corporation Master Retirement Trust and certain funds managed by ProMed Asset
Management LLC (collectively, “ProMed”) and (ii) Certificate of Designations,
Preferences and Rights of Series C Convertible Preferred Stock of the Company
(“Series C Certificate”).
 
General.  As you know, the Company is proposing to issue and sell up to $25
million of its shares of Series D Convertible Preferred Stock, par value $0.10
per share (“Series D Stock”), substantially on the terms and conditions set
forth on the term sheet (“Series D Term Sheet”) attached hereto as Annex A.  As
part of the issue and sale of the Series D Stock, all of the Company’s Series C
Convertible Preferred Stock, par value $0.10 per share (“Series C Stock”), held
by a holder thereof who is purchasing at least the same dollar amount of Series
D Stock as its initial purchase of Series C Stock, will, effective on the Series
D Closing (as hereinafter defined), be automatically converted (the “Series C
Conversion”) into (i) a number of shares of Series D Stock to be determined by
giving effect to the weighted average anti-dilution protection afforded to the
Series C Stock upon issuance of the Series D Stock and (ii) a number of shares
of Series C Stock to provide additional consideration to account for the
difference between the weighted average anti-dilution protection (as afforded to
the Series C Stock) and full ratchet anti-dilution protection.  For your
convenience, the Company has enclosed herein a sample analysis of the
calculation of the Series C Conversion based on GE’s intended purchase of $5
million of Series D Stock.  Also, the Company, as a condition of its issuance of
the Series D Stock, is requesting that you and the other holders of the Series C
Stock consent to such issuance and to certain amendments to the Series C
Certificate and to the Subscription Agreement, as more fully described herein.
 
This letter shall serve as our offer to you of your right to subscribe for
shares of Series D Stock pursuant to the Subscription Agreement and as our
solicitation of your consent to the issuance of the Series D Stock and to the
amendments of the Series C Certificate and the
 

 
 

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Subscription Agreement.  The Company understands that GE intends to purchase $5
million of the Series D Stock.  The Company also understands that GE will
consent to the sale of the Series D Stock and to the proposed amendments to the
Subscription Agreement and the Series C Certificate described herein.  Based on
our discussions, you have indicated that you do not intend to purchase shares of
the Series D Stock, but that you will consent to the issuance of the Series D
Stock, on substantially the terms and conditions set forth on the Series D Term
Sheet, and to the amendments to the Subscription Agreement and the Series C
Certificate as described herein.   In consideration therefor, the Company will
issue to you 175,000 shares of common stock, par value $0.001 per share (“Common
Stock”), at the closing (the “Series D Closing”) of the sale of the Series D
Stock.  If ProMed does not elect to purchase shares of Series D Stock, but does
consent to the sale of the Series D Stock and the amendments to the Subscription
Agreement and the Series C Certificate, the Company will issue to it 17,017
shares of Common Stock at the Series D Closing.
 
Right of First Refusal.  Section 3.1 of the Subscription Agreement requires the
Company to offer you the opportunity to purchase shares of Series D Stock
substantially on the terms and conditions set forth on the Series D Term Sheet
prior to a sale of such shares and, pursuant thereto, the Company is hereby
making you such offer.  The Company understands that you have elected not to
participate in the proposed sale of the Series D Stock.  If the Company is
incorrect and you wish to purchase shares of the Series D Stock, pursuant to
Section 3.1 of the Subscription Agreement, you have fifteen (15) days from the
date hereof to inform the Company in writing of your intention to purchase such
shares.
 
Consent to Series D Stock Issuance.  Section D(2) of the Series C Certificate
requires your consent prior to the authorization, creation and issuance by the
Company of the Series D Stock.  Your acknowledgment below indicates your consent
to such issuance and sale, substantially on the terms set forth in the Series D
Term Sheet.
 
Subscription Agreement Amendment.  The Company is proposing to amend certain
sections of the Subscription Agreement as set forth below.
 
First, the Company is proposing to amend Section 3.1(a) of the Subscription
Agreement so that all holders of Series C Stock and all holders of Series D
Stock will be entitled to participate, pro rata, in the right of first refusal
set forth therein in respect of the Offered Securities (as defined
therein).  Under Section 6.2 of the Subscription Agreement, your consent is
required for such an amendment.  Your acknowledgment below indicates your
acceptance of the following amendment to clause (x) of Section 3.1(a) of the
Subscription Agreement (the underlined portion reflecting the amended portion):
 

 
 

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“... (x) that portion of the Offered Securities as the number of shares of
Common Stock held by such Offeree (including shares then issuable upon the
exercise on conversion of outstanding exercisable or convertible equity
securities) bears to the number of shares of Common Stock held by all Offerees
and all holders of the Company’s securities having rights pari passu with such
Offerees (including shares then issuable upon the exercise on conversion of
outstanding exercisable or convertible securities) (the “Basic Amount”)...”
 
Second, the Company is proposing to amend Section 3.1(c)(i) of the Subscription
Agreement to extend  the period between the expiration of the 15-day notice
period to holders of the Series C Stock of a potential stock sale and the
closing of the sale from 45 days to 75 days.  Under Section 6.2 of the
Subscription Agreement, your consent is required for such an amendment.  Your
acknowledgment below indicates your acceptance of the following amendment to the
third line of Section 3.1(c)(i) of the Subscription Agreement (the underlined
portion reflecting the amended portion):
 
“¼Company shall have seventy five (75) days from the expiration of the fifteen
(15) day period¼”
 
Third, the Company is proposing to amend Section 3.2(a) of the Subscription
Agreement so that all holders of Series C Stock and all holders of Series D
Stock will be entitled to participate, pro rata, in the right of first refusal
set forth therein in respect of any equity securities of the Company (or any
option, warrant or other right relating thereto) proposed to be sold by a Holder
(as defined therein).  Under Section 6.2 of the Subscription Agreement, your
consent is required for such an amendment.  For such amendment to become
effective as to a Holder, the consent of such Holder will be required.  The
Company will use reasonable efforts to obtain such consent.  Your acknowledgment
below indicates your acceptance of the following amendment to the fourth
sentence of Section 3.2(a) of the Subscription Agreement (the underlined portion
reflecting the amended portion):
 
“...and the denominator of which is the aggregate number of shares of such
Common Stock then held by all the Investors and all holders of the Company’s
securities having rights pari passu with such Investors (including shares then
issuable upon the exercise or conversion of outstanding exercisable or
convertible securities).”
 
Fourth, the Company is proposing to amend Section 3.3 of the Subscription
Agreement so that all holders of Series C Stock and all holders of Series D
Stock will be treated, on a pari passu basis, in connection with any tag-along
rights associated with any sale of the Company’s securities by a Holder.  Under
Section 6.2 of the Subscription Agreement, your consent is required for such an
amendment. For such amendment to become effective as to a Holder, the consent of
such Holder will be required.  The Company will use reasonable efforts to obtain
such consent.  Your acknowledgment below indicates your acceptance of the
following amendment to the fourth sentence of Section 3.3 of the Subscription
Agreement (the underlined portion reflecting the amended portion):
 

 
 

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“...and the denominator of which is the aggregate number of shares of such
Common Stock held by the Holder, by all of the participating Investors and by
all participating holders of the Company’s securities having rights pari passu
with such Investors (including shares then issuable upon the exercise or
conversion of outstanding exercisable or convertible securities).”
 
Fifth, the Company is proposing to amend Section 3.9(a)(i)(x) of the
Subscription Agreement to increase the required percentage of Registrable
Securities (as defined therein) held by the Investors (as defined therein)
necessary to request a Demand Registration Statement (as defined therein) from
forty percent (40%) to eighty percent (80%).  Under Section 6.2 of the
Subscription Agreement, your consent is required for such an amendment.  Your
acknowledgment below indicates your acceptance of the following amendment to the
first sentence of Section 3.9(a)(i)(x) of the Subscription Agreement (the
underlined portion reflecting the amended portion):
 
“...upon the request of any Investor or Investors holding Registrable Securities
(as defined below) constituting at least eighty percent (80%) in interest of all
Registrable Securities then outstanding...”
 
Series C Certificate Amendments.  The Company is hereby proposing to amend
certain sections of the Series C Certificate to be conditioned and effective
upon the Series D Closing, and your consent is required to effectuate such
amendments.  All of such amendments, together with minor correction changes, are
reflected in the Amended and Restated Series C Certificate attached hereto as
Annex B (“Restated Certificate”).  Such amendments will become effective, and
the Restated Certificate will be filed, immediately prior to, and subject to,
the Series D Closing.  Your acknowledgment below will indicate your consent to
each of such amendments and your approval of the Restated Certificate.
 
Such amendments to the Restated Certificate principally consist of the
following:
 
 
·
Section B is to be amended to provide for a 9% semi-annual cash dividend payable
in lieu of the PIK Dividends (as defined in the Series C Certificate) currently
payable on the Series C Stock and the participating dividends on the Series C
Stock provided for in Sections B(2) and B(3).

 
 
·
A new Section B(2) has been added to allow the Company to pay accrued and unpaid
dividends in either cash or shares of Common Stock upon a conversion of Series C
Stock.

 
 
·
Section D(2) is to be amended to change the provision requiring the consent of
at least 70% of the holders of shares of Series C Stock for the authorization,
creation or issuance of any security or convertible security that is pari passu
with, or senior to, the Series C Stock so that it is only applicable with
respect to the issuance of a security that is junior to the Series D Stock.

 

 
 

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·
Section E(2)(b) is added to provide for the Series C Conversion with the actual
number of shares of Series D Stock and additional shares of Series C Stock to be
determined in accordance with the analysis enclosed herewith and inserted
therein once the Series D Conversion Price (as such term is defined in the
Series D Term Sheet) is determined immediately prior to the Series D
Closing.  Section E(3)(b) is added to provide for the mechanics of the Series C
Conversion.

 
Your acknowledgement below will constitute your consent and acceptance of the
matters described herein.  Accordingly, please sign the copy of this letter
enclosed for such purpose in the designated space below and return it to the
Company.
 

 
Sincerely,
                    /s/ Marc Panoff     Marc L. Panoff     Chief Financial
Officer          

 
Consented and Accepted:

DAIMLERCHRYSLER CORPORATION MASTER RETIREMENT TRUST

State Street Bank and Trust Company as Trustee of the DaimlerChrysler
Corporation Master Retirement Trust

       
By:
/s/ Steve Sovany     Name: Steve Sovany     Title: V.P.        

 
Cc:  Heather Mowat, State Street Corporation
        David Schwartz, Debevoise & Plimpton, LLP