Exhibit 10.1





Exhibit 10.1





NEUROLOGIX, INC.




NOTE AND WARRANT PURCHASE AGREEMENT




DECEMBER 6, 2010



 


 









 







TABLE OF CONTENTS




	 	 	 	 	 
	 	 	Page	 
	 
	 	 	 	 
	1. Definitions
	 	 	1	 
	 
	 	 	 	 
	2. Amount and Terms of the Secured Senior Notes
	 	 	2	 
	2.1 Issuance of Secured Senior Notes
	 	 	2	 
	2.2 Note Conversion
	 	 	3	 
	 
	 	 	 	 
	3. Warrants
	 	 	3	 
	 
	 	 	 	 
	4. Closing
	 	 	4	 
	 
	 	 	 	 
	5. Representations and Warranties of the Company
	 	 	4	 
	5.1 Organization, Good Standing and Qualification
	 	 	4	 
	5.2 Authorization and Issuance
	 	 	4	 
	5.3 Non-Contravention
	 	 	4	 
	5.4 Indebtedness
	 	 	5	 
	5.5 Capitalization
	 	 	5	 
	5.6 Legal Proceedings
	 	 	6	 
	5.7 No Violations
	 	 	6	 
	5.8 Governmental Permits, Etc.
	 	 	6	 
	5.9 Intellectual Property
	 	 	7	 
	5.10 Financial Statements; Solvency; Obligations to Related Parties
	 	 	8	 
	5.11 No Material Adverse Change
	 	 	9	 
	5.12 Disclosure
	 	 	9	 
	5.13 Exchange Act Compliance
	 	 	9	 
	5.14 Reporting Status
	 	 	9	 
	5.15 No Manipulation of Stock
	 	 	10	 
	5.16 Company Not an “Investment Company”
	 	 	10	 
	5.17 Embargoed Person
	 	 	10	 
	5.18 Accountants
	 	 	10	 
	5.19 Contracts
	 	 	10	 
	5.20 Taxes
	 	 	10	 
	5.21 Transfer Taxes
	 	 	11	 
	5.22 Private Offering
	 	 	11	 
	5.23 Controls and Procedures
	 	 	11	 
	5.24 Real Property Holding Corporation
	 	 	11	 
	5.25 Relationship with General Electric Company or its Affiliates
	 	 	12	 
	5.26 Clinical Trials
	 	 	12	 
	 
	 	 	 	 
	6. Representations and Warranties of the Lenders
	 	 	12	 
	6.1 Authorization
	 	 	12	 
	6.2 Purchase Entirely for Own Account
	 	 	13	 
	6.3 Disclosure of Information
	 	 	13	 
	6.4 Accredited Investor
	 	 	13	 
	6.5 Restricted Securities
	 	 	13	 
	6.6 Disclosures to the Company
	 	 	13	 
	6.7 Legends
	 	 	13	 





 


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	 	 	Page	 
	 
	 	 	 	 
	7. Defaults and Remedies
	 	 	14	 
	7.1 Events of Default
	 	 	14	 
	7.2 Remedies
	 	 	15	 
	 
	 	 	 	 
	8. Covenants
	 	 	15	 
	8.1 Distributions
	 	 	15	 
	8.2 Indebtedness
	 	 	15	 
	8.3 Use of Proceeds
	 	 	15	 
	8.4 Removal of Legends
	 	 	15	 
	8.5 Section 203 Exemption
	 	 	15	 
	8.6 Rule 144
	 	 	16	 
	8.7 Issuance and Quotation
	 	 	16	 
	8.8 Investment Company
	 	 	16	 
	8.9 Disclosure
	 	 	16	 
	8.10 Status as an Operating Company
	 	 	16	 
	8.11 Right of First Refusal
	 	 	16	 
	 
	 	 	 	 
	9. Miscellaneous
	 	 	18	 
	9.1 Successors and Assigns
	 	 	18	 
	9.2 Pro Rata Treatment
	 	 	18	 
	9.3 Actions in Concert
	 	 	19	 
	9.4 Governing Law
	 	 	19	 
	9.5 Counterparts
	 	 	19	 
	9.6 Titles and Subtitles
	 	 	19	 
	9.7 Notices
	 	 	20	 
	9.8 Finder’s Fee
	 	 	20	 
	9.9 Expenses
	 	 	20	 
	9.10 Entire Agreement; Amendments and Waivers
	 	 	20	 
	9.11 Severability
	 	 	21	 
	9.12 Exculpation Among Lenders; Independent Nature of Lenders’
Obligations and Rights
	 	 	21	 
	9.13 Survival: Indemnity
	 	 	22	 
	9.14 Further Assurance
	 	 	22	 
	9.15 Waivers
	 	 	22	 






Exhibits




	 	 	 
	Exhibit A

	 	Form of Secured Senior Promissory Note
	Exhibit B

	 	Form of Warrant
	Exhibit C

	 	Form of Legal Opinion







 


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NOTE AND WARRANT PURCHASE AGREEMENT




THIS NOTE AND WARRANT PURCHASE AGREEMENT (“Agreement”) is made as of December 6, 2010, by and
among Neurologix, Inc. a Delaware corporation (the “Company”), and the lenders (each individually a
“Lender,” and collectively the “Lenders”) named on the Schedule of Lenders attached hereto (the
“Schedule of Lenders”). Capitalized terms not otherwise defined in this Agreement shall have the
meanings ascribed to them in Section 1 below.



WHEREAS, each Lender intends to provide certain Consideration to the Company as described for
each Lender on the Schedule of Lenders;



WHEREAS, the parties wish to provide for the sale and issuance of such Notes and Warrants in
return for the provision by the Lenders of the Consideration to the Company; and



WHEREAS, the parties intend for the Company to issue in return for the Consideration one or
more Notes and Warrants to purchase shares of the Company’s Common Stock.




NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:




1. Definitions.



(a) “Common Stock” shall mean the common stock, par value $0.001 per share, of the
Company.



(b) “Consideration” shall mean the amount of money paid by each Lender pursuant to
this Agreement as shown on the Schedule of Lenders.



(c) “Conversion Shares” shall mean, if the Notes are converted to equity pursuant to
Section 2.2(a) below, the shares of New Preferred Stock issued in the Next Preferred Equity
Financing.



(d) “Conversion Price” shall mean with respect to a conversion pursuant to Section
2.2(a) below, the price paid per share for the New Preferred Stock purchased by the investors in
the Next Preferred Equity Financing.



(e) “Equity Securities” shall mean the Common Stock or Preferred Stock or any equity
securities conferring the right to purchase the Common Stock or Preferred Stock or equity
securities convertible into, or exchangeable for (with or without additional consideration), the
Common Stock or Preferred Stock, except any security granted, issued and/or sold by the Company to
any director, officer, employee or consultant of the Company in such capacity for the primary
purpose of soliciting or retaining their services.



(f) “Material Adverse Effect” shall mean any material adverse effect, or any
development that could reasonably be expected to result in a material adverse effect, on the
business or business prospects, properties, assets, operations, results of operations or condition
(financial or otherwise) of the Company or on the transactions contemplated hereby or on the
Notes or the Warrants (collectively, the “Transaction Documents”).


 


 









 





(g) “Maturity Date” shall mean the earliest to occur of (i) any event set forth in
Section C(2) of the Certificate of Designations, Preferences and Rights of Series D Convertible
Preferred Stock to the Restated Certificate of Incorporation of the Company, as amended from time
to time (the “Series D Certificate”) (whether or not waived by the holders of Series D Convertible
Preferred Stock), (ii) the date on which the Company receives in cash an aggregate of at least
$30,000,000 in connection with the consummation of a transaction or series of transactions pursuant
to which the Company licenses its Intellectual Property Rights (as defined in Section 5.9(a))
related to the Company’s gene transfer therapy for Parkinson’s disease and (iii) October 31, 2011.



(h) “New Preferred Stock” shall mean the class or series of Preferred Stock sold in
the Next Preferred Equity Financing.



(i) “Next Preferred Equity Financing” shall mean the next sale (or series of related
sales) by the Company of New Preferred Stock following the date of this Agreement (i) pursuant to
which the Company receives gross proceeds of not less than $30,000,000 (excluding the aggregate
amount of Notes converted into New Preferred Stock upon conversion of the Notes pursuant to Section
2.2 below) and (ii) in which such New Preferred Stock is senior to all other Equity Securities with
respect to liquidation and dividend rights.



(j) “Notes” shall mean the one or more promissory notes issued to each Lender pursuant
to Section 2.1 below, the form of which is attached hereto as Exhibit A.



(k) “Required Note Holders” shall mean the holders of a majority in interest of the
aggregate principal amount of Notes then outstanding.



(l) “Preferred Stock” shall mean the preferred stock, par value $0.10 per share, of
the Company.



(m) “Security Agreement” shall mean that certain Security Agreement, dated as of even
date herewith, by and among the Company and the Lenders.



(n) “Warrant Shares” shall mean the shares of Common Stock issuable upon exercise of
the Warrants.




(o) “Warrants” shall mean one or more warrants issued pursuant to Section 3 below.




2. Amount and Terms of the Secured Senior Notes.



2.1 Issuance of Secured Senior Notes. In return for the Consideration paid by each
Lender, the Company shall sell and issue to such Lender one or more secured senior Notes. Each
Note shall have an initial principal balance equal to the Consideration paid by such Lender for the
Note, as set forth in the Schedule of Lenders. Each Note shall be convertible into
Conversion Shares pursuant to Section 2.2 below and shall be secured by the assets of the
Company as described in such Notes and the Security Agreement.


 


2









 






2.2 Note Conversion.



(a) Next Equity Financing. Any unpaid principal and unpaid accrued interest of each
Note shall automatically be converted into Conversion Shares upon the closing of the Next Preferred
Equity Financing. The number of Conversion Shares to be issued upon such conversion shall be
determined as follows:



(i) if the Next Preferred Equity Financing is consummated prior to July 1, 2011, the number of
Conversion Shares shall be equal to the quotient obtained by dividing (A) (I) the product of 1.1
and the outstanding principal amount on a Note to be converted on the date of conversion, plus (II)
the unpaid accrued interest on such Note, by (B) the Conversion Price; or



(ii) if the Next Preferred Equity Financing is consummated between July 1, 2011 and October
30, 2011, the number of Conversion Shares shall be equal to the quotient obtained by dividing (A)
(I) the product of 1.2 and the outstanding principal amount on a Note to be converted on the date
of conversion, plus (II) the unpaid accrued interest on such Note, by (B) the Conversion Price.



At least five (5) days prior to the closing of the Next Preferred Equity Financing, the Company
shall notify the holder of each Note in writing of the terms under which the Equity Securities of
the Company will be sold in such financing. The issuance of Conversion Shares pursuant to the
conversion of each Note shall be upon and subject to the same terms and conditions applicable to
the New Preferred Stock sold in the Next Preferred Equity Financing.



(b) No Fractional Shares. Upon the conversion of a Note into Conversion Shares, in
lieu of any fractional shares to which the holder of the Note would otherwise be entitled, the
Company shall pay the Note holder cash equal to such fraction multiplied by the Conversion Price.



(c) Mechanics of Conversion. The Company shall not be required to issue or deliver
the Conversion Shares until the Note holder has surrendered the Note to the Company.



3. Warrants. Upon the Closing (as defined in Section 4 below), and in return for the
Company’s receipt of the Consideration, each Lender shall receive a warrant to purchase Common
Stock in the form attached hereto as Exhibit B (the “Warrant”). Each Warrant shall be
exercisable at an exercise price of $1.44 per share for that number of Warrant Shares set forth
opposite the name of each Lender on said Exhibit B (in each case, subject to adjustments as set
forth in the Warrant). The Warrant Shares shall constitute “Registrable Securities” under the
Registration Rights Agreement by and among the Company and the Investors named therein dated as of
November 19, 2007, as amended from time to time, as reflected in that certain amendment to the
Registration Rights Agreement dated as of even date herewith.


 


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4. Closing. The closing (the “Closing”) of the purchase of Notes and issuance of
Warrants in return for the Consideration paid by each Lender shall take place at 10:00 am on the
date hereof at the offices of Winston & Strawn LLP, 200 Park Avenue, New York, NY 10166, or at
such other time and place as the Company and Required Note Holders agree upon orally or in writing.
At the Closing, each Lender shall deliver the Consideration to the Company and the Company shall
deliver to each Lender (i) one or more executed Notes and Warrants in return for the respective
Consideration provided to the Company and (ii) an opinion of legal counsel to the Company in
substantially the form attached hereto as Exhibit C.



5. Representations and Warranties of the Company. Except as disclosed by the Company
in a written Disclosure Schedule provided by the Company to the Lenders (the “Disclosure
Schedule”), the Company hereby represents and warrants to the Lenders that:



5.1 Organization, Good Standing and Qualification. The Company is a corporation duly
organized, validly existing, and in good standing under the laws of the State of Delaware and has
all requisite corporate power and authority to own, operate and occupy its properties and to carry
on its business as now conducted and as described in the documents filed by the Company under the
Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations
promulgated thereunder since January 1, 2009 through the date hereof, including, without
limitation, its most recent report on Form 10-K (the “Exchange Act Documents”). The Company is
duly qualified to transact business and is registered or qualified to do business and is in good
standing in each jurisdiction in which the nature of the business conducted by it or the location
of the properties owned or leased by it requires such qualification, except where the failure to be
so authorized, qualified or in good standing would not be reasonably likely to have a Material
Adverse Effect. No proceeding to which the Company is a party has been instituted in any such
jurisdiction, revoking, limiting or curtailing, or seeking to revoke, limit or curtail, such power
and authority or qualification. The Company is an operating company within the meaning of the
Department of Labor Regulation 2510.3-101. The Company has no subsidiaries as defined in Rule 405
under the Securities Act of 1933, as amended (the “Securities Act”).



5.2 Authorization and Issuance. Except for the authorization and issuance of the
shares issuable in connection with the Next Preferred Equity Financing, all corporate action has
been taken on the part of the Company, its officers, directors and stockholders necessary for the
authorization, execution and delivery of this Agreement, the Notes and the Warrants. Except as may
be limited by applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
relating to or affecting the enforcement of creditors’ rights, except as rights to indemnity and
contribution may be limited by state or federal securities laws or the public policy underlying
such laws, and except as enforceability may be subject to general principles of equity (regardless
of whether such enforceability is considered in a proceeding in equity or at law), the Company has
taken all corporate action required to make all of the obligations of the Company reflected in the
provisions of this Agreement, the Notes and the Warrants, the valid and enforceable obligations
they purport to be. The Conversion Shares and the Warrant Shares, when issued, will be duly and
validly issued, fully paid and non-assessable.


 


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5.3 Non-Contravention. The execution and delivery of the Transaction Documents, the
issuance and sale of the Notes and the Warrants under this Agreement, the fulfillment of the terms
of the Transaction Documents and the consummation of the transactions contemplated thereby do not
and will not (A) conflict with or constitute a violation of, or default
(with the passage of time or otherwise) (including any covenant, restriction or provision with
respect to financial ratios or tests or any aspect of the financial condition or results of
operations of the Company) under, (i) any bond, debenture, note or other evidence of indebtedness,
lease, contract, indenture, mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument to which the Company is a party or by which it or its properties are bound,
(ii) the certificate of incorporation, by-laws or other organizational documents of the Company, or
(iii) any law, administrative regulation, ordinance or order of any court or governmental agency,
arbitration panel or authority or the rules of the OTC Bulletin Board (the “OTC BB”) applicable to
the Company or its properties, except in the case of clauses (i) and (iii) for any such conflicts,
violations or defaults which are not reasonably likely to have a Material Adverse Effect or (B)
other than the security interest granted under the Security Agreement, result in the creation or
imposition of any lien, encumbrance, claim, security interest or restriction whatsoever upon any of
the properties or assets of the Company or an acceleration of indebtedness pursuant to any
obligation, agreement or condition contained in any bond, debenture, note or any other evidence of
indebtedness or any indenture, mortgage, deed of trust or any other agreement or instrument to
which the Company is a party or by which it is bound or to which any of the property or assets of
the Company is subject, except to the extent that such acceleration would not have a Material
Adverse Effect. No consent, approval, authorization or other order of, or registration,
qualification or filing with, any regulatory body, administrative agency, or other governmental
body or any other person is required for the execution and delivery of the Transaction Documents by
the Company, the valid issuance and sale of the Notes and Warrants to be sold pursuant to the
Transaction Documents and the performance by the Company of its other obligations thereunder, other
than such as have been made or obtained, and except for any post closing securities filings or
notifications required to be made under federal or state securities laws.



5.4  Indebtedness. The Company does not have any outstanding Indebtedness.
“Indebtedness” means, without duplication all (a) indebtedness for borrowed money, (b) notes
payable, whether or not representing obligations for borrowed money, (c) obligations representing
the deferred purchase price for property or services, (d) obligations secured by any mortgage or
lien on property owned or acquired subject to such mortgage or lien, whether or not the liability
secured thereby shall have been assumed, (e) all guaranties, endorsements and other contingent
obligations, in respect of Indebtedness of others, whether or not the same are or should be so
reflected in the Company’s balance sheet, except guaranties by endorsement of negotiable
instruments for deposit or collection or similar transactions in the ordinary course of business
and (f) that portion of any lease payments due under leases required to be capitalized in
accordance with generally accepted accounting principles consistently applied, provided however,
that Indebtedness shall not include trade payables and trade debt.



5.5 Capitalization. The authorized capital of the Company consists of 100,000,000
shares of Common Stock and 5,000,000 shares of Preferred Stock, of which 650 shares have been
designated Series A Preferred Stock, 700,000 shares have been designated Series C Preferred Stock
and 792,100 shares have been designated Series D Preferred Stock. As of November 10, 2010,
28,881,816 shares were issued and outstanding, consisting of 27,865,010 shares of Common Stock, 645
shares of Series A Preferred Stock, 281,263 shares of Series C Preferred Stock and 734,898 shares
of Series D Preferred Stock. The Company has not issued any capital stock since the date above
other than pursuant to (i) employee benefit plans disclosed
in the Exchange Act Documents, or (ii) outstanding warrants, options or other securities
disclosed in the Exchange Act Documents. The outstanding shares of capital stock of the Company
have been duly and validly issued and are fully paid and nonassessable, have been issued in
compliance with all

 


5









 






 federal and state securities laws, and were not issued in violation of any
preemptive rights or similar rights to subscribe for or purchase securities. Except as set forth
in or contemplated by the Exchange Act Documents, there are no outstanding rights (including,
without limitation, preemptive rights), warrants or options to acquire, or instruments convertible
into or exchangeable for, any unissued shares of capital stock or other equity interest in the
Company or any contract, commitment, agreement, understanding or arrangement of any kind to which
the Company is a party or of which the Company has knowledge and relating to the issuance or sale
of any capital stock of the Company, any such convertible or exchangeable securities or any such
rights, warrants or options. Without limiting the foregoing and except as provided herein or as
disclosed in the Exchange Act Documents, no preemptive right, co-sale right, right of first
refusal, registration right, or other similar right exists with respect to the Notes or Warrants or
the issuance and sale thereof. No further approval or authorization of any stockholder, the Board
of Directors of the Company or others is required for the issuance and sale of the Notes or
Warrants. Except as disclosed in the Exchange Act Documents, there are no stockholders agreements,
voting agreements or other similar agreements with respect to the Common Stock to which the Company
is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.



5.6 Legal Proceedings. There is no material legal or governmental proceeding pending
or, to the knowledge of the Company, threatened to which the Company is a party or of which the
business or property of the Company is subject that is not disclosed in the Exchange Act Documents.



5.7 No Violations. The Company is not (i) in violation of its certificate of
incorporation, by-laws, or other organizational document; (ii) in violation of any law,
administrative regulation, ordinance or order of any court or governmental agency, arbitration
panel or authority applicable to the Company, which violation, individually or in the aggregate,
would be reasonably likely to have a Material Adverse Effect; or (iii) in default (and there exists
no condition which, with the passage of time or otherwise, would constitute a default) in the
performance of any bond, debenture, note or any other evidence of indebtedness in any indenture,
mortgage, deed of trust or any other agreement or instrument to which the Company is a party or by
which the Company is bound or by which the properties of the Company is bound, which default,
individually or in the aggregate, would be reasonably likely to have a Material Adverse Effect.



5.8 Governmental Permits, Etc. With the exception of the matters which are dealt with
separately in Sections 5.1 (Organization, Good Standing and Qualification), 5.9 (Intellectual
Property), 5.13 (Exchange Act Compliance), and 5.14 (Reporting Status), the Company has all
necessary franchises, licenses, certificates and other authorizations from any foreign, federal,
state or local government or governmental agency, department, or body that are currently necessary
for the operation of the business of the Company as currently conducted and as described in the
Exchange Act Documents except where the failure to currently possess could not reasonably be
expected to have a Material Adverse Effect.


 


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5.9 Intellectual Property.



(a) The Company owns or has valid, binding and enforceable licenses or other rights to use the
patents and patent applications, copyrights, trademarks, trade names, service marks, service names,
and know how (including trade secrets and other unpatented proprietary intellectual property
rights) (collectively, the “Intellectual Property Rights”) that are necessary to conduct its
business in the manner in which it is presently conducted or contemplated to be conducted, except
where the failure to have such ownership, license or right to use would not, individually or in the
aggregate, have a Material Adverse Effect.



(b) Section 5.9(b) of the Disclosure Schedule lists all (i) patents of the Company, (ii) owned
patent applications of the Company and (iii) license agreements to use patents or patent
applications by the Company. To the knowledge of the Company, there are no present or threatened
infringements of any patents or patent applications owned by the Company or licensed to the Company
(the “Company Patents”) by any third party, except, in either case, for such infringements which
would not, individually or in the aggregate, have a Material Adverse Effect. The Company has
complied with the required duty of candor and good faith in dealing with the United States Patent
and Trademark Office (the “PTO”) with respect to the Company Patents, and, to the Company’s
knowledge, all individuals to whom the duty of candor and good faith applies with respect to the
Company Patents have complied with such duty, including the duty to disclose to the PTO all
information believed to be material to the patentability of the Company Patents. The Company is
not aware of any publication, disclosure, public use, or offer for sale by any of its employees or
consultants of subject matter prior to the filing date of any one of the Company Patents that
negatively impacts the patentability of any claim of such patent. There are no legal or
governmental proceedings pending relating to Company Patents other than proceedings in the PTO, or
foreign patent office review of pending applications for patents, and, other than PTO (or patent
offices in other jurisdictions) review of pending applications for patents, to the Company’s
knowledge, no such proceedings are threatened or contemplated by governmental authorities.



(c) To the Company’s knowledge, there are no pending, nor has there been any notice of any
third party patents or threatened, actions, suits, proceedings, claims or allegations by others
that the Company, including through use of the Company Patents, is or will be infringing any
patent, trade secret, trademark, service mark, copyright or other proprietary intellectual property
rights.



(d) The Company is not in breach of, and has complied in all respects with all terms of, any
of the license agreements under which the Company licenses a patent or patent application that
covers technology necessary to conduct or used in the conduct of the Company’s business in the
manner in which it is currently conducted; except as would not, individually or in the aggregate,
have a Material Adverse Effect.


 


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(e) The Company is not aware of any obligation of any of its employees under any contract
(including licenses, covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would interfere with the use
of such employee’s best efforts to promote the interest of the Company or that would conflict with
the Company’s business; and to the Company’s knowledge, it is not and
will not be necessary to use any inventions, trade secrets or proprietary information of any
of its consultants, or its employees (or persons it currently intends to hire) made prior to their
employment by the Company, except for technology that is licensed to or owned by the Company. All
employees of the Company have executed and delivered to and in favor of the Company an agreement
regarding the protection of confidential and proprietary information and the assignment to the
Company of all intellectual property rights arising from the services performed for the Company by
such persons.




5.10 Financial Statements; Solvency; Obligations to Related Parties.



(a) The financial statements of the Company and the related notes contained in the Exchange
Act Documents present fairly, in accordance with generally accepted accounting principles applied
on a consistent basis (“GAAP”), the financial position of the Company and its subsidiaries as of
the dates indicated, and the results of its operations and cash flows for the periods therein
specified consistent with the books and records of the Company and its subsidiaries except that the
unaudited interim financial statements were or are subject to normal and recurring year end
adjustments which are not expected to be material in amount except as otherwise described in the
Exchange Act Documents. Such financial statements (including the related notes) have been prepared
in accordance with GAAP throughout the periods therein specified, except as may be disclosed in the
notes to such financial statements, or in the case of unaudited statements, as may be permitted by
the Securities and Exchange Commission (the “SEC”) and except as disclosed in the Exchange Act
Documents. The other financial information contained in the Exchange Act Documents has been
prepared on a basis consistent with the financial statements of the Company.



(b) Except as set forth in the Exchange Act Documents, the Company has no knowledge of any
facts or circumstances which lead it to believe that it will be required to file for reorganization
or liquidation under the bankruptcy or reorganization laws of any jurisdiction, and has no present
intention to so file.



(c) Except as set forth in any Exchange Act Documents, there are no obligations of the Company
to officers, directors, stockholders or employees of the Company other than:




(i) for payment of salary for services rendered and for bonus payments;




(ii) reimbursements for reasonable expenses incurred on behalf of the Company;



(iii) for other standard employee benefits made generally available to all employees
(including stock option agreements outstanding under any stock option plan approved by the Board of
Directors of the Company);




(iv) obligations listed in the Company’s financial statements; and



(v) under applicable laws.


 


8









 





Except as described above or in any Exchange Act Documents, (i) none of the officers, directors or,
to the best of the Company’s knowledge, key employees or stockholders of the Company or any members
of their immediate families, are indebted to the Company, individually or in the aggregate, in
excess of $120,000, and (ii) none of the officers, directors or, to the best of the Company’s
knowledge, key employees have any direct or indirect ownership interest in any firm or corporation
with which the Company is affiliated or with which the Company has a business relationship, or any
firm or corporation which competes with the Company, other than passive investments in publicly
traded companies (representing less than one percent (1%) of such company) which may compete with
the Company. Except as described above or as set forth in the Exchange Act Documents, no officer,
director, or any member of their immediate families, is, directly or indirectly, interested in any
material contract with the Company and no agreements, understandings or proposed transactions are
contemplated between the Company and any such person. Except as set forth in any Exchange Act
Documents, the Company is not a guarantor or indemnitor of any indebtedness of any other person,
firm or corporation.



5.11 No Material Adverse Change. Except as disclosed in the Exchange Act Documents,
since January 1, 2010, there has not been (i) any material adverse change in the financial
condition or results of operations of the Company, (ii) any event affecting the Company which has
had or could reasonably be expected to have a Material Adverse Effect, (iii) any obligation, direct
or contingent, that is material to the Company, incurred by the Company, except obligations
incurred in the ordinary course of business or with respect to the transactions contemplated by the
Transaction Documents or (iv) any dividend or distribution of any kind declared, paid or made on
the capital stock of the Company.



5.12 Disclosure. The representations and warranties of the Company contained in this
Section 5 as of the date hereof do not and will not contain any untrue statement of a material fact
or omit to state a material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not misleading. The Company
understands and confirms that the Lenders will rely on the foregoing representations in purchasing
the Notes and Warrants.



5.13 Exchange Act Compliance. The Common Stock is registered pursuant to Section
12(g) of the Exchange Act and is quoted on the OTC BB, and the Company has taken no action designed
to, or likely to have the effect of, terminating the registration of the Common Stock under the
Exchange Act or removal from quotation of the Common Stock from the OTC BB, nor has the Company
received any notification that the SEC, the OTC BB or the Financial Industry Regulatory Authority
(“FINRA”) is contemplating terminating such registration or quotation.



5.14 Reporting Status. Since January 1, 2008, the Company has filed or furnished with
the SEC in a timely manner all of the documents that the Company was required to file or furnish
under the Exchange Act. As of the date of filing thereof, each Exchange Act Document complied in
all material respects with the requirements of the Exchange Act and the rules and regulations of
the SEC promulgated thereunder applicable to such Exchange Act Document. None of the Exchange Act
Documents, as of the date 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.


 


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5.15 No Manipulation of Stock. The Company has not taken, in violation of applicable
law, any action designed to or that might reasonably be expected to cause or result in
stabilization or manipulation of the price of the Common Stock.



5.16 Company Not an “Investment Company”. The Company has been advised of the rules
and requirements under the Investment Company Act of 1940, as amended (the “Investment Company
Act”). The Company is not, and immediately after receipt of payment for the Notes and Warrants
will not be, an “investment company” within the meaning of the Investment Company Act.



5.17 Embargoed Person. The Company has no foreign operations and (i) none of the
funds or other assets of the Company constitute or shall constitute property of, or shall be
beneficially owned, directly or indirectly, by any person with whom U.S. persons are restricted
from engaging in financial or other transactions under United States law, including, but not
limited to, the International Emergency Economic Powers Act, 50 U.S.C. § 1701 et seq., The Trading
with the Enemy Act, 50 U.S.C. App. 1 et seq., and any executive orders or regulations promulgated
under any such United States laws (each, an “Embargoed Person”), with the result that the
investments evidenced by the Notes or the Warrants are or would be in violation of law; (ii) no
Embargoed Person has or shall have any interest of any nature whatsoever in the Company with the
result that the investments evidenced by the Notes and Warrants are or would be in violation of
law; and (iii) none of the funds of the Company are or shall be derived from any unlawful activity
with the result that the investments evidenced by the Notes or the Warrants are or would be in
violation of law; provided, that, with respect to the covenants contained in this Section 5.17, the
Company may assume that the Lenders are not Embargoed Persons. The Company certifies that, to the
Company’s knowledge, the Company has not been designated, and is not owned or controlled by, an
Embargoed Person.



5.18 Accountants. To the Company’s knowledge, J.H. Cohn LLP and BDO USA, LLP, which
have expressed their opinions with respect to the financial statements included in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2009, are independent accountants as
required by the Securities Act and the rules and regulations promulgated thereunder.



5.19 Contracts. The contracts filed as exhibits to the Exchange Act Documents are in
full force and effect on the date hereof, except as to contracts whose term has expired, and the
Company is not in breach of or default under any of such contracts, except as would not have a
Material Adverse Effect. The Company has filed with the SEC all contracts and agreements required
to be filed by the Exchange Act.



5.20 Taxes. The Company has filed all material federal, state and foreign income and
franchise tax returns due to be filed as of the date hereof, taking into account all extensions,
and has paid or accrued all taxes shown as due thereon, and the Company has no knowledge of a tax
deficiency which has been or might be asserted or threatened against it which would have a Material
Adverse Effect.


 


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5.21 Transfer Taxes. On the date of the Closing, all stock transfer or other taxes
(other than income taxes) which are required to be paid in connection with the sale and transfer of
the Warrants to be sold to the Lenders hereunder will be, or will have been, fully paid or provided
for by the Company and all laws imposing such taxes will be or will have been fully complied with.



5.22 Private Offering. Assuming the correctness of the representations and warranties
of the Lenders set forth in Section 6 hereof, the offer and sale of the Notes and Warrants
hereunder, and the issuance of the Warrant Shares pursuant to the Warrants, shall be exempt from
registration under the Securities Act. The Company has not in the past nor will it hereafter take
any action to sell, offer for sale or solicit offers to buy any securities of the Company which
would bring the offer, issuance or sale of the Notes or the Warrants as contemplated by this
Agreement or the Warrant Shares, within the provisions of Section 5 of the Securities Act, unless
such offer, issuance or sale was or shall be within the exemptions of Section 4 of the Securities
Act. Neither the Company nor any person acting on behalf of the Company has offered or sold any of
the Notes or Warrants by any form of general solicitation or general advertising (as those terms
are used in Regulation D under the Securities Act).



5.23 Controls and Procedures. The Company is in material compliance with all
provisions of the Sarbanes Oxley Act of 2002 which are applicable to it as of the date hereof.
Except as provided in the Exchange Act Documents, the Company maintains a system of internal
control over financial reporting (as such term is defined in the Exchange Act) 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 GAAP 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’s certifying officers are responsible for establishing and maintaining disclosure controls
and procedures (as defined in Exchange Act) for the Company and they have (a) designed such
disclosure controls and procedures, or caused such disclosure controls and procedures to be
designed under their supervision, 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 periods in which the Exchange Act Documents have been prepared;
(b) to the extent required by the Exchange Act, evaluated the effectiveness of the Company’s
disclosure controls and procedures and presented in the Exchange Act Documents their conclusions
about the effectiveness of the disclosure controls and procedures, as of the end of the periods
covered by the Exchange Act Documents based on such evaluation; and (c) since the last evaluation
date referred to in (b) above, there have been no material changes in the Company’s internal
control over financial reporting (as such term is defined in the Exchange Act) or, to the Company’s
knowledge, in other factors that could significantly affect the Company’s internal control over
financial reporting.



5.24 Real Property Holding Corporation. Since its date of incorporation, the Company
has not been, and as of the date hereof shall not be, a “United States real property holding
corporation,” as defined in Section 897(c)(2) of the Internal Revenue Code of 1986, and in Section
1.897-2(b) of the Treasury Regulations issued thereunder. The Company has no
current plans or intentions which would cause the Company to become a “United States real
property holding corporation,” and the Company has filed with the IRS all statements, if any, with
its United States income tax returns which are required under Section 1.897-2(h) of the Treasury
Regulations. The shares of the Company do not derive their value principally from real property,
and the property of the Company does not and will not consist principally of real property.


 


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5.25 Relationship with General Electric Company or its Affiliates. Other than with
respect to the transactions contemplated in the Transaction Documents or as disclosed in the
Exchange Act Documents, the Company does not have any equity, creditor or similar relationship
(including, without limitation, any investment in (or right to acquire an investment in), or any
debtor, revolving credit, leasing or creditor relationship, but excluding any vendor or vendee
relationship, with General Electric Company or any subsidiary or affiliate thereof, other than
Palisade Private Partnership, L.P. or any of its affiliates (“Palisade”). The Company is not a
party in interest, as defined in Section 3(14) of the Employee Retirement Income Security Act of
1974, as amended, with respect to General Electric Pension Trust.



5.26 Clinical Trials. The preclinical tests and clinical trials that are described
in, or the results of which are referred to in, the Exchange Act Documents, were and, if still
pending, are being conducted in all material respects in accordance with protocols filed with the
appropriate regulatory authorities for each such test or trial, as the case may be. The
description of the results of such tests and trials contained in the Exchange Act Documents are
accurate and complete in all material respects, and the Company has no knowledge of any other
studies or tests the results of which are inconsistent with, or otherwise call into question, the
results described or referred to in the Exchange Act Documents. The Company has not received any
notices or other correspondence from the United States Food and Drug Administration (the “FDA”) or
from any other U.S. or foreign government agency requiring the termination, suspension or
modification of any clinical trials that are described or referred to in the Exchange Act
Documents, and the Company has operated and currently is in compliance in all material respects
with all applicable rules, regulations and policies of the FDA.



6. Representations and Warranties of the Lenders. In connection with the transactions
provided for herein, each Lender hereby represents and warrants to the Company that:



6.1 Authorization. The Lender has all requisite power and authority to execute,
deliver and perform its obligations under this Agreement. The execution of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized by all necessary
action on the part of such Lender and this Agreement has been duly executed and delivered and
constitutes the valid and binding obligation of the Lender enforceable in accordance with its
terms, except as rights to indemnity and contribution may be limited by state or federal securities
laws or the public policy underlying such laws, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws affecting creditors’
and contracting parties’ rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered in a proceeding in
equity or at law).


 


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6.2 Purchase Entirely for Own Account. Each Lender acknowledges that this Agreement
is made with Lender in reliance upon such Lender’s representation to the Company that the Notes,
Warrants, Warrant Shares and Conversion Shares (collectively, the “Securities”) will be acquired
for investment only for the Lender’s own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof in violation of the Securities Act, and such Lender
has no present intention of selling, granting any participation in, or otherwise distributing the
same. Such Lender does not have any contract, undertaking, agreement, or arrangement with any
person to sell, transfer, or grant participation to any person with respect to any of the
Securities. Nothing contained herein shall be deemed a representation or warranty by such Lender
to hold the Securities for any period of time



6.3 Disclosure of Information. The Lender acknowledges that it has received all the
information that it has requested relating to the Company and the purchase of the Notes and
Warrants. The Lender further represents that it has had an opportunity to ask questions and
receive answers from the Company regarding the terms and conditions of the offering of the Notes
and Warrants. The Lender recognizes that an investment in the Notes and Warrants involves a high
degree of risk, including the risk of total loss of the Lender’s investment. The Lender has
knowledge and experience in financial and business matters such that it is capable of evaluating
the risks of the investment in the Notes and Warrants. The foregoing, however, does not limit or
modify the representations and warranties of the Company in this Agreement or the right of the
Lender to rely thereon.



6.4 Accredited Investor. The Lender is an “accredited investor” within the meaning of
Rule 501 of Regulation D promulgated under the Securities Act, as presently in effect and the
Lender is also knowledgeable, sophisticated and experienced in making, and is qualified to make
decisions with respect to the transactions contemplated hereby.



6.5 Restricted Securities. Each Lender understands that the Notes and Warrants are
characterized as “restricted securities” under the federal securities laws inasmuch as they are
being acquired from the Company in a transaction not involving a public offering and that under
such laws and applicable regulations such securities may be resold without registration under the
Securities Act only in certain limited circumstances. Each Lender represents that it is familiar
with SEC Rule 144, as presently in effect, and understands the resale limitations imposed thereby
and by the Securities Act.



6.6 Disclosures to the Company. The Lender understands that the Company is relying on
the statements contained herein to establish an exemption from registration under federal and state
securities laws.



6.7 Legends. It is understood that the Securities may bear a legend substantially
similar to the following:




“THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED, HYPOTHECATED, OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER
THE SECURITIES ACT OF 1933,
AS AMENDED, OR AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY THAT REGISTRATION
IS NOT REQUIRED UNDER SUCH ACT OR UNLESS SOLD PURSUANT TO RULE 144 UNDER SUCH ACT.”


 


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7. Defaults and Remedies.



7.1 Events of Default. The following events shall be considered “Events of Default”
with respect to each Note:



(a) The Company shall default in the payment of any part of the principal or unpaid accrued
interest on the Note after the Maturity Date or at a date fixed by acceleration or otherwise;



(b) The Company shall make an assignment for the benefit of creditors, or shall admit in
writing its inability to pay its debts as they become due, or shall file a voluntary petition for
bankruptcy, or shall file any petition or answer seeking for itself any reorganization,
arrangement, composition, readjustment, dissolution or similar relief under any present or future
statute, law or regulation, or shall file any answer admitting the material allegations of a
petition filed against the Company in any such proceeding, or shall seek or consent to or acquiesce
in the appointment of any trustee, receiver or liquidator of the Company, or of all or any
substantial part of the properties of the Company, or the Company or its respective directors or
majority stockholders shall take any action looking to the dissolution or liquidation of the
Company;



(c) Within thirty (30) days after the commencement of any proceeding against the Company
seeking any bankruptcy reorganization, arrangement, composition, readjustment, liquidation,
dissolution or similar relief under any present or future statute, law or regulation, such
proceeding shall not have been dismissed, or within thirty (30) days after the appointment without
the consent or acquiescence of the Company of any trustee, receiver or liquidator of the Company or
of all or any substantial part of the properties of the Company, such appointment shall not have
been vacated;



(d) Within thirty (30) days after the Company becomes involved in litigation that threatens to
materially and adversely affect the Company’s business, operations, assets, results of operations
or prospects, if the Company’s involvement has not terminated by such date in a manner that does
not and could not reasonably be expected to materially and adversely affect the Company’s business,
operations, assets, results of operations or prospects;



(e) Any default or defined event of default that has not otherwise been cured or forgiven
shall occur under any agreement to which the Company or any of its subsidiaries is a party that
evidences Indebtedness of $250,000 or more;



(f) The Company shall fail to observe or perform any other obligation to be observed or
performed by it under this Agreement, the Security Agreement, the Notes or the Warrants within 30
days after written notice from the Required Note Holders to perform or observe the obligation; or



(g) The Company shall have materially breached a representation or warranty under this
Agreement or the Security Agreement.


 


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7.2 Remedies. Upon the occurrence of an Event of Default under Section 7.1 hereof, at
the option and upon the declaration of Required Note Holders, the entire unpaid principal and
accrued and unpaid interest on such Note shall, without presentment, demand, protest, or notice of
any kind, all of which are hereby expressly waived, be forthwith due and payable, and such holder
may, immediately and without expiration of any period of grace, enforce payment of all amounts due
and owing under such Note and exercise any and all other remedies granted to it at law, in equity
or otherwise.



8. Covenants. Except to the extent the following covenants and provisions of this
Section are waived in any instance by the Required Note Holders, the Company covenants and agrees
that until the Notes are paid in full or converted into equity securities of the Company:



8.1 Distributions. The Company shall not declare or pay any dividends, purchase,
redeem, retire, or otherwise acquire for value any of its capital stock (or rights, options or
warrants to purchase such shares) now or hereafter outstanding, return any capital to its
stockholders as such, or make any distribution of assets to its stockholders as such, or pay into
or set aside a sinking fund for such purpose; provided, however, that nothing herein contained
shall prevent the Company from: (i) effecting a stock split or declaring a stock dividend in
shares of capital stock of the Company; (ii) complying with any specific provision of the terms of
this Agreement and the Notes; (iii) redeeming any stock of a deceased stockholder out of insurance
held by the Company on that stockholder’s life; or (iv) repurchasing any stock of an officer,
employee or consultant subject to a stock repurchase agreement under which the Company has the
right or obligation to repurchase such shares in the event of termination of employment or of a
consulting arrangement; provided, however, that such purchase shall not exceed $250,000 in the
aggregate.



8.2 Indebtedness. The Company shall not create, incur, assume or suffer to exist any
liability with respect to Indebtedness except for: (i) the Notes and (ii) current liabilities and
trade payables, other than for borrowed money, which are incurred in the ordinary course of
business.



8.3 Use of Proceeds. The Company shall use the proceeds from the sale of the Notes
and Warrants solely for the following purposes: (i) working capital, (ii) the open label arm of
the Company’s Phase 2 clinical trial for the treatment of advanced Parkinson’s disease, (iii)
completion of the initial portion of the Company’s Phase 2 clinical trial for the treatment of
advanced Parkinson’s disease and (iv) the scale-up of the Company’s manufacturing capabilities.



8.4 Removal of Legends. Upon Rule 144(b) becoming available with respect to a
Lender’s Warrant Shares, the Company shall, upon a Lender’s written request, promptly cause
certificates evidencing such shares to be replaced with certificates which do not bear a
restrictive legend described in Section 6.7.



8.5 Section 203 Exemption. The Board of Directors has adopted this Agreement and the
transactions contemplated hereby and thereby in such manner as is sufficient to render the
restrictions of Section 203 of the Delaware General Corporations Law inapplicable to the Agreements
and all transactions contemplated hereby and thereby.


 


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8.6 Rule 144. The Company covenants that it will timely file the reports required to
be filed by it under the Securities Act and the Exchange Act and the rules and regulations adopted
by the SEC thereunder (or, if the Company is not required to file such reports, it will, upon the
request of a Lender if such request is made after the first anniversary of the Closing, make
publicly available such information as necessary to permit sales pursuant to Rule 144 under the
Securities Act), and it will take such further action as any such Lender may reasonably request,
all to the extent required from time to time to enable such Lender to sell Securities purchased
hereunder without registration under the Securities Act within the limitation of the exemptions
provided by (a) Rule 144 under the Securities Act, as such Rule may be amended from time to time,
or (b) any similar rule or regulation hereafter adopted by the SEC. Upon request, the Company will
provide to the Lender written certification of its compliance with the provisions of this Section
8.6.



8.7 Issuance and Quotation. The Company shall comply with all requirements of FINRA
and the SEC with respect to the issuance of the Warrant Shares and the OTC BB with respect to the
quotation of the Warrant Shares on the OTC BB, including without limitation providing a CUSIP
number for all such shares, to the extent required.



8.8 Investment Company. The Company shall conduct its business in a manner so that it
will not become subject to the Investment Company Act.



8.9 Disclosure. The Company shall as soon as practicable after the Closing issue a
press release disclosing the material terms of the transactions contemplated by the Transaction
Documents (including at least the Notes and Warrants sold and proceeds therefrom).



8.10 Status as an Operating Company. The Company shall maintain its status as an
operating company within the meaning of the Department of Labor Regulation 2510.3-101.




8.11 Right of First Refusal.



(a) Right of First Refusal. The Company shall not issue, sell or exchange, agree or
obligate itself to issue, sell or exchange, or reserve or set aside for issuance, sale or exchange,
in a transaction not involving a public offering, any (i) equity security or debt security of the
Company, including without limitation, any security which by its terms is convertible into or
exchangeable for any equity security of the Company or (ii) any option, warrant or other right to
subscribe for, purchase or otherwise acquire any equity security or any debt security of the
Company, unless in each case the Company shall have first offered to sell an amount of such
securities equal to the Participation Amount, as defined in Section 8.11(f) hereof (the “Offered
Securities”), to the Lenders (each, an “Offeree” and collectively, the “Offerees”) as follows:
Each Offeree shall have the right to purchase (x) that portion of the Offered Securities as the
principal amount of the Note or Notes held by such Offeree bears to the aggregate principal amounts
of the Notes held by all Offerees (the “Basic Amount”), and (y) such additional portion of the
Offered Securities as such Offeree shall indicate that it will purchase should the other Offerees
subscribe for less than their Basic Amounts (the “Undersubscription Amount”), at a price and on
such other terms as shall have been specified by the Company in writing delivered to such Offeree
(the “Offer”), which Offer by its terms shall remain open and irrevocable for a period of fifteen
(15) days from receipt of the Offer.


 


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(b) Notice of Acceptance. Notice of each Offeree’s intention to accept, in whole or
in part, any Offer made shall be evidenced by a writing signed by such Offeree and delivered to the
Company prior to the end of the fifteen (15) day period of such Offer, setting forth such of the
Offeree’s Basic Amount as such Offeree elects to purchase and, if such Offeree shall elect to
purchase all of its Basic Amount, such Undersubscription Amount as such Offeree shall elect to
purchase (the “Notice of Acceptance”). If the Basic Amounts subscribed for by all Offerees are
less than the total Offered Securities, then each Offeree who has set forth Undersubscription
Amounts in its Notice of Acceptance shall be entitled to purchase, in addition to the Basic Amounts
subscribed for, all Undersubscription Amounts it has subscribed for; provided,
however, that should the Undersubscription Amounts subscribed for exceed the difference
between the Offered Securities and the Basic Amounts subscribed for (the “Available
Undersubscription Amount”), each Offeree who has subscribed for any Undersubscription Amount shall
be entitled to purchase only that portion of the Available Undersubscription Amount as the
Undersubscription Amount subscribed for by such Offeree bears to the total Undersubscription
Amounts subscribed for by all Offerees, subject to rounding by the Company to the extent it
reasonably deems necessary. The purchase by the Offerees of any Offered Securities is subject in
all cases to the preparation, execution and delivery by the Company and the Offerees of a purchase
agreement relating to such Offered Securities reasonably satisfactory in form and substance to the
Company and the Offerees and their respective counsel.




(c) Conditions to Acceptances and Purchase.



(i) Permitted Sales of Refused Securities. In the event that Notices of Acceptance
are not given by the Offerees in respect of all the Offered Securities, the Company shall have
seventy-five (75) days from the expiration of the fifteen (15) day period set forth above to close
the sale of all or any part of such Offered Securities as to which a Notice of Acceptance has not
been given by the Offerees (the “Refused Securities”) to the person or persons specified in the
Offer, but only for cash and otherwise in all respects upon terms and conditions, including,
without limitation, unit price and interest rates, which are no more favorable, in the aggregate,
to the purchasers or less favorable to the Company than those set forth in the Offer.



(ii) Closing. Upon the closing, which shall include full payment to the Company for
the sale to such other person or persons of all or less than all the Refused Securities, the
Offerees shall purchase from the Company and the Company shall sell to the Offerees the number of
Offered Securities specified in the Notices of Acceptance upon the terms and conditions specified
in the Offer.



(d) Further Sale. In each case, any Offered Securities not purchased by the Offerees
or other person or persons in accordance with Section 8.11(c)(ii) above may not be sold or
otherwise disposed of until they are again offered to the Offerees under the procedures specified
in Section 8.11(a)-(c) above.


 


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(e) Exceptions. The rights of the Offerees under this Section 8.11 shall not apply
to:



(i) any Common Stock issued as a stock dividend to holders of Common Stock or upon any
subdivision or combination of shares of Common Stock;



(ii) any capital stock or derivative thereof granted to an employee, director or consultant
under a stock plan approved by the Board of Directors of the Company and its stockholders;



(iii) any securities issued as consideration for the acquisition of another entity by the
Company by merger or share exchange (whereby the Company owns no less than fifty-one percent (51%)
of the voting power of the surviving entity) or purchase of substantially all of such entity’s
stock or assets, if such acquisition is approved by the Board of Directors;



(iv) any securities issued in connection with a strategic partnership, joint venture or other
similar arrangement, provided that the purpose of such arrangement is not primarily the raising of
capital and that such arrangement is approved by two-thirds of the members of the Board of
Directors;



(v) any securities issued to a financial institution in connection with a bank loan or lease
with such financial institution provided that such issuance is approved by two-thirds of the
members of the Board of Directors;



(vi) any securities issuable upon the exercise or conversion of options, warrants or other
convertible or exercisable securities outstanding on the date of the Closing; and




(vii) any Common Stock issuable or issued upon the exercise of the Warrants.



(f) “Participation Amount” shall mean an amount of debt securities and equity
securities offered by the Company in a non-public transaction, as described in Section 8.11(a)
hereof, equal to the greater of (i) 19% of the aggregate amount of such offered securities or (ii)
the amount of such offered securities not subscribed for by holders of preemptive rights with
respect to such offering of the Company’s securities, as such rights exist immediately prior to the
Closing on the date hereof.




9. Miscellaneous.



9.1 Successors and Assigns. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties, provided, however, that the Company may not
assign its obligations under this Agreement without the written consent of the Required Note
Holders. Nothing in this Agreement, express or implied, is intended to confer upon any party other
than the parties hereto or their respective successors and assigns any rights, remedies,
obligations or liabilities under or by reason of this Agreement, except as expressly provided in
this Agreement.



9.2 Pro Rata Treatment. Whether or not a default or Event of Default exists, each
payment or prepayment of principal (scheduled or unscheduled) or premium, if any, of the Notes and
each payment of interest on the Notes shall be allocated pro rata among the Lenders in accordance
with the respective principal amounts of their outstanding Notes.


 


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9.3 Actions in Concert. For the sake of clarity, each Lender hereby agrees with each
other Lender that no Lender shall take any action to protect or enforce its rights arising out of
this Agreement, the Notes or any other related document (including exercising any rights of setoff)
without first obtaining the consent of the Required Note Holders, it being the intent of Lenders
that any such action to protect or enforce rights under this Agreement and the Notes shall be taken
in concert and at the direction of Required Note Holders.



9.4 Governing Law. This Agreement shall be governed by, and construed in accordance
with, the internal laws of the State of New York, without regard to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the exclusive jurisdiction of the
courts of the State of New York located in New York County and the United States District Court for
the Southern District of New York for the purpose of any suit, action, proceeding or judgment
relating to or arising out of this Agreement and the transactions contemplated hereby. Each of the
parties hereto irrevocably consents to the jurisdiction of any such court in any such suit, action
or proceeding and to the laying of venue in such court. Each party hereto irrevocably waives any
objection to the laying of venue of any such suit, action or proceeding brought in such courts and
irrevocably waives any claim that any such suit, action or proceeding brought in any such court has
been brought in an inconvenient forum. EACH OF THE PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A
TRIAL BY JURY IN ANY LITIGATION WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN
CONSULTED SPECIFICALLY AS TO THIS WAIVER.



9.5 Counterparts. This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute one and the same
instrument. Execution and delivery of this Agreement by facsimile or electronic exchange bearing
the copies of a party’s signature shall constitute a valid and binding execution and delivery of
this Agreement by such party. Such facsimile or electronic copies shall constitute enforceable
original documents.



9.6 Titles and Subtitles. The titles and subtitles used in this Agreement are used
for convenience only and are not to be considered in construing or interpreting this Agreement.


 


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9.7 Notices. All notices and other communications given or made pursuant hereto shall
be in writing and shall be deemed effectively given: (i) upon personal delivery to
the party to be notified, (ii) when sent by confirmed electronic mail or facsimile if sent
during normal business hours of the recipient, if not so confirmed, then on the next business day,
(iii) five (5) days after having been sent by registered or certified mail, return receipt
requested, postage prepaid, or (iv) one (1) day after deposit with a nationally recognized
overnight courier, specifying next day delivery, with written verification of receipt. All
communications shall be sent to the respective parties at the following addresses (or at such other
addresses as shall be specified by notice given in accordance with this Section 9.7):




If to the Company:




Neurologix, Inc.

One Bridge Plaza

Fort Lee, New Jersey 07024

Attn: Marc L. Panoff, Chief Financial Officer, Treasurer and Secretary




With a copy to:




Winston & Strawn LLP

200 Park Avenue

New York, New York 10166

Attn: Harlee A. Richmond




If to Lenders:




At the respective addresses shown on the signature pages hereto.



9.8 Finder’s Fee. Except for the fees payable by the Company to MTS Health Partners,
L.P. and Trout Capital LLC, each party represents that it neither is nor will be obligated for any
finder’s fee or commission in connection with this transaction. Each Lender agrees to indemnify
and to hold harmless the Company from any liability for any commission or compensation in the
nature of a finder’s fee (and the costs and expenses of defending against such liability or
asserted liability) for which such Lender or any of its officers, partners, employees or
representatives is responsible. The Company agrees to indemnify and hold harmless each Lender from
any liability for any commission or compensation in the nature of a finder’s fee (and the costs and
expenses of defending against such liability or asserted liability) for which the Company or any of
its officers, employees or representatives is responsible.



9.9 Expenses. If any action at law or in equity is necessary to enforce or interpret
the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys’ fees,
costs and necessary disbursements in addition to any other relief to which such party may be
entitled. The Company shall pay all costs and expenses that it incurs with respect to the
negotiation, execution, delivery and performance of this Agreement. The Company shall pay the
reasonable fees and expenses of the Lenders (including legal fees) incurred with respect to the
negotiation, execution and delivery of this Agreement, up to a maximum of $100,000 in the aggregate
(of which up to $75,000 shall be reserved for the fees and expenses of General Electric Pension
Trust and up to $25,000 shall be reserved for the fees and expenses of all other Lenders).



9.10 Entire Agreement; Amendments and Waivers. This Agreement, the Notes and the
Warrants and the other documents delivered pursuant hereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects hereof and thereof.
The Company’s agreements with each of the Lenders are separate agreements, and the sales of the
Notes and Warrants to each of the Lenders are separate sales. Nonetheless, any term of this
Agreement, the Notes or the Warrants may be amended and the observance of any term of this
Agreement, the Notes or the Warrants may be waived (either generally or in a


 


20









 






particular instance and either retroactively or prospectively), with the written consent of the Company and the
Required Note Holders; provided, however, that (i) no such amendment, modification, waiver or
consent shall, unless in writing and signed by all of the Lenders directly affected thereby, in
addition to Required Note Holders, reduce the principal amount of any Note, the amount or rate of
interest thereon or the rate of cash interest thereon (provided, that the Required Note Holders may
rescind an imposition of default interest), or reduce, rescind or forgive any fees, premiums or
other amounts payable hereunder; and (ii) no such amendment, modification, waiver or consent shall,
unless in writing and signed by all of the holders of Notes, do any of the following: (1) release
all or substantially all of the Collateral (as such term is defined in the Security Agreement), (2)
change the definition of Required Note Holders, (3) change any provision of this Section 9.10, or
(4) amend or modify the pro rata treatment requirements of Section 9.2. Any waiver or amendment
effected in accordance with this Section shall be binding upon each party to this Agreement and any
holder of any Note or Warrant purchased under this Agreement at the time outstanding and each
future holder of all such Notes or Warrants.



9.11 Severability. If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this Agreement and the
balance of the Agreement shall be interpreted as if such provision were so excluded and shall be
enforceable in accordance with its terms.



9.12 Exculpation Among Lenders; Independent Nature of Lenders’ Obligations and Rights.



(a) Each Lender acknowledges that it is not relying upon any person, firm, corporation or
stockholder, other than the Company and its officers and directors in their capacities as such, in
making its investment or decision to invest in the Company. Each Lender agrees that no other
Lender nor the respective controlling persons, officers, directors, partners, agents, stockholders
or employees of any other Lender shall be liable for any action heretofore or hereafter taken or
omitted to be taken by any of them in connection with the purchase and sale of the Securities.



(b) The obligations of each Lender under this Agreement are several and not joint with the
obligations of any other Lender, and no Lender shall be responsible in any way for the performance
of the obligations of any other Lender under this Agreement. Nothing contained herein or in any
other document, and no action taken by any Lender pursuant thereto, shall be deemed to constitute
the Lenders as a partnership, an association, a joint venture or any other kind of entity, or
create a presumption that the Lenders are in any way acting in concert or as a group with respect
to such obligations or the transactions contemplated by this Agreement. Subject to the terms
hereof, each Lender 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 related documents,
and it shall not be necessary for any other Lender to be joined as an additional party in any
proceeding for such purpose. Each Lender has had the opportunity to be represented by its own
separate legal counsel in their review and negotiation of this Agreement.


 


21









 





9.13 Survival: Indemnity.



(a) Notwithstanding any investigation made by any party to this Agreement, all covenants,
agreements, representations and warranties made by the Company herein shall survive the execution
of this Agreement, the delivery to the Lenders of the Notes and Warrants being purchased and the
payment therefor; provided, that the representations and warranties of the parties hereunder shall
only survive for a period of one (1) year following the Closing.



(b) The Company agrees to indemnify and hold each Lender, and its respective directors,
managers, officers, shareholders, members, partners, affiliates, employees, attorneys and agents
(each, an “Indemnified Person”), harmless from and against any and all suits, actions, proceedings,
claims, damages, losses, liabilities and expenses of any kind or nature whatsoever (including
attorneys’ fees and disbursements and other costs of investigation or defense, including those
incurred upon any appeal) which may be instituted or asserted against or incurred by any such
Indemnified Person with respect to any breach (or alleged breach) of any representation, warranty
or covenant of the Company contained in this Agreement or with respect to the execution, delivery,
enforcement, performance and administration of, or in any other way arising out of or relating to,
this Agreement or the transactions contemplated by or referred to herein and any actions or
failures to act with respect to any of the foregoing, except to the extent that any such
indemnified liability is finally determined by a court of competent jurisdiction to have resulted
from such Indemnified Person’s gross negligence or willful misconduct. The Company shall reimburse
each Lender for amounts provided for herein on demand as such expenses are incurred. THE COMPANY
SHALL NOT BE RESPONSIBLE OR LIABLE TO ANY INDEMNIFIED PERSON OR TO ANY OTHER PARTY OR TO ANY
SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY OTHER PERSON ASSERTING CLAIMS DERIVATIVELY
THROUGH SUCH PARTY, FOR INDIRECT, PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED
AS A RESULT OF THEIR INVESTMENT IN THE NOTES OR WARRANTS UNDER THIS AGREEMENT OR AS A RESULT OF ANY
OTHER TRANSACTION CONTEMPLATED HEREUNDER.



9.14 Further Assurance. From time to time, the Company shall execute and deliver to
the Lenders such additional documents and shall provide such additional information to the Lenders
as any Lender may reasonably require to carry out the terms of this Agreement and the Notes and any
agreements executed in connection herewith or therewith, or to be informed of the financial and
business conditions and prospects of the Company.




9.15 Waivers.



(a) Corriente Master Fund, L.P. hereby waives its “right of first refusal” solely with respect
to the issuance of the Notes and Warrants, pursuant to Section 3.1 of that certain Stock and
Warrant Subscription Agreement dated as of April 28, 2008;



(b) Each of General Electric Pension Trust and Corriente Master Fund, L.P. hereby waives its
“right of first refusal” solely with respect to the issuance of the Notes and Warrants, pursuant to
Section 3.1 of that certain Stock and Warrant Subscription Agreement dated as of November 19, 2007;
and



(c) General Electric Pension Trust hereby waives its “right of first refusal” solely with
respect to the issuance of the Notes and Warrants, pursuant to Section 3.1 of that certain Stock
and Warrant Subscription Agreement dated as of May 10, 2006.


 


22









 





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



	 	 	 	 	 
	 	NEUROLOGIX, INC.

 	 
	 	By:  	/s/ Clark A. Johnson
 	 
	 	 	Name:  	Clark A. Johnson 	 
	 	 	Title:  	President and Chief Executive Officer 	 
	 	 	 
	 	By:  	              /s/ Marc L. Panoff
 	 
	 	 	Name:  	Marc L. Panoff 	 
	 	 	Title:  	Chief Financial Officer, Treasurer and Secretary 	 





 


 









 





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



	 	 	 	 	 	 	 
	 	 	LENDER:	 	 
	 
	 	 	 	 	 	 
	 	 	PALISADE CONCENTRATED

EQUITY PARTNERSHIP II, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Palisade Concentrated Holdings II, LLC,	 	 
	 

	 	 	 	its General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ Jeffrey D. Serkes	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: Jeffrey D. Serkes	 	 
	 

	 	 	 	Title:   Authorized Person	 	 
	 
	 	 	 	 	 	 
	 	 	Address:	 	 
	 
	 	 	 	 	 	 
	 	 	c/o Palisade Capital Management, L.L.C.

One Bridge Plaza North, Suite 695

Fort Lee, New Jersey 07024	 	 







 


 









 





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



	 	 	 	 	 	 	 
	 	 	LENDER:	 	 
	 
	 	 	 	 	 	 
	 	 	GENERAL ELECTRIC PENSION TRUST	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	GE Asset Management Incorporated,	 	 
	 

	 	 	 	its Investment Manager	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ B.C. Sophia Tsai
 

Name: B.C. Sophia Tsai
	 	 
	 

	 	 	 	Title:   Vice President and Managing Director	 	 
	 
	 	 	 	 	 	 
	 	 	Address:	 	 
	 
	 	 	 	 	 	 
	 	 	3001 Summer Street

Stamford, CT 06905

Tel: 203-326-4208	 	 







 


 









 





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



	 	 	 	 	 	 	 
	 	 	LENDER:	 	 
	 
	 	 	 	 	 	 
	 	 	CORRIENTE MASTER FUND, L.P.	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Corriente Capital Management, L.P.,	 	 
	 

	 	 	 	its Managing General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	Corriente Advisors, LLC,	 	 
	 

	 	 	 	its General Partner	 	 
	 
	 	 	 	 	 	 
	 

	 	By:
	 	/s/ James Haddaway	 	 
	 

	 	 	 	 	 	 
	 

	 	 	 	Name: James Haddaway

Title:   President	 	 
	 
	 	 	 	 	 	 
	 	 	Address:	 	 
	 
	 	 	 	 	 	 
	 	 	201 Main Street

Suite 1800

Fort Worth, TX 76102	 	 






 


 









 







SCHEDULE OF LENDERS




Consideration at the Closing and Warrant Shares




	 	 	 	 	 	 	 	 	 
	 	 	Principal Balance of Promissory	 	 	 	 
	Lender	 	Note	 	 	Warrant Shares	 
	 
	 	 	 	 	 	 	 	 
	Palisade Concentrated Equity
Partnership II, L.P.
	 	$	3,000,000	 	 	 	1,041,667	 
	 
	 	 	 	 	 	 	 	 
	Corriente Master Fund, L.P.
	 	$	2,000,000	 	 	 	694,444	 
	 
	 	 	 	 	 	 	 	 
	General Electric Pension Trust
	 	$	2,000,000	 	 	 	694,444