Unassociated Document


     

    Exhibit
      10.1

     

     

    STOCK
      AND WARRANT

    SUBSCRIPTION
      AGREEMENT

     

    THIS
      STOCK AND WARRANT SUBSCRIPTION AGREEMENT (the “Agreement”) is
      made as of November 19, 2007 by and between Neurologix, Inc., a Delaware
      corporation (the “Company”),
      and
      the investors set forth on Exhibit A hereto (individually, an
“Investor” and collectively, the “Investors”)
      and, solely with respect to Sections 3.2 and 3.3, (i) Martin J. Kaplitt, M.
      D.
      and (ii) Palisade Private Holdings LLC (“Palisade”) ((i) – (ii)
      together, the “Holders”).

     

    WITNESSETH:

     

    WHEREAS,
      the Company desires to issue and sell to each of the Investors and each of
      the
      Investors desires to purchase from the Company the number of shares (the
“Purchased Shares”) of Series D Convertible Preferred Stock,
      par value $0.10 per share, of the Company (the “Series D Preferred
      Stock”) set forth opposite such Investor’s name on
Exhibit A hereto at a price per share of $35.00 (the
“Purchase Price”) and warrants (the
“Warrants”) substantially
      in the form of
Exhibit E attached hereto (the “Warrant
      Certificate”) to purchase up to the number of shares of Common
      Stock set forth on Exhibit A hereto (such number of shares,
      as adjusted in accordance with the Warrants, the “Warrant
      Shares”), for the “Total Purchase Price” set forth
      opposite such Investor’s name on Exhibit A, pursuant to the
      terms of this Agreement; the Warrant Shares, the Purchased Shares, and the
      shares of the Company’s common stock, par value $0.001 per share (the
“Common Stock”), issuable upon conversion of the Purchased
      Shares, including any shares of Common Stock issued pursuant to Section B(2)
      of
      the Certificate of Designations to the Restated Certificate of Incorporation
      for
      the Series D Preferred Stock  (the “Conversion
      Shares”), are referred to herein together as the
“Shares”;

     

    WHEREAS,
      the parties hereto desire to enter into this Agreement for the purpose of
      setting forth certain representations, warranties and covenants made by each
      to
      the other as an inducement to the execution and delivery of this Agreement
      and
      the conditions precedent to the consummation of the transactions set forth
      in
      this Agreement.

     

    NOW,
      THEREFORE, in consideration of the premises and of the mutual provisions,
      agreements and covenants contained herein and for other good and valuable
      consideration, the receipt and sufficiency of which are hereby acknowledged,
      the
      parties hereto agree as follows:

     

    ARTICLE
      I

     

    PURCHASE
      AND SALE OF THE SHARES AND WARRANTS

     

    1.1           Authorization
      and Sale of the Purchased Shares and Warrants.  Subject
      to the terms and conditions set forth in this Agreement, the Company has
      authorized the issuance and sale of up to 628,571 shares of Series D Preferred
      Stock and Warrants to purchase up to 4,741,379 Warrant 

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    Shares.  In
      addition, the Company has authorized the issuance of 163,470 shares of Series
      D
      Preferred Stock pursuant to Section E(2)(b) of the Certificate of Designations
      (the “Series C Certificate”) to the Restated Certificate of
      Incorporation.

     

    1.2           Agreement
      to Sell and Purchase the Purchased Shares and Warrants.  Subject
      to the terms and conditions of this Agreement, each Investor, severally and
      not
      jointly, agrees to purchase at the Closing (as such term is defined in Section
      1.3), for the total
      purchase price set forth opposite such Investor’s name on
Exhibit A (reflecting the Total Purchase Price), that number
      of Purchased Shares and Warrants set forth opposite such Investor’s name on
Exhibit A.

     

    1.3           Delivery
      of the Purchased Shares and Warrants at Closing.

     

    (a)           Except
      as set forth in this Section 1.3, the completion of the purchase and sale of
      the
      Purchased Shares and Warrants (the “Closing”) shall occur on
      November 19, 2007 (the “Closing Date”), at the offices of
      Katten Muchin Rosenman LLP, 575 Madison Avenue, New York, New York 10022 at
      10:00 AM Eastern time, or at such other time and place as may be mutually agreed
      upon by the Company and the Investors.  At the Closing, the Company
      shall deliver the Warrants to the Investors and either

     

    (i)           deliver
      to the Investors one or more stock certificates representing the number of
      Purchased Shares set forth on Exhibit A, each such
      certificate to be registered in the name of each Investor or, if so indicated
      on
Exhibit A of this Agreement, in the name of a nominee
      designated by such Investor; or

     

    (ii)           direct
      its transfer agent to deliver such certificates to the Investors (at the address
      of each Investor set forth on Exhibit A hereto) or to the
      Investors’ designated custodian (at such address as is provided to the Company
      prior to the Closing Date) within three business days after the Closing
      Date.

     

    (b)           The
      Company’s obligation to issue the Purchased Shares and Warrants to the Investors
      shall be subject to the following conditions, any one or more of which may
      be
      waived by the Company in writing at any time in its sole
      discretion:

     

    (i)           the
      Company shall have received one or more wire transfers of funds to the account
      designated by the Company in Exhibit F in the full amount of the
      Purchase Price for all of the Purchased Shares and Warrants being purchased
      hereunder as set forth on Exhibit A (the “Wire
      Transfer”); and

     

    (ii)           the
      representations and warranties of the Investors set forth herein shall be true
      and correct in all respects as of the Closing Date (except for representations
      and warranties that speak as of a specific date, which representations and
      warranties shall be true and correct as of such date) and the undertakings
      of
      the Investors set forth herein shall have been satisfied and fulfilled on or
      prior to the Closing Date as set forth herein.

     

     

    
      
        
        

      

      
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    (c)           The
      Investors’ obligations to purchase the Purchased Shares and Warrants shall be
      subject to the following conditions, any one or more of which may be waived
      by
      the written consent of a majority-in-interest of the Investors at any
      time:

     

    (i)           the
      representations and warranties of the Company set forth herein shall be true
      and
      correct as of the Closing Date in all respects (except for representations
      and
      warranties that speak as of a specific date, which representations and
      warranties shall be true and correct as of such date); and

     

    (ii)           the
      Investors shall have received an opinion of Company counsel substantially in
      the
      form attached as Exhibit B hereto and such other documents as
      shall have been reasonably requested from the Company for the purpose of
      enabling them to pass upon the issuance and sale of the Purchased Shares and
      Warrants as contemplated herein, or to evidence the accuracy of any
      representations and warranties or the satisfaction of any of the conditions
      or
      agreements contained herein.

     

    (d)           Funds
      received from each Investor in the Wire Transfer shall be held in escrow by
      the
      Company for the benefit of the Investor and may only be released to the Company
      at such time as the Company has received one or more wire transfers from the
      Investors for the Purchase Price for the Purchased Shares and Warrants totaling
      at least $15,000,000.

     

    1.4           Right
      to Sell Additional Shares of Series D Preferred Stock and
      Warrants.  Subject to the terms and conditions set forth in this
      Agreement, the Company may, at its option, issue and sell up to 200,000 shares
      of Series D Preferred Stock and 1,508,621 Warrants (collectively, the
“Additional Shares”) at a second closing (the “Second
      Closing”) to be held at such time and place as may be mutually agreed
      upon by the Company and the purchasers thereof (the “New
Investors”), but, in no event, later than December
      31,
      2007.  The purchase and sale of the Additional Shares shall be at the
      same price and on the same terms and conditions as set forth herein, including
      the conditions specified in Section 1.3(b) and 1.3(c) hereof.  On the
      date of the Second Closing, the Company will deliver to each New Investor
      certificates representing the Additional Shares to be purchased by such New
      Investor, registered in such names and in such denominations as shall be
      requested by such New Investor, against delivery by such New Investor of the
      consideration therefor by wire transfer of funds to the account of the Company
      (as set forth in Exhibit F).  As a condition to the purchase of
      the Additional Shares, each New Investor shall enter into a joinder of this
      Agreement.

     

    ARTICLE
      II

     

    REPRESENTATIONS
      AND WARRANTIES OF THE COMPANY

     

    Except
      as
      disclosed by the Company in a written Disclosure Schedule provided by the
      Company to the Investors (the “Disclosure Schedule”), the
      Company hereby represents, warrants and covenants to the Investors as of the
      Closing Date, as follows:

     

    2.1           Organization.  The
      Company is a corporation duly organized and validly existing in good standing
      under the laws of the State of Delaware.  The Company has all
      requisite corporate power and authority to own, operate and occupy its
      properties and to conduct its business as presently 

     

     

    
      
        
        

      

      
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    conducted
      and as described in the documents filed by the Company under the Securities
      Exchange Act of 1934, as amended, and the rules and regulations promulgated
      thereunder (the “Exchange Act”) since January 1, 2006 through
      the date hereof, including, without limitation, its most recent report on Form
      10-KSB (the “Exchange Act Documents”), 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 (as defined
      below).  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 has designated the terms of the Series D
      Preferred Stock by filing the Certificate of Designation to the Restated
      Certificate of Incorporation in substantially the form set forth in
Exhibit C with the Secretary of State of the State of
      Delaware.  The Company has also amended the terms of the Series C
      Convertible Preferred Stock, par value $0.10 per share (the “Series C
      Preferred Stock”), by filing the Series C Certificate in the form set
      forth in Exhibit D with the Secretary of State of the State of
      Delaware.  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”).

     

    (a)           For
      purposes of this Agreement:

     

    (i)           “Person”
      shall mean an individual, corporation, limited liability company, joint venture,
      partnership, trust, unincorporated organization, government or any agency or
      political subdivision thereof or any other entity that may be treated as a
      person under applicable law.

     

    (ii)           “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 by the Warrants (collectively, the
      “Transaction Documents”).

     

    2.2           Due
      Authorization and Valid Issuance.  The
      Company has all requisite corporate power and authority to execute, deliver
      and
      perform its obligations under the Transaction Documents, and the Transaction
      Documents have been duly authorized and validly executed and delivered by the
      Company and constitute the legal, valid and binding agreement of the Company
      enforceable against the Company in accordance with their respective terms,
      except (i) as rights to indemnity and contribution which may be limited by
      state
      or federal securities laws, or (ii) 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).  The issuance, sale and delivery of the Purchased Shares and
      Warrants in accordance with this Agreement, and the issuance of the Conversion
      Shares issuable upon conversion of the Purchased Shares and the Warrant Shares
      issuable upon exercise of the Warrants, have been duly authorized and


     

     

    
      
        
        

      

      
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    reserved
      for issuance, as the case may be, by all necessary corporate action on the
      part
      of the Company.  The Purchased Shares and Warrants when so issued,
      sold and delivered against payment therefor in accordance with the provisions
      of
      this Agreement, and the Conversion Shares and Warrant Shares, when issued
      pursuant to the terms of the Purchased Shares and Warrants, will be duly and
      validly issued, fully paid and non-assessable.

     

    2.3           Non-Contravention.  The
      execution and delivery of the Transaction Documents, the issuance and sale
      of
      the Shares under the Transaction Documents, 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 (collectively, the
“Applicable Law”), 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) 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 Shares 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.

     

    2.4           Capitalization.  The
      authorized capital stock of the Company consists of 100,000,000 shares of Common
      Stock and 5,000,000 shares of preferred stock, par value $0.10 per share, of
      which 650 shares have been designated Series A Preferred Stock and 700,000
      shares have been designated Series C Preferred Stock.  As of
      November 6, 2007, 27,312,390 shares were issued and outstanding, consisting
      of
      26,892,976 shares of Common Stock, 645 shares of Series A Preferred Stock and
      418,769 shares of Series C 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 

     

     

    
      
        
        

      

      
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    nonassessable,
      have been issued in compliance with all 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 Purchased Shares 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 Purchased Shares 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.

     

    2.5           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.

     

    2.6           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.

     

    2.7           Governmental
      Permits, Etc.  With
      the exception of the matters which are dealt with separately in Sections 2.1
      (Organization), 2.8 (Intellectual Property),  2.12 (Exchange Act
      Compliance), and 2.13 (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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    2.8           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) 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,
      exercise or right to use would not, individually or in the aggregate, have
      a
      Material Adverse Effect.

     

    (b)           Section
      2.8(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.

     

    (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
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    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.

     

    2.9           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, 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 generally
      accepted accounting principles applied on a consistent basis 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

     

     

    
      
        
        

      

      
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    (v)           under
      applicable laws.

     

    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 $60,000;
      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.

     

    2.10           No
      Material Adverse Change.  Except
      as disclosed in the Exchange Act Documents, since January 1, 2007, 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.

     

    2.11           Disclosure.  The
      representations and warranties of the Company contained in this Article II
      as of
      the date hereof and as of the Closing Date, 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 Investors will rely on the foregoing
      representations in purchasing the Purchased Shares and Warrants.

     

    2.12           Exchange
      Act Compliance.  The
      Company’s 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 National Association of Securities Dealers, Inc. (the
“NASD”) is contemplating terminating such registration or
      quotation.

     

    2.13           Reporting
      Status.  Since
      January 1, 2005, 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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    2.14           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 to facilitate the sale or resale
      of the Shares.

     

    2.15           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 Purchased Shares and Warrants will not be, an “investment
      company” within the meaning of the Investment Company Act.

     

    2.16           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 Purchased Shares 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 Purchased Shares 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 Purchased Shares or the Warrants are or would be in violation
      of law; provided, that with respect to the covenants contained in this Section
      2.16, the Company may assume that the Investors 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.

     

    2.17           Accountants.  To
      the Company’s knowledge, J.H. Cohn LLP and BDO Seidman, LLP, which have
      expressed their opinions with respect to the financial statements included
      in
      the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2006,
      are independent accountants as required by the Securities Act and the rules
      and
      regulations promulgated thereunder.

     

    2.18           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.

     

     

    
      
        
        

      

      
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    2.19           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.

     

    2.20           Transfer
      Taxes.  On
      the Closing Date, 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
      Purchased Shares and the Warrants to be sold to the Investors 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.

     

    2.21           Private
      Offering.  Assuming
      the correctness of the representations and warranties of the Investors set
      forth
      in Article IV hereof, the offer and sale of the Purchased
      Shares 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 Purchased Shares
      or
      the Warrants as contemplated by this Agreement or the Warrant Shares under
      the
      Warrants, 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 Purchased Shares or
      Warrants by any form of general solicitation or general advertising (as those
      terms are used in Regulation D under the Securities Act).

     

    2.22           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 Closing Date. 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.

     

     

    
      
        
        

      

      
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    2.23           Real
      Property Holding Corporation.  Since
      its date of incorporation, the Company has not been, and as of the Closing
      Date
      shall not be, a “United States real property holding corporation,” as defined in
      Section 897(c)(2) of the Internal Revenue Code of 1986 (the
“Code”), 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.

     

    2.24           Relationship
      with General Electric Company or its Affiliates.  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 or any of its
      affiliates.  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
      (“ERISA”), with respect to General Electric Pension
      Trust.

     

    2.25           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.

     

     

    
      
        
        

      

      
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    ARTICLE
      III

     

    AFFIRMATIVE
      COVENANTS OF THE COMPANY

     

    The
      Company hereby covenants as follows:

     

    3.1           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) shares of Common Stock, (ii) any other equity security of the Company,
      including without limitation, preferred shares, (iii) any debt security of
      the
      Company (other than debt with no equity feature) including, without limitation,
      any debt security which by its terms is convertible into or exchangeable for
      any
      equity security of the Company, (iv) any security of the Company that is a
      combination of debt and equity, or (v) any option, warrant or other right to
      subscribe for, purchase or otherwise acquire any such equity security or any
      such debt security of the Company, unless in each case the Company shall have
      first offered to sell such securities (the “Offered
      Securities”) to the Investors (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 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 Series C Preferred
      Stock (including shares then issuable upon the exercise on conversion of
      outstanding exercisable or convertible equity securities) (the “Basic
      Amount”), and (y) such additional portion of the Offered Securities as
      such Offeree shall indicate 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.

     

    (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


     

     

    
      
        
        

      

      
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    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 3.1(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 3.1(a)-(c)
      above.

     

    (e)           Exceptions.  The
      rights of the Offerees under this Section 3.1 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;

     

     

    
      
        
        

      

      
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    (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; and

     

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

     

    3.2           Right
      of First Refusal on Dispositions by the Holders.

     

    (a)           If
      at any time any of the Holders wishes to sell, assign, transfer or otherwise
      dispose of or encumber, other than in a transaction involving a public offering,
      any equity security of the Company or any option, warrant or other right to
      subscribe for, purchase or otherwise acquire any such equity security, whether
      presently held or hereafter acquired (collectively, the “Restricted
      Shares”) by such Holder, such Holder shall submit a written offer to
      sell such Restricted Shares to the Investors on terms and conditions, including
      price, not less favorable to the Investors than those on which such Holder
      proposes to sell such Restricted Shares to a third party (the
“Offer”).  The Offer shall disclose the Restricted
      Shares proposed to be sold or transferred, the agreed terms of the sale or
      transfer, including price, and any other material facts relating to the sale
      or
      transfer.  Within fifteen (15) days after receipt of the Offer, each
      of the Investors shall have the right to purchase, on the same terms and
      conditions set forth in the Offer, that portion of the offered Restricted Shares
      (the “Offered Restricted Shares”) to be determined in the
      manner set forth herein.  Each Investor shall have the right to
      purchase that number of the Offered Restricted Shares as shall be equal to
      the
      aggregate Offered Restricted Shares multiplied by a fraction, the numerator
      of
      which is the number of shares of Common Stock then held by such Investor
      (including shares then issuable upon the exercise or conversion of outstanding
      exercisable or convertible securities) 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 Series C Preferred Stock
      (including shares then issuable upon the exercise or conversion of outstanding
      exercisable or convertible securities).  The amount of Offered
      Restricted Shares each Investor or Qualified Transferee, as that term is defined
      below, is entitled to purchase under this Section 3.2 shall be referred to
      as
      such Investor’s “Pro Rata Fraction.”  Each Investor
      shall have the right to transfer his right to any Pro Rata Fraction or part
      thereof to any Qualified Transferee.  In the event an Investor does
      not wish to purchase or to transfer his right to purchase his Pro Rata Fraction,
      then any Investors who so elect shall have the right to purchase, on a pro
      rata basis with any other Investors who so elect, any Pro Rata Fraction not
      purchased by an Investor or Qualified Transferee.  Subject to such
      proration, each Investor shall have the right to accept the Offer as to all
      or
      part of the Offered Restricted Shares offered thereby.  In the event
      that an Investor shall elect to purchase all or part of the Offered Restricted
      Shares covered by the Offer, said Investor shall individually communicate in
      writing such election to purchase to whichever of the Holders has made the
      Offer, which communication shall be delivered by hand or mailed to such Holder
      at the address set forth on Exhibit A hereto and shall, when
      taken in conjunction with the Offer be 

     

     

    
      
        
        

      

      
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    deemed
      to
      constitute a valid, legally binding and enforceable agreement for the sale
      and
      purchase of the Restricted Shares covered thereby.  In the event that
      the Investors do not purchase all of the Offered Restricted Shares pursuant
      to
      and within forty-five (45) days after the Offer, each such agreement to purchase
      the Offered Restricted Shares shall be deemed null and void, and such Holder
      shall have the right to sell such Shares at any time within ninety (90) days
      after the expiration of the Offer, but subject to the provisions of Section
      3.3
      below.  Any such sale shall be at a price not less than the price, and
      upon other terms and conditions, if any, not more favorable to the purchaser
      than those specified in the Offer.  Any Shares not sold within such
      ninety (90)-day period shall continue to be subject to the requirements of
      a
      prior offer and re-sale pursuant to this Section.  For purposes of
      this Section 3.2, a “Qualified Transferee” of an Investor shall
      mean any person (i) who is an Investor, (ii) who is an “affiliated person” of an
      Investor, as that term is defined in the Investment Company Act of 1940, or
      (iii) who is a member, partner or shareholder of an Investor.

     

    (b)           Anything
      herein to the contrary notwithstanding, the provisions of this Section 3.2
      and
      Section 3.3 shall not apply to:  (i) any transfer of Restricted Shares
      by a Holder by gift or bequest or through inheritance to, or for the benefit
      of,
      any member or members of his or her family (which shall include any spouse,
      lineal ancestor or descendant or sibling) or to a trust, partnership or limited
      liability company for the benefit of such members; (ii) any transfer of
      Restricted Shares by a Holder to a trust in respect of which he or she serves
      as
      trustee, provided that the trust instrument governing said trust shall provide
      that such Holder, as trustee, shall retain sole and exclusive control over
      the
      voting and disposition of said shares until the termination of this Agreement;
      (iii) any repurchase of shares of Common Stock from officers, employees,
      directors or consultants of the Company which are subject to restrictive stock
      purchase agreements under which the Company has the option to repurchase such
      shares upon the occurrence of certain events, including termination of
      employment; (iv) any transfer of Restricted Shares of Palisade to any directors,
      managers, officers, shareholders, members, or partners of Palisade or any of
      its
      affiliates; and (v) any transfer of Restricted Shares in connection with a
      merger, consolidation or other similar transaction of the Company whereby the
      shareholders of the Company immediately prior to such transaction own less
      than
      a majority of the surviving entity immediately following such
      transaction.  In the event of any such transfer, other than pursuant
      to subsection (iii), (iv) or (v) above, the transferee of the Restricted Shares
      shall hold the Restricted Shares so acquired with all the rights conferred
      by,
      and subject to all the restrictions imposed by, this Agreement, and as a
      condition to such transfer, each such transferee shall execute and deliver
      an
      instrument of accession in form and substance reasonably satisfactory to the
      Investors agreeing to be bound by the provisions of this Agreement.

     

    3.3           Right
      of Participation in Sales by Holders.  If
      at any time any Holder wishes to sell, assign, transfer or otherwise dispose
      of
      any Restricted Shares owned by such Holder in a transaction which is subject
      to
      the provisions of Section 3.2 hereof and, subject to the exercise of rights
      under such Section 3.2, each Investor shall have the right to require, as a
      condition to such sale or disposition, that the Person acquiring Restricted
      Shares (the “Purchaser”) purchase from said Investor at the
      same price per share and on the same terms and conditions as involved in such
      sale or disposition by the Holder the same percentage of shares of Common Stock
      (including shares then issuable upon the exercise or conversion of outstanding
      exercisable or convertible securities) held by such Investor as such sale or
      disposition represents with respect to said Restricted Shares then owned by
      the
      Holder that is selling.  Each Investor wishing so to participate in
      any such sale or disposition shall notify the selling Holder of such intention
      as soon as practicable after receipt of the Offer made pursuant to Section
      3.2,
      and in all events within twenty (20) days after receipt thereof, which twenty
      (20) day period shall run 

     

     

    
      
        
        

      

      
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    concurrently
      with the fifteen (15) day period set forth in Section 3.2(a).  In the
      event that an Investor shall elect to participate in such sale or disposition,
      said Investor shall individually communicate such election to the selling
      Holder, which communication shall be delivered by hand or mailed to such Holder
      at the address set forth on Exhibit A hereto.  The Holder
      and/or each participating Investor shall sell to the Purchaser all, or at the
      option of the Purchaser, any part of the Common Stock proposed to be sold by
      them at not less than the price and upon other terms and conditions, if any,
      not
      more favorable to the Purchaser than those originally offered; provided,
      however, that any purchase of less than all of such Common Stock by the
      Purchaser shall be made from the Holder and/or each participating Investor
      based
      upon a fraction, the numerator of which is the number of shares of Common Stock
      of the Company then owned by the Holder or such participating Investor
      (including shares then issuable upon the exercise or conversion of outstanding
      exercisable or convertible securities) and the denominator of which is the
      aggregate number of shares of such Common Stock held by the Holder and all
      of
      the participating Investors and all participating holders of the Series C
      Preferred Stock (including shares then issuable upon the exercise or conversion
      of outstanding exercisable or convertible securities).  The selling
      Holder shall use his or its reasonable best efforts to obtain the agreement
      of
      the Purchaser to the participation of the participating Investors in the
      contemplated sale, and shall not sell any Restricted Shares to such Purchaser
      if
      such Purchaser declines to permit the participating Investors to participate
      pursuant to the terms of this Section 3.3.  The provisions of this
      Section 3.3 shall not apply to the sale of any Restricted Shares by a Holder
      to
      an Investor pursuant to an Offer under Section 3.2. The rights of the parties
      under this Section 3.3 and Section 3.2 above are unique and, accordingly, the
      Investors shall, in addition to such other remedies as may be available to
      any
      of them at law or in equity, have the right to enforce their rights hereunder
      by
      actions for specific performance to the extent permitted by law.

     

    3.4           Further
      Assurances.  The
      Company hereby agrees to take all further actions, execute all further documents
      and perform all further things necessary to give effect to the provisions of
      this Agreement.

     

    3.5           Removal
      of Legends.  Upon
      the earlier of (i) registration of the Shares for sale pursuant to Section
      3.9
      or (ii) Rule 144(k) becoming available with respect to an Investor’s Shares, the
      Company shall, upon an Investor’s written request (which in the case of clause
      (i) shall be accompanied by a written certification by the Investor that (A)
      the
      Investor has a present intention to dispose of Shares covered by such
      Registration Statement pursuant to the plan of distribution included in a
      currently available final prospectus related thereto, and (B) the Investor
      will
      comply with the prospectus delivery requirements applicable to such disposition,
      and which, in the case of clause (ii), shall be accompanied by such reasonable
      and appropriate customary representations as may be reasonably requested by
      the
      Company), promptly cause certificates evidencing such Shares to be replaced
      with
      certificates which do not bear the restrictive legend described in Section
      4.7.  When the Company is required to cause unlegended certificates to
      replace previously issued legended certificates, if unlegended certificates
      are
      not delivered to an Investor within ten (10) business days of submission by
      that
      Investor of legended 

     

     

    
      
        
        

      

      
        17

        
          

        

      

      
        
        

      

    

     

     

    stock
      certificate(s) to the Company’s transfer agent together with a representation
      letter in customary form, the Company shall be liable to the Investor for a
      penalty equal to 1% of the aggregate purchase price of the Shares (or in the
      case of the Conversion Shares, the purchase price of the Purchased Shares
      pursuant to which such Conversion Shares were issued) evidenced by such
      certificate(s) for each thirty (30) day period (or portion thereof) beyond
      such
      ten (10) days that the unlegended certificates have not been so
      delivered.

     

    3.6           Use
      of Proceeds.
      The
      Company shall use the proceeds from the sale of the Purchased Shares and the
      Warrants to finance clinical trials for the Corporation’s NLX-P101 and NLX-E201
      technologies and for general corporate purposes and working
      capital.

     

    3.7           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.

     

    3.8           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 an Investor if such request is made after
      the first anniversary of the Closing Date, 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 Investor
      may
      reasonably request, all to the extent required from time to time to enable
      such
      Investor to sell Shares 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 Investor written certification of
      its
      compliance with the provisions of this Section 3.8.

     

    3.9           Intentionally
      omitted.

     

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

     

    3.11           No
      Manipulation of Stock.  The
      Company will not take, 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 to facilitate the sale or resale
      of the Shares.

     

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

     

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

     

     

    
      
        
        

      

      
        18

        
          

        

      

      
        
        

      

    

     

     

    3.14           Transactions
      with General Electric Company or its Affiliates.  Except
      for transactions with Palisade, the Company hereby covenants and agrees that
      it
      will provide General Electric Pension Trust written notice no less than fifteen
      (15) days prior to the occurrence of any of the following events: (i) the
      issuance by the Company of any securities (including without limitation any
      capital stock or notes, debentures or other indebtedness, whether or not
      convertible into or exchangeable for capital stock) of the Company to General
      Electric Company or any subsidiary, division or affiliate of General Electric
      Company; or (ii) the grant by the Company or any of its subsidiaries of any
      options, warrants or other rights to acquire any securities of the Company
      or
      any of its subsidiaries to General Electric Company or any subsidiary, division
      or affiliate of General Electric Company.  The Company covenants and
      agrees that it shall not become a party-in-interest, as defined in Section
      3(14)
      of ERISA, with respect to General Electric Pension Trust.

     

    3.15           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.

     

     

    ARTICLE
      IV

     

    REPRESENTATIONS,
      WARRANTIES AND COVENANTS OF THE INVESTORS

     

    Each
      Investor, severally and not jointly, represents and warrants to, and covenants
      with, the Company that:

     

    4.1           Due
      Authorization.  The
      Investor 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 Investor and this
      Agreement has been duly executed and delivered and constitutes the valid and
      binding obligation of the Investor 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).

     

    4.2           Purchase
      Entirely for Own Account.  The
      Shares to be purchased by the Investor will be acquired for investment only
      for
      the Investor’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 Investor has no present intention of selling, granting any
      participation in, or otherwise distributing the same.  Such Investor
      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 Shares.  Nothing contained herein shall be deemed a
      representation or warranty by such Investor to hold the Shares for any period
      of
      time.

     

    4.3           Disclosure
      of Information.  The
      Investor acknowledges that it has received all the information that it has
      requested relating to the Company and the purchase of the Shares.  The
      Investor further represents that it has had an opportunity to ask questions
      and
      receive answers from the 

     

     

    
      
        
        

      

      
        19

        
          

        

      

      
        
        

      

    

     

     

    Company
      regarding the terms and conditions of the offering of the Shares.  The
      Investor recognizes that an investment in the Shares involves a high degree
      of
      risk, including the risk of total loss of the Investor’s
      investment.  The Investor has knowledge and experience in the
      financial and business matters such that it is capable of evaluating the risks
      of the investment in the Shares.  The foregoing, however, does not
      limit or modify the representations and warranties of the Company in this
      Agreement or the right of the Investor to rely thereon.

     

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

     

    4.5           Restricted
      Securities.  The
      Investor understands that the Shares that it is purchasing 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 the Shares may
      be
      resold without registration under the Securities Act, only in certain limited
      circumstances.  In this connection, the Investor represents that it is
      familiar with Rule 144, as presently in effect, and understands the resale
      limitations imposed thereby and by the Securities Act.

     

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

     

    4.7           Legends.  It
      is understood that the certificates evidencing the Shares shall bear a legend,
      reading substantially as follows:

     

    
      	
               “THE
                SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
                UNDER
                THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR THE SECURITIES LAWS
                OF ANY STATE AND ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AS
                SET
                FORTH IN THIS CERTIFICATE.  THE SECURITIES REPRESENTED HEREBY
                MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED, OR
                OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
                STATEMENT WITH RESPECT THERETO UNDER THE ACT OR UNLESS SUCH SALE,
                TRANSFER, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION
                IS
                OTHERWISE EXEMPT FROM REGISTRATION AND ANY APPLICABLE STATE SECURITIES
                LAWS EXCEPT PURSUANT TO RULE 144(K) OR PURSUANT TO AN OPINION OF
                COUNSEL,
                REASONABLY ACCEPTABLE TO COUNSEL FOR THE COMPANY, TO THE EFFECT THAT
                THE
                PROPOSED SALE, TRANSFER ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER
                DISPOSITION MAY BE EFFECTUATED WITHOUT REGISTRATION UNDER THE ACT
                AND
                APPLICABLE STATE SECURITIES
                LAWS.”

            


    

     

     

    
      
        
        

      

      
        20

        
          

        

      

      
        
        

      

    

     

     

    4.8           General
      Electric Pension Trust.  Notwithstanding
      anything to the contrary in the Transaction Documents, General Electric Pension
      Trust shall not be obligated to sell any Shares to any Person under this
      Agreement if such sale would constitute a non-exempt prohibited transaction
      under ERISA.

     

    ARTICLE
      V

     

    SURVIVAL;
      INDEMNITY

     

    5.1           Survival
      of Representations, Warranties and Agreements.  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 Investors of the
      Purchased Shares 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
      Date.

     

    5.2           Indemnity.

     

    (a)           The
      Company agrees to indemnify and hold each Investor, 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 Investor 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 SHARES UNDER THIS AGREEMENT OR AS A RESULT OF ANY OTHER
      TRANSACTION CONTEMPLATED HEREUNDER.

     

     

    
      
        
        

      

      
        21

        
          

        

      

      
        
        

      

    

     

     

    ARTICLE
      VI

     

    MISCELLANEOUS

     

    6.1           Notices.  All
      notices, requests, consents and other communications hereunder shall be in
      writing, shall be mailed (a) if within the United States by first-class
      registered or certified airmail, or nationally recognized overnight express
      courier, postage prepaid, or by facsimile, or (b) if delivered from outside
      the
      United States, by International Federal Express or facsimile, and shall be
      deemed given and received (i) if delivered by first-class registered or
      certified mail, three business days after so mailed, (ii) if delivered by
      nationally recognized overnight carrier, one business day after so mailed,
      (iii)
      if delivered by International Federal Express, two business days after so
      mailed, (iv) if delivered by facsimile, upon electronic confirmation of receipt
      and shall be delivered as addressed as follows:

     

    (A)        
      if to the Company, to:

     

    Neurologix,
      Inc.

    One
      Bridge Plaza

    Fort
      Lee,
      NJ 07024

    Attention:
      Marc Panoff

    Fax:
      (201) 592-0366

     

    (B)         if
      to the Investors, at their respective addresses on Exhibit A hereto,
      or at such other address or addresses as may have been furnished to the Company
      in writing, with a copy to: counsel set forth on Exhibit A
      hereto.

     

    (C)         if
      to the Holders, at their respective addresses on Exhibit Ahereto, or
      at such other address or addresses as may have been furnished to the Company
      in
      writing.

     

    6.2           Changes.  This
      Agreement may not be modified, waived or amended except pursuant to an
      instrument in writing signed by the Company and at least seventy percent (70%)
      in interest of the Investors; provided that any Investor may waive by
      written consent any provision that is intended for its benefit;
providedfurther, however, that any such modification,
      waiver or amendment that adversely and disproportionately affects any Investor
      shall require the prior consent of such Investor.  Notwithstanding the
      foregoing, any amendment to Sections 3.2 or 3.3 shall also require the prior
      written consent of the Holders.

     

    6.3           Headings.  The
      headings of the various sections of this Agreement have been inserted for
      convenience of reference only and shall not be deemed to be part of this
      Agreement.

     

    6.4           Severability.  In
      case any provision contained in this Agreement should be invalid, illegal or
      unenforceable in any respect, the validity, legality and enforceability of
      the
      remaining provisions contained herein shall not in any way be affected or
      impaired thereby.

     

    6.5           Governing
      Law; Consent to Jurisdiction; Waiver of Jury Trial; Currency.  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 

     

     

    
      
        
        

      

      
        22

        
          

        

      

      
        
        

      

    

     

     

    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.

     

    6.6           Counterparts.  This
      Agreement may be executed in two or more counterparts, each of which shall
      constitute an original, but all of which, when taken together, shall constitute
      but one instrument, and shall become effective when one or more counterparts
      have been signed by each party hereto and delivered to the other
      parties.

     

    6.7           Prior
      Agreements.  This
      Agreement constitutes the entire agreement between the parties and supersedes
      any prior understandings or agreements (including without limitation oral
      agreements) concerning the purchase and sale of the Shares.

     

    6.8           Costs,
      Expenses and Taxes.  The
      Company agrees to pay  the reasonable out-of-pocket costs and expenses of
      the Investors incurred in connection with the transactions contemplated by
      this
      Agreement, including the reasonable fees and expenses of Goodwin Procter LLP,
      special counsel for GE Asset Management Incorporated, and the reasonable fees
      and expenses of Haynes and Boone, LLP, special counsel for Corriente Master
      Fund, L.P., as well as the reasonable fees and out-of-pocket
      expenses of legal counsel, independent public accountants, technical
      professionals and other outside experts retained by the Investors in connection
      with the amendment or enforcement of this Agreement.

     

    6.9           Transfer
      of Rights.  All
      covenants and agreements contained in this Agreement by or on behalf of any
      of
      the parties hereto shall bind and inure to the benefit of the respective
      successors and assigns of the parties hereto (including without limitation
      transferees of any Shares), whether so expressed or not; provided,
however, that rights conferred to the Investors may be transferred
      to a
      transferee of Shares only if the Company has been given written notice thereof,
      such transfer complies with the requirements of applicable law and the NASD
      and
      the SEC and such transferee is (i) a partner or retired partner of any Investor
      which is a partnership; (ii) a member or retired member of any Investor which
      is
      a limited liability company or (iii) any purchaser of Shares from an Investor
      representing at least five percent (5%) of the Purchased
      Shares.  Notwithstanding the foregoing, the rights set forth in
      Sections 3.1, 3.2 and 3.3 shall only apply to transferees who purchase at least
      fifty percent (50%) of the Shares held by the transferor (on an as-converted
      to
      Common Stock basis).

     

    6.10           Independent
      Nature of Investors’ Obligations and Rights.  The
      obligations of each Investor under this Agreement are several and not joint
      with
      the obligations of any other Investor, and no Investor shall be responsible
      in
      any way for the performance of the obligations of any other 

     

     

    
      
        
        

      

      
        23

        
          

        

      

      
        
        

      

    

     

     

    Investor
      under this Agreement.  Nothing contained herein or in any other
      document, and no action taken by any Investor pursuant thereto, shall be deemed
      to constitute the Investors as a partnership, an association, a joint venture
      or
      any other kind of entity, or create a presumption that the Investors are in
      any
      way acting in concert or as a group with respect to such obligations or the
      transactions contemplated by this Agreement.  Each Investor shall be
      entitled to independently protect and enforce its rights, including without
      limitation, the rights arising out of this Agreement or out of the other related
      documents, and it shall not be necessary for any other Investor to be joined
      as
      an additional party in any proceeding for such purpose.  Each Investor
      has been represented by its own separate legal counsel in their review and
      negotiation of this Agreement.

     

    [REMAINDER
      OF PAGE INTENTIONALLY LEFT BLANK.]

     


    
      
        
        

      

      
        24

        
          

        

      

      
        
        

      

    

     

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

     

    NEUROLOGIX,
      INC.

     

    
      	
              By:

            	
              /s/
                Marc Panoff

            


    

    
      	
               

            	
              Name:  Marc
                Panoff

            


    

    
      	
               

            	
              Title:  Chief
                Financial Officer

            


    

     

    THE
      INVESTORS

     

    GENERAL
      ELECTRIC PENSION TRUST

     

    By:
      GE
      Asset Management Incorporated, its Investment Manager

     

    
      	
              By:

            	
              /s/
                Daniel L. Furman

            


    

    
      	
               

            	
              Name:  Daniel
                L. Furman

            


    

    
      	
               

            	
              Title:
                Vice President

            


    

     

    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:  Member

            


    

     

    THE
      HOLDERS

     

    [FOR
      PURPOSES OF SECTION 3.2 AND SECTION 3.3]:

     

    /s/
      Martin J. Kaplitt

    Martin
      J.
      Kaplitt, M.D.

    Address:

     

     

    
      
        
        

      

      
        
        

        
          

        

      

      
        
        

      

    

     

     

    PALISADE
      PRIVATE PARTNERSHIP, L.P.

    By:
      Palisade Private Holdings, LLC, General Partner

     

    
      	
              By:

            	
              /s/
                Steven E. Berman

            


    

    
      	
               

            	
              Name:
                Steven E. Berman

            


    

    
      	
               

            	
              Title:
                Member

            


    

    
      	
            	
              Address:
                

            	
              One
                Bridge Plaza 
                Fort
                  Lee, NJ 07024

              

            


    

     

    


    NEUROLOGIX,
      INC.

     

    
      	
              
                By:

              

            	
              /s/
                John E. Mordock

            


    

    
      	
               

            	
              Name:  John
                E. Mordock

            


    

    
      	
               

            	
              Title:  President
                & Chief Executive
                Officer