Document:

Exhibit 10.3

Exhibit 10.3

THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”) OR ANY STATE SECURITIES LAWS, AND MAY NOT
BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, OR HYPOTHECATED UNLESS AND UNTIL (I) REGISTERED UNDER
THE ACT OR, (II) THE TRANSACTION IS EXEMPT FROM REGISTRATION UNDER THE ACT AND AN OPINION OF
COUNSEL IN A FORM REASONABLY SATISFACTORY TO THE ISSUER OF THESE SECURITIES HAS BEEN RENDERED.

WARRANT

TO PURCHASE COMMON STOCK

OF

NEUROLOGIX, INC.

(void after December
 ____, 2017)

No. W-[—]

THIS CERTIFIES THAT, for value received, [                    ] or its registered assigns (the
“Holder”), from and after the date hereof, and subject to the terms and conditions herein set
forth, is entitled to purchase from Neurologix, Inc., a Delaware corporation (the “Company”), at
any time before 5:00 p.m. New York City time on December [____], 2017 (the “Termination Date”),
[                    ] shares (the “Warrant Shares”) of the Company’s common stock, par value $0.001 per share
(the “Common Stock”), at a price per share equal to the Warrant Price (as defined below) upon
exercise of this Warrant pursuant to Section 5 hereof. The number of Warrant Shares is subject to
adjustment under Section 2.

1. Definitions. As used in this Warrant, the following terms have the definitions ascribed
to them below:

(a) “Cash Shares” shall have the meaning ascribed to them in Section 5(a).

(b) “Issuance Date” means December [____], 2010.

(c) “Offering Warrants” shall have the meaning ascribed to the term in Section 8.

(d) “Person” means any individual, corporation, partnership, limited liability
company, trust, incorporated or unincorporated association, joint venture, joint stock
company, governmental authority or other entity of any kind, and shall include any
successor (by merger or otherwise) of such entity.

(e) “Purchase Agreement” means that certain Note and Warrant Purchase Agreement
dated as of December [____], 2010 between the Company and the initial Holder of this
Warrant and the other parties named therein.

(f) “Warrant Price” means $1.44 per share subject to adjustment under Section 2.

 

 

 

2. Adjustments and Notices. The Warrant Price and/or the Warrant Shares shall be subject
to adjustment from time to time in accordance with this Section 2. The Warrant Price and/or the
Warrant Shares shall be adjusted to reflect all of the following events that occur on or after the
Issuance Date.

(a) Subdivision, Stock Dividends or Combinations. In case the Company shall at any
time subdivide the outstanding shares of the Common Stock or shall issue a stock dividend with
respect to the Common Stock, the Warrant Price in effect immediately prior to such subdivision or
the issuance of such dividend shall be proportionately decreased, and the number of Warrant Shares
for which this Warrant may be exercised immediately prior to such subdivision or the issuance of
such dividend shall be proportionately increased. In case the Company shall at any time combine
the outstanding shares of the Common Stock, the Warrant Price in effect immediately prior to such
combination shall be proportionately increased, and the number of Warrant Shares for which this
Warrant may be exercised immediately prior to such combination shall be proportionately decreased.
In each of the foregoing cases, the adjustment shall be effective at the close of business on the
date of such subdivision, dividend or combination, as the case may be.

(b) Reclassification, Exchange, Substitution, In-Kind Distribution. Upon any
reclassification (other than a change in par value or from par value to no par value or from no par
value to par value or as a result of a stock dividend or subdivision, split-up or combination of
shares covered in clause (a) above), exchange, substitution or other event that results in a change
of the number and/or class of the securities issuable upon exercise or conversion of this Warrant
or upon the payment of a dividend in securities or property other than shares of the Common Stock,
the Holder shall be entitled to receive, upon exercise of this Warrant, the number and kind of
securities and property that the Holder would have received if this Warrant had been exercised
immediately before the record date for such reclassification, exchange, substitution, or other
event or immediately prior to the record date for such dividend. The Company or its successor
shall promptly issue to the Holder a new warrant for such new securities or other property. The
new warrant shall provide for adjustments which shall be as nearly equivalent as may be practicable
to the adjustments provided for in this Section 2 including, without limitation, adjustments to the
Warrant Price and to the number of securities or property issuable upon exercise or conversion of
the new warrant. The provisions of this Section 2(b) shall similarly apply to successive
reclassifications, exchanges, substitutions, or other events and successive dividends.

(c) Reorganization, Merger etc. In case of any merger or consolidation of the Company
(where the Company is not the surviving Person or where there is a change in or distribution with
respect to the Common Stock), or sale, transfer or lease (but not including a transfer or lease by
pledge or mortgage to a bona fide lender) of all or substantially all of the assets of the Company,
the Company, or such successor or purchasing corporation, as the case may be, shall, as a condition
to closing any such reorganization, merger or sale, duly execute and deliver to the Holder hereof a
new warrant so that the Holder shall have the right to receive, at a total purchase price not to
exceed that payable upon the exercise or conversion of the unexercised portion of this Warrant, and
in lieu of the Warrant Shares theretofore issuable upon exercise or conversion of this Warrant, the
kind and amount of shares of stock, other securities, money and property that would have been
receivable upon such reorganization, merger or sale by the Holder with respect to the Warrant
Shares if this Warrant had been exercised immediately before the consummation of such transaction.
Such new warrant shall provide for adjustments that shall be as nearly equivalent as may be
practicable to the adjustments provided for in this Section 2. The provisions of this subparagraph
(c) shall similarly apply to successive transactions of the type described in this subparagraph
(c).

 

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(d) Adjustment for Issuance of Shares of Common Stock Below Warrant Price. If the
Company shall issue, or be deemed to issue (as provided below), any additional shares of Common
Stock other than Excluded Stock, as defined below (“Additional Shares of Common Stock”), for a
consideration per share less than $1.44 (excluding subdivisions, stock dividends, combinations,
reclassifications and reorganizations which are covered in Sections 2(a), 2(b) and 2(c) above), the
Warrant Price shall be reduced concurrent with each such issuance to a price calculated as follows:

	 	 	 
	Adjusted Warrant Price = 	(Outstanding Stock x Warrant Price) + Additional Stock Consideration
	     Outstanding Stock + No. of Additional Shares of Common Stock

As used herein:

“Additional Stock Consideration” means the consideration received by the Company upon the
issuance of the Additional Shares of Common Stock.

“Convertible Securities” means any evidence of indebtedness, shares or securities, in each
case convertible into or exchange for Additional Shares of Common Stock.

“Excluded Stock” means (a) securities issued, or deemed issued (as provided below), to
directors, officers, employees or consultants of the Company or a subsidiary of the Company in
connection with their service as directors of the Company or a subsidiary of the Company, their
employment by the Company or a subsidiary of the Company or their retention as consultants by the
Company or a subsidiary of the Company under stock option plans of the Company; (b) shares of
Common Stock issuable upon exercise of warrants outstanding as of the Issuance Date; (c) shares of
Common Stock issued, or deemed issued (as provided below), pursuant to a merger, consolidation or
stock or asset acquisition approved by the Company’s Board of Directors; (d) the issuance, or
deemed issuance, of securities of the Company for any purpose and in any amount as approved by the
holders of Offering Warrants exercisable for at least fifty percent (50%) of the Warrant Shares
issuable upon exercise of the then outstanding Offering Warrants; (e) shares issued, or deemed
issued, to persons or entities in connection with a strategic partnership, joint venture or other
similar agreement with the Company, provided such issuances are primarily for other than equity
financing purposes and are approved by a two-thirds majority of the members of the Board of
Directors; (f) shares issued, or deemed issued, pursuant to any equipment leasing arrangement or
debt financing from a bank or similar institution approved by a two-thirds majority of the members
of the Board of Directors; provided such financing is primarily for non-equity financing purposes;
(g) shares of Common Stock issued or issuable upon exercise of the Offering Warrants; and (h)
shares of Common Stock issued or issuable upon conversion of the Series C Convertible Preferred
Stock or the Series D Convertible Preferred Stock.

“No. of Additional Shares of Common Stock” means the number of units of Additional Shares of
Common Stock issued in connection with the issuance of the same.

“Options” means rights, options or warrants to subscribe for, purchase or otherwise acquire
shares of Common Stock or Convertible Securities.

“Outstanding Stock” means the total number of shares of Common Stock outstanding plus the
total number of shares of Common Stock issuable upon conversion or exercise of outstanding
Convertible Securities (including this Warrant, all other warrants and any Options) immediately
prior to the issuance of the Additional Shares of Common Stock; provided that the number of
shares of Common Stock outstanding at any given time shall not include shares owned or held by or
for the account of the Company.

 

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No adjustment in the Warrant Price need be made if such adjustment would result in a change in
the Warrant Price of less than $0.01. Any such adjustment which is not made shall be carried
forward and shall be made at the time of and together with any subsequent adjustment which, on a
cumulative basis, amounts to an adjustment of $0.01 or more in the Warrant Price. No adjustment in
the Warrant Price of this Warrant shall be made in respect of the issuance of Additional Shares of
Common Stock unless the consideration per share for such Additional Shares of Common Stock issued
or deemed to be issued (as provided below) by the Company is less than the Warrant Price then in
effect on the date of, and immediately prior to, such issue, for this Warrant.

For purposes of making any adjustment required under this Section 2(d), the consideration
received by the Company for any issue or sale of securities shall (a) to the extent that it
consists of cash be computed as the amount of cash received by the Company without deduction of any
underwriting or similar commissions, compensation or concessions paid or allowed by the Company in
connection with such issue or sale, (b) to the extent that it consists of property other than cash,
be computed at the fair market value of that property as determined in good faith by the Board of
Directors, and (c) if Additional Shares of Common Stock, Convertible Securities or rights or
Options are issued or sold together with other securities or other assets of the Company for a
consideration which covers both, be computed (as provided in clauses (a) and (b) above) as the
portion of the consideration so received that may be reasonably determined in good faith by the
Board of Directors to be allocable to such Additional Shares of Common Stock, Convertible
Securities or rights or Options.

If the holders of at least fifty percent (50%) in interest of the Offering Warrants shall, in
good faith, disagree with any determination made by the Board of Directors of the Company of the
fair market value of any property (including without limitation any securities other than shares of
Common Stock) pursuant to the Offering Warrants (such holders hereinafter referred to as the
“Requesting Holders”), and such disagreement is in respect of property valued by the Board of
Directors of the Company at more than $500,000, then the Requesting Holders may by written notice
to the Company (an “Appraisal Notice”), given within 15 days after notice to the holders of the
Offering Warrants following such determination, elect to contest such determination; provided,
however, that the holders of the Offering Warrants may not seek appraisal or any determination of
fair market value to the extent that the Company has received a fairness opinion or other appraisal
from an independent appraiser selected by the Board of Directors of the Company in connection with
the transaction giving rise to such determination. Within 15 days after an Appraisal Notice, the
Company shall engage an Appraiser (as defined below) to make an independent determination of such
fair market value (the “Appraiser’s Determination”), and to deliver to the Company and the holder
of this Warrant a report describing its methodology and results in reasonable detail within 15 days
of such engagement. The Company and the holder of this Warrant shall be afforded reasonable
opportunities to discuss the appraisal with the Appraiser. The Appraiser’s Determination shall be
final and binding on the Company and the holder of this Warrant, absent manifest error. The costs
of conducting an appraisal, including all fees and expenses of the Appraiser, shall be borne one
half by the Requesting Holders (among the Requesting Holders, pro rata according to the number of
shares issuable upon exercise of outstanding Offering Warrants that are held by the Requesting
Holders) and one half by the Company. “Appraiser” means an independent appraiser chosen by the
Board of Directors of the Company with the consent of the Requesting Holder with the greatest
number of Shares issuable upon exercise of the Offering Warrants, which consent shall not be
unreasonably withheld or delayed.

 

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For purposes of the adjustment required under this Section 2(d), if at any time or from time
to time after the Issuance Date, the Company issues or sells any Options or Convertible Securities,
then in each case the Company shall be deemed to have issued at the time of the issuance of such
Options or Convertible Securities the maximum number of Additional Shares of Common Stock (as
set forth in the instruments relating thereto, giving effect to any provision contained therein for
a subsequent upward adjustment of such number other than any provision requiring anti-dilution
adjustments (based on price, recapitalizations, mergers, reorganizations or otherwise), which such
anti-dilution provisions shall only result in upward adjustments upon the triggering of such
anti-dilution adjustment) issuable upon exercise or conversion thereof and to have received as
consideration for the issuance of such shares of Common Stock an amount equal to the total amount
of consideration, if any, received by the Company for the issuance of such Options or Convertible
Securities plus, in the case of such Options, the minimum amounts of consideration, if any (as set
forth in the instruments relating thereto, giving effect to any provision contained therein for a
subsequent downward adjustment of such consideration), payable to the Company upon the exercise of
such Options and, in the case of Convertible Securities, the minimum amounts of consideration, if
any, payable to the Company upon the subsequent conversion of any such Convertible Security (other
than by cancellation of liabilities or obligations evidenced by such Convertible Securities). No
further adjustment of the Warrant Price, adjusted upon the issuance of such Options or Convertible
Securities, shall be made as a result of the actual issuance of Additional Shares of Common Stock
on the exercise of any such Options or the conversion of any such Convertible Securities. If any
such Options or the conversion privilege represented by any such Convertible Securities shall
expire without having been exercised, the Warrant Price adjusted upon the issuance of such Options
or Convertible Securities or upon the triggering of any anti-dilution adjustments (based on price,
recapitalization, mergers reorganizations or otherwise) thereunder shall be readjusted to the
Warrant Price which would have been in effect had an adjustment been made on the basis that the
only Additional Shares of Common Stock so issued were the Additional Shares of Common Stock, if
any, actually issued or sold for the consideration received by the Company for the granting of all
such Options, whether or not exercised, plus the consideration received for issuing or selling the
Convertible Securities actually converted plus the consideration, if any, actually received by the
Company (other than by cancellation of liabilities or obligations evidenced by such Convertible
Securities) on the conversion of such Convertible Securities. Upon the happening of any of the
following events, namely, if the purchase price provided for in any Option, the additional
consideration, if any, payable upon the conversion or exchange of any Convertible Securities, or
the rate at which Convertible Securities are convertible into or exchangeable for Common Stock
shall change at any time (including, but not limited to, changes under or by reason of provisions
designed to protect against dilution), the Warrant Price in effect at the time of such event shall
forthwith be readjusted to the Warrant Price which would have been in effect at such time had such
Options or Convertible Securities still outstanding provided for such changed purchase price,
additional consideration or conversion rate, as the case may be, at the time initially granted,
issued or sold, but only if as a result of such adjustment the Warrant Price then in effect after
any adjustment hereunder is thereby reduced; and on the termination of any such Option or any such
right to convert or exchange such Convertible Securities, the Warrant Price then in effect
hereunder shall forthwith be increased to the Warrant Price which would have been in effect at the
time of such termination had such Option or Convertible Securities, to the extent outstanding
immediately prior to such termination, never been issued.

(e) Certificate of Adjustment. In each case of an adjustment or readjustment of the
Warrant Price, the Company, at its own expense, shall cause its Chief Financial Officer (or
equivalent officer of the Company) to compute such adjustment or readjustment in accordance with
the provisions hereof and prepare a certificate showing such adjustment or readjustment, and shall
mail such certificate, by first class mail, postage prepaid, to the Holder. The certificate shall
set forth such adjustment or readjustment, showing in detail the facts upon which such adjustment
or readjustment is based. No adjustment of the Warrant Price shall be required to be made unless
it would result in an increase or decrease of at least one cent, but any adjustments not made
because of this sentence shall be carried forward and taken into account in any subsequent adjustment
otherwise required hereunder.

 

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(f) No Impairment. The Company shall not, by amendment of its certificate of
incorporation, by-laws or other organizational documents, or through a reorganization, transfer of
assets, consolidation, merger, dissolution, issue, or sale of securities or any other voluntary
action, avoid or seek to avoid the observance or performance of any of the terms to be observed or
performed under this Warrant by the Company, but shall subject to Section 8 at all times in good
faith assist in carrying out all of the provisions of this Section 2 and in taking all such action
as may be necessary or appropriate to protect the Holder’s rights under this Section 2 against
impairment.

(g) Fractional Shares. No fractional shares shall be issuable upon exercise or
conversion of the Warrant and the number of shares to be issued shall be rounded down to the
nearest whole share. If a fractional share interest arises upon any exercise or conversion of the
Warrant, the Company shall eliminate such fractional share interest by paying the Holder an amount
computed by multiplying the fractional interest by the fair market value of a full share.

3. No Shareholder Rights. This Warrant, by itself, as distinguished from any shares
purchased hereunder, shall not entitle the Holder to any of the rights of a shareholder of the
Company.

4. Reservation of Stock. The Company will reserve from its authorized and unissued stock a
sufficient number of shares to provide for the issuance of the Warrant Shares upon the exercise of
this Warrant. Issuance of this Warrant shall constitute full authority to the Company’s officers
who are charged with the duty of executing stock certificates to execute and issue the necessary
certificates for the Warrant Shares issuable upon the exercise of this Warrant.

5. Exercise of Warrant.

(a) This Warrant may be exercised by the Holder hereof, in whole or in part, at any time prior
to the Termination Date, at the election of the Holder hereof (with the notice of exercise
substantially in the form attached hereto as Attachment 1 duly completed and executed for
an exercise under this Section 5(a)) (the “Notice”), by the surrender of this Warrant at the
principal office of the Company or transfer agent and the payment to the Company, by certified or
bank check, or by wire transfer to an account designated by the Company, of an amount equal to the
then applicable Warrant Price multiplied by the number of Warrant Shares then being purchased
(Warrant Shares issued upon such an exercise described in this Section 5(a), “Cash Shares”). This
Warrant shall be deemed to have been exercised immediately prior to the close of business on the
date of its surrender for exercise as provided above, and the person entitled to receive the
Warrant Shares issuable upon such exercise shall be treated for all purposes as the holder of such
shares of record as of the close of business on such date. As promptly as practicable after such
date, the Company shall issue and deliver to the person or persons entitled to receive the same a
certificate or certificates for the number of full Warrant Shares issuable upon such exercise.

 

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(b) At any time prior to the Termination Date, in lieu of exercising this Warrant for cash,
the Holder may elect to receive shares equal to the value of this Warrant (or the portion thereof
being exercised) by surrender of this Warrant at the principal office of the Company together with
notice of such election substantially in the form attached hereto as Attachment 1 duly
completed and executed for an exercise under this Section 5(b) (a “Net Exercise”). The
Company shall issue to a Holder who Net Exercises a number of Warrant Shares computed using
the following formula:

	 	 	 
	X =

	 	Y (A - B)

A

Where

	 	X =	 	 The number of Warrant Shares to be issued to the Holder.

	 
	 	Y =	 	The number of Warrant Shares set forth in the Notice.

	 
	 	A =	 	The fair market value of one (1) Warrant Share (at the date
of such calculation).

	 
	 	B =	 	The Warrant Price (as adjusted to the date of such calculation).

For purposes of this Section 5, the fair market value of a Warrant Share shall mean:

	 	(i)	 	If traded on a securities exchange or other market or over-the-counter
system, the fair market value of the Common Stock shall be deemed to be the average of
the closing prices of the Common Stock on the principal such U.S. exchange or market
by trading volume (or if not traded on a U.S. exchange or market, the principal
exchange or market by trading volume) over the thirty trading days immediately prior
to the determination date; or

	 	(ii)	 	If there is no public market for the Common Stock, the fair market value
shall be the price per Warrant Share that the Company could obtain from a willing
buyer for Warrant Shares sold by the Company from authorized but unissued Warrant
Shares, as such prices shall be determined in good faith by the Company’s Board of
Directors.

(c) Notwithstanding anything to the contrary contained herein, to the extent this Warrant is
not previously exercised, and if the fair market value of one Warrant Share is greater than the
Warrant Price then in effect, this Warrant shall be deemed automatically exercised pursuant to
Section 5(b) above (even if not surrendered) immediately before the Termination Date. To the
extent this Warrant or any portion thereof is deemed automatically exercised pursuant to this
Section 5(c), the Company agrees to promptly notify the Holder of the number of Warrant Shares, if
any, the Holder is to receive by reason of such automatic exercise, which number shall be
determined in accordance with Section 5(b).

6. Transfer of Warrant. This Warrant may be transferred or assigned by the Holder hereof
as a whole or in part, provided that prior to such transfer the transferor provides to the Company,
at the Company’s request, an opinion of counsel satisfactory to the Company that such transfer does
not require registration under the Securities Act.

7. Legends. Upon issuance, the certificate or certificates evidencing any Warrant Shares
shall bear legends as set forth in the Purchase Agreement.

 

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8. Purchase Agreement. This Warrant is one of a number of warrants (the “Offering
Warrants”) issued pursuant to the Purchase Agreement, and the Warrant Shares shall be entitled to
the rights conferred thereon under the Purchase Agreement, including without limitation the
registration rights provided in Section 3 thereof. Any term of the Warrant and each other Offering
Warrant may be amended and the observance of any term may be waived by the Company and the
holders-in-interest of at least fifty percent (50%) of the then outstanding Offering Warrants, and
any such amendment or waiver shall be binding upon all holders of Offering Warrants.

9. Termination. This Warrant shall terminate at 5:00 p.m. New York City time on the
Termination Date.

10. Miscellaneous. This Warrant shall be governed by the laws of the State of New York, as
such laws are applied to contracts to be entered into and performed entirely in New York by New
York residents. The headings in this Warrant are for purposes of convenience and reference only,
and shall not be deemed to constitute a part hereof. Subject to the provisions of Section 8
hereof, neither this Warrant nor any term hereof may be changed or waived orally, but only by an
instrument in writing signed by the Company and the Holder. All notices and other communications
from the Company to the Holder of this Warrant shall be delivered personally or by facsimile
transmission or mailed by first class mail, postage prepaid, to the address or facsimile number
furnished to the Company in writing by the last Holder of this Warrant who shall have furnished an
address or facsimile number to the Company in writing, and if mailed shall be deemed given three
days after deposit in the United States mail. Upon receipt of evidence satisfactory to the Company
of the ownership of and the loss, theft, destruction or mutilation of any Warrant and, in the case
of any such loss, theft or destruction, upon receipt of indemnity or security satisfactory to the
Company or, in the case of any such mutilation, upon surrender and cancellation of such Warrant,
the Company will make and deliver, in lieu of such lost, stolen, destroyed or mutilated Warrant, a
new Warrant of like tenor and representing the right to purchase the same aggregate number of
shares of Common Stock.

 

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ISSUED: December [__], 2010

NEUROLOGIX, INC.

	 	 	 	 	 
	By:
	 	 	 	 
	 

	 	 	 	 
	 

	 	Name: Clark A. Johnson	 	 
	 

	 	Title:   President and Chief Executive Officer	 	 
	 
	 	 	 	 
	By:
	 	 	 	 
	 

	 	 

Name: Marc L. Panoff
	 	 
	 

	 	Title:   Chief Financial Officer, Treasurer and Secretary	 	 

 

 

Attachment 1

NOTICE OF EXERCISE

TO: NEUROLOGIX, INC.

	1.	 	The undersigned hereby:

	 	o	 	elects to purchase ___ shares of Common Stock of the Company pursuant to
Section 5(a) of the attached Warrant, and tenders herewith payment of the purchase price
of such shares in full, or

	 
	 	o	 	elects to exercise its net issuance rights pursuant to Section 5(b) of the attached
Warrant with respect to ___ shares of Common Stock (such number being “Y” in the
formula in such Section).

	2.	 	Please issue a certificate or certificates representing said Warrant Shares in the name of
the undersigned or in such other name as is specified below:

 

(Name in which certificate(s) are to be issued)

 

(Address)

	 	 	 	 	 
	 	 	 
	 	 	(Name of Warrant Holder)
	 
	 	 	 	 
	 

	 	By:	 	 
	 

	 	 	 
	 

	 	Title:	 	 
	 

	 	 	 
	 

	 	Date signed:Exhibit 10.4

Exhibit 10.4

SECURITY AGREEMENT

This Security Agreement dated as of December 6, 2010 (the “Agreement”) by and among
Neurologix, Inc., a Delaware corporation (the “Borrower”), with its primary place of
business at One Bridge Plaza, Fort Lee, New Jersey 07024, and the parties listed on
Schedule A hereto, which parties are also parties to that certain Note and Warrant Purchase
Agreement (the “Purchase Agreement”) dated December 6, 2010, and holders of “Notes” issued
thereunder (collectively, the “Secured Parties”):

The Borrower and the Secured Parties hereby agree as follows:

1. Certain Definitions. Unless otherwise defined herein or in the Purchase Agreement,
capitalized terms used herein that are defined in the Code shall have the meanings assigned to them
in the Code. The following terms shall have the following meanings:

(a) “Code” means the Uniform Commercial Code (or any similar or equivalent
legislation) as in effect in any applicable jurisdiction.

(b) “Collateral” shall mean the property described on Exhibit A hereto other
than the Excluded Contract Rights.

(c) “Excluded Contract Rights” shall have the meaning set forth on Exhibit A
hereto.

(d) “Lien” means any lien (statutory or other), mortgage, pledge, hypothecation,
assignment, deposit arrangement, security interest, charge, claim or other encumbrance of any kind
(including any conditional sale or other title retention agreement, any lease in the nature
thereof, and any agreement to give any security interest) and any agreement to give or refrain from
giving a lien, mortgage, pledge, hypothecation, assignment, deposit arrangement, security interest,
charge, claim or other encumbrance of any kind.

(e) “Obligations” shall have the meaning set forth in Section 3 below.

(f) “Permitted Liens” means: (i) Liens imposed by law, such as carriers’,
warehousemen’s, materialmen’s and mechanics’ liens, or Liens arising out of judgments or awards
against Borrower with respect to which Borrower at the time shall currently be prosecuting an
appeal or proceedings for review; (ii) Liens for taxes not yet subject to penalties for nonpayment
and Liens for taxes the payment of which is being contested in good faith and by appropriate
proceedings and for which, to the extent required by generally accepted accounting principles then
in effect, proper and adequate book reserves relating thereto are established by Borrower; (iii)
Liens upon or in any equipment acquired or held by the Borrower to secure the purchase price of
such equipment or indebtedness incurred solely for the purpose of financing the acquisition of such
equipment, provided that the Lien is confined solely to the property so acquired and
improvements thereon, and the proceeds of such equipment and other equipment financed by the holder
of such Lien; (iv) Liens consisting of leases or subleases and licenses and sublicenses granted to
others in the ordinary course of Borrower’s business not interfering in any material respect with
the business of Borrower and any interest or title of a
lessor or licensor under any lease or license, as applicable; (v) Liens incurred or deposits
made in the ordinary course of Debtor’s business in connection with worker’s compensation,
unemployment insurance, social security and other like laws; (vi) Liens in favor of customs and
revenue authorities arising as a matter of law to secure payment of customs duties in connection
with the importation of goods; (viii) Liens to which the Secured Parties have each expressly
consented in writing; (ix) Liens in favor of the Secured Parties; and (x) the Lien in favor of De
Lage Landen Financial Services, Inc. filed with the New York Department of State on March 31, 2003
under file number 200303310717856 and continued on February 6, 2008 under file number
200802065127766 (the “Equipment Lien”).

 

 

 

2. Security Agreement.

(a) Grant. As collateral security for the payment and performance in full in cash of
the Obligations, the Borrower, for valuable consideration, the receipt of which is acknowledged,
hereby grants to the Secured Parties a security interest in and Lien on all of the Collateral now
owned or at any time hereafter acquired by the Borrower and wherever located or in which the
Borrower now has or at any time in the future may acquire any right, title or interest.

(b) Borrower Remains Liable. Anything herein to the contrary notwithstanding, (i) the
Borrower shall remain liable under any contracts, agreements and other documents included in the
Collateral, to the extent set forth therein, to perform all of its duties and obligations
thereunder to the same extent as if this Agreement had not been executed, (ii) the exercise by any
Secured Party of any of the rights hereunder shall not release the Borrower from any of its duties
or obligations under such contracts, agreements and other documents included in the Collateral and
(iii) no Secured Party shall have any obligation or liability under any contracts, agreements and
other documents included in the Collateral by reason of this Agreement, nor shall any Secured Party
be obligated to perform any of the obligations or duties of the Borrower thereunder or to take any
action to collect or enforce any such contract, agreement or other document included in the
Collateral hereunder.

(c) Continuing Security Interest. The Borrower agrees that this Agreement shall
create a continuing security interest in the Collateral which shall remain in effect until
indefeasible payment and performance in full of all of the Obligations.

3. Obligations Secured. The security interest granted hereby secures payment of all
amounts owed pursuant to the Notes and all other obligations of the Borrower to the Secured Parties
under the Notes and the Purchase Agreement, including, without limitation, all principal, interest
(including any interest that accrues after the commencement of a proceeding by or against the
Borrower under the federal bankruptcy laws or any other applicable federal, state or foreign
bankruptcy, insolvency or other similar law, regardless of whether allowed or allowable in whole or
in part as a claim in any such proceeding), obligations (including indemnification obligations),
fees, charges, costs, expenses, guaranties, covenants, and duties of any kind and description owing
by Borrower to the Secured Parties pursuant to or evidenced by the Notes and the Purchase Agreement
and irrespective of whether for the payment of money, whether direct or indirect, absolute or
contingent, due or to become due, now existing or hereafter arising, and including all interest not
paid when due and all expenses that Borrower
is required to pay or reimburse under the Note, the Purchase Agreement, by law, or otherwise
(collectively, the “Obligations”).

 

2

 

4. Borrower’s Representations, Warranties And Covenants. Borrower hereby represents,
warrants and covenants to the Secured Parties that:

(a) Borrower’s principal place of business is the address set forth above and Borrower keeps
its records concerning accounts, contract rights and other property at that location. Borrower is a
corporation duly organized, validly existing and in good standing under the laws of the State of
Delaware and has all requisite power and authority to execute, deliver and perform its obligations
under this Agreement.

(b) Except for the security interest granted to the Secured Parties pursuant to this Agreement
and the Permitted Liens, the Borrower owns and has rights in, and, as to Collateral acquired by it
from time to time after the date hereof, will own and have rights in each item of Collateral
pledged by it hereunder, free and clear of any and all Liens or claims of others.

(c) The security interest in and Lien on the Collateral granted to the Secured Parties
hereunder constitutes (a) a legal and valid first priority security interest in all the Collateral
securing the payment and performance of the Obligations except for Permitted Liens and (b) a
perfected security interest in all the Collateral to the extent perfection may be achieved by the
filings, possession or Control required hereunder. The security interest and Lien granted to the
Secured Parties pursuant to this Agreement in and on the Collateral will at all times constitute a
perfected (to the extent perfection may be achieved by the filings, possession or Control required
hereunder), continuing security interest therein, prior to all other Liens on the Collateral except
for Permitted Liens.

(d) Borrower shall, at its own cost and expense, defend title to the Collateral pledged by it
hereunder and the security interest therein and Lien thereon granted to the Secured Parties and the
priority thereof against all claims and demands of all persons, at any time claiming any interest
therein adverse to the Secured Parties, other than Permitted Liens. There is no agreement, order,
judgment or decree, and the Borrower shall not enter into any agreement or take any other action,
that would restrict the transferability of any of the Collateral or otherwise impair or conflict
with the Borrower’s obligations or the rights of the Secured Parties hereunder.

(e) The only Excluded Contract Rights of Borrower existing on the date hereof are those set
forth on Exhibit B. Borrower will use its commercially reasonable efforts to obtain as
soon as practicable all approvals and consents necessary for such Excluded Contract Rights to be
included as part of the Collateral.

(f) Borrower will at all times keep in a manner reasonably satisfactory to the Secured Parties
accurate and complete records of the Collateral and will keep such Collateral insured to the extent
similarly situated companies insure their assets. The Secured Parties shall be entitled, at
reasonable times during regular business hours and intervals after
reasonable notice to Borrower, to enter Borrower’s premises for purposes of inspecting the
Collateral and Borrower’s books and records relating thereto.

 

3

 

(g) Borrower will not create or permit to be created or suffer to exist any Lien, except
Permitted Liens, of any kind on any of the Collateral.

(h) Borrower shall not use the Collateral in violation of any applicable statute, ordinance,
law or regulation or in violation of any insurance policy maintained by Borrower with respect to
the Collateral.

(i) Location of Inventory and Equipment. Borrower shall not move any Equipment or
Inventory to any location unless it shall have given the Secured Parties not less than 30 days’
prior written notice of its intention so to do, clearly describing such new location and providing
such other information in connection therewith as the Secured Parties may request in the exercise
of their good faith credit judgment.

(j) Other Financing Statements. Other than financing statements, security agreements,
chattel mortgages, assignments, copyright security agreements or collateral assignments, patent or
trademark security agreements or collateral assignments, fixture filings and other agreements or
instruments executed, delivered, filed or recorded for the purpose of granting or perfecting any
Lien (collectively, “Financing Statements”) existing as of the date hereof and disclosed to
the Secured Parties or arising after the date hereof in connection with any Permitted Lien and
Financing Statements in favor of the Secured Parties, no effective Financing Statement naming the
Borrower as debtor, assignor, grantor, mortgagor, pledgor or the like and covering all or any part
of the Collateral is on file in any filing or recording office in any jurisdiction.

(k) Notices, Reports and Information. The Borrower will (i) notify the Secured
Parties upon Borrower’s receipt of a consent or other evidence of satisfaction of a condition that
results in an Excluded Contract Right becoming part of the Collateral; (ii) notify the Secured
Parties of any material claim made or asserted against the Collateral by any person or entity and
of any change in the composition of the Collateral or other event which could materially adversely
affect the value of the Collateral or any Secured Party’s Lien thereon; (iii) furnish to the
Secured Parties such statements and schedules further identifying and describing the Collateral and
such other reports and other information in connection with the Collateral as the Secured Parties
may reasonably request, all in reasonable detail; and (iv) upon the reasonable request of the
Secured Parties make such demands and requests for information and reports as the Borrower is
entitled to make in respect of the Collateral.

(l) Insurance. In the event that the proceeds of any insurance claim with respect to
any Collateral are paid to the Borrower, such proceeds shall be held in trust for the benefit of
the Secured Parties and shall be paid to the Secured Parties upon the occurrence of an Event of
Default under Section 7.

 

4

 

(m) Chief Executive Office; Change of Name; Jurisdiction of Organization. Borrower shall
not effect any change (i) to its legal name, (ii) in the location of its chief executive office,
(iii) in its identity or organizational structure, (iv) in its organizational
identification number, if any, or (v) in its jurisdiction of organization (in each case, including
by merging with or into any other entity, reorganizing, dissolving, liquidating, reorganizing or
organizing in any other jurisdiction), unless (A) it shall have given the Secured Parties not less
than 30 days’ prior written notice of its intention to do so and clearly describing such change and
providing such other information in connection therewith as the Secured Parties may reasonably
request and (B) it shall have taken all action reasonably necessary to maintain the perfection and
priority of the security interest of the Secured Parties in the Collateral. Borrower agrees to
promptly provide the Secured Parties with certified organization documents reflecting any of the
changes described in clauses (i), (iii), (iv) or (v) in the preceding sentence. Borrower also
agrees to promptly notify the Secured Parties of any change in the location of any office in which
it maintains books or records relating to Collateral owned by it or any office or facility at which
Collateral is located (including the establishment of any such new office or facility).

(n) Disposition of Collateral. The Borrower will not (i) surrender or lose possession
of (other than to the Secured Parties), sell, assign (by operation of law or otherwise), lease,
rent, or otherwise dispose of or transfer any of the Collateral or any right or interest therein,
except in the ordinary course of its business or otherwise to the extent permitted by this
Agreement, or (ii) to the extent in physical form, remove any of the Collateral from its present
location (other than disposals of Collateral permitted by subsection (i)) except upon at least 30
days’ prior written notice to the Secured Parties.

(o) Separate Obligations and Liens. The Borrower acknowledges and agrees that (i) the
Obligations represent separate and distinct indebtedness, obligations and liabilities of the
Borrower to each of the Secured Parties, which the Borrower is separately obligated to each Secured
Party to pay and perform, in each case regardless of whether or not any indebtedness, obligation or
liability to any other Secured Party or any other person or entity, or any agreement, instrument or
guaranty that evidences any such other indebtedness, liability or obligation, or any provision
thereof, shall for any reason be or become void, voidable, unenforceable or discharged, whether by
payment, performance, avoidance or otherwise; (ii) the Lien that secures each of the Secured
Parties’ respective Obligations (A) is separate and distinct from any and all other Liens on the
Collateral, (B) is enforceable (subject to applicable bankruptcy and similar laws) without regard
to whether or not any other Lien shall be or become void, voidable or unenforceable or the
indebtedness, obligations or liabilities secured by any such other Lien shall be discharged,
whether by payment, performance, avoidance or otherwise, and (C) shall not merge with or be
impaired by any other Lien (subject to applicable bankruptcy and similar laws).

(p) The Equipment Lien secures only the assets noted therein, and the fair market value of
the assets secured by the Equipment Lien is less than $250.

5. Financing Statements. Borrower shall at its cost execute any Financing Statement
(including without limitation the filing of notices with the United States Copyright Office and the
United States Patent and Trademark Office), in respect of any security interest created pursuant to
this Agreement which may at any time be required or which, in the opinion of the Secured Parties,
may at any time be desirable. If any recording or filing thereof (or the filing of any statements
of continuation or assignment of any financing statement) is required to protect and preserve such
lien or security interest, Borrower shall at its cost execute the same at
the time and in the manner requested by the Secured Parties. To the fullest extent permitted
by applicable law, the Borrower authorizes each Secured Party, and any agent acting on behalf of
any Secured Party, to file any such Financing Statements without the signature of the Borrower.

 

5

 

6. Borrower’s Rights Until Default. So long as an Event of Default, as defined in
Section 7 below, has not occurred, Borrower shall have the right to possess the Collateral, manage
its property and sell, lease, rent, or license its inventory and/or intellectual property in the
ordinary course of business.

7. Event of Default. An “Event of Default” shall occur under this Agreement upon the
declaration of the acceleration of the Notes by the Required Note Holders pursuant to Section 7.2
of the Purchase Agreement.

8. Rights and Remedies on Event of Default.

(a) Upon the occurrence of an Event of Default, Secured Parties, upon the election of the
Required Note Holders, shall have the right, themselves or through any of their agents, with or
without notice to Borrower (as provided below), as to any or all of the Collateral, by any
available judicial procedure, or without judicial process (provided, however, that it is in
compliance with the UCC), to exercise any and all rights afforded to a secured party under the UCC
or other applicable law. Without limiting the generality of the foregoing and in accordance with
the Purchase Agreement, Secured Parties, upon the election of the Required Note Holders, shall have
the right upon the occurrence of an Event of Default to sell or otherwise dispose of all or any
part of the Collateral, either at public or private sale, in lots or in bulk, for cash or for
credit, with or without warranties or representations, and upon such terms and conditions, all as
the Required Note Holders, in their sole discretion, may deem advisable, and the Secured Parties
shall have the right to purchase at any such sale. Borrower agrees that a notice sent in
accordance with Section 11 at least ten (10) days before the time of any intended public sale or of
the time after which any private sale or other disposition of the Collateral in accordance with
this Section 8 is to be made shall be reasonable notice of such sale or other disposition. The
proceeds of any such sale, or other Collateral disposition shall be applied, first to the expenses
of retaking, holding, storing, processing and preparing for sale, selling, and the like, and to
Secured Parties’ reasonable attorneys’ fees and legal expenses, and then to the Obligations and to
the payment of any other amounts required by applicable law, after which Secured Parties shall
account to Borrower for any surplus proceeds. If, upon the sale or other disposition of the
Collateral, the proceeds thereof are insufficient to pay all amounts to which Secured Parties are
legally entitled, Borrower shall be liable for the deficiency, together with interest thereon at
the rate of 10% per annum, and the reasonable fees of any attorneys Secured Parties employ to
collect such deficiency; provided, however, that the foregoing shall not be deemed
to require Secured Parties to resort to or initiate proceedings against the Collateral prior to the
collection of any such deficiency from Borrower. To the extent permitted by applicable law,
Borrower waives all claims, damages and demands against Secured Parties arising out of the
retention or sale or lease of the Collateral or other exercise of Secured Parties” rights and
remedies with respect thereto in accordance with applicable law.

 

6

 

(b) To the extent permitted by applicable law, any sale upon the occurrence of an Event of
Default, whether under any power of sale hereby given or by virtue of
judicial proceedings, shall operate to divest all Borrower’s right, title, interest, claim and
demand whatsoever, either at law or in equity, in and to the Collateral sold, and shall be a
perpetual bar, both at law and in equity, against Borrower, its successors and assigns, and against
all persons and entities claiming the Collateral sold or any part thereof under, by or through
Borrower, its successors or assigns.

(c) Borrower appoints each Secured Party, and any officer, employee or agent of such Secured
Party, with full power of substitution, as Borrower’s true and lawful attorney-in-fact, effective
as of the date hereof, with power, upon the Required Note Holders’ election, in its own name or in
the name of Borrower, upon the occurence of an Event of Default, (i) to receive, collect and
endorse any notes, checks, drafts, money orders, or other instruments of payment in respect of the
Collateral that may come into Secured Parties’ possession, (ii) to sign and endorse any drafts
against Borrower, assignments, verifications and notices in connection with accounts, and other
documents relating to Collateral; (iii) to pay or discharge taxes or Liens at any time levied or
placed on or threatened against the Collateral; (iv) to demand, collect, issue receipt for,
compromise, settle, sue for and recover monies due in respect of the Collateral; (v) to notify
persons and entities obligated with respect to the Collateral to make payments directly to Secured
Parties; (vi) to receive and open all mail addressed to the Borrower and to notify postal
authorities to change the address for the delivery of mail to the Borrower to that of a Secured
Party designated by the Required Note Holders; (vii) to file any claims or take any action or
institute any proceedings which the Secured Parties may deem necessary or desirable for the
collection of any of the Collateral of the Borrower or otherwise to enforce the rights of the
Secured Parties with respect to any of the Collateral; and (viii) generally, to do, at Secured
Parties’ option and at Borrower’s expense, at any time, or from time to time, all acts and things
and to execute any instrument which Secured Parties deems necessary or advisable to protect,
preserve and realize upon the Collateral and Secured Parties’ security interest therein to effect
the intent of this Agreement, all as fully and effectually as Borrower might or could do; and
Borrower hereby ratifies all that said attorney shall lawfully do or cause to be done by virtue
hereof. This power of attorney shall be irrevocable as long as any of the Obligations are
outstanding.

(d) All of Secured Parties’ rights and remedies with respect to the Collateral, whether
established hereby or by any other agreements, instruments or documents or by law shall be
cumulative and may be exercised singly or concurrently.

9. Secured Parties’ Rights; Borrower Waivers.

(a) Secured Parties’ acceptance of partial or delinquent payment from Borrower under any Note
or hereunder, or Secured Parties’ failure to exercise any right hereunder, shall not constitute a
waiver of any obligation of Borrower hereunder, or any right of Secured Parties hereunder, and
shall not affect in any way the right to require full performance at any time thereafter.

(b) The Borrower waives, to the fullest extent permitted by law, (i) any right of redemption
with respect to the Collateral, whether before or after sale hereunder, and all rights, if any, of
marshaling of the Collateral or other collateral or security for the Obligations; (ii) any right to
require any Secured Party (A) to proceed against any person or
entity, (B) to exhaust any other collateral or security for any of the Obligations, (C) to
pursue any remedy in the Secured Party’s power, or (D) to make or give any presentments, demands
for performance, notices of nonperformance, protests, notices of protests or notices of dishonor in
connection with any of the Collateral; and (iii) all claims, damages, and demands against any
Secured Party arising out of the repossession, retention, sale or application of the proceeds of
any sale of the Collateral.

 

7

 

10. Collateral Agent. At any time or times, in order to comply with any legal
requirement in any jurisdiction or in order to effectuate any provision of this Agreement as
determined in the discretion of the Required Note Holders, the Required Note Holders may, without
the consent of or notice to the Borrower, appoint any Secured Party, or any bank or trust company
or any other person or entity to act as collateral agent (the “Collateral Agent”), either
jointly with any Secured Party or separately, on behalf of the Secured Parties with such power and
authority as may be necessary for the effectual operation of the provisions hereof and specified in
the instrument of appointment. The Borrower acknowledges that (i) the rights and responsibilities
of the Collateral Agent under this Agreement or arising out of this Agreement shall, as between the
Collateral Agent and the Secured Parties, be governed by the matters as among the Secured Parties
and the Collateral Agent to which the Borrower shall not be a third party or other beneficiary; and
(ii) as between the Collateral Agent and the Borrower, the Collateral Agent shall be conclusively
presumed to be acting as agent for itself and the Secured Parties with full and valid authority so
to act or refrain from acting.

11. Miscellaneous.

(a) Expenses. Borrower agrees to promptly pay all fees, costs and expenses incurred
in connection with any matters contemplated by or arising out of this Agreement, the Purchase
Agreement or any other document related thereto, subject to the limitations set forth in Section
9.9 of the Purchase Agreement, and all such fees, costs and expenses shall be part of the
Obligations, payable on demand: (a) fees, costs and expenses incurred by the Secured Parties
(including reasonable attorneys’ fees) in connection with the examination, negotiation, review, and
documentation of this Agreement, the Purchase Agreement and any other document related thereto,
subject to the limitations set forth in Section 9.9 of the Purchase Agreement, and any amendments,
waivers, consents, forbearances and other modifications relating hereto, including in connection
with any workout or restructuring involving the Borrower or thereto; and (b) fees, costs, expenses
(including attorneys’ fees) of the Secured Parties and costs of settlement incurred in any action
to enforce this Agreement, the Purchase Agreement or any other document related thereto or to
collect any payments due from the Borrower under this Agreement, the Purchase Agreement or any
other document related thereto.

 

8

 

(b) Indemnity. In addition to the payment of expenses pursuant to Section 11(a), the
Borrower agrees to indemnify, pay and hold each Secured Party, and the officers, directors,
employees, agents, consultants, partners, auditors, accountants, affiliates and attorneys of each
Secured Party (collectively called the “Indemnitees”) harmless from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits, claims, costs,
expenses and disbursements of any kind or nature whatsoever (including the reasonable and
documented fees and disbursements of counsel for such Indemnitees in
connection with any investigative, administrative or judicial proceeding commenced or
threatened, whether or not such Indemnitee shall be designated a party thereto) that may be imposed
on, incurred by, or asserted against that Indemnitee, in any manner relating to or arising out of
this Agreement, the Purchase Agreement or any other document related thereto, the consummation of
the transactions contemplated by this Agreement or the Purchase Agreement, the use or intended use
of the proceeds of any of the Notes, the existence or perfection of any Liens, or realization upon
any Collateral, or the exercise of any right or remedy under this Agreement, the Purchase Agreement
or any other document related thereto (the “Indemnified Liabilities”); provided, that (i)
the Borrower shall have no obligation to an Indemnitee hereunder with respect to Indemnified
Liabilities arising from the gross negligence or willful misconduct of that Indemnitee as
determined by a final non-appealable judgment by a court of competent jurisdiction; and (ii) the
Indemnitee shall give the Borrower prompt written notice of any claims, actions or suits asserted
against the Indemnitee relating to the Indemnified Liabilities, provided, however, that failure to
provide such notice shall not impair the rights and remedies of the parties hereunder unless the
Borrower is materially prejudiced by such failure to provide prompt written notice.

(c) Amendment and Waiver. Neither this Agreement nor any part hereof may be changed, waived,
or amended except by an instrument in writing signed by the Required Note Holders and by the
Borrower; and waiver on one occasion shall not operate as a waiver on any other occasion.

(d) Notices. Unless otherwise provided, any notice required or permitted under this
Agreement shall be given pursuant to the terms of the Purchase Agreement.

(e) Successors and Assigns. This Agreement shall be binding upon and inure to the
benefit of, the successors and assigns of the parties hereto, including, without limitation, all
future holders of the Notes.

(f) Governing Law. This Agreement and any controversy arising out of or relating to
this Agreement shall be governed by, and construed in accordance with, the Uniform Commercial Code
of the State of New York as to matters within the scope thereof, and as to all other matters
(including contract law, tort law and matters of fraud) shall be governed by, and construed in
accordance with, the internal laws of the State of New York, without regard to conflict of law
principles that would result in the application of any law other than the law of the State of New
York.

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

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

 

9

 

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

(j) Venue. Borrower and Secured Parties agree that all actions or proceedings arising
in connection with this Agreement shall be tried and litigated only in the courts of the State of
New York located in the County of New York, and the United States District Court for the Southern
District of New York or, at the Required Note Holders’ option, any court in which the Required Note
Holders determine it is necessary or appropriate to initiate legal or equitable proceedings in
order to exercise, preserve, protect or defend any of Secured Parties’ rights and remedies
hereunder or otherwise or to exercise, preserve, protect or defend the Secured Parties’ Lien, and
the priority thereof, against the Collateral, and which has subject matter jurisdiction over the
matter in controversy. Borrower waives any right it may have to assert the doctrine of forum non
conveniens or to object to such venue, and consents to any court ordered relief. Borrower waives
personal service of process and agrees that a summons and complaint commencing an action or
proceeding in any such court shall be promptly served and shall confer personal jurisdiction if
served by registered or certified mail to Borrower. If Borrower fails to appear or answer any
summons, complaint, process or papers so served within thirty (30) days after the mailing or other
service thereof, it shall be deemed in default and an order of judgment may be entered against it
as demanded or prayed for in such summons, complaint, process or papers. The choice of forum set
forth herein shall not be deemed to preclude the enforcement of any judgment obtained in such
forum, or the taking of any action hereunder to enforce the same, in any appropriate jurisdiction.

(k) Waiver of Jury Trial. TO THE EXTENT EACH MAY LEGALLY DO SO, EACH PARTY HERETO
HEREBY EXPRESSLY WAIVES ANY RIGHT TO TRIAL BY JURY OF ANY CLAIM, DEMAND, ACTION, CAUSE OF ACTION,
OR PROCEEDING ARISING UNDER OR WITH RESPECT TO THIS AGREEMENT, OR IN ANY WAY CONNECTED WITH, OR
RELATED TO, OR INCIDENTAL TO, THE DEALING OF THE PARTIES HERETO WITH RESPECT TO THIS AGREEMENT, OR
THE TRANSACTIONS RELATED THERETO, IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER ARISING, AND
IRRESPECTIVE OF WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE. TO THE EXTENT EACH MAY LEGALLY
DO SO, EACH PARTY HERETO HEREBY AGREES THAT ANY SUCH CLAIM, DEMAND, ACTION, OR PROCEEDING SHALL BE
DECIDED BY A COURT TRIAL WITHOUT A JURY AND THAT EITHER PARTY HERETO MAY FILE AN ORIGINAL
COUNTERPART OR A COPY OF THIS AGREEMENT WITH ANY COURT AS WRITTEN EVIDENCE OF THE CONSENT OF ANY
OTHER PARTY HERETO TO THE WAIVER OF ITS RIGHT TO TRIAL BY JURY.

(l) Termination of Security Interest.

(i) The security interest granted herein shall terminate immediately and automatically upon
the payment in full of the Obligations.

(ii) Upon termination of the security interest, the Secured Parties shall promptly execute and
deliver to the Borrower such documents and instruments reasonably requested by the Borrower, and
shall take all actions necessary or appropriate to effect the release of such security interest.

[THE REMAINDER OF THIS PAGE IS INTENTIONALLY LEFT BLANK]

 

10

 

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

	 	 	 	 	 
	 	BORROWER:

NEUROLOGIX, INC.

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

 

 

 

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

	 	 	 	 	 
	 	SECURED PARTY:

PALISADE CONCENTRATED

EQUITY PARTNERSHIP II, L.P.

 	 
	 	By:  	Palisade Concentrated Holdings II, LLC,
 	 
	 	 	its General Partner 	 
	 	 	 	 
	 	By:  	               /s/ Jeffrey D. Serkes
 	 
	 	 	Name:  	Jeffrey D. Serkes 	 
	 	 	Title:  	Authorized Signatory 	 

 

 

 

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

	 	 	 	 	 
	 	SECURED PARTY:

GENERAL ELECTRIC PENSION TRUST

 	 
	 	By:  	GE Asset Management Incorporated,
 	 
	 	 	its Investment Manager 	 
	 	 	 	 
	 	By:  	                                      /s/ B.C. Sophia Tsai
 	 
	 	 	Name:  	Sophia Tsai 	 
	 	 	Title:  	
Vice President and Managing Director 	 

 

 

 

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

	 	 	 	 	 
	 	SECURED PARTY:

CORRIENTE MASTER FUND, L.P.

 	 
	 	By:  	Corriente Capital Management, L.P.,
 	 
	 	 	its Managing General Partner 	 
	 	 	 
	 	By:  	            Corriente Advisors, LLC, 
its General Partner
 	 
	 	 	 
	 	By:  	                          /s/ James Haddaway
 	 
	 	 	Name:  	James Haddaway 	 
	 	 	Title:  	President 	 

 

 

 

EXHIBIT A

DESCRIPTION OF COLLATERAL

A. Collateral. Except for Excluded Contract Rights set forth in Section B below, all
personal property of Borrower (herein referred to as “Borrower” or “Debtor”) whether presently
existing or hereafter created, written, produced or acquired, including, but not limited to:

(i) all accounts receivable, Accounts, Chattel Paper (including, without limitation, tangible
Chattel Paper and electronic Chattel Paper), contract rights (including, without limitation,
royalty agreements, license agreements and distribution agreements), documents, instruments, money,
deposit accounts and general intangibles, including, without limitation, payment intangibles,
returns, repossessions, books and records (including, without limitation, all records indicating,
summarizing or evidencing its assets or liabilities, or its business operations or financial
condition), and equipment containing said books and records, all financial assets, all investment
property, including securities and securities entitlements;

(ii) all software, computer source codes and other computer programs and supporting
information (collectively, the “Software Products”), and all common law and statutory
copyrights and copyright registrations, applications for registration, now existing or hereafter
arising, United States of America and foreign, obtained or to be obtained on or in connection with
the Software Products, or any parts thereof or any underlying or component elements of the Software
Products together with the right to copyright and all rights to renew or extend such copyrights and
the right (but not the obligation) of any Secured Party to sue in its own name and/or the name of
the Debtor for past, present and future infringements of copyright;

(iii) all goods, including, without limitation, equipment, fixtures and inventory (including,
without limitation, all export inventory) and all computer programs embedded in goods and any
supporting information;

(iv) all guarantees and other security therefor;

(v) all trademarks, service marks, trade names and service names and the goodwill associated
therewith;

(vi) (a) all patents and patent applications filed in the United States Patent and Trademark
Office or any similar office of any foreign jurisdiction, and interests under patent license
agreements, including, without limitation, the inventions and improvements described and claimed
therein, (b) licenses pertaining to any patent whether Debtor is licensor or licensee, (c) all
income, royalties, damages, payments, accounts and accounts receivable now or hereafter due and/or
payable under and with respect thereto, including, without limitation, damages and payments for
past, present or future infringements thereof, (d) the right (but not the obligation) to sue for
past, present and future infringements thereof, (e) all rights corresponding thereto throughout the
world in all jurisdictions in which such patents have been issued or applied for, and (f) the
reissues, divisions, continuations, renewals, extensions and continuations-in-part with any of the
foregoing (all of the foregoing patents and applications and interests under patent
license agreements, together with the items described in clauses (a) through (f) in this
paragraph are sometimes herein individually and collectively referred to as the “Patents”);

 

 

 

(vii) all letter-of-credit rights, letters of credit, instruments, promissory notes, drafts
and Documents;

(viii) all rights in respect of Obligations;

(ix) all interest with respect to any Commercial Tort Claims;

(x) all money, cash equivalents or other assets that now or hereafter come into the
possession, custody or control of any Secured Party; and

(xi) all products and proceeds, including, without limitation, insurance proceeds, of any of
the foregoing.

B. Excluded Contract Rights. Notwithstanding anything herein to the contrary, in no event
shall the Collateral include, or the security interest granted under Section 2(a) attach
to, any lease, license, contract or agreement to which the Borrower is a party or any of its rights
or interests thereunder if and for so long as the grant of such security interest shall constitute
or result in (i) the abandonment, invalidation or unenforceability of any right, title or interest
of the Borrower therein or (ii) a breach or termination pursuant to the terms of, or a default
under, any such lease, license, contract or agreement, including, without limitation, a breach
thereof due to the refusal or failure by the other party to such lease, license, contract or
agreement to consent to the granting of a security interest therein (notwithstanding that any such
term would be rendered ineffective pursuant to Sections 9-406, 9-407, 9-408 or 9-409 of the UCC (or
any successor provision or provisions) of any relevant jurisdiction or any other applicable law
(including Title 11 of the United States Code) or principles of equity), provided, however, that
such security interest shall attach immediately at such time as the condition causing such
abandonment, invalidation or unenforceability shall be remedied and to the extent severable, shall
attach immediately to any portion of such lease, license, contract, property rights or agreement
that does not result in any of the consequences specified in (i) and (ii) above (such leases,
licenses, contracts, property rights and agreements, collectively, the “Excluded Contract
Rights”). Excluded Contract Rights consist of the licenses and agreements set forth on Exhibit
B to the Security Agreement.

 

 

 

EXHIBIT B

EXCLUDED CONTRACT RIGHTS

	1.	 	License Agreement, dated January 13, 2009, by and between Cornell University as represented
by its Cornell Center for Technology, Enterprise and Commercialization and Neurologix, Inc.
(“Neurologix”).

	2.	 	Sublicense Agreement, dated July 27, 2006, by and between Diamyd Therapeutics AB and
Neurologix.

	3.	 	License Agreement, dated November 1, 2002, by and between The Rockefeller University
(“Rockefeller”) and Neurologix.

	4.	 	Non-Exclusive License, dated August 28, 2002, by and between Yale University, Rockefeller,
and Neurologix.

	5.	 	Exclusive License Agreement, dated June 1, 2002, between Thomas Jefferson University (“TJU”)
and Neurologix.

	6.	 	Exclusive License Agreement, dated August 1, 2002, between TJU and Neurologix.

 

 

 

SCHEDULE A

Palisade Concentrated Equity Partnership II, L.P.

General Electric Pension Trust

Corriente Master Fund, L.P.

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