Neurologix Letterhead]
Exhibit
10.6
[Neurologix
Letterhead]
November
8, 2007
Via
Facsimile & Federal Express
ProMed
Partners LP
c/o
Xxxxx
Xxxxxxxx
ProMed
Management
000
Xxxx
00xx
Xxxxxx
Suite
2105
New
York,
NY 10168
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Re:
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Proposed
Series D Stock Financing
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Ladies
and Gentlemen:
Reference
is made to the (i) Stock and Warrant Subscription Agreement (“Subscription
Agreement”), dated as of May 10, 2006, by and among Neurologix, Inc.
(“Company”), General Electric Pension Trust (“GE”),
DaimlerChrysler Corporation Master Retirement Trust (“DaimlerChrysler”)
and certain funds managed by ProMed Asset Management LLC (collectively,
“you”) and (ii) Certificate of Designations, Preferences and Rights of
Series C Convertible Preferred Stock of the Company (“Series C
Certificate”).
General. As
you know, the Company is proposing to issue and sell up to $25 million of
its
shares of Series D Convertible Preferred Stock, par value $0.10 per share
(“Series D Stock”), substantially on the terms and conditions set forth
on the term sheet (“Series D Term Sheet”) attached hereto as Annex
A. As part of the issue and sale of the Series D Stock, all of
the Company’s Series C Convertible Preferred Stock, par value $0.10 per share
(“Series C Stock”), held by a holder thereof who is purchasing at least
the same dollar amount of Series D Stock as its initial purchase of Series
C
Stock, will, effective on the Series D Closing (as hereinafter defined),
be
automatically converted (the “Series C Conversion”) into (i) a number of
shares of Series D Stock to be determined by giving effect to the weighted
average anti-dilution protection afforded to the Series C Stock upon issuance
of
the Series D Stock and (ii) a number of shares of Series C Stock to provide
additional consideration to account for the difference between the weighted
average anti-dilution protection (as afforded to the Series C Stock) and
full
ratchet anti-dilution protection. For your convenience, the Company
has enclosed herein a sample analysis of the calculation of the Series C
Conversion based on GE’s intended purchase of $5 million of Series D
Stock. Also, the Company, as a condition of its issuance of the
Series D Stock, is requesting that you and the other holders of the Series
C
Stock consent to such issuance and to certain amendments to the Series C
Certificate and to the Subscription Agreement, as more fully described
herein.
This
letter shall serve as our offer to you of your right to subscribe for shares
of
Series D Stock pursuant to the Subscription Agreement and as our solicitation
of
your consent to the issuance of the Series D Stock and to the amendments
of the
Series C Certificate and the Subscription Agreement. The Company
understands that GE intends to purchase $5 million of the Series D
Stock. The Company also understands that GE will consent to the
proposed amendments to the Subscription Agreement and the Series C Certificate
described herein. The Company understands that DaimlerChrysler will
not be purchasing shares of Series D Stock, but will consent to the sale
of the
Series D Stock and the amendments to the Subscription Agreement and the Series
C
Certificate. If DaimlerChrysler gives such consent, the Company will
issue to it 175,000 shares of common stock, par value $0.001 per share
(“Common Stock”), at the closing (“Series D Closing”) of the sale
of the Series D Stock. If you do not elect to purchase shares of
Series D Stock on the terms set forth on the Series D Term Sheet, but consent
to
the sale of the Series D Stock and the amendments to the Subscription Agreement
and the Series C Certificate, as described herein, the Company will
issue to you 17,017 shares of Common Stock at the Series D Closing.
Right
of First Refusal. Section 3.1 of the
Subscription Agreement requires the Company to offer you the opportunity
to
purchase shares of Series D Stock substantially on the terms and conditions
set
forth on the Series D Term Sheet prior to a sale of such shares and, pursuant
thereto, the Company is hereby making you such offer.
Please
indicate below whether you elect to purchase shares of Series D Stock and
the
dollar amount you wish to purchase:
o
Yes ý No
$ 0
We,
of
course, acknowledge that any binding commitment to acquire your shares of
the
Series D Stock is subject to the execution of definitive agreements relating
thereto.
If
you
elect to purchase shares of Series D Stock in the same dollar amount as the
dollar amount of your purchase of Series C Stock, your outstanding shares
of
Series C Stock will automatically be converted, upon the Series D Closing,
pursuant to the Series C Conversion.
Consent
to Series D Stock Issuance. Section
D(2) of the Series C Certificate requires your consent prior to the
authorization, creation and issuance by the Company of the Series D
Stock. Your acknowledgment below indicates your consent to such
issuance and sale, substantially on the terms set forth in the Series D Term
Sheet.
Subscription
Agreement Amendment. The Company is
proposing to amend certain sections of the Subscription Agreement as set
forth
below.
First,
the Company is proposing to amend Section 3.1(a) of the Subscription Agreement
so that all holders of Series C Stock and all holders of Series D Stock will
be
entitled to participate, pro rata, in the right of first refusal set forth
therein in respect of the Offered Securities (as defined
therein). Under Section 6.2 of the Subscription Agreement, your
consent
is
required for such an amendment. Your acknowledgment below indicates
your acceptance of the following amendment to clause (x) of Section 3.1(a)
of
the Subscription Agreement (the underlined portion reflecting the amended
portion):
“...
(x)
that portion of the Offered Securities as the number of shares of Common
Stock
held by such Offeree (including shares then issuable upon the exercise on
conversion of outstanding exercisable or convertible equity securities) bears
to
the number of shares of Common Stock held by all Offerees and all holders of
the Company’s securities having rights pari passu with such Offerees
(including shares then issuable upon the exercise on conversion of outstanding
exercisable or convertible securities) (the “Basic Amount”)...”
Second,
the Company is proposing to amend Section 3.1(c)(i) of the Subscription
Agreement to extend the period between the expiration of the 15-day
notice period to holders of the Series C Stock of a potential stock sale
and the
closing of the sale from 45 days to 75 days. Under Section 6.2 of the
Subscription Agreement, your consent is required for such an
amendment. Your acknowledgment below indicates your acceptance of the
following amendment to the third line of Section 3.1(c)(i) of the Subscription
Agreement (the underlined portion reflecting the amended portion):
“¼Company
shall have
seventy five (75) days from the expiration of the fifteen (15) day
period¼”
Third,
the Company is proposing to amend Section 3.2(a) of the Subscription Agreement
so that all holders of Series C Stock and all holders of Series D Stock will
be
entitled to participate, pro rata, in the right of first refusal set forth
therein in respect of any equity securities of the Company (or any option,
warrant or other right relating thereto) proposed to be sold by a Holder
(as
defined therein). Under Section 6.2 of the Subscription Agreement,
your consent is required for such an amendment. For such amendment to
become effective as to a Holder, the consent of such Holder will be
required. The Company will use reasonable efforts to obtain such
consent. Your acknowledgment below indicates your acceptance of the
following amendment to the fourth sentence of Section 3.2(a) of the Subscription
Agreement (the underlined portion reflecting the amended portion):
“...and
the denominator of which is the aggregate number of shares of such Common
Stock
then held by all the Investors and all holders of the Company’s securities
having rights pari passu with such Investors (including shares then issuable
upon the exercise or conversion of outstanding exercisable or convertible
securities).”
Fourth,
the Company is proposing to amend Section 3.3 of the Subscription Agreement
so
that all holders of Series C Stock and all holders of Series D Stock will
be
treated, on a pari passu basis, in connection with any tag-along rights
associated with any sale of the Company’s securities by a
Holder. Under Section 6.2 of the Subscription Agreement, your consent
is required for such an amendment. For such amendment to become effective
as to
a Holder, the consent of such Holder will be required. The Company
will use reasonable efforts to obtain such consent. Your
acknowledgment below indicates your acceptance of the following amendment
to the
fourth sentence of Section 3.3 of the Subscription Agreement (the underlined
portion reflecting the amended portion):
“...and
the denominator of which is the aggregate number of shares of such Common
Stock
held by the Holder, by all of the participating Investors and by all
participating holders of the Company’s securities having rights pari passu with
such Investors (including shares then issuable upon the exercise or
conversion of outstanding exercisable or convertible securities).”
Fifth,
the Company is proposing to amend Section 3.9(a)(i)(x) of the Subscription
Agreement to increase the required percentage of Registrable Securities (as
defined therein) held by the Investors (as defined therein) necessary to
request
a Demand Registration Statement (as defined therein) from forty percent (40%)
to
eighty percent (80%). Under Section 6.2 of the Subscription
Agreement, your consent is required for such an amendment. Your
acknowledgment below indicates your acceptance of the following amendment
to the
first sentence of Section 3.9(a)(i)(x) of the Subscription Agreement (the
underlined portion reflecting the amended portion):
“...upon
the request of any Investor or Investors holding Registrable Securities (as
defined below) constituting at least eighty percent (80%) in interest of
all Registrable Securities then outstanding...”
Series
C Certificate Amendments. The Company
is hereby proposing to amend certain sections of the Series C Certificate
to be
conditioned and effective upon the Series D Closing, and your consent is
required to effectuate such amendments. All of such amendments,
together with minor correction changes, are reflected in the Amended and
Restated Series C Certificate attached hereto as Annex B (“Restated
Certificate”). Such amendments will become effective, and the
Restated Certificate will be filed, immediately prior to, and subject to,
the
Series D Closing. Your acknowledgment below will indicate your
consent to each of such amendments and your approval of the Restated
Certificate.
Such
amendments to the Restated Certificate principally consist of the
following:
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·
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Section
B is to be amended to provide for a 9% semi-annual cash dividend
payable
in lieu of the PIK Dividends (as defined in the Series C Certificate)
currently payable on the Series C Stock and the participating dividends
on
the Series C Stock provided for in Sections B(2) and
B(3).
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·
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A
new Section B(2) has been added to allow the Company to pay accrued
and
unpaid dividends in either cash or shares of Common Stock upon
a
conversion of Series C Stock.
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·
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Section
D(2) is to be amended to change the provision requiring the consent
of at
least 70% of the holders of shares of Series C Stock for the
authorization, creation or issuance of any security or convertible
security that is pari passu with, or senior to,
the Series C Stock so that it is only applicable with respect to
the
issuance of a security that is junior to the Series D
Stock.
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·
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Section
E(2)(b) is added to provide for the Series C Conversion with the
actual
number of shares of Series D Stock and additional shares of Series
C Stock
to be determined in accordance with the analysis enclosed herewith
and
inserted therein once the Series D Conversion Price (as such term
is
defined in the Series D Term Sheet) is determined immediately prior
to the
Series D Closing. Section E(3)(b) is added to provide for the
mechanics of the Series C
Conversion.
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Your
acknowledgement below will constitute your consent and acceptance of the
matters
described herein. Accordingly, please sign the copy of this letter
enclosed for such purpose in the designated space below and return it to
the
Company.
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Sincerely,
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| /s/ Xxxx Xxxxxx | |||
| Xxxx X. Xxxxxx | |||
| Chief Financial Officer | |||
Consented
and Accepted:
PROMED
PARTNERS LP
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By:
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/s/ Xxxxx Xxxxxxxx | |
| Name: Xxxxx Xxxxxxxx | ||
| Title: Managing Director | ||
