STOCK AND WARRANT SUBSCRIPTION AGREEMENT
STOCK
AND WARRANT
SUBSCRIPTION
AGREEMENT
THIS
STOCK AND WARRANT SUBSCRIPTION AGREEMENT (the “Agreement”) is made as of
April 28, 2008 by and between Neurologix, Inc., a Delaware corporation (the
“Company”), Corriente Master
Fund, L.P. (“Corriente”)
and, solely with respect to Article V of the Agreement, General Electric Pension
Trust (“GE”). Capitalized
terms used herein, but not otherwise defined, shall have the meanings set forth
in that certain Stock and Warrant Subscription Agreement, dated November 19,
2007, by and among the Company and the signatories thereto (the “Original Series D
Agreement”).
WITNESSETH:
WHEREAS,
the Company desires to issue and sell to
Corriente, and Corriente desires to
purchase from the Company, the number of shares (the “Additional 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
Corriente’s name on Exhibit A hereto at a price
per share of $35.00 (the “Purchase Price”) and warrants (the “Additional Warrants”), substantially in the form of Exhibit C 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 “Additional Warrant Shares”), for the
“Total Purchase Price”
set forth opposite Corriente’s name on
Exhibit A, pursuant to the
terms of this Agreement; the Additional Warrant Shares, the Additional 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 Additional
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 “Additional Shares”;
WHEREAS,
the Company has previously authorized the issuance and sale of the Series D
Preferred Stock and warrants pursuant to the terms and conditions of the
Original Series D Agreement;
WHEREAS,
the Company has previously issued 428,571 shares of Series D Preferred Stock and
3,232,758 Warrants to Corriente and GE pursuant to the terms and conditions set
forth in the Original Series D Agreement;
WHEREAS,
the Company has obtained all necessary authorizations and consents, including
the waiver and consent of GE set forth in Article V hereof, for the issuance and
sale of the Additional Purchased Shares and Additional Warrants;
and
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 Agreement to Sell and
Purchase the Additional Purchased Shares and Additional Warrants. Subject
to the terms and conditions of this Agreement, Corriente agrees to purchase at
the Closing (as such term is defined in Section 1.2), for the total purchase price set forth opposite
Corriente’s name on Exhibit A (reflecting
the Total Purchase Price), that number of
Additional Purchased Shares and Additional Warrants set forth opposite
Corriente’s name on Exhibit A.
1.2 Delivery of the Additional Purchased Shares
and Warrants at Closing. Except as
set forth in this Section 1.2, the completion of the purchase and sale of the
Additional Purchased Shares and Additional Warrants (the “Closing”) shall occur on April
28, 2008 (the “Closing
Date”), at the offices of Xxxxxx Xxxxxx Xxxxxxxx LLP, 000 Xxxxxxx Xxxxxx,
Xxx Xxxx, Xxx Xxxx 00000 at 10:00 AM Eastern time, or at such other time and
place as may be mutually agreed upon by the Company and Corriente. At
the Closing, the Company shall deliver the Additional Warrants to Corriente and
either:
(i) deliver to Corriente one or more stock certificates representing the number
of Additional Purchased Shares set forth on Exhibit A, each such certificate to be registered in the name of Corriente, or if so indicated on Exhibit A of this Agreement, in the name of a nominee designated by Corriente; or
(ii) direct its transfer agent to deliver such certificates
to Corriente (at the address of
Corriente set forth on Exhibit A hereto) or to Corriente’s 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 Additional Purchased Shares and Additional Warrants to Corriente 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 D in the full amount of the Purchase Price for all
of the Additional Purchased Shares and
Additional Warrants being purchased hereunder as set forth
on Exhibit A (the “Wire Transfer”); and
(ii) the representations
and warranties of Corriente 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 Corriente 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) Corriente’s
obligations to purchase the Additional
Purchased Shares and Additional Warrants
shall be subject to the following conditions, any one or more of which may be
waived by the written consent of
Corriente 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);
(ii) Corriente
shall have received a duly executed copy of an amendment (the “RRA Amendment”) to
the Registration Rights Agreement, dated as of November 19, 2007 (the “RRA”), among the
Company, the holders of the Series C Preferred Stock and the holders of the
Series D Preferred Stock, substantially in the form attached as Exhibit E;
and
(iii) Corriente shall
have received an opinion of the
Company’s 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 Additional Purchased Shares and Additional 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.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except as
disclosed by the Company in a written Disclosure Schedule provided by the
Company to Corriente (the “Additional Disclosure Schedule”), the
Company hereby represents, warrants and covenants to Corriente 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 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 with the Secretary of State of the State of
Delaware on November 19, 2007. The Company 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 with the Secretary of State of the State of
Delaware on November 19, 2007. 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”).
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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 Additional Warrants.
(iii) “Transaction Documents” shall mean this Agreement, the Additional Warrants,
the RRA, the RRA Amendment and any ancillary documents relating
thereto.
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 Additional Purchased
Shares and the Additional Warrants in accordance with this Agreement, and the
issuance of the Conversion Shares issuable upon conversion of the Additional
Purchased Shares and the Additional Warrant Shares issuable upon exercise of the
Additional Warrants, have been duly authorized and reserved for issuance, as the
case may be, by all necessary corporate action on the part of the
Company. The Additional Purchased Shares and Additional Warrants when
so issued, sold and delivered against payment therefor in accordance with the
provisions of this Agreement, and the Conversion Shares and the Additional
Warrant Shares, when issued pursuant to the terms of the Additional Purchased
Shares and the Additional Warrants, will be duly and validly issued, fully paid
and non-assessable.
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2.3 Non-Contravention. The execution and
delivery of the Transaction Documents, the
issuance and sale of the Additional 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
Additional 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 700,000 shares have been designated Series C Preferred
Stock and 792,100 shares have been designated
Series D Preferred Stock. As of April 28, 2008,
28,517,372 shares were issued and outstanding, consisting of
27,632,808 shares of Common Stock, 645 shares of Series A Preferred
Stock, 291,878 shares of Series C Preferred Stock and 592,041
shares of Series D Preferred Stock. The Company has not issued
any capital stock since the date above other than pursuant to (i) employee
benefit plans disclosed in the Exchange Act Documents, or (ii) outstanding
warrants, options or other securities disclosed in the Exchange Act
Documents. The outstanding shares of capital stock of the Company
have been duly and validly issued and are fully paid and nonassessable, have
been issued in compliance with all 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 Additional Purchased Shares or Additional 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 Additional Purchased Shares or the Additional
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.
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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.
2.8 Intellectual
Property.
(i) 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.
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(ii) Section
2.8(b) of the Additional 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.
(iii) 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 xxxx, copyright or other proprietary
intellectual property rights.
(iv) The
Company is not in breach of, and has complied in all respects with all terms of,
any of the license agreements under which the
Company licenses a patent or patent application that covers technology
necessary to conduct or used in the conduct of the Company’s business in the
manner in which it is currently conducted; except
as would not, individually or in the aggregate, have a Material Adverse
Effect.
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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
(v) under
applicable laws.
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(d) 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 Additional Purchased Shares and Additional
Warrants.
2.12 Exchange Act
Compliance. The
Common Stock is registered pursuant to Section 12(g) of the Exchange Act and is
quoted on the OTC BB, and the Company has taken no action designed to, or likely
to have the effect of, terminating the registration of the Common Stock under
the Exchange Act or removal from quotation of the Common Stock from the OTC BB,
nor has the Company received any notification that the SEC, the OTC BB or the
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 Additional 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 Additional Purchased Shares or the
Additional 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 Additional Purchased
Shares and the Additional 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 Additional
Purchased Shares or the Additional 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 Corriente is not an Embargoed Person. 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, X.X. Xxxx LLP and BDO Xxxxxxx, 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, 2007,
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
Additional Purchased Shares and the Additional Warrants to be sold to Corriente
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 Corriente set forth in
Article IV hereof, the offer and
sale of the Additional Purchased Shares and the Additional Warrants hereunder,
and the issuance of the Additional Warrant Shares pursuant to the Additional
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 Additional
Purchased Shares or the Additional Warrants as contemplated by this Agreement or
the Additional Warrant Shares under the Additional 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 Additional Purchased Shares or the
Additional 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 Xxxxxxxx-Xxxxx 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.
ARTICLE
III
AFFIRMATIVE
COVENANTS OF THE COMPANY
3.1 Applicable Covenants - -
Original Series D Agreement. The Company and Corriente
acknowledge and affirm that the covenants contained in Sections 3.1, 3.2, 3.3,
3.8 and 3.14 of the Original Series D Agreement are applicable to the Additional
Shares being acquired hereunder.
12
3.2 Incorporated Covenants - -
Original Series D Agreement. The Company hereby reaffirms and
makes the covenants contained in Sections 3.4 through and including 3.13 and
contained in Section 3.15 as if such covenants were fully set forth herein, all
of which covenants are applicable to the Additional Shares and all of which are
incorporated by reference herein.
ARTICLE
IV
REPRESENTATIONS,
WARRANTIES AND COVENANTS OF CORRIENTE
Corriente,
represents and warrants to, and covenants with, the Company that:
4.1 Due
Authorization. Corriente
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 Corriente and this Agreement has
been duly executed and delivered and constitutes the valid and binding
obligation of Corriente 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 considered in a proceeding in
equity or at law).
4.2 Purchase Entirely for Own
Account. The
Additional Shares to be purchased by Corriente will be acquired for investment
only for Corriente'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 Corriente has no present intention of selling, granting any
participation in, or otherwise distributing the same. Corriente 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
Additional Shares. Nothing contained herein shall be deemed a representation or
warranty by Corriente to hold the Additional Shares for any period of
time.
4.3 Disclosure of
Information. Corriente
acknowledges that it has received all the information that it has requested
relating to the Company and the purchase of the Additional Shares. Corriente
further represents that it has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the offering of
the Additional Shares. Corriente recognizes that an investment in the Additional
Shares involves a high degree of risk, including the risk of total loss of
Corriente's investment. Corriente has knowledge and experience in the financial
and business matters such that it is capable of evaluating the risks of the
investment in the Additional Shares. The foregoing, however, does not limit or
modify the representations and warranties of the Company in this Agreement or
the right of Corriente to rely thereon.
13
4.4 Accredited Investor.
Corriente 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. Corriente understands that the Additional 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 Additional Shares may be resold without registration
under the Securities Act, only in certain limited circumstances. In this
connection, Corriente 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. Corriente
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 Additional 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."
14
ARTICLE
V
CONSENT
AND WAIVER OF GE
GE hereby
consents to the Company and Corriente entering into the terms of this Agreement
and the consummation of the transactions contemplated hereunder. GE
hereby waives its rights to acquire any of the Additional Purchased Shares and
Additional Warrants pursuant to Section 3.1 of the Original Series D Agreement
and Section 3.1 of that certain Stock and Warrant Subscription Agreement, dated
May 10, 2006, by and among the Company and the signatories thereto.
ARTICLE
VI
SURVIVAL;
INDEMNITY
6.1 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 Corriente of the
Additional Purchased Shares and Additional 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.
6.2 Indemnity. The
Company agrees to indemnify and hold Corriente, 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 Corriente 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.
15
ARTICLE
VII
MISCELLANEOUS
7.1 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.
Xxx
Xxxxxx Xxxxx
Xxxx Xxx,
XX 00000
Attention:
Xxxx Xxxxxx
Fax:
(000) 000-0000
(B) if
to Corriente, at the address 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.
7.2 Changes. This
Agreement may not be modified, waived or amended except pursuant to an
instrument in writing signed by the Company and Corriente; provided however that
Corriente may waive by written consent any provision that is intended for its
benefit
7.3 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.
7.4 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.
7.5 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
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.
16
7.6 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.
7.7 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 Additional
Shares.
7.8 Costs, Expenses and
Taxes. The
Company agrees to pay the reasonable
out-of-pocket costs and expenses of Corriente incurred in connection with the
transactions contemplated by this Agreement, including the reasonable fees and
expenses of Xxxxxx and Xxxxx, LLP, 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 Corriente in connection with
the amendment or enforcement of this Agreement.
7.9 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 Additional Shares), whether so expressed or not; provided, however, that rights
conferred to Corriente may be transferred to a transferee of Additional 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 Corriente which is a limited
liability company or (iii) any purchaser of Additional Shares from Corriente
representing at least five percent (5%) of the Additional Purchased
Shares.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK.]
17
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date
first above written.
NEUROLOGIX,
INC.
| By: | /s/ Xxxx X. Xxxxxxx | ||
| Name: Xxxx X. Xxxxxxx | |||
| Title: President and Chief Executive Officer |
| By: | /s/ Xxxx X. Xxxxxx | ||
| Name: Xxxx X. Xxxxxx | |||
| Title: Chief Financial Officer, Treasurer and Secretary |
CORRIENTE MASTER FUND, L.P.
By Corriente Capital Management, L.P
Its managing general partner
By Corriente Advisors, LLC
Its General Partner
| By: | /s/ Xxxxx Xxxxxxxx | ||
| Name: Xxxxx Xxxxxxxx | |||
| Title: CFO |
FOR PURPOSES OF ARTICLE V:
GENERAL ELECTRIC PENSION TRUST
By: GE Asset Management
Incorporated,
its
Investment Manager
| By: | /s/ Xxxxxx X. Xxxxxx | ||
| Name: Xxxxxx X. Xxxxxx | |||
| Title: Vice President |
