STOCK AND WARRANT SUBSCRIPTION AGREEMENT
Exhibit
10.1
STOCK
AND WARRANT
SUBSCRIPTION
AGREEMENT
THIS
STOCK AND WARRANT SUBSCRIPTION AGREEMENT (the “Agreement”) is
made as of November 19, 2007 by and between Neurologix, Inc., a Delaware
corporation (the “Company”),
and
the investors set forth on Exhibit A hereto (individually, an
“Investor” and collectively, the “Investors”)
and, solely with respect to Sections 3.2 and 3.3, (i) ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, M.
D.
and (ii) Palisade Private Holdings LLC (“Palisade”) ((i) – (ii)
together, the “Holders”).
WITNESSETH:
WHEREAS,
the Company desires to issue and sell to each of the Investors and each of
the
Investors desires to purchase from the Company the number of shares (the
“Purchased Shares”) of Series D Convertible Preferred Stock,
par value $0.10 per share, of the Company (the “Series D Preferred
Stock”) set forth opposite such Investor’s name on
Exhibit A hereto at a price per share of $35.00 (the
“Purchase Price”) and warrants (the
“Warrants”) substantially
in the form of
Exhibit E attached hereto (the “Warrant
Certificate”) to purchase up to the number of shares of Common
Stock set forth on Exhibit A hereto (such number of shares,
as adjusted in accordance with the Warrants, the “Warrant
Shares”), for the “Total Purchase Price” set forth
opposite such Investor’s name on Exhibit A, pursuant to the
terms of this Agreement; the Warrant Shares, the Purchased Shares, and the
shares of the Company’s common stock, par value $0.001 per share (the
“Common Stock”), issuable upon conversion of the Purchased
Shares, including any shares of Common Stock issued pursuant to Section B(2)
of
the Certificate of Designations to the Restated Certificate of Incorporation
for
the Series D Preferred Stock (the “Conversion
Shares”), are referred to herein together as the
“Shares”;
WHEREAS,
the parties hereto desire to enter into this Agreement for the purpose of
setting forth certain representations, warranties and covenants made by each
to
the other as an inducement to the execution and delivery of this Agreement
and
the conditions precedent to the consummation of the transactions set forth
in
this Agreement.
NOW,
THEREFORE, in consideration of the premises and of the mutual provisions,
agreements and covenants contained herein and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
the
parties hereto agree as follows:
ARTICLE
I
PURCHASE
AND SALE OF THE SHARES AND WARRANTS
1.1 Authorization
and Sale of the Purchased Shares and Warrants. Subject
to the terms and conditions set forth in this Agreement, the Company has
authorized the issuance and sale of up to 628,571 shares of Series D Preferred
Stock and Warrants to purchase up to 4,741,379 Warrant
Shares. In
addition, the Company has authorized the issuance of 163,470 shares of Series
D
Preferred Stock pursuant to Section E(2)(b) of the Certificate of Designations
(the “Series C Certificate”) to the Restated Certificate of
Incorporation.
1.2 Agreement
to Sell and Purchase the Purchased Shares and Warrants. Subject
to the terms and conditions of this Agreement, each Investor, severally and
not
jointly, agrees to purchase at the Closing (as such term is defined in Section
1.3), for the total
purchase price set forth opposite such Investor’s name on
Exhibit A (reflecting the Total Purchase Price), that number
of Purchased Shares and Warrants set forth opposite such Investor’s name on
Exhibit A.
1.3 Delivery
of the Purchased Shares and Warrants at Closing.
(a) Except
as set forth in this Section 1.3, the completion of the purchase and sale of
the
Purchased Shares and Warrants (the “Closing”) shall occur on
November 19, 2007 (the “Closing Date”), at the offices of
▇▇▇▇▇▇ ▇▇▇▇▇▇ Rosenman LLP, ▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇ at
10:00 AM Eastern time, or at such other time and place as may be mutually agreed
upon by the Company and the Investors. At the Closing, the Company
shall deliver the Warrants to the Investors and either
(i) deliver
to the Investors one or more stock certificates representing the number of
Purchased Shares set forth on Exhibit A, each such
certificate to be registered in the name of each Investor or, if so indicated
on
Exhibit A of this Agreement, in the name of a nominee
designated by such Investor; or
(ii) direct
its transfer agent to deliver such certificates to the Investors (at the address
of each Investor set forth on Exhibit A hereto) or to the
Investors’ designated custodian (at such address as is provided to the Company
prior to the Closing Date) within three business days after the Closing
Date.
(b) The
Company’s obligation to issue the Purchased Shares and Warrants to the Investors
shall be subject to the following conditions, any one or more of which may
be
waived by the Company in writing at any time in its sole
discretion:
(i) the
Company shall have received one or more wire transfers of funds to the account
designated by the Company in Exhibit F in the full amount of the
Purchase Price for all of the Purchased Shares and Warrants being purchased
hereunder as set forth on Exhibit A (the “Wire
Transfer”); and
(ii) the
representations and warranties of the Investors set forth herein shall be true
and correct in all respects as of the Closing Date (except for representations
and warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date) and the undertakings
of
the Investors set forth herein shall have been satisfied and fulfilled on or
prior to the Closing Date as set forth herein.
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(c) The
Investors’ obligations to purchase the Purchased Shares and Warrants shall be
subject to the following conditions, any one or more of which may be waived
by
the written consent of a majority-in-interest of the Investors at any
time:
(i) the
representations and warranties of the Company set forth herein shall be true
and
correct as of the Closing Date in all respects (except for representations
and
warranties that speak as of a specific date, which representations and
warranties shall be true and correct as of such date); and
(ii) the
Investors shall have received an opinion of Company counsel substantially in
the
form attached as Exhibit B hereto and such other documents as
shall have been reasonably requested from the Company for the purpose of
enabling them to pass upon the issuance and sale of the Purchased Shares and
Warrants as contemplated herein, or to evidence the accuracy of any
representations and warranties or the satisfaction of any of the conditions
or
agreements contained herein.
(d) Funds
received from each Investor in the Wire Transfer shall be held in escrow by
the
Company for the benefit of the Investor and may only be released to the Company
at such time as the Company has received one or more wire transfers from the
Investors for the Purchase Price for the Purchased Shares and Warrants totaling
at least $15,000,000.
1.4 Right
to Sell Additional Shares of Series D Preferred Stock and
Warrants. Subject to the terms and conditions set forth in this
Agreement, the Company may, at its option, issue and sell up to 200,000 shares
of Series D Preferred Stock and 1,508,621 Warrants (collectively, the
“Additional Shares”) at a second closing (the “Second
Closing”) to be held at such time and place as may be mutually agreed
upon by the Company and the purchasers thereof (the “New
Investors”), but, in no event, later than December
31,
2007. The purchase and sale of the Additional Shares shall be at the
same price and on the same terms and conditions as set forth herein, including
the conditions specified in Section 1.3(b) and 1.3(c) hereof. On the
date of the Second Closing, the Company will deliver to each New Investor
certificates representing the Additional Shares to be purchased by such New
Investor, registered in such names and in such denominations as shall be
requested by such New Investor, against delivery by such New Investor of the
consideration therefor by wire transfer of funds to the account of the Company
(as set forth in Exhibit F). As a condition to the purchase of
the Additional Shares, each New Investor shall enter into a joinder of this
Agreement.
ARTICLE
II
REPRESENTATIONS
AND WARRANTIES OF THE COMPANY
Except
as
disclosed by the Company in a written Disclosure Schedule provided by the
Company to the Investors (the “Disclosure Schedule”), the
Company hereby represents, warrants and covenants to the Investors as of the
Closing Date, as follows:
2.1 Organization. The
Company is a corporation duly organized and validly existing in good standing
under the laws of the State of Delaware. The Company has all
requisite corporate power and authority to own, operate and occupy its
properties and to conduct its business as presently
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conducted
and as described in the documents filed by the Company under the Securities
Exchange Act of 1934, as amended, and the rules and regulations promulgated
thereunder (the “Exchange Act”) since January 1, 2006 through
the date hereof, including, without limitation, its most recent report on Form
10-KSB (the “Exchange Act Documents”), and is registered or
qualified to do business and is in good standing in each jurisdiction in
which the nature of the business conducted by it or the location of the
properties owned or leased by it requires such qualification, except where
the
failure to be so authorized, qualified or in good standing would not be
reasonably likely to have a Material Adverse Effect (as defined
below). No proceeding to which the Company is a party has been
instituted in any such jurisdiction, revoking, limiting or curtailing, or
seeking to revoke, limit or curtail, such power and authority or
qualification. The Company has designated the terms of the Series D
Preferred Stock by filing the Certificate of Designation to the Restated
Certificate of Incorporation in substantially the form set forth in
Exhibit C with the Secretary of State of the State of
Delaware. The Company has also amended the terms of the Series C
Convertible Preferred Stock, par value $0.10 per share (the “Series C
Preferred Stock”), by filing the Series C Certificate in the form set
forth in Exhibit D with the Secretary of State of the State of
Delaware. The Company is an operating company within the meaning of
the Department of Labor Regulation 2510.3-101. The Company has no
subsidiaries as defined in Rule 405 under the Securities Act of 1933, as amended
(the “Securities Act”).
(a) For
purposes of this Agreement:
(i) “Person”
shall mean an individual, corporation, limited liability company, joint venture,
partnership, trust, unincorporated organization, government or any agency or
political subdivision thereof or any other entity that may be treated as a
person under applicable law.
(ii) “Material
Adverse Effect” shall mean any material adverse effect, or any
development that could reasonably be expected to result in a material adverse
effect, on the business or business prospects, properties, assets, operations,
results of operations or condition (financial or otherwise) of the Company
or on
the transactions contemplated hereby or by the Warrants (collectively, the
“Transaction Documents”).
2.2 Due
Authorization and Valid Issuance. The
Company has all requisite corporate power and authority to execute, deliver
and
perform its obligations under the Transaction Documents, and the Transaction
Documents have been duly authorized and validly executed and delivered by the
Company and constitute the legal, valid and binding agreement of the Company
enforceable against the Company in accordance with their respective terms,
except (i) as rights to indemnity and contribution which may be limited by
state
or federal securities laws, or (ii) as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors’ and contracting parties’ rights generally and except as
enforceability may be subject to general principles of equity (regardless of
whether such enforceability is considered in a proceeding in equity or at
law). The issuance, sale and delivery of the Purchased Shares and
Warrants in accordance with this Agreement, and the issuance of the Conversion
Shares issuable upon conversion of the Purchased Shares and the Warrant Shares
issuable upon exercise of the Warrants, have been duly authorized and
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reserved
for issuance, as the case may be, by all necessary corporate action on the
part
of the Company. The Purchased Shares and Warrants when so issued,
sold and delivered against payment therefor in accordance with the provisions
of
this Agreement, and the Conversion Shares and Warrant Shares, when issued
pursuant to the terms of the Purchased Shares and Warrants, will be duly and
validly issued, fully paid and non-assessable.
2.3 Non-Contravention. The
execution and delivery of the Transaction Documents, the issuance and sale
of
the Shares under the Transaction Documents, the fulfillment of the terms of
the
Transaction Documents and the consummation of the transactions contemplated
thereby do not and will not (A) conflict with or constitute a violation of,
or
default (with the passage of time or otherwise) (including any covenant,
restriction or provision with respect to financial ratios or tests or any aspect
of the financial condition or results of operations of the Company) under,
(i)
any bond, debenture, note or other evidence of indebtedness, lease, contract,
indenture, mortgage, deed of trust, loan agreement, joint venture or other
agreement or instrument to which the Company is a party or by which it or its
properties are bound, (ii) the certificate of incorporation, by-laws or other
organizational documents of the Company, or (iii) any law, administrative
regulation, ordinance or order of any court or governmental agency, arbitration
panel or authority or the rules of the OTC Bulletin Board (the “OTC
BB”) applicable to the Company or its properties (collectively, the
“Applicable Law”), except in the case of clauses (i) and (iii)
for any such conflicts, violations or defaults which are not reasonably likely
to have a Material Adverse Effect or (B) result in the creation or imposition
of
any lien, encumbrance, claim, security interest or restriction whatsoever upon
any of the properties or assets of the Company or an acceleration of
indebtedness pursuant to any obligation, agreement or condition contained in
any
bond, debenture, note or any other evidence of indebtedness or any indenture,
mortgage, deed of trust or any other agreement or instrument to which the
Company is a party or by which it is bound or to which any of the property
or
assets of the Company is subject, except to the extent that such acceleration
would not have a Material Adverse Effect. No consent, approval,
authorization or other order of, or registration, qualification or filing with,
any regulatory body, administrative agency, or other governmental body or any
other person is required for the execution and delivery of the Transaction
Documents by the Company, the valid issuance and sale of the Shares to be sold
pursuant to the Transaction Documents and the performance by the Company of
its
other obligations thereunder, other than such as have been made or obtained,
and
except for any post-closing securities filings or notifications required to
be
made under federal or state securities laws.
2.4 Capitalization. The
authorized capital stock of the Company consists of 100,000,000 shares of Common
Stock and 5,000,000 shares of preferred stock, par value $0.10 per share, of
which 650 shares have been designated Series A Preferred Stock and 700,000
shares have been designated Series C Preferred Stock. As of
November 6, 2007, 27,312,390 shares were issued and outstanding, consisting
of
26,892,976 shares of Common Stock, 645 shares of Series A Preferred Stock and
418,769 shares of Series C Preferred Stock. The Company has not
issued any capital stock since the date above other than pursuant to (i)
employee benefit plans disclosed in the Exchange Act Documents, or (ii)
outstanding warrants, options or other securities disclosed in the Exchange
Act
Documents. The outstanding shares of capital stock of the Company
have been duly and validly issued and are fully paid and
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nonassessable,
have been issued in compliance with all federal and state securities laws,
and
were not issued in violation of any preemptive rights or similar rights to
subscribe for or purchase securities. Except as set forth in or
contemplated by the Exchange Act Documents, there are no outstanding rights
(including, without limitation, preemptive rights), warrants or options to
acquire, or instruments convertible into or exchangeable for, any unissued
shares of capital stock or other equity interest in the Company or any contract,
commitment, agreement, understanding or arrangement of any kind to which the
Company is a party or of which the Company has knowledge and relating to the
issuance or sale of any capital stock of the Company, any such convertible
or
exchangeable securities or any such rights, warrants or
options. Without limiting the foregoing and except as provided herein
or as disclosed in the Exchange Act Documents, no preemptive right, co-sale
right, right of first refusal, registration right, or other similar right exists
with respect to the Purchased Shares or Warrants or the issuance and sale
thereof. No further approval or authorization of any stockholder, the
Board of Directors of the Company or others is required for the issuance and
sale of the Purchased Shares or Warrants. Except as disclosed in the
Exchange Act Documents, there are no stockholders agreements, voting agreements
or other similar agreements with respect to the Common Stock to which the
Company is a party or, to the knowledge of the Company, between or among any
of
the Company’s stockholders.
2.5 Legal
Proceedings. There
is no material legal or governmental proceeding pending or, to the knowledge
of
the Company, threatened to which the Company is a party or of which the business
or property of the Company is subject that is not disclosed in the Exchange
Act
Documents.
2.6 No
Violations. The
Company is not (i) in violation of its certificate of incorporation, by-laws,
or
other organizational document; (ii) in violation of any law, administrative
regulation, ordinance or order of any court or governmental agency, arbitration
panel or authority applicable to the Company, which violation, individually
or
in the aggregate, would be reasonably likely to have a Material Adverse Effect;
or (iii) in default (and there exists no condition which, with the passage
of
time or otherwise, would constitute a default) in the performance of any bond,
debenture, note or any other evidence of indebtedness in any indenture,
mortgage, deed of trust or any other agreement or instrument to which the
Company is a party or by which the Company is bound or by which the properties
of the Company is bound, which default, individually or in the aggregate, would
be reasonably likely to have a Material Adverse Effect.
2.7 Governmental
Permits, Etc. With
the exception of the matters which are dealt with separately in Sections 2.1
(Organization), 2.8 (Intellectual Property), 2.12 (Exchange Act
Compliance), and 2.13 (Reporting Status), the Company has all necessary
franchises, licenses, certificates and other authorizations from any foreign,
federal, state or local government or governmental agency, department, or body
that are currently necessary for the operation of the business of the Company
as
currently conducted and as described in the Exchange Act Documents except where
the failure to currently possess could not reasonably be expected to have a
Material Adverse Effect.
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2.8 Intellectual
Property.
(a) The
Company owns or has valid, binding and enforceable licenses or other rights
to
use the patents and patent applications, copyrights, trademarks, trade names,
service marks, service names, and know-how (including trade secrets and other
unpatented proprietary intellectual property rights) that are necessary to
conduct its business in the manner in which it is presently conducted or
contemplated to be conducted, except where the failure to have such ownership,
exercise or right to use would not, individually or in the aggregate, have
a
Material Adverse Effect.
(b) Section
2.8(b) of the Disclosure Schedule lists all (i) patents of the Company, (ii)
owned patent applications of the Company and (iii) license agreements to use
patents or patent applications by the Company. To the knowledge of
the Company, there are no present or threatened infringements of any patents
or
patent applications owned by the Company or licensed to the Company (the
“Company Patents”) by any third party, except, in either case,
for such infringements which would not, individually or in the aggregate, have
a
Material Adverse Effect. The Company has complied with the required
duty of candor and good faith in dealing with the United States Patent and
Trademark Office (the “PTO”) with respect to the Company
Patents, and, to the Company’s knowledge, all individuals to whom the duty of
candor and good faith applies with respect to the Company Patents have complied
with such duty, including the duty to disclose to the PTO all information
believed to be material to the patentability of the Company
Patents. The Company is not aware of any publication, disclosure,
public use, or offer for sale by any of its employees or consultants of subject
matter prior to the filing date of any one of the Company Patents that
negatively impacts the patentability of any claim of such
patent. There are no legal or governmental proceedings pending
relating to Company Patents other than proceedings in the PTO, or
foreign patent office review of pending applications for patents, and, other
than PTO (or patent offices in other jurisdictions) review of pending
applications for patents, to the Company’s knowledge, no such proceedings are
threatened or contemplated by governmental authorities.
(c) To
the Company’s knowledge, there are no pending, nor has there been any notice of
any third-party patents or threatened actions, suits, proceedings, claims or
allegations by others that the Company, including through use of the Company
Patents, is or will be infringing any patent, trade secret, trademark, service
▇▇▇▇, copyright or other proprietary intellectual property rights.
(d) The
Company is not in breach of, and has complied in all respects with all terms
of,
any of the license agreements under which the Company licenses a patent or
patent application that covers technology necessary to conduct or used in the
conduct of the Company’s business in the manner in which it is currently
conducted; except as would not, individually or in the aggregate, have a
Material Adverse Effect.
(e) The
Company is not aware of any obligation of any of its employees under any
contract (including licenses, covenants or commitments of any nature) or other
agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with the use of such employee’s best
efforts to promote the interest of the Company or that would conflict with
the
Company’s business; and to the Company’s knowledge, it is not and will not be
necessary to use any inventions, trade secrets or proprietary information of
any
of its consultants, or its employees (or
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persons
it currently intends to hire) made prior to their employment by the Company,
except for technology that is licensed to or owned by the
Company. All employees of the Company have executed and delivered to
and in favor of the Company an agreement regarding the protection of
confidential and proprietary information and the assignment to the Company
of
all intellectual property rights arising from the services performed for the
Company by such persons.
2.9 Financial
Statements; Solvency; Obligations to Related Parties.
(a) The
financial statements of the Company and the related notes contained in the
Exchange Act Documents present fairly, in accordance with generally accepted
accounting principles, the financial position of the Company and its
subsidiaries as of the dates indicated, and the results of its operations and
cash flows for the periods therein specified consistent with the books and
records of the Company and its subsidiaries except that the unaudited interim
financial statements were or are subject to normal and recurring year-end
adjustments which are not expected to be material in amount except as otherwise
described in the Exchange Act Documents. Such financial statements
(including the related notes) have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis throughout the
periods therein specified, except as may be disclosed in the notes to such
financial statements, or in the case of unaudited statements, as may be
permitted by the Securities and Exchange Commission (the “SEC”)
and except as disclosed in the Exchange Act Documents. The other financial
information contained in the Exchange Act Documents has been prepared on a
basis
consistent with the financial statements of the Company.
(b) Except
as set forth in the Exchange Act Documents, the Company has no knowledge of
any
facts or circumstances which lead it to believe that it will be required to
file
for reorganization or liquidation under the bankruptcy or reorganization laws
of
any jurisdiction, and has no present intention to so file.
(c) Except
as set forth in any Exchange Act Documents, there are no obligations of the
Company to officers, directors, stockholders or employees of the Company other
than:
(i) for
payment of salary for services rendered and for bonus payments;
(ii) reimbursements
for reasonable expenses incurred on behalf of the Company;
(iii) for
other standard employee benefits made generally available to all employees
(including stock option agreements outstanding under any stock option plan
approved by the Board of Directors of the Company);
(iv) obligations
listed in the Company’s financial statements; and
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(v) under
applicable laws.
Except
as
described above or in any Exchange Act Documents, (i) none of the officers,
directors or, to the best of the Company’s knowledge, key employees or
stockholders of the Company or any members of their immediate families, are
indebted to the Company, individually or in the aggregate, in excess of $60,000;
and (ii) none of the officers, directors or, to the best of the
Company’s knowledge, key employees have any direct or indirect ownership
interest in any firm or corporation with which the Company is affiliated or
with
which the Company has a business relationship, or any firm or corporation which
competes with the Company, other than passive investments in publicly traded
companies (representing less than one percent (1%) of such company) which may
compete with the Company. Except as described above or as set forth
in the Exchange Act Documents, no officer, director, or any member of their
immediate families, is, directly or indirectly, interested in any material
contract with the Company and no agreements, understandings or proposed
transactions are contemplated between the Company and any such
person. Except as set forth in any Exchange Act Documents, the
Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation.
2.10 No
Material Adverse Change. Except
as disclosed in the Exchange Act Documents, since January 1, 2007, there has
not
been (i) any material adverse change in the financial condition or results
of
operations of the Company, (ii) any event affecting the Company which has had
or
could reasonably be expected to have a Material Adverse Effect, (iii) any
obligation, direct or contingent, that is material to the Company, incurred
by
the Company, except obligations incurred in the ordinary course of business
or
with respect to the transactions contemplated by the Transaction Documents
or
(iv) any dividend or distribution of any kind declared, paid or made on the
capital stock of the Company.
2.11 Disclosure. The
representations and warranties of the Company contained in this Article II
as of
the date hereof and as of the Closing Date, do not and will not contain any
untrue statement of a material fact or omit to state a material fact required
to
be stated therein or necessary to make the statements therein, in light of
the
circumstances under which they were made, not misleading. The Company
understands and confirms that the Investors will rely on the foregoing
representations in purchasing the Purchased Shares and Warrants.
2.12 Exchange
Act Compliance. The
Company’s Common Stock is registered pursuant to Section 12(g) of the Exchange
Act and is quoted on the OTC BB, and the Company has taken no action designed
to, or likely to have the effect of, terminating the registration of the Common
Stock under the Exchange Act or removal from quotation of the Common Stock
from
the OTC BB, nor has the Company received any notification that the SEC, the
OTC
BB or the National Association of Securities Dealers, Inc. (the
“NASD”) is contemplating terminating such registration or
quotation.
2.13 Reporting
Status. Since
January 1, 2005, the Company has filed or furnished with the SEC in a timely
manner all of the documents that the Company was required to file or furnish
under the Exchange Act. As of the date of filing thereof, each
Exchange Act Document complied in all material respects with the requirements
of
the Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to such Exchange Act Document. None of the Exchange Act
Documents, as of the date filed, contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein or
necessary in order to make the statements therein, in light of the circumstances
under which they were made, not misleading.
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2.14 No
Manipulation of Stock. The
Company has not taken, in violation of applicable law, any action designed
to or
that might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Shares.
2.15 Company
Not an “Investment Company”. The
Company has been advised of the rules and requirements under the Investment
Company Act of 1940, as amended (the “Investment Company
Act”). The Company is not, and immediately after receipt of
payment for the Purchased Shares and Warrants will not be, an “investment
company” within the meaning of the Investment Company Act.
2.16 Embargoed
Person. The
Company has no foreign operations and (i) none of the funds or other assets
of
the Company constitute or shall constitute property of, or shall be beneficially
owned, directly or indirectly, by any person with whom U.S. persons are
restricted from engaging in financial or other transactions under United States
law, including, but not limited to, the International Emergency Economic Powers
Act, 50 U.S.C. § 1701 et seq., The Trading with the Enemy Act, 50 U.S.C. App. 1
et seq., and any executive orders or regulations promulgated under any such
United States laws (each, an “Embargoed Person”), with the
result that the investments evidenced by the Purchased Shares or the Warrants
are or would be in violation of law; (ii) no Embargoed Person has or shall
have
any interest of any nature whatsoever in the Company with the result that the
investments evidenced by the Purchased Shares and Warrants are or would be
in
violation of law; and (iii) none of the funds of the Company are or shall be
derived from any unlawful activity with the result that the investments
evidenced by the Purchased Shares or the Warrants are or would be in violation
of law; provided, that with respect to the covenants contained in this Section
2.16, the Company may assume that the Investors are not Embargoed
Persons. The Company certifies that, to the Company’s knowledge, the
Company has not been designated, and is not owned or controlled, by an Embargoed
Person.
2.17 Accountants. To
the Company’s knowledge, ▇.▇. ▇▇▇▇ LLP and BDO ▇▇▇▇▇▇▇, LLP, which have
expressed their opinions with respect to the financial statements included
in
the Company’s Annual Report on Form 10-KSB for the year ended December 31, 2006,
are independent accountants as required by the Securities Act and the rules
and
regulations promulgated thereunder.
2.18 Contracts. The
contracts filed as exhibits to the Exchange Act Documents are in full force
and
effect on the date hereof, except as to contracts whose term has expired, and
the Company is not in breach of or default under any of such contracts, except
as would not have a Material Adverse Effect. The Company has filed
with the SEC all contracts and agreements required to be filed by the Exchange
Act.
10
2.19 Taxes. The
Company has filed all material federal, state and foreign income and franchise
tax returns due to be filed as of the date hereof, taking into account all
extensions, and has paid or accrued all taxes shown as due thereon, and the
Company has no knowledge of a tax deficiency which has been or might be asserted
or threatened against it which would have a Material Adverse
Effect.
2.20 Transfer
Taxes. On
the Closing Date, all stock transfer or other taxes (other than income taxes)
which are required to be paid in connection with the sale and transfer of the
Purchased Shares and the Warrants to be sold to the Investors hereunder will
be,
or will have been, fully paid or provided for by the Company and all laws
imposing such taxes will be or will have been fully complied with.
2.21 Private
Offering. Assuming
the correctness of the representations and warranties of the Investors set
forth
in Article IV hereof, the offer and sale of the Purchased
Shares and Warrants hereunder, and the issuance of the Warrant Shares pursuant
to the Warrants, shall be exempt from registration under the Securities
Act. The Company has not in the past nor will it hereafter take any
action to sell, offer for sale or solicit offers to buy any securities of the
Company which would bring the offer, issuance or sale of the Purchased Shares
or
the Warrants as contemplated by this Agreement or the Warrant Shares under
the
Warrants, within the provisions of Section 5 of the Securities Act, unless
such
offer, issuance or sale was or shall be within the exemptions of Section 4
of
the Securities Act. Neither the Company nor any person acting on
behalf of the Company has offered or sold any of the Purchased Shares or
Warrants by any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Securities Act).
2.22 Controls
and Procedures. The
Company is in material compliance with all provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
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.
11
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.
12
ARTICLE
III
AFFIRMATIVE
COVENANTS OF THE COMPANY
The
Company hereby covenants as follows:
3.1 Right
of First Refusal.
(a) Right
of First Refusal. The Company shall not issue, sell or exchange,
agree or obligate itself to issue, sell or exchange, or reserve or set aside
for
issuance, sale or exchange, in a transaction not involving a public offering,
any (i) shares of Common Stock, (ii) any other equity security of the Company,
including without limitation, preferred shares, (iii) any debt security of
the
Company (other than debt with no equity feature) including, without limitation,
any debt security which by its terms is convertible into or exchangeable for
any
equity security of the Company, (iv) any security of the Company that is a
combination of debt and equity, or (v) any option, warrant or other right to
subscribe for, purchase or otherwise acquire any such equity security or any
such debt security of the Company, unless in each case the Company shall have
first offered to sell such securities (the “Offered
Securities”) to the Investors (each, an “Offeree” and
collectively, the “Offerees”) as follows: Each
Offeree shall have the right to purchase (x) that portion of the Offered
Securities as the number of shares of Common Stock held by such Offeree
(including shares then issuable upon the exercise on conversion of outstanding
exercisable or convertible equity securities) bears to the number of shares
of
Common Stock held by all Offerees and all holders of the Series C Preferred
Stock (including shares then issuable upon the exercise on conversion of
outstanding exercisable or convertible equity securities) (the “Basic
Amount”), and (y) such additional portion of the Offered Securities as
such Offeree shall indicate it will purchase should the other Offerees subscribe
for less than their Basic Amounts (the “Undersubscription
Amount”), at a price and on such other terms as shall have been
specified by the Company in writing delivered to such Offeree (the
“Offer”), which Offer by its terms shall remain open and
irrevocable for a period of fifteen (15) days from receipt of the
Offer.
(b) Notice
of Acceptance. Notice of each Offeree’s intention to accept, in
whole or in part, any Offer made shall be evidenced by a writing signed by
such
Offeree and delivered to the Company prior to the end of the fifteen (15)-day
period of such Offer, setting forth such of the Offeree’s Basic Amount as such
Offeree elects to purchase and, if such Offeree shall elect to purchase all
of
its Basic Amount, such Undersubscription Amount as such Offeree shall elect
to
purchase (the “Notice of Acceptance”). If the Basic
Amounts subscribed for by all Offerees are less than the total Offered
Securities, then each Offeree who has set forth Undersubscription Amounts in
its
Notice of Acceptance shall be entitled to purchase, in addition to the Basic
Amounts subscribed for, all Undersubscription Amounts it has subscribed for;
provided, however, that should the Undersubscription Amounts
subscribed for exceed the difference between the Offered Securities and the
Basic Amounts subscribed for (the “Available Undersubscription
Amount”), each Offeree who has subscribed for any Undersubscription
Amount shall be entitled to purchase only that portion of the Available
13
Undersubscription
Amount as the Undersubscription Amount subscribed for by such Offeree bears
to
the total Undersubscription Amounts subscribed for by all Offerees, subject
to
rounding by the Company to the extent it reasonably deems
necessary. The purchase by the Offerees of any Offered Securities is
subject in all cases to the preparation, execution and delivery by the Company
and the Offerees of a purchase agreement relating to such Offered Securities
reasonably satisfactory in form and substance to the Company and the Offerees
and their respective counsel.
(c) Conditions
to Acceptances and Purchase.
(i) Permitted
Sales of Refused Securities. In the event that Notices of
Acceptance are not given by the Offerees in respect of all the Offered
Securities, the Company shall have seventy-five (75) days from the expiration
of
the fifteen (15) day period set forth above to close the sale of all or any
part
of such Offered Securities as to which a Notice of Acceptance has not been
given
by the Offerees (the “Refused Securities”) to the Person or
Persons specified in the Offer, but only for cash and otherwise in all respects
upon terms and conditions, including, without limitation, unit price and
interest rates, which are no more favorable, in the aggregate, to the purchasers
or less favorable to the Company than those set forth in the Offer.
(ii) Closing. Upon
the closing, which shall include full payment to the Company for the sale to
such other person or persons of all or less than all the Refused Securities,
the
Offerees shall purchase from the Company and the Company shall sell to the
Offerees the number of Offered Securities specified in the Notices of Acceptance
upon the terms and conditions specified in the Offer.
(d) Further
Sale. In each case, any Offered Securities not purchased by the
Offerees or other Person or Persons in accordance with Section 3.1(c)(ii) above
may not be sold or otherwise disposed of until they are again offered to the
Offerees under the procedures specified in Section 3.1(a)-(c)
above.
(e) Exceptions. The
rights of the Offerees under this Section 3.1 shall not apply to:
(i) any
Common Stock issued as a stock dividend to holders of Common Stock or upon
any
subdivision or combination of shares of Common Stock;
(ii) any
capital stock or derivative thereof granted to an employee, director or
consultant under a stock plan approved by the Board of Directors of the Company
and its stockholders;
(iii) any
securities issued as consideration for the acquisition of another entity by
the
Company by merger or share exchange (whereby the Company owns no less than
fifty-one percent (51%) of the voting power of the surviving entity) or purchase
of substantially all of such entity’s stock or assets, if such acquisition is
approved by the Board of Directors;
(iv) any
securities issued in connection with a strategic partnership, joint venture
or
other similar arrangement, provided that the purpose of such arrangement is
not
primarily the raising of capital and that such arrangement is approved by
two-thirds of the members of the Board of Directors;
14
(v) any
securities issued to a financial institution in connection with a bank loan
or
lease with such financial institution provided that such issuance is approved
by
two-thirds of the members of the Board of Directors; and
(vi) any
securities issuable upon the exercise or conversion of options, warrants or
other convertible or exercisable securities outstanding on the Closing
Date.
3.2 Right
of First Refusal on Dispositions by the Holders.
(a) If
at any time any of the Holders wishes to sell, assign, transfer or otherwise
dispose of or encumber, other than in a transaction involving a public offering,
any equity security of the Company or any option, warrant or other right to
subscribe for, purchase or otherwise acquire any such equity security, whether
presently held or hereafter acquired (collectively, the “Restricted
Shares”) by such Holder, such Holder shall submit a written offer to
sell such Restricted Shares to the Investors on terms and conditions, including
price, not less favorable to the Investors than those on which such Holder
proposes to sell such Restricted Shares to a third party (the
“Offer”). The Offer shall disclose the Restricted
Shares proposed to be sold or transferred, the agreed terms of the sale or
transfer, including price, and any other material facts relating to the sale
or
transfer. Within fifteen (15) days after receipt of the Offer, each
of the Investors shall have the right to purchase, on the same terms and
conditions set forth in the Offer, that portion of the offered Restricted Shares
(the “Offered Restricted Shares”) to be determined in the
manner set forth herein. Each Investor shall have the right to
purchase that number of the Offered Restricted Shares as shall be equal to
the
aggregate Offered Restricted Shares multiplied by a fraction, the numerator
of
which is the number of shares of Common Stock then held by such Investor
(including shares then issuable upon the exercise or conversion of outstanding
exercisable or convertible securities) and the denominator of which is the
aggregate number of shares of such Common Stock then held by all the
Investors and all holders of the Series C Preferred Stock
(including shares then issuable upon the exercise or conversion of outstanding
exercisable or convertible securities). The amount of Offered
Restricted Shares each Investor or Qualified Transferee, as that term is defined
below, is entitled to purchase under this Section 3.2 shall be referred to
as
such Investor’s “Pro Rata Fraction.” Each Investor
shall have the right to transfer his right to any Pro Rata Fraction or part
thereof to any Qualified Transferee. In the event an Investor does
not wish to purchase or to transfer his right to purchase his Pro Rata Fraction,
then any Investors who so elect shall have the right to purchase, on a pro
rata basis with any other Investors who so elect, any Pro Rata Fraction not
purchased by an Investor or Qualified Transferee. Subject to such
proration, each Investor shall have the right to accept the Offer as to all
or
part of the Offered Restricted Shares offered thereby. In the event
that an Investor shall elect to purchase all or part of the Offered Restricted
Shares covered by the Offer, said Investor shall individually communicate in
writing such election to purchase to whichever of the Holders has made the
Offer, which communication shall be delivered by hand or mailed to such Holder
at the address set forth on Exhibit A hereto and shall, when
taken in conjunction with the Offer be
15
deemed
to
constitute a valid, legally binding and enforceable agreement for the sale
and
purchase of the Restricted Shares covered thereby. In the event that
the Investors do not purchase all of the Offered Restricted Shares pursuant
to
and within forty-five (45) days after the Offer, each such agreement to purchase
the Offered Restricted Shares shall be deemed null and void, and such Holder
shall have the right to sell such Shares at any time within ninety (90) days
after the expiration of the Offer, but subject to the provisions of Section
3.3
below. Any such sale shall be at a price not less than the price, and
upon other terms and conditions, if any, not more favorable to the purchaser
than those specified in the Offer. Any Shares not sold within such
ninety (90)-day period shall continue to be subject to the requirements of
a
prior offer and re-sale pursuant to this Section. For purposes of
this Section 3.2, a “Qualified Transferee” of an Investor shall
mean any person (i) who is an Investor, (ii) who is an “affiliated person” of an
Investor, as that term is defined in the Investment Company Act of 1940, or
(iii) who is a member, partner or shareholder of an Investor.
(b) Anything
herein to the contrary notwithstanding, the provisions of this Section 3.2
and
Section 3.3 shall not apply to: (i) any transfer of Restricted Shares
by a Holder by gift or bequest or through inheritance to, or for the benefit
of,
any member or members of his or her family (which shall include any spouse,
lineal ancestor or descendant or sibling) or to a trust, partnership or limited
liability company for the benefit of such members; (ii) any transfer of
Restricted Shares by a Holder to a trust in respect of which he or she serves
as
trustee, provided that the trust instrument governing said trust shall provide
that such Holder, as trustee, shall retain sole and exclusive control over
the
voting and disposition of said shares until the termination of this Agreement;
(iii) any repurchase of shares of Common Stock from officers, employees,
directors or consultants of the Company which are subject to restrictive stock
purchase agreements under which the Company has the option to repurchase such
shares upon the occurrence of certain events, including termination of
employment; (iv) any transfer of Restricted Shares of Palisade to any directors,
managers, officers, shareholders, members, or partners of Palisade or any of
its
affiliates; and (v) any transfer of Restricted Shares in connection with a
merger, consolidation or other similar transaction of the Company whereby the
shareholders of the Company immediately prior to such transaction own less
than
a majority of the surviving entity immediately following such
transaction. In the event of any such transfer, other than pursuant
to subsection (iii), (iv) or (v) above, the transferee of the Restricted Shares
shall hold the Restricted Shares so acquired with all the rights conferred
by,
and subject to all the restrictions imposed by, this Agreement, and as a
condition to such transfer, each such transferee shall execute and deliver
an
instrument of accession in form and substance reasonably satisfactory to the
Investors agreeing to be bound by the provisions of this Agreement.
3.3 Right
of Participation in Sales by Holders. If
at any time any Holder wishes to sell, assign, transfer or otherwise dispose
of
any Restricted Shares owned by such Holder in a transaction which is subject
to
the provisions of Section 3.2 hereof and, subject to the exercise of rights
under such Section 3.2, each Investor shall have the right to require, as a
condition to such sale or disposition, that the Person acquiring Restricted
Shares (the “Purchaser”) purchase from said Investor at the
same price per share and on the same terms and conditions as involved in such
sale or disposition by the Holder the same percentage of shares of Common Stock
(including shares then issuable upon the exercise or conversion of outstanding
exercisable or convertible securities) held by such Investor as such sale or
disposition represents with respect to said Restricted Shares then owned by
the
Holder that is selling. Each Investor wishing so to participate in
any such sale or disposition shall notify the selling Holder of such intention
as soon as practicable after receipt of the Offer made pursuant to Section
3.2,
and in all events within twenty (20) days after receipt thereof, which twenty
(20) day period shall run
16
concurrently
with the fifteen (15) day period set forth in Section 3.2(a). In the
event that an Investor shall elect to participate in such sale or disposition,
said Investor shall individually communicate such election to the selling
Holder, which communication shall be delivered by hand or mailed to such Holder
at the address set forth on Exhibit A hereto. The Holder
and/or each participating Investor shall sell to the Purchaser all, or at the
option of the Purchaser, any part of the Common Stock proposed to be sold by
them at not less than the price and upon other terms and conditions, if any,
not
more favorable to the Purchaser than those originally offered; provided,
however, that any purchase of less than all of such Common Stock by the
Purchaser shall be made from the Holder and/or each participating Investor
based
upon a fraction, the numerator of which is the number of shares of Common Stock
of the Company then owned by the Holder or such participating Investor
(including shares then issuable upon the exercise or conversion of outstanding
exercisable or convertible securities) and the denominator of which is the
aggregate number of shares of such Common Stock held by the Holder and all
of
the participating Investors and all participating holders of the Series C
Preferred Stock (including shares then issuable upon the exercise or conversion
of outstanding exercisable or convertible securities). The selling
Holder shall use his or its reasonable best efforts to obtain the agreement
of
the Purchaser to the participation of the participating Investors in the
contemplated sale, and shall not sell any Restricted Shares to such Purchaser
if
such Purchaser declines to permit the participating Investors to participate
pursuant to the terms of this Section 3.3. The provisions of this
Section 3.3 shall not apply to the sale of any Restricted Shares by a Holder
to
an Investor pursuant to an Offer under Section 3.2. The rights of the parties
under this Section 3.3 and Section 3.2 above are unique and, accordingly, the
Investors shall, in addition to such other remedies as may be available to
any
of them at law or in equity, have the right to enforce their rights hereunder
by
actions for specific performance to the extent permitted by law.
3.4 Further
Assurances. The
Company hereby agrees to take all further actions, execute all further documents
and perform all further things necessary to give effect to the provisions of
this Agreement.
3.5 Removal
of Legends. Upon
the earlier of (i) registration of the Shares for sale pursuant to Section
3.9
or (ii) Rule 144(k) becoming available with respect to an Investor’s Shares, the
Company shall, upon an Investor’s written request (which in the case of clause
(i) shall be accompanied by a written certification by the Investor that (A)
the
Investor has a present intention to dispose of Shares covered by such
Registration Statement pursuant to the plan of distribution included in a
currently available final prospectus related thereto, and (B) the Investor
will
comply with the prospectus delivery requirements applicable to such disposition,
and which, in the case of clause (ii), shall be accompanied by such reasonable
and appropriate customary representations as may be reasonably requested by
the
Company), promptly cause certificates evidencing such Shares to be replaced
with
certificates which do not bear the restrictive legend described in Section
4.7. When the Company is required to cause unlegended certificates to
replace previously issued legended certificates, if unlegended certificates
are
not delivered to an Investor within ten (10) business days of submission by
that
Investor of legended
17
stock
certificate(s) to the Company’s transfer agent together with a representation
letter in customary form, the Company shall be liable to the Investor for a
penalty equal to 1% of the aggregate purchase price of the Shares (or in the
case of the Conversion Shares, the purchase price of the Purchased Shares
pursuant to which such Conversion Shares were issued) evidenced by such
certificate(s) for each thirty (30) day period (or portion thereof) beyond
such
ten (10) days that the unlegended certificates have not been so
delivered.
3.6 Use
of Proceeds.
The
Company shall use the proceeds from the sale of the Purchased Shares and the
Warrants to finance clinical trials for the Corporation’s NLX-P101 and NLX-E201
technologies and for general corporate purposes and working
capital.
3.7 Section
203 Exemption. The
Board of Directors has adopted this Agreement and the transactions contemplated
hereby and thereby in such manner as is sufficient to render the restrictions
of
Section 203 of the Delaware General Corporations Law inapplicable to the
Agreements and all transactions contemplated hereby and thereby.
3.8 Rule
144. The
Company covenants that it will timely file the reports required to be filed
by
it under the Securities Act and the Exchange Act and the rules and regulations
adopted by the SEC thereunder (or, if the Company is not required to file such
reports, it will, upon the request of an Investor if such request is made after
the first anniversary of the Closing Date, make publicly available such
information as necessary to permit sales pursuant to Rule 144 under the
Securities Act), and it will take such further action as any such Investor
may
reasonably request, all to the extent required from time to time to enable
such
Investor to sell Shares purchased hereunder without registration under the
Securities Act within the limitation of the exemptions provided by (a) Rule
144
under the Securities Act, as such Rule may be amended from time to time, or
(b)
any similar rule or regulation hereafter adopted by the SEC. Upon
request, the Company will provide to the Investor written certification of
its
compliance with the provisions of this Section 3.8.
3.9 Intentionally
omitted.
3.10 Issuance
and Quotation. The
Company shall comply with all requirements of the NASD and the SEC with respect
to the issuance of the Shares and the OTC BB with respect to the quotation
of
the Shares on the OTC BB, including without limitation providing a CUSIP number
for all Shares, to the extent required.
3.11 No
Manipulation of Stock. The
Company will not take, in violation of applicable law, any action designed
to or
that might reasonably be expected to cause or result in stabilization or
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Shares.
3.12 Investment
Company. The
Company shall conduct its business in a manner so that it will not become
subject to the Investment Company Act.
3.13 Disclosure. The
Company shall as soon as practicable after the Closing Date issue a press
release disclosing the material terms of the transactions contemplated by the
Transaction Documents (including at least the Purchased Shares and Warrants
sold
and proceeds therefrom).
18
3.14 Transactions
with General Electric Company or its Affiliates. Except
for transactions with Palisade, the Company hereby covenants and agrees that
it
will provide General Electric Pension Trust written notice no less than fifteen
(15) days prior to the occurrence of any of the following events: (i) the
issuance by the Company of any securities (including without limitation any
capital stock or notes, debentures or other indebtedness, whether or not
convertible into or exchangeable for capital stock) of the Company to General
Electric Company or any subsidiary, division or affiliate of General Electric
Company; or (ii) the grant by the Company or any of its subsidiaries of any
options, warrants or other rights to acquire any securities of the Company
or
any of its subsidiaries to General Electric Company or any subsidiary, division
or affiliate of General Electric Company. The Company covenants and
agrees that it shall not become a party-in-interest, as defined in Section
3(14)
of ERISA, with respect to General Electric Pension Trust.
3.15 Status
as an Operating Company. The
Company shall maintain its status as an operating company within the meaning
of
the Department of Labor Regulation 2510.3-101.
ARTICLE
IV
REPRESENTATIONS,
WARRANTIES AND COVENANTS OF THE INVESTORS
Each
Investor, severally and not jointly, represents and warrants to, and covenants
with, the Company that:
4.1 Due
Authorization. The
Investor has all requisite power and authority to execute, deliver and perform
its obligations under this Agreement. The execution of this Agreement
and the consummation of the transactions contemplated hereby have been duly
authorized by all necessary action on the part of such Investor and this
Agreement has been duly executed and delivered and constitutes the valid and
binding obligation of the Investor enforceable in accordance with its terms,
except as rights to indemnity and contribution may be limited by state or
federal securities laws or the public policy underlying such laws, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors’ and contracting
parties’ rights generally and except as enforceability may be subject to general
principles of equity (regardless of whether such enforceability is considered
in
a proceeding in equity or at law).
4.2 Purchase
Entirely for Own Account. The
Shares to be purchased by the Investor will be acquired for investment only
for
the Investor’s own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof in violation of the Securities
Act, and such Investor has no present intention of selling, granting any
participation in, or otherwise distributing the same. Such Investor
does not have any contract, undertaking, agreement, or arrangement with any
person to sell, transfer, or grant participation to any person with respect
to
any of the Shares. Nothing contained herein shall be deemed a
representation or warranty by such Investor to hold the Shares for any period
of
time.
4.3 Disclosure
of Information. The
Investor acknowledges that it has received all the information that it has
requested relating to the Company and the purchase of the Shares. The
Investor further represents that it has had an opportunity to ask questions
and
receive answers from the
19
Company
regarding the terms and conditions of the offering of the Shares. The
Investor recognizes that an investment in the Shares involves a high degree
of
risk, including the risk of total loss of the Investor’s
investment. The Investor has knowledge and experience in the
financial and business matters such that it is capable of evaluating the risks
of the investment in the Shares. The foregoing, however, does not
limit or modify the representations and warranties of the Company in this
Agreement or the right of the Investor to rely thereon.
4.4 Accredited
Investor. The
Investor is an “accredited investor” within the meaning of Rule 501 of
Regulation D promulgated under the Securities Act, as presently in effect and
the Investor is also knowledgeable, sophisticated and experienced in making,
and
is qualified to make decisions with respect to the transactions contemplated
hereby.
4.5 Restricted
Securities. The
Investor understands that the Shares that it is purchasing are characterized
as
“restricted securities” under the federal securities laws inasmuch as they are
being acquired from the Company in a transaction not involving a public
offering, and that under such laws and applicable regulations the Shares may
be
resold without registration under the Securities Act, only in certain limited
circumstances. In this connection, the Investor represents that it is
familiar with Rule 144, as presently in effect, and understands the resale
limitations imposed thereby and by the Securities Act.
4.6 Disclosures
to the Company. The
Investor understands that the Company is relying on the statements contained
herein to establish an exemption from registration under federal and state
securities laws.
4.7 Legends. It
is understood that the certificates evidencing the Shares shall bear a legend,
reading substantially as follows:
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“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.”
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20
4.8 General
Electric Pension Trust. Notwithstanding
anything to the contrary in the Transaction Documents, General Electric Pension
Trust shall not be obligated to sell any Shares to any Person under this
Agreement if such sale would constitute a non-exempt prohibited transaction
under ERISA.
ARTICLE
V
SURVIVAL;
INDEMNITY
5.1 Survival
of Representations, Warranties and Agreements. Notwithstanding
any investigation made by any party to this Agreement, all covenants,
agreements, representations and warranties made by the Company herein shall
survive the execution of this Agreement, the delivery to the Investors of the
Purchased Shares and Warrants being purchased and the payment therefor;
provided, that the representations and warranties of the parties
hereunder shall only survive for a period of one (1) year following the Closing
Date.
5.2 Indemnity.
(a) The
Company agrees to indemnify and hold each Investor, and its respective
directors, managers, officers, shareholders, members, partners, affiliates,
employees, attorneys and agents (each, an “Indemnified
Person”), harmless from and against any and all suits, actions,
proceedings, claims, damages, losses, liabilities and expenses of any kind
or
nature whatsoever (including attorneys’ fees and disbursements and other costs
of investigation or defense, including those incurred upon any appeal) which
may
be instituted or asserted against or incurred by any such Indemnified Person
with respect to any breach (or alleged breach) of any representation, warranty
or covenant of the Company contained in this Agreement or with respect to the
execution, delivery, enforcement, performance and administration of, or in
any
other way arising out of or relating to, this Agreement or the transactions
contemplated by or referred to herein and any actions or failures to act with
respect to any of the foregoing, except to the extent that any such indemnified
liability is finally determined by a court of competent jurisdiction to have
resulted from such Indemnified Person’s gross negligence or willful
misconduct. The Company shall reimburse each Investor for amounts
provided for herein on demand as such expenses are incurred. THE
COMPANY SHALL NOT BE RESPONSIBLE OR LIABLE TO ANY INDEMNIFIED PERSON OR TO
ANY
OTHER PARTY OR TO ANY SUCCESSOR, ASSIGNEE OR THIRD PARTY BENEFICIARY OR ANY
OTHER PERSON ASSERTING CLAIMS DERIVATIVELY THROUGH SUCH PARTY, FOR INDIRECT,
PUNITIVE, EXEMPLARY OR CONSEQUENTIAL DAMAGES WHICH MAY BE ALLEGED AS A RESULT
OF
THEIR INVESTMENT IN THE SHARES UNDER THIS AGREEMENT OR AS A RESULT OF ANY OTHER
TRANSACTION CONTEMPLATED HEREUNDER.
21
ARTICLE
VI
MISCELLANEOUS
6.1 Notices. All
notices, requests, consents and other communications hereunder shall be in
writing, shall be mailed (a) if within the United States by first-class
registered or certified airmail, or nationally recognized overnight express
courier, postage prepaid, or by facsimile, or (b) if delivered from outside
the
United States, by International Federal Express or facsimile, and shall be
deemed given and received (i) if delivered by first-class registered or
certified mail, three business days after so mailed, (ii) if delivered by
nationally recognized overnight carrier, one business day after so mailed,
(iii)
if delivered by International Federal Express, two business days after so
mailed, (iv) if delivered by facsimile, upon electronic confirmation of receipt
and shall be delivered as addressed as follows:
(A)
if to the Company, to:
Neurologix,
Inc.
▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇
▇▇▇,
▇▇ ▇▇▇▇▇
Attention:
▇▇▇▇ ▇▇▇▇▇▇
Fax:
(▇▇▇) ▇▇▇-▇▇▇▇
(B) if
to the Investors, at their respective addresses on Exhibit A hereto,
or at such other address or addresses as may have been furnished to the Company
in writing, with a copy to: counsel set forth on Exhibit A
hereto.
(C) if
to the Holders, at their respective addresses on Exhibit Ahereto, or
at such other address or addresses as may have been furnished to the Company
in
writing.
6.2 Changes. This
Agreement may not be modified, waived or amended except pursuant to an
instrument in writing signed by the Company and at least seventy percent (70%)
in interest of the Investors; provided that any Investor may waive by
written consent any provision that is intended for its benefit;
providedfurther, however, that any such modification,
waiver or amendment that adversely and disproportionately affects any Investor
shall require the prior consent of such Investor. Notwithstanding the
foregoing, any amendment to Sections 3.2 or 3.3 shall also require the prior
written consent of the Holders.
6.3 Headings. The
headings of the various sections of this Agreement have been inserted for
convenience of reference only and shall not be deemed to be part of this
Agreement.
6.4 Severability. In
case any provision contained in this Agreement should be invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of
the
remaining provisions contained herein shall not in any way be affected or
impaired thereby.
6.5 Governing
Law; Consent to Jurisdiction; Waiver of Jury Trial; Currency. This
Agreement shall be governed by, and construed in accordance with, the internal
laws of the State of New York, without regard to the choice of law principles
thereof. Each of the parties hereto irrevocably submits to the
exclusive jurisdiction of the courts of the State of New York located in New
York County and the United States District Court for the Southern District
of
New York for the purpose of any suit, action, proceeding or judgment relating
to
or arising out of this Agreement and the transactions contemplated
22
hereby. Each
of the parties hereto irrevocably consents to the jurisdiction of any such
court
in any such suit, action or proceeding and to the laying of venue in such
court. Each party hereto irrevocably waives any objection to the
laying of venue of any such suit, action or proceeding brought in such courts
and irrevocably waives any claim that any such suit, action or proceeding
brought in any such court has been brought in an inconvenient forum. EACH OF
THE
PARTIES HERETO WAIVES ANY RIGHT TO REQUEST A TRIAL BY JURY IN ANY LITIGATION
WITH RESPECT TO THIS AGREEMENT AND REPRESENTS THAT COUNSEL HAS BEEN CONSULTED
SPECIFICALLY AS TO THIS WAIVER.
6.6 Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall
constitute an original, but all of which, when taken together, shall constitute
but one instrument, and shall become effective when one or more counterparts
have been signed by each party hereto and delivered to the other
parties.
6.7 Prior
Agreements. This
Agreement constitutes the entire agreement between the parties and supersedes
any prior understandings or agreements (including without limitation oral
agreements) concerning the purchase and sale of the Shares.
6.8 Costs,
Expenses and Taxes. The
Company agrees to pay the reasonable out-of-pocket costs and expenses of
the Investors incurred in connection with the transactions contemplated by
this
Agreement, including the reasonable fees and expenses of ▇▇▇▇▇▇▇ Procter LLP,
special counsel for GE Asset Management Incorporated, and the reasonable fees
and expenses of ▇▇▇▇▇▇ and ▇▇▇▇▇, LLP, special counsel for Corriente Master
Fund, L.P., as well as the reasonable fees and out-of-pocket
expenses of legal counsel, independent public accountants, technical
professionals and other outside experts retained by the Investors in connection
with the amendment or enforcement of this Agreement.
6.9 Transfer
of Rights. All
covenants and agreements contained in this Agreement by or on behalf of any
of
the parties hereto shall bind and inure to the benefit of the respective
successors and assigns of the parties hereto (including without limitation
transferees of any Shares), whether so expressed or not; provided,
however, that rights conferred to the Investors may be transferred
to a
transferee of Shares only if the Company has been given written notice thereof,
such transfer complies with the requirements of applicable law and the NASD
and
the SEC and such transferee is (i) a partner or retired partner of any Investor
which is a partnership; (ii) a member or retired member of any Investor which
is
a limited liability company or (iii) any purchaser of Shares from an Investor
representing at least five percent (5%) of the Purchased
Shares. Notwithstanding the foregoing, the rights set forth in
Sections 3.1, 3.2 and 3.3 shall only apply to transferees who purchase at least
fifty percent (50%) of the Shares held by the transferor (on an as-converted
to
Common Stock basis).
6.10 Independent
Nature of Investors’ Obligations and Rights. The
obligations of each Investor under this Agreement are several and not joint
with
the obligations of any other Investor, and no Investor shall be responsible
in
any way for the performance of the obligations of any other
23
Investor
under this Agreement. Nothing contained herein or in any other
document, and no action taken by any Investor pursuant thereto, shall be deemed
to constitute the Investors as a partnership, an association, a joint venture
or
any other kind of entity, or create a presumption that the Investors are in
any
way acting in concert or as a group with respect to such obligations or the
transactions contemplated by this Agreement. Each Investor shall be
entitled to independently protect and enforce its rights, including without
limitation, the rights arising out of this Agreement or out of the other related
documents, and it shall not be necessary for any other Investor to be joined
as
an additional party in any proceeding for such purpose. Each Investor
has been represented by its own separate legal counsel in their review and
negotiation of this Agreement.
[REMAINDER
OF PAGE INTENTIONALLY LEFT BLANK.]
24
IN
WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date
first above written.
NEUROLOGIX,
INC.
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By:
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/s/
▇▇▇▇ ▇▇▇▇▇▇
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|
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Name: ▇▇▇▇
▇▇▇▇▇▇
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Title: Chief
Financial Officer
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THE
INVESTORS
GENERAL
ELECTRIC PENSION TRUST
By:
GE
Asset Management Incorporated, its Investment Manager
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By:
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/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
|
|
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Name: ▇▇▇▇▇▇
▇. ▇▇▇▇▇▇
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Title:
Vice President
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CORRIENTE
MASTER FUND, L.P.
By: Corriente
Capital Management, L.P., its Managing General Partner
By: Corriente
Advisors LLC, its General Partner
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By:
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/s/
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
|
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Name:
▇▇▇▇▇ ▇▇▇▇▇▇▇▇
|
|
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Title: Member
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THE
HOLDERS
[FOR
PURPOSES OF SECTION 3.2 AND SECTION 3.3]:
/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇▇▇
▇.
▇▇▇▇▇▇▇, M.D.
Address:
PALISADE
PRIVATE PARTNERSHIP, L.P.
By:
Palisade Private Holdings, LLC, General Partner
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By:
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/s/
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
|
|
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Name:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
|
|
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Title:
Member
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Address:
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▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇
▇▇▇, ▇▇ ▇▇▇▇▇
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NEUROLOGIX,
INC.
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By:
|
/s/
▇▇▇▇ ▇. ▇▇▇▇▇▇▇
|
|
|
Name: ▇▇▇▇
▇. ▇▇▇▇▇▇▇
|
|
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Title: President
& Chief Executive
Officer
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