EXHIBIT 10.1
NOTE PURCHASE AGREEMENT
THIS NOTE PURCHASE AGREEMENT (this "AGREEMENT") is made as of October 23,
2002, by and between INTERLEUKIN GENETICS, INC., a Delaware corporation (the
"COMPANY"), and PYXIS INNOVATIONS INC., a Delaware corporation ("PYXIS").
RECITALS
A. The Company and Pyxis (or an Affiliate of the Pyxis) are
presently in discussions with the intent of entering into one or more strategic
alliance agreements with respect to the licensing of the Company's intellectual
property and the distribution and marketing of products based on such
intellectual property;
B. The Company and Pyxis are executing and delivering this Agreement
in reliance upon the exemption from securities registration afforded by the
provisions of Regulation D ("REGULATION D"), as promulgated by the U.S.
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended;
C. On each of the date of this Agreement, November 15, 2002, and (at
the option of Pyxis) December 16, 2002, Pyxis wishes to purchase, and the
Company wishes to sell and issue to Pyxis, upon the terms and conditions stated
in this Agreement, a promissory note in a principal amount of $500,000 in the
form attached as EXHIBIT A (each, a "NOTE" and collectively, the "NOTES"); and
D. Contemporaneous with the execution and delivery of this
Agreement, the parties are executing and delivering a Security Agreement, in the
form attached as EXHIBIT B (the "SECURITY AGREEMENT"), pursuant to which the
Company has agreed to grant Pyxis a first secured position in certain
intellectual property assets of the Company.
Accordingly, the parties agree as follows:
1. DEFINITIONS. In addition to those terms defined above and elsewhere in
this Agreement, for the purposes of this Agreement, the following terms shall
have the meanings here set forth:
1.1. "AFFILIATE" means, with respect to any Person, any other Person which
directly or indirectly controls, is controlled by, or is under common control
with, such Person.
1.2. "AGREEMENTS" means this Agreement, the Notes, and the Security
Agreement
1.3. "CONTROL" means the possession, direct or indirect, of the power to
direct or cause the direction of the management and policies of a Person,
whether through the ownership of voting securities, by contract or otherwise.
1.4. "EXEMPT ISSUANCE" means (i) sales of shares of common stock by the
Company upon conversion or exercise of any convertible securities, options, or
warrants outstanding prior to the date hereof; (ii) securities issued to
employees, officers, or directors of the Company pursuant to any stock option,
stock purchase or stock bonus plan, agreement or arrangement as existing on date
hereof or subsequently adopted upon approval of the stockholders of the Company;
(iii) securities issued to universities, provided such securities are issued for
other than primarily equity financing purposes and is limited to an aggregate
value of no more than $5,000,000; (iv) up to $500,000 in the aggregate of the
Company's securities issued to consultants of the Company; (v) securities issued
to vendors, customers, suppliers, consultants, financial advisors or to other
persons in similar commercial situations with the Company if such issuance is
approved by the Board of Directors, provided such securities are issued for
other than primarily equity financing purposes and is limited to an aggregate
value of $500,000; (vi) up to $5,000,000 in the aggregate of common stock issued
pursuant to a private placement and (vii) up to
1,700,000 shares of common stock to stockholders of the Company holding certain
anti-dilution and other rights.
1.5. "INTELLECTUAL PROPERTY" means (i) the Company name, all fictional
business names, trading names, registered and unregistered trademarks, service
marks, and applications; (ii) all patents, patent applications, inventions,
improvements, and discoveries that may be patentable (collectively, "PATENTS");
(iii) all copyrights in both published works and unpublished works; (iv) all
rights in mask works; and (v) all know-how, trade secrets, confidential
information, customer lists, software, technical information, data, process
technology, plans, drawings, and blue prints (collectively, "TRADE SECRETS");
owned, used, or licensed by the Company or any Subsidiary of the Company as
licensee or licensor.
1.6. "MATERIAL ADVERSE EFFECT" means a material adverse effect on the
condition (financial or otherwise), business, assets, or results of operations
of the Company and its subsidiaries as a whole other than the effects of (i) the
delisting, or possible delisting, of the Company's common stock from the Nasdaq
SmallCap Market and (ii) the Company's continuing losses and subsequent
deteriorating financial condition.
1.7. "PERSON" means an individual, corporation, partnership, trust,
business trust, association, joint stock company, joint venture, pool,
syndicate, sole proprietorship, unincorporated organization, governmental
authority or any other form of entity not specifically listed herein.
1.8. "1933 ACT" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.
1.9. "1934 ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
2. INITIAL PURCHASE AND SALE OF THE NOTES. Subject to the terms and
conditions of this Agreement:
2.1. INITIAL PURCHASE. Immediately following the execution of this
Agreement (the "INITIAL CLOSING"), Pyxis hereby agrees to purchase, and the
Company hereby agrees to sell and issue to Pyxis, a Note in the principal amount
of $500,000 at a price equal to 100% of the principal amount of such Note (the
"PURCHASE PRICE").
2.2. SUBSEQUENT PURCHASES. On November 15, 2002, Pyxis hereby agrees to
purchase, and the Company hereby agrees to sell and issue to Pyxis, a Note in
the principal amount of $500,000. On December 16, 2002, Pyxis shall have the
option to purchase, and if such option is exercised, the Company hereby agrees
to sell and issue to Pyxis, a Note in the principal amount of $500,000. The
exercise of such option by Pyxis shall be in its sole discretion, given by
written notice to the Company on or before December 13, 2002. If and until such
option is exercised by Pyxis, the Company shall have no right to require Pyxis
to purchase any Note after November 15, 2002. The closing of the November 15,
2002 purchase and, to the extent applicable, the closing of the December 16,
2002 purchase, are each referred to as a "SUBSEQUENT CLOSING."
2.3. CLOSINGS. The Initial Closing and each Subsequent Closing (each, a
"CLOSING") shall be conducted by the exchange of documents and funds via
overnight courier and wire transfer, in a manner mutually agreed upon by the
parties. At each Closing, subject to Section 2.4 and Section 2.5, the Company
shall deliver to Pyxis, against payment in full of the Purchase Price in
immediately available funds, the Note in the aggregate principal amount of
$500,000. In addition, each party shall deliver those agreements and documents
contemplated by Sections 2.4 and 2.5.
2.4. CLOSING CONDITIONS - COMPANY. The obligations of the Company to
consummate the transactions contemplated by this Agreement at each Closing are
subject to the satisfaction (or waiver by the Company) of the following
conditions:
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2.4.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of Pyxis contained in this Agreement shall be true and correct in all material
respects as of the date of this Agreement and the date of such Closing and if
requested by the Company, Pyxis shall have delivered to the Company an officer's
certificate to such effect;
2.4.2. COVENANTS. Pyxis shall have performed, satisfied, and complied with
all covenants, agreements, and conditions required by this Agreement to be
performed, satisfied, and complied with by it at or before such Closing and if
requested by the Company, Pyxis shall have delivered to the Company an officer's
certificate to such effect; and
2.4.3. INJUNCTION. There shall not have been issued or threatened any
injunction, order, or other decree, or enacted any law or regulation that
prevents the consummation of the transactions contemplated by this Agreement.
2.5. CLOSING CONDITIONS - PYXIS. The obligations of Pyxis to consummate
the transactions contemplated by this Agreement at each Closing are subject to
the satisfaction (or waiver by Pyxis) of the following conditions:
2.5.1. REPRESENTATIONS AND WARRANTIES. The representations and warranties
of the Company contained in this Agreement shall be true and correct in all
material respects as of the date of this Agreement and the date of such Closing
and the Company shall have delivered to Pyxis an officer's certificate to such
effect;
2.5.2. COVENANTS. The Company shall have performed, satisfied, and
complied with all covenants, agreements, and conditions required by this
Agreement to be performed, satisfied, and complied with by it at or before such
Closing and the Company shall have delivered to Pyxis an officer's certificate
to such effect;
2.5.3. INJUNCTION. There shall not have been issued or threatened any
injunction, order, or other decree, or enacted any law or regulation that could
prevent or interfere with the consummation of the transactions contemplated by
this Agreement;
2.5.4. SECURITY AGREEMENT. The Company shall have executed and delivered
the Security Agreement;
2.5.5. DELISTING PENALTIES. The Company shall have received a continuing
waiver from each applicable investor of the Company's obligations to make
payments upon a delisting of its common stock from the Nasdaq SmallCap Market;
2.5.6. CONSENTS. All consents, approvals, authorizations, exemptions, and
waivers from governmental entities that shall be required to enable the Company
to consummate the transactions contemplated hereby shall have been obtained;
2.5.7. MATERIAL ADVERSE CHANGE. Since June 30, 2002, there shall not have
occurred any change or event that has had a Material Adverse Effect on the
Company and there shall not have been any development that is reasonably likely
to have a Material Adverse Effect on the Company, and the Company shall have
delivered to Pyxis an officer's certificate to such effect;
2.5.8. EVENT OF DEFAULT. No event of default (as defined in the Notes)
shall have occurred and be continuing as of the date of such Closing, nor shall
any event of default result from or exist after giving effect to the purchase
and sale of the Note and the consummation of the transactions contemplated by
this Agreement, and the Company shall have delivered to Pyxis an officer's
certificate to such effect;
2.5.9. OPINION. Counsel to the Company shall have delivered to Pyxis,
dated as of such Closing Date, in form reasonably acceptable to Pyxis, with
respect to the matters set forth on EXHIBIT C;
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provided that with respect to the Initial Closing, the opinion of counsel need
not include the opinion in Paragraph 6 set forth on Exhibit C;
2.5.10. AMENDMENT. The Company and Pyxis shall have entered into a second
amendment to the Memorandum of Understating, dated August 28, 2002, in a form
satisfactory to Pyxis;
2.5.11. CORPORATE PROCEEDINGS. The Company shall have provided to Pyxis a
certified copy of all documents or corporate proceedings taken in connection
with this Agreement, including certified copies of resolutions of the Board of
Directors of the Company authorizing the execution, delivery, and performance of
the Agreements and any other documents provided for in this Agreement; and
2.5.12. OTHER DOCUMENTS. The Company shall have delivered to Pyxis such
other documents as reasonably requested by Pyxis, including such agreements,
documents, and instruments necessary or desirable to perfect Pyxis's first
secured position in the Collateral.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company hereby
represents and warrants to Pyxis that:
3.1. ORGANIZATION, GOOD STANDING AND QUALIFICATION. Each of the Company
and its subsidiaries is a corporation duly incorporated, validly existing, and
in good standing under the laws of the jurisdiction of its incorporation and has
all requisite corporate power and authority to carry on its business as now
conducted and own its properties. Each of the Company and its subsidiaries is
duly qualified to do business as a foreign corporation and is in good standing
in Massachusetts and each other jurisdiction in which the conduct of its
business or its ownership or leasing of property makes such qualification or
licensing necessary unless the failure to so qualify could not reasonably be
expected to have a Material Adverse Effect on the Company.
3.2. AUTHORIZATION. The Company has full power and authority and has taken
all requisite action on the part of the Company, its officers, directors, and
stockholders necessary for (i) the authorization, execution, and delivery of the
Agreements, (ii) authorization of the performance of all obligations of the
Company hereunder or thereunder, and (iii) the authorization, issuance, and
delivery of the Notes. The Agreements constitute the legal, valid, and binding
obligations of the Company, enforceable against the Company in accordance with
their terms.
3.3. CAPITALIZATION. Set forth on SCHEDULE 3.3 is (a) the authorized
capital stock of the Company on the date hereof; (b) the number of shares of
capital stock issued and outstanding; (c) the number of shares of capital stock
issuable pursuant to the Company's stock plans; and (d) the number of shares of
capital stock issuable and reserved for issuance pursuant to securities
exercisable for, or convertible into or exchangeable for any shares of capital
stock. Except as set forth on SCHEDULE 3.3, all of the issued and outstanding
shares of the Company's capital stock have been duly authorized and validly
issued and are fully paid, nonassessable and free of statutory or contractual
preemptive rights. Except as set forth on SCHEDULE 3.3, there are no outstanding
warrants, options, convertible securities or other rights, agreements, or
arrangements of any character under which the Company or any of its subsidiaries
is or may be obligated to issue any equity securities of any kind.
3.4. CONSENTS. The execution, delivery, and performance by the Company of
the Agreements and the offer, issuance, and sale of the Notes require no consent
of, action by or in respect of, or filing with, any Person, governmental body,
agency, or official other than filings that have been made pursuant to
applicable state securities laws and post-sale filings pursuant to applicable
state and federal securities laws, which filings the Company undertakes to file
within the applicable time periods.
3.5. DELIVERY OF SEC FILINGS; BUSINESS. The Company has provided Pyxis
with copies of the Company's most recent Annual Report on Form 10-K for the
fiscal year ended December 31, 2001, and all other reports filed by the Company
pursuant to the 1934 Act since the filing of the Annual Report on Form 10-K and
prior to the date hereof (collectively, the "SEC FILINGS"); which reports
represent all filings required of the Company pursuant to the 1934 Act for such
period. The Company is engaged only
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in the business described in the SEC Filings and the SEC Filings contain a
complete and accurate description of the business of the Company.
3.6. NO MATERIAL ADVERSE CHANGE. Since December 31, 2001, or as otherwise
identified and described in subsequent reports filed on or before the date of
this Agreement by the Company pursuant to the 1934 Act and excluding the effect
of the delisting, or possible delisting, of the Company's common stock from the
Nasdaq SmallCap Market and the Company's continuing losses and subsequent
deteriorating financial condition, there has not been: (i) any change in the
consolidated assets, liabilities, financial condition, or operating results of
the Company from that reflected in the financial statements included in the
Company's most recent Quarterly Report on Form 10-Q, except changes in the
ordinary course of business which have not had, in the aggregate, a Material
Adverse Effect; (ii) any declaration or payment of any dividend, or any
authorization or payment of any distribution, on any of the capital stock of the
Company, or any redemption or repurchase of any securities of the Company; (iii)
any material damage, destruction or loss, whether or not covered by insurance to
any assets or properties of the Company or any of its subsidiaries; (iv) any
waiver by the Company of a valuable right or of a material debt owed to it not
in the ordinary course of business; (v) except for the Company's issuance of up
to 1,700,000 shares of common stock in connection with the waiver of certain
anti-dilution and other rights by existing stockholders, any satisfaction or
discharge of any lien, claim or encumbrance or payment of any obligation by the
Company or any of its subsidiaries, except in the ordinary course of business
and which is not material to the assets, properties, financial condition,
operating results or business of the Company taken as a whole (as such business
is presently conducted and as it is proposed to be conducted); (vi) any material
change or amendment to a material contract or arrangement by which the Company
or any of its subsidiaries, assets, or properties is bound or subject; (vii) any
material labor difficulties or labor union organizing activities with respect to
employees of the Company or its subsidiaries; (viii) any transaction entered
into by the Company or any of its subsidiaries other than in the ordinary course
of business; or (ix) any other event or condition of any character that might
have a Material Adverse Effect on the Company.
3.7. SEC FILINGS. As of their respective dates, the SEC Filings complied
as to form in all material respects with the requirements of the 1934 Act and
did not contain at the time they were filed any untrue statement of a material
fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they were
made, not misleading.
3.8. NO CONFLICT, BREACH, VIOLATION OR DEFAULT. The execution, delivery
and performance of the Agreements by the Company and the issuance and sale of
the Notes will not conflict with or result in a breach or violation of any of
the terms and provisions of, or constitute a default under (i) the Company's
Certificate of Incorporation or the Company's Bylaws, both as in effect on the
date hereof (copies of which have been provided to Pyxis before the date
hereof); or (ii) except where it would not have a Material Adverse Effect, (a)
any statute, rule, regulation or order of any governmental agency or body or any
court, domestic or foreign, having jurisdiction over the Company or any of its
properties, or (b) any agreement or instrument to which the Company is a party
or by which the Company is bound or to which any of the properties of the
Company is subject.
3.9. TAX MATTERS. The Company has timely prepared and filed all tax
returns required to have been filed by the Company with all appropriate
governmental agencies and timely paid all taxes owed by it. The charges,
accruals and reserves on the books of the Company in respect of taxes for all
fiscal periods are adequate in all material respects, and there are no material
unpaid assessments against the Company nor, to the knowledge of the Company, any
basis for the assessment of any additional taxes, penalties or interest for any
fiscal period or audits by any federal, state or local taxing authority except
such as which are not material. All taxes and other assessments and levies that
the Company is required to withhold or to collect for payment have been duly
withheld and collected and paid to the proper governmental entity or third party
when due. There are no tax liens or claims pending or threatened against the
Company or any of its respective assets or property. There are no outstanding
tax sharing agreements or other such arrangements between the Company and any
other corporation or entity.
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3.10. TITLE TO PROPERTIES. Except as disclosed in SCHEDULE 3.10, the
Company has good and marketable title to all real properties and all other
properties and assets owned by it, in each case free from liens, encumbrances
and defects that would materially affect the value thereof or materially
interfere with the use made or currently planned to be made thereof by them; and
except as disclosed in the SEC Filings, the Company holds any leased real or
personal property under valid and enforceable leases with no exceptions that
would materially interfere with the use made or currently planned to be made
thereof by them.
3.11. CERTIFICATES, AUTHORITIES AND PERMITS. The Company possesses
adequate certificates, authorities or permits issued by appropriate governmental
agencies or bodies necessary to conduct the business now operated by it and has
not received any notice of proceedings relating to the revocation or
modification of any such certificate, authority or permit that, if determined
adversely to the Company, would individually or in the aggregate have a Material
Adverse Effect.
3.12. INTELLECTUAL PROPERTY. The Intellectual Property assets used in the
Company's business (as described in the Company's SEC Filings) are owned or
licensed by the Company and not any subsidiary of the Company.
3.12.1. AGREEMENTS. SCHEDULE 3.12.1 contains a complete and accurate list
of all contracts relating to Intellectual Property to which the Company is a
party or by which the Company is bound, except for any license implied by the
sale of a product and perpetual, paid-up licenses for commonly available
software programs. There are no outstanding and, to the Company's knowledge, no
threatened disputes or disagreements with respect to any such agreement.
3.12.2. OWNERSHIP; INFRINGEMENT. Except as set forth on SCHEDULE 3.12.2,
the Company is the owner of all right, title, and interest in and to each of the
Intellectual Property assets of the Company, free and clear of all liens,
security interests, charges, encumbrances, equities, and other adverse claims,
and has the right to use without payment to a third party all of the
Intellectual Property assets. To the Company's knowledge, there is no
potentially interfering Intellectual Property of any third party. No
Intellectual Property of the Company is infringed or has been challenged or, to
the Company's knowledge, threatened in any way. None of the products
manufactured and sold, nor any process or know-how used, by the Company
infringes or to the Company's knowledge is alleged to infringe any Intellectual
Property rights of any other Person.
3.12.3. PATENTS. All of the issued Patents are currently in compliance
with formal legal requirements (including payment of filing, examination, and
maintenance fees and proofs of working or use) and are valid and enforceable.
Except as set forth on SCHEDULE 3.12.3, no Patent has been or is now involved in
any interference, reissue, reexamination, or opposition proceeding.
3.12.4. TRADE SECRETS. The Company has taken all reasonable precautions to
protect the secrecy, confidentiality, and value of their Trade Secrets. The
Company has good title and an absolute (but not necessarily exclusive) right to
use the Trade Secrets. The Trade Secrets are not part of the public knowledge or
literature, and, to the Company's knowledge, have not been used, divulged, or
appropriated either for the benefit of any Person or to the detriment of the
Company. No Trade Secret is subject to any adverse claim or has been challenged
or threatened in any way.
3.13. ENVIRONMENTAL MATTERS. The Company is not in violation of any
statute, rule, regulation, decision or order of any governmental agency or body
or any court, domestic or foreign, relating to the use, disposal or release of
hazardous or toxic substances or relating to the protection or restoration of
the environment or human exposure to hazardous or toxic substances
(collectively, "ENVIRONMENTAL LAWS"), does not own or operate any real property
contaminated with any substance that is subject to any Environmental Laws, is
not liable for any off-site disposal or contamination pursuant to any
Environmental Laws, and is not subject to any claim relating to any
Environmental Laws, which violation, contamination, liability or claim would
individually or in the aggregate have a Material Adverse Effect; and the Company
is not aware of any pending investigation that might lead to such a claim. For
the purposes of this Section, the "Company" includes the Company and its
subsidiaries.
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3.14. LITIGATION. Except as disclosed in the SEC Filings or on SCHEDULE
3.14, there are no pending actions, suits or proceedings against or affecting
the Company, its subsidiaries or any of its or their properties that, if
determined adversely to the Company or such subsidiary, would individually or in
the aggregate have a Material Adverse Effect or would materially and adversely
affect the ability of the Company to perform its obligations under this
Agreement, or which are otherwise material in the context of the sale of the
Notes; and to the Company's knowledge, no such actions, suits or proceedings are
threatened or contemplated.
3.15. FINANCIAL STATEMENTS. The financial statements included in each SEC
Filing present fairly and accurately in all material respects the consolidated
financial position of the Company as of the dates shown and its consolidated
results of operations and cash flows for the periods shown, and such financial
statements have been prepared in conformity with generally accepted accounting
principles applied on a consistent basis. Except as set forth in the financial
statements of the Company included in the SEC Filings, to the best of the
Company's knowledge, the Company has no liabilities, contingent or otherwise,
except those which individually or in the aggregate would not have a Material
Adverse Effect.
3.16. BROKERS AND FINDERS. Pyxis shall have no liability or responsibility
for the payment of any commission or finder's fee to any third party in
connection with or resulting from this agreement or the transactions
contemplated by this Agreement by reason of any agreement of or action taken by
the Company.
3.17. REGULATION D. Neither the Company nor any Person acting on its
behalf has conducted any general solicitation or general advertising (as those
terms are used in Regulation D) in connection with the offer or sale of any of
the Notes. Neither the Company nor any of its Affiliates, nor any Person acting
on its or their behalf has, directly or indirectly, made any offers or sales of
any security or solicited any offers to buy any security, under circumstances
that would adversely affect reliance by the Company on Section 4(2) for the
exemption from registration for the transactions contemplated hereby or would
require registration of the Notes under the 1933 Act.
3.18. DISCLOSURES. No representation or warranty made under any Section
hereof contains any untrue statement of a material fact or omits to state a
material fact necessary to make the statements contained herein, in light of the
circumstances under which the statements were made, not misleading.
4. REPRESENTATIONS AND WARRANTIES OF PYXIS. Pyxis hereby represents and
warrants to the Company that:
4.1. ORGANIZATION AND EXISTENCE. Pyxis is a validly existing limited
liability company and has all requisite limited liability company power and
authority to invest in the Notes pursuant to this Agreement.
4.2. AUTHORIZATION. The execution, delivery, and performance by Pyxis of
this Agreement have been duly authorized and this Agreement will constitute the
valid and legally binding obligation of Pyxis, enforceable against Pyxis in
accordance with its terms.
4.3. PURCHASE ENTIRELY FOR OWN ACCOUNT. The Notes to be received by Pyxis
hereunder will be acquired for Pyxis's own account, not as nominee or agent, and
not with a view to the resale or distribution of any part thereof, and Pyxis has
no present intention of selling, granting any participation in, or otherwise
distributing the same. Pyxis is not a registered broker dealer or an entity
engaged in the business of being a broker dealer.
4.4. INVESTMENT EXPERIENCE. Pyxis acknowledges that it can bear the
economic risk and complete loss of its investment in the Notes and has such
knowledge and experience in financial or business matters that it is capable of
evaluating the merits and risks of the investment contemplated hereby.
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4.5. DISCLOSURE OF INFORMATION. Pyxis has had an opportunity to receive
documents related to the Company and to ask questions of and receive answers
from the Company regarding the Company, its business and the terms and
conditions of the offering of the Notes. Pyxis acknowledges receipt of the SEC
Filings.
4.6. RESTRICTED SECURITIES. Pyxis understands that the Notes are
characterized as "restricted securities" under the U.S. 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
such securities may be resold without registration under the 1933 Act only in
certain limited circumstances.
4.7. ACCREDITED INVESTOR. Pyxis is an accredited investor as defined in
Rule 501(a) of Regulation D, as amended, under the 1933 Act. Pyxis did not learn
of the investment in the Notes as a result of any public advertising or general
solicitation.
4.8. BROKERS AND FINDERS. Pyxis has made no commitment for payment of any
commissions or finders' fees to any third party in connection with the
transactions contemplated by this Agreement.
5. AFFIRMATIVE COVENANTS OF THE COMPANY. From the date of this Agreement
and until all the Notes have been fully paid and Pyxis does not have any
obligation to purchase Notes from the Company, except with the prior written
consent of Pyxis, the Company shall:
5.1. USE OF PROCEEDS. Use the proceeds from the sale of the Notes for
ongoing operations, including the payment of salaries and accounts payable in
the ordinary course of business, and research and development.
5.2. INSURANCE. Maintain insurance, including, but not limited to, fire
and extended coverage insurance, workers' compensation insurance and casualty
and liability insurance with responsible insurance companies on its properties
and against the risks and in the amounts that similar businesses in the
Company's industry customarily maintain; upon request, furnish to Pyxis the
details with respect to that insurance and satisfactory evidence of that
insurance coverage.
5.3. TAXES. Pay and discharge, as often as they are due and payable, all
taxes and assessments of whatever nature that are levied or assessed against it
or any of its properties, unless and to the extent only that (i) in a
jurisdiction where payment of taxes and assessments is abated during the period
of any contest, those taxes or assessments are being contested in good faith by
appropriate proceedings; and (ii) the Company shall have set aside on its books
adequate reserves with respect to those taxes and assessments.
5.4. CORPORATE EXISTENCE. Maintain its existence as a corporation in good
standing in the State of Delaware and its qualification in good standing in
Massachusetts and every other jurisdiction in which the failure to be qualified
or authorized to do business could have a Material Adverse Effect; continue to
conduct and operate its business substantially as it presently conducts and
operates it; and comply with all governmental laws, rules, regulations, and
orders that apply to it, the failure to comply with which could have a Material
Adverse Effect.
5.5. OPERATIONS. Act prudently in managing and operating its assets,
properties, business and investments; and keep in good working order and
condition, ordinary wear and tear excepted, all of its assets and properties
that are necessary to the conduct of its business.
5.6. ERISA. (1) Comply in all material respects with the requirements of
ERISA, including, without limitation, all provisions regarding minimum funding
requirements and requirements as to plan termination insurance; (2) upon
request, furnish to Pyxis a copy of each annual report and annual return, with
all schedules and attachments, that ERISA requires the Company to file with the
Department of Labor or the Internal Revenue Service pursuant to ERISA in
connection with each Plan for each Plan year; (3) notify Pyxis immediately of
any fact or circumstance, including, but not limited to, any "reportable event"
(as defined in Title IV of ERISA), that might be grounds for termination of a
Plan by
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the Pension Benefit Guaranty Corporation or for the appointment by the
appropriate United States District Court of a trustee to administer the Plan,
together with a statement, if Pyxis requests it, as to the reason the fact or
circumstance has occurred and the action, if any, that the Company proposes to
take to avoid termination of the Plan; and furnish to Pyxis, upon its request,
any additional information concerning any Plan that Pyxis reasonably requests.
5.7. NOTICE. Notify Pyxis in writing within two business days after the
Company receives any notice or has knowledge of (a) an event of default under
the Notes, or (b) the beginning of any proceeding or investigation by a federal
or state environmental agency against the Company regarding the Company's
compliance with Environmental Laws, or any other judicial or administrative
proceeding or litigation by or against the Company.
6. NEGATIVE COVENANTS OF THE COMPANY. From the date of this Agreement and
until all the Notes have been fully paid and Pyxis does not have any obligation
to purchase Notes from the Company, the Company shall not, without the prior
written consent of Pyxis:
6.1. NO CONFLICTING AGREEMENTS. Take any action, enter into any agreement,
or make any commitment that would conflict or interfere in any material respect
with the obligations to Pyxis under the Agreements.
6.2. LOANS. Make loans or advances to any Person or guarantee, endorse,
assume or otherwise incur or suffer to exist any contingent liability in respect
of any obligation of any other person, firm or corporation, except by the
endorsement of negotiable instruments for deposit or collection in the ordinary
course of business and except for the guaranty of Pyxis Indebtedness.
6.3. CHANGE OF CONTROL. Enter into any merger, consolidation,
reorganization or recapitalization, or purchase or otherwise acquire all, or
substantially all, of the assets, obligations or capital stock of or any other
interest in any Person.
6.4. DIVIDENDS. Pay any dividends, other than dividends payable in shares
of the Company's capital stock, on any shares of any class of its capital stock
or purchase, redeem or otherwise acquire or make other distribution of its
assets, by reduction of capital or otherwise, with respect to any shares of any
class of its capital stock.
6.5. AFFILIATE TRANSACTIONS. Engage in any transaction with any Affiliate
on terms that are less favorable to the Company than the Company could obtain at
the time in a comparable transaction in an arm's-length dealing with a person
other than an Affiliate.
6.6. BUSINESS. Engage, directly or indirectly, in any line of business
other than a line of business in which the Company is presently engaged or a
line of business related to it.
6.7. INDEBTEDNESS. Issue, incur, assume or permit to remain outstanding
any indebtedness, other than the Notes and existing indebtedness as described on
the Company's most recent SEC Filings.
6.8. ERISA. Become a contributing employer with respect to a
multi-employer employee benefit plan within the meaning of Section 3(37)(A) of
ERISA, as amended by Section 302 of the Multi-Employer Pension Plan Amendments
Act of 1980; or establish for any of its employees any employee benefit plan
that has, or may in the future incur, any unfunded past service liability.
6.9. COMPENSATION. Pay direct or indirect compensation (including salaries
and fringe benefits) to its executive officers and directors in amounts no more
than disclosed in the Company's most recent proxy statement.
7. ADDITIONAL COVENANTS AND AGREEMENTS OF THE COMPANY.
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7.1. RIGHT OF PYXIS TO PARTICIPATE IN FUTURE TRANSACTIONS. For a period of
six months following the date of this Agreement, Pyxis will have a right to
participate in future capital raising transactions, excluding an Exempt
Issuance, on the terms and conditions set forth in this Section. During such
period, the Company shall give ten business days advance written notice to Pyxis
prior to any non-public offer or sale of any of the Company's equity securities
or any securities convertible into or exchangeable or exercisable for such
securities by providing to Pyxis a comprehensive term sheet containing all
significant business terms of such a proposed transaction. Pyxis shall have the
right to purchase up to an aggregate of 20% of such securities that are the
subject of such a proposed transaction for the same consideration and on the
same terms and conditions as contemplated for such third-party sale. Pyxis's
rights hereunder must be exercised in writing by Pyxis within ten business days
following receipt of the notice from the Company. If, subsequent to the Company
giving notice to an Pyxis hereunder but prior to Pyxis exercising its right to
participate (or the expiration of the five-day period without response from
Pyxis), the terms and conditions of the proposed third-party sale are changed
from that disclosed in the comprehensive term sheet provided to such Pyxis, the
Company shall be required to provide a new notice to Pyxis and Pyxis shall have
the right, which must be exercised within ten business days of such new notice,
to exercise their rights to purchase the securities on such changed terms and
conditions as provided hereunder. If Pyxis does not exercise its rights under
this Section, or affirmatively decline to engage in the proposed transaction
with the Company, then the Company may proceed with such proposed transaction on
the same terms and conditions as noticed to Pyxis.
7.2. REPORTS. From the date of this Agreement and until all the Notes have
been fully paid and Pyxis does not have any obligation to purchase Notes from
the Company, the Company promptly will furnish to Pyxis the following reports:
7.2.1. MONTHLY REPORTS. Consolidated monthly balance sheets of the Company
as at the end of such period and the related consolidated statements of
operations, stockholders' equity and cash flows for such period and for the
portion of the Company's fiscal year ended on the last day of such month, all in
reasonable detail and certified by a principal financial officer of the Company
to have been prepared in accordance with generally accepted accounting
principles, subject to year-end and audit adjustments.
7.2.2. QUARTERLY REPORTS. The Company's quarterly report on Form 10-Q or,
in the absence of such report, consolidated balance sheets of the Company as at
the end of such period and the related consolidated statements of operations,
stockholders' equity and cash flows for such period and for the portion of the
Company's fiscal year ended on the last day of such quarter, all in reasonable
detail and certified by a principal financial officer of the Company to have
been prepared in accordance with generally accepted accounting principles,
subject to year-end and audit adjustments.
7.2.3. ANNUAL REPORTS. The Company's Form 10-K or, in the absence of a
Form 10-K, consolidated balance sheets of the Company as of the end of such year
and the related consolidated statements of earnings, stockholders' equity and
cash flows for such year, all in reasonable detail and accompanied by the report
on such consolidated financial statements of an independent certified public
accountant selected by the Company and reasonably satisfactory to Pyxis.
7.2.4. SECURITIES FILINGS. Copies of (i) all notices, proxy statements,
financial statements, reports and documents as the Company shall send or make
available generally to its stockholders or to financial analysts, promptly after
providing same to the stockholders, and (ii) all periodic and special reports,
documents and registration statements (other than on Form S-8) which the Company
furnishes to or files, or any officer or director of the Company (in such
person's capacity as such) furnishes to or files with the SEC.
7.2.5. OTHER INFORMATION. Such other information relating to the Company
as from time to time may reasonably be requested by Pyxis provided the Company
produces such information in its ordinary course of business, and further
provided that the Company, solely in its own discretion, determines that such
information is not confidential in nature and disclosure to Pyxis would not be
harmful to the Company.
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7.3. OBSERVATION RIGHTS. From the date of this Agreement and until all the
Notes have been fully paid and Pyxis does not have any obligation to purchase
Notes from the Company, Pyxis shall be entitled to designate one individual
reasonably acceptable to the Company (the "OBSERVER") who shall be entitled to
notice of, to attend and to receive copies of any documentation distributed to
members before, during or after, all meetings (including any action to be taken
by written consent) of the Board of Directors (the "BOARD") of the Company and
all committees thereof; provided however, that the Company reserves the right to
withhold any information and to exclude such representative from any meeting or
portion thereof (so long as the Company notifies the Observer of such
withholding and of any action taken by the Board as a result of such meeting) if
access to such information or attendance at such meeting would, (i) in the
judgment of the Company's outside counsel, adversely affect the attorney-client
privilege between the Company and its counsel or cause the Board to breach its
fiduciary duties, or (ii) in the good faith determination of a majority of the
Board, result in a conflict of interest with the Company due to the Observer's
and Pyxis's relationships with their Affiliates. The Observer shall not be (a)
permitted to vote at any meeting of the Board, or (b) counted for purposes of
determining whether there is sufficient quorum for the Board to conduct its
business. The parties acknowledge and agree that notwithstanding contrary
authority, if any, the Observer shall owe no fiduciary or other duties to the
stockholders of the Company or otherwise have any directorial or other duties or
liabilities to the Company or its stockholders. Pyxis shall designate, and may
replace, the Observer with or without cause in its sole discretion by providing
written notice to the Company at least five business days prior to any such
action taking effect.
The Company acknowledges that Pyxis will likely have, from time to time,
information that may be of interest to the Company ("INFORMATION") regarding a
wide variety of matters including, for example, (1) Pyxis's technologies, plans
and services, and strategies relating thereto, (2) current and future
investments Pyxis has made, may make, may consider or may become aware of with
respect to other companies and other technologies, products and services that
may be competitive with the Company's, and (3) developments with respect to the
technologies, products and services, and plans and strategies relating thereto,
of other companies, including, without limitation, companies that may be
competitive with the Company. The Company recognizes that a portion of such
Information may be of interest to the Company. Such Information may or may not
be known by the Observer. The Company, as a material part of the consideration
for this Agreement, agrees that Pyxis and its Observer shall have no duty to
disclose any Information to the Company or permit the Company to participate in
any projects or investments based on any Information, or to otherwise take
advantage of any opportunity that may be of interest to the Company if it were
aware of such Information, and hereby waives, to the extent permitted by law,
any claim based on the corporate opportunity doctrine or otherwise that could
limit Pyxis's ability to pursue opportunities based on such Information or that
would require Pyxis or the Observer to disclose any such Information to the
Company or offer any opportunity relating thereto to the Company.
7.4. NEGOTIATION RIGHTS. For a period of six months from the date of this
Agreement, subject only to the fiduciary duties of the Board (as determined in
the judgment of the Company's outside counsel), prior to entering into
negotiations regarding or otherwise considering a proposal that would be likely
to result in a change of control of the Company, the Company will provide Pyxis
with a two week period in which to exclusively evaluate a strategic transaction
between the Company and Pyxis or one of its Affiliates.
8. MISCELLANEOUS.
8.1. SURVIVAL. All representations, warranties, covenants and agreements
contained in this Agreement shall be deemed to be representations, warranties,
covenants and agreements as of the date hereof and shall survive the execution
and delivery of this Agreement. No investigation by or knowledge of a party or
its representatives, before or after the date of this Agreement, will affect in
any manner the representations, warranties, covenants or agreements of another
party set forth in this Agreement (or in any document to be delivered in
connection with the consummation of the transactions contemplated by this
Agreement) or the rights to rely thereon, and such representations, warranties,
covenants and agreements will survive any such investigation.
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8.2. PRESS RELEASES. Any press release or other publicity concerning this
Agreement or the transactions contemplated by this Agreement shall be submitted
to Pyxis for comment at least two business days prior to issuance, unless the
release is required to be issued within a shorter period of time by law or
pursuant to the rules of a national securities exchange.
8.3. SUCCESSORS AND ASSIGNS. This Agreement may not be assigned by a party
hereto without the prior written consent of the other party hereto, except that
without the prior written consent of the Company, but after notice duly given,
an Pyxis may assign its rights and delegate its duties hereunder in whole or in
part to an Affiliate or to a third party acquiring some portion or all of its
Notes in a private transaction, and without the prior written consent of Pyxis,
but after notice duly given and in compliance with this Agreement, the Company
may assign its rights and delegate its duties hereunder to any
successor-in-interest corporation in the event of a merger or consolidation of
the Company with or into another corporation, or any merger or consolidation of
another corporation with or into the Company that results directly or indirectly
in an aggregate change in the ownership or control of more than 50% of the
voting rights of the equity securities of the Company, or the sale of all or
substantially all of the Company's assets. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
permitted successors and assigns of the parties. Nothing in this Agreement,
express or implied, is intended to confer upon any party other than the parties
hereto or their respective successors and assigns any rights, remedies,
obligations, or liabilities under or by reason of this Agreement, except as
expressly provided in this Agreement.
8.4. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8.5. NOTICES. Unless otherwise provided, any notice required or permitted
under this Agreement shall be given in writing and shall be deemed effectively
given only upon delivery to each party to be notified by (i) personal delivery,
(ii) telex or telecopier, upon receipt of confirmation of complete transmittal,
or (iii) an internationally recognized overnight air courier, addressed to the
party to be notified at the address as follows, or at such other address as such
party may designate by ten days' advance written notice to the other party:
If to the Company:
Interleukin Genetics, Inc.
135 Beaver Street 2nd Floor
Waltham, MA 02452
Attn: Fenel Eloi
Fax: 781/398-0720
If to Pyxis:
Pyxis Innovations Inc.
7575 Fulton Street East
Ada, Michigan 49355-0001
Attn: Thomas R. Curran, Jr.
Fax: 616/787-7813
8.6. EXPENSES. The parties shall pay their own costs and expenses in
connection with this Agreement.
8.7. AMENDMENTS AND WAIVERS. Any term of this Agreement may be amended and
the observance of any term of this Agreement may be waived (either generally or
in a particular instance and either retroactively or prospectively), only with
the written consent of the Company and Pyxis.
8.8. SEVERABILITY. If one or more provisions of this Agreement are held to
be unenforceable under applicable law, such provision shall be excluded from
this Agreement and the balance of this
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Agreement shall be interpreted as if such provision were so excluded and shall
be enforceable in accordance with its terms.
8.9. ENTIRE AGREEMENT. This Agreement, including its exhibits and
schedules, and the agreements referenced herein, constitute the entire agreement
among the parties hereof with respect to the subject matter hereof and thereof
and supersede all prior agreements and understandings, both oral and written,
between the parties with respect to the subject matter hereof and thereof.
8.10. FURTHER ASSURANCES. The parties shall execute and deliver all such
further instruments and documents and take all such other actions as may
reasonably be required to carry out the transactions contemplated hereby and to
evidence the fulfillment of the agreements herein contained.
8.11. APPLICABLE LAW. This Agreement shall be governed by, and construed
in accordance with, the laws of the State of Michigan, without regard to
principles of conflicts of laws.
8.12. THE COMPANY AND PYXIS EACH IRREVOCABLY AND UNCONDITIONALLY WAIVES
ITS RIGHT TO A TRIAL BY JURY IN ANY ACTION, INCLUDING ANY CLAIM, COUNTERCLAIM,
CROSS-CLAIM OR THIRD-PARTY CLAIM ("CLAIM"), THAT IS BASED UPON, ARISES OUT OF OR
RELATES TO THIS AGREEMENT.
* * *
IN WITNESS WHEREOF, the parties have executed this Note Purchase Agreement
as of the date first above written.
INTERLEUKIN GENETICS, INC.
By: /s/ Fenel Eloi
-----------------------------------
Name: Fenel Eloi
Title: Chief Financial Officer
PYXIS INNOVATIONS INC.
By: /s/ Janice Jackson
-------------------------------
Name: Janice Jackson
Title:
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