EXHIBIT 10.2
SECURITY AGREEMENT
This Security Agreement (the "AGREEMENT") is made as
of October 23, 2002, by and between INTERLEUKIN GENETICS, INC., a
Delaware corporation, of 135 Beaver Street, 2nd Floor, Waltham,
Massachusetts 02452 ("DEBTOR"), and PYXIS INNOVATIONS INC., a Delaware
corporation, of 7575 Fulton Street East, Ada, Michigan 49355-0001
("SECURED PARTY").
Debtor and Secured Party are parties to a Note
Purchase Agreement, dated as of the date of this Agreement (the "NOTE
PURCHASE AGREEMENT"). Section 2.3 of the Note Purchase Agreement
requires that this Agreement be delivered in connection with the
initial closing of the transactions contemplated by the Note Purchase
Agreement.
The parties agree as follows:
1. GRANT OF SECURITY INTEREST. Debtor grants to Secured Party
a continuing security interest in:
1.1. The United States patents and patent applications set
forth on SCHEDULE A, including all related divisions, continuations,
continuations-in-part, continuing prosecution applications, extensions,
reissues, reexaminations and foreign counterparts;
1.2. All other existing and after-acquired intellectual
property assets of Debtor, including without limitation all ideas,
inventions, discoveries, improvements, know-how, trade secrets,
confidential information, proprietary information and all other
intellectual property as well as all related patents, trademarks,
design patents, utility models, design registrations, industrial
designs, copyrights, trade dress rights, trade secret rights,
intellectual property licenses and all other intellectual property
rights of the Debtor (collectively, "OTHER INTELLECTUAL PROPERTY
ASSETS"), excluding from the Other Intellectual Property Assets only
those intellectual property assets exclusively related to periodontal
disease and sepsis; and
1.3. All existing and after-acquired accounts and general
intangibles of Debtor relating to or arising out of the property and
assets described in Sections 1.1 or 1.2, including without limitation
all licenses; together with (a) all proceeds of the foregoing,
including, without limitation, all cash, checks, drafts, accounts
receivable, chattel paper, leases and instruments that Debtor receives
in connection with any sale, lease, license, exchange or other
disposition of any of the foregoing, and (b) all books, records
(including computer software) and documents that at any time evidence
or relate to any of the foregoing or any proceeds of the foregoing. All
of the foregoing properties and assets of Debtor are referred to
collectively in this Agreement as the "COLLATERAL."
2. INDEBTEDNESS SECURED. The foregoing security interest is
given to secure payment and performance of all obligations and
indebtedness that Debtor now and in the future owes to Secured Party
under this Agreement and the obligations and indebtedness evidenced by
the following instruments, documents, or agreements which Debtor has
signed:
INSTRUMENT, DOCUMENT
OR AGREEMENT DATE AMOUNT
------------ ---- ------
Note Purchase Agreement October 23, 2002
Promissory Note October 23, 2002 $500,000
Promissory Note November 15, 2002 $500,000
Promissory Note December 16, 2002 $500,000
The indebtedness and obligations that this security interest secures
are collectively called the "INDEBTEDNESS."
3. WARRANTIES, REPRESENTATIONS, AND AGREEMENTS. Debtor
warrants and represents to Secured Party, and agrees, as follows:
3.1. Debtor is the exclusive owner of the Collateral, and none
of the Collateral is subject to any lien, security interest,
encumbrance or claim in favor of any third party, and no financing
statement is on file in any public office covering any of the
Collateral.
3.2. All information that Debtor has furnished or in the
future furnishes to Secured Party concerning Debtor or the Collateral,
including, without limitation, all information concerning the
condition, quality or value of the Collateral, is and will be correct
and complete in all material respects.
3.3. Debtor's exact legal name is set forth in the first
paragraph of this Agreement, and Debtor's employer identification
number is 94-3123681. Debtor's address set forth on the first page of
this Agreement is the location of Debtor's sole place of business.
4. AGREEMENTS OF DEBTOR. Debtor agrees that:
4.1. Debtor shall not cause or permit any lien, security
interest or encumbrance to be placed on any Collateral, except in favor
of Secured Party. Unless otherwise agreed in advance by Secured Party
in writing, Debtor shall not license, sell, assign, or transfer any
Collateral or permit the Collateral to be transferred by operation of
law.
4.2. Debtor shall maintain all records concerning the
Collateral at Debtor's address appearing on the first page of this
Agreement. Debtor shall furnish to Secured Party all information
regarding the Collateral that Secured Party from time to time requests
and shall allow Secured Party at any reasonable time to inspect the
Collateral and Debtor's records regarding the Collateral.
4.3. Debtor shall sign, file, record or obtain from third
persons, all subordination agreements and other documents, and shall
take all other actions, that Secured Party considers necessary or
appropriate to perfect, to continue perfection of, or to maintain first
priority of, Secured Party's security interest in the Collateral.
Actions that Secured Party may require Debtor to take under the
preceding sentence include, without limitation, (a) giving Secured
Party possession of Collateral, and (b) obtaining from any third party
who has possession of Collateral an acknowledgment that the third party
holds the Collateral for Secured Party.
4.4. Debtor shall promptly notify Secured Party in writing of
any change in Debtor's name, identity or corporate structure, and of
any change in the location of Debtor's place of business and of the
location of each additional place of business that Debtor establishes.
Debtor shall not make any change in its name or its organizational
structure or in the jurisdiction under the laws of which Debtor is
organized, without Secured Party's prior written consent.
4.5. Debtor shall indemnify Secured Party with respect to all
losses, damages, liabilities and expenses (including attorney fees)
that Secured Party incurs by reason of any failure of Debtor to comply
with any obligation under this Agreement or by reason of any warranty
or representation that Debtor makes to Secured Party in this Agreement
being false in any material respect.
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5. SECURED PARTY'S RIGHT TO PERFORM. If Debtor fails to
perform any obligation of Debtor under this Agreement, then Secured
Party may, without giving notice to or obtaining the consent of Debtor,
perform that obligation on behalf of Debtor. Debtor shall reimburse
Secured Party on demand for any expense that Secured Party incurs in
performing the obligation and shall pay to Secured Party interest on
each expense, from the date the expense was incurred by Secured Party,
at an annual rate equal to the lesser of (a) 15 percent, or (b) the
highest rate to which Debtor could lawfully agree in writing. Secured
Party is not required to perform an obligation that Debtor has failed
to perform. If Secured Party does so, then that shall not be a waiver
of Secured Party's right to declare the Indebtedness immediately due
and payable by reason of Debtor's failure to perform.
6. EVENTS OF DEFAULT AND ACCELERATION. Any part or all of the
Indebtedness shall, at the option of Secured Party, become immediately
due and payable without notice or demand upon the occurrence of an
event of default as specified in the promissory notes described in
Section 2.
7. SECURED PARTY'S RIGHTS AND REMEDIES. Secured Party shall
have all rights and remedies of a secured party under applicable laws.
Without limiting those rights and remedies:
7.1. Upon the occurrence of an event of default: (a) without
notice or demand to Debtor, Secured Party shall be entitled to notify
Debtor's account debtors, obligors and licensees, to make all payments
directly to Secured Party, and Secured Party shall have the right to
take all actions that Secured Party considers necessary or desirable to
collect upon the Collateral, including, without limitation, prosecuting
actions against, or settling or compromising disputes and claims with,
Debtor's account debtors, obligors, and licensees, (b) without notice
or demand to Debtor, Secured Party may receive, open, dispose of and
notify the postal authorities to change the address of, mail directed
to Debtor, and (c) upon Secured Party's demand, Debtor shall
immediately deliver to Secured Party, at the place that Secured Party
designates, all proceeds of the Collateral and all books, records,
agreements, licenses, leases, documents and instruments that evidence
or relate to the Collateral.
7.2. If all or any part of the Indebtedness is not paid at
maturity, then Debtor, upon Secured Party's demand, shall deliver the
Collateral and proceeds of Collateral to Secured Party at the place
that Secured Party designates, and Secured Party may dispose of the
Collateral in any commercially reasonable manner in accordance with
applicable law. Any notification that Secured Party is required to give
to Debtor regarding any sale or other disposition of Collateral shall
be considered reasonable if it is mailed at least ten days before the
sale or other disposition.
7.3. If all or any part of the Indebtedness is not paid at
maturity, then Secured Party shall have the right (but no obligation)
to continue or complete the processing of, or other operations in
connection with, any part of the Collateral, and, for that purpose, to
enter and remain upon or in any land or buildings that are possessed by
Debtor or that Debtor has the right to possess. Debtor shall reimburse
Secured Party on demand for any expense that Secured Party incurs in
connection with those activities and shall pay to Secured Party
interest on each expense, from the date on which Secured Party incurred
the expense, at the rate specified in Section 5.
7.4. Secured Party shall apply the proceeds of any collection
or disposition of Collateral first to expenses that Secured Party
incurs in retaking, holding, preparing for disposition, processing and
disposing of the Collateral and to Secured Party's attorney fees and
expenses, as provided in Section 8, and then to the Indebtedness, and
Debtor shall be liable for any deficiency remaining. Secured Party does
not have any obligation to prepare or process any Collateral for sale
or other disposition. If Secured Party sells any of the Collateral on
credit, then Debtor will be credited only with payments that the
purchaser actually makes and that Secured Party receives and applies to
the unpaid balance of the purchase price of the Collateral. If the
purchaser fails to pay for the Collateral, then Secured Party may again
dispose of the Collateral and apply the proceeds in accordance with
this paragraph.
All rights and remedies of Secured Party shall be cumulative and may be
exercised from time to time.
8. EXPENSES. Debtor shall reimburse Secured Party on demand
for all attorney fees, legal
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expenses and other expenses that Secured Party incurs in protecting and
enforcing its rights under this Agreement. This includes fees and
expenses that Secured Party incurs in trying to take possession of
Collateral from Debtor, a trustee or receiver in bankruptcy or any
other person. Secured Party may apply any proceeds of collection or
disposition of Collateral to Secured Party's reasonable attorney fees,
legal expenses and other expenses.
9. AMENDMENTS AND WAIVERS. A provision of this Agreement may
not be modified or waived except by a written agreement that Secured
Party signs. Secured Party shall continue to have all of its rights
under this Agreement even if it does not fully and promptly exercise
them on all occasions.
10. NOTICES. Any notice to Debtor or to Secured Party shall be
considered to be given if and when delivered pursuant to Section 8.5 of
the Note Purchase Agreement.
11. OTHER. In this Agreement, "MATURITY" of any of the
Indebtedness means the time when that Indebtedness has become due and
payable, for whatever reason (including, for example, acceleration due
to default or bankruptcy). This Agreement shall be governed by, and
interpreted according to, Michigan law.
12. BINDING EFFECT. This Agreement shall be binding upon and
inure to the benefit of Debtor and Secured Party and their respective,
successors and assigns.
SECURED PARTY AND DEBTOR 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 SECURITY AGREEMENT OR THE
INDEBTEDNESS, INCLUDING, WITHOUT LIMITATION, ANY CLAIM THAT IS BASED
UPON, ARISES OUT OF OR RELATES TO ANY ACTION OR INACTION OF SECURED
PARTY IN CONNECTION WITH ANY ACCELERATION OF THE INDEBTEDNESS OR ANY
ENFORCEMENT OF SECURED PARTY'S SECURITY INTEREST IN THE COLLATERAL.
Debtor and Secured Party have signed this Security Agreement as of the
date stated on the first page.
INTERLEUKIN GENETICS, INC.
DEBTOR
By: /s/ Fenel Eloi
-------------------------------
Name: Fenel Eloi
Title: Chief Financial Officer
PYXIS INNOVATIONS INC.
SECURED PARTY
By: /s/ Janice Jackson
-------------------------------
Name: Janice Jackson
Title:
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