STOCK PURCHASE AGREEMENT
INTERLEUKIN GENETICS, INC.
PYXIS INNOVATIONS INC.
Dated as of August 17, 2006
TABLE OF CONTENTS
A - Amendment No. 5 to Note Purchase Agreement
B - Form of Promissory Notes
C - Opinion of Counsel to the Company
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (“ Agreement ”) is made as of the 17th day of August, 2006 by and between INTERLEUKIN GENETICS, INC., a Delaware corporation (the “ Company ”), and Pyxis Innovations Inc., a Delaware corporation (“ Investor ”).
A. The Company wishes to raise an aggregate of approximately $30,000,000 from the issuance of equity securities, debt securities or a combination of the foregoing in order to provide working capital for the Company (the “ Proposed Financing ”);
B. Investor has a right to participate pro rata in the Proposed Financing (subject to certain limitations) under the Stock Purchase Agreement dated March 5, 2003 between the Company and Investor (the “ 2003 Purchase Agreement ”);
C. Investor desires to purchase, and the Company wishes to sell and issue to Investor, upon the terms and conditions stated in this Agreement, the Common Shares (as defined below), representing Investor’s pro rata potion of the Proposed Financing;
D. As a condition to Investor’s willingness to enter into the transactions contemplated hereby, Investor requires, and the Company desires, that the Company offer to its existing stockholders (other than Investor) the opportunity to acquire shares of Common Stock pursuant to a “rights offering” at the same price per share that Investor is acquiring the Common Shares (the “ Rights Offering ”);
E. Investor desires to extend certain credit facilities to the Company to provide the balance of the Proposed Financing subject to reduction by the amount raised in the Rights Offering; and
F. The Company and Investor are executing and delivering this Agreement in reliance upon the exemption from securities registration afforded by Section 4(2) of the 1933 Act (as defined below).
The parties agree as follows:
ARTICLE 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 “Acquisition” means the Company’s acquisition of all or substantially all of the assets of Alan James Group LLC and its affiliates.
1.2 “ Affiliate ” means, with respect to any Person, any other Person that directly or indirectly Controls, is Controlled by, or is under common Control with, such Person.
1.3 “ Agreements ” means this Agreement and Amendment No. 5.
1.4 “ Amendment No. 5 ” means Amendment No. 5 to the Note Purchase Agreement in the form attached as Exhibit A .
1.5 “ Contemplated Transactions ” means those transactions and actions contemplated by the Agreements, including the issuance of the Common Shares and the Conversion Shares.
1.6 “ Common Stock ” means the Company’s common stock, $0.001 par value per share.
1.7 “ 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.
1.8 “ Conversion Shares ” means Common Stock of the Company to be issued upon conversion of any notes issued under Section 2.5 of this Agreement.
1.9 “ Material Adverse Effect ” means a material adverse effect on the condition (financial or otherwise), business, assets, prospects, or results of operations of the Company as a whole.
1.10 “ Note Purchase Agreement ” means the Note Purchase Agreement, dated October 23, 2002, between the Company and Investor, as amended.
1.11 “ Notes ” means any promissory notes issued evidencing loans made under the Loan Commitment.
1.12 “ 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.
1.13 “ Securities ” means the Common Shares, the Notes, and the Conversion Shares.
1.14 “ 1933 Act ” means the Securities Act of 1933, as amended, and the rules and regulations promulgated thereunder.
1.15 “ 1934 Act ” means the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.
ARTICLE 2. PURCHASE AND SALE; CLOSING
2.1 Authorization . The Company has authorized the sale and issuance to the Investor of the Common Shares.
2.2 Sale . Subject to the terms and conditions of this Agreement, Investor agrees to purchase at the Closing, and the Company agrees to sell and issue to Investor at the Closing, 2,750,037 shares of Common Stock (the “ Common Shares ”) for the aggregate purchase price of $15,615,537 ($5.6783 per share) (the “ Purchase Price ”).
2.3 Closing . The purchase and sale of the Common Shares (the “ Closing ”) shall take place at the same place and time as the closing of the Acquisition, or at such other time and place as the Company and Investor mutually agree (the “ Closing Date ”). The Closing shall be conditioned on and concurrent with the closing of the Acquisition. At the Closing, the Company shall deliver to Investor a certificate representing the Common Shares against payment of the Purchase Price by wire transfer.
2.4 Registration Rights . The Company and the Investor agree that the Common Shares and any Conversion Shares shall be additional “Registrable Securities” subject to the Registration Rights
Agreement dated March 5, 2003 between the Company and Investor (the “ Registration Rights Agreement ”), pursuant to which the Company has agreed to provide certain registration rights under the 1933 Act and applicable state securities laws; provided , however , that Investor agrees that the Company shall have no obligation to register any of the Common Shares or Conversion Shares under the Registration Rights Agreement for a period of one year following the Closing.
2.5 Credit Facility.
2.5.1 Available Financing . At any time prior to the second anniversary of the date of this Agreement, upon the request of the Company, Investor shall loan to the Company up to $14,384,463 (in the aggregate), subject to adjustment under Section 2.5.3 (the “ Loan Commitment ”). Loan requests shall be made in increments of not less than $1,000,000.
2.5.2 Note Purchase Agreement . Any loan made pursuant to Section 2.5 of this Agreement shall be made as an additional loan under, and subject to the terms and conditions, including interest rate and maturity, of, the Note Purchase Agreement, as amended. Accordingly, at the Closing, each party will execute and deliver Amendment No. 5 to the Note Purchase Agreement in the form attached as Exhibit A .
2.5.3 Reductions in Available Credit . The aggregate amount of the credit available under Section 2.5.1 of this Agreement shall be reduced dollar-for-dollar by the sum of:
(a) The proceeds of the sale of shares by the Company in the Rights Offering; and
(b) The dollar amount of any loans previously made by Investor under the Loan Commitment.
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Investor that, except as set forth on the Disclosure Schedules to this Agreement:
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 each 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. The Company’s subsidiaries, all of which are wholly owned, are reflected on Schedule 3.1 . Except as set forth on Schedule 3.1 , the Company does not own or control, directly or indirectly, any equity interest in any other Person.
3.2 Authorization; Enforceability . 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 (a) the authorization, execution and delivery of the Agreements, (b) authorization of the performance of all obligations of the Company under the Agreements, and (c) the authorization, issuance, and delivery of the Common Shares and Conversion Shares. On or before the date of this Agreement, the Company’s board of directors, at a meeting duly called and held, has (a) determined that the Agreements and the Contemplated Transactions are fair to, advisable and in the best interests of the Company and the
stockholders of the Company, (b) approved the Agreements and Contemplated Transactions, and (c) acted with due care and satisfied its fiduciary duties to the Company. Section 203 of the Delaware General Corporate Law does not apply to this Agreement or the Contemplated Transactions. No other state takeover, antitakeover, moratorium, fair price, interested stockholder, business combination or similar statute or rule is applicable to the Contemplated Transactions. The Agreements constitute the legal, valid and binding obligations of the Company, enforceable against the Company in accordance with their terms. The Company has duly and validly authorized and reserved 2,533,234Conversion Shares for issuance upon conversion of the Notes, which number is sufficient to permit the conversion of all of such Notes, and such shares will, upon such conversion and issuance, be validly issued, fully paid and non-assessable.
3.3 Capitalization . Set forth on Schedule 3.3 is (a) the amount of the authorized capital stock of the Company; (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; (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 Preferred Stock, Common Stock, Notes, or other securities; and (e) the name of each holder of options and warrants for capital stock, the term of such agreement or instrument, the number of shares for which such options and warrants are exercisable with respect to each holder, along with the applicable vesting schedule, if any, and the exercise price. 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 preemptive rights. There are no contractual or statutory preemptive rights, rights of first refusal, put or call rights or obligations or anti-dilution rights with respect to the issuance, sale or redemption of the Company’s capital stock, other than rights set forth herein or in the Registration Rights Agreement or the 2003 Purchase Agreement. The Company has no obligation to purchase, redeem, or otherwise acquire any of its capital stock or any interests therein. Except as set forth on Schedule 3.3 or as contemplated by this Agreement, 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 and except as contemplated by this Agreement, neither the Company nor any of its subsidiaries is currently in negotiations for the issuance of any equity securities of any kind. Except as set forth on Schedule 3.3 , the Company has no knowledge of any voting agreements, buy-sell agreements, option or right of first purchase agreements or other agreements of any kind among any of the security holders of the Company relating to the securities of the Company held by them. Except as set forth on Schedule 3.3 (which Schedule shall set forth the holders and number of shares for which the Company remains obligated to such registration rights), the Company has not granted any Person other than Investor the right to require the Company to register any securities of the Company under the 1933 Act, whether on a demand basis or in connection with the registration of securities of the Company for its own account or for the account of any other Person.
3.4 Consents . The execution, delivery and performance by the Company of the Agreements and the offer, issuance and sale of the Common Shares and the Conversion Shares 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 the Company undertakes to file within the applicable time periods.
3.5 Delivery of SEC Filings; Business . The Company has provided Investor with copies of the Company’s most recent Annual Report on Form 10-K for the fiscal year ended December 31, 2005, 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 are all of the filings required of the Company pursuant to the 1934 Act for such period. The Company is engaged only 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 the filing of the Company’s most recent Annual Report on Form 10-K or as otherwise identified and described in subsequent reports filed by the Company pursuant to the 1934 Act there has not been: (a) 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; (b) 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; (c) any material damage, destruction or loss, whether or not covered by insurance to any assets or properties of the Company; (d) any waiver by the Company of a valuable right or of a material debt owed to it not in the ordinary course of business; (e) any satisfaction or discharge of any lien, claim or encumbrance or payment of any obligation by the Company, except in the ordinary course of business and which is not material to the assets, properties, financial condition, prospects, 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); (f) any material change or amendment to a material contract or arrangement by which the Company or any of its assets or properties is bound or subject; (g) any material labor difficulties or labor union organizing activities with respect to employees of the Company; (h) any transaction entered into by the Company other than in the ordinary course of business; or (i) any other event or condition of any character that might have a Material Adverse Effect.
3.7 SEC Filings; Private Placements .
3.7.1 1934 Act Filings . As of their respective dates, the SEC Filings complied as t