Exhibit 10.21

 

EXECUTION VERSION

 

SUBSCRIPTION AGREEMENT

 

Subject to the terms and conditions set forth in this Subscription Agreement,
dated as of April 17, 2017 (this “Agreement”), each of the undersigned (each, a
“Subscriber” and collectively, the “Subscribers”) hereby offers to purchase from
Interleukin Genetics, a Delaware corporation (the “Company”), a subordinated
convertible promissory note in an original principal amount equal to the “Note
Principal Amount” set forth with its signature on the signature page hereto, the
form of which is attached as Exhibit A hereto, (the “Note” and, collectively,
the “Notes”) and a warrant, substantially in the form of Exhibit B hereto (the
“Warrant” and, collectively, the “Warrants”), representing the right to purchase
shares of the Company’s common stock, par value $0.001 per share (“Common
Stock”), exercisable as set forth therein. The Note is convertible into shares
of Common Stock (the “Conversion Shares,” and together with the Notes, the
Warrants and the Warrant Shares (as defined below), the “Securities”) at a
conversion price and on the other terms set forth therein. The Notes shall be
issued in the aggregate principal amount of not more than $1,000,000.00.

 

The Securities being subscribed for pursuant to this Agreement have not been
registered under the Securities Act of 1933, as amended (the “Securities Act”). 
The offering of the Notes and the Warrants is being made to “accredited
investors,” as defined in Regulation D under the Securities Act in reliance upon
the exemption from securities registration afforded by Section 4(a)(2) of the
Securities Act and Rule 506 of Regulation D.

 

The closing of the transactions contemplated by this Agreement (the “Closing”)
shall take place at the offices of Mintz, Levin, Cohn, Ferris, Glovsky and
Popeo, P.C. at One Financial Center, Boston, Massachusetts, (or via electronic
transmission) at 9:00 a.m., Boston time, on the date hereof (the “Closing
Date”). The Closing will not occur unless the conditions set forth in Sections 6
and 7 shall have been satisfied.

 

1.Subscription. Each Subscriber hereby subscribes to purchase the Note and the
Warrants, for the aggregate “Note Principal Amount” set forth with its signature
on the signature page hereto, subject to the terms and conditions of this
Agreement and on the basis of the representations, warranties, covenants and
agreements contained herein.

 

2.Representations and Warranties of the Company. The Company hereby represents
and warrants to the Subscribers, as of the Closing Date (unless otherwise
specified), the following:

 

a.Organization and Qualification. The Company is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Delaware, and has the requisite corporate power to own its properties and to
carry on its business as now being conducted. The Company is duly qualified as a
foreign corporation to do business and is in good standing in every jurisdiction
in which the nature of the business conducted by it makes such qualification
necessary, except to the extent that the failure to be so qualified or be in
good standing would not have a material adverse effect on the assets, business,
financial condition or results of operations of the Company (a “Material Adverse
Effect”).

 

   

 

 

b.Authorization, Enforcement, Compliance with Other Instruments. (i) The Company
has the requisite corporate power and authority to enter into and perform its
obligations under this Agreement, the Notes, and the Warrants and each of the
other agreements and documents that are exhibits hereto or thereto or are
contemplated hereby or thereby or necessary or desirable to effect the
transactions contemplated hereby or thereby (the “Transaction Documents”) and to
issue the Notes and the Warrants, and the Conversion Shares and the shares of
Common Stock issuable upon exercise of the Warrants (the “Warrant Shares”), in
accordance with the terms hereof and thereof, (ii) the execution and delivery by
the Company of each of the Transaction Documents and the consummation by it of
the transactions contemplated hereby and thereby, including, without limitation,
the issuance of the Notes, the Conversion Shares, the Warrants and the Warrant
Shares, have been, or will be at the time of execution of such Transaction
Document, duly authorized by the Company’s Board of Directors, and no further
consent or authorization is, or will be at the time of execution of such
Transaction Document, required by the Company, its respective Board of Directors
or its stockholders, (iii) each of the Transaction Documents will be duly
executed and delivered by the Company, (iv) the Transaction Documents when
executed and delivered by the Company and each other party thereto will
constitute the valid and binding obligations of the Company enforceable against
the Company in accordance with their terms, except as may be limited by: (A)
judicial principles limiting the availability of specific performance,
injunctive relief, and other equitable remedies or (B) bankruptcy, insolvency,
reorganization, moratorium or other similar laws now or hereafter in effect
generally relating to or affecting creditors’ rights.

 

c.Capitalization.  The authorized capital stock of the Company consists of
450,000,000 shares of Common Stock and 6,000,000 shares of convertible preferred
stock, par value of $0.001 per share (the “Preferred Stock”). As of the date
hereof, the Company has 229,471,392 shares of Common Stock and no shares of
Preferred Stock issued and outstanding. Except as set forth in the reports,
schedules, forms, statements and other documents filed by the Company with the
Securities and Exchange Commission (the “SEC”) on or prior to the date hereof
(the “SEC Reports”), no shares of capital stock of the Company will be subject
to preemptive rights or any other similar rights or any liens or encumbrances
suffered or permitted by the Company, (ii) except as set forth in the SEC
Reports there will be no outstanding options, warrants, scrip, rights to
subscribe to, calls or commitments of any character whatsoever relating to, or
securities or rights convertible into, any shares of capital stock of the
Company, or contracts, commitments, understandings or arrangements by which the
Company is or may become bound to issue additional shares of capital stock of
the Company, (iii) there will be no outstanding debt securities of the Company
other than the Notes and the indebtedness as set forth in the SEC Reports, (iv)
other than as set forth in the SEC Reports, there will be no agreements or
arrangements under which the Company is obligated to register the sale of any of
their securities under the Securities Act, (v) there will be no outstanding
registration statements of the Company, and there will be no outstanding comment
letters from the SEC or any other regulatory agency and (vi) except as may be
provided in the Transaction Documents, no co-sale right, right of first refusal
or other similar right will exist with respect to the Notes or the Warrants (or
will exist with respect to the Conversion Shares or the Warrant Shares) or the
issuance and sale thereof. Upon request, the Company will make available to the
Subscribers true and correct copies of the Company’s Certificate of
Incorporation, as amended and in effect on the date hereof (the “Certificate of
Incorporation”), and the Company’s By-laws, as amended and in effect on the date
hereof (the “By-laws”).

 

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d.Issuance of Conversion Shares and Warrant Shares. Upon issuance of the
Conversion Shares, in accordance with the terms of the Notes, the Conversion
Shares will be duly issued, fully paid and nonassessable, and will be free from
all taxes, liens and charges with respect to the issue thereof. Upon issuance of
the Warrant Shares upon exercise of the Warrants, against payment therefor and
in accordance with the terms of the Warrants, the Warrant Shares will be duly
issued, fully paid and nonassessable, and will be free from all taxes, liens and
charges with respect to the issue thereof.

 

e.No Conflicts.  The execution, delivery and performance of each of the
Transaction Documents by the Company, and the consummation by the Company of the
transactions contemplated hereby and thereby will not (i) result in a violation
of the Certificate of Incorporation or the By-laws or (ii) violate or conflict
with, or result in a breach of any provision of, or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any rights of termination, amendment, acceleration or
cancellation of, any agreement, indenture or instrument to which the Company is
a party, except for those which would not reasonably be expected to have a
Material Adverse Effect, or (iii) result in a violation of any law, rule,
regulation, order, judgment or decree (including U.S. federal and state
securities laws and regulations) applicable to the Company or by which any
property or asset of the Company is bound or affected except for those which
could not reasonably be expected to have a Material Adverse Effect. Except those
which could not reasonably be expected to have a Material Adverse Effect, the
Company is not in violation of any term of or in default under its Certificate
of Incorporation or By-laws. Except those which could not reasonably be expected
to have a Material Adverse Effect, the Company is not in violation of any term
of or in default under any material contract, agreement, mortgage, indebtedness,
indenture, instrument, judgment, decree or order or any statute, rule or
regulation applicable to the Company. Except as specifically contemplated by
this Agreement and as required under the Securities Act and any applicable state
securities laws, the Company is not required to obtain any consent,
authorization or order of, or make any filing or registration with, any court or
governmental agency in order for it to execute, deliver or perform any of its
obligations under or contemplated by this Agreement or the other Transaction
Documents in accordance with the terms hereof or thereof. Neither the execution
and delivery by the Company of the Transaction Documents, nor the consummation
by the Company of the transactions contemplated hereby or thereby, will require
any notice, consent or waiver under any contract or instrument to which the
Company is a party or by which the Company is bound or to which any of its
assets is subject, except for any notice, consent or waiver the absence of which
would not reasonably be expected, individually or in the aggregate, to have a
Material Adverse Effect and would not adversely affect the consummation of the
transactions contemplated hereby or thereby, other than any such notice, consent
or waiver that has been properly made or obtained prior to the date of this
Agreement.

 

f.Absence of Litigation. Except as set forth in the SEC Reports, there is no
action, suit, claim, inquiry, notice of violation, proceeding (including any
partial proceeding such as a deposition) or investigation before or by any
court, public board, governmental or administrative agency, self-regulatory
organization, arbitrator, regulatory authority, stock market, stock exchange or
trading facility (an “Action”) now pending or, to the knowledge of the Company,
threatened, against or affecting the Company, wherein an unfavorable decision,
ruling or finding would (i) adversely affect the validity or enforceability of,
or the authority or ability of the Company to perform its obligations under,
this Agreement or any of the other Transaction Documents, or (ii) have a
Material Adverse Effect.

 

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g.No General Solicitation. Neither the Company, nor any of its “affiliates” as
defined in Rule 144 under the Securities Act), nor, to the knowledge of the
Company, any person acting on its or their behalf, has engaged in any form of
general solicitation or general advertising (within the meaning of Regulation D)
in connection with the offer or sale of the Notes and Warrants.

 

h.Permits. The Company has all authorizations, approvals, clearances, licenses,
permits, certificates or exemptions (including manufacturing approvals and
authorizations, pricing and reimbursement approvals, labeling approvals,
registration notifications or their foreign equivalent) issued by any regulatory
authority or governmental agency (collectively, “Permits”) required to conduct
their respective businesses as currently conducted except to the extent that the
failure to have such Permits would not have a Material Adverse Effect.

 

i.Title. Except as set forth in the SEC Reports, the Company has good and
marketable title to all of its real and personal property and assets, free and
clear of any material restriction, mortgage, deed of trust, pledge, lien,
security interest or other charge, claim or encumbrance which would have a
Material Adverse Effect.

 

j.Financial Statements. The financial statements of the Company included in the
SEC Reports comply in all material respects with applicable accounting
requirements and the rules and regulations of the SEC with respect thereto as in
effect at the time of filing. Such financial statements have been prepared in
accordance with GAAP applied on a consistent basis during the periods involved,
except as may be otherwise specified in such financial statements or the notes
thereto and except that unaudited financial statements may not contain all
footnotes required by GAAP, and fairly present in all material respects the
financial position of the Company as of and for the dates thereof and the
results of operations and cash flows for the periods then ended, subject, in the
case of unaudited statements, to normal, year-end audit adjustments. The pro
forma financial information and the related notes, if any, included in the SEC
Reports have been properly compiled and prepared in accordance with the
applicable requirements of the Securities Act and the regulations promulgated
thereunder and fairly present in all material respects the information shown
therein, and the assumptions used in the preparation thereof are reasonable and
the adjustments used therein are appropriate to give effect to the transactions
and circumstances referred to therein.

 

k.SEC Reports. The Company has filed all reports, schedules, forms, statements
and other documents required to be filed by the Company under the Securities
Exchange Act of 1934, as amended (the “Exchange Act”), including pursuant to
Section 13(a) or 15(d) thereof, for the two (2) years preceding the date hereof
(or such shorter period as the Company was required by law or regulation to file
such material). The SEC Reports taken as a whole do not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein (in the case of SEC Reports) or necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading.

 

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l.Brokers’ Fees. The Company does not have any liability or obligation to pay
any fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement.

 

m.Off-Balance Sheet Arrangements. There is no transaction, arrangement, or other
relationship between the Company and an unconsolidated or other off-balance
sheet entity that is required to be disclosed by the Company in its SEC Reports
and is not so disclosed or that otherwise would have a Material Adverse Effect.

 

n.Investment Company. The Company is not required to be registered as, and is
not an affiliate of, and immediately following the Closing will not be required
to register as, an “investment company” within the meaning of the Investment
Company Act of 1940, as amended.

 

3.Representations, Warranties and Agreements of the Subscribers. Each Subscriber
represents and warrants to, and agrees with, the Company as follows:

 

a.Such Subscriber, its advisers, if any, and its designated representatives, if
any, have the knowledge and experience in financial and business matters
necessary to evaluate the merits and risks of its prospective investment in the
Company, and have carefully reviewed and understand the risks of, and other
considerations relating to, the purchase of the Securities and the tax
consequences of the investment, and have the ability to bear the economic risks
of the investment.

 

b.Such Subscriber is acquiring the Notes and the Warrants, and upon conversion
of the Notes, the Conversion Shares, and upon exercise of the Warrants, the
Warrant Shares, for investment for its own account and not with the view to, or
for resale in connection with, any distribution thereof. Such Subscriber
understands and acknowledges that sale of the Notes and the Warrants have not
been, and the Conversion Shares and the Warrant Shares will not be, registered
under the Securities Act or any state securities laws, by reason of a specific
exemption from the registration provisions of the Securities Act and applicable
state securities laws, which depends upon, among other things, the bona fide
nature of the investment intent as expressed herein. Such Subscriber further
represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation to any
third person with respect to any of the Notes, the Conversion Shares, the
Warrants or the Warrant Shares. Such Subscriber understands and acknowledges
that the sale of the Securities pursuant to this Agreement will not be
registered under the Securities Act nor under the state securities laws on the
ground that the sale provided for in this Agreement and the issuance of
securities hereunder is exempt from the registration requirements of the
Securities Act and any applicable state securities laws.

 

c.Such Subscriber is an “accredited investor” as defined in Rule 501 of
Regulation D as promulgated by the SEC under the Securities Act, and such
Subscriber shall submit to the Company such further assurances of such status as
may be reasonably requested by the Company. Such Subscriber further acknowledges
and understands that it is required to be an “accredited investor” at the time
it exercises the Warrants. Such Subscriber resides in the jurisdiction set forth
on the signature page affixed hereto. Such Subscriber has not taken any of the
actions set forth in, and is not subject to, the disqualification provisions of
Rule 506(d)(1) of the Securities Act.

 

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d.Such Subscriber represents that it was not formed for the specific purpose of
acquiring the Securities, is duly organized, validly existing and in good
standing under the laws of the state or jurisdiction of its organization, the
consummation of the transactions contemplated hereby is authorized by, and will
not result in a violation of state law or its charter or other organizational
documents, it has full power and authority to execute and deliver this
Agreement, the other Transaction Documents to which it is a party, and all other
related agreements or certificates and to carry out the provisions hereof and
thereof and to purchase and hold the Securities, the execution and delivery of
this Agreement and each other Transaction Document to which it is a party has
been duly authorized by all necessary action, this Agreement and each other
Transaction Document to which it is a party has been duly executed and delivered
on behalf of such Subscriber and is a legal, valid and binding obligation of
such Subscriber. The execution and delivery of this Agreement and each other
Transaction Document to which it is a party will not violate or be in conflict
with any order, judgment, injunction, agreement or controlling document to which
such Subscriber is a party or by which it is bound.

 

e.Such Subscriber understands that the Securities are being offered and sold to
it in reliance on specific exemptions from the registration requirements of
United States federal and state securities laws and that the Company is relying
in part upon the truth and accuracy of, and such Subscriber’s compliance with,
the representations, warranties, agreements, acknowledgments and understandings
of such Subscriber set forth herein in order to determine the availability of
such exemptions and the eligibility of such Subscriber to acquire such
securities. Such Subscriber further acknowledges and understands that the
Company is relying on the representations and warranties made by it hereunder
and that such representations and warranties are a material inducement to the
Company to sell the Securities to such Subscriber.

 

f.Such Subscriber understands that no public market now exists, and there never
will be a public market for, the Notes or the Warrants, that only a limited
public market for the Common Stock exists and that there can be no assurance
that a more active public market for the Common Stock will exist or continue to
exist.

 

g.Such Subscriber, its advisers, if any, and its designated representatives, if
any, have received and reviewed information about the Company, and have had an
opportunity to discuss the Company’s business, management and financial affairs
with the Company’s management. Such Subscriber understands that such
discussions, as well as any materials provided by the Company, were intended to
describe the aspects of the Company’s business and prospects which the Company
believes to be material, but were not necessarily a thorough or exhaustive
description, and except as expressly set forth in this Agreement. Some of such
information may include projections as to the future performance of the Company,
which projections may not be realized, may be based on assumptions which may not
be correct and may be subject to numerous factors beyond the Company’s control.
Such Subscriber has sought such accounting, legal and tax advice as it has
considered necessary to make an informed investment decision with respect to its
acquisition of the Securities.

 

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h.As of the Closing, all actions on the part of such Subscriber, and its
officers, directors and partners, if applicable, necessary for the
authorization, execution and delivery of this Agreement and the other
Transaction Documents to which it is a party and the performance of all
obligations of such Subscriber hereunder and thereunder shall have been taken,
and this Agreement and such other Transaction Documents, assuming due execution
by the parties hereto and thereto, constitute valid and legally binding
obligations of such Subscriber, enforceable in accordance with their respective
terms, except as may be limited by: (i) judicial principles limiting the
availability of specific performance, injunctive relief, and other equitable
remedies or (ii) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect generally relating to or affecting
creditors’ rights.

 

i.Such Subscriber agrees to be bound by all of the terms and conditions of the
Notes and the Warrants and to perform all obligations thereby imposed upon it.

 

4.Transfer Restrictions.  Each Subscriber acknowledges and agrees as follows:

 

a.The Notes, the Conversion Shares, the Warrants and the Warrant Shares have not
been registered for sale under the Securities Act, in reliance on the private
offering exemption in Section 4(a)(2) thereof; the Company does not currently
intend to register the Notes, the Conversion Shares, the Warrants or the Warrant
Shares under the Securities Act at any time in the future unless otherwise
contractually obligated to do so under this Agreement or any of the other
Transaction Documents; and such Subscriber will not immediately be entitled to
the benefits of Rule 144 with respect to the Notes, the Conversion Shares, the
Warrants and the Warrant Shares.

 

b.Such Subscriber understands that there are substantial restrictions on the
transferability of the Securities that the notes, agreement or certificates
representing the Securities shall bear a restrictive legend in substantially the
following form (or in the case of the Warrants, as shown on the form of Warrant
attached hereto) (and a stop-transfer order may be placed against transfer of
such certificates or other instruments):

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED (THE “ACT”), OR APPLICABLE STATE
SECURITIES LAWS AND NEITHER MAY BE SOLD, TRANSFERRED, ASSIGNED OR OTHERWISE
DISPOSED OF UNLESS REGISTERED UNDER THE ACT AND SUCH LAWS OR (1) REGISTRATION
UNDER APPLICABLE STATE SECURITIES LAWS IS NOT REQUIRED AND (2) AN OPINION OF
COUNSEL SATISFACTORY TO THE MAKER IS FURNISHED TO THE MAKER TO THE EFFECT THAT
REGISTRATION UNDER THE ACT IS NOT REQUIRED.

 

In addition, if any Subscriber is an affiliate of the Company notes, agreements
or certificates evidencing the Securities issued to such Subscriber may bear a
customary “Affiliates” legend.

 

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The legend set forth above shall be removed and the Company shall issue a
certificate without such legend to the holder of the Securities upon which it is
stamped, if (a) such Securities are sold pursuant to a registration statement
under the Securities Act, or (b) such holder delivers to the Company an opinion
of counsel, reasonably acceptable to the Company, that a disposition of the
Securities is being made pursuant to an exemption from such registration and
that the Securities, after such transfer, shall no longer be “restricted
securities” within the meaning of Rule 144.

 

5.Creation of Security Interest.

 

a.Grant of Security Interests. The Company grants to each Subscriber a valid,
continuing security interest in all presently existing and hereafter acquired or
arising Collateral (as defined below) in order to secure prompt, full and
complete payment of any and all Obligations (as defined below) and in order to
secure prompt, full and complete performance by the Company of each of its
covenants and duties under each of the Transaction Documents (other than the
Warrants). The “Collateral” shall mean and include all right, title, interest,
claims and demands of the Company in the following:

 

i.All goods (and embedded computer programs and supporting information included
within the definition of “goods” under the Code (as defined below)) and
equipment now owned or hereafter acquired, including all laboratory equipment,
computer equipment, office equipment, machinery, fixtures, vehicles (including
motor vehicles and trailers), and any interest in any of the foregoing, and all
attachments, accessories, accessions, replacements, substitutions, additions,
and improvements to any of the foregoing, wherever located;

 

ii.All inventory now owned or hereafter acquired, including all merchandise, raw
materials, parts, supplies, packing and shipping materials, work in process and
finished products including such inventory as is temporarily out of the
Company’s custody or possession or in transit and including any returns upon any
accounts or other proceeds, including insurance proceeds, resulting from the
sale or disposition of any of the foregoing and any documents of title
representing any of the above, and the Company’s books relating to any of the
foregoing;

 

iii.All contract rights and general intangibles (including Intellectual Property
(as defined below)), now owned or hereafter acquired, including goodwill,
license agreements, franchise agreements, blueprints, drawings, purchase orders,
customer lists, route lists, infringements, claims, software, computer programs,
computer disks, computer tapes, literature, reports, catalogs, design rights,
income tax refunds, payment intangibles, commercial tort claims, payments of
insurance and rights to payment of any kind;

 

iv.All now existing and hereafter arising accounts, contract rights, royalties,
license rights, license fees and all other forms of obligations owing to the
Company arising out of the sale or lease of goods, the licensing of technology
or the rendering of services by the Company (subject, in each case, to the
contractual rights of third parties to require funds received by the Company to
be expended in a particular manner), whether or not earned by performance, and
any and all credit insurance, guaranties, and other security therefor, as well
as all merchandise returned to or reclaimed by the Company and the Company’s
books relating to any of the foregoing;

 

   

 

 

v.All documents, cash, deposit accounts, letters of credit and letters of credit
rights (whether or not the letter of credit is evidenced by a writing) and other
supporting obligations, certificates of deposit, instruments, promissory notes,
chattel paper (whether tangible or electronic) and investment property,
including all securities, whether certificated or uncertificated, security
entitlements, securities accounts, commodity contracts and commodity accounts,
and all financial assets held in any securities account or otherwise, wherever
located, now owned or hereafter acquired and the Company’s books relating to the
foregoing; and

 

vi.To the extent not covered by the foregoing clauses (i) through (v), all other
personal property of the Company, whether tangible or intangible, and any and
all rights and interests in any of the above and the foregoing and, any and all
claims, rights and interests in any of the above and all substitutions for,
additions and accessions to and proceeds thereof, including insurance,
condemnation, requisition or similar payments and proceeds of the sale or
licensing of Intellectual Property.

 

Notwithstanding the foregoing, the Collateral shall not include any equipment
that now or hereafter is subject to a Lien (as defined below) that constitute
purchase money Liens (i) on equipment acquired or held by the Company incurred
for financing the acquisition of the equipment securing no more than Seven
Hundred Fifty Thousand Dollars ($750,000.00) in the aggregate amount
outstanding, or (ii) existing on equipment when acquired, if the Lien is
confined to the property and improvements and the proceeds of the equipment.

 

b.After-Acquired Property. If the Company shall at any time acquire a commercial
tort claim having a value in excess of Fifty Thousand Dollars ($50,000), as
defined in the Code, the Company shall immediately notify each Subscriber in
writing signed by the Company of the brief details thereof and grant to each
Subscriber in such writing a security interest therein and in the proceeds
thereof, all upon the terms of this Agreement, with such writing to be in form
and substance satisfactory to each Subscriber.

 

c.Duration of Security Interest. Each Subscriber’s security interest in the
Collateral shall continue until the payment in full and the satisfaction of all
Obligations (other than inchoate indemnification and similar obligations),
whereupon such security interest shall automatically terminate. Each Subscriber
shall, at the Company’s sole cost and expense, execute such further documents
and take such further actions as may be reasonably necessary to make effective
the release contemplated by this Section 5(c), including duly authorizing and
delivering termination statements for filing in all relevant jurisdictions under
the Code.

 

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d.Location and Possession of Collateral. The Collateral is and shall remain in
the possession of the Company at its corporate headquarters or at such other
location specified in writing by the Company to each Subscriber. The Company
shall remain in full possession, enjoyment and control of the Collateral (except
only as may be otherwise required by each Subscriber for perfection of the
security interests therein created hereunder) and so long as no Event of Default
(as defined in the Notes) has occurred and is continuing, shall be entitled to
manage, operate and use the same and each part thereof with the rights and
franchises appertaining thereto; provided that the possession, enjoyment,
control and use of the Collateral shall at all time be subject to the Company’s
observance and performance of the terms of this Agreement.

  

e.Delivery of Additional Documentation Required. The Company shall from time to
time execute and deliver to each Subscriber, at the request of such Subscriber,
all financing statements and other documents such Subscriber may reasonably
request, in form satisfactory to such Subscriber, to perfect and continue such
Subscriber’s perfected security interests in the Collateral and in order to
consummate fully all of the transactions contemplated under the Transaction
Documents.

 

f.Right to Inspect. Each Subscriber (through any of its officers, employees, or
agents) shall have the right, upon reasonable prior notice, from time to time
during the Company’s usual business hours, to inspect the books and records of
the Company and to make copies thereof and to inspect, test, and appraise the
Collateral in order to verify the Company’s financial condition or the amount,
condition of, or any other matter relating to, the Collateral. Notwithstanding
the foregoing, so long as no Event of Default (as defined in the Note) shall be
continuing, the inspection rights shall be exercised no more frequently than one
(1) per year.

 

g.Protection of Intellectual Property. The Company shall:

 

i.protect, defend and maintain the validity and enforceability of its
Intellectual Property and promptly advise each Subscriber in writing of material
infringements;

 

ii.not allow any Intellectual Property material to the Company’s business to be
abandoned, forfeited or dedicated to the public without each Subscriber’s
written consent;

 

iii.provide written notice to each Subscriber within ten (10) days of entering
or becoming bound by any Restricted License (as defined below) (other than
over-the-counter software that is commercially available to the public); and

 

iv.take such commercially reasonable steps as each Subscriber reasonably
requests to obtain the consent of, or waiver by, any person whose consent or
waiver is necessary for (i) any Restricted License to be deemed “Collateral” and
for each Subscriber to have a security interest in it that might otherwise be
restricted or prohibited by law or by the terms of any such Restricted License,
whether now existing or entered into in the future, and (ii) each Subscriber to
have the ability in the event of a liquidation of any Collateral to dispose of
such Collateral in accordance with or such Subscriber’s rights and remedies
under this Agreement and the other Transaction Documents.

 

  9 

 

 

h.Intellectual Property.

 

i.At each Subscriber’s request, the Company shall register or cause to be
registered with the United States Copyright Office (i) any software (material to
the business of the Company) developed or acquired by the Company in connection
with any product developed or acquired for sale or licensing, (ii) any software
(material to the business of the Company) developed or acquired by the Company
hereafter from time to time in connection with any product developed or acquired
for sale or licensing, and (iii) any major revisions or upgrades to any software
that has previously been registered by or on behalf of the Company with the
United States Copyright Office.

 

ii.The Company shall promptly notify each Subscriber on a quarterly basis of the
federal registration or filing by the Company of any patent or patent
application, or trademark or trademark application, or copyright or copyright
application and shall promptly execute and deliver to each Subscriber any grants
of security interests in same, in form acceptable to such Subscriber, to file
with the United States Patent and Trademark Office or the United States
Copyright Office, as applicable.

 

i.Certain Definitions.

 

i.“Code” means the Uniform Commercial Code as adopted and in effect in the
Commonwealth of Massachusetts, as amended from time to time; provided, however,
that if by reason of mandatory provisions of law, the creation and/or perfection
or the effect of perfection or non-perfection of the security interest in any
Collateral is governed by the Uniform Commercial Code as in effect in a
jurisdiction other than the Commonwealth of Massachusetts, the term “Code” shall
also mean the Uniform Commercial Code as in effect from time to time in such
jurisdiction for purposes of the provisions hereof relating to such creation,
perfection or effect of perfection or non-perfection.

 

ii.“Intellectual Property” means, with respect to any person, all of such
person’s right, title and interest in and to patents, patent rights (and
applications and registrations therefor and divisions, continuations, renewals,
reissues, extensions and continuations-in-part of the same), trademarks and
service marks (and applications and registrations therefor and the goodwill
associated therewith), whether registered or not, inventions, copyrights
(including applications and registrations therefor and like protections in each
work or authorship and derivative work thereof), whether published or
unpublished, mask works (and applications and registrations therefor), trade
names, trade styles, software and computer programs, source code, object code,
trade secrets, licenses, methods, processes, know how, drawings, specifications,
descriptions, and all memoranda, notes, and records with respect to any research
and development, all whether now owned or subsequently acquired or developed by
such person and whether in tangible or intangible form or contained on magnetic
media readable by machine together with all such magnetic media (but not
including embedded computer programs and supporting information included within
the definition of “goods” under the Code).

 

  10 

 

 

iii.“Lien” means any voluntary or involuntary security interest, pledge,
bailment, lease, mortgage, hypothecation, conditional sales and title retention
agreement, encumbrance or other lien with respect to any Property (as defined
below) in favor of any person.

 

iv.“Obligations” means all debt, principal, interest, fees, charges, and other
amounts, obligations, covenants, and duties owing by the Company to the
applicable Subscriber of any kind and description arising under by the
Transaction Documents (other than the Warrants) and whether or not for the
payment of money, whether direct or indirect, absolute or contingent, due or to
become due, now existing or hereafter arising.

 

v.“Property” means any interest in any kind of property or asset, whether real,
personal or mixed, whether tangible or intangible.

 

vi.“Restricted License” means any license or other agreement with respect to
which the Company is the licensee and such license or agreement is material to
the Company’s business and (a) that prohibits or otherwise restricts the Company
from granting a security interest in the Company’s interest in such license or
agreement or any other property or (b) for which a default under or termination
of could interfere with the Subscribers’ right to sell any Collateral.

 

6.Conditions to Company’s Obligations at Closing. The Company’s obligation to
complete the sale and issuance of the Notes and Warrants and deliver the Notes
and the Warrants to each Subscriber, individually, at the Closing shall be
subject to the following conditions to the extent not waived by the Company:

 

a.Receipt of Payment. The Company shall have received payment, by certified or
other bank check or by wire transfer of immediately available funds, in the full
amount of the “Note Principal Amount” set forth with such Subscriber’s signature
on the signature page hereto.

 

b.Representations and Warranties. The representations and warranties made by
such Subscriber in Section 3 hereof shall be true and correct in all material
respects as of the Closing Date (except to the extent any such representation
and warranty is qualified by materiality or reference to Material Adverse
Effect, in which case, such representation and warranty shall be true and
correct in all respects as so qualified), except to the extent any such
representation or warranty expressly speaks as of an earlier date, in which case
such representation or warranty shall be true and in all material respects
correct as of such earlier date (except in each case to the extent any such
representation and warranty is qualified by materiality or reference to Material
Adverse Effect, in which case, such representation and warranty shall be true
and correct in all respects as so qualified). Such Subscriber shall have
performed in all material respects all obligations and covenants herein required
to be performed by it on or prior to the Closing Date.

 

c.Receipt of Executed Transaction Documents. Such Subscriber shall have executed
and delivered to the Company the applicable Transaction Documents.

  

  11 

 

 

d.Judgments. No judgment, writ, order, injunction, award or decree of or by any
court, or judge, justice or magistrate, including any bankruptcy court or judge,
or any order of or by any governmental authority, shall have been issued, and no
action or proceeding shall have been instituted by any governmental authority,
enjoining or preventing the consummation of the transactions contemplated
hereby.

 

e.Consents. All necessary consents of any third parties with respect to the
execution, delivery and performance of the Transaction Documents shall have been
received.

 

7.Conditions to Subscribers’ Obligations at Closing. Each Subscriber’s
obligation to purchase and pay for the Notes and Warrants at the Closing shall
be subject to the following conditions to the extent not waived by the
applicable Subscriber:

 

a.Representations and Warranties Correct. The representations and warranties
made by the Company in Section 2 hereof shall be true and correct in all
material respects as of the Closing Date (except to the extent any such
representation and warranty is qualified by materiality or reference to Material
Adverse Effect, in which case, such representation and warranty shall be true
and correct in all respects as so qualified), except to the extent any such
representation or warranty expressly speaks as of an earlier date, in which case
such representation or warranty shall be true and in all material respects
correct as of such earlier date (except in each case to the extent any such
representation and warranty is qualified by materiality or reference to Material
Adverse Effect, in which case, such representation and warranty shall be true
and correct in all respects as so qualified). The Company shall have performed
in all material respects all obligations and covenants herein required to be
performed by it on or prior to the Closing Date.

 

b.Receipt of Executed Transaction Documents. The Company shall have executed and
delivered to each Subscriber the applicable Transaction Documents.

 

c.Judgments. No judgment, writ, order, injunction, award or decree of or by any
court, or judge, justice or magistrate, including any bankruptcy court or judge,
or any order of or by any governmental authority, shall have been issued, and no
action or proceeding shall have been instituted by any governmental authority,
enjoining or preventing the consummation of the transactions contemplated
hereby.

 

d.Consents. All necessary consents of any third parties with respect to the
execution, delivery and performance of the Transaction Documents shall have been
received.

 

8.Binding Effect. Each Subscriber hereby acknowledges and agrees that this
Agreement shall be binding upon and inure to the benefit of the parties and
their successors, legal representatives and permitted assigns.

 

9.Modification. This Agreement shall not be modified or waived except by an
instrument in writing signed by the Company and the majority by the holders of
Notes representing at least fifty percent (50%) of the aggregate principal
amount of the Notes then outstanding; provided, however, that this Agreement may
not be amended, and no provision hereof may be waived, in each case, in any way
which would adversely affect the rights of a Subscriber in a manner
disproportionate to any adverse effect such amendment or waiver would have on
the rights of the other Subscribers, without the consent of such Subscriber.

 

  12 

 

 

10.Third-Party Beneficiary. This Agreement is intended for the benefit of the
parties hereto and their respective successors and permitted assigns and is not
for the benefit of, nor may any provision hereof be enforced by, any other
person or entity.

 

11.Notices. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, or delivered against receipt to the party to whom it is to be
given (a) if to the Company, to Interleukin Genetics, Inc., 135 Beaver Street,
Waltham, Massachusetts 02452, Attention: Chief Executive Officer, with a copy to
Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., One Financial Center,
Boston, Massachusetts, 02111, Attention: Daniel T. Kajunski, e-mail:
DTKajunski@mintz.com, or (b) if to a Subscriber, at the applicable address set
forth on the signature page hereof (or, in either case, to such other address as
the party shall have furnished in writing in accordance with the provisions of
this Section 11). Any notice or other communication given by certified mail
shall be deemed given at the time of certification thereof, except for a notice
changing a party’s address which shall be deemed given at the time of receipt
thereof.

 

12.Assignability. This Agreement and the rights, interests and obligations
hereunder are not transferable or assignable by the Subscribers, and the
transfer or assignment of the Notes, the Conversion Shares, the Warrants or the
Warrant Shares shall be made only in accordance with all applicable laws and the
terms of the Notes and the Warrants.

 

13.Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the Commonwealth of Massachusetts, without reference
to the principles thereof relating to the conflict of laws.

 

14.Blue Sky Qualification. The purchase of the Securities under this Agreement
is expressly conditioned upon the exemption from qualification of the offer and
sale of the Notes and Warrants from applicable federal and state securities
laws. The Company shall not be required to qualify this transaction under the
securities laws of any jurisdiction and, should qualification be necessary, the
Company shall be released from any and all obligations to maintain its offer,
and may rescind any sale contracted, in the jurisdiction.

 

15.Use of Pronouns.   All pronouns and any variations thereof used herein shall
be deemed to refer to the masculine, feminine, neuter, singular or plural as the
identity of the person or persons referred to may require.

 

16.No Short Selling. Each Subscriber agrees that during the period of twelve
(12) months following the Closing Date, such Subscriber will not, directly or
indirectly, effect or agree to effect any Short Sale (as defined in rule 200 of
Regulation SHO under the Exchange Act) with respect to any shares of Common
Stock, whether or not against the box, establish any “put equivalent position”
(as defined in Rule 16a-1(h) under the Exchange Act) with respect to any shares
of Common Stock, borrow or pre-borrow any shares of Common Stock, or grant any
other right (including, without limitation, any put or call option) with respect
to shares of the Common Stock, or, in each case, with respect to any security
that includes, is convertible into or exercisable for or derives any significant
part of its value from shares of the Common Stock or otherwise seek to hedge
such Subscriber’s position in the Common Stock.

 

  13 

 

 

17.Miscellaneous.

 

a.This Agreement, together with the Note and Warrant and any confidentiality
agreement between each Subscriber and the Company, constitute the entire
agreement between such Subscriber and the Company with respect to the offering
and issuance of the Notes and Warrants and supersedes all prior oral or written
agreements and understandings, if any, relating to the subject matter hereof.

 

b.The representations and warranties of the Company and the Subscribers made in
this Agreement shall survive the execution and delivery hereof and delivery of
the Notes and the Warrants for a period of twelve (12) months following the
Closing Date.

 

c.Each of the parties hereto shall pay its own fees and expenses (including the
fees of any attorneys, accountants, appraisers or others engaged by such party)
in connection with this Agreement and the transactions contemplated hereby,
whether or not the transactions contemplated hereby are consummated.

 

d.This Agreement may be executed in one or more original or facsimile or by an
e-mail which contains a portable document format (.pdf) file of an executed
signature page counterparts, each of which shall be deemed an original, but all
of which shall together constitute one and the same instrument and which shall
be enforceable against the parties actually executing such counterparts. The
exchange of copies of this Agreement and of signature pages by facsimile
transmission or in .pdf format shall constitute effective execution and delivery
of this Agreement as to the parties and may be used in lieu of the original
Agreement for all purposes. Signatures of the parties transmitted by facsimile
or by e-mail of a document in pdf format shall be deemed to be their original
signatures for all purposes.

 

e.Each provision of this Agreement shall be considered separable and, if for any
reason any provision or provisions hereof are determined to be invalid or
contrary to applicable law, such invalidity or illegality shall not impair the
operation of or affect the remaining portions of this Agreement.

 

f.Paragraph titles are for descriptive purposes only and shall not control or
alter the meaning of this Agreement as set forth in the text.

 

g.Each Subscriber hereby agrees to furnish the Company such other information as
the Company may reasonably request with respect to its subscription hereunder
and the transactions contemplated by then Transaction Documents.

 

18.Public Disclosure. None of the Subscribers, nor any officer, manager,
director, member, partner, stockholder, employee, affiliate, affiliated person
or entity of any Subscriber shall make or issue any press releases or otherwise
make any public statements or make any disclosures to any third person or entity
with respect to the transactions contemplated herein and will not make or issue
any press releases or otherwise make any public statements of any nature
whatsoever with respect to the Company without the Company’s express prior
approval. The Company has the right to withhold such approval in its sole
discretion.

 

  14 

 

 

19.Independent Nature of Each Subscriber’s Obligations and Rights. For avoidance
of doubt, the obligations of each Subscriber under this Agreement are several
and not joint with the obligations of any other Subscriber hereunder.

 

20.Increase in Authorized Shares of Common Stock. If the Company does not have a
sufficient number of authorized, but unissued, shares of Common Stock to cover
the full conversion of the Notes under Section 5(b) thereof and the full
exercise of the Warrants at Closing, following the Closing, the Company shall
file the Certificate of Amendment to the Certificate of Incorporation approved
by the stockholders of the Company at the 2016 annual meeting of stockholders
held on October 20, 2016 to increase the authorized shares of Common Stock to
650,000,000 shares.

 

[SIGNATURE PAGE FOLLOWS.]

 

   

 

 

IN WITNESS WHEREOF, this Subscription Agreement has been duly executed and
delivered by each Party as of the date first above written.

 

The Company

  

Interleukin Genetics, Inc.     By: /s/ Mark Carbeau     Name: Mark Carbeau    
Title:   CEO  

  

   

 

 

THE Subscribers

 

Bay City Capital Fund V, L.P.

      By:  Bay City Capital Management V LLC, its general partner   By:  Bay
City Capital LLC, its manager       By: /s/ Fred Craves     Name:       Title:
Manager and Managing Director     Address:

 

                            Note Principal Amount: $490,650.00  

 

Bay City Capital Fund V Co-Investment, L.P.

      By:  Bay City Capital Management V LLC, its general partner   By:  Bay
City Capital LLC, its manager       By: /s/ Fred Craves     Name:       Title:
Manager and Managing Director     Address:                        

  

    Note Principal Amount: $9,350.00  

 

In each case, with a copy (which shall not constitute notice) to;

 

Stradling Yocca Carlson & Rauth, P.C.

660 Newport Center Drive, Suite 1600

Newport Beach, CA 92660

Attn:Michael Lawhead

Email:mlawhead@sycr.com

 

[Signature Page to Subscription Agreement]

 

   

 

 

THE Subscribers

 

Horizon Technology Finance Corporation

          By:  /s/ Robert D. Pomeroy, Jr.     Name: Robert D. Pomeroy, Jr.    
Title: Chief Executive Officer     Address: 312 Farmington Avenue    

Farmington, CT 05032

     

Attn: Legal Department

            Note Principal Amount: $500,000.00  

  

[Signature Page to Subscription Agreement]