April 16, 1999
Xx. Xxxxx Xxxxxx
Managing Director
Q-Med AB
00 xxx Xxxxxxxx x'Xxxxxx
000 00 Xxxxx, Xxxxxx
Dear Xx. Xxxxxx:
This will confirm our agreement in principle pursuant to which Q-Med AB
("Q-Med") or a wholly-owned subsidiary thereof will purchase an initial 50%
interest in the capital stock of Ixion Biotechnology, Inc. ("Ixion") through the
purchase of newly-issued common stock of Ixion, and will execute a royalty free
license to its non-animal stabilized hyaluronic acid ("NASHA") technology in the
field of islet cell encapsulation to Ixion.
1. The number of shares to be purchased by Q-Med shall be not
less than 3,000,000 shares of newly-issued common stock of Ixion for
consideration consisting of a cash price of $2.00 per share, and a royalty-free
license to NASHA technology for the field of islet cell encapsulation.
2. The agreement set forth in this letter shall be a binding
agreement between us, subject to the following conditions:
(a) The board of directors of Ixion and the board of
directors of Q-Med shall have approved the
transaction contemplated hereby prior to July 15,
1999, unless extended by mutual agreement; and
(b) A mutually satisfactory formal stock purchase
agreement as hereinafter described, shall have been
prepared and executed.
3. The stock purchase agreement (which shall be drafted by
counsel for Q-Med) shall contain such representations, warranties, covenants,
terms and conditions as are mutually acceptable to counsel to the parties
hereto, specifically including the following:
(a) The number of shares to be purchased by Q-Med shall
be equal to the sum of (i) 2,514,014 (the number of
shares outstanding on the date hereof; (ii) 100,900
(the number of options to purchase shares outstanding
on the date hereof; (iii) 23,630 (the number of
shares issuable upon the exercise of certain stock
purchase warrants; (iv) 21,513 (the number of shares
issuable upon the exercise of Charitable Benefit
Warrants, after adjustment); (v) 51,630 (the number
of shares to be issued to purchasers in the Ixion
public offering to adjust the price of their shares);
288,313 (shares to be reserved for issuance under
the Ixion Board Retainer Plan and the 1994 Stock
Option Plan); and (vi) a number of shares equal to
the number of shares which are purchased by current
shareholders of Ixion pursuant to an offer in the
nature of a preemptive right to be made to current
shareholders at a price of not less than $2.00/share;
(b) Payment by Q-Med in the amount of $3,300,000 (plus
accrued interest on the loan described below) shall
be made on the Closing Date, which shall be September
1, 1999. On that date, Ixion will issue the number of
shares equal to $3,300,000 plus accrued interest
divided by $2.00, or approximately 1,650,000 shares.
On the Closing Date, Ixion shall issue warrants for
the remainder of the shares to be purchased by Q-Med
(not less than 1,350,000 shares) with an exercise
price of $2.00 per share, expiring on the first
anniversary of the Closing Date.
(c) On the Closing Date, Xx. Xxxxx Xxxxxx will be added
to the board of Ixion as an inside director.
(d) The closing of the stock purchase agreement will be
contingent on (i) Q-Med's successful completion of
additional financing not later than July 15,
1999, (ii) the stockholders of Ixion approval of an
increase in the number of authorized shares of common
stock as set forth in the preliminary proxy
statement filed with the Securities and Exchange
Commission on April 8, 1999; (iii) Ixion's not, since
the date hereof, having (a) disposed or made changes
in its assets or incurred any liability other than in
the ordinary course of business, (b) made any
material changes in its business structure, or (c)
declared any dividend or made any other distribution
to its shareholders.
(e) Upon the issuance of shares of newly-issued stock by
Ixion after the initial Closing Date, Q-Med shall
have the right to purchase for cash such number of
shares, at the same price per share as such shares
are offered to third parties, as are necessary to
maintain its percentage interest in Ixion.
(f) Royalty-free license of NASHA for use as an
encapsulation material for Ixion islets.
4. Each party agrees to proceed in good faith and with all
due diligence to enter into the formal stock purchase agreement and to close the
transaction contemplated hereby. In the event that such stock purchase
agreement is not executed on or prior to June 15, 1999, either party may
terminate this agreement by giving written notice to the other. Between the date
hereof and the date of any such notice, Ixion will not entertain or accept any
offers for the purchase of its stock and shall suspend its public offering of
stock pursuant to its current registration statement.
5. In connection with of the closing of the stock purchase
transaction contemplated by this agreement, Ixion shall have the right to make
an offer to its current shareholders permitting them to purchase a number of
shares at a price of $2.00 per share equal to the number of shares held by them
(or equal to the number of shares which they may purchase through the exercise
of options or warrants) such that they may substantially protect their current
percentage ownership of Ixion. Ixion may cancel and reissue all options issued
at a price greater than $4.00 per share with a new exercise price of $4.00 per
share.
6. Upon the execution of the stock purchase agreement, Ixion
will make the following offer to holders of its unsecured convertible
debentures:
(a) All holders will be given 60 days from the Closing
Date to elect to convert their debentures at the
price of $2.00 per share;
(b) Q-Med will offer to redeem, at the maturity date,
from all holders electing not to convert at such
date, all variable rate unsecured debt at a price
equal to par, plus an amount equal to accrued
interest at 10% for the life of the debenture.
7. The parties agree to consult with each other regarding any
press releases or other public disclosures related to this agreement in
principal or the transactions contemplated hereby. Q-Med understands that the
U.S. federal securities laws will apply to disclosures required to be made by
Ixion.
8. In consideration for Xxxxx's agreeing to not entertain or
accept any offers between the date hereof and June 15, 1999, and its agreement
to suspend its public offering, Q-Med shall lend Ixion $300,000 payable upon
execution of this letter, for the purpose of purchasing certain equipment and
funding Ixion's operating costs. The terms of the loan are set forth in the
promissory note attached hereto as Annex A. The terms of the loan shall survive
termination of this agreement.
If the forgoing correctly sets forth our agreement, please
sign and return to us the copy of this letter enclosed for the purpose, at which
time this letter shall become a binding agreement between us.
Sincerely yours,
Ixion Biotechnology, Inc.
By: /S/
--------------------------
Xxxxxx X. Xxxxxx
Chairman and Chief Executive Officer
Q-Med AB
By: /S/
--------------------------
Xxxxx Xxxxxx
Managing Director
