SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): October 22, 2002
INTERLEUKIN GENETICS, INC.
(Exact name of registrant as specified in its charter)
Delaware 000-23413 94-3123681
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification No.)
incorporation)
135 Beaver Street, Waltham, MA 02452
(Address of principal executive offices)
Registrant's telephone number, including area code: (781) 398-0700
Item 5. Other Events.
On October 23, 2002, we entered into a Note Purchase Agreement with a
major consumer products company (the "Lender") providing for the issuance and
sale by us of up to $1,500,000 in 15% secured promissory notes, due December 31,
2003 (the "Notes"). The Notes are to be sold in three closings of $500,000 each.
The first closing was held on October 23, 2002 and the remaining closings are to
be held on November 15, 2002 and December 16, 2002. Each closing is subject to
certain customary conditions and the final closing will only be held at the
discretion of the Lender. Our obligations under the Notes are secured by all of
our intellectual property assets pursuant to a Security Agreement dated as of
October 23, 2002. While the Notes are outstanding, we are prohibited from taking
certain corporate actions including: entering into any merger, consolidation,
reorganization or recapitalization; purchasing or otherwise acquiring the
assets, obligations or capital stock of any other person or entity; and paying
any dividends or repurchasing or redeeming any shares of our common stock. We
have also granted Board of Directors observation rights to the Lender that
terminate when the Notes are repaid. Additionally, we have granted to the Lender
the right to participate in any capital raising transactions we enter into prior
to April 23, 2003 and a two-week exclusive negotiation period in the event that
prior to April 23, 2003 we consider a transaction that would be likely to result
in a change of control. The Note Purchase Agreement, the Security Agreement and
the form of Promissory Note are attached hereto as Exhibits 10.1, 10.2 and 10.3,
respectively. On October 24, 2002, we publicly disseminated a press release
announcing the interim financing. The information contained in the press release
is incorporated herein by reference and filed as Exhibit 99.1 hereto.
On October 22, 2002, as a condition to the Note Purchase Agreement, we
entered into an Agreement and Waiver with The Tail Wind Fund, Ltd. ("Tailwind").
Pursuant to the Agreement and Waiver, Tailwind agreed to temporarily waive
certain of its rights under a Stock Purchase Agreement and a Registration Rights
Agreement, each dated as of December 5, 2000. Included among the rights Tailwind
has waived through March 31, 2003 is the right to receive monthly cash payments
if our common stock is de-listed from the Nasdaq SmallCap Market. Also waived
through March 31, 2003 is Tailwind's right to receive additional shares of our
common stock for no additional consideration if we issue shares of our common
stock at a price below $2.50 per share prior to February 9, 2003, such that
Tailwind's effective price per share of common stock will equal the lowest price
at which we issued shares. Under the Agreement and Waiver, Tailwind is obligated
to surrender for cancellation a warrant to purchase up to 264,407 shares of our
common stock at a per share exercise price of $3.15. The terms of this warrant
include the downward adjustment of the exercise price to equal 125% of the
lowest price at which we issue shares of our common stock (or securities
convertible into common stock) prior to February 9, 2003. In exchange, we are
required to issue to Tailwind, for no additional cash consideration, 670,588
shares of our common stock. If we receive at least $3,000,000 in equity
investment from the Lender prior to April 1, 2003, the temporary waivers will
become permanent, however if we do not, the waivers will terminate, all of
Tailwind's rights under the Stock Purchase Agreement (other than the right to
receive additional shares of our common stock, which will have expired) and the
Registration Rights Agreement will return and, subject to the stockholder
approval requirements of any stock market on which our common stock is then
listed or quoted, we will be required to issue a new warrant to purchase up to
264,407 shares of our common stock on terms identical to the cancelled warrant
except that the exercise price will be $1.70 per share and the exercise price of
the warrant will no longer be subject to the adjustments described above. A copy
of the Agreement and Waiver with Tailwind is attached hereto as Exhibit 10.4.
On October 22, 2002, as a condition to the Note Purchase Agreement, we
entered into an Agreement and Waiver with Special Situations Fund III, L.P.,
Special Situations Cayman Fund, L.P. and Special Situations Private Equity Fund,
L.P. (together, "Special Situations"). Pursuant to the Agreement and Waiver,
Special Situations agreed to temporarily waive certain of its rights under a
Stock Purchase Agreement and a Registration Rights Agreement, each dated as of
January 26, 2001. Included among the rights Special Situations has waived
through March 31, 2003 is the right to receive monthly cash payments in the
event that our common stock is de-listed from the Nasdaq SmallCap Market. Also
waived through March 31, 2003 is Special Situations' right to receive additional
shares of our common stock for no additional consideration if we issue shares of
our common stock at a price below $2.50 per share prior to May 23, 2003, such
that Special Situations' effective price per share of common stock will equal
the lowest price at which we issued shares. Under the Agreement and Waiver,
Special Situations is obligated to surrender for cancellation warrants to
purchase an aggregate of 600,000 shares of our common stock at a per share
exercise price of $3.00. The terms of this warrant include the downward
adjustment of the exercise price to equal 125% of the lowest price at which we
issue shares of our common stock (or securities convertible into common stock)
prior to May 23, 2003. In exchange, we are required to issue to Special
Situations, for no additional cash consideration, 1,005,670 shares of our common
stock. If we receive at least $3,000,000 in equity investment from the Lender
prior to April 1, 2003, the temporary waivers will become permanent, however if
we do not, the waivers will terminate, all of Special Situations' rights under
the Stock Purchase Agreement and the Registration Rights Agreement will return
and, subject to the stockholder approval requirements of any stock market on
which our common stock is then listed or quoted, we will be required to issue a
new warrant to purchase up to 600,000 shares of our common stock on terms
identical to the cancelled warrant except that the exercise price will be $1.70
per share. A copy of the Agreement and Waiver with Special Situations is
attached hereto as Exhibit 10.5.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
10.1 Note Purchase Agreement, dated as of October 23, 2002
10.2 Security Agreement, dated as of October 23, 2002
10.3 Form of Secured Promissory Note
10.4 Agreement and Waiver, dated as of October 22, 2002, between the Registrant
and The Tail Wind Fund, Ltd.
10.5 Agreement and Waiver, dated as of October 22, 2002, between the Registrant
and Special Situations Fund III, L.P., Special Situations Cayman Fund,
L.P. and Special Situations Private Equity Fund, L.P.
99.1 Press Release, dated October 24, 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
INTERLEUKIN GENETICS, INC.
(Registrant)
Date:
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Fenel M. Eloi, Chief Operating Officer,
Chief Financial Officer, Treasurer and
Secretary and Treasurer