EXHIBIT 10.5
AGREEMENT AND WAIVER
October 22, 2002
Reference is hereby made to that certain Purchase Agreement, dated as of
January 26, 2001 (the "Purchase Agreement"), by and between Interleukin
Genetics, Inc. (the "Company"), Special Situations Fund III, L.P. ("SSF"),
Special Situations Cayman Fund, L.P. ("SSCF") and Special Situations Private
Equity Fund, L.P. ("SSPEF" and together with SSF and SSCF, the "Investors") and
the Registration Rights Agreement, dated as of January 26, 2001, between the
Company and the Investors (the "Registration Rights Agreement").
WHEREAS, pursuant to the Purchase Agreement, the Investors purchased and
the Company issued and sold, (i) an aggregate of 1,200,000 shares of the
Company's common stock, $0.001 par value per share (the "Common Stock") at a
purchase price of $2.50 per share and (ii) warrants to purchase an aggregate of
up to 600,000 additional shares of Common Stock at an exercise price of $3.00
per share (the "Warrants");
WHEREAS, the Company is negotiating a Strategic Transaction (as defined
below) and in order to facilitate the consummation thereof, the Company and the
Investors have agreed, among other things, that (i) the Company will issue
Additional Registrable Securities to the Investors pursuant to Section 7.1 of
the Purchase Agreement, (ii) the Investors will surrender the Warrants for
cancellation, (iii) the Investors will waive certain rights under the Purchase
Agreement and the Registration Rights Agreement and (iv) certain terms and
conditions of the Purchase Agreement and the Registration Rights Agreement will
be amended upon the consummation of the Strategic Transaction; and
WHEREAS, contemporaneous with the execution hereof the Company is entering
into a Note Purchase Agreement (the "Note Purchase Agreement") with the
Strategic Partner (as defined below) providing for, among other things, the
Strategic Partner to advance up to $1,500,000 to the Company.
NOW, THEREFORE, in consideration for the mutual covenants contained herein
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and each Investor hereby agree as
follows:
9. Each Investor hereby represents and warrants to the Company as a
material inducement to the Company to enter into this Agreement that it
continues to hold, in the aggregate, at least 65% of the shares of Common Stock
originally issued to it pursuant to the Purchase Agreement. The Company hereby
represents and warrants to each Investor that contemporaneous with the execution
and delivery hereof, the Company is entering into an Agreement and Waiver with
The Tail Wind Fund, Ltd. in the form presented to the Investors herewith (the
"Other Investor Agreement").
10. Within five business days following the date hereof, the Investors
shall surrender the Warrants to the Company for cancellation and exchange as set
forth below. Within five business days following such surrender, the Company
shall issue and deliver to the Investors an aggregate of 1,005,670 additional
newly issued, fully paid and non-assessable shares of Common Stock (the
"Additional Shares"), which Additional Shares shall be deemed to be issued
pursuant to Section 7.1 of the Purchase Agreement (such that an aggregate of
2,205,670 shares of
Common Stock shall have been issued under the Purchase Agreement and the
effective Purchase Price for all such shares of Common Stock shall equal
approximately $1.36). Such Additional Shares shall therefore be "Additional
Registrable Securities" (as defined in the Registration Rights Agreement) and
shall be issued pro rata to the Investors based upon the number of shares of
Common Stock each Investor originally purchased under the Purchase Agreement.
Upon the delivery of certificates representing the Additional Shares to the
Investors as provided herein, the Warrants shall terminate and no longer be
outstanding. The Company hereby represents and warrants to each Investor that
the Additional Shares have been duly authorized and, upon issuance pursuant to
the terms of this Agreement, will be validly issued, fully paid and
non-assessable and subject to no lien, claim, encumbrance or restriction
whatsoever, other than restrictions arising pursuant to applicable securities
laws.
11. From the date hereof through April 1, 2003 (the "Waiver Termination
Date"), the Investors hereby waive (i) any and all rights under Section 7 of the
Purchase Agreement and such section shall be of no force or effect with respect
to any securities issued or deemed to be issued by the Company on or prior to
the Waiver Termination Date, (ii) any and all rights under Section 2(c)(i)(C) of
the Registration Rights Agreement and such section shall be of no further force
or effect through the Waiver Termination Date, and (iii) any and all rights
under Section 2(c)(i) of the Registration Rights Agreement to receive additional
shares of Common Stock in payment of liquidated damages accruing through the
Waiver Termination Date. Except as set forth in Section 5 hereof, the waiver set
forth in this Section 3 shall be of no further force and effect from and after
the Waiver Termination Date.
12. In the event that the Company has not entered into a Strategic
Transaction prior to the Waiver Termination Date, but has reached an agreement
in principal with the Strategic Partner for a Strategic Transaction prior to
such date, the Company shall provide the Investors with reasonably prompt notice
thereof and the Waiver Termination Date shall be automatically extended to May
1, 2003 without any further action on the part of the parties hereto.
13. In the event that the Company enters into a Strategic Transaction on
or prior to the Waiver Termination Date, the Company shall provide the Investors
with reasonably prompt notice thereof, and from and after the Waiver Termination
Date, (i) Section 7 shall be deleted in its entirety from the Purchase
Agreement, (ii) Section 2(c)(i)(C) shall be deleted in its entirety from the
Registration Rights Agreement and (iii) in Section 2(c)(i) of the Registration
Rights Agreement the phrase ", at the option of the Investors, in lawful money
of the United States or in shares of Common Stock at the Market Price (as
defined in the Purchase Agreement)," shall be replaced by the phrase " in lawful
money of the United States".
14. In the event that the Company has not entered into a Strategic
Transaction on or prior to the Waiver Termination Date (as the same may be
extended as provided in Section 4 above), within five business days thereafter
the Company shall issue to the Investors new warrants to purchase an aggregate
of 600,000 shares of Common Stock at an exercise price of $1.70 per share and
otherwise in substantially the same form as the Warrants (the "New Warrants").
The shares of Common Stock issuable upon exercise of the New Warrants shall be
deemed to be "Additional Registrable Securities" under the Registration Rights
Agreement. In the event that stockholder approval of the issuance of the New
Warrants is then required under the rules and regulation of any stock exchange
or stock market on which the Company's securities are then listed, quoted or
admitted to trading, the Company shall use its best efforts to obtain such
stockholder approval at the first annual meeting of stockholders held after the
Waiver Termination Date and the New Warrants shall not be issued until such
stockholder approval is obtained.
15. For purposes of this Agreement, the term "Strategic Transaction" shall
mean the sale and issuance by the Company to the Strategic Partner of the
Company's equity or equity-related securities resulting in gross proceeds to the
Company on or prior to the Waiver Termination Date of at least Three Million
Dollars ($3,000,000). For purposes of this Agreement, the term "Strategic
Partner" shall mean the major Consumer Products company with whom the Company is
contemporaneously herewith entering into the Note Purchase Agreement and its
affiliates and related parties.
16. Miscellaneous.
a. Notices. All notices, requests, consents and other communications
hereunder shall be in writing, and given in accordance with Section 9.4 of the
Purchase Agreement.
b. Governing Law. This Agreement and the rights and obligations of
the parties hereunder shall be governed by and construed in accordance with the
laws of New York, without giving effect to the conflict of law principles
thereof.
c. Effect on Prior Agreements. Except as expressly modified as set
forth herein, the Purchase Agreement and the Registration Rights Agreement shall
remain in full force and effect.
d. Severability. If any court of competent jurisdiction determines
any provision, or any portion thereof, of this Agreement to be unenforceable or
invalid, then such provision shall be deemed limited to the extent that such
court deems it valid or enforceable and the remaining provisions of this
Agreement shall nevertheless remain in full force and effect.
e. Counterparts. This Agreement may be executed in any number of
counterparts, and by different parties hereto on separate counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
f. Expenses. Not later than one business day after the date hereof,
the Company shall pay the reasonable legal fees and disbursements of counsel to
the Investors incurred in connection with the negotiation and documentation of
this Agreement; provided that such fees and disbursements shall in no event
exceed $3,000.
g. Amendment. The Company agrees that it shall not amend or modify,
or enter into any transaction which directly or indirectly amends or modifies,
or has the effect of amending or modifying, the Other Investor Agreement unless
the Investor is afforded equivalent treatment.
h. SEC Reporting. The Company shall prepare and file with the
Securities and Exchange Commission a Current Report on Form 8-K (the "8-K")
disclosing and attaching this Agreement within five business days of the date
hereof. The Company represents and warrants to the Investor that it has not
provided, and covenants that it will not provide, any non-public information to
the Investor (except for the existence of this Agreement, the Other Investor
Agreement and the Note Purchase Agreement, all of which will be disclosed in the
8-K).
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IN WITNESS WHEREOF, the undersigned have executed this Agreement and
Waiver as of the date first written above.
INTERLEUKIN GENETICS, INC.
By: /s/ ▇▇▇▇▇ ▇. ▇▇▇▇
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Name: ▇▇▇▇▇ ▇. ▇▇▇▇
Title: Chief Financial Officer and
Chief Operating Officer
SPECIAL SITUATIONS FUND III, L.P.
By: /s/ ▇▇▇▇▇ Greenhouse
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Name: ▇▇▇▇▇ Greenhouse
Title: General Partner
SPECIAL SITUATIONS CAYMAN FUND, L.P.
By: /s/ ▇▇▇▇▇ Greenhouse
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Name: ▇▇▇▇▇ Greenhouse
Title: General Partner
Special Situations Private Equity Fund, L.P.
By: /s/ ▇▇▇▇▇ Greenhouse
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Name: ▇▇▇▇▇ Greenhouse
Title: General Partner