-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Fq1h/J1Qy1kUAlYXK0mahhQDFZTf4fFVH9ITQE13oPrk1/AKWkuLK2A9naIxau6w LZ6zR5g0Ogc6mEzZKhRsDg== /in/edgar/work/20000814/0000950134-00-007055/0000950134-00-007055.txt : 20000921 0000950134-00-007055.hdr.sgml : 20000921 ACCESSION NUMBER: 0000950134-00-007055 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20000630 FILED AS OF DATE: 20000814 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERLEUKIN GENETICS INC CENTRAL INDEX KEY: 0001037649 STANDARD INDUSTRIAL CLASSIFICATION: [8071 ] IRS NUMBER: 943123681 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-23413 FILM NUMBER: 700212 BUSINESS ADDRESS: STREET 1: 100 NE LOOP 410 STREET 2: STE 820 CITY: SAN ANTONIO STATE: TX ZIP: 78216-4749 BUSINESS PHONE: 2103496400 MAIL ADDRESS: STREET 1: 100 NE LOOP 410 STREET 2: STE 820 CITY: SAN ANTONIO STATE: TX ZIP: 78216 FORMER COMPANY: FORMER CONFORMED NAME: MEDICAL SCIENCE SYSTEMS INC DATE OF NAME CHANGE: 19971003 10-Q 1 e10-q.txt FORM 10-Q FOR QUARTER ENDED JUNE 30, 2000 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 [X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES AND EXCHANGE ACT OF 1934 For the quarterly period ended: JUNE 30, 2000 Commission File Number: 333-37441 INTERLEUKIN GENETICS, INC. (Name of Issuer in its Charter) DELAWARE 94-3123681 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 135 BEAVER STREET, 2ND FLOOR WALTHAM, MA 02452 (Address of principal executive offices)(Zip Code) Issuer's Telephone Number: (781) 398-0700 Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES (X) NO ( ) The number of shares outstanding of the issuer's common stock as of July 31, 2000 is 18,356,439. 2 ================================================================================ INTERLEUKIN GENETICS, INC. FORM 10-Q INDEX PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Balance Sheets at June 30, 2000 (Unaudited) and December 31, 1999..........................................1 Condensed Consolidated Statements of Operations (Unaudited) for the three and six months ended June 30, 2000 and June 30, 1999.......................2 Condensed Consolidated Statements of Cash Flows (Unaudited) for the six months ended June 30, 2000 and June 30, 1999.....................................3 Notes to Condensed Consolidated (Unaudited) Financial Statements.........................4 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations....................................................................6 Item 3. Quantitative and Qualitative Disclosure about Market Risk...............................12 PART II. OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders.....................................13 Item 5. Other Information.......................................................................13 Item 6. Exhibits and Reports on Form 8-K........................................................14
i 3 PART I FINANCIAL INFORMATION INTERLEUKIN GENETICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS
June 30, 2000 December 31, 1999 ---------------- ----------------- ASSETS (unaudited) Cash and cash equivalents $ 586,965 $ 668,616 Marketable securities 4,930,800 1,987,500 Accounts receivable, net of allowance for doubtful accounts of $47,804 at June 30, 2000 and $55,300 at December 31, 1999 118,202 103,002 Prepaid expenses 177,693 132,560 ---------------- ---------------- Total current assets 5,813,660 2,891,678 Furniture and equipment, net 200,824 284,481 ---------------- ---------------- TOTAL ASSETS $ 6,014,484 $ 3,176,159 ================ ================ LIABILITIES AND SHAREHOLDERS' EQUITY Accounts payable $ 125,752 $ 134,968 Notes payable -0- 1,797 Accrued expenses 748,971 400,281 Deferred revenue 256,108 322,812 Current portion of capitalized lease obligations 58,953 63,877 ---------------- ---------------- Total current liabilities 1,189,784 923,735 Capitalized lease obligations, net 66,250 99,246 ---------------- ---------------- Total liabilities 1,256,034 1,022,981 Preferred Stock, no par value 5,000,000 shares authorized none issued and outstanding -0- -0- Common stock, no par value 50,000,000 shares authorized; 18,334,016 shares at June 30, 2000 and 17,223,302 shares at December 31, 1999 outstanding 28,302,588 23,177,865 Accumulated deficit (23,547,860) (21,012,188) Other comprehensive income 3,722 (12,499) ---------------- ---------------- Total shareholders' equity 4,758,450 2,153,178 ---------------- ---------------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 6,014,484 $ 3,176,159 ================ ================
See accompanying notes to condensed consolidated financial statements. 1 4 INTERLEUKIN GENETICS, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)
Three Months Ended Six Months Ended June 30, 2000 June 30, 1999 June 30, 2000 June 30, 1999 ------------- ------------- ------------- ------------- Sales $ 82,119 $ 129,335 $ 167,950 $ 222,073 Cost of sales 56,357 43,206 120,425 76,117 ------------- ------------- ------------- ------------- Gross profit 25,762 86,129 47,525 145,956 Expenses: Research & development 357,570 545,819 916,066 1,100,944 Selling, general & administrative 1,051,729 693,418 1,794,636 1,402,571 ------------- ------------- ------------- ------------- Total expenses 1,409,299 1,239,237 2,710,702 2,503,515 ------------- ------------- ------------- ------------- Loss from operations (1,383,537) (1,153,108) (2,633,177) (2,357,559) Other income (expense): Interest income 101,227 26,744 141,563 44,336 Interest expense (6,346) (17,966) (13,705) (40,547) Other income (981) 2,642 (353) 6,957 ------------- ------------- ------------- ------------- Total other income (expense) 93,900 11,420 127,505 10,746 ------------- ------------- ------------- ------------- NET LOSS $ (1,289,637) $ (1,141,688) $ (2,535,672) $ (2,346,813) ============= ============= ============= ============= Reconciliation of net loss to net loss applicable to common stock: Net Loss $ (1,289,637) $ (1,141,688) $ (2,535,672) $ (2,346,813) Amortization of the value of the beneficial conversion feature of the preferred stock -0- (1,234,854) -0- (1,234,854) ------------- ------------- ------------- ------------- Net loss applicable to common stock $ (1,289,637) $ (2,376,542) $ (2,535,672) $ (3,581,667) ============= ============= ============= ============= Basic and diluted loss per share $ (0.07) $ (0.43) $ (0.14) $ (0.64) ============= ============= ============= ============= Weighted average common shares outstanding 18,321,651 5,558,668 18,105,348 5,553,569 ============= ============= ============= =============
See accompanying notes to condensed consolidated financial statements. 2 5 INTERLEUKIN GENETICS, INC. AND SUBSIDIARIES CONDENSED STATEMENT OF CASH FLOWS
Six Months Ended June 30, 2000 June 30, 1999 ------------- ------------- (unaudited) (unaudited) CASH FLOW FROM OPERATING ACTIVITIES Net loss $ (2,535,672) $ (2,346,813) Adjustments to reconcile net loss to net cash used in operating activities: Depreciation and amortization 83,657 99,562 Issuance of stock options for services rendered 156,114 -0- (Increase) decrease in: Accounts receivable (15,200) 40,111 Prepaid expenses (45,133) 46,073 Increase (decrease) in: Accounts payable (9,216) (134,903) Accrued expenses 348,690 4,967 Notes payable (1,797) -0- Deferred revenue (66,704) 95,288 ------------- ------------- Net cash used in operating activities (2,085,261) (2,195,715) ------------- ------------- CASH FLOWS FROM INVESTING ACTIVITIES Purchases of marketable securities (3,930,907) -0- Proceeds from maturity of investments 1,003,828 -0- Purchases of furniture and equipment -0- (5,175) Decreases (Increases) in other assets -0- 530,000 ------------- ------------- Net cash provided by (used in) investing activities (2,927,079) 524,825 ------------- ------------- CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from sale of common stock 4,968,609 10,613 Sale of preferred stock -0- 5,000,000 Offering costs of preferred stock issuance -0- (251,580) Principal payments of notes payable -0- (30,976) Principal payments of long-term debt -0- (529,288) Principal payments of capitalized lease obligations (37,920) (47,272) ------------- ------------- Net cash provided by financing activities 4,930,689 4,151,497 ------------- ------------- Net increase (decrease) in cash and equivalents (81,651) 2,480,607 Cash and equivalents, beginning of period 668,616 2,432,271 ------------- ------------- CASH AND EQUIVALENTS, END OF PERIOD $ 586,965 $ 4,912,878 ============= ============= Interest paid $ 13,705 $ 40,547 NON-CASH ITEMS Stock issued to placement agent -0- $ 500,000 Common stock warrants issued to placement agent -0- $ 3,080,000
See accompanying notes to condensed consolidated financial statements. 3 6 NOTE 1 - PRESENTATION OF INTERIM INFORMATION The accompanying unaudited consolidated financial statements have been prepared by Interleukin Genetics, Inc., the Company, in accordance with generally accepted accounting standards for interim financial reporting and with Securities Exchange Commission rules and regulations for form 10-Q. It is recommended that these interim consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year ended December 31, 1999. The interim financial data are unaudited; however, in the opinion of the management of Interleukin Genetics, Inc. and subsidiaries (the "Company"), the accompanying unaudited consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to make the interim financial information not misleading. All significant intercompany transactions and accounts have been eliminated in consolidation. Results for interim periods are not necessarily indicative of those to be expected for the full year. The accompanying financial statements of the Company have been prepared on the basis of accounting principles applicable to a going concern. Since its inception, the Company has incurred cumulative net losses of approximately $23.5 million, including losses of approximately $1.3 million during the second quarter of 2000 and $2.5 million during the six months ended June 30, 2000. For the six months ended June 30, 2000, the Company reported negative cash flows from operating activities of approximately $2.1 million. During the six months ended June 30, 2000, the Company raised approximately $5.0 million from a common stock private placement and shareholder stock option exercises. During 1999, the Company raised approximately $5.1 million from a preferred stock offering and shareholder stock option exercises. The Company believes that their current cash resources are more than adequate to fund operations throughout the year 2000, however, absent additional equity or debt financings, it also believes that those resources will be depleted in September 2001. To address these future capital resources requirements, management of the Company is currently in discussions with several potential strategic partners regarding the up-front funding of certain of the Company's research and development programs. While the Company continues to pursue sources of capital and strategic partnerships, there can be no assurance that they will be successful in these efforts. Commercial success of genetic susceptibility tests will depend upon their acceptance as medically useful and cost-effective by patients, physicians, dentists, other members of the medical and dental community, and third-party payers. It is uncertain whether current genetic susceptibility tests or others that the Company may develop will gain commercial acceptance on a timely basis. Research in the field of disease predisposing genes and genetic markers is intense and highly competitive. The Company has many competitors in the United States and abroad which have considerably greater financial, technical, marketing, and other resources available. If the Company does not discover disease predisposing genes or genetic markers and develop susceptibility tests and launch such services or products before their competitors, then revenues may be reduced or eliminated. The Company's ability to successfully commercialize genetic susceptibility tests depends on obtaining adequate reimbursement for such products and related treatment from government and private health care insurers and other third-party payers. Doctors' decisions to recommend genetic susceptibility tests will be influenced by the scope and 4 7 reimbursement for such tests by third-party payers. If both third-party payers and individuals are unwilling to pay for the test, then the number of tests performed will significantly decrease, therefore resulting in a reduction of revenues. In July 1999, the Company entered into an agreement with Sheffield University, whereby the Company will undertake the development and commercialization of certain discoveries resulting from Sheffield University's research. The agreement is non-cancelable for discoveries on which the parties have reached a specific agreement, but may be terminated with or without cause by either party upon six-months notice with respect to new discoveries on which the parties have not yet reached agreement. If Sheffield University terminated the agreement, such termination could make the discovery and commercial introduction of new products more difficult or unlikely. NOTE 2 - EARNINGS PER SHARE Statement of Financial Accounting Standards (SFAS) No. 128 (SFAS 128), "Earnings per Share," outlines methods for computing and presenting earnings per share. SFAS 128 requires a calculation of basic and diluted earnings per shares for all periods presented. As the Company had losses for the three and six months ended June 30, 2000 and 1999, options and warrants have been excluded from the calculation of the dilutive weighted average shares outstanding as they are antidilutive in loss periods. NOTE 3 - EQUITY Pursuant to a private placement which occurred in January 2000, the Company issued 832,667 shares of its Common Stock, no par value, for $5 million. After payment of offering costs, net proceeds to the Company amounted to $4.7 million. NOTE 4 - SEGMENT INFORMATION The Company has adopted SFAS No. 131 (SFAS 131), "Disclosures about Segments of an Enterprise and Related Information." SFAS 131 establishes standards for reporting information about operating segments in annual and interim financial statements, requiring that public business enterprises report financial and descriptive information about its reportable segments based on a management approach. SFAS 131 also establishes standards for related disclosures about products and services, geographic areas and major customers. In applying the requirements of this statement, each of the Company's geographic areas described below were determined to be an operating segment as defined by the statement, but have been aggregated as allowed by the statement for reporting purposes. As a result, the Company continues to have one reportable segment, which is the development of genetic susceptibility tests and therapeutic targets for common diseases. NOTE 5 - TERMINATION OF DUMEX AGREEMENT In April 1999, the Company entered into an Exclusive Independent Representative and Derivation Agreement (the Representative Agreement) with Dumex-Alpharama A/S (Dumex), in which Dumex agreed to act as an independent representative of the Company for the marketing and promotion of the PST test in certain European countries. In connection with the Representative Agreement, Dumex paid the Company $150,000 in consideration for the territory rights granted therein. The Company had recorded $85,000 of such amount as revenue through June 30, 2000. In June 2000, the Company and Dumex entered into a termination and settlement agreement (the Termination Agreement) related to the Representative Agreement. Under the terms of the Termination Agreement, Dumex is required to pay the Company all amounts collected for PST tests and sample collection materials and provide the Company a list of the names and addresses of all customers to whom Dumex obtained orders or sold PST tests or sample collection materials. Under the terms of the Termination Agreement, the Company is required to pay Dumex $159,000 and reimburse Dumex for all PST Sample Collection Kits that Dumex has in stock at 50% of the original price paid. The Company recorded a $98,000 charge to selling, general and administrative expense in the quarter ended June 30, 2000. 5 8 The following table presents information about the Company by geographic area.
For the Six Months Ended June 30, 2000 1999 ------------- ------------- (unaudited) (unaudited) Total Revenues: United States $ 141,187 $ 169,427 France 15,912 20,910 Other foreign 10,851 31,736 ------------- ------------- Total $ 167,950 $ 222,073 ============= ============= Operating Loss: United States $ (2,238,797) $ (1,791,745) France (252,316) (212,180) Other foreign (172,064) (353,634) ------------- ------------- Total $ (2,663,177) $ (2,357,559) ============= =============
As of June 30, 2000 1999 ---------------- ---------------- (unaudited) (unaudited) Assets: United States $ 6,014,484 $ 5,442,925 France -0- -0- Other foreign -0- -0- ---------------- ---------------- Total $ 6,014,484 $ 5,442,925 ================ ================
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Certain statements contained in this Form 10-Q are "forward-looking statements" within the meaning of the Section 27A of the Securities Act and Section 21E of the Exchange Act. Specifically, all statements other than statements of historical fact included in this Form 10-Q regarding the Company's financial position, business strategy and plans and objectives of management of the Company for future operations are forward-looking statements. These forward-looking statements are based on the beliefs of the Company's management, as well as assumptions made by and information currently available to the Company's management. When used in this report, the words "anticipate," "believe," "estimate," "expect" and "intend" and words or phrases of similar import, as they relate to the Company or its subsidiaries or Company management, are intended to identify forward-looking statements. Such statements reflect the current view of the Company with respect to future events and are subject to certain risks, uncertainties and assumptions related to certain factors including, without limitation, risks inherent to developing genetic tests once genes have been discovered, the Company's limited sales and marketing experience, risk of market acceptance of the Company's products, risk of technology and products obsolescence, delays in development of products, reliance on partners, risks related to third-party reimbursement, risks regarding government regulation, competitive risks and those risks and uncertainties described in the Company's Registration Statement on Form S-3 filed July 23, 1999 (File No. 333-83631), as amended on July 25, 1999, and in other filings made by the Company with the Securities and Exchange Commission (collectively, "cautionary statements"). Although the Company believes that its expectations are reasonable, it can give no assurance that such expectations will prove to be correct. Based upon changing conditions, should any one or more of these risks or uncertainties materialize, or should any underlying assumptions prove incorrect, actual results may vary materially from those described herein as anticipated, believed, estimated, expected, or intended. All subsequent written and oral forward-looking statements attributable to the Company or persons acting on its behalf are expressly qualified in their entirety by the applicable cautionary statements. The Company does not intend to update these forward-looking statements. The following comments should be read in conjunction with the Company's consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q. 6 9 GENERAL OVERVIEW Interleukin Genetics, Inc., a Delaware corporation ("ILGN" or the "Company"), develops and commercializes genetic diagnostic tests and medical research tools. The Company's efforts are focused on genetic factors that affect the rate of progression of clinical disease through their influence on common host systems. The Company's first genetic test, PST(R), a test predictive of risk for periodontal disease, is currently marketed in the United States, Europe and Israel. Products under development include tests predictive of risk for osteoporosis, coronary artery disease, diabetic retinopathy, asthma, pulmonary fibrosis, and meningitis/sepsis. The Company believes by combining genetic risk assessment with specific therapeutic strategies, improved clinical outcomes and more cost-effective management of these common diseases are achieved. ILGN also develops and licenses its medical research tools, including BioFusion(R), to pharmaceutical companies. BioFusion, a proprietary enabling system for diagnostic and drug discovery and development, is a computer modeling system that integrates genetic and other sub-cellular behavior, system functions, and clinical symptoms to simulate complex diseases. This system allows useful information to be derived from rapidly increasing databases of gene expression being generated in companies and academic centers worldwide. Pursuant to a private placement which occurred in January 2000, the Company issued 832,667 shares of its Common Stock, no par value, for $5 million. After payment of offering costs, net proceeds to the Company amounted to $4.7 million. Additionally, the Company is in discussions with a number of potential strategic partners and, if such discussions are successfully completed, the Company believes this will result in the up-front funding of some of its programs. There can be no assurance that any of these discussions will be completed, or if such discussions are completed, that there will be up-front funding of the Company's programs. The Company has followed a strategy of working with strategic partners at the fundamental discovery stage. This strategy has given the Company access to discoveries while reducing up-front research expenses. Since 1994, the Company has had a strategic alliance with the Department of Molecular and Genetic Medicine at Sheffield University in the United Kingdom (Sheffield). Under this alliance, Sheffield has provided to the Company the fundamental discovery and genetic analysis from Sheffield's research laboratories, and the Company has focused on product development, including clinical trials, and the commercialization of these discoveries. During the third quarter of 1999, the Company entered into a new arrangement with Sheffield. This new arrangement replaced the research and development agreement that had been in place with Sheffield since 1996. Pursuant to the new arrangement, the Company issued an aggregate of 475,000 shares of its common stock to Sheffield and certain of its investigators in exchange for the relinquishment by Sheffield of its net proceeds interests under certain agreements with the Company. In June 2000, the Company terminated its arrangement with Dumex under which Dumex had agreed to market and sell PST in nine European countries. The Company is currently in discussions to enter into a similar marketing arrangement for PST with another European distributor of oral health care products. However, there can be no assurance that the Company will be able to reach a marketing arrangement for PST in Europe. 7 10 In March 1999, the Company entered into an agreement with the Straumann Company, a leading supplier of dental implants, to market and sell PST in the United States and Puerto Rico. Straumann launched its PST promotional activities in April 1999. In December 1998, the Company signed an agreement with Washington Dental Service, a member of the Delta Dental Plans Association, for the purchase of 1,200 PST tests. The tests will be used in a study, sponsored by Washington Dental Service, in collaboration with the University of Washington School of Dentistry and Interleukin Genetics. This study is expected to provide scientific and financial data regarding the use of PST as a treatment-planning tool to assess risk before actual damage occurs. The data from the study may be available for analysis in early 2001. In December 1997, the Company entered into an agreement with Medicadent, a French corporation ("Medicadent"), to market and sell PST in France. In August 1998, the Company entered into an agreement with H.A. Systems, Ltd. to market and sell PST in Israel. Medicadent commenced offering PST in France in June 1998, and H.A. Systems commenced offering PST in Israel in April 1999. No assurances can be made regarding the commercial acceptance of PST. The Company has been awarded four U.S. patents, and has sixteen U.S. patent applications pending. The U.S. Patent & Trademark Office awarded patents to the Company for its osteoporosis and periodontal disease susceptibility tests and two patent awards for its biologic modeling technology called BioFusion(R). BioFusion is used by the Company in the discovery, development and commercialization process. The Company's disease susceptibility patents seek to protect the use of its various genetic markers as an indicator of risk for the specific disease covered, as well as protecting various therapeutic applications which these markers may have. The Company has been granted a number of corresponding foreign patents and has filed foreign counterparts of its U.S. applications. Where the Company has originally filed in another country, it has filed and plans to continue to file U.S. and other foreign counterparts. RESULTS OF OPERATIONS COMPARISON OF THREE MONTHS ENDED JUNE 30, 2000 TO THREE MONTHS ENDED JUNE 30, 1999 Gross revenue for the three months ended June 30, 2000 was $82,119 compared to $129,335 for the three months ended June 30, 1999, a decrease of 37%. In June 1999, the Company received an up-front payment of $150,000 from Dumex-Alpharma A/S for the rights to distribute the Company's genetic susceptibility test for periodontal disease, PST(R), in nine European countries. The Company recognized $50,000 of this payment as revenue during the three months ended June 30, 1999 to offset direct expenses associated with the agreement. There has been no revenue recognized from this source during 2000. In the three months ended June 30, 2000, the Company conducted 588 PST tests compared to 586 tests in the same period in 1999. Cost of sales was $56,357 for the three months ended June 30, 2000 compared to $43,206 for 1999. Gross profit margin was 31% in the three months ended June 30, 2000 compared to 67% for the year earlier period. The decrease in gross profit is primarily caused by the decreased distribution fees discussed above and increased lab charges. For the three months ended June 30, 2000, the Company had research and development expenses of $357,570 as compared to $545,819 for the second quarter of 8 11 1999. During the second quarter of 2000, the Company incurred $79,454 in expense for clinical trials as compared to $146,391 in 1999. Also, research and development expense was reduced by a non-cash credit of $105,132 in the quarter ended June 30, 2000 for stock issued for services rendered. The Company has issued options to purchase common stock to Sheffield as a component of its research and development agreements. The Company follows variable plan accounting for such options and has recorded a credit in the quarter ended June 30, 2000 for the decrease in the value of the options. Selling, general and administrative expenses were $1,051,729 in the second quarter of 2000 compared to $693,418 in the second quarter of 1999, an increase of 52%. Effective June 23, 2000, the Company terminated its relationship with Dumex. The Company accrued expenses of $98,200 associated with this termination in the period. The remainder of the increase is primarily due to the non-recurring costs of relocating the corporate offices and personnel to Waltham. Interest income in the second quarter of 2000 was $101,227 compared to $26,744 in the second quarter of 1999. This increase reflects higher balances of cash in the second quarter of 2000 compared to the year earlier period. Interest expense of $6,346 was incurred during the quarter ended June 30, 2000, compared to $17,966 in the same period in 1999. Net loss increased to $1,289,637 for the second quarter of 2000 compared to a net loss of $1,141,688 for the second quarter of 1999, an increase of $147,949, due to the reasons set forth above. The Company anticipates that it will continue to experience losses unless its genetic testing revenues grow substantially from current levels and its efforts to develop revenue from licensing its biologic modeling research tools are successful. In addition, if the Company is successful in reaching agreements with strategic partners on developing additional genetic tests, milestone payments, if any, from these strategic partners will help cover the Company's research and development expense and could also reduce the net loss. No assurances can be made that the Company will be able to increase its revenues, either from genetic tests or licensing revenue, or that it will be able to reach collaborative partnering agreements. COMPARISON OF SIX MONTHS ENDED JUNE 30, 2000 TO SIX MONTHS ENDED JUNE 30, 1999 Gross revenue for the six months ended June 30, 2000 was $167,950 compared to $222,073 for the same period ended June 30, 1999, a decrease of 24%. In June 1999, the Company received an up-front payment of $150,000 from Dumex-Alpharma A/S for the rights to distribute the Company's genetic susceptibility test for periodontal disease, PST(R), in nine European countries. The Company recognized $50,000 of this payment as revenue during the six months ended June 30, 1999 to offset direct expenses associated with the agreement. There has been no revenue recognized from this source during 2000. In the six months ended June 30, 2000, the Company conducted 1,036 PST tests compared to 1,096 tests in the same period in 1999. Cost of sales was $120,425 for the six months ended June 30, 2000 compared to $76,117 for 1999. Gross profit margin was 28% in the six months ended June 30, 2000 compared to 66% for the year earlier period. The decrease in gross profit margin was a result of the decrease in distributor fee revenue and the start of distributor fees being paid during the six months ended June 30, 2000. There were no distributor fees paid during the first six months of 1999. For the six months ended June 30, 2000, the Company had research and development expenses of $916,066 as compared to $1,100,944 for the first half of 1999. The year-earlier expense included $324,462 for conducting several large clinical trials, compared to $111,815 in expense for clinical trials in the first half of 2000. Offsetting the 9 12 decreased cost of clinical trials was a non-cash charge of $116,754 in the six months ended June 30, 2000 for the cost of stock issued for services rendered. The Company has issued options to purchase common stock to Sheffield as a component of its research and development's agreements. The Company follows variable plan accounting for such options and has recorded a credit in the quarter ended June 30, 2000 for the decrease in the value of the options. There was no charge in the six months ended June 30, 1999 for stock issued. Selling, general and administrative expenses were $1,794,636 in the first six months of 2000 compared to $1,402,571 in the first six months of 1999, an increase of 21%. Effective June 23, 2000, the Company terminated its relationship with Dumex. The Company accrued expenses of $98,200 associated with this termination in the period. The remainder of the increase is primarily due to the non-recurring costs of relocating the corporate offices and personnel to Waltham. Interest income in the first six months of 2000 was $141,563 compared to $44,336 in the first six months of 1999. This increase reflects higher balances of cash in the first six months of 2000 compared to the year earlier period. Interest expense of $13,705 was incurred during the six months ended June 30, 2000, compared to $40,547 in the same period in 1999. Net loss increased to $2,535,672 for the first half of 2000 compared to a net loss of $2,346,813 for the first half of 1999, an increase of $188,859, due to the reasons set forth above. The Company anticipates that it will continue to experience losses unless its genetic testing revenues grow substantially from current levels and its efforts to develop revenue from licensing its biologic modeling research tools are successful. In addition, if the Company is successful in reaching agreements with strategic partners on developing additional genetic tests, milestone payments, if any, from these strategic partners will help cover the Company's research and development expense and could also reduce the net loss. No assurances can be made that the Company will be able to increase its revenues, either from genetic tests or licensing revenue, or that it will be able to reach collaborative partnering agreements. LIQUIDITY AND CAPITAL RESOURCES Pursuant to a $5 million private placement in January 2000, the Company issued 832,667 shares of Common Stock, no par value, which generated net proceeds of approximately $4.7 million. Additionally, shareholder stock option exercises generated approximately $0.2 million during the first quarter of 2000. During 1999, the Company raised approximately $5.1 million from preferred stock offering and shareholder stock option exercises. Since its inception, the Company has incurred cumulative net losses of approximately $23.4 million, including losses of approximately $1.2 million during the six months ended June 30, 2000. Net cash used in operating activities was $2,085,261 during the three months ended June 30, 2000 and $2,195,715 during the same period of the prior fiscal year. As of June 30, 2000, the Company had cash, cash equivalents and marketable securities of $5,517,765. The Company currently does not have any commitments for material capital expenditures. The Company's obligation at June 30, 2000 for capitalized lease obligations totaled $125,203, of which $66,250 is classified as long-term and $58,953 is classified as current. The Company anticipates that its existing cash and cash equivalents, together with anticipated interest income and revenue, will be sufficient to conduct its operations as 10 13 planned until September 30, 2001. However, the Company's future capital requirements are anticipated to be substantial, and the Company does not have commitments for additional capital at this time. Such capital requirements are expected to arise from the commercial launch of additional genetic tests, continued marketing and sales efforts for PST, continued research and development efforts, the protection of the Company's intellectual property rights (including preparing and filing of patent applications), as well as operational, administrative, legal and accounting expenses. THERE CAN BE NO ASSURANCE THAT THE COMPANY WILL BE ABLE TO RAISE ANY ADDITIONAL NECESSARY CAPITAL. IF ADDITIONAL AMOUNTS CANNOT BE RAISED, THE COMPANY WOULD SUFFER MATERIAL ADVERSE CONSEQUENCES TO ITS BUSINESS, FINANCIAL CONDITION AND RESULTS OF OPERATIONS AND WOULD LIKELY BE REQUIRED TO SEEK PROTECTION UNDER THE UNITED STATES BANKRUPTCY LAWS. SEE Note 1 of the Financial Statements included herein. The Company's Common Stock is currently listed on the NASDAQ SmallCap Market and the Boston Stock Exchange. If the Company fails to maintain the qualification for its Common Stock to trade on the NASDAQ SmallCap Market or the Boston Stock Exchange, its Common Stock could be subject to delisting. During 1999, the Company received several notices from The Nasdaq Stock Market, Inc. ("NASDAQ") stating that the Company was not in compliance with certain of the continued listing requirements of the NASDAQ SmallCap Market. The Company believes that it currently complies with the continued listing requirements of the NASDAQ SmallCap Market. However, there can be no assurance that the Company will maintain the qualifications for continued listing on the NASDAQ SmallCap Market. If the Company's shares are not listed on the NASDAQ SmallCap Market as intended, trading, if any, would be conducted in the over-the-counter market in the so-called "pink sheets" or the OTC Bulletin Board, which was established for securities that do not meet the NASDAQ SmallCap Market's listing requirements. Consequently, selling the Common Stock of the Company would be more difficult because smaller quantities of shares could be bought and sold, transactions could be delayed, and security analysts' and news media's coverage of the Company may be reduced. These factors could result in lower prices and larger spreads in the bid and ask prices for shares of Common Stock. Such NASDAQ delisting would also greatly impair the Company's ability to raise additional necessary capital through equity or debt financing. If the Common Stock of the Company is not listed on the NASDAQ SmallCap Market and/or the Boston Stock Exchange, it may become subject to Rule 15g-9 under the Exchange Act. That rule imposes additional sales practice requirements on broker-dealers that sell low-priced securities to persons other than established customers and institutional accredited investors. For transactions covered by this rule, a broker-dealer must make a special suitability determination for the purchaser and have received the purchaser's written consent to the transaction prior to sale. Consequently, the rule may affect the ability of broker-dealers to sell the Common Stock and affect the ability of holders to sell their shares of Common Stock of the Company in the secondary market. The SEC's regulations define a "penny stock" to be any equity security that has a market price less than $5.00 per share or with an exercise price of less than $5.00 per share, subject to certain exceptions. The penny stock restrictions will not apply to our shares if they are listed on the NASDAQ SmallCap Market or the Boston Stock Exchange and we provide certain price and volume information on a current and continuing basis, or meet required minimum net tangible assets or average revenue criteria. There can be no assurance that the shares of Common Stock of the Company will qualify for exemption 11 14 from these restrictions. If such shares were subject to the penny stock rules, the market liquidity for the shares could be adversely affected. Historically, the Common Stock of the Company has experienced low trading volumes. The market price of the Common Stock also has been highly volatile and it may continue to be highly volatile as has been the case with the securities of other public biotechnology companies. Factors such as announcements by the Company or its competitors concerning technological innovations, new commercial products or procedures, proposed government regulations and developments or disputes relating to patents or proprietary rights may substantially affect the market price of the Company's securities. Changes in the market price of the Common Stock may bear no relation to the Company's actual operational or financial results. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK The Company maintains an investment portfolio consisting of securities of U.S. Treasury Notes. The securities held in the Company's investment portfolio are subject to interest rate risk. Changes in interest rates affect the fair market value of these securities. After a review of the Company's marketable securities as of June 30, 2000, the Company has determined that in the event of a hypothetical 100 basis point increase in interest rates, the resulting decrease in fair market value of the Company's marketable investment securities would be insignificant to the financial statements as a whole. 12 15 PART II OTHER INFORMATION ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS The following matters were voted upon at the Annual Meeting of Shareholders held on June 5, 2000, and received the votes set forth below: (a) All of the following persons nominated were elected to serve as directors and received the number of votes set forth opposite their respective names:
NAME FOR WITHHELD Philip R. Reilly 14,309,459 0 Kenneth S. Kornman 14,309,459 0 Thomas A. Moore 14,309,459 0 Edward M. Blair, Jr. 14,309,459 0 Gary L. Crocker 14,309,459 0
(b) A proposal to effect a change in the state of incorporation of the Company from Texas to Delaware by approving a Plan of Reorganization and Merger providing for the Company to merge into a wholly owned Delaware subsidiary received 11,389,349 votes FOR and 34,374 votes AGAINST, with 5,050 abstentions. (c) A proposal to approve the establishment of a classified Board of Directors of the Company received 11,377,849 votes FOR and 45,379 votes AGAINST, with 5,550 abstentions. (d) A proposal to ratify the adoption of the Company's 2000 Employee Stock Compensation Plan received 11,260,005 votes FOR and 53,529 votes AGAINST, with 115,239 abstentions. (e) A proposal to ratify the appointment of Arthur Andersen LLP as independent public accountants of the Company for the fiscal year ending December 31, 2000, received 14,312,164 votes FOR and 15,875 votes AGAINST, with 900 abstentions. ITEM 5. OTHER INFORMATION Effective July 14, 2000, (the "Effective Date"), the Company changed its state of incorporation from Texas to Delaware. This change in its state of incorporation was approved by the holders of a majority of the Company's outstanding shares of Common Stock at the Company's annual meeting of shareholders on June 5, 2000. At the time of reincorporation in the State of Delaware, the Company merged into and is continuing its business as a Delaware corporation. The reincorporation will not result in any change in the Company's business, assets or liabilities. Shareholders of the Company are not required to undertake an exchange of the Company's shares. As of the Effective Date, certificates for the Company's shares automatically represent an equal number of shares in the Delaware company. 13 16 In addition, the Company relocated its corporate headquarters from San Antonio, Texas to Waltham, Massachusetts. The address of the Company's new corporate headquarters is 135 Beaver Street, 2nd Floor, Waltham, Massachusetts 02452. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. 2.1* Plan of Reorganization and Merger dated July 12, 2000 by and between Interleukin Genetics, Inc., a Texas Corporation, and Interleukin Genetics, Inc., a Delaware Corporation 3.1* Certificate of Incorporation of the Company 3.2* Bylaws of the Company, as adopted on June 5, 2000 4.1* Form of Stock Certificate representing Common Stock, $.001 par value, of the Company 10.1* Lease Agreement between the Company and Clematis LLC 10.2* First Amendment to a Commercial Lease between the Company and Clematis LLC 10.3* 2000 Employee Stock Compensation Plan for the Company 10.4* Form of Nonqualified Stock Option Agreement 10.5* Form of Incentive Stock Option Agreement 10.6* Employment Agreement dated June 18, 2000 between the Company and Fenel Eloi 27* Financial Data Schedule ---------- *filed herewith (b) Reports on Form 8-K None SIGNATURES In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. INTERLEUKIN GENETICS, INC. Date: August 14, 2000 By: /s/ PHILIP R. REILLY -------------------------------- Philip R. Reilly Chairman of the Board and Chief Executive Officer (Principle Executive Officer) By: /s/ FENEL M. ELOI --------------------------------- Fenel M. Eloi Chief Financial Officer, Secretary & Treasurer (Principle Financial and Accounting Officer) 14 17 EXHIBIT INDEX
EXHIBIT NUMBER DESCRIPTION - ------ -----------
2.1* Plan of Reorganization and Merger dated July 12, 2000 by and between Interleukin Genetics, Inc., a Texas Corporation, and Interleukin Genetics, Inc., a Delaware Corporation 3.1* Certificate of Incorporation of the Company 3.2* Bylaws of the Company, as adopted on June 5, 2000 4.1* Form of Stock Certificate representing Common Stock, $.001 par value, of the Company 10.1* Lease Agreement between the Company and Clematis LLC 10.2* First Amendment to a Commercial Lease between the Company and Clematis LLC 10.3* 2000 Employee Stock Compensation Plan for the Company 10.4* Form of Nonqualified Stock Option Agreement 10.5* Form of Incentive Stock Option Agreement 10.6* Employment Agreement dated June 18, 2000 between the Company and Fenel Eloi 27* Financial Data Schedule - ---------- *filed herewith EX-2.1 2 ex2-1.txt PLAN OF REORGANIZATION AND MERGER 1 EXHIBIT 2.1 PLAN OF REORGANIZATION AND MERGER OF INTERLEUKIN GENETICS, INC., A DELAWARE CORPORATION AND INTERLEUKIN GENETICS, INC., A TEXAS CORPORATION THIS PLAN OF REORGANIZATION AND MERGER, dated as of July 12, 2000, (this "Agreement"), is between Interleukin Genetics, Inc., a Delaware corporation (the, "Company"), and Interleukin Genetics, Inc., a Texas corporation ("ILGN-Texas"). The Company and ILGN-Texas are sometimes referred to herein as the "Constituent Corporations." RECITALS A. The Company is a corporation duly organized and existing under the laws of the State of Delaware and has an authorized capital stock of 55,000,000 shares, 50,000,000 of which are designated "Common Stock," par value $.001 per share, and 5,000,000 shares of Preferred Stock, par value $.001 per share. As of the date of this Agreement, 1,000 shares of Common Stock are issued and outstanding, all of which are held by ILGN-Texas. No shares of Preferred Stock are issued and outstanding. B. ILGN-Texas is a corporation duly organized and existing under the laws of the State of Texas and has an authorized capital stock of 55,000,000 shares, 50,000,000 of which are designated "Common Stock," no par value per share, and 5,000,000 of which are designated "Preferred Stock," no par value per share. As of April 28, 2000, 18,268,716 shares of Common Stock and no shares of Preferred Stock were issued and outstanding. C. The Board of Directors of ILGN-Texas has determined that, for the purpose of effecting the reincorporation of ILGN-Texas in the State of Delaware, it is advisable and in the best interests of ILGN-Texas that ILGN-Texas merge with and into the Company upon the terms and conditions herein provided. D. The respective Boards of Directors of the Company and ILGN-Texas have approved this Agreement and have directed that this Agreement be submitted to a vote of their respective sole stockholder and shareholders, and executed by the undersigned officers. E. The Company is a wholly owned subsidiary of ILGN-Texas. F. The Merger (herein below defined) is intended to constitute a reorganization within the meaning of Section 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended. 1 2 NOW, THEREFORE, in consideration of the mutual agreements and covenants set forth herein, the Company and ILGN-Texas hereby agree, subject to the terms and conditions hereinafter set forth, as follows: 1. MERGER 1.1 Merger. In accordance with the provisions of this Agreement, the Delaware General Corporation Law and the Texas Business Corporation Act, ILGN-Texas shall be merged with and into the Company (the "Merger"), the separate existence of ILGN-Texas shall cease and the Company shall be, and is herein sometimes referred to as, the "Surviving Corporation," and the name of the Surviving Corporation shall be "Interleukin Genetics, Inc." 1.2 Filing and Effectiveness. The Merger shall become effective when the following actions shall have been completed: (a) This Agreement and the Merger shall have been adopted and approved by the shareholders of ILGN-Texas and the sole stockholder of the Company in accordance with the requirements of the Delaware General Corporation Law and the Texas Business Corporation Act; (b) All of the conditions precedent to the consummation of the Merger specified in this Agreement shall have been satisfied or duly waived by the party entitled to satisfaction thereof; and (c) An executed Certificate of Ownership and Merger or an executed counterpart of this Agreement meeting the requirements of the Delaware General Corporation Law shall have been filed with the Secretary of State of the State of Delaware. The date and time when the Merger shall become effective, as aforesaid, is herein called the "Effective Date of the Merger." 1.3 Effect of the Merger. Upon the Effective Date of the Merger, the separate existence of ILGN-Texas shall cease and the Company, as the Surviving Corporation, (i) shall continue to possess all of its assets, rights, powers and property as constituted immediately prior to the Effective Date of the Merger, (ii) shall be subject to all action previously taken by its and ILGN-Texas' Board of Directors, (iii) shall succeed, without other transfer, to all of the assets, rights, powers and property of ILGN-Texas, including all shares of any subsidiary held by ILGN-Texas, in the manner more fully set forth in Section 259 of the Delaware General Corporation Law, (iv) shall continue to be subject to all of the debts, liabilities and obligations of ILGN-Texas as constituted immediately prior to the Effective Date of the Merger, and (v) shall succeed, without other transfer, to all of the debts, liabilities and obligations of ILGN-Texas in the same manner as if the Company had itself incurred them, all as more fully provided under the applicable provisions of the Delaware General Corporation Law and the Texas Business Corporation Act. 2 3 2. CHARTER DOCUMENTS, DIRECTORS AND OFFICERS 2.1 Certificate of Incorporation. The Certificate of Incorporation of the Company, a copy of which is attached hereto as Exhibit A, as in effect immediately prior to the Effective Date of the Merger shall continue in full force and effect as the Certificate of Incorporation of the Surviving Corporation until duly amended in accordance with the provisions thereof and applicable law. 2.2 Bylaws. The Bylaws of the Company as in effect immediately prior to the Effective Date of the Merger shall continue in full force and effect as the Bylaws of the Surviving Corporation until duly amended in accordance with the provisions thereof and applicable law. 2.3 Directors and Officers. The directors and officers of the Company immediately prior to the Effective Date of the Merger shall be the directors and officers of the Surviving Corporation until their successors shall have been duly elected and qualified or until as otherwise provided by law, the Certificate of Incorporation of the Surviving Corporation or the Bylaws of the Surviving Corporation. 3. MANNER OF CONVERSION OF STOCK 3.1 ILGN-Texas Common Shares. Upon the Effective Date of the Merger, each share of ILGN-Texas Common Stock, no par value per share, issued and outstanding immediately prior to the Merger shall, by virtue of the Merger and without any action by the Constituent Corporations, the holder of such shares or any other person, be converted into and exchanged for one (1) fully paid and nonassessable share of Common Stock, par value $.001 per share, of the Surviving Corporation. No fractional share interests of the Surviving Corporation's Common Stock shall be issued but shall, instead, be paid in cash or check by the Company to the holder of such shares in that amount equal to the fair market value of such fractional shares. 3.2 ILGN-Texas Rights to Purchase Common Shares. Upon the effective date of the Merger, all issued and outstanding options and rights to acquire the Common Stock of ILGN-Texas under the Interleukin Genetics, Inc. 1996 Equity Incentive Plan, as amended, and the Interleukin Genetics, Inc. 2000 Employee Stock Compensation Plan, as amended, and all other outstanding options, warrants or rights will automatically be converted into equivalent options and rights to purchase the same number of shares of Surviving Corporation's Common Stock. In addition, no "additional benefits" (within the meaning of section 424(a)(2) of the Internal Revenue Code of 1986, as amended) shall be accorded to the optionees pursuant to the assumption of their options. 3.3 The Company's Common Stock. Upon the Effective Date of the Merger each share of Common Stock, par value $.001 per share, of the Company issued and outstanding immediately prior thereto shall, by virtue of the Merger and without any action by the Company, the 3 4 holder of such shares or any other person, be canceled and returned to the status of authorized but unissued shares. 3.4 Exchange of Certificates. After the Effective Date of the Merger, each holder of an outstanding certificate representing shares of ILGN-Texas Common Stock may be asked to surrender the same for cancellation to an exchange agent, whose name will be delivered to holders prior to any requested exchange (the "Exchange Agent"), and each such holder shall be entitled to receive in exchange therefor a certificate or certificates representing the number of shares of the Surviving Corporation's Common Stock, into which the surrendered shares were converted as herein provided. Until so surrendered, each outstanding certificate theretofore representing shares of ILGN-Texas Common Stock shall be deemed for all purposes to represent the number of shares of the Surviving Corporation's Common Stock, into which such shares of ILGN-Texas Common Stock were converted in the Merger. The registered owner on the books and records of the Surviving Corporation or the Exchange Agent of any such outstanding certificate shall, until such certificate shall have been surrendered for transfer or conversion or otherwise accounted for to the Surviving Corporation or the Exchange Agent, have and be entitled to exercise any voting and other rights with respect to and to receive dividends and other distributions upon the shares of Common Stock of the Surviving Corporation represented by such outstanding certificate as provided above. Each certificate representing Common Stock of the Surviving Corporation so issued in the Merger shall bear the same legends, if any, with respect to the restrictions on transferability as the certificates of ILGN-Texas so converted and given in exchange therefore, unless otherwise determined by the Board of Directors of the Surviving Corporation in compliance with applicable laws, or other such additional legends as agreed upon by the holder and the Surviving Corporation. If any certificate for shares of the Company's stock is to be issued in a name other than that in which the certificate surrendered in exchange therefor is registered, it shall be a condition of issuance thereof that the certificate so surrendered shall be properly endorsed and otherwise in proper form for transfer, that such transfer otherwise be proper and comply with applicable securities laws and that the person requesting such transfer pay to the Exchange Agent any transfer or other taxes payable by reason of issuance of such new certificate in a name other than that of the registered holder of the certificate surrendered or establish to the satisfaction of the Company that such tax has been paid or is not payable. 4. GENERAL 4.1 Covenants of the Company. The Company covenants and agrees that it will, on or before the Effective Date of the Merger: (a) File any and all documents with the Texas Franchise Tax Board necessary for the assumption by the Company of all of the franchise tax liabilities of ILGN-Texas. 4 5 (b) Take such other actions as may be required by the Texas Business Corporation Act. 4.2 Further Assurances. From time to time, as and when required by the Company or by its successors or assigns, there shall be executed and delivered on behalf of ILGN-Texas such deeds and other instruments, and there shall be taken or caused to be taken by it such further and other actions as shall be appropriate or necessary in order to vest or perfect in or conform of record or otherwise by the Company the title to and possession of all the property, interests, assets, rights, privileges, immunities, powers, franchises and authority of ILGN-Texas and otherwise to carry out the purposes of this Agreement, and the officers and directors of the Company are fully authorized in the name and on behalf of ILGN-Texas or otherwise to take any and all such action and to execute and deliver any and all such deeds and other instruments. 4.3 Abandonment. At any time before the Effective Date of the Merger, this Agreement may be terminated and the Merger may be abandoned for any reason whatsoever by the Board of Directors of either ILGN-Texas or of the Company, or of both, notwithstanding the approval of this Agreement by the shareholders of ILGN-Texas or the stockholder of the Company. 4.4 Amendment. The Boards of Directors of the Constituent Corporations may amend this Agreement at any time prior to the filing of this Agreement (or certificate in lieu thereof) with the Secretary of State of the State of Delaware, provided that an amendment made subsequent to the adoption of this Agreement by the stockholders of either Constituent Corporation shall not: (1) alter or change the amount or kind of shares, securities, cash, property and/or rights to be received in exchange for or on conversion of all or any of the shares of any class or series thereof of such Constituent Corporation, (2) alter or change any term of the Certificate of Incorporation of the Surviving Corporation to be effected by the Merger, (3) alter or change any of the terms and conditions of this Agreement if such alteration or change would adversely affect the holders of any class or series of capital stock of any Constituent Corporation. 4.5 Registered Office. The registered office of the Surviving Corporation in the State of Delaware 9 East Loockerman Street, Dover, Delaware 19901 and Capitol Services, Inc. is the registered agent of the Surviving Corporation at such address. 4.6 Agreement. Executed copies of this Agreement will be on file at the principal place of business of the Surviving Corporation at 135 Beaver Street, Waltham, MA 02452 and copies thereof will be furnished to any stockholder of either Constituent Corporation, upon request and without cost. 4.7 Governing Law. This Agreement shall in all respects be construed interpreted and enforced in accordance with and governed by the laws of the State of Delaware and, so far as applicable, the merger provisions of the Texas Business Corporation Act. 5 6 4.8 Counterparts. In order to facilitate the filing and recording of this Agreement, the same may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument. [signatures on next page] 6 7 IN WITNESS WHEREOF, this Agreement having first been approved by the resolutions of the Board of Directors of the Company and ILGN-Texas is hereby executed on behalf of each of such two corporations and attested by their respective officers thereunto duly authorized. INTERLEUKIN GENETICS, INC. a Delaware corporation By: -------------------------------- Kenneth S. Kornman President INTERLEUKIN GENETICS, INC. a Texas corporation By: -------------------------------- Kenneth S. Kornman President 7 EX-3.1 3 ex3-1.txt CERTIFICATE OF INCORPORATION OF THE COMPANY 1 EXHIBIT 3.1 CERTIFICATE OF INCORPORATION OF INTERLEUKIN GENETICS, INC. a Delaware corporation ARTICLE 1 The name of this corporation is Interleukin Genetics, Inc. ARTICLE 2 A. The address of its registered offices in the State of Delaware is 9 East Loockerman Street, in the City of Dover, County of Kent. The name of its registered agent at such address is Capitol Services, Inc. B. The name and mailing address of the incorporator is: Tami Gerardi Capitol Services, Inc. 9 East Loockerman Street Dover, Delaware 19901 ARTICLE 3 The purpose of the Corporation is to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware. ARTICLE 4 The total number of shares of stock of all classes which the Corporation has authority to issue is 55,000,000 shares, of which 50,000,000 shares shall be common stock, with a par value of $.001 per share ("Common Stock"), and 5,000,000 shares shall be preferred stock, with a par value of $.001 per share ("Preferred Stock"). The designations and the powers, preferences and rights, and the qualifications, limitations or restrictions of the shares of each class of stock are as follows: 2 PREFERRED STOCK Preferred Stock may be issued from time to time by the Board of Directors as shares of one or more series. Subject to the provisions hereof and the limitations prescribed by law, the Board of Directors is hereby vested with the authority and is expressly authorized, prior to issuance, by adopting resolutions providing for the issuance of, or providing for a change in the number of, shares of any particular series and, if and to the extent from time to time required by law, by filing a certificate pursuant to the General Corporation Law of the State of Delaware (or other law hereafter in effect relating to the same or substantially similar subject matter), to establish or change the number of shares to be included in each such series and to fix the designation and powers, preferences and rights and the qualifications and limitations or restrictions thereof relating to the shares of each such series, all to the maximum extent permitted by the General Corporation Law of the State of Delaware as in effect on the date hereof or as hereafter amended. The vested authority of the Board of Directors with respect to each series shall include, but not be limited to, the determination of the following: (a) the distinctive serial designation of such series and the number of shares constituting such series (provided that the aggregate number of shares constituting all series of Preferred Stock shall not exceed 5,000,000); (b) the annual dividend rate, if any, on shares of such series and the preferences, if any, over any other series (or of any other series over such series) with respect to dividends, and whether dividends shall be cumulative and, if so, from which date or dates; (c) whether the shares of such series shall be redeemable and, if so, the terms and conditions of such redemption, including the date or dates upon and after which such shares shall be redeemable, and the amount per share payable in case of redemption, which amount may vary under different conditions and at different redemption dates; (d) the obligation, if any, of the Corporation to purchase or redeem shares of such series pursuant to a sinking fund or purchase fund and, if so, the terms of such obligation; (e) whether shares of such series shall be convertible into, or exchangeable for, shares of stock of any other class or classes, any stock of any series of the same class or any other class or classes or any evidence of indebtedness and, if so, the terms and conditions of such conversion or exchange, including the price or prices or the rate or rates of conversion or exchange and the terms of adjustment, if any; 2 3 (f) whether the shares of such series shall have voting rights in addition to the voting rights provided by law, and, if so, the terms of such voting rights, including, without limitation, whether such shares shall have the right to vote with the Common Stock on issues on an equal, greater or lesser basis; (g) the rights of the shares of such series in the event of a voluntary or involuntary liquidation, dissolution, winding up or distribution of assets of the Corporation; (h) whether the shares of such series shall be entitled to the benefit of conditions and restrictions upon (i) the creation of indebtedness of the Corporation or any subsidiary, (ii) the issuance of any additional stock (including additional shares of such series or of any other series) or (iii) the payment of dividends or the making of other distributions on the purchase, redemption or other acquisition by the Corporation or any subsidiary of any outstanding stock of the Corporation; and (i) any other relative rights, powers, preferences, qualifications, limitations or restrictions thereof, including, but not limited to, any that may be determined in connection with the adoption of any stockholder rights plan after the date hereof, relating to any such series. Except where otherwise set forth in the resolution or resolutions adopted by the Board of Directors providing for the issuance of any series of Preferred Stock, the number of shares comprising such series may be increased or decreased (but not below the number of shares then outstanding) from time to time by like action of the Board of Directors. Shares of any series of Preferred Stock that have been redeemed (whether through the operation of a sinking fund or otherwise) or purchased by the Corporation, or which, if convertible or exchangeable, have been converted into, or exchanged for, shares of stock of any other class or classes or any evidences of indebtedness shall have the status of authorized and unissued shares of Preferred Stock and may be reissued as a part of the series of which they were originally a part or may be reclassified and reissued as part of a new series of Preferred Stock to be created by resolution or resolutions of the Board of Directors or as part of any other series of Preferred Stock, all subject to the conditions or restrictions on issuance set forth in the resolution or resolutions adopted by the Board of Directors providing for the issuance of any series of Preferred Stock and to any filing required by law. COMMON STOCK Subject to all of the rights of the Preferred Stock, and except as may be expressly provided with respect to the Preferred Stock herein, by law or by the Board of Directors pursuant to this Article 4: 3 4 (a) dividends may be declared and paid or set apart for payment upon Common Stock out of any assets or funds of the Corporation legally available for the payment of dividends and may be payable in cash, stock or otherwise; (b) the holders of Common Stock shall have the exclusive right to vote for the election of directors (other than in the case of newly created directorships and vacancies, which shall be filled solely by the remaining directors as set forth in Article 6 hereof) and on all other matters requiring stockholder action, each share being entitled to one vote; and (c) upon the voluntary or involuntary liquidation, dissolution or winding up of the Corporation, the net assets of the Corporation shall be distributed pro rata to the holders of Common Stock in accordance with their respective rights and interests. DENIAL OF PREEMPTIVE RIGHTS AND CUMULATIVE VOTING No holder of any stock of the Corporation shall be entitled as such, as a matter of right, to subscribe for or purchase any part of any new or additional issue of stock of any class whatsoever of the Corporation, or of securities convertible into stock of any class whatsoever, whether now or hereafter authorized, or whether issued for cash or other consideration or by way of dividend. No holder of any stock of the Corporation shall have the right of cumulative voting at any election of directors or upon any other matter. ARTICLE 5 The Corporation is to have perpetual existence. ARTICLE 6 All power of the Corporation shall be vested in and exercised by or under the direction of the Board of Directors except as otherwise provided herein or required by law. For the management of the business and for the conduct of the affairs of the Corporation, and in further creation, definition, limitation and regulation of the power of the Corporation and of its directors and stockholders, it is further provided: Section 1. Elections of Directors. Elections of Directors need not be by written ballot unless the Bylaws of the Corporation shall so provide. 4 5 Section 2. Number, Election and Terms of Directors. Except as otherwise fixed pursuant to the provisions of Article 4 hereof relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional directors under specified circumstances, the number of directors of the Corporation shall be fixed from time to time by or pursuant to the Bylaws; provided that such number shall not be less than three nor more than twelve. The directors, other than those who may be elected by the holders of any class or series of stock having preference over the Common Stock as to dividends or upon liquidation, shall be classified, with respect to the time for which they severally hold office, into three classes, each as nearly equal in number as possible, as shall be provided in the manner specified in the Bylaws, one class (Class I) to hold office initially for a term expiring at the annual meeting of stockholders to be held in 2001, another class (Class II) to hold office initially for a term expiring at the annual meeting of stockholders to be held in 2002, and another class (Class III) to hold office initially for a term expiring at the annual meeting of stockholders to be held in 2003, with the members of each class to hold office until their successors are elected and qualified or until their earlier resignation or removal. At each annual meeting of the stockholders until their earlier resignation or removal. At each annual meeting of the stockholders of the Corporation, the successors to the class of directors whose term expires at that meeting shall be elected to hold office for a term expiring at the annual meeting of stockholders to be held in the third year following the year of their election. Section 3. Stockholder Nomination of Director Candidates. Advance notice of nominations for the election of Directors, other than by the Board of Directors or a Committee thereof, shall be given in the manner provided in the Bylaws. Section 4. Newly Created Directorships and Vacancies. Except as otherwise fixed pursuant to the provisions of Article 4 hereof relating to the rights of the holders of any class or series of stock having a preference over Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, newly created directorships resulting from any increase in the number of directors and any vacancies on the Board of Directors resulting from death, resignation, disqualification, removal or other cause shall be filled solely by the affirmative vote of not less than two-thirds of the remaining directors then in office, even though less than a quorum of the Board of Directors. Any director elected to fill a vacancy resulting from death, resignation, disqualification, removal or other cause shall hold office for the remainder of the full term of the class of directors in which the vacancy occurred and until such director's successor shall have been elected and qualified or until his or her earlier resignation or removal. Newly created directorships shall be within such class of directors as shall be required to maintain, as nearly as possible, an equal number of directors in each class. Any director elected to fill a newly created directorship shall hold office for the term of the class in which such directorship has been created and until such director's successor shall have been elected and qualified or until his or her earlier resignation or removal. No decrease in the number of directors constituting the Board of Directors shall shorten the term of any incumbent director. 5 6 Section 5. Removal of Directors. Subject to the rights of any class or series of stock having preference over Common Stock as to dividends or upon liquidation to elect directors under specified circumstances, any director may be removed from office only for cause. Except as may otherwise be provided by law, cause for removal shall be construed to exist only if during a director's term as a director of the Corporation: (a) the director whose removal is proposed has been convicted of a felony by a court of competent jurisdiction and such conviction is no longer subject to direct appeal; (b) such director has been adjudicated by a court of competent jurisdiction to be liable for gross negligence, recklessness or misconduct in the performance of his or her duty to the Corporation in a manner of substantial importance to the Corporation and such adjudication is no longer subject to direct appeal; or (c) such director has been adjudicated by a court of competent jurisdiction to be mentally incompetent, which mental incompetency directly affects his or her ability as a director of the Corporation, and such adjudication is no longer subject to direct appeal. Section 6. Stockholder Action. Any action required or permitted to be taken by the stockholders of the corporation must be effected at a duly called annual or special meeting of such holders and may not be effected by any consent in writing by such holders. Except as otherwise required by law and subject to the rights of holders of any class or series of stock having a preference over Common Stock as to dividends or upon liquidation, special meetings of stockholders of the Corporation may be called only by the Chairman of the Board, the Chief Executive Officer or the Board of Directors pursuant to a resolution approved by a majority of the entire Board of Directors. Section 7. Bylaw Amendments. The Board of Directors shall have the power to make, alter, amend and repeal the Bylaws (except so far as the Bylaws adopted by the stockholders shall otherwise provide). Any Bylaws made by the Board of Directors under the powers conferred hereby may be altered, amended or repealed by the directors or by the stockholders; provided, however, that the Bylaws shall not be altered, amended or repealed and no provision inconsistent therewith shall be adopted (i) by stockholder action without the affirmative vote of the holders of at least 66 2/3% of the voting power of all the shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class or (ii) by director action without the affirmative vote of not less than two-thirds of the directors then in office. Section 8. Liability of Directors. A. No director of the Corporation shall be liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director; provided that this Article 6 shall not eliminate or limit the liability of a director of the Corporation: (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) under Section 174 of the General Corporation Law of the State of Delaware, or (iv) for any transaction from which the director derived an improper personal benefit. B. If the General Corporation Law of the State of Delaware hereafter is amended to authorize the further elimination or limitation of the liability of directors of the 6 7 Corporation, then the liability of a director of the Corporation shall be limited to the fullest extent permitted by the General Corporation Law of the State of Delaware, as so amended, and such limitation of liability shall be in addition to, and not in lieu of, the limitation on the liability of a director of the Corporation provided by the provisions of this Section 8 of this Article 6. C. Any amendment, repeal or modification of this Section 8 of this Article 6 shall be prospective only and shall not adversely affect any right or protection of a director of the Corporation existing at the time of such amendment, repeal or modification. D. The Corporation shall be obligated at all times to maintain the effectiveness of Bylaw provisions providing for the mandatory indemnification of the directors of the Corporation to the maximum extent permitted by the General Corporation Law of the State of Delaware. Section 9. Amendment, Repeal, etc. Notwithstanding anything contained in this Certificate of Incorporation to the contrary, the affirmative vote of the holders of at least 66 2/3% of the voting power of all shares of the Corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required to alter, amend, adopt any provision inconsistent with, or repeal, this Article 6 or any provision hereof. ARTICLE 7 The Corporation reserves the right to amend, alter, change or repeal any provision contained in this Certificate of Incorporation, in the manner now or hereafter prescribed by statute and this Certificate of Incorporation, and all rights conferred upon stockholders herein are granted subject to this reservation. I, the undersigned, as incorporator and for the purpose of forming a corporation pursuant to the General Corporation Law of Delaware, do make this certificate, hereby declaring and certifying that this is my act and deed and the facts herein stated are true, and accordingly have hereunto set my hand this 28th day of March 2000. /s/ Tami Gerardi ---------------------------------------- Tami Gerardi 7 EX-3.2 4 ex3-2.txt BYLAWS OF THE COMPANY 1 EXHIBIT 3.2 BYLAWS OF INTERLEUKIN GENETICS, INC. (a Delaware Corporation) OFFICES 1. The Corporation shall at all times maintain a registered office in the State of Delaware. 2. The Corporation may also have offices at such other places within or outside of the State of Delaware as the Board of Directors shall from time to time appoint or the business of the Corporation require. CAPITAL STOCK 3. The Board of Directors may authorize the issuance of the capital stock of the Corporation at such times, for such consideration, and on such terms and conditions as the Board may deem advisable, subject to any restrictions and provisions of law, the Certificate of Incorporation, as amended and restated from time to time (the "Certificate of Incorporation"), of the Corporation or any other provisions of these Bylaws. 4. The shares of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of its stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Notwithstanding the adoption of such a resolution by the Board of Directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the Corporation by, the chairman or vice-chairman of the board of directors, or the president or vice-president, and by the treasurer or an assistant treasurer, or the secretary or an assistant secretary of the Corporation representing the number of shares registered in certificate form. Any or all of the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue. The certificates shall otherwise be in such form as may be determined by the Board of Directors, shall be issued in numerical order, shall be entered in the books of the Corporation as they are issued and shall exhibit the holder's name and number of shares. 1 2 5. The shares of the capital stock of the Corporation are transferable only on the books of the Corporation upon surrender, in the case of certificated shares, of the certificates therefor properly endorsed for transfer, or otherwise properly assigned, and upon the presentation of such evidences of ownership of the shares and validity of the assignment as the Corporation may require. 6. The Corporation shall be entitled to treat the person in whose name any share of stock is registered as the owner thereof for purposes of dividends and other distributions in the course of business or in the course of recapitalization, consolidation, merger, reorganization, liquidation, or otherwise, and for the purpose of votes, approvals and consents by stockholders, and for the purpose of notices to stockholders, and for all other purposes whatsoever, and shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not the Corporation shall have notice thereof, save as expressly required by the laws of the State of Delaware. 7. The Board of Directors may appoint one or more transfer agents and registrars, and may require certificates for shares to bear the signature of such transfer agent(s) and registrar(s). 8. Upon the presentation to the Corporation of a proper affidavit attesting the loss, destruction or mutilation of any certificate for shares of stock of the Corporation, the Board of Directors may direct the issuance of a new certificate or uncertificated shares in lieu of and to replace the certificate so alleged to be lost, destroyed or mutilated. The Board of Directors may require as a condition precedent to the issuance of a new certificate or uncertificated shares any or all of the following: (a) additional evidence of the loss, destruction or mutilation claimed; (b) advertisement of the loss in such manner as the Board of Directors may direct or approve; (c) a bond or agreement of indemnity, in such form and amount and with such surety (or without surety) as the Board of Directors may direct or approve; and (d) the order or approval of a court. STOCKHOLDERS AND MEETINGS OF STOCKHOLDERS 9. All meetings of stockholders shall be held at such place within or outside of the State of Delaware as shall be fixed by the Board of Directors and stated in the notice of meeting. 10. The Annual Meeting of Stockholders of the Corporation shall be held on such date and at such time as is fixed by the Board of Directors and stated in the notice of meeting. Directors shall be elected in accordance with the provisions of the Certificate of Incorporation of the Corporation and these Bylaws and such other business shall be transacted as may properly come before the meeting. 11. The Annual Meeting of Stockholders may be adjourned by the presiding officer of the meeting for any reason (including, if the presiding officer determines that it would be in the best interests of the Corporation to extend the period of time for the solicitation of proxies) from time to time and place to place until the presiding officer shall determine that the business to be conducted at the meeting is completed, which determination shall be conclusive. 2 3 12. At an Annual Meeting of the Stockholders, only such business shall be conducted as shall have been properly brought before the meeting. To be properly brought before an Annual Meeting, business must be (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (b) otherwise properly brought before the meeting by or at the direction of the Board of Directors or (c) otherwise properly brought before the meeting by a stockholder of the Corporation. For business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation. To be timely, a stockholder's notice must be delivered to or mailed and received at the principal executive offices of the Corporation, not less than 60 days nor more than 180 days prior to the anniversary date of the immediately preceding annual meeting; provided, however, that in the event that the date of the annual meeting is more than 60 days later than the anniversary date of the immediately preceding annual meeting, notice by the stockholder to be timely must be received not later than the close of business on the tenth day following the earlier of the date on which a written statement setting forth the date of the annual meeting was mailed to stockholders or the date on which it is first disclosed to the public. A stockholder's notice to the Secretary shall set forth as to each matter the stockholder proposes to bring before the annual meeting (a) a brief description of the business desired to be brought before the annual meeting, (b) the name and address, as they appear on the Corporation's books, of the stockholder proposing such proposal, (c) the class and number of shares of the Corporation that are beneficially owned by the stockholder and (d) any material interest of the stockholder in such business. In addition, if the stockholder's ownership of shares of the Corporation, as set forth in the notice, is solely beneficial, documentary evidence of such ownership must accompany the notice. Notwithstanding anything in these Bylaws to the contrary, no business shall be conducted at an annual meeting except in accordance with the procedures set forth in this Section 12. The presiding officer of an annual meeting shall, if the facts warrant, determine and declare to the meeting that any business that was not properly brought before the meeting is out of order and shall not be transacted at the meeting. 13. A special meeting of stockholders may only be called by the Chairman of the Board, the Chief Executive Officer or the Board of Directors pursuant to a resolution adopted by two-thirds of the directors then in office. The notice of every special meeting of stockholders shall state the purpose for which it is called. At any special meeting of stockholders, only such business shall be conducted as shall be provided for in the resolution or resolutions calling the special meeting or, where no such resolution or resolutions have been adopted, only such business shall be conducted as shall be provided in the notice to stockholders of the special meeting. Any special meeting of stockholders may be adjourned by the presiding officer of the meeting for any reason (including, if the presiding officer determines that it would be in the best interests of the Corporation to extend the period of time for the solicitation of proxies) from time to time and from place to place until the presiding officer shall determine that the business to be conducted at the meeting is completed, which determination shall be conclusive. 14. Written notice of each meeting of stockholders shall be mailed to each stockholder of record at his last address as it appears on the books of the Corporation at least ten days prior to the date of the meeting. 3 4 15. The Board of Directors shall have the power to close the stock transfer books of the Corporation for a period not more than sixty nor less than ten days preceding the date of any meeting of stockholders, or the date for payment of any dividend, or the date for the allotment of rights, or the date when any reclassification or change or conversion or exchange of capital stock shall go into effect; provided, however, that in lieu of closing the stock transfer books as aforesaid, the Board of Directors may fix in advance a date not more than sixty nor less than ten days preceding the date of any meeting of stockholders, or the date for any payment of dividends, or the date for allotment of rights, or the date when any reclassification or change or conversion or exchange of capital stock shall go into effect, as a record date for the determination of the stockholders entitled to vote at any such meeting or entitled to receive payment of any such dividend or to any such allotment of rights, or to exercise the rights in respect of any such reclassification, change, conversion or exchange of capital stock, and in such cases only such stockholders as shall be stockholders of record on the date so fixed shall be entitled to vote at such meeting, or to receive payment of such dividend, or to receive such allotment of rights, or to exercise such rights or to participate in the effect of any such transaction, as the case may be, notwithstanding any transfer of any stock on the books of the Corporation after any such record date fixed as aforesaid. This Bylaw shall in no way affect the rights of a stockholder and his transferee or transferor as between themselves. 16. The holders of a majority of the outstanding shares of stock of the Corporation having voting power with respect to a subject matter (excluding shares held by the Corporation for its own account) present or represented by proxy shall constitute a quorum at the meeting of stockholders for the transaction of business with respect to such subject matter. In the absence of a quorum with respect to a particular subject matter, the presiding officer of the meeting shall have power to adjourn the meeting from time to time, without notice other than an announcement at the meeting, until a quorum is present with respect to that subject matter. If the adjournment is for more than 30 days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. At such adjourned meeting, any business may be transacted that might have been transacted at the meeting as originally notified. 17. When a quorum is present or represented at any meeting of stockholders, the affirmative vote of the holders of a majority of the shares present in person or represented by proxy at the meeting and entitled to vote on the subject matter shall be the act of the stockholders in all matters, unless the matter is one upon which, by express provision of the corporation laws of the State of Delaware, of the Certificate of Incorporation or of these Bylaws, a different vote is required, in which case such express provision shall govern and control the decision of that matter. Directors shall be elected by a plurality of the votes of the shares present in person or represented by proxy and entitled to vote on the election of directors. 18. Every stockholder having the right to vote shall be entitled to vote in person, or by proxy appointed by an instrument in writing subscribed by such stockholder (which for purposes of this paragraph may include a signature and form of proxy pursuant to a facsimile or telegraphic form of proxy or any other instruments acceptable to the Judge of Election), bearing a date not more than 4 5 three years prior to voting, unless such instrument provides for a longer period, and filed with the Secretary of the Corporation before, or at the time of, the meeting. If such instrument shall designate two or more persons to act as proxies, unless such instrument shall provide to the contrary, a majority of such persons present at any meeting at which their powers thereunder are to be exercised shall have and may exercise all the powers of voting thereby conferred, or if only one be present, then such powers may be exercised by that one; or, if an even number attend and a majority do not agree on any particular issue, each proxy so attending shall be entitled to exercise such powers in respect of the same portion of the shares as he is of the proxies representing such shares. 19. Unless otherwise provided by the Certificate of Incorporation or by the corporation laws of the State of Delaware, each stockholder of the Corporation shall, at every meeting of stockholders, be entitled to one vote in person or by proxy for each share of capital stock of the Corporation registered in his name. 20. Any other corporation owning voting shares in this Corporation may vote the same by its President or by proxy appointed by him, unless some other person shall be appointed to vote such shares by resolution of the Board of Directors of such stockholder corporation. A partnership holding shares of this Corporation may vote such shares by any general partner or by proxy appointed by any general partner. 21. Shares standing in the name of a deceased person may be voted by the executor or administrator of such deceased person, either in person or by proxy. Shares standing in the name of a guardian, conservator or trustee may be voted by such fiduciary, either in person or by proxy, but no such fiduciary shall be entitled to vote shares held in such fiduciary capacity without a transfer of such shares into the name of such fiduciary. Shares standing in the name of a receiver may be voted by such receiver. A stockholder whose shares are pledged shall be entitled to vote such shares, unless in the transfer by the pledgor on the books of the Corporation, he has expressly empowered the pledgee to vote thereon, in which case only the pledgee, or his proxy, may represent the stock and vote thereon. 22. The order of business and all other matters of procedure at every meeting of the stockholders may be determined by the presiding officer of the meeting, who shall be the Chairman of the Board, or the Chief Executive Officer, or in the absence of both of them such other officer of the Corporation as designated by the Board. The presiding officer of the meeting shall have all the powers and authority vested in a presiding officer by law or practice without restriction, including, without limitation, the authority, in order to conduct an orderly meeting, to impose reasonable limits on the amount of time at the meeting taken up in remarks by any one stockholder and to declare any business not properly brought before the meeting to be out of order. 23. The Board shall appoint one or more Judges of Election to serve at every meeting of the stockholders. 5 6 DIRECTORS AND MEETINGS OF DIRECTORS 24. The business of the Corporation shall be managed by a Board of Directors (herein the "Board of Directors" or the "Board") who shall exercise all the powers of the Corporation not reserved to or conferred on the stockholders by statute, the Certificate of Incorporation or the Bylaws of the Corporation. 25. Except as otherwise fixed pursuant to the provisions of the Certificate of Incorporation relating to the rights of the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation to elect additional directors under specified circumstances, the number of directors shall be as fixed from time to time by resolution of the Board adopted by the affirmative vote of at least two-thirds of the directors then in office, provided the number shall be not less than the minimum or more than the maximum number permitted by the Certificate of Incorporation, provided further that if no such minimum or maximum number is stated in the Certificate of Incorporation the number shall not be less than three nor more than 12. The directors, other than those who may be elected by the holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, shall be divided into three classes as nearly equal in number as possible, with the term of office of one class expiring each year. Directors shall be assigned to each class in accordance with a resolution or resolutions of the Board of Directors. The term of office of each director shall expire at the third Annual Meeting after election of the class to which he belongs. During the intervals between Annual Meetings of Stockholders, any vacancy occurring in the Board of Directors caused by resignation, removal, death or other incapacity, and any newly-created directorships resulting from an increase in the number of directors, shall be filled by a two-thirds vote of the directors then in office, whether or not a quorum. Each director chosen to fill a vacancy shall hold office for the unexpired term in respect of which such vacancy occurs. Each director chosen to fill a newly-created directorship shall hold office until the next election of the class for which such director shall have been chosen. 26. Subject to the rights of holders of any class or series of stock having a preference over the Common Stock as to dividends or upon liquidation, nominations for the election of directors may be made by the Board of Directors or a committee appointed by the Board of Directors or by any stockholder entitled to vote in the election of directors generally. However, any stockholder entitled to vote in the election of directors generally may nominate one or more persons for election as directors at a meeting only if written notice of such stockholder's intent to make such nomination or nominations has been given, either by personal delivery or by United States mail, postage prepaid, to the Secretary of the Corporation not later than 90 days prior to the anniversary date of the date of the immediately preceding annual meeting of stockholders. Notwithstanding the foregoing if an existing director is not standing for reelection to a directorship that is the subject of an election at such meeting, then a stockholder may make a nomination with respect to such directorship at anytime not later than the close of business on the tenth day following the date on which a written statement setting forth the fact that such directorship is to be elected and the name of the nominee proposed by the Board of Directors is first mailed to stockholders. Each notice of a nomination from a stockholder shall set forth: (a) the name and address of the stockholder who intends to make the 6 7 nomination and of the person or persons to be nominated; (b) a representation that the stockholder is a holder of record of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to nominate the person or persons specified in the notice; (c) a description of all arrangements or understandings between the stockholder and each nominee and any other person or persons (naming such person or persons) pursuant to which the nomination or nominations are to be made by the stockholder; (d) such other information regarding each nominee proposed by such stockholder as would be required to be included in a proxy statement filed pursuant to the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations); and (e) the consent of each nominee to serve as a director of the Corporation if so elected. The presiding officer of the meeting may refuse to acknowledge the nomination of any person not made in compliance with the foregoing procedure. 27. Any director may be removed from office as a director at any time, but only for cause (as set forth in the Certificate of Incorporation), by the affirmative vote of stockholders of record holding a majority of the outstanding shares of stock of the Corporation entitled to vote in elections of directors at a meeting of the stockholders called for that purpose. 28. Regular meetings of the Board of Directors shall be held at such times and at such place or places as the directors shall, from time to time, determine at a prior meeting. Special meetings of the Board may be called by the Chairman of the Board or President of the Corporation and shall be called by either of said officers upon the written request of any two directors. Special meetings shall be held at the office of the Corporation or at such place as is stated in the notice of the meeting. No notice shall be required for regular meetings of the Board. Notices of special meetings shall be given by mail at least five days before the meeting or by telephone, telecopy or telegram at least 24 hours before the meeting. Notices may be waived. Notices need not include any statement of the purpose of the meeting. 29. When all of the directors shall be present at any meeting, however called or notified, they may act upon any business that might lawfully be transacted at regular meetings of the Board, or at special meetings duly called, and action taken at such meetings shall be as valid and binding as if legally called and notified. Members of the Board of Directors may participate in a meeting of the Board by means of conference telephone or similar communications equipment to the full extent and with the same effect as authorized and permitted by Delaware law. 30. One-third of the total number of the members of the Board of Directors (but in no event less than three directors) shall constitute a quorum for the transaction of business, and the acts of a majority of the directors present at any meeting at which there is a quorum present shall be the acts of the Board; provided, however, that the directors may act in such other manner, with or without a meeting, as may be permitted by the laws of the State of Delaware and provided further, that if all of the directors shall consent in writing to any action taken by the Corporation, such action shall be as valid as though it had been authorized at a meeting of the Board. 7 8 31. Directors shall receive such compensation and reimbursement for expenses for attendance at meetings of the Board or of committees thereof and such other compensation as shall be fixed by a majority of the entire Board. COMMITTEES OF DIRECTORS 32. The Board of Directors shall establish an Audit Committee and a Compensation Committee, and may establish an Executive Committee, a Nominating Committee and such other committees as may be established by resolution of a majority of the whole Board. Each of such committees shall consist of one or more members of the Board. Members of committees of the Board of Directors shall be elected annually by vote of a majority of the Board. Presence of a majority of the committee members (not counting any ex-officio nonvoting members) shall constitute a quorum. Committees may act by majority vote of the voting members present at a meeting. Each of such committees shall have and may exercise such of the powers of the Board of Directors in the management of the business and affairs of the Corporation as may be provided in these Bylaws or by resolution of the Board of Directors. Each of such committees may authorize the seal of the Corporation to be affixed to any document or instrument. The Board of Directors may designate one or more directors as alternate members of any such committee, who may replace any absent or disqualified member at any meeting of such committee. Meetings of committees may be called by any member of a committee by written, telegraphic or telephonic notice to all members of the committee and shall be held at such time and place as shall be stated in the notice of meeting. Any member of a committee may participate in any meeting by means of conference telephone or similar communications equipment. In the absence or disqualification of a member of any committee the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum may, if deemed advisable, unanimously appoint another member of the Board to act at the meeting in the place of the disqualified or absent member. Each committee may fix such other rules and procedures governing conduct of meetings as it shall deem appropriate. 33. The Executive Committee of the Board of Directors, if one is established, shall consist of not less than three directors. The Executive Committee shall have and exercise the authority of the Board of Directors between meetings of the Board, subject to such limitations and restrictions required by Delaware law or as the Board may impose in a resolution duly adopted by the Board. 34. The Audit Committee shall consist of not less than two members of the Board of Directors. The Audit Committee shall be responsible for recommending to the entire Board engagement and discharge of independent auditors of the financial statements of the Corporation, shall review the professional service provided by independent auditors, shall review the independence of independent auditors, shall review with the auditors the plan and results of the auditing engagement, shall consider the range of audit and non-audit fees, shall review the adequacy of the Corporation's system of internal accounting controls, shall review the results of procedures for internal auditing and shall consult with the internal auditor of the Corporation with respect to all 8 9 aspects of the Corporation's internal auditing program. In addition, the Audit Committee shall direct and supervise special investigations as deemed necessary by the Audit Committee. 35. The Compensation Committee shall consist of not less than two members of the Board of Directors. The Compensation Committee shall recommend to the Board the compensation to be paid to officers and key employees of the Corporation and the compensation of members of the Board of Directors. Except as otherwise provided in any specific plan adopted by the Board, the Compensation Committee shall be responsible for administration of executive incentive compensation plans, stock option plans and other forms of direct or indirect compensation of officers and key employees, and each member of the Compensation Committee shall have the power and authority to execute and bind the Company to such documents, agreements and instruments related to such plans and compensation as are approved by the Compensation Committee. In the alternative, the Compensation Committee may authorize any officer of the Company to execute such documents, agreements and instruments on behalf of the Company. In addition, the Compensation Committee shall review levels of pension benefits and insurance programs for officers and key employees. 36. The Nominating Committee, if one is established, shall recommend to the Board nominees for election as directors. The Nominating Committee shall consider performance of incumbent directors and shall recommend to the Board whether an incumbent director whose term expires shall be nominated for reelection. 37. Any action required or permitted to be taken at any meeting of any committee of the Board of Directors may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed by all of the members of such committee. OFFICERS 38. The Board of Directors shall elect a President and a Secretary, and may elect a Chairman of the Board, a Treasurer, one or more vice presidents, including one or more Senior Vice Presidents and Executive Vice Presidents and a Chief Financial Officer, a General Counsel, a Controller, one or more assistant secretaries and assistant treasurers, and such other officers as the Board of Directors shall deem appropriate. The Chairman of the Board shall be a director of the Corporation. Other officers need not be directors. One individual may be elected to and hold multiple offices. 39. Officers of the Corporation shall hold office until their successors are chosen and qualified or until their earlier resignation or removal. Any officer, agent or employee may be removed at any time, with or without cause, by the Board but such removal shall be without prejudice to the contractual rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create contract rights. Vacancy occurring in any office or position at any time may be filled by the Board. All officers, agents and employees of the Corporation shall respectively have such authority and perform such duties in the conduct and management of the Corporation as may be delegated by the Board of Directors or by these Bylaws. 9 10 40. Officers shall receive such compensation as may from time to time be determined by the Board of Directors. Agents and employees shall receive such compensation as may from time to time be determined by the Chief Executive Officer. 41. The Chairman of the Board, if one is elected, may preside, or may direct that the President so preside, at all meetings of the stockholders and at all meetings of the directors. In the absence of the Chairman of the Board, or if no Chairman of the Board is elected, the President shall so preside. If the Board of Directors shall elect a person to be the Chairman of the Board and shall designate such person the Chief Executive Officer of the Corporation, the Chairman of the Board shall supervise and direct the operations of the business of the Corporation in accordance with the policies determined by the Board of Directors. 42. Unless the Board of Directors shall have elected a Chairman of the Board of Directors and designated such person the Chief Executive Officer of the Corporation, the President shall be the Chief Executive Officer of the Corporation, supervising and directing the operations of the business of the Corporation in accordance with the policies determined by the Board of Directors. If the Board of Directors shall have elected a person as Chairman of the Board and designated such person as a Chief Executive Officer of the Corporation, the President shall be the Chief Operating Officer of the Corporation and shall be responsible for the general supervision and control of the business and the affairs of the Corporation subject to the directions of the Chairman of the Board and the Board of Directors. If the Board of Directors shall have elected a person Chairman of the Board and shall designate such person the Chief Executive Officer of the Corporation, the President, in the absence or incapacity of such Chairman of the Board, shall perform the duties of that office. 43. A Vice President, if one is elected, in the absence or incapacity of the President, shall perform the duties of the President. If there be more than one Vice President, the Board of Directors shall designate the Vice President who is to perform the duties of the President in the event of his absence or incapacity. Each Vice President shall have such other duties and authority as shall be assigned by the Chief Executive Officer or may be delegated by the Board of Directors. The Executive Vice President and Chief Financial Officer, if one is elected, shall be responsible for and direct, either directly or indirectly through any Treasurer, Controller or Director of Data Processing of the Corporation, all treasury, accounting, cost and budgeting, and data collection functions. He will report directly to the President with a report and policy relationship to the Chairman of the Board and the Board of Directors. 44. The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and shall record all votes and minutes from all proceedings in a book to be kept for that purpose. He shall keep in safe custody the seal of the Corporation and affix the same to any instrument requiring it, and when so affixed, it shall be attested by his signature or by the signature of the Treasurer or an Assistant Secretary; provided, however, that the affixing of the seal of the Corporation to any document or instrument specifically shall not be required in order for such document or instrument to be binding on or the official act of the Corporation, and the signature of any authorized officer, without the seal of the Corporation, shall be sufficient for such purposes. The 10 11 Secretary shall perform such other duties and have such other authorities as are delegated to him by the Board of Directors. 45. The Treasurer, if one is elected, shall be responsible for the care and custody of all funds and other financial assets, taxes, corporate debt, order entry and sales invoicing including credit memos, credit and collection of accounts receivable, cash receipts, and the banking and insurance functions of the Corporation. He shall report directly to and perform such other duties as shall be assigned by the Executive Vice President and Chief Financial Officer, if one is elected, or otherwise the President. 46. The Controller, if one is elected, shall be responsible for the installation and supervision of all general accounting records of the Corporation, preparation of financial statements and the annual and operating budgets and profit plans, continuous audit of accounts and records of the Corporation, preparation and interpretation of statistical records and reports, taking and costing of all physical inventories and administering the inventory levels, supervision of accounts payable and cash disbursements function and hourly and salary payrolls. He shall report directly to and perform such other functions as shall be assigned him by the Executive Vice President and Chief Financial Officer, if one is elected, or otherwise the President. 47. The Board of Directors of the Corporation may require any officer, agent or employee to give bond for the faithful discharge of his duty and for the protection of the Corporation, in such sum and with such surety as the Board deems advisable. BANKING, CHECKS AND OTHER INSTRUMENTS 48. The Board of Directors shall by resolution designate the bank or banks in which the funds of the Corporation shall be deposited, and such funds shall be deposited in the name of the Corporation and shall be subject to checks drawn as authorized by resolution of the Board of Directors. 49. The Board of Directors may in any instance designate the officers and agents who shall have authority to execute any contract, conveyance, or other instrument on behalf of the Corporation; or may ratify or confirm any execution. When the execution of any instrument has been authorized without specification of the executing officer or agents, the Chairman of the Board, if designated as the Chief Executive Officer of the Corporation, President or any Vice President, and the Secretary or Assistant Secretary or Treasurer or Assistant Treasurer may execute the same in the name and on behalf of the Corporation and may affix the corporate seal thereto; provided, however, that the affixing of the seal of the Corporation to any document or instrument specifically shall not be required in order for such document or instrument to be binding on or the official act of the Corporation, and the signature of any authorized officer, without the seal of the Corporation, shall be sufficient for such purposes. 11 12 FISCAL YEAR 50. The fiscal year of the Corporation shall begin on the first day of January and end on the thirty-first day of December. BOOKS AND RECORDS 51. The proper officers and agents of the Corporation shall keep and maintain such books, records and accounts of the Corporation's business and affairs and such stock ledgers and lists of stockholders as the Board of Directors shall deem advisable and as shall be required by the laws of the State of Delaware or other states or jurisdictions empowered to impose such requirements. INDEMNIFICATION 52. Each director or officer of the Corporation or a subsidiary of the Corporation who was or is made a party or is threatened to be made a party to or is involved in any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or a subsidiary of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (the "DGCL"), (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment), against all expenses, (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators. The right to indemnification conferred in this Section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that, if the DGCL requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under the applicable provisions of the DGCL. The Corporation may, by action of its Board of Directors, provide indemnification to employees and agents of the Corporation or a subsidiary of the Corporation with the same scope and effect as the foregoing indemnification of directors and officers. 12 13 53. The indemnification and advancement of expenses provided in paragraph 52 of these Bylaws shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any agreement, vote of stockholders, vote of disinterested directors, insurance arrangement or otherwise, both as to action in his or her official capacity and as to action in another capacity. AMENDMENTS 54. Except as otherwise provided in the Certificate of Incorporation, these Bylaws may be altered, amended or repealed and new Bylaws may be adopted at any regular meeting of the stockholders or Board of Directors; or at any special meeting of the stockholders or Board of Directors. The Board of Directors may take such action by the vote of two-thirds of those Directors present and voting at a meeting where a quorum is present. Subject to applicable provisions of the Certificate of Incorporation, the stockholders may make new Bylaws, or adopt, alter, amend, or repeal Bylaws adopted by either the stockholders or the Board of Directors by the affirmative vote of the holders of not less than two-thirds (66 2/3%) of the voting power of all of the then outstanding shares of capital stock of the Corporation then entitled to vote generally in the election of directors. 13 EX-4.1 5 ex4-1.txt FORM OF STOCK CERTIFICATE REPRESENTING COMMON STK 1 NUMBER [INTERLEUKIN GENETICS, INC. LOGO] SHARES IGI COMMON STOCK INTERLEUKIN GENETICS, INC. INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE CUSIP 458738 10 1 SEE REVERSE FOR CERTAIN DEFINITIONS This Certifies that is the record holder of FULLY PAID AND NONASSESSABLE SHARES OF COMMON STOCK, $.001 PAR VALUE, OF INTERLEUKIN GENETICS, INC. transferable on the books of the Corporation by the holder hereof in person or by duly authorized Attorney upon surrender of this certificate properly endorsed. This certificate is not valid until countersigned by the Transfer Agent and Registrar. WITNESS the facsimile signatures of its duly authorized officers. Dated: /s/ FENEL M. ELOI /s/ [ILLEGIBLE] Secretary President COUNTERSIGNED AND REGISTERED: U.S. STOCK TRANSFER CORPORATION TRANSFER AGENT AND REGISTRAR BY AUTHORIZED SIGNATURE
EX-10.1 6 ex10-1.txt LEASE AGREEMENT WITH CLEMATIS LLC 1 EXHIBIT 10.1 COMMERCIAL LEASE 1. PARTIES: CLEMATIS LLC, with a principal place of business at 411 Waverley Oaks Road, Suite 340, Waltham, MA, 02452, LESSOR, which expression shall include its heirs, successors, and assigns where the context so admits, does hereby lease to Interleukin Genetics, Inc., 100 North East Loop 410, San Antonio, TX 78216, LESSEE, which expression shall include its successors, executors, administrators, and assigns where the context so admits, and the LESSEE hereby leases the following described premises: 2. PREMISES: 2,600 sq. ft. + / - on the second floor of 135 Beaver Street, Waltham, MA, 02452, together with the right to use in common, with others entitled thereto, the hallways, stairways, and elevators, necessary for access to said leased premises, and lavatories nearest thereto. 3. TERM: The term of this lease shall be for five years commencing on July 15, 2000 or upon substantial completion of buildout required per Exhibit A and ending on June 30, 2005. The LESSOR will work with the LESSEE in trying to have the leased premises ready for occupancy as soon as possible. If the leased premises are ready for occupancy on a date other than July 15, 2000, the rent will be adjusted on a daily prorated basis. 4. RENT: The LESSEE shall pay to the LESSOR rent at the rate of $78,000.00 dollars per year, payable in advance in monthly installments of $6,500.00. Upon the execution of this lease the LESSEE shall pay to the LESSOR the first months rent in the amount of $6,500.00. See #7. 5. SECURITY DEPOSIT: Upon the execution of this lease, the LESSEE shall pay to the LESSOR the amount of $6,500.00 dollars, which shall be held as a security for the LESSEE's performance as herein provided and refunded to the LESSEE at the end of this lease subject to the LESSEE's satisfactorily compliance with the conditions hereof. 6. RENT ADJUSTMENT: A. TAX ESCALATION: If any tax year commencing with the fiscal year end 6/01, the real estate taxes on the land and buildings, of which the leased premises are a part, are in excess of the amount of the real estate taxes thereon for the fiscal year end 6/00 2 (hereinafter called the "Base Year"), LESSEE will pay to LESSOR as additional rent hereunder, when and as designated by notice in writing by LESSOR, 2.7 per cent of such excess that may occur in each year of the term of this lease or any extension or renewal thereof and proportionately for any part of a fiscal year. If the LESSOR obtains an abatement of any such excess real estate tax, a proportionate share of such abatement, less the reasonable fees and costs incurred in obtaining the same, if any, shall be refunded to the LESSEE. B. OPERATING COST ESCALATION: The LESSEE shall pay to the LESSOR as additional rent hereunder when and as designated by notice in writing by LESSOR, 2.7 per cent of any increase in operating expenses over those incurred during the calendar year 2000. Operating expenses are defined for the purposes of this agreement as: See Attached Appendicies. This increase shall be prorated should this lease be in effect with respect to only a portion of any calendar year. 7. UTILITIES: The LESSEE shall pay, as they become due, all bills for electricity and other utilities (whether they are used for furnishing heat or other purposes) that are furnished to the leased premises and all bills for fuel furnished to a separate tank servicing the leased premises exclusively. The LESSOR agrees to provide all other utility service and to furnish reasonably hot and cold water and reasonable heat and air conditioning (except to the extent that the same are furnished through separately metered utilities or separate fuel tanks as set forth above) to the leased premises, the hallways and stairways during normal business hours on regular business days of the heating and air conditioning seasons of each year, to furnish elevator service and to light passageways and stairways during business hours, and to furnish such cleaning service as is customary in similar buildings in said city or town, all subject to interruption due to any accident, to the making of repairs, alterations, or improvements, to labor difficulties, to trouble in obtaining fuel, electricity, service, or supplies from the sources from which they are usually obtained for said building, or to any cause beyond the LESSOR's control. If leased premises are not separately metered for Tenant electric (lights and plugs), Lessee will pay Lessor $1.10 per rentable sq. ft. for Tenant electric as additional rent. LESSOR shall have no obligation to provide utilities or equipment other than the utilities and equipment within the premises as of the commencement date of this lease. In the event LESSEE requires additional utilities or equipment, the installation and maintenance thereof shall be the LESSEE's sole obligation, provided that such installation shall be subject to the written consent of the LESSOR. 8. USE OF LEASED PREMISES: The LESSEE shall use the leased premises only for the purpose of general office and administrative use. 2 3 9. COMPLIANCE WITH LAWS: The LESSEE acknowledges that no trade or occupation shall be conducted in the leased premises or use made thereof which will be unlawful, improper, noisy or offensive, or contrary to any law or any municipal by-law or ordinance in force in the city or town in which the premises are situated. 10. FIRE INSURANCE: The LESSEE shall not permit any use of the leased premises which will make voidable any insurance on the property of which the leased premises are a part, or on the contents of said property or which shall be contrary to any law or regulation from time to time established by the New England Fire Insurance Rating Association, or any similar body succeeding to its powers. The LESSEE shall on demand reimburse the LESSOR, and all other tenants, all extra insurance premiums caused by the LESSEE's use of the premises. 11. MAINTENANCE: A. LESSEE'S OBLIGATIONS: The LESSEE agrees to maintain the leased premises in good condition, damage by fire and other casualty only excepted, and whenever necessary, to replace plate glass and other glass therein *, acknowledging that the leased premises are now in good order and the glass whole. The LESSEE shall not permit the leased premises to be overloaded, damaged, stripped or defaced, nor suffer any waste. LESSEE shall obtain written consent of LESSOR before erecting any sign on the premises. * That is damaged by the negligence of the LESSEE or invitees of the LESSEE. B. LESSOR'S OBLIGATIONS: The LESSOR agrees to maintain the structure of the building of which the leased premises are a part in the same condition as it is at the commencement of the term or as it may be put in during the term of this lease, reasonable wear and tear, damage by fire and other casualty only excepted, unless such maintenance is required because of the LESSEE or those for whose conduct the LESSEE is legally responsible. 12. ALTERATIONS - ADDITIONS: The LESSEE shall not make structural alterations or additions to the leased premises, but may make non-structural alterations provided the LESSOR consents thereto in writing, which consent shall not be unreasonably withheld or delayed. All such allowed alterations shall be at LESSEE's expense and shall be in quality at least equal to the present construction. LESSEE shall not permit any mechanics' liens, or similar liens, to remain upon the leased premises for labor and material furnished to LESSEE or claimed to have been furnished to LESSEE in connection with work of any character performed or claimed to have been performed at the direction of LESSEE and shall cause any such lien to be released of record forthwith without cost to LESSOR. Any alterations or improvements made by the LESSEE shall become the property of the LESSOR at the termination of occupancy as provided herein. 3 4 13. ASSIGNMENT - SUBLEASING: The LESSEE shall not assign or sublet the whole or any part of the leased premises without LESSOR's prior written consent. Notwithstanding such consent, LESSEE shall remain liable to LESSOR for the payment of all rent and for the full performance of the covenants and conditions of this lease. See Addendum. 14. SUBORDINATION: This lease shall be subject and subordinate to any and all mortgages, deeds of trust and other instruments in the nature of a mortgage, now or at any time hereafter, a lien or liens on the property of which the leased premises are a part and the LESSEE shall, when requested, promptly execute and deliver such written instruments as shall be necessary to show the subordination of this lease to said mortgages, deeds of trust or other such instruments in the nature of a mortgage. 15. LESSOR'S ACCESS: The LESSOR or agents of the LESSOR may, at reasonable times, enter to view the leased premises and may remove placards and signs not approved and affixed as herein provided, and make repairs and alterations as LESSOR should elect to do and may show the leased premises to others, and at any time within three (3) months before the expiration of the term, may affix to any suitable part of the leased premises a notice for letting or selling the leased premises or property of which the leased premises are a part and keep the same so affixed without hindrance or molestation. 16. INDEMNIFICATION AND LIABILITY: The LESSEE shall save the LESSOR harmless from all loss and damage occasioned by the use or escape of water or by the bursting of pipes *, as well as from any claim or damage resulting from neglect in not removing snow and ice from the roof of the building or from the sidewalks bordering upon the premises so leased, or by any nuisance made or suffered on the leased premises, unless such loss is caused by the neglect of the LESSOR. The removal of snow and ice from the sidewalks bordering upon the leased premises shall be LESSOR's responsibility. * Due to the negligence of the LESSEE or the invitees of the LESSEE. 17. LESSEE'S LIABILITY INSURANCE: The LESSEE shall maintain with respect to the leased premises and the property of which the leased premises are a part comprehensive public liability insurance in the amount of 1 MILLION CSL with property damage insurance in limits of 1 MILLION CSL in responsible companies qualified to do business in Massachusetts and in good standing therein insuring the LESSOR and well as LESSEE against injury to persons or damage to property as provided. The LESSEE shall deposit with the LESSOR certificates for such insurance at or prior to the commencement of the term, and thereafter within thirty (30) 4 5 days prior to the expiration of any such policies. All such insurance certificates shall provide that such policies shall not be canceled without at least ten (10) days prior written notice to each assured named therein. 18. FIRE, CASUALTY - EMINENT DOMAIN: Should a substantial portion of the leased premises, or of the property of which they are a part be substantially damaged by fire or other casualty, or be taken by eminent domain, the LESSOR may elect to terminate this lease. When such fire, casualty, or taking renders the leased premises substantially unsuitable for their intended use, a just and proportionate abatement of rent shall be made, and the LESSEE may elect to terminate this lease if; (a) The LESSOR fails to give written notice within thirty (30) days of intention to restore leased premises, or (b) The LESSOR fails to restore the leased premises to a condition substantially suitable for their intended use within ninety (90) days of said fire, casualty or taking. The LESSOR reserves, and the LESSEE grants to the LESSOR, all rights which the LESSEE may have for damages or injury to the leased premises for any taking by eminent domain, except for damage to the LESSEE's fixtures, property or equipment. 5 6 19. DEFAULT AND BANKRUPTCY: In the event that: (a) The LESSEE shall default in the payment of any installment of rent or other sum herein specified and such default shall continue for ten (10) days after written notice thereof; or (b) The LESSEE shall default in the observance or performance of any other of the LESSEE's covenants, agreement, or obligations hereunder and such default shall not be corrected within thirty (30) days after written notice thereof; or (c) The LESSEE shall be declared bankrupt or insolvent according to law, or, if any assignment shall be made of LESSEE's property for the benefit of creditors, then the LESSOR shall have the right thereafter, while such default continues, to re-enter and take complete possession of the leased premises, to declare the term of this lease ended, and remove the LESSEE's effects, without prejudice to any remedies which might be otherwise used for arrears of rent or other default. The LESSEE shall indemnify the LESSOR against all loss of rent and other payments which the LESSOR may incur by reason of such termination during the residue of the term. If the LESSEE shall default, after reasonable notice thereof, in the observance or performance of any conditions or covenants on LESSEE's part to be observed or performed under or by virtue of any of the provisions in any article of this lease, the LESSOR, without being under any obligation to do so and without thereby waiving such default, may remedy such default for the account and at the expense of the LESSEE. If the LESSOR makes any expenditures or incurs any obligations for the payment of money in connection therewith, including but not limited to, reasonable attorney's fees in instituting, prosecuting or defending any action or proceeding, such sums paid or obligations insured, with interest at the rate of 15 per cent per annum and costs, shall be paid to the LESSOR by the LESSEE as additional rent. 20. NOTICE: Any notice from the LESSOR to the LESSEE relating to the leased premises or to the occupancy thereof, shall be deemed duly served, if left at the leased premises addressed to the LESSEE, or if mailed to the leased premises, registered or certified mail, return receipt requested, postage prepaid, addressed to the LESSEE. Any notice from the LESSEE to the LESSOR relating to the leased premises or to the occupancy thereof, shall be deemed duly served, if mailed to the LESSOR by registered or certified mail, return receipt requested, postage prepaid, addressed to the LESSOR at such address as the LESSOR may from time to time advise in writing. ALL rent notices shall be paid and sent to the LESSOR at 411 Waverley Oaks Road, Suite 340, Waltham, MA 02452. 21. SURRENDER: The LESSEE shall at the expiration or other termination of this lease remove all LESSEE's goods and effects from the leased premises, (including, without hereby 6 7 limiting the generality of the foregoing, all signs and lettering affixed or painted by the LESSEE, either inside or outside the leased premises). LESSEE shall deliver to the LESSOR the leased premises and all keys, locks thereto, and other fixtures connected therewith and all alterations and additions made to or upon the leased premises, in good condition, damage by fire or other casualty only excepted. In the event of the LESSEE's failure to remove any of LESSEE's property from the premises, LESSOR is hereby authorized, without liability to LESSEE for loss or damage thereto, and at the sole risk of LESSEE, to remove and store any of the property at LESSEE's expense, or to retain same under LESSOR's control or to sell at public or private sale, without notice any or all of the property not so removed and to apply the net proceeds of such sale to the payment of any sum due hereunder, or to destroy such property. 22. LATE FEES: LESSEE agrees that because of actual damages for a late payment or a dishonored check are difficult to fix or ascertain, but recognizing that damage and injury result therefore, LESSEE agrees that if payments of rent and other obligations are not received in hand by LESSOR five (5) days after the date is due, LESSEE agrees to pay liquidated damages of $100.00 plus 18% per annum on the delinquent amount from the due date. The postmark on the payment, received plus two (2) days, shall be conclusive evidence of whether the payment is delinquent. However, LESSOR is not responsible for late deliveries by U.S. Mail. LESSEE agrees to pay a liquidated damage of $25.00 for each dishonored check. In the event that two or more of the LESSEE's checks are dishonored in a 12 month period, the LESSOR, in addition to other Rights, shall have the right to demand payment by Certified Check or Money Order. 23. OTHER PROVISIONS: It is also understood and agreed that o Attached Addendum, Appendices D, E F and Exhibit G are part of this Agreement. o Attached Exhibit A buildout plan is part of this Agreement. IN WITNESS WHEREOF, the said parties hereunto set their hands and seals this day of May, 2000. Interleukin Genetics, Inc. Clematis LLC - --------------------------------- -------------------------------- LESSEE LESSOR Phillip Riley Duffy Bros. Management Company, Inc. Manager Norman J. Duffy, President. 7 EX-10.2 7 ex10-2.txt 1ST AMENDMENT TO COMMERCIAL LEASE 1 EXHIBIT 10.2 FIRST AMENDMENT TO A COMMERCIAL LEASE The parties hereto Clematis LLC, Lessor and Interleukin Genetics, Inc., Lessee under a certain Lease Agreement ("Lease Agreement") dated May 26, 2000 for premises located at 135 Beaver Street, Waltham, MA ("Premises") agree as follows: Whereas the Lessee, for its own convenience desires to lease the premises for an additional rent in lieu of paying for improvements directly; and Whereas the Parties have agreed that the additional rent shall be calculated by taking the build-out cost of $13,557.00 (as reflected in Exhibits A and B attached) , amortized over 24 months at a 10% interest charge: and Whereas the parties hereby agree to adjust the Lease Agreement to reflect the change in the rent due to include additional rent of $625.59 per month. Now therefore, the Parties agree as follows: The following is added to paragraph 4 of the Leases Agreement: At and after July 15, 2000 through July 14, 2002, the Lessee shall pay to the Lessor rent in advance in monthly installments as follows: Base Rent $6,500.00 Additional Rent 625.59 --------- Total Base Rent $7,125.59
All other terms and conditions in said Lease Agreement shall remain unchanged. Agreed this day of July 2000. Clematis LLC Lessor by: -------------------------------------------- Duffy Bros. Management Company, Inc. Manager Norman J. Duffy, President Interleukin Genetics, Inc. Lessee by: -------------------------------------------- EX-10.3 8 ex10-3.txt 2000 EMPLOYEE STOCK COMPENSATION PLAN 1 EXHIBIT 10.3 INTERLEUKIN GENETICS, INC. 2000 EMPLOYEE STOCK COMPENSATION PLAN 2 INTERLEUKIN GENETICS, INC. 2000 EMPLOYEE STOCK COMPENSATION PLAN TABLE OF CONTENTS
Section ARTICLE I - PLAN Purpose.......................................................................................1.1 Term of Plan..................................................................................1.2 ARTICLE II - DEFINITIONS Affiliate.....................................................................................2.1 Award.........................................................................................2.2 Award Agreement...............................................................................2.3 Board.........................................................................................2.4 Change of Control.............................................................................2.5 Code..........................................................................................2.6 Committee.....................................................................................2.7 Company.......................................................................................2.8 Corporate Change..............................................................................2.9 Disability...................................................................................2.10 Employee.....................................................................................2.11 Exchange Act.................................................................................2.12 Fair Market Value............................................................................2.13 Holder.......................................................................................2.14 Incentive Option.............................................................................2.15 Mature Shares................................................................................2.16 Non-Employee Director........................................................................2.17 Nonqualified Option..........................................................................2.18 Option.......................................................................................2.19 Option Agreement.............................................................................2.20 Outside Director.............................................................................2.21 Plan.........................................................................................2.22 Restricted Stock.............................................................................2.23 Restricted Stock Agreement...................................................................2.24 Restricted Stock Award.......................................................................2.25 Retirement...................................................................................2.26 Stock........................................................................................2.27 Ten Percent Stockholder......................................................................2.28 Voting Stock.................................................................................2.29 ARTICLE III - ELIGIBILITY
D-i 3 ARTICLE IV - GENERAL PROVISIONS RELATING TO AWARDS Authority to Grant Awards.....................................................................4.1 Dedicated Shares; Maximum Awards..............................................................4.2 Non-Transferability...........................................................................4.3 Requirements of Law...........................................................................4.4 Recapitalization or Reorganization of the Company.............................................4.5 Election Under Section 83(b) of the Code......................................................4.6 ARTICLE V - OPTIONS Type of Option................................................................................5.1 Exercise Price................................................................................5.2 Duration of Options...........................................................................5.3 Amount Exercisable............................................................................5.4 Exercise of Options...........................................................................5.5 Exercise on Termination of Employment.........................................................5.6 Substitution Options..........................................................................5.7 No Rights as Stockholder......................................................................5.8 ARTICLE VI - RESTRICTED STOCK AWARDS Restricted Stock Awards.......................................................................6.1 Holder's Rights as Stockholder................................................................6.2 ARTICLE VII - ADMINISTRATION ARTICLE VIII - AMENDMENT OR TERMINATION OF PLAN ARTICLE IX - MISCELLANEOUS No Establishment of a Trust Fund..............................................................9.1 No Employment or Affiliation Obligation.......................................................9.2 Forfeiture ...................................................................................9.3 Tax Withholding...............................................................................9.4 Written Agreement.............................................................................9.5 Indemnification of the Committee and the Board................................................9.6 Gender........................................................................................9.7 Headings......................................................................................9.8 Other Compensation Plans......................................................................9.9 Other Options or Awards......................................................................9.10 Governing Law................................................................................9.11
ii 4 ARTICLE I PLAN 1.1 PURPOSE. The Plan is intended to advance the best interests of the Company and its stockholders by providing those persons who have responsibility for the management and growth of the Company and its Affiliates or other persons who provide services to the Company or any of its Affiliates with additional incentives and an opportunity to obtain or increase their proprietary interest in the Company, thereby encouraging them to continue to serve the Company or any of its Affiliates. 1.2 TERM OF PLAN. The Plan is effective June 5, 2000. The Plan shall remain in effect until all Awards under the Plan have been satisfied or expired. ARTICLE II DEFINITIONS The words and phrases defined in this Article shall have the meaning set out in these definitions throughout the Plan, unless the context in which any such word or phrase appears reasonably requires a broader, narrower, or different meaning. 2.1 "AFFILIATE" means any parent corporation and any subsidiary corporation. The term "parent corporation" means any corporation (other than the Company) in an unbroken chain of corporations ending with the Company if, at the time of the action or transaction, each of the corporations other than the Company owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. The term "subsidiary corporation" means any corporation (other than the Company) in an unbroken chain of corporations beginning with the Company if, at the time of the action or transaction, each of the corporations other than the last corporation in the unbroken chain owns stock possessing 50 percent or more of the total combined voting power of all classes of stock in one of the other corporations in the chain. 2.2 "AWARD" means any Incentive Option, Nonqualified Option, or Restricted Stock Award granted under the Plan. 2.3 "AWARD AGREEMENT" has the meaning ascribed to it in Section 9.5. 2.4 "BOARD" means the board of directors of the Company. 2.5 "CHANGE OF CONTROL" means the occurrence of any of the following after the date on which the applicable Award is granted: 1 5 (i) the consummation of: (x) a merger, consolidation or reorganization of the Company with or into any other person if as a result of such merger, consolidation or reorganization, 50 percent or less of the combined voting power of the then- outstanding securities of the continuing or surviving entity immediately after such merger, consolidation or reorganization are held in the aggregate by the holders of Voting Stock immediately prior to such merger, consolidation or reorganization; (y) any sale, lease, exchange or other transfer of all or substantially all the assets of the Company and its consolidated subsidiaries to any other person if as a result of such sale, lease, exchange or other transfer, 50 percent or less of the combined voting power of the then- outstanding securities of such other person immediately after such sale, lease, exchange or other transfer are held in the aggregate by the holders of Voting Stock immediately prior to such sale, lease, exchange or other transfer; or (z) the stockholders of the Company approve the dissolution of the Company. A transaction shall not constitute a Change in Control if its sole purpose is to change the state of the Company's incorporation or to create a holding company that will be owned in substantially the same proportions by the persons who held the Company's securities immediately before such transaction. 2.6 "CODE" means the Internal Revenue Code of 1986, as amended. 2.7 "COMMITTEE" means a committee of at least two persons appointed by the Board. The Committee shall be comprised solely of persons who are both Non-Employee Directors and Outside Directors. 2.8 "COMPANY" means Interleukin Genetics, Inc, a Texas corporation. 2.9 "CORPORATE CHANGE" shall have the meaning ascribed to it in Section 4.5. 2.10 "DISABILITY" means a medically determinable mental or physical impairment which, in the opinion of a physician selected by the Committee, shall prevent the Holder from engaging in any substantial gainful activity and which can be expected to result in death or which has lasted or can be expected to last for a continuous period of not less than 12 months and which: (a) was not contracted, suffered or incurred while the Holder was engaged in, or did not result from having engaged in, a felonious criminal enterprise; (b) did not result from alcoholism or addiction 2 6 to narcotics; (c) did not result from an injury incurred while a member of the Armed Forces of the United States for which the Holder receives a military pension; and (d) did not result from an intentionally self-inflicted injury. 2.11 "EMPLOYEE" means a person employed by the Company or any Affiliate. 2.12 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended. 2.13 "FAIR MARKET VALUE" of the Stock as of any date means (a) the average of the high and low sale prices of the Stock on that date (or, if there was no sale on such date, the next preceding date on which there was such a sale) on the principal securities exchange on which the Stock is listed; or (b) if the Stock is not listed on a securities exchange, an amount as determined by the Committee in its sole discretion. 2.14 "HOLDER" means a person who has been granted an Award, or any person who is entitled to payment under an Award in accordance with the terms of the Plan. 2.15 "INCENTIVE OPTION" means an Option granted under the Plan which is designated as an "Incentive Option" and satisfies the requirements of section 422 of the Code. 2.16 "MATURE SHARES" means shares of Stock that the Holder has held for at least six months. 2.17 "NON-EMPLOYEE DIRECTOR" means a "non-employee director" as defined in Rule 16b-3 of the Exchange Act. 2.18 "NONQUALIFIED OPTION" means an Option granted under the Plan other than an Incentive Option. 2.19 "OPTION" means either an Incentive Option or a Nonqualified Option granted under the Plan to purchase shares of Stock. 2.20 "OPTION AGREEMENT" means the written agreement which sets out the terms of an Option. 2.21 "OUTSIDE DIRECTOR" means a member of the Board serving on the Committee who qualifies as an outside director as defined in Department of Treasury regulations promulgated under section 162(m) of the Code. 2.22 "PLAN" means the Interleukin Genetics, Inc. 2000 Employee Stock Compensation Plan, as set forth in this document and as it may be amended from time to time. 3 7 2.23 "RESTRICTED STOCK" means stock awarded or purchased under the Plan pursuant to a Restricted Stock Agreement. 2.24 "RESTRICTED STOCK AGREEMENT" means the written agreement which sets out the terms of a Restricted Stock Award. 2.25 "RESTRICTED STOCK AWARD" means an Award of Restricted Stock. 2.26 "RETIREMENT" means the termination of an Employee's employment relationship with the Company and all Affiliates after completing at least five years of service and attaining the age of 65. 2.27 "STOCK" means the common stock of the Company, no par value or, in the event that the outstanding shares of common stock are later changed into or exchanged for a different class of stock or securities of the Company or another corporation, that other stock or security. 2.28 "TEN PERCENT STOCKHOLDER" means an individual who, at the time the Option is granted, owns stock possessing more than ten percent of the total combined voting power of all classes of stock of the Company or of any Affiliate. An individual shall be considered as owning the stock owned, directly or indirectly, by or for his brothers and sisters (whether by the whole or half blood), spouse, ancestors, and lineal descendants; and stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust, shall be considered as being owned proportionately by or for its stockholders, partners, or beneficiaries. 2.29 "VOTING STOCK" means shares of capital stock of the Company the holders of which are entitled to vote for the election of directors, but excluding shares entitled to so vote only upon the occurrence of a contingency unless that contingency shall have occurred. ARTICLE III ELIGIBILITY The individuals who shall be eligible to receive Incentive Options shall be those key employees of the Company or any of its Affiliates as the Committee shall determine from time to time. The individuals who shall be eligible to receive Awards other than Incentive Options shall be those persons, including employees, consultants, advisors, directors and other persons, who have responsibility for the management and growth of the Company or any of its Affiliates or other persons providing services to the Company or any of its Affiliates as the Committee shall determine from time to time. The Board may designate one or more individuals who shall not be eligible to receive any Award under the Plan or under other similar plans of the Company. 4 8 ARTICLE IV GENERAL PROVISIONS RELATING TO AWARDS 4.1 AUTHORITY TO GRANT AWARDS. The Committee may grant to those Employees of the Company or any of its Affiliates and other eligible persons as it shall from time to time determine, Awards under the terms and conditions of the Plan. Subject only to any applicable limitations set out in the Plan, the number of shares of Stock to be covered by any Award to be granted to any person shall be as determined by the Committee. 4.2 DEDICATED SHARES; MAXIMUM AWARDS. The total number of shares of Stock with respect to which Awards may be granted under the Plan is 2,000,000. The shares of Stock may be treasury shares or authorized but unissued shares. The total number of shares of Stock with respect to which Incentive Options may be granted under the Plan is 500,000 shares. The total number of shares of Stock with respect to which Restricted Stock Awards may be granted under the Plan is 500,000 shares. The maximum number of shares subject to Options which may be issued to any person under the Plan during any calendar year is 500,000 shares. The maximum number of shares subject to Restricted Stock Awards which may be granted to any person under the Plan during any calendar year is 500,000 shares. The number of shares stated in this Section 4.2 shall be subject to adjustment in accordance with the provisions of Section 4.5. If any outstanding Award expires or terminates for any reason or any Award is surrendered or cancelled, the shares of Stock allocable to the unexercised portion of that Award may again be subject to an Award under the Plan. 4.3 NON-TRANSFERABILITY. Incentive Options shall not be transferable by the Employee other than by will or under the laws of descent and distribution, and shall be exercisable, during the Employee's lifetime, only by him. Except as specified in the applicable Award agreements or in domestic relations court orders, other Awards shall not be transferable by the Holder other than by will or under the laws of descent and distribution, and shall be exercisable, during the Holder's lifetime, only by him. In the discretion of the Committee, any attempt to transfer an Award other than under the terms of the Plan and the applicable Award agreement may terminate the Award. 4.4 REQUIREMENTS OF LAW. The Company shall not be required to sell or issue any Stock under any Award if issuing that Stock would constitute or result in a violation by the Holder or the Company of any provision of any law, statute, or regulation of any governmental authority. Specifically, in connection with any applicable statute or regulation relating to the registration of securities, upon exercise of any Option or pursuant to any other Award, the Company shall not be required to issue any Stock unless the Committee has received evidence satisfactory to it to the effect that the Holder of that Award will not transfer the Stock except in accordance with applicable law, including receipt of an opinion of counsel satisfactory to the Company to the effect that any proposed transfer complies with applicable law. The determination by the Committee on this matter 5 9 shall be final, binding and conclusive. The Company may, but shall in no event be obligated to, register any Stock covered by the Plan pursuant to applicable securities laws. In the event the Stock issuable on exercise of an Option or pursuant to any other Award is not registered, the Company may imprint on the certificate evidencing the Stock any legend that counsel for the Company considers necessary or advisable to comply with applicable law. The Company shall not be obligated to take any other affirmative action in order to cause the exercise of an Option or vesting under an Award, or the issuance of shares pursuant thereto, to comply with any law or regulation of any governmental authority. 4.5 RECAPITALIZATION OR REORGANIZATION OF THE COMPANY. The existence of outstanding Awards shall not affect in any way the right or power of the Company or its stockholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the Company's capital structure or its business, or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock ahead of or affecting the Stock or its rights, or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding, whether of a similar character or otherwise. If the Company shall effect a subdivision or consolidation of shares or other capital readjustment, the payment of a stock dividend, or other increase or reduction of the number of shares of the Stock outstanding, without receiving compensation for it in money, services or property, then (a) the number, class, and per share price of shares of Stock subject to outstanding Awards under this Plan shall be appropriately adjusted in such a manner as to entitle a Holder to receive upon exercise of an Award, for the same aggregate cash consideration, the equivalent total number and class of shares he would have received had he exercised his Award in full immediately prior to the event requiring the adjustment; and (b) the number and class of shares of Stock then reserved to be issued under the Plan shall be adjusted by substituting for the total number and class of shares of Stock then reserved, that number and class of shares of Stock that would have been received by the owner of an equal number of outstanding shares of each class of Stock as the result of the event requiring the adjustment. Such adjustment shall be made by the Board, whose determination in that respect shall be final, binding and conclusive. If while unexercised Awards remain outstanding under the Plan (i) the Company shall not be the surviving entity in any merger, consolidation or other reorganization (or survives only as a subsidiary of an entity other than an entity that was wholly-owned by the Company immediately prior to such merger, consolidation or other reorganization), (ii) the Company sells, leases or exchanges or agrees to sell, lease or exchange all or substantially all of its assets to any other person or entity (other than an entity wholly-owned by the Company), or (iii) the Company is to be dissolved and liquidated (each such event is referred to herein as a "Corporate Change"), then (x) except as otherwise provided in an Award Agreement or as a result of the Board of Directors' effectuation of one or more of the alternatives described below, there shall be no acceleration of the time at which any Award then outstanding may be exercised, and (y) no later than ten days after the 6 10 approval by the stockholders of the Company of such Corporate Change, the Committee, acting in its sole and absolute discretion without the consent or approval of any Holder, shall act to effect one or more of the following alternatives, which may vary among individual Holders and which may vary among Awards held by any individual Holder: (1) accelerate the time at which some or all of the Awards then outstanding may be exercised so that such Awards may be exercised in full for a limited period of time on or before a specified date (before or after such Corporate Change) fixed by the Committee, after which specified date all such Awards that remain unexercised and all rights of Holders thereunder shall terminate, (2) require the mandatory surrender to the Company by all or selected Holders of some or all of the then outstanding Awards held by such Holders (irrespective of whether such Awards are then exercisable under the provisions of this Plan or the Award Agreements evidencing such Awards) as of a date, before or after such Corporate Change, specified by the Committee, in which event the Committee shall thereupon cancel such Awards and the Company shall pay to each such Holder an amount of cash per share equal to the excess, if any, of the per share price offered to stockholders of the Company in connection with such Corporate Change over the exercise price(s) under such Awards for such shares, (3) with respect to all or selected Holders, have some or all of their then outstanding Awards (whether vested or unvested) assumed or have a new Award substituted for some or all of their then outstanding Awards (whether vested or unvested) by an entity which is a party to the transaction resulting in such Corporate Change, (4) provide that the number and class of shares of Stock covered by an Award (whether vested or unvested) theretofore granted shall be adjusted so that such Award shall thereafter cover the number and class of shares of stock or other securities or property (including, without limitation, cash) to which the Holder would have been entitled pursuant to the terms of the agreement and/or plan relating to such Corporate Change if, immediately prior to such Corporate Change, the Holder had been the holder of record of the number of shares of Stock then covered by such Award, or (5) make any adjustments to Awards then outstanding as the Committee deems appropriate to reflect such Corporate Change (provided, however, that the Committee may determine in its sole and absolute discretion that no such adjustment is necessary). In effecting one or more of alternatives (3), (4) or (5) above, and except as otherwise may be provided in an Award Agreement, the Committee, in its sole and 7 11 absolute discretion and without the consent or approval of any Holder, may accelerate the time at which some or all Awards then outstanding may be exercised. In the event of changes in the outstanding Stock by reason of recapitalizations, reorganizations, mergers, consolidations, combinations, exchanges or other relevant changes in capitalization occurring after the date of the grant of any Award and not otherwise provided for by this Section 4.5, any outstanding Awards and any agreements evidencing such Awards shall be subject to adjustment by the Committee in its sole and absolute discretion as to the number and price of shares of stock or other consideration subject to such Awards. In the event of any such change in the outstanding Stock, the aggregate number of shares available under this Plan may be appropriately adjusted by the Committee, whose determination shall be conclusive. The issue by the Company of shares of stock of any class, or securities convertible into shares of stock of any class, for cash or property, or for labor or services either upon direct sale or upon the exercise of rights or warrants to subscribe for them, or upon conversion of shares or obligations of the Company convertible into shares or other securities, shall not affect, and no adjustment by reason of such issuance shall be made with respect to, the number, class, or price of shares of Stock then subject to outstanding Awards. 4.6 ELECTION UNDER SECTION 83(b) OF THE CODE. No Holder shall exercise the election permitted under section 83(b) of the Code without written approval of the Committee. Any Holder doing so may, in the discretion of the Committee, forfeit any or all Awards issued to him under the Plan. ARTICLE V OPTIONS 5.1 TYPE OF OPTION. The Committee shall specify in an Option Agreement whether a given Option is an Incentive Option or a Nonqualified Option. However, notwithstanding such designation, to the extent that the aggregate Fair Market Value (determined as of the time an Incentive Option is granted) of the Stock with respect to which incentive stock options first become exercisable by an Employee during any calendar year (under the Plan and any other incentive stock option plan(s) of the Company or any Affiliate) exceeds $100,000.00, the Incentive Option shall be treated as a Nonqualified Option. In making this determination, incentive stock options shall be taken into account in the order in which they were granted. 5.2 EXERCISE PRICE. The price at which Stock may be purchased under an Incentive Option shall not be less than 100 percent of the Fair Market Value of the shares of Stock on the date the Option is granted. In its discretion, the Committee may provide that the price at which shares of Stock may be purchased under an Option shall be more than the minimum price specified above. In the case of any Ten Percent Stockholder, the price at which shares of Stock may be purchased under an Incentive Option shall not be less than 110 percent of the Fair Market Value 8 12 of the Stock on the date the Incentive Option is granted. The price at which Stock may be purchased under a Nonqualified Option shall be specified in an Optionee's Option Agreement, and may be more or less than 100% of the Fair Market Value of the shares of Stock on the date the Option is granted. 5.3 DURATION OF OPTIONS. The Option Agreement shall specify the term of the Option; provided that no Option shall be exercisable after the expiration of ten years from the date the Option is granted. In the case of a Ten Percent Stockholder, no Incentive Option shall be exercisable after the expiration of five years from the date the Incentive Option is granted. 5.4 AMOUNT EXERCISABLE. Each Option may be exercised at the time, in the manner and subject to the conditions the Committee specifies in the Option Agreement in its sole discretion. Unless the Option Agreement expressly specifies otherwise, an Option shall not continue to vest after the Optionee's severance of employment or affiliation relationship with the Company and all Affiliates for any reason. If specified in the Option Agreement, an Option will be exercisable in full upon the occurrence of a Change of Control. Otherwise, a Change of Control shall not effect the exercisability of the Option, except as set forth in Section 4.5 hereof. 5.5 EXERCISE OF OPTIONS. Each Option shall be exercised by the delivery of written notice to the Committee setting forth the number of shares of Stock with respect to which the Option is to be exercised, together with cash, certified check, bank draft, or postal or express money order payable to the order of the Company for an amount equal to the exercise price under the Option, and/or any other form of payment which is acceptable to the Committee, and specifying the address to which the certificates for the shares are to be mailed. As promptly as practicable after receipt of written notification and payment, the Company shall deliver to the Holder certificates for the number of shares with respect to which the Option has been exercised, issued in the Holder's name. The Committee may, in its sole discretion, permit a Holder to elect to pay the exercise price upon exercise of an Option by authorizing a third-party broker to sell all or a portion of the shares of Stock acquired upon exercise of the Option and remit to the Company a sufficient portion of the sale proceeds to pay the exercise price and any applicable tax withholding resulting from such exercise. An Option may not be exercised for a fraction of a share of Stock. 5.6 EXERCISE ON TERMINATION OF EMPLOYMENT OR AFFILIATION. (a) Termination of Employment Other Than As a Result of Retirement, Death or Disability. Unless it is expressly provided otherwise in the Option Agreement, an Option shall terminate one day less than three months after the severance of employment or affiliation relationship between the Holder and the Company and all Affiliates for any reason, with or without cause, other than Retirement, death or Disability. Whether authorized leave of absence or absence 9 13 on military or government service shall constitute severance of the employment of an Employee shall be determined by the Committee at that time. (b) Retirement. Unless it is expressly provided otherwise in the Option Agreement, an Option shall terminate one day less than one year after the Retirement of the Holder. (c) Death. After the death of the Holder, his executors, administrators or any persons to whom his Option may be transferred by will or by the laws of descent and distribution shall have the right, at any time prior to the earlier of the Option's expiration or one day less than one year after the death of the Holder, to exercise it, to the extent to which he was entitled to exercise it immediately prior to his death, unless it is expressly provided otherwise in the Option Agreement. (d) Disability. If, before the expiration of an Option, the Holder shall be severed from the employ of or affiliation with the Company and all Affiliates due to Disability, the Option shall terminate on the earlier of the Option's expiration date or one day less than one year after the date of his severance due to Disability, unless it is expressly provided otherwise in the Option Agreement. In the event that the Holder shall be severed from the employ of or affiliation with the Company and all Affiliates for Disability, the Holder shall have the right prior to the termination of the Option to exercise the Option, to the extent to which he was entitled to exercise it immediately prior to his severance of employment or affiliation due to Disability, unless it is expressly provided otherwise in the Option Agreement. (e) Employment With an Entity in a Section 424(a) Transaction. In determining the employment relationship between the Company and or any Affiliate and an Employee, employment by a corporation issuing or assuming a stock option in a transaction to which section 424(a) of the Code applies shall be considered employment by the Company or an Affiliate. 5.7 SUBSTITUTION OPTIONS. Options may be granted under the Plan from time to time in substitution for stock options held by employees of other corporations who are about to become employees of or affiliated with the Company or any Affiliate as the result of a merger or consolidation of the employing corporation with the Company or any Affiliate, or the acquisition by the Company or any Affiliate of the assets of the employing corporation, or the acquisition by the Company or any Affiliate of stock of the employing corporation as the result of which it becomes an Affiliate of the Company. The terms and conditions of the substitute Options granted may vary from the terms and conditions set out in the Plan to the extent the Committee, at the time of grant, may deem appropriate to conform, in whole or in part, to the provisions of the stock options in substitution for which they are granted. 5.8 NO RIGHTS AS STOCKHOLDER. No Holder shall have any rights as a stockholder with respect to Stock covered by his Option until the date a stock certificate is issued for the Stock. 10 14 ARTICLE VI RESTRICTED STOCK AWARDS 6.1 RESTRICTED STOCK AWARDS. The Committee may make Awards of Restricted Stock to eligible persons selected by it. The amount of, the vesting and the transferability restrictions applicable to, any Restricted Stock Award shall be determined by the Committee in its sole discretion. If the Committee imposes vesting or transferability restrictions on a Holder's rights with respect to shares of Restricted Stock, the Committee may issue such instructions to the Company's stock transfer agent in connection therewith as it deems appropriate. The Committee may also cause the certificate for shares issued pursuant to a Restricted Stock Award to be imprinted with any legend which counsel for the Company considers advisable with respect to the restrictions. Each Restricted Stock Award shall be evidenced by a Restricted Stock Award Agreement that contains any vesting, transferability restrictions and other provisions not inconsistent with the Plan as the Committee may specify. 6.2 HOLDER'S RIGHTS AS STOCKHOLDER. (a) From the date a Restricted Stock Award is granted, the Holder shall have the right to receive all cash dividends or other distributions paid or made with respect to the shares of Stock subject to the Award. (b) Commencing on the date of the transfer of shares of Restricted Stock to a Holder on the books of the Company pursuant to an Award, the Holder shall have the right to vote the shares subject to the Award. ARTICLE VII ADMINISTRATION The Plan shall be administered by the Committee. All questions of interpretation and application of the Plan and Awards shall be subject to the determination of the Committee. A majority of the members of the Committee shall constitute a quorum. All determinations of the Committee shall be made by a majority of its members. Any decision or determination reduced to writing and signed by a majority of the members shall be as effective as if it had been made by a majority vote at a meeting properly called and held. In carrying out its authority under the Plan, the Committee shall have full and final authority and discretion, including but not limited to the following rights, powers and authorities, to: (a) determine the persons to whom and the time or times at which Awards will be made, 11 15 (b) determine the number of shares and the exercise price of Stock covered in each Award, subject to the terms of the Plan, (c) determine the terms, provisions and conditions of each Award, which need not be identical, (d) accelerate the time at which any outstanding Option may be exercised, or Restricted Stock Award will vest, (e) define the effect, if any, on an Award of the death, disability, retirement, or termination of employment or affiliation relationship between the Holder and the Company and Affiliates, (f) prescribe, amend and rescind rules and regulations relating to administration of the Plan, and (g) make all other determinations and take all other actions deemed necessary, appropriate, or advisable for the proper administration of the Plan. The actions of the Committee in exercising all of the rights, powers, and authorities set out in this Article and all other Articles of the Plan, when performed in good faith and in its sole judgment, shall be final, conclusive and binding on all parties. ARTICLE VIII AMENDMENT OR TERMINATION OF PLAN The Board may amend, terminate or suspend the Plan at any time, in its sole and absolute discretion. The Board shall have the power to make any changes in the Plan and in the regulations and administrative provisions under it or in any outstanding Incentive Option as in the opinion of counsel for the Company may be necessary or appropriate from time to time to enable any Incentive Option granted under the Plan to continue to qualify as an incentive stock option or such other stock option as may be defined under the Code so as to receive preferential federal income tax treatment. ARTICLE IX MISCELLANEOUS 9.1 NO ESTABLISHMENT OF A TRUST FUND. No property shall be set aside nor shall a trust fund of any kind be established to secure the rights of any Holder under the Plan. All Holders shall at all times rely solely upon the general credit of the Company for the payment of any benefit which becomes payable under the Plan. 12 16 9.2 NO EMPLOYMENT OR AFFILIATION OBLIGATION. The granting of any Option or Award shall not constitute an employment contract, express or implied, nor impose upon the Company or any Affiliate any obligation to employ or continue to employ, or utilize the services of, any Holder. The right of the Company or any Affiliate to terminate the employment of any person shall not be diminished or affected by reason of the fact that an Option or Award has been granted to him. 9.3 FORFEITURE. Notwithstanding any other provisions of the Plan, if the Committee finds by a majority vote after full consideration of the facts that the Holder, before or after termination of his employment or affiliation relationship with the Company or an Affiliate for any reason (a) committed or engaged in fraud, embezzlement, theft, commission of a felony, or proven dishonesty in the course of his employment by the Company or an Affiliate, which conduct damaged the Company or Affiliate, or disclosed trade secrets of the Company or an Affiliate, or (b) participated, engaged in or had a material, financial or other interest, whether as an employee, officer, director, consultant, contractor, stockholder, owner, or otherwise, in any commercial endeavor in the United States which is competitive with the business of the Company or an Affiliate without the written consent of the Company or Affiliate, the Holder shall forfeit all outstanding Options and all outstanding Awards, and including all exercised Options and other situations pursuant to which the Company has not yet delivered a stock certificate. Clause (b) shall not be deemed to have been violated solely by reason of the Holder's ownership of stock or securities of any publicly owned corporation, if that ownership does not result in effective control of the corporation. The decision of the Committee as to the cause of the Holder's discharge, the damage done to the Company or an Affiliate, and the extent of the Holder's competitive activity shall be final. No decision of the Committee, however, shall affect the finality of the discharge of the Holder by the Company or an Affiliate in any manner. 9.4 TAX WITHHOLDING. The Company or any Affiliate shall be entitled to deduct from other compensation payable to each Holder any sums required by federal, state, or local tax law to be withheld with respect to the grant or exercise of an Option, or lapse of restrictions on Restricted Stock. In the alternative, the Company may require the Holder of an Award to pay such sums for taxes directly to the Company or any Affiliate in cash or by check within ten days after the date of exercise or lapse of restrictions. In the discretion of the Committee, a Holder may use shares of Stock received by the Holder upon the exercise of a Nonqualified Option to satisfy any required tax withholding obligations of the Company or an Affiliate that result from the exercise. The Committee may, in its discretion, permit a Holder to satisfy any tax withholding obligations arising upon the vesting of Restricted Stock by delivering to the Holder of the Restricted Stock Award a reduced number of shares of Stock in the manner specified herein. If permitted by the Committee and acceptable to the Holder, at the time of vesting of shares of Restricted Stock, the Company shall (i) calculate the amount of withholding tax due on the assumption that all such vested shares of Restricted Stock are made available for delivery, (ii) reduce the number of such shares made available for delivery so that the Fair Market Value of the shares withheld on the vesting date 13 17 approximates the amount of tax the Company is obliged to withhold and (iii) in lieu of the withheld shares, remit cash to the United States Treasury and other applicable governmental authorities, on behalf of the Holder, in the amount of the withholding tax due. The Company shall withhold only whole shares of Stock to satisfy its withholding obligation. Where the Fair Market Value of the withheld shares does not equal the Company's withholding tax obligation, the Company shall withhold shares with a Fair Market Value slightly in excess of the amount of its withholding obligation and shall remit the excess cash to the Holder of the Restricted Stock Award with the shares of Stock made available for delivery. The withheld shares of Restricted Stock not made available for delivery by the Company shall be retained as treasury stock or will be cancelled and, in either case, the Holder's right, title and interest in such Restricted Stock shall terminate. The Company shall have no obligation upon exercise of any Option or lapse of restrictions on Restricted Stock until the Company or an Affiliate has received payment sufficient to cover all tax withholding amounts due with respect to that exercise. Neither the Company nor any Affiliate shall be obligated to advise a Holder of the existence of the tax or the amount which it will be required to withhold. 9.5 WRITTEN AGREEMENT. Each Award shall be embodied in a written agreement ("Award Agreement") which shall be subject to the terms and conditions of the Plan and shall be signed by the Holder and by a member of the Committee on behalf of the Committee and the Company or an executive officer of the Company, other than the Holder, on behalf of the Company. The agreement may contain any other provisions that the Committee in its discretion shall deem advisable which are not inconsistent with the terms of the Plan. 9.6 INDEMNIFICATION OF THE COMMITTEE AND THE BOARD. With respect to administration of the Plan, the Company shall indemnify each present and future member of the Committee and the Board against, and each member of the Committee and the Board shall be entitled without further act on his part to indemnity from the Company for, all expenses (including attorney's fees, the amount of judgments and the amount of approved settlements made with a view to the curtailment of costs of litigation, other than amounts paid to the Company itself) reasonably incurred by him in connection with or arising out of any action, suit, or proceeding in which he may be involved by reason of his being or having been a member of the Committee and/or the Board, whether or not he continues to be a member of the Committee and/or the Board at the time of incurring the expenses -- including, without limitation, matters as to which he shall be finally adjudged in any action, suit or proceeding to have been found to have been negligent in the performance of his duty as a member of the Committee or the Board. However, this indemnity shall not include any expenses incurred by any member of the Committee and/or the Board in respect of matters as to which he shall be finally adjudged in any action, suit or proceeding to have been guilty of gross negligence or willful misconduct in the performance of his duty as a member of the Committee and the Board. In addition, no right of indemnification under the Plan shall be available to or enforceable by any member of the Committee and the Board unless, within 60 days after institution of any action, suit or proceeding, he shall have offered the Company, in writing, the opportunity to handle and defend same at its own expense. This right of indemnification shall inure to the benefit of the heirs, executors or administrators of each member of the Committee and the 14 18 Board and shall be in addition to all other rights to which a member of the Committee and the Board may be entitled as a matter of law, contract, or otherwise. 9.7 GENDER. If the context requires, words of one gender when used in the Plan shall include the other and words used in the singular or plural shall include the other. 9.8 HEADINGS. Headings of Articles and Sections are included for convenience of reference only and do not constitute part of the Plan and shall not be used in construing the terms of the Plan. 9.9 OTHER COMPENSATION PLANS. The adoption of the Plan shall not affect any other stock option, incentive or other compensation or benefit plans in effect for the Company or any Affiliate, nor shall the Plan preclude the Company from establishing any other forms of incentive or other compensation for employees of the Company or any Affiliate. 9.10 OTHER OPTIONS OR AWARDS. The grant of an Award shall not confer upon the Holder the right to receive any future or other Awards under the Plan, whether or not Awards may be granted to similarly situated Holders, or the right to receive future Awards upon the same terms or conditions as previously granted. 9.11 GOVERNING LAW. The provisions of the Plan shall be construed, administered, and governed under the laws of the State of Delaware. 15 EX-10.4 9 ex10-4.txt FORM OF NONQUALIFIED STOCK OPTION AGREEMENT 1 EXHIBIT 10.4 INTERLEUKIN GENETICS, INC. 2000 EMPLOYEE STOCK COMPENSATION PLAN NONQUALIFIED STOCK OPTION AGREEMENT This STOCK OPTION AGREEMENT (the "Agreement") is made between INTERLEUKIN GENETICS, INC., a Texas corporation (the "Company"), and ____________________________ (the "Optionee"). The Board of Directors of the Company has adopted the Interleukin Genetics, Inc. 2000 Employee Stock Compensation Plan (the "Plan"), the terms of which are incorporated by reference herein. The Company considers that its interests will be served by granting the Optionee an option to purchase shares of common stock of the Company as an inducement for his or her continued and effective performance of services for the Company. Any term used in this Agreement that is not specifically defined herein shall have the meaning specified in the Plan. IT IS AGREED: 1. GRANT OF OPTION. Subject to the terms of the Plan and this Agreement, on , 2000 (the "Date of Grant"), the Company hereby grants to the Optionee a nonqualified stock option (the "Option") to purchase ________________ shares of the common stock of the Company, no par value per share (the "Stock"), at a price of $ ________________ per share, subject to adjustment as provided in the Plan. 2. VESTING SCHEDULE. The Option is exercisable according to the following schedule: (a) on the first anniversary of the Date of Grant, the Option may be exercised with respect to up to 1/4 of the shares subject to the Option; (b) on each succeeding anniversary of the Date of Grant, the Option may be exercised with respect to up to an additional 1/4 of the shares subject to the Option, so that on the fourth anniversary of the Date of Grant the Option shall be exercisable in full; and (c) to the extent not exercised, installments shall be cumulative and may be exercised in whole or in part. 3. TERM OF OPTION. Subject to paragraphs 4, 5 and 6 hereof, the Option shall terminate and become null and void on the earlier of (a) one day less than three months after the severance of the employment or affiliation relationship between the Optionee and the Company and all Affiliates for any reason other than Retirement, death or Disability or (b) the last day of the ten-year period commencing on the Date of Grant. The Option shall not continue to vest after such severance of employment. 2 4. RETIREMENT OF THE OPTIONEE. The Option shall terminate and become null and void on the earlier of (a) one day less than one year after the Retirement of the Optionee after attaining the age of 65 or (b) the last day of the ten-year period commencing on the Date of Grant. The Option shall not continue to vest after such severance of employment. 5. DEATH OF OPTIONEE DURING EMPLOYMENT OR AFFILIATION. Upon the death of the Optionee while in the employ of or affiliation with the Company or an Affiliate, the Optionee's executors, administrators or any person or persons to whom the Option may be transferred by will or by the laws of descent and distribution shall have the right, at any time prior to the earlier of (a) the date that is one day less than one year following the date of the Optionee's death or (b) the last day of the ten-year period commencing on the Date of Grant, to exercise the Option in whole. 6. DISABILITY OF OPTIONEE. If the Optionee is severed from the employ of or affiliation with the Company and all Affiliates due to Disability, the Optionee's Option shall terminate and become null and void on the earlier of (a) the date that is one day less than one year following the date of the Optionee's severance of employment or affiliation with the Company or (b) the last day of the ten-year period commencing on the Date of Grant. The Option shall not continue to vest after such severance of employment. 7. EXERCISE OF OPTION. The Option may be exercised by the delivery of written notice to the Committee setting forth the number of shares of Stock with respect to which the Option is to be exercised, together with: (a) cash, certified check, bank draft, or postal or express money order payable to the order of the Company for an amount equal to the exercise price under the Option, (b) Mature Shares with a Fair Market Value on the date of exercise equal to the aggregate exercise price under the Option, or (c) an election to make a cashless exercise through a registered broker-dealer. 8. ASSIGNMENT PROHIBITION. The Option granted to the Optionee under this Agreement shall not be transferable or assignable by the Optionee other than by will or the laws of descent and distribution, and shall be exercisable during the Optionee's lifetime only by the Optionee. 9. AMENDMENTS. This Agreement may not be changed or terminated orally, but only by an agreement in writing signed by the party against whom enforcement of any such change or termination is sought. 10. NO REQUIREMENT OF CONTINUED EMPLOYMENT OR AFFILIATION. The Company shall not be deemed by the grant of the Option (as distinguished from a separate employment agreement, if any) to be required to employ or utilize the services of the Optionee for any period. 11. LEGEND. The Optionee consents to the placing on the certificate for any shares covered by the Option of an appropriate legend restricting resale or other transfer of such shares except in accordance with the Securities Act of 1933 and all applicable rules thereunder. 2- 3 12. NO RIGHTS AS STOCKHOLDER. The Optionee shall not have any rights as a stockholder with respect to any shares covered by the Option until the date of the issuance of the stock certificate or certificates to the Optionee for such shares following the Optionee's exercise of the Option pursuant to its terms and conditions and payment for the shares. No adjustment shall be made for dividends or other rights for which the record date is prior to the date such certificate or certificates are issued. 13. RESOLUTION OF DISPUTES. In the event of any difference of opinion concerning the meaning or effect of the Plan or this Agreement, such difference shall be resolved by the Committee referred to in the Plan. 14. NOTICES. All offers, notices, demands, requests, acceptances or other communications hereunder shall be in writing and shall be deemed to have been duly made or given if mailed by registered or certified mail, return receipt requested. Any such notice mailed to the Company shall be addressed to its principal office, and any notice mailed to the Optionee shall be addressed to the Optionee's residence address as it appears on the books and records of the Company or to such other address as either party may hereafter designate in writing to the other. 15. INUREMENT. This Agreement shall, except as herein stated to the contrary, inure to the benefit of and bind the legal representatives, successors and assigns of the parties hereto. 16. TYPE OF OPTION. The Option is a nonqualified stock option which is not intended to be governed by section 422 of the Internal Revenue Code of 1986, as amended. 17. TAX WITHHOLDING. The Optionee is authorized to use shares of Stock received by the Optionee upon the exercise of the Option to satisfy any tax withholding obligations of the Company that result from the exercise. 18. AGREEMENT TO PLAN TERMS. In accepting the Option, the Optionee accepts and agrees to be bound by all the terms and conditions of the Plan which pertain to incentive stock options granted under the Plan. 19. GOVERNING LAW AND SEVERABILITY. The validity, construction and performance of this agreement shall be governed by the laws of the State of Texas. Any invalidity of any provision of this Agreement shall not affect the validity of any other provision. 3- 4 IN WITNESS WHEREOF, this Agreement has been duly executed and delivered to be effective as of the day and year first above written. INTERLEUKIN GENETICS, INC. By: --------------------------------- Title: ------------------------------ ------------------------------------ OPTIONEE 4- EX-10.5 10 ex10-5.txt FORM OF INCENTIVE STOCK OPTION AGREEMENT 1 EXHIBIT 10.5 INTERLEUKIN GENETICS, INC. 2000 EMPLOYEE STOCK COMPENSATION PLAN INCENTIVE STOCK OPTION AGREEMENT This STOCK OPTION AGREEMENT (the "Agreement") is made between INTERLEUKIN GENETICS, INC., a Delaware corporation (the "Company"), and (the "Employee"). The Board of Directors of the Company has adopted the Interleukin Genetics, Inc. 2000 Employee Stock Compensation Plan (the "Plan"), the terms of which are incorporated by reference herein. The Company considers that its interests will be served by granting the Employee an option to purchase shares of common stock of the Company as an inducement for his or her continued and effective performance of services for the Company. Any term used in this Agreement that is not specifically defined herein shall have the meaning specified in the Plan. IT IS AGREED: 1. GRANT OF OPTION. Subject to the terms of the Plan and this Agreement, on , 2000 (the "Date of Grant"), the Company hereby grants to the Employee an incentive stock option (the "Option") to purchase ________________ shares of common stock of the Company, no par value per share (the "Stock"), at a price of $ ________________ per share, subject to adjustment as provided in the Plan. 2. VESTING SCHEDULE. The Option is exercisable according to the following schedule: (a) on the first anniversary of the Date of Grant, the Option may be exercised with respect to up to 1/4 of the shares subject to the Option; (b) on each succeeding anniversary of the Date of Grant, the Option may be exercised with respect to up to an additional 1/4 of the shares subject to the Option, so that on the fourth anniversary of the Date of Grant the Option shall be exercisable in full; and (c) to the extent not exercised, installments shall be cumulative and may be exercised in whole or in part. 3. TERM OF OPTION. Subject to paragraphs 4, 5 and 6 hereof, the Option shall terminate and become null and void on the earlier of (a) one day less than three months after the severance 2 of the employment relationship between the Employee and the Company and all Affiliates for any reason other than Retirement, death or Disability or (b) the last day of the ten-year period commencing on the Date of Grant and the Option shall not continue to vest after such severance of employment. 4. RETIREMENT OF EMPLOYEE. The Option shall terminate and become null and void on the earlier of (a) one day less than one year after the Retirement of the Employee after attaining the age of 65 or (b) the last day of the ten-year period commencing on the Date of Grant and the Option shall not continue to vest after such severance of employment. THE EMPLOYEE IS HEREBY NOTIFIED THAT THE OPTION MAY BE TAXED AS IF IT IS A NONQUALIFIED STOCK OPTION RATHER THAN AN INCENTIVE STOCK OPTION TO THE EXTENT THAT THE EMPLOYEE EXERCISES THE OPTION ON OR AFTER THREE MONTHS AFTER HIS OR HER TERMINATION OF EMPLOYMENT WITH THE COMPANY AND ALL AFFILIATES. THE EMPLOYEE IS ADVISED TO CONSULT WITH HIS OR HER TAX CONSULTANTS IF THE EMPLOYEE WISHES TO EXERCISE THE OPTION LATER THAN THIS DATE. 5. DEATH OF EMPLOYEE DURING EMPLOYMENT. Upon the death of the Employee while in the employ of the Company or an Affiliate, the Employee's executors, administrators or any person or persons to whom the Option may be transferred by will or by the laws of descent and distribution shall have the right, at any time prior to the earlier of (a) the date that is one day less than one year following the date of the Employee's death or (b) the last day of the ten-year period commencing on the Date of Grant, to exercise the Option in whole. 6. DISABILITY OF EMPLOYEE. If the Employee is severed from the employ of the Company and all Affiliates due to Disability, the Employee's Option shall terminate and become null and void on the earlier of (a) the date that is one day less than one year following the date of the Employee's severance of employment or (b) the last day of the ten-year period commencing on the Date of Grant. The Option shall not continue to vest after such severance of employment. 7. EXERCISE OF OPTION. The Option may be exercised by the delivery of written notice to the Committee setting forth the number of shares of Stock with respect to which the Option is to be exercised, together with cash, certified check, bank draft, or postal or express money order payable to the order of the Company for an amount equal to the exercise price under the Option. 8. $100,000.00 LIMITATION. To the extent that the aggregate fair market value of shares of Stock with respect to which incentive stock options are exercisable for the first time by the Employee during any calendar year (under the Plan or any other plan of the Company or its Affiliates) exceeds $100,000.00, the options will be treated as nonqualified stock options. For purposes of this rule, the fair market value of the shares of Stock is determined at the time the option for the shares of Stock is granted. 3 9. ASSIGNMENT PROHIBITION. The Option granted to the Employee under this Agreement shall not be transferable or assignable by the Employee other than by will or the laws of descent and distribution, and shall be exercisable during the Employee's lifetime only by the Employee. 10. AMENDMENTS. This Agreement may not be changed or terminated orally but only by an agreement in writing signed by the party against whom enforcement of any such change or termination is sought. 11. NO REQUIREMENT OF CONTINUED EMPLOYMENT. The Company shall not be deemed by the grant of the Option (as distinguished from a separate employment agreement, if any) to be required to employ the Employee for any period. 12. LEGEND. The Employee consents to the placing on the certificate for any shares covered by the Option of an appropriate legend restricting resale or other transfer of such shares except in accordance with the Securities Act of 1933 and all applicable rules thereunder. 13. NO RIGHTS AS STOCKHOLDER. The Employee shall not have any rights as a stockholder with respect to any shares covered by the Option until the date of the issuance of the stock certificate or certificates to the Employee for such shares following the Employee's exercise of the Option pursuant to its terms and conditions and payment for the shares. No adjustment shall be made for dividends or other rights for which the record date is prior to the date such certificate or certificates are issued. 14. RESOLUTION OF DISPUTES. In the event of any difference of opinion concerning the meaning or effect of the Plan or this Agreement, such difference shall be resolved by the Committee referred to in the Plan. 15. NOTICES. All offers, notices, demands, requests, acceptances or other communications hereunder shall be in writing and shall be deemed to have been duly made or given if mailed by registered or certified mail, return receipt requested. Any such notice mailed to the Company shall be addressed to its principal office, and any notice mailed to the Employee shall be addressed to the Employee's residence address as it appears on the books and records of the Company or to such other address as either party may hereafter designate in writing to the other. 16. INUREMENT. This Agreement shall, except as herein stated to the contrary, inure to the benefit of and bind the legal representatives, successors and assigns of the parties hereto. 17. TYPE OF OPTION. To the maximum extent permitted by law, the Option is an incentive stock option which is intended to be governed by section 422 of the Internal Revenue Code of 1986, as amended. 4 18. AGREEMENT TO PLAN TERMS. In accepting the Option, the Employee accepts and agrees to be bound by all the terms and conditions of the Plan which pertain to incentive stock options granted under the Plan. 19. NOTIFICATION OF SALES. If the Employee sells or otherwise disposes of Stock within twelve months of the transfer of the Stock to him or her pursuant to his or her exercise of the Option, the Employee will notify the Company of such disposition within 30 days of the disposition. THE EMPLOYEE IS HEREBY NOTIFIED THAT IF HE OR SHE DISPOSES OF STOCK TRANSFERRED TO THE EMPLOYEE UPON HIS OR HER EXERCISE OF THE OPTION WITHIN TWO YEARS AFTER THE DATE OF THE GRANTING OF THE OPTION OR WITHIN ONE YEAR AFTER THE TRANSFER OF THE STOCK TO HIM OR HER, ALL OR A PORTION OF THE OPTION WILL BE TAXED AS IF IT IS A NONQUALIFIED STOCK OPTION RATHER THAN AN INCENTIVE STOCK OPTION. 20. GOVERNING LAW AND SEVERABILITY. The validity, construction and performance of this agreement shall be governed by the laws of the State of Texas. Any invalidity of any provision of this Agreement shall not affect the validity of any other provision. IN WITNESS WHEREOF, this Agreement has been duly executed and delivered to be effective as of the day and year first above written. INTERLEUKIN GENETICS, INC. By: ----------------------------------- Name: --------------------------------- Title: -------------------------------- -------------------------------------- EMPLOYEE EX-10.6 11 ex10-6.txt EMPLOYEE AGREEMENT - FENEL ELOI 1 EXHIBIT 10.6 EMPLOYMENT AGREEMENT This EMPLOYMENT AGREEMENT (this "Agreement"), is made and entered into as of the 18th day of June, 2000 (the "Effective Date"), by and between INTERLEUKIN GENETICS, INC., a Texas corporation ("Employer"), and FENEL ELOI, an individual ("Employee"). RECITALS A. Employer desires to obtain the benefit of the services of Employee and Employee desires to render such services to Employer. B. The Board of Directors of Employer (the "Board") has determined that it is in Employer's best interest to employ Employee and to provide certain benefits to Employee. C. Employer and Employee desire to set forth the terms and conditions of Employee's employment with Employer on the terms and subject to the conditions of this Agreement. AGREEMENT In consideration of the foregoing recitals and of the mutual covenants and conditions contained herein, the parties, intending to be legally bound, agree as follows: 1. Term. Employer agrees to employ Employee, and Employee agrees to serve Employer, in accordance with the terms of this Agreement, for a term (the "Term") beginning on the Effective Date and continuing for a period of four (4) years thereafter unless earlier terminated in accordance with the provisions hereof. 2. Employment of Employee. (a) Specific Positions. Employer and Employee hereby agree that, subject to the provisions of this Agreement, Employer will employ Employee and Employee will serve as an employee of Employer. Employee shall have the titles and perform the duties of Chief Operating Officer and Chief Financial Officer and such other reasonable, usual and customary duties of such office as may be delegated to Employee from time to time by the Board, subject always to the policies as reasonably determined from time to time by the Board. (b) Promotion of Employer's Business. During the Term, Employee shall not engage in any business competitive with Employer. Employee agrees to devote his full business time, attention, knowledge, skill and energy to the business, affairs and interests of Employer and matters related thereto, and shall use his best efforts and abilities to promote Employer's interests; provided, however, that Employee is not precluded from devoting reasonable periods to time required: (i) for serving as a director or committee member of any organization that does not compete with Employer or that does not involve a conflict of interest with Employer; or (ii) for managing his personal investments; so long as in either case, such activities do not materially interfere with the regular performance of his duties under this Agreement. 2 3. Salary. Employer shall pay to Employee during the term of this Agreement a base salary ("Base Salary") of $195,000.00 per year, payable in equal monthly installments. The Base Salary may be increased (but not decreased) annually at the Employer's sole discretion throughout the Term on each anniversary of the Effective Date in the discretion of Employer's Board. 4. Bonus. In addition to the Base Salary, Employee shall also receive a bonus, if any, as determined annually by the Board of Directors of Employer in its sole discretion. 5. Benefits. (a) Stock Options. The Employer shall issue to Employee stock options to purchase 200,000 shares of the Employer's stock. These options will be issued under the Employer's 2000 Employee Stock Compensation Plan which will be approved by shareholders at the June 2000 Annual Meeting. The options will be issued as soon as practical after shareholder approval of the Plan and the strike price will be set at the closing price of the stock on the date the options are issued. The options will vest as follows: o 20,000 shares on December 31, 2000 o 3,333 shares each month from January 31, 2001 through June 30, 2001 o 4,167 shares each month from July 31, 2001 through June 30, 2002 o 5,000 shares each month from July 31, 2002 through June 30, 2003 o 4,167 shares each month from July 31, 2003 through May 31, 2004 o 4,161 shares on June 30, 2004 We will maximize the ISO portion of the award, utilizing the maximum allowable under IRS code ($100,000 per year), The strike price for the ISOs will be the closing price on the first business day following the effective date of this agreement. All remaining options will be nonqualified stock options with a strike price based on the closing price on the date this agreement is executed by both parties. In the event there is a Change of Control (as defined in the Employer's 2000 Employee Stock Compensation Plan), all outstanding unvested options will immediately vest. (b) Fringe Benefits. During Employee's employment by Employer under this Agreement, Employee shall be eligible for participation in and shall be covered by any and all such medical, disability, vision, dental, life and other insurance plans and such other similar benefits available to other employees. (c) Reimbursements. During Employee's employment with Employer under this Agreement, Employee shall be entitled to receive prompt reimbursement of all reasonable expenses incurred by Employee in performing services hereunder, including all expenses of travel at the request of, or in the service of, Employer provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by Employer. 2 3 (d) Vacation. During Employee's employment with Employer hereunder, Employee shall be entitled to an annual vacation leave of three (3) weeks at full pay, which shall be adjusted in accordance with the vacation policy generally applicable to employees of the Employer. 6. Termination. (a) Termination for Cause. Employer shall have the right, exercisable immediately upon written notice, to terminate Employee's employment for "Cause." (i) Definition of Cause. As used herein, "Cause" means any of the following: (A) habitual drunkenness under the influence of alcohol by Employee or illegal use of narcotics; (B) Employee is convicted by a court of competent jurisdiction, or pleads "no contest" to, a felony or any other conduct of a criminal nature (other than minor traffic violations) by Employee; (C) Employee engages in fraud, embezzlement, or any other illegal conduct; (D) Employee imparts confidential information relating to Employer or its business to competitors or to other third parties other than in the course of carrying out Employee's duties; (E) Employee refuses to perform his duties hereunder or otherwise breaches any covenant, warranty or representation of this Agreement or Employee's Non-Disclosure and Confidentiality Agreement executed concurrently herewith, and, except for any conduct described in clauses (A) through (D) of this Section 6(a)(i), fails to cure such breach (if such breach is then capable of being cured) within ten (10) business days following written notice thereof specifying in reasonable detail the nature of such breach, or if such breach is not capable of being cured in such time, a cure shall not have been diligently initiated within such ten (10) business day period. (ii) Effect of Termination. Upon termination in accordance with this Section 6(a), Employee shall be entitled to no further compensation hereunder other than the Base Salary and other benefits accrued hereunder through, but not including, the effective date of such termination. Employer's exercise of its right to terminate for Cause shall be without prejudice to any other remedy to which it may be entitled at law, in equity or under this Agreement. (b) Voluntary Termination. Employee may terminate his employment at any time by giving no less than thirty (30) days' written notice to Employer. (i) No Reason. Upon termination in accordance with this Section 6(b), except as otherwise provided in Section 6(b)(ii) below, Employee shall be entitled to no further compensation hereunder other than the Base Salary and other benefits accrued hereunder through, but not including, the effective date of such termination. (ii) Good Reason. Notwithstanding anything to the contrary in Section 6(b)(i) above, if Employee terminates his employment under this Section 6(b) for Good Reason (as defined below), Employee shall be entitled to receive from Employer all of the compensation and benefits provided for in Section 6(e) below. As used herein, "Good Reason" means any of the following: (A) the assignment to Employee of duties materially inconsistent with those of other employees of Employer in like positions where Employee provides written notice to Employer within six (6) months of such assignment that such duties are materially inconsistent with those duties of similarly situated employees and Employer fails to release Employee from 3 4 his obligation to perform such inconsistent duties within twenty (20) business days after Employer's receipt of such notice; or (B) a failure by Employer to comply with any other material provision of Sections 3 through 5, inclusive, of this Agreement which has not been cured within fifteen (15) business days after notice of such noncompliance has been given by Employee to Employer, or if such failure is not capable of being cured in such time, a cure shall not have been diligently initiated by Employer within such fifteen (15) business day period. (c) Termination Due to Death or Disability. This Agreement shall automatically terminate upon the death of Employee. In addition, if Employee, is unable to perform the essential functions of his job with or without a reasonable accommodation because of a physical or mental impairment for a period of six (6) months, Employer may terminate Employee's employment upon written notice to Employee. Upon termination in accordance with this Section 6(c), Employee (or Employee's estate, as the case may be) shall be entitled to no farther compensation hereunder other than the Base Salary and other benefits accrued hereunder through, but not including, the date of death or, in the case of disability, the date of termination. (d) Termination Upon Cessation of Business. Employer shall have the right to immediately terminate Employee's employment under this Agreement upon a "Cessation of Business." For purposes of this Agreement, a "Cessation of Business" shall mean Employer's ceasing to operate in the ordinary course of business, whether by dissolution, liquidation, sale of assets, consolidation, merger or otherwise, in connection with, pursuant to or arising out of a good faith determination by the Board that the continuing operation of the business in its ordinary course is reasonably likely to render Employer unable to meet its liabilities as they mature. Upon termination in accordance with this Section 6(d), Employee shall be entitled to no further compensation hereunder other than the Base Salary and other benefits accrued hereunder through, but not including, the effective date of such termination. If Employee is so terminated by Employer pursuant to this Section 6(d) during the Term, Employer shall (i) pay to Employee the Base Salary, and (ii) provide the same health insurance benefits to which Employee was entitled hereunder, in each case (i.e., the Base Salary and health insurance benefits), until the earlier to occur of (A) the expiration of the remaining portion of the Term, or (B) the expiration of the twelve (12) month period commencing on the date Employee is terminated. Employer may make such payments in accordance with its regular payroll schedule or in a single lump sum payment in its sole discretion. (e) Termination Without Cause. Employer shall have the right, exercisable upon 30 days' prior written notice, to terminate Employee's employment under this Agreement for any reason other than set forth in Sections 6(a), (c) and (d) above, at any time during the Term. If Employee is so terminated by Employer pursuant to this Section 6(e) during the Term, Employer shall (i) pay to Employee the Base Salary, and (ii) provide the same health insurance benefits to which Employee was entitled hereunder, in each case (i.e., the Base Salary and health insurance benefits), until the expiration of the twelve (12) month period commencing on the date Employee is terminated. 7. Publicity. During the term of this Agreement and for a period of one (1) year thereafter, Employee shall not, directly or indirectly, originate or participate in the origination of any publicity, news release or other public announcements, written or oral, whether to the public 4 5 press or otherwise, relating to this Agreement, to any amendment hereto, to Employee's employment hereunder or to the Company, without the prior written approval of the Company. 8. Restrictive Covenants. (a) Non-Competition. In consideration of the benefits of this Agreement, including Employee's access to and limited use of proprietary and confidential information of the Company, as well as training, education and experience provided to Employee by the Company directly and/or as a result of work projects assigned by the Company with respect thereto, Employee hereby covenants and agrees that during the term of this Agreement and for a period of twelve (12) months following termination of this Agreement, regardless of how such termination may be brought about, Employee shall not, directly or indirectly, as proprietor, partner, stockholder, director, officer, employee, consultant, joint venture, investor or in any other capacity, engage in, or own, manage, operate or control, or participate in the ownership, management, operation or control, of any entity which engages anywhere in the world in any business activity which is competitive to current business activities in which the Company participates during Employee's employment with the Company; provided, however, the foregoing shall not, in any event, prohibit Employee from purchasing and holding as an investment not more than 1% of any class of publicly traded securities of any entity which conducts a business in competition with the business of the Company, so long as Employee does not participate in any way in the management, operation or control of such entity. It is further recognized and agreed that, even though an activity may not be restricted under the foregoing provision, Employee shall not during the term of this Agreement and for a period of twelve (12) months following termination of this Agreement, regardless of how such termination may be brought about, provide any services to any person or entity which may be used against, or in conflict with the interests of, the Company or its customers or clients. (b) Judicial Reformation. Employee acknowledges that, given the nature of the Company's business, the covenants contained in Section 8(a) establish reasonable limitations as to time, geographic area and scope of activity to be restrained and do not impose a greater restraint than is reasonably necessary to protect and preserve the goodwill of the Company's business and to protect its legitimate business interests. If, however, Section 8(a) is determined by any court of competent jurisdiction to be unenforceable by reason of its extending for too long a period of time or over too large a geographic area or by reason of it being too extensive in any other respect or for any other reason, it will be interpreted to extend only over the longest period of time for which it may be enforceable and/or over the largest geographic area as to which it may be enforceable and/or to the maximum extent in all other aspects as to which it may be enforceable, all as determined by such court. (c) Customer Lists; Non-Solicitation. In consideration of the benefits of this Agreement, including Employee's access to and limited use of proprietary and confidential information of the Company, as well as training, education and experience provided to Employee by the Company directly and/or as a result of work projects assigned by the Company with respect thereto, Employee hereby further covenants and agrees that for a period of twelve (12) months following the termination of this Agreement, regardless of how such termination may be brought about, Employee shall not, directly or indirectly, (i) use or make known to any person or entity the names or addresses of any clients or customers of the Company or any other 5 6 information pertaining to them, (ii) call on for the purpose of competing, solicit, take away or attempt to call on, solicit or take away any clients or customers of the Company on whom Employee called or with whom he became acquainted during his employment with the Company, nor (iii) recruit or attempt to recruit any employees of the Company. (d) Affiliates. When used in this Section 8, the term "Company" includes Interleukin Genetics, Inc. and all affiliates and subsidiaries of Interleukin Genetics, Inc. 9. Miscellaneous. (a) Withholdings. All payments to Employee hereunder shall be made after reduction for all federal, state and local withholding and payroll taxes, all as determined under applicable law and regulations, and Employer shall make all reports and similar filings required by such law and regulations with respect to such payments, withholdings and taxes. (b) Succession. This Agreement shall inure to the benefit of and shall be binding upon Employer, its successors and assigns. The obligations and duties of Employee hereunder shall be personal and not assignable. (c) Notices. Any and all notices, demands, requests or other communications hereunder shall be in writing and shall be deemed duly given when personally delivered to or transmitted overnight express delivery or by facsimile to and received by the party to whom such notice is intended (provided the original thereof is sent by mail, in the manner set forth below, on the next business day after the facsimile transmission is sent), or in lieu of such personal delivery or overnight express delivery or facsimile transmission, on receipt when deposited in the United States mail, first-class, certified or registered, postage prepaid, return receipt requested, addressed to the applicable party at the address set forth below such party's signature to this Agreement. The parties may change their respective addresses for the purpose of this Section 9(c) by giving notice of such change to the other parties in the manner which is provided in this Section 9(c). (d) Entire Agreement. This Agreement contains the entire agreement of the parties relating to the subject matter hereof, and it replaces and supersedes any prior agreements between the parties relating to said subject matter. (e) Headings. The headings of Sections herein are used for convenience only and shall not affect the meaning of contents hereof. (f) Waiver; Amendment. No provision hereof may be waived except by a written agreement signed by the waiving party. The waiver of any term or of any condition of this Agreement shall not be deemed to constitute the waiver of any other term or condition. This Agreement may be amended only by a written agreement signed by the parties hereto. (g) Severability. If any of the provisions of this Agreement shall be held unenforceable by the final determination of a court of competent jurisdiction and all appeals therefrom shall have failed or the time for such appeals shall have expired, such provision or provisions shall be deemed eliminated from this Agreement but the remaining provisions shall nevertheless be given full effect. In the event this Agreement or any portion hereof is more 6 7 restrictive than permitted by the law of the jurisdiction in which enforcement is sought, this Agreement or such portion shall be limited in that jurisdiction only to the extent required by the law of that jurisdiction. (h) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Texas. (i) Arbitration. Except for the provisions of Sections 7 and 8 with regard to which the Company expressly reserves the right to petition a court directly for injunctive or other relief, any dispute arising out of or relating to this Agreement, or the breach, termination or the validity hereof, shall be settled by arbitration in accordance with the Commercial Arbitration Rules of the American Arbitration Association. Judgment upon the award rendered by the arbitrator or arbitrators may be entered in any court having jurisdiction thereof. THE ARBITRATOR OR ARBITRATORS ARE NOT EMPOWERED TO AWARD DAMAGES IN EXCESS OF COMPENSATORY DAMAGES (INCLUDING REASONABLE ATTORNEYS FEES AND EXPERT WITNESS FEES) AND EACH PARTY HEREBY IRREVOCABLY WAIVES ANY RIGHT TO RECOVER SUCH DAMAGES (INCLUDING, WITHOUT LIMITATION, PUNITIVE DAMAGES) IN ANY FORUM. The arbitrator or arbitrators may award equitable relief in those circumstances where monetary damages would be inadequate. The arbitrator or arbitrators shall be required to follow the applicable law as set forth in the governing law section of this Agreement. The arbitrator or arbitrators shall award reasonable attorneys fees and costs of arbitration to the prevailing party in such arbitration. (j) Equitable Relief. In the event of a breach or a threatened breach by Employee of any of the provisions contained in Sections 7 or 8 of this Agreement, Employee acknowledges that the Company will suffer irreparable injury not fully compensable by money damages and, therefore, will not have an adequate remedy available at law. Accordingly, the Company shall be entitled to obtain such injunctive relief or other equitable remedy from any court of competent jurisdiction as may be necessary or appropriate to prevent or curtail any such breach, threatened or actual, without having to post bond. The foregoing shall be in addition to and without prejudice to any other rights that the Company may have under this Agreement, at law or in equity, including, without limitation, the right to sue for damages. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above. "EMPLOYER" "EMPLOYEE" INTERLEUKIN GENETICS, INC. By: --------------------------- ------------------------------------- , President FENEL ELOI --------------------------- Address: Address: 100 N.E. Loop 410, Suite 820 135 Beaver Street, 2nd Floor San Antonio, Texas 78216 Waltham, Massachusetts 02452 7 EX-27 12 ex27.txt FINANCIAL DATA SCHEDULE
5 THE FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30, 2000 BALANCE SHEET AND THE INCOME STATEMENT FOR THE SIX MONTHS ENDED JUNE 30, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 3-MOS DEC-31-2000 JUN-30-2000 586,965 4,930,800 166,006 47,804 0 5,813,660 813,592 612,768 6,014,484 1,091,584 0 0 0 28,302,588 3,722 6,014,484 82,119 82,119 56,357 1,311,099 0 0 6,346 (1,191,436) 0 0 0 0 0 (1,191,436) (.07) (.07)
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