EXHIBIT 10.12


 


EMPLOYMENT AGREEMENT


 


This EMPLOYMENT AGREEMENT (this
“AGREEMENT), is made and entered into as of the 1st day of April, 2000 (the
“EFFECTIVE DATE”), by and between INTERLEUKIN GENETICS, INC., a Texas
corporation (“EMPLOYER”), and PHILIP R. REILLY, an individual (“EMPLOYEE”).


 


R E C I T A L S


 


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


 


A G R E E M E N T


 


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 three (3) 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 title
and perform the duties set forth on EXHIBIT A hereto 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. The place of employment will be
within a sixty mile radius of Boston, MA.


 


(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; (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 or (iii) for delivering
lectures in the area of genetics and bioethics. Employer acknowledges that
Employee will maintain a consulting relationship with Gene Sage Incorporated,
based in San Francisco, California, with the understanding that this
relationship will not conflict with Employee’s duties with Employer.


 


3. SALARY. Employer shall pay
to Employee during the term of this Agreement a base salary (“BASE SALARY”) of
$325,000.00 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 of Directors.


 

















 


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. STOCK OPTIONS. In addition,
Employee shall receive an award of 500,000 stock options, of which 148,606 are
incentive stock options and 351,394 are non-qualified stock options. This award
was made effective December 1, 1999, the Employee’s hire date under previous
agreement, and is at a strike price of $2.875. This award will vest over 36
months in equal increments commencing December 1, 1999m unless Employee’s
employment is terminated prior to expiration of that 36 month period. These
awards will be covered in detail by separate Option Agreements.


 


In the event there is a change
of control of the Company, all outstanding unvested options will immediately
vest.  A change in control of the
Company shall be defined here as a purchase of the majority of the outstanding
common stock by an outside entity not organized solely for the purpose of
investment.


 


6.
BENEFITS.


 


(a) 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, life and other insurance plans
and such other similar benefits available to other executive employees.
Employer will pay $2,720 to Employee each year on the annual anniversary date
of this agreement, as reimbursement for life insurance premiums. Employee shall
receive a monthly automobile allowance of $600.00.


 


(b) 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.


 


(c) VACATION. During Employee’s employment with Employer hereunder,
Employee shall be entitled to an annual vacation leave of four (4) weeks at
full pay, which shall be adjusted in accordance with the vacation policy
generally applicable to employees of the Employer and Holdings.


 


7.
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 accured 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 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 further 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 or 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 the 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
three (3) 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 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.


 


8.
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 8(c) by
giving notice of such change to the other parties in the manner which is
provided in this Section 8(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 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. 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.


 


IN WITNESS WHEREOF, the parties
have executed this Agreement as of the date first set forth above.


 


	
  “EMPLOYER”:

  	
   

  	
  “EMPLOYEE”:

  
	
   

  	
   

  	
   

  
	
  INTERLEUKIN
  GENETICS, INC.

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
  /s/ KENNETH
  S. KORNMAN

  	
   

  	
  /s/ PHILIP
  R. REILLY

  	
   

  
	
  KENNETH S.
  KORNMAN

  	
   

  	
  PHILIP R.
  REILLY

  
	
   

  	
   

  	
   

  
	
  Address:

  	
   

  	
  Address:

  
	
   

  	
   

  	
   

  
	
  100 N.E.
  Loop 410, Suite 820

  	
   

  	
  145 Monument
  St.

  
	
  San Antonio,
  TX 78216

  	
   

  	
  Concord, MA
  01742

  
					



 

















 


EXHIBIT A


 


DESCRIPTION OF JOB


 


TITLE:


 


Chairman of the Board and Chief
Executive Officer


 


DUTIES
AND RESPONSIBILITIES:


 


1.   Plan and execute overall corporate strategy


 


2.   Conduct Board of Directors meetings as required


 


3.   Lead the Company’s business development activities


 


4.   Other activities as designated by the Board of Directors.