Exhibit 10.4


 


EMPLOYMENT AGREEMENT


 


This Employment Agreement (this “Agreement”), is made and entered into as of
the 12th day of November, 2008 (the “Effective Date”), by and between INTERLEUKIN GENETICS, INC., a
Delaware corporation (“Employer”),
and KENNETH S. KORNMAN, 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 March 31, 2009
(the “Term Date”) and continuing for a period
of three (3) years thereafter unless earlier terminated in accordance with
the provisions hereof.  Prior to the
commencement of the Term, Employee’s employment relationship with Employer
shall continue to be governed by the Employment Agreement dated March 31,
2006 between the parties.


 


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.


 


(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, committee member
or scientific editor 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 scientific lectures in the area of
Periodontal Disease and Treatment and such other scientific areas, as shall be
approved by the CEO or the Board.


 


3.                                       Salary. 
Employer shall pay to Employee during the Term a base salary (“Base Salary”) of $360,000 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 Term Date, in the sole discretion of the Board.


 


4.                                       Bonus/Stock Grant.


 


(a)                                  Bonus. In addition to the Base Salary, Employee
shall also be eligible to receive a discretionary annual bonus. The bonus to be
awarded, if any, shall be determined by the Board in its sole discretion.


 


(b)                                 Option Grant. 
Subject to approval by the Board’s Compensation Committee, Employee
shall be granted an option to purchase 75,000 shares of Employer’s common stock
at an exercise price equal to the fair market value (closing price) of such stock
on the date of grant.  Such option shall
vest and become exercisable with respect to forty percent (40%) of the shares
upon the Effective Date, and thereafter an additional twenty percent (20%) of
the shares shall vest annually on each of the three anniversaries of the Term
Date (not including the Term Date itself), until such option is exercisable in
full.  Except as otherwise expressly
provided in this Agreement, any options granted to Employee shall be subject to
the terms and conditions set forth in the applicable option plan and option
agreements.


 


5.                                       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 life insurance premiums annually in the amount of $3,296.00
on a policy for Employee; Employee shall have the right to designate ownership
and beneficiary of said policy.


 


(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.  All expense reimbursements and in kind
benefits provided under this Section 5(b) or elsewhere in this
Agreement will be made or provided in accordance with the requirements of Section 409A
of the Internal Revenue Code of 1986, as amended (“Code § 409A”), including,
where applicable, the requirement that: (i) the amount of expenses
eligible for reimbursement, or in kind benefits provided, during a calendar
year may not affect the expenses eligible for reimbursement, or in kind
benefits to be provided, in any other calendar year; (ii) the
reimbursement of an eligible expense will be made on or before the last day of
the calendar year following the year in which the expense is incurred; and (iii) the
right to 


 


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reimbursement or in kind benefits is not subject to liquidation or
exchange for another benefit.


 


(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.


 


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, 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 


 


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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 written 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 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 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 


 


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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 shall
make such payments in accordance with its regular payroll schedule in effect as
of the Effective Date.


 


(f)                                    Options. Upon the expiration of the term of this
Agreement, Employee shall be entitled to receive from Employer all of the
compensation and benefits provided for in Section 6(e). In addition, in
accordance with Employee’s existing stock option arrangements, if Employee’s
employment terminates pursuant to Section 6(b)(ii) or Section 6(e) or
if Employee’s employment terminates as a result of the expiration of the Term,
then the period during which Employee may exercise all stock options granted to
him by the Company shall be extended until the earliest of: (i) two (2) years,
(ii) the tenth (10th) anniversary of the grant of the stock
option, or (iii) the date the stock option expires under the terms
of the underlying plan.


 


7.                                       Publicity. 
During the Term and for a period of twelve (12) months 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 press or otherwise, relating to this
Agreement, to any amendment hereto, to Employee’s employment hereunder or to
Employer, without the prior written approval of Employer.


 


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 Employer, as well as training, education and
experience provided to Employee by Employer directly and/or as a result of work
projects assigned by Employer with respect thereto, Employee hereby covenants
and agrees that during the Term and for a period of twelve (12) months
following termination of Employee’s employment, regardless of how such
termination may be brought about, Employee shall not, directly or indirectly,
as proprietor, partner, stockholder, director, officer, employee, consultant,
joint venturer, 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 Employer
participates during Employee’s employment with Employer, or take any action in
preparation to do any of the foregoing; 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 Employer,
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 and for a period of twelve (12) months
following termination of his employment, regardless of how such termination may
be brought about, provide any services to any person or entity which may be used
against, or is or may be in conflict with the interests of, Employer or its
customers or clients.


 


(b)                                 Confidentiality.  Employee
expressly acknowledges and agrees that the Non-Disclosure and Confidentiality
Agreement dated March 31, 2006 between the parties shall 


 


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remain in full force and effect, and
reaffirms that he will continue to be bound by the terms and conditions of such
Non-Disclosure and Confidentiality Agreement.


 


(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 Employer, as well as training, education and
experience provided to Employee by Employer directly and/or as a result of work
projects assigned by Employer with respect thereto, Employee hereby further
covenants and agrees that for a period of twelve (12) months following the
termination of Employee’s employment, 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 Employer or any other 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 Employer on whom Employee
called or with whom he became acquainted during his employment with Employer,
nor (iii) recruit or attempt to recruit or hire or attempt to hire any
employees of Employer.


 


(d)                                 Judicial Reformation. Employee acknowledges that, given the
nature of Employer’s business, the covenants contained in Section 8
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 Employer’s
business and to protect its legitimate business interests. If, however, Section 8
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.


 


(e)                                  Affiliates. When used in this Section 8, the term “Company” includes Interleukin Genetics, Inc.
and all affiliates, parents, 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)                                 Taxation. Employee acknowledges and agrees that
Employer does not guarantee the tax treatment or tax consequences associated
with any payment or benefit arising under this Agreement, including but not
limited to consequences related to Code § 409A. This Agreement will be
interpreted and administered in accordance with the applicable requirements of,
and exemptions from, Code § 409A in a manner consistent with Treas. Reg.
§ 1.409A-1(c). To the extent payments and benefits are subject to Code
§ 409A, this Agreement shall be interpreted, construed and administered in
a manner that satisfies the requirements of: (i) Code § 409A(a)(2), (3) and
(4); (ii) Treas. Reg. § 1.409A-1 et seq.; (iii) transitional
relief under IRS Notice 2007-86; and (iv) other applicable authority
issued 


 


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by the Internal Revenue Service and the U.S.
Department of the Treasury. 
Notwithstanding the foregoing, Employer and Employee agree that both
will negotiate in good faith and jointly execute an amendment to modify this
Agreement to the extent necessary to comply with the requirements of Code
§ 409A, or any successor statute, regulation and guidance thereto; provided,
that no such amendment shall increase the total financial obligation of
Employer under this Agreement.


 


(c)                                  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.


 


(d)                                 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).


 


(e)                                  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, including but not limited to the Employment Agreement dated December 1,
1999, as amended, and, as of the Term Date, the Employment Agreement dated March 31,
2006.


 


(f)                                    Headings. The headings of Sections herein are used
for convenience only and shall not affect the meaning of contents hereof.


 


(g)                                 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.


 


(h)                                 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.


 


(i)                                     Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the Commonwealth of Massachusetts,
without giving effect to conflict of law principles.


 


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(j)                                     Arbitration. Except for the provisions of
Sections 7 and 8 with regard to which Employer 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.


 


(k)                                  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 Employer will suffer irreparable
injury not fully compensable by money damages and, therefore, will not have an
adequate remedy available at law. Accordingly, Employer 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 Employer may have under this Agreement, at law or in equity, including,
without limitation, the right to sue for damages.


 


(l)                                     Counterparts. This Agreement may be executed in two or
more counterparts, and by different parties hereto on separate counterparts,
each of which will be deemed an original, but all of which together will
constitute one and the same instrument.


 


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


 


	
   

  	
  Employer:  

  
	
   

  	
   

  
	
   

  	
  INTERLEUKIN GENETICS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By

  	
   /s/ Lewis H. Bender

  
	
   

  	
   

  	
  Lewis H. Bender

  
	
   

  	
   

  	
   

  
	
   

  	
  Its

  	
  Chief Executive Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Employee:

  
	
   

  	
   

  
	
   

  	
   

  	
   /s/ Kenneth S. Kornman,
  D.D.S., Ph.D.

  
	
   

  	
   

  	
  Kenneth S. Kornman, D.D.S.,
  Ph.D.

  



 


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EXHIBIT A


 


DESCRIPTION OF JOB


 


Title:


 


President and Chief Scientific Officer


 


Duties and Responsibilities:


 


1.                                       Assist CEO to plan overall corporate
strategy.


 


2.                                       Review external research directed at
discovering new technology to be commercialized by Employer.


 


3.                                       Guide Employer’s internal and external
product development programs with and without partners.


 


4.                                       Other activities as designated by the CEO.


 


5.                                       Participate in activities related to
protection of intellectual property, including managing outside patent counsel.


 


6.                                       Represent company in trade organizations, e.g., Personalized Medicine Coalition.


 


7.                                       Present at partner conferences, e.g., Alticor training conferences such as Achievers.


 


8.                                       Manage and confer with Scientific Advisory
Board members.


 


9.                                       Provide monthly reports and routine updates
to CEO.


 


10.                                 Work to achieve performance goals and objectives.


 


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