Document:

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                                                                   Exhibit 10.11

[Letterhead]

PERSONAL AND CONFIDENTIAL

July 10, 2002

Jack Voller
Vice President of Marketing
Pilot Therapeutics, Inc.
101 North Chestnut Street, Suite 102
Winston-Salem, North Carolina 27101

Dear Jack:

         Pilot Therapeutics Holdings, Inc. (the "Company") considers it
essential to the best interests of its shareholders to foster the continuous
employment of key management personnel. In addition, the Board of Directors of
the Company (the "Board") recognizes that the possibility of a change of control
of the Company may exist and the uncertainty and questions which it may raise
among management may result in the distraction or departure of management
personnel to the detriment of the Company and its shareholders.

         The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of the possibility of a change in control of the
Company.

         In order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in subsection 4(ii) hereof, the
Company agrees that you shall receive the severance benefits set forth in this
Agreement in the event your employment with the Company is terminated subsequent
to a "change in control of the Company" (as defined in section 4 hereof and
hereinafter a "Change of Control") under the circumstances described below.

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Term of Agreement. This Agreement shall commence on July 10, 2002 (the
"Effective Date") and shall continue in effect through July 10, 2003; provided,
however, that commencing on January 1, 2003 and each January 1 thereafter, the
term of this Agreement shall automatically be extended for one additional year
unless, not later than September 30 of the preceding year, the Company shall
have given notice that it does not wish to extend this Agreement.

Terms of Employment Before a Change of Control. Prior to a Change of Control,
your terms of employment ("Terms of Employment") shall be as follows:

General duties. Excluding periods of vacation and sick leave to which you are
entitled, you will continue to exercise such authority and perform such
executive duties as are commensurate with the authority being exercised and
duties being performed by you immediately before the Effective Date.

Place of employment. Your services will be performed at the location where you
were employed immediately before the Effective Date. If the Company and you
agree, however, the location of your employment may be changed without affecting
your rights under this Agreement.

Expenses generally. You are entitled to receive prompt reimbursement for all
reasonable expenses you incur. Reimbursement must be made in accordance with the
Company's policies and procedures in effect on the Effective Date (which may
include a requirement that you submit an itemized expense voucher).

Meetings, conventions, and seminars. You are encouraged and are expected to
attend seminars, professional meetings and conventions, and educational courses.
The cost of travel, tuition or registration, food, and lodging for attending
those activities must be paid by the Company. Other costs are your expense,
unless the Company authorizes those costs. If those other costs are authorized
expenses, you must be reimbursed after satisfying the Company's policies and
procedures for such reimbursement (which may include a requirement that you
submit an itemized expense voucher).

Promotional expenses. You are encouraged and are expected, from time to time, to
incur reasonable expenses for promoting the Company's business. Such promotional
expenses include travel, entertainment (including memberships in social and
athletic clubs), professional advancement, and community service expenses. You
agree to bear those expenses except to the extent that those expenses are
incurred at the Company's specific direction or those expenses are specifically
authorized by the Company as expenses that the Company may pay directly or
indirectly through reimbursement to you.

Outside activities. You may (i) serve on corporate, civic, or charitable boards
or committees; (ii) deliver lectures, fulfill speaking engagements, or teach at
educational institutions; and (iii) manage personal investments. Such activities
must not significantly interfere with the performance of your responsibilities
for the Company. To the extent that any such activities have been conducted by
you before the Effective Date, such prior conduct of activities and any
subsequent conduct of activities similar in nature and scope may not be deemed
to interfere with the performance of your responsibilities to the Company.

Compensation and fringe benefits. Your compensation (including your annual base
salary and any bonuses or incentive compensation) and benefits generally are the
same as those in effect on the Effective Date. Your compensation and benefits
are, however, subject to periodic review and adjustment by the Company. This
section of this Agreement does not change the terms of any fringe benefit
program or employee benefit plan maintained by the Company and does not give you
any additional vested interest in any compensation or benefit to which you are
not already entitled under any such program or plan on the Effective Date.
Generally, your benefits include the following items, all of which are subject
to periodic review and adjustment: (i) You are entitled to receive all group
life, accidental death and dismemberment, long-term disability, and medical
insurance benefits available to you according to Company policies and employee
benefit plans maintained by the Company that are in effect on the Effective
Date; (ii) You are entitled to paid vacation in accordance with the Company's
policies in effect on the Effective Date; (iii) You are entitled to sick leave
in accordance with the Company's policies in effect on the Effective Date; and
(iv) You are entitled to participate in all employee benefit plans and programs
in which you participate on the Effective Date, whether or not such plans or
programs are subject to the Employee Retirement Income Act of 1974, as amended
("ERISA").

Extension of Agreement Upon Change of Control. If a Change of Control shall have
occurred during the original or extended term of this Agreement, this Agreement
shall continue in effect for a period of at least twelve (12) months beyond the
month in which such Change of Control occurred. The Terms of Employment set
forth in section 2 continue in effect after a Change of Control and may not be
changed to terms and conditions less favorable than those in effect on the day
immediately preceding a Change of Control.

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Change of Control.

         No benefits shall be payable hereunder unless there shall have been a
Change of Control, as set forth below. For purposes of this Agreement, a Change
of Control shall be deemed to have occurred if (A) any "person" (as such term is
used in sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a corporation owned,
directly or indirectly, by the shareholders of the Company in substantially the
same proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding securities (a "20%
Holder"); or (B) during any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board of Directors of the Company (the
"Board") and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction described
in clauses (A) or (C) of this subsection) whose election by the Board or
nomination for election by the Company's shareholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority of the directors of the Company; or (C) the shareholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the shareholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets;
provided, however, that a Change of Control shall not be deemed to have occurred
under clauses (A) or (C) above if a majority of the Continuing Directors (as
defined below) determine within five business days after the occurrence of any
event specified in clauses (A) or (C) above that control of the Company has not
in fact changed and it is reasonably expected that such control of the Company
in fact will not change. Notwithstanding that, in the case of clause (A) above,
the Board shall have made a determination of the nature described in the
preceding sentence, if there shall thereafter occur any material change in facts
involving, or relating to, the 20% Holder or to the 20% Holder's relationship to
the Company, including, without limitation, the acquisition by the 20% Holder of
l% or more additional outstanding voting stock of the Company, the occurrence of
such material change in facts shall result in a new Change of Control for the
purpose of this Agreement. In such event, the second immediately preceding
sentence hereof shall be effective. As used herein, the term "Continuing
Director" shall mean any member of the Board on the date of this Agreement and
any successor of a Continuing Director who is recommended to succeed the
Continuing Director by a majority of Continuing Directors. If, following a
Change of Control, you are the beneficial owner of twenty percent or more of the
then-outstanding equity securities of the Company, or its successor in interest,
a majority of the Continuing Directors may elect, within five business days
after such Change of Control, to terminate any benefits payable to you under
this Agreement after the date of such an election by the Continuing Directors.

         For purposes of this Agreement, a "Potential Change of Control" shall
be deemed to have occurred if (A) the Company enters into an agreement, the
consummation of which would result in the occurrence of a Change of Control; (B)
any person (including the Company) publicly announces an intention to take or to
consider taking actions which if consummated would constitute a Change of
Control; (C) any person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a corporation owned,
directly or indirectly, by the shareholders of the Company in substantially the
same proportion as their ownership of stock of the Company, becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 5% or more of the combined voting power of the Company's then
outstanding securities; or (D) the Board adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change of Control has occurred. You
agree that, subject to the terms and conditions of this Agreement, in the event
of a Potential Change of Control, you will remain in the employ of the Company
until the earliest of (i) a date which is six (6) months from the occurrence of
such Potential Change of Control, (ii) the termination by you of your employment
by reason of Long-Term Disability or Retirement (at your normal retirement age),
as defined in subsection 5(i), or (iii) the occurrence of a Change of Control.

Termination Following Change of Control. If any of the events described in
subsection 4(i) hereof constituting a Change of Control shall have occurred, you
shall be entitled to the benefits provided in subsection 6(iii) hereof upon the
subsequent termination of your employment during the term of this Agreement
unless such termination is (A) because of your death, Long-Term Disability or
Retirement, (B) by the Company for Cause, or (C) by you other than for Good
Reason.

         Death, Long-Term Disability, or Retirement. If, as a result of your
incapacity due to physical or mental illness which is determined to be total and
permanent and to prevent you from performing, with or without reasonable

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accommodation, the essential functions of your employment by a physician and any
other consultants selected by the Company or its insurers and acceptable to you
or your legal representative, you shall have been absent from the full-time
performance of your duties with the Company for six (6) consecutive months, and
within thirty (30) days after written notice of termination is given you shall
not have returned to the full-time performance of your duties, your employment
may be terminated for "Long -Term Disability". Termination by the Company or you
of your employment based on "Retirement" shall mean termination in accordance
with the Company's retirement policy, including early retirement, generally
applicable to its salaried employees or in accordance with any retirement
arrangement established with your consent with respect to you. Your death
("Death") during the term of this Agreement will terminate the Agreement.

         Cause. Termination by the Company of your employment for "Cause" shall
mean termination upon (A) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness or any such
actual or anticipated failure after the issuance of a Notice of Termination, by
you for Good Reason, as defined in subsection 5(iii)) after a written demand for
substantial performance is delivered to you by the Board, which demand
specifically identifies the manner in which the Board believes that you have not
substantially performed your duties, (B) the willful engaging by you in conduct
which is demonstrably and materially injurious to the Company, monetarily or
otherwise, or (C) your willful and continued breach of a material term of this
Agreement. For purposes of this subsection, no act, or failure to act, on your
part shall be deemed "willful" unless done, or omitted to be done, by you not in
good faith and without reasonable belief that your action or omission was in the
best interest of the Company. Notwithstanding the foregoing, you shall not be
deemed to have been terminated for Cause unless and until there shall have been
delivered to you a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after reasonable notice
to you and an opportunity for you, together with your counsel, to be heard
before the Board), finding that in the good faith opinion of the Board you were
guilty of conduct set forth above in clauses (A), (B), or (C) of the first
sentence of this subsection and specifying the particulars thereof in detail.

         Good Reason. You shall be entitled to terminate your employment for
Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without
your express written consent, the occurrence after a Change of Control of any of
the following circumstances unless, in the case of paragraphs (A), (E), (F),
(G), (H) or (I), such circumstances are fully corrected prior to the Date of
Termination specified in the Notice of Termination, as defined in Subsections
6(iv) and 6(v), respectively, given in respect thereof:

                  the assignment to you of any duties inconsistent with your
status as Vice President of Marketing of Pilot Therapeutics, Inc. or a
substantial adverse alteration in the nature or status of your responsibilities
from those in effect immediately prior to the Change of Control;

                  a reduction by the Company in your annual base salary as in
effect on the date hereof or as the same may be increased from time-to-time
except for across-the-board salary reductions similarly affecting all executives
of the Company and all executives of any person in control of the Company;

                  the relocation of the Company's principal executive offices
(presently located at 101 North Chestnut Street, Winston-Salem, North Carolina)
to a location more than fifty miles distant from the present location prior to
the Change of Control, or the closing thereof, or the Company's requiring you to
be based anywhere other than within fifty miles of the present location, except
for required travel on the Company's business to an extent substantially
consistent with your present business travel obligations;

                  the failure by the Company, without your consent, to pay to
you any portion of your current compensation except pursuant to an
across-the-board compensation deferral similarly affecting all executives of the
Company and all executives of any person in control of the Company;

                  the failure by the Company to offer you any compensation plan
introduced to other executives of similar responsibility or any substitute plans
adopted prior to the Change of Control, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to such plan; or the failure by the Company to continue your
participation in any such compensation plan (or in such substitute or
alternative plan) on a basis not materially less favorable, both in terms of the
amount of benefits provided and the level of your participation relative to
other participants, as existed at the time of the Change of Control;

                  the failure by the Company to continue to provide you with the
benefits substantially similar to those enjoyed by you under any of the
following plans or programs maintained by the Company at the time of a Change of
Control or the taking of any action which would directly or indirectly
materially reduce any of such benefits,

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including but not limited to: (i) fringe benefits, in accordance with the
Company's policies in effect at the time of a Change of Control; (ii) group
life, accidental death and dismemberment, long-term disability, and medical and
dental insurance benefits available to you according to Company policies and
employee benefit plans maintained by the Company that are in effect at the time
of a Change of Control; (iii) paid vacation in accordance with your agreements
with the Company's and/or the Company's policies in effect at the time of a
Change of Control; (iv) sick leave in accordance with the Company's policies in
effect at the time of a Change of Control; and (v) any incentive compensation
plans maintained by the Company or any successor thereto, any stock-based
compensation plans maintained by the Company or successor plans thereto, any
savings or thrift plan maintained by the Company, whether or not such plans or
programs are subject to ERISA;

                  any action by the Company that eliminates, materially reduces
or jeopardizes the ability of the Company to fulfill its obligations under any
deferred compensation or retirement plan, or both such plans, including by way
of example and not of limitation, the sale or other disposition of assets of the
Company, and all, or substantially all, of the proceeds from such sale or other
disposition do not remain with the Company;

                  the failure of the Company to obtain a satisfactory agreement
from any successor company to assume and agree to perform this Agreement, as
contemplated in section 7 hereof;

                  any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of
subsection (iv) below (and if applicable, the requirements of subsection (ii)
above); for purposes of this Agreement, no such purported termination shall be
effective; or

                  your resignation, if tendered during the thirty days
immediately following the first twelve months after a Change of Control;
provided, however, that, if the Change of Control occurs pursuant to subsection
4(i)(C), your resignation must be tendered during the thirty days immediately
following the first twelve months after the date the Company merges or
consolidates with the corporation approved by the shareholders pursuant to
subsection 4(i)(C) of this Agreement.

         Your right to terminate your employment pursuant to this subsection
shall not be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good Reason hereunder. For purposes of
this subsection, any good faith determination of Good reason made by you shall
be conclusive.

         Notice of Termination. Any purported termination of your employment by
the Company or by you shall be communicated by written Notice of Termination to
the other party hereto in accordance with section 9 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of your employment under the provision so indicated.

         Date of Termination. "Date of Termination" shall mean (A) if your
employment is terminated for Long-Term Disability, thirty (30) days after Notice
of Termination is given (provided that you shall not have returned to the
full-time performance of your duties during such thirty (30) day period), and
(B) if your employment is terminated pursuant to subsection (ii) or (iii) above
or for any other reason (other than Long-Term Disability), the date specified in
the Notice of Termination (which, in the case of a termination pursuant to
subsection (ii) above shall not be less than thirty (30) days, and in the case
of a termination pursuant to subsection (iii) above shall not be less than
fifteen (15) nor more than sixty (60) days, respectively, from the date such
Notice of Termination is given); provided that if within fifteen (15) days after
any Notice of Termination (as determined without regard to this provision), the
party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (which is not
applicable or with respect to which the time for appeal there from has expired
and no appeal has been perfected); provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
this subsection. Amounts paid under this subsection are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement.

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Compensation Upon Termination or During Short-Term Disability. Following a
Change of Control, as defined by subsection 4(i), upon termination of your
employment or during a period of Short-Term Disability you shall be entitled to
the following benefits:

         During any period that you fail to perform your full-time duties with
the Company as a result of incapacity due to physical or mental illness
(hereinafter "Short-Term Disability") you shall continue to receive your base
salary at the rate in effect at the commencement of the Short-Term Disability,
together with all compensation and benefits payable or available to you and your
family under any other plan in effect during such period, until this Agreement
is terminated pursuant to subsection 5(i) hereof. Thereafter, or in the event
your employment shall be terminated by the Company or by you for Long-Term
Disability, Retirement, or by reason of your Death, your benefits and your
family's or heirs' benefits, if applicable, shall be determined under the
Company's retirement, insurance and other compensation programs with respect to
other peer executives and their families as in effect on the Date of
Termination, or if more favorable to you, your family or your heirs, as in
effect during the 120-day period immediately preceding a Change of Control, in
accordance with the terms of such programs. You, or, if applicable, your heirs
or estate, shall also receive your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given.

         If your employment shall be terminated by the Company for Cause or by
you other than for Good Reason, Long-Term Disability, Death or Retirement, the
Company shall pay you your full base salary through the Date of Termination at
the rate in effect at the time Notice of Termination is given, plus all other
amounts to which you are entitled under any compensation or benefit plan of the
Company at the time such payments are due, and the Company shall have no further
obligations to you under this Agreement.

         If your employment by the Company shall be terminated (a) by the
Company other than for Cause, Retirement, Death or Long-Term Disability or (b)
by you for Good Reason, then you shall be entitled to the benefits provided
below:

                  The Company shall pay you the following: the sum of (1) your
full base salary through the Date of Termination to the extent not theretofore
paid, (2) the product of (x) the higher of (I) your most recent annual bonus or
variable compensation award and (II) the annual bonus or variable compensation
award paid or payable, including any bonus or portion thereof which has been
earned but deferred (and annualized for any fiscal year consisting of less than
twelve full months or during which you were employed for less than twelve full
months), for the most recently completed fiscal year since the Change of
Control, if any, and (y) a fraction, the numerator of which is the number of
days in the current fiscal year through the Date of Termination, and the
denominator of which is 365 and (3) any accrued vacation or sick pay, in each
case to the extent not theretofore paid;

                  In lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as severance pay to
you a lump sum severance payment (the "Severance Payment") equal to 1.0 times
your "base amount," as defined in section 280G of the Internal Revenue Code of
1986, as amended (the "Code"). Such base amount shall be determined in
accordance with temporary or final regulations, if any, promulgated under
section 280G of the Code.

                  The Company shall pay to you all legal fees and expenses
incurred by you as a result of such termination (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement or
in connection with any tax audit or proceeding to the extent attributable to the
application of section 4999 of the Code to any payment or benefit provided
hereunder), such payment to be made at the later of the times provided in
paragraph (D), below or within five (5) days after your request for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.

                  In addition, if the excise tax imposed under Code section 4999
on "excess parachute payments," as defined in Code section 280G, is provoked by
(i) any amount paid or payable to or for the benefit of you under this section
as legal fees and expenses, or (ii) any payments or benefits which you receive
or have the right to receive from the Company (including the Severance Payment)
or any affiliated entity or any payments or benefits under any plan or program
maintained by the Company or any affiliated entity, the Company must indemnify
you and hold you harmless against all claims, losses, damages, penalties,
expenses, and excise taxes. To effect this indemnification, the Company must pay
you an additional amount that is sufficient to pay any excise tax imposed by
Code section 4999 on the payments and benefits to which you are entitled without
the additional amount, plus the excise and income taxes on the additional
amount. The determination of any additional amount that must be paid under this
section must be made by the Company in good faith.

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                  The payments provided for in paragraphs (B), (C) and (D)
above, shall (except as otherwise provided therein) be made not later than the
fifth day following the Date of Termination, provided, however, that if the
amounts of such payments cannot be finally determined on or before such day, the
Company shall pay to you on such day an estimate, as determined in good faith by
the Company, of the minimum amount of such payments and shall pay the remainder
of such payments (together with interest at the rate provided in section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but
in no event later than the thirtieth day after the Date of Termination. In the
event that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the Company
to you, payable on the fifth day after demand by the Company (together with
interest at the rate provided in section 1274(b)(2)(B) of the Code).

         If your employment shall be terminated (A) by the Company other than
for Cause, Retirement or Disability or (B) by you for Good Reason, then for a
twelve (12) month period after such termination, the Company shall provide you
and your family at Company expense with group life, disability, medical and
dental insurance benefits substantially similar to those which you and your
family are receiving immediately prior to the Notice of Termination. The Company
shall pay any applicable premiums on behalf of you and your family for
continuation of medical coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"). Benefits otherwise receivable
by you and your family pursuant to this subsection 6(iv) shall be reduced to the
extent comparable benefits are actually received by you and your family during
the twelve (12) month period following your termination, and any such benefits
actually received by you and your family shall be reported to the Company.

         If your employment shall be terminated (A) by the Company other than
for Cause, Retirement or Long-Term Disability or (B) by you for Good Reason,
then in addition to the retirement benefits to which you are entitled under any
Company retirement plan or any successor plan thereto, the Company shall pay you
in cash at the time and in the manner provided in paragraph (E) of subsection
6(iii), a lump sum equal to the actuarial equivalent of the excess of (x) the
retirement pension (determined as a straight life annuity commencing at age
sixty-five) which you would have accrued under the terms of any Company
retirement plan without regard to any amendment to the Company's retirement plan
made subsequent to a Change of Control and on or prior to the Date of
Termination, which amendment adversely affects in any manner the computation of
retirement benefits thereunder, determined as if you were fully vested
thereunder and had accumulated (after the Date of Termination) twelve (12)
additional months of service credit thereunder at your annual rate of
compensation during the twelve (12) months immediately preceding the Date of
Termination over (y) the retirement pension (determined as a straight life
annuity commencing at age sixty-five) which you had then accrued pursuant to the
provisions of the Company's retirement plan. For the purposes of this
subsection, "actuarial equivalent" shall be determined using the same methods
and assumptions utilized under the Company's retirement plan immediately prior
to the Change of Control.

         The Company shall, at its sole expense as incurred, provide you with
outplacement services the scope and provider of which shall be selected by you
in your sole discretion.

         Offsets Against Severance Payment.

                  The Severance Payment to which you are entitled under this
Agreement may be reduced under this subsection, but not below zero. Reductions
in the Severance Payment must be made under this subsection in the manner herein
described. The Company must make any required determination or calculation in
good faith.

                  You are not required to seek or accept any employment that is
not Comparable Employment. If you obtain any employment during the months
remaining in your employment period after the Date of Termination, the Severance
Payment must be reduced by all amounts actually earned by you from such
employment during those months; except that no such reduction may be made
because of earnings from employment in which you could have engaged while you
were employed by the Company. For example, the Severance Payment may not be
reduced because of your fees for service as a director of a corporation other
than the Company or your earnings from part-time employment or from any other
employment that would not have impaired your ability to perform the duties
described in section 2 of this Agreement.

                  During the months remaining in your employment period after
the Date of Termination and unless you are then eligible to retire under any
Company retirement plan, you must seek and accept any Comparable Employment that
is offered to you. If the Company establishes that Comparable Employment was
offered to you and that you did not accept it, the full amount of wages that you
could have earned from Comparable Employment reduces the Severance Payment to
which you are entitled under this Agreement.

                  For purposes of this Agreement, Comparable Employment means
employment that entitles you to the same (or higher) total compensation
(including employment related benefits) to which you were entitled

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immediately prior to a Change of Control and to similar status, title(s),
office(s), and management responsibilities; employment with a general character
and grade similar to the general character and grade of your former employment
with the Company; and employment suited to your education, training, and
experience. For purposes of the Agreement, employment is not Comparable
Employment if such employment is located more than forty miles from the location
at which you are based on the Date of Termination; is short-term or temporary
employment; entitles you to total compensation that is less than the total
compensation (including employment related benefits) to which you were entitled
immediately prior to a Change of Control; requires you to take serious bodily or
financial risks; entitles you to a lower status, title(s), office(s), and
management responsibilities; or would not have impaired your ability to perform
the duties described in section 2 of this Agreement.

                  To prevent hardship, repayment of the Severance Payment under
this section may be made by you in installments, determined in the Company's
sole discretion, but a repayment arrangement may not be used as a disguised
loan.

         In addition to all other amounts payable to you under this section 6,
you shall be entitled to receive all benefits payable to you under any Company
retirement plan, savings and thrift plan, supplemental retirement plan and any
other plan or agreement relating to retirement benefits.

Agreement Binding on Successors.

         The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms as you
would be entitled to hereunder if you terminate your employment for Good Reason
following a Change of Control, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Company" shall mean
the Company as herein before defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.

         This Agreement shall inure to the benefit of and be enforceable by your
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If you should die while any amount would
still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
is no such designee, to your estate.

Subsidiary Corporations. Upon approval of the Board of Directors of the
appropriate wholly-owned subsidiary, this Agreement shall apply to an executive
of any wholly-owned subsidiary of the Company with the same force and effect as
if said executive were employed directly by the Company. Upon approval by said
subsidiary's Board of Directors, the executive of the wholly-owned subsidiary
shall be entitled to the same benefits from the Company as those granted to
executives of the Company. For purposes of this Agreement the transfer of an
employee from the Company to any wholly-owned subsidiary of the Company, or from
any wholly-owned subsidiary to the Company, or from one wholly-owned subsidiary
to another shall not constitute a termination of such employee's employment. As
applied to an executive of a wholly-owned subsidiary, the duties and obligations
of the Company shall, wherever appropriate, refer to the duties and obligations
of the Company's wholly-owned subsidiary which employs the executive; provided,
however, that the Company rather than the wholly-owned subsidiary shall remain
liable to the executive for payment of benefits due hereunder.

Notice. For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States registered mail,
return receipt requested, postage prepaid, addressed to the respective addresses
set forth on the first page of this Agreement, provided that all notice to the
Company shall be directed to the attention of the Board with a copy to the
Secretary of the Company, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.

Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by you and such officer as may be specifically designated by
the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement

                                       8
<PAGE>

supersedes any previous agreements between the Company and you on the matters
herein addressed. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of North Carolina. All reference to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law.
The obligations of the Company under section 6 shall survive the expiration of
the term of this Agreement.

Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit your
continuing or future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and for which you may
qualify. Amounts which are vested benefits or which you are otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to a Change of Control shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Agreement.

Confidentiality.

         Confidential information. You must hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge, or
data relating to the Company and its business, which is obtained by you during
your employment by the Company and which is not public knowledge (other than by
acts by you or your representatives in violation of this Agreement). After the
termination of your employment with the Company, you must not, without the
Company's prior written consent, communicate or divulge any such information,
knowledge, or data to anyone other than the Company and those designated by it
to receive such information, knowledge, or data. In no event may an asserted
violation of this section constitute a basis for deferring or withholding any
amounts otherwise payable to you under this Agreement.

         Records and files. All records and files concerning the Company or the
Company's clients and customers belong to and remain the property of the
Company.

Termination of Employment Prior to a Change of Control of the Company. You and
the Company acknowledge that prior to a Change of Control or a Potential Change
of Control, your employment may be terminated by the Company in accordance with
the notice provisions set forth in section 1 of this Agreement, and by you at
any time, in which case you shall have no further rights under this Agreement.

Anti-assignment. You may not assign, alienate, anticipate, or otherwise encumber
any rights, duties, or amounts that you might be entitled to receive under this
Agreement.

Validity. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.

Funding. The Company is not required to establish a trust or other funding
vehicle to pay benefits under this Agreement, except to the extent otherwise
required by the Code or ERISA with respect to any employee benefit plan.

Counterparts. This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

Arbitration. Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Winston-Salem, North
Carolina in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction; provided, however, that you shall be entitled to seek
specific performance of your right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.

Governing Law. This Agreement shall be governed by the laws of State of North
Carolina.

                                       9
<PAGE>

ACKNOWLEDGMENT OF ARBITRATION

         The parties hereto understand that this Agreement contains an agreement
to arbitrate. After signing this document, the parties understand that they will
not be able to bring a lawsuit concerning any dispute that may arise which is
covered by the arbitration agreement, unless it involves a question of
constitutional or civil rights. Instead the parties agree to submit any such
dispute to an impartial arbitrator.

         This letter is submitted in duplicate. If it sets forth our agreement
on the subject matter hereof, kindly sign both copies and return one copy to me
within thirty (30) days (after which this offer of severance benefits will
lapse). These letters will then constitute our agreement on this subject.

         By:      /s/ Glenn J. Kline
                  --------------------------------------------
                  Glenn J. Kline, Chairman
                  Board of Directors
                  Pilot Therapeutics Holdings, Inc.

Agreed to this 10th day of July, 2002

/s/Jack Voller
Jack Voller
Vice President of Marketing
Pilot Therapeutics, Inc.

                                       10<PAGE>

                                                                   Exhibit 10.12

[Letterhead]

PERSONAL AND CONFIDENTIAL

July 10, 2002

Marc Surette
Director of Research and Development
Pilot Therapeutics, Inc.
101 North Chestnut Street, Suite 102
Winston-Salem, North Carolina 27101

Dear Marc:

         Pilot Therapeutics Holdings, Inc. (the "Company") considers it
essential to the best interests of its shareholders to foster the continuous
employment of key management personnel. In addition, the Board of Directors of
the Company (the "Board") recognizes that the possibility of a change of control
of the Company may exist and the uncertainty and questions which it may raise
among management may result in the distraction or departure of management
personnel to the detriment of the Company and its shareholders.

         The Board has determined that appropriate steps should be taken to
reinforce and encourage the continued attention and dedication of members of the
Company's management, including yourself, to their assigned duties without
distraction in the face of the possibility of a change in control of the
Company.

         In order to induce you to remain in the employ of the Company and in
consideration of your agreement set forth in subsection 4(ii) hereof, the
Company agrees that you shall receive the severance benefits set forth in this
Agreement in the event your employment with the Company is terminated subsequent
to a "change in control of the Company" (as defined in section 4 hereof and
hereinafter a "Change of Control") under the circumstances described below.

                                       1
<PAGE>

Term of Agreement. This Agreement shall commence on July 10, 2002 (the
"Effective Date") and shall continue in effect through July 10, 2003; provided,
however, that commencing on January 1, 2003 and each January 1 thereafter, the
term of this Agreement shall automatically be extended for one additional year
unless, not later than September 30 of the preceding year, the Company shall
have given notice that it does not wish to extend this Agreement.

Terms of Employment Before a Change of Control. Prior to a Change of Control,
your terms of employment ("Terms of Employment") shall be as follows:

General duties. Excluding periods of vacation and sick leave to which you are
entitled, you will continue to exercise such authority and perform such
executive duties as are commensurate with the authority being exercised and
duties being performed by you immediately before the Effective Date.

Place of employment. Your services will be performed at the location where you
were employed immediately before the Effective Date. If the Company and you
agree, however, the location of your employment may be changed without affecting
your rights under this Agreement.

Expenses generally. You are entitled to receive prompt reimbursement for all
reasonable expenses you incur. Reimbursement must be made in accordance with the
Company's policies and procedures in effect on the Effective Date (which may
include a requirement that you submit an itemized expense voucher).

Meetings, conventions, and seminars. You are encouraged and are expected to
attend seminars, professional meetings and conventions, and educational courses.
The cost of travel, tuition or registration, food, and lodging for attending
those activities must be paid by the Company. Other costs are your expense,
unless the Company authorizes those costs. If those other costs are authorized
expenses, you must be reimbursed after satisfying the Company's policies and
procedures for such reimbursement (which may include a requirement that you
submit an itemized expense voucher).

Promotional expenses. You are encouraged and are expected, from time to time, to
incur reasonable expenses for promoting the Company's business. Such promotional
expenses include travel, entertainment (including memberships in social and
athletic clubs), professional advancement, and community service expenses. You
agree to bear those expenses except to the extent that those expenses are
incurred at the Company's specific direction or those expenses are specifically
authorized by the Company as expenses that the Company may pay directly or
indirectly through reimbursement to you.

Outside activities. You may (i) serve on corporate, civic, or charitable boards
or committees; (ii) deliver lectures, fulfill speaking engagements, or teach at
educational institutions; and (iii) manage personal investments. Such activities
must not significantly interfere with the performance of your responsibilities
for the Company. To the extent that any such activities have been conducted by
you before the Effective Date, such prior conduct of activities and any
subsequent conduct of activities similar in nature and scope may not be deemed
to interfere with the performance of your responsibilities to the Company.

Compensation and fringe benefits. Your compensation (including your annual base
salary and any bonuses or incentive compensation) and benefits generally are the
same as those in effect on the Effective Date. Your compensation and benefits
are, however, subject to periodic review and adjustment by the Company. This
section of this Agreement does not change the terms of any fringe benefit
program or employee benefit plan maintained by the Company and does not give you
any additional vested interest in any compensation or benefit to which you are
not already entitled under any such program or plan on the Effective Date.
Generally, your benefits include the following items, all of which are subject
to periodic review and adjustment: (i) You are entitled to receive all group
life, accidental death and dismemberment, long-term disability, and medical
insurance benefits available to you according to Company policies and employee
benefit plans maintained by the Company that are in effect on the Effective
Date; (ii) You are entitled to paid vacation in accordance with the Company's
policies in effect on the Effective Date; (iii) You are entitled to sick leave
in accordance with the Company's policies in effect on the Effective Date; and
(iv) You are entitled to participate in all employee benefit plans and programs
in which you participate on the Effective Date, whether or not such plans or
programs are subject to the Employee Retirement Income Act of 1974, as amended
("ERISA").

Extension of Agreement Upon Change of Control. If a Change of Control shall have
occurred during the original or extended term of this Agreement, this Agreement
shall continue in effect for a period of at least twelve (12) months beyond the
month in which such Change of Control occurred. The Terms of Employment set
forth in section 2 continue in effect after a Change of Control and may not be
changed to terms and conditions less favorable than those in effect on the day
immediately preceding a Change of Control.

                                       2
<PAGE>

Change of Control.

         No benefits shall be payable hereunder unless there shall have been a
Change of Control, as set forth below. For purposes of this Agreement, a Change
of Control shall be deemed to have occurred if (A) any "person" (as such term is
used in sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act")), other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a corporation owned,
directly or indirectly, by the shareholders of the Company in substantially the
same proportions as their ownership of stock of the Company, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding securities (a "20%
Holder"); or (B) during any period of two consecutive years (not including any
period prior to the execution of this Agreement), individuals who at the
beginning of such period constitute the Board of Directors of the Company (the
"Board") and any new director (other than a director designated by a person who
has entered into an agreement with the Company to effect a transaction described
in clauses (A) or (C) of this subsection) whose election by the Board or
nomination for election by the Company's shareholders was approved by a vote of
at least two-thirds (2/3) of the directors then still in office who either were
directors at the beginning of the period or whose election or nomination for
election was previously so approved, cease for any reason to constitute a
majority of the directors of the Company; or (C) the shareholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than a merger or consolidation which would result in the voting securities
of the Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least 80% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or the shareholders of the Company approve a plan
of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all the Company's assets;
provided, however, that a Change of Control shall not be deemed to have occurred
under clauses (A) or (C) above if a majority of the Continuing Directors (as
defined below) determine within five business days after the occurrence of any
event specified in clauses (A) or (C) above that control of the Company has not
in fact changed and it is reasonably expected that such control of the Company
in fact will not change. Notwithstanding that, in the case of clause (A) above,
the Board shall have made a determination of the nature described in the
preceding sentence, if there shall thereafter occur any material change in facts
involving, or relating to, the 20% Holder or to the 20% Holder's relationship to
the Company, including, without limitation, the acquisition by the 20% Holder of
l% or more additional outstanding voting stock of the Company, the occurrence of
such material change in facts shall result in a new Change of Control for the
purpose of this Agreement. In such event, the second immediately preceding
sentence hereof shall be effective. As used herein, the term "Continuing
Director" shall mean any member of the Board on the date of this Agreement and
any successor of a Continuing Director who is recommended to succeed the
Continuing Director by a majority of Continuing Directors. If, following a
Change of Control, you are the beneficial owner of twenty percent or more of the
then-outstanding equity securities of the Company, or its successor in interest,
a majority of the Continuing Directors may elect, within five business days
after such Change of Control, to terminate any benefits payable to you under
this Agreement after the date of such an election by the Continuing Directors.

         For purposes of this Agreement, a "Potential Change of Control" shall
be deemed to have occurred if (A) the Company enters into an agreement, the
consummation of which would result in the occurrence of a Change of Control; (B)
any person (including the Company) publicly announces an intention to take or to
consider taking actions which if consummated would constitute a Change of
Control; (C) any person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company or a corporation owned,
directly or indirectly, by the shareholders of the Company in substantially the
same proportion as their ownership of stock of the Company, becomes the
beneficial owner, directly or indirectly, of securities of the Company
representing 5% or more of the combined voting power of the Company's then
outstanding securities; or (D) the Board adopts a resolution to the effect that,
for purposes of this Agreement, a Potential Change of Control has occurred. You
agree that, subject to the terms and conditions of this Agreement, in the event
of a Potential Change of Control, you will remain in the employ of the Company
until the earliest of (i) a date which is six (6) months from the occurrence of
such Potential Change of Control, (ii) the termination by you of your employment
by reason of Long-Term Disability or Retirement (at your normal retirement age),
as defined in subsection 5(i), or (iii) the occurrence of a Change of Control.

Termination Following Change of Control. If any of the events described in
subsection 4(i) hereof constituting a Change of Control shall have occurred, you
shall be entitled to the benefits provided in subsection 6(iii) hereof upon the
subsequent termination of your employment during the term of this Agreement
unless such termination is (A) because of your death, Long-Term Disability or
Retirement, (B) by the Company for Cause, or (C) by you other than for Good
Reason.

         Death, Long-Term Disability, or Retirement. If, as a result of your
incapacity due to physical or mental illness which is determined to be total and
permanent and to prevent you from performing, with or without reasonable

                                       3
<PAGE>

accommodation, the essential functions of your employment by a physician and any
other consultants selected by the Company or its insurers and acceptable to you
or your legal representative, you shall have been absent from the full-time
performance of your duties with the Company for six (6) consecutive months, and
within thirty (30) days after written notice of termination is given you shall
not have returned to the full-time performance of your duties, your employment
may be terminated for "Long -Term Disability". Termination by the Company or you
of your employment based on "Retirement" shall mean termination in accordance
with the Company's retirement policy, including early retirement, generally
applicable to its salaried employees or in accordance with any retirement
arrangement established with your consent with respect to you. Your death
("Death") during the term of this Agreement will terminate the Agreement.

         Cause. Termination by the Company of your employment for "Cause" shall
mean termination upon (A) the willful and continued failure by you to
substantially perform your duties with the Company (other than any such failure
resulting from your incapacity due to physical or mental illness or any such
actual or anticipated failure after the issuance of a Notice of Termination, by
you for Good Reason, as defined in subsection 5(iii)) after a written demand for
substantial performance is delivered to you by the Board, which demand
specifically identifies the manner in which the Board believes that you have not
substantially performed your duties, (B) the willful engaging by you in conduct
which is demonstrably and materially injurious to the Company, monetarily or
otherwise, or (C) your willful and continued breach of a material term of this
Agreement. For purposes of this subsection, no act, or failure to act, on your
part shall be deemed "willful" unless done, or omitted to be done, by you not in
good faith and without reasonable belief that your action or omission was in the
best interest of the Company. Notwithstanding the foregoing, you shall not be
deemed to have been terminated for Cause unless and until there shall have been
delivered to you a copy of a resolution duly adopted by the affirmative vote of
not less than three-quarters (3/4) of the entire membership of the Board at a
meeting of the Board called and held for such purpose (after reasonable notice
to you and an opportunity for you, together with your counsel, to be heard
before the Board), finding that in the good faith opinion of the Board you were
guilty of conduct set forth above in clauses (A), (B), or (C) of the first
sentence of this subsection and specifying the particulars thereof in detail.

         Good Reason. You shall be entitled to terminate your employment for
Good Reason. For purposes of this Agreement, "Good Reason" shall mean, without
your express written consent, the occurrence after a Change of Control of any of
the following circumstances unless, in the case of paragraphs (A), (E), (F),
(G), (H) or (I), such circumstances are fully corrected prior to the Date of
Termination specified in the Notice of Termination, as defined in Subsections
6(iv) and 6(v), respectively, given in respect thereof:

                  the assignment to you of any duties inconsistent with your
status as Director of Research and Development of Pilot Therapeutics, Inc. or a
substantial adverse alteration in the nature or status of your responsibilities
from those in effect immediately prior to the Change of Control;

                  a reduction by the Company in your annual base salary as in
effect on the date hereof or as the same may be increased from time-to-time
except for across-the-board salary reductions similarly affecting all executives
of the Company and all executives of any person in control of the Company;

                  the relocation of the Company's principal executive offices
(presently located at 101 North Chestnut Street, Winston-Salem, North Carolina)
to a location more than fifty miles distant from the present location prior to
the Change of Control, or the closing thereof, or the Company's requiring you to
be based anywhere other than within fifty miles of the present location, except
for required travel on the Company's business to an extent substantially
consistent with your present business travel obligations;

                  the failure by the Company, without your consent, to pay to
you any portion of your current compensation except pursuant to an
across-the-board compensation deferral similarly affecting all executives of the
Company and all executives of any person in control of the Company;

                  the failure by the Company to offer you any compensation plan
introduced to other executives of similar responsibility or any substitute plans
adopted prior to the Change of Control, unless an equitable arrangement
(embodied in an ongoing substitute or alternative plan) has been made with
respect to such plan; or the failure by the Company to continue your
participation in any such compensation plan (or in such substitute or
alternative plan) on a basis not materially less favorable, both in terms of the
amount of benefits provided and the level of your participation relative to
other participants, as existed at the time of the Change of Control;

                  the failure by the Company to continue to provide you with the
benefits substantially similar to those enjoyed by you under any of the
following plans or programs maintained by the Company at the time of a Change of
Control or the taking of any action which would directly or indirectly
materially reduce any of such benefits,

                                       4
<PAGE>

including but not limited to: (i) fringe benefits, in accordance with the
Company's policies in effect at the time of a Change of Control; (ii) group
life, accidental death and dismemberment, long-term disability, and medical and
dental insurance benefits available to you according to Company policies and
employee benefit plans maintained by the Company that are in effect at the time
of a Change of Control; (iii) paid vacation in accordance with your agreements
with the Company's and/or the Company's policies in effect at the time of a
Change of Control; (iv) sick leave in accordance with the Company's policies in
effect at the time of a Change of Control; and (v) any incentive compensation
plans maintained by the Company or any successor thereto, any stock-based
compensation plans maintained by the Company or successor plans thereto, any
savings or thrift plan maintained by the Company, whether or not such plans or
programs are subject to ERISA;

                  any action by the Company that eliminates, materially reduces
or jeopardizes the ability of the Company to fulfill its obligations under any
deferred compensation or retirement plan, or both such plans, including by way
of example and not of limitation, the sale or other disposition of assets of the
Company, and all, or substantially all, of the proceeds from such sale or other
disposition do not remain with the Company;

                  the failure of the Company to obtain a satisfactory agreement
from any successor company to assume and agree to perform this Agreement, as
contemplated in section 7 hereof;

                  any purported termination of your employment which is not
effected pursuant to a Notice of Termination satisfying the requirements of
subsection (iv) below (and if applicable, the requirements of subsection (ii)
above); for purposes of this Agreement, no such purported termination shall be
effective; or

                  your resignation, if tendered during the thirty days
immediately following the first twelve months after a Change of Control;
provided, however, that, if the Change of Control occurs pursuant to subsection
4(i)(C), your resignation must be tendered during the thirty days immediately
following the first twelve months after the date the Company merges or
consolidates with the corporation approved by the shareholders pursuant to
subsection 4(i)(C) of this Agreement.

         Your right to terminate your employment pursuant to this subsection
shall not be affected by your incapacity due to physical or mental illness. Your
continued employment shall not constitute consent to, or a waiver of rights with
respect to, any circumstance constituting Good Reason hereunder. For purposes of
this subsection, any good faith determination of Good Reason made by you shall
be conclusive.

         Notice of Termination. Any purported termination of your employment by
the Company or by you shall be communicated by written Notice of Termination to
the other party hereto in accordance with section 9 hereof. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of your employment under the provision so indicated.

         Date of Termination. "Date of Termination" shall mean (A) if your
employment is terminated for Long-Term Disability, thirty (30) days after Notice
of Termination is given (provided that you shall not have returned to the
full-time performance of your duties during such thirty (30) day period), and
(B) if your employment is terminated pursuant to subsection (ii) or (iii) above
or for any other reason (other than Long-Term Disability), the date specified in
the Notice of Termination (which, in the case of a termination pursuant to
subsection (ii) above shall not be less than thirty (30) days, and in the case
of a termination pursuant to subsection (iii) above shall not be less than
fifteen (15) nor more than sixty (60) days, respectively, from the date such
Notice of Termination is given); provided that if within fifteen (15) days after
any Notice of Termination (as determined without regard to this provision), the
party receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination shall be the
date on which the dispute is finally determined, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final
judgment, order or decree of a court of competent jurisdiction (which is not
appealable or with respect to which the time for appeal therefrom has expired
and no appeal has been perfected); provided further that the Date of Termination
shall be extended by a notice of dispute only if such notice is given in good
faith and the party giving such notice pursues the resolution of such dispute
with reasonable diligence. Notwithstanding the pendency of any such dispute, the
Company will continue to pay you your full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to, base
salary) and continue you as a participant in all compensation, benefit and
insurance plans in which you were participating when the notice giving rise to
the dispute was given, until the dispute is finally resolved in accordance with
this subsection. Amounts paid under this subsection are in addition to all other
amounts due under this Agreement and shall not be offset against or reduce any
other amounts due under this Agreement.

                                       5
<PAGE>

Compensation Upon Termination or During Short-Term Disability. Following a
Change of Control, as defined by subsection 4(i), upon termination of your
employment or during a period of Short-Term Disability you shall be entitled to
the following benefits:

         During any period that you fail to perform your full-time duties with
the Company as a result of incapacity due to physical or mental illness
(hereinafter "Short-Term Disability") you shall continue to receive your base
salary at the rate in effect at the commencement of the Short-Term Disability,
together with all compensation and benefits payable or available to you and your
family under any other plan in effect during such period, until this Agreement
is terminated pursuant to subsection 5(i) hereof. Thereafter, or in the event
your employment shall be terminated by the Company or by you for Long-Term
Disability, Retirement, or by reason of your Death, your benefits and your
family's or heirs' benefits, if applicable, shall be determined under the
Company's retirement, insurance and other compensation programs with respect to
other peer executives and their families as in effect on the Date of
Termination, or if more favorable to you, your family or your heirs, as in
effect during the 120-day period immediately preceding a Change of Control, in
accordance with the terms of such programs. You, or, if applicable, your heirs
or estate, shall also receive your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given.

         If your employment shall be terminated by the Company for Cause or by
you other than for Good Reason, Long-Term Disability, Death or Retirement, the
Company shall pay you your full base salary through the Date of Termination at
the rate in effect at the time Notice of Termination is given, plus all other
amounts to which you are entitled under any compensation or benefit plan of the
Company at the time such payments are due, and the Company shall have no further
obligations to you under this Agreement.

         If your employment by the Company shall be terminated (a) by the
Company other than for Cause, Retirement, Death or Long-Term Disability or (b)
by you for Good Reason, then you shall be entitled to the benefits provided
below:

                  The Company shall pay you the following: the sum of (1) your
full base salary through the Date of Termination to the extent not theretofore
paid, (2) the product of (x) the higher of (I) your most recent annual bonus or
variable compensation award and (II) the annual bonus or variable compensation
award paid or payable, including any bonus or portion thereof which has been
earned but deferred (and annualized for any fiscal year consisting of less than
twelve full months or during which you were employed for less than twelve full
months), for the most recently completed fiscal year since the Change of
Control, if any, and (y) a fraction, the numerator of which is the number of
days in the current fiscal year through the Date of Termination, and the
denominator of which is 365 and (3) any accrued vacation or sick pay, in each
case to the extent not theretofore paid;

                  In lieu of any further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay as severance pay to
you a lump sum severance payment (the "Severance Payment") equal to 1.0 times
your "base amount," as defined in section 280G of the Internal Revenue Code of
1986, as amended (the "Code"). Such base amount shall be determined in
accordance with temporary or final regulations, if any, promulgated under
section 280G of the Code.

                  The Company shall pay to you all legal fees and expenses
incurred by you as a result of such termination (including all such fees and
expenses, if any, incurred in contesting or disputing any such termination or in
seeking to obtain or enforce any right or benefit provided by this Agreement or
in connection with any tax audit or proceeding to the extent attributable to the
application of section 4999 of the Code to any payment or benefit provided
hereunder), such payment to be made at the later of the times provided in
paragraph (D), below or within five (5) days after your request for payment
accompanied with such evidence of fees and expenses incurred as the Company
reasonably may require.

                  In addition, if the excise tax imposed under Code section 4999
on "excess parachute payments," as defined in Code section 280G, is provoked by
(i) any amount paid or payable to or for the benefit of you under this section
as legal fees and expenses, or (ii) any payments or benefits which you receive
or have the right to receive from the Company (including the Severance Payment)
or any affiliated entity or any payments or benefits under any plan or program
maintained by the Company or any affiliated entity, the Company must indemnify
you and hold you harmless against all claims, losses, damages, penalties,
expenses, and excise taxes. To effect this indemnification, the Company must pay
you an additional amount that is sufficient to pay any excise tax imposed by
Code section 4999 on the payments and benefits to which you are entitled without
the additional amount, plus the excise and income taxes on the additional
amount. The determination of any additional amount that must be paid under this
section must be made by the Company in good faith.

                                       6
<PAGE>

                  The payments provided for in paragraphs (B), (C) and (D)
above, shall (except as otherwise provided therein) be made not later than the
fifth day following the Date of Termination, provided, however, that if the
amounts of such payments cannot be finally determined on or before such day, the
Company shall pay to you on such day an estimate, as determined in good faith by
the Company, of the minimum amount of such payments and shall pay the remainder
of such payments (together with interest at the rate provided in section
1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but
in no event later than the thirtieth day after the Date of Termination. In the
event that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the Company
to you, payable on the fifth day after demand by the Company (together with
interest at the rate provided in section 1274(b)(2)(B) of the Code).

         If your employment shall be terminated (A) by the Company other than
for Cause, Retirement or Disability or (B) by you for Good Reason, then for a
twelve (12) month period after such termination, the Company shall provide you
and your family at Company expense with group life, disability, medical and
dental insurance benefits substantially similar to those which you and your
family are receiving immediately prior to the Notice of Termination. The Company
shall pay any applicable premiums on behalf of you and your family for
continuation of medical coverage under the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"). Benefits otherwise receivable
by you and your family pursuant to this subsection 6(iv) shall be reduced to the
extent comparable benefits are actually received by you and your family during
the twelve (12) month period following your termination, and any such benefits
actually received by you and your family shall be reported to the Company.

         If your employment shall be terminated (A) by the Company other than
for Cause, Retirement or Long-Term Disability or (B) by you for Good Reason,
then in addition to the retirement benefits to which you are entitled under any
Company retirement plan or any successor plan thereto, the Company shall pay you
in cash at the time and in the manner provided in paragraph (E) of subsection
6(iii), a lump sum equal to the actuarial equivalent of the excess of (x) the
retirement pension (determined as a straight life annuity commencing at age
sixty-five) which you would have accrued under the terms of any Company
retirement plan without regard to any amendment to the Company's retirement plan
made subsequent to a Change of Control and on or prior to the Date of
Termination, which amendment adversely affects in any manner the computation of
retirement benefits thereunder, determined as if you were fully vested
thereunder and had accumulated (after the Date of Termination) twelve (12)
additional months of service credit thereunder at your annual rate of
compensation during the twelve (12) months immediately preceding the Date of
Termination over (y) the retirement pension (determined as a straight life
annuity commencing at age sixty-five) which you had then accrued pursuant to the
provisions of the Company's retirement plan. For the purposes of this
subsection, "actuarial equivalent" shall be determined using the same methods
and assumptions utilized under the Company's retirement plan immediately prior
to the Change of Control.

         The Company shall, at its sole expense as incurred, provide you with
outplacement services the scope and provider of which shall be selected by you
in your sole discretion.

         Offsets Against Severance Payment.

                  The Severance Payment to which you are entitled under this
Agreement may be reduced under this subsection, but not below zero. Reductions
in the Severance Payment must be made under this subsection in the manner herein
described. The Company must make any required determination or calculation in
good faith.

                  You are not required to seek or accept any employment that is
not Comparable Employment. If you obtain any employment during the months
remaining in your employment period after the Date of Termination, the Severance
Payment must be reduced by all amounts actually earned by you from such
employment during those months; except that no such reduction may be made
because of earnings from employment in which you could have engaged while you
were employed by the Company. For example, the Severance Payment may not be
reduced because of your fees for service as a director of a corporation other
than the Company or your earnings from part-time employment or from any other
employment that would not have impaired your ability to perform the duties
described in section 2 of this Agreement.

                  During the months remaining in your employment period after
the Date of Termination and unless you are then eligible to retire under any
Company retirement plan, you must seek and accept any Comparable Employment that
is offered to you. If the Company establishes that Comparable Employment was
offered to you and that you did not accept it, the full amount of wages that you
could have earned from Comparable Employment reduces the Severance Payment to
which you are entitled under this Agreement.

                  For purposes of this Agreement, Comparable Employment means
employment that entitles you to the same (or higher) total compensation
(including employment related benefits) to which you were entitled

                                       7
<PAGE>

immediately prior to a Change of Control and to similar status, title(s),
office(s), and management responsibilities; employment with a general character
and grade similar to the general character and grade of your former employment
with the Company; and employment suited to your education, training, and
experience. For purposes of the Agreement, employment is not Comparable
Employment if such employment is located more than forty miles from the location
at which you are based on the Date of Termination; is short-term or temporary
employment; entitles you to total compensation that is less than the total
compensation (including employment related benefits) to which you were entitled
immediately prior to a Change of Control; requires you to take serious bodily or
financial risks; entitles you to a lower status, title(s), office(s), and
management responsibilities; or would not have impaired your ability to perform
the duties described in section 2 of this Agreement.

                  To prevent hardship, repayment of the Severance Payment under
this section may be made by you in installments, determined in the Company's
sole discretion, but a repayment arrangement may not be used as a disguised
loan.

         In addition to all other amounts payable to you under this section 6,
you shall be entitled to receive all benefits payable to you under any Company
retirement plan, savings and thrift plan, supplemental retirement plan and any
other plan or agreement relating to retirement benefits.

Agreement Binding on Successors.

         The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place. Failure of the
Company to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle you to
compensation from the Company in the same amount and on the same terms as you
would be entitled to hereunder if you terminate your employment for Good Reason
following a Change of Control, except that for purposes of implementing the
foregoing, the date on which any such succession becomes effective shall be
deemed the Date of Termination. As used in this Agreement, "Company" shall mean
the Company as herein before defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.

         This Agreement shall inure to the benefit of and be enforceable by your
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If you should die while any amount would
still be payable to you hereunder if you had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to your devisee, legatee or other designee or, if there
is no such designee, to your estate.

Subsidiary Corporations. Upon approval of the Board of Directors of the
appropriate wholly-owned subsidiary, this Agreement shall apply to an executive
of any wholly-owned subsidiary of the Company with the same force and effect as
if said executive were employed directly by the Company. Upon approval by said
subsidiary's Board of Directors, the executive of the wholly-owned subsidiary
shall be entitled to the same benefits from the Company as those granted to
executives of the Company. For purposes of this Agreement the transfer of an
employee from the Company to any wholly-owned subsidiary of the Company, or from
any wholly-owned subsidiary to the Company, or from one wholly-owned subsidiary
to another shall not constitute a termination of such employee's employment. As
applied to an executive of a wholly-owned subsidiary, the duties and obligations
of the Company shall, wherever appropriate, refer to the duties and obligations
of the Company's wholly-owned subsidiary which employs the executive; provided,
however, that the Company rather than the wholly-owned subsidiary shall remain
liable to the executive for payment of benefits due hereunder.

Notice. For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have
been duly given when delivered or mailed by United States registered mail,
return receipt requested, postage prepaid, addressed to the respective addresses
set forth on the first page of this Agreement, provided that all notice to the
Company shall be directed to the attention of the Board with a copy to the
Secretary of the Company, or to such other address as either party may have
furnished to the other in writing in accordance herewith, except that notice of
change of address shall be effective only upon receipt.

Miscellaneous. No provision of this Agreement may be modified, waived or
discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by you and such officer as may be specifically designated by
the Board. No waiver by either party hereto at any time of any breach by the
other party hereto of, or compliance with, any condition or provision of this
Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time. This Agreement

                                       8
<PAGE>

supersedes any previous agreements between the Company and you on the matters
herein addressed. No agreements or representations, oral or otherwise, express
or implied, with respect to the subject matter hereof have been made by either
party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of North Carolina. All reference to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding required under federal, state or local law.
The obligations of the Company under section 6 shall survive the expiration of
the term of this Agreement.

Non-exclusivity of Rights. Nothing in this Agreement shall prevent or limit your
continuing or future participation in any plan, program, policy or practice
provided by the Company or any of its affiliated companies and for which you may
qualify. Amounts which are vested benefits or which you are otherwise entitled
to receive under any plan, policy, practice or program of or any contract or
agreement with the Company or any of its affiliated companies at or subsequent
to a Change of Control shall be payable in accordance with such plan, policy,
practice or program or contract or agreement except as explicitly modified by
this Agreement.

Confidentiality.

         Confidential information. You must hold in a fiduciary capacity for the
benefit of the Company all secret or confidential information, knowledge, or
data relating to the Company and its business, which is obtained by you during
your employment by the Company and which is not public knowledge (other than by
acts by you or your representatives in violation of this Agreement). After the
termination of your employment with the Company, you must not, without the
Company's prior written consent, communicate or divulge any such information,
knowledge, or data to anyone other than the Company and those designated by it
to receive such information, knowledge, or data. In no event may an asserted
violation of this section constitute a basis for deferring or withholding any
amounts otherwise payable to you under this Agreement.

         Records and files. All records and files concerning the Company or the
Company's clients and customers belong to and remain the property of the
Company.

Termination of Employment Prior to a Change of Control of the Company. You and
the Company acknowledge that prior to a Change of Control or a Potential Change
of Control, your employment may be terminated by the Company in accordance with
the notice provisions set forth in section 1 of this Agreement, and by you at
any time, in which case you shall have no further rights under this Agreement.

Anti-assignment. You may not assign, alienate, anticipate, or otherwise encumber
any rights, duties, or amounts that you might be entitled to receive under this
Agreement.

Validity. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this
Agreement, which shall remain in full force and effect.

Funding. The Company is not required to establish a trust or other funding
vehicle to pay benefits under this Agreement, except to the extent otherwise
required by the Code or ERISA with respect to any employee benefit plan.

Counterparts. This Agreement may be executed in several counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.

Arbitration. Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by arbitration in Winston-Salem, North
Carolina in accordance with the rules of the American Arbitration Association
then in effect. Judgment may be entered on the arbitrator's award in any court
having jurisdiction; provided, however, that you shall be entitled to seek
specific performance of your right to be paid until the Date of Termination
during the pendency of any dispute or controversy arising under or in connection
with this Agreement.

Governing Law. This Agreement shall be governed by the laws of State of North
Carolina.

                                       9
<PAGE>

ACKNOWLEDGMENT OF ARBITRATION

         The parties hereto understand that this Agreement contains an agreement
to arbitrate. After signing this document, the parties understand that they will
not be able to bring a lawsuit concerning any dispute that may arise which is
covered by the arbitration agreement, unless it involves a question of
constitutional or civil rights. Instead the parties agree to submit any such
dispute to an impartial arbitrator.

         This letter is submitted in duplicate. If it sets forth our agreement
on the subject matter hereof, kindly sign both copies and return one copy to me
within thirty (30) days (after which this offer of severance benefits will
lapse). These letters will then constitute our agreement on this subject.

         By:      /s/ Glenn J. Kline
                  --------------------------------------------
                  Glenn J. Kline, Chairman
                  Board of Directors
                  Pilot Therapeutics Holdings, Inc.

Agreed to this 10th day of July, 2002

/s/ Marc Surette
Marc Surette
Director of Research and Development
Pilot Therapeutics, Inc.

                                       10

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