Document:

Exhibit 10.12

                              EMPLOYMENT AGREEMENT

      THIS  EMPLOYMENT  AGREEMENT  (the  "Agreement")  is entered into as of the
first day of November, 2004, by and between Daniel J. Kerkman ("Employee"),  and
APPLIED  NEUROSOLUTIONS,  INC.  ("APNS"),  a  Delaware  corporation  having  its
principal  place of business  in Vernon  Hills,  Illinois  (the  "Company").  In
consideration  of the mutual  covenants and  conditions  set forth  herein,  the
parties hereby agree as follows:

      1.  Employment.  The Company hereby employs  Employee to serve as its Vice
President of Research and Development (V.P. - R & D) and Employee hereby accepts
such employment.  In his capacity as Vice President of Research and Development,
Employee shall be responsible for performing the duties of the Vice President of
Research  and  Development  and agrees to perform  such  duties  during the term
hereof  as the  Board of  Directors  of the  Company  shall,  from time to time,
reasonably direct.  Employee agrees to utilize his skills and to render services
to the best of his ability during the term of this Agreement.

      2. Term. Unless earlier terminated pursuant to the provisions of Paragraph
6 below,  Employee's  employment  hereunder  shall be for a period  of three (3)
years  commencing  on November 1, 2004 and shall be extended  automatically  for
additional  three (3) year  periods,  unless  either the Company or the Employee
delivers  written  notice to the other of its or his  election  not to extend at
least ninety (90) days prior to the end of either the initial or any  additional
term, as applicable.  If the Company decides not to extend this Agreement within
the ninety (90) day period described in the immediately  preceding  sentence for
reasons  other than  "cause" (as defined in  Paragraph  6a below),  the Employee
shall  receive a  severance  payment  equal to the third  year's Base Salary (as
defined in  Paragraph 3 below) with  respect to the initial or  additional  term
that was last completed,  plus the amount of the bonus earned by the Employee in
such third year.  Such  severance  payment  shall be payable over a one (1) year
period in the same manner as the Employee had been paid under this  Agreement in
such third year,  with  payments to begin within two (2) weeks of the end of the
current term of employment under this Agreement.

      3. Compensation.

            a. Base  Salary.  For all services  rendered by Employee  under this
Agreement,  Employee  shall  receive a salary at an annual  rate of  $189,000 as
increased under Paragraphs 3b and 4c ("Base Salary"), or such higher annual rate
as the Board of Directors of the Company may from time to time  establish in its
sole direction.

            b. Annual  Increases.  The Base Salary shall be increased at the end
of each year of service by a minimum  amount equal to (i) a percentage  equal to
the increase,  if any, in the United States  Department of Labor  Consumer Price
Index for Chicago urban areas,  all items,  over the previous twelve months.  If
the index  specified  in this  paragraph is  discontinued  or not  available,  a
substitute index shall be selected by arbitration in the manner  contemplated by
Paragraph 6e unless the parties mutually agree on a substitute index.

            c. Auto and  Cellular  Phone  Allowance.  Employee  is entitled to a
monthly non-accountable  allowance not less than $300.00 to cover the use of his
automobile, cellular phone and other business related purposes.

            d. Stock Option  Plans.  The Company has adopted stock option and/or
stock  purchase  plans for the  benefit of  certain  Employees  of the  Company.
Employee  shall be entitled to participate  in such plans,  consistent  with the
terms of such plans, applicable law and Company Policy.

      4. Benefits.

            a.  Medical/Health  and  Disability  Insurance.  The  Company  shall
provide  Employee  with Company paid medical and dental  insurance  which covers
Employee,  his spouse and dependents,  in accordance with such policies as shall

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be maintained by the Company,  which shall be comparable to that made  available
to other  employees of the Company.  The  Company's  benefit plan shall  provide
disability  insurance  for the  benefit  of  Employee  through  a  Company  plan
reasonably  acceptable to Employee.

            b. Vacation/Sick  Leave.  Employee shall be entitled to vacation and
sick leave in  accordance  with  Company  policy,  provided,  Employee  shall be
entitled annually to (i) a minimum of four (4) weeks of paid vacation,  and (ii)
a  minimum  of three  (3) days of paid  sick  leave  for each ten (10)  weeks of
consecutive  employment.  When  Employee has completed ten (10) years of service
with the Company, such paid vacation will be increased to five (5) weeks.

            c.  Expense  Reimbursement.  The  Company  shall  pay  or  reimburse
Employee  for all  reasonable  travel  and other  expenses  incurred  or paid by
Employee in connection  with the  performance  of services  under this Agreement
upon  presentation of expense vouchers and such other supporting  information as
the Company may from time to time reasonably request.

      5. Warranties and Indemnification. Employee represents to the Company that
Employee  is  free to  enter  into  this  Agreement  and  that  Employee  has no
commitment,  arrangement  or  understanding  to, or with,  any third party which
restrains  or is in conflict  with this  Agreement;  or which  would  operate to
prevent  Employee from  performing  the services to the Company  which  Employee
hereby has agreed to provide.  Employee agrees to indemnify and hold the Company
harmless from and against any and all  liabilities or claims,  including  costs,
expenses  and  reasonable  attorney's  fees  arising out of any acts by Employee
which, the foregoing representation or warranty to the contrary notwithstanding,
shall be in  violation of or shall  constitute a breach of any such  commitment,
arrangement or understanding.

      6. Termination.

            a. The Company may terminate  Employee's  employment  hereunder upon
thirty (30) days' prior  written  notice to  Employee  for cause,  and except as
provided below, the salary and benefits  referred to in Paragraphs 3 and 4 above
shall cease upon the effective date of any such  termination  for just cause. As
used herein, with respect to termination by the Company,  the term "cause" shall
mean (i) any material breach hereof by Employee which is not cured within thirty
(30) days following written notice of such breach given by the Company, provided
that no such  prior  notice  and  opportunity  to cure need be given  where such
breach, or similar breach, has been the subject of such a notice and cure period
on more than two prior occasions;  or (ii) conviction of Employee for commitment
of a felony; or (iii) any act of Employee, which in the reasonable judgment of a
majority  of the Board of  Directors  of the  Company,  constitutes  dishonesty,
larceny, fraud, deceit or gross negligence by Employee in the performance of his
duties to the Company or willful misrepresentation to shareholders, directors or
officers of the Company.

            b.  The  Company  may,  by  action  of a  majority  of the  Board of
Directors,  terminate  Employee's  employment at any time upon thirty (30) days'
prior written  notice and without cause;  provided,  that prior to the effective
date of  termination,  the Company  shall pay to Employee an amount equal to the
greater of (i) the total Base Salary otherwise payable through the expiration of
the term of this  Agreement  as set forth at  Paragraph 2 above;  or (ii) twelve
(12)  months' Base Salary and bonus - both based on the prior year's Base Salary
plus bonus. Health disability and life insurance, as described in Paragraph 4(a)
above,  equivalent to that provided to Employee during last month of employment,
will be provided to Employee for up to twelve  months  following  the  effective
date of termination.

            c. Employee may terminate his employment  hereunder at any time upon
thirty (30) days'  prior  written  notice to the Company for cause.  The amounts
identified in Paragraph 6b shall be paid to Employee as of the effective date of
termination,  together  with  the  continuing  benefits  described  therein,  as
Employee's sole remedy.  As used herein with respect to termination by Employee,
"cause"  shall mean (i) any material  breach  hereof by the Company which is not
cured within thirty (30) days  following  written notice of such breach given by
Employee;  (ii)  repeated  and  consistent  bad faith  attempts  to bring  about
Employee's  resignation  through  obstruction  by the Company of operations  and
programs of Employee in his  capacity  hereunder;  (iii) the removal of Employee

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from  the  position  of Vice  President  of  Research  and  Development,  or the
appointment of another person to perform the duties  ordinarily  associated with
such position(s) without the formal removal of Employee's title(s);  or (iv) the
transfer of Employee or the  relocation of the principal  offices from which the
activities  of the Company are  conducted  to an area more than fifty (50) miles
outside the Village of Vernon Hills.

            d.  If  Employee  terminates  his  employment  without  cause,  such
termination  shall be treated as a  termination  with cause by the  Company,  as
provided in Subparagraph 6a above (but without the necessity of any prior notice
by the Company).

            e. Any dispute  between the parties as to the meaning or presence of
"cause"  for  termination  shall be resolved  by binding  arbitration  conducted
before a single  arbitrator in the Chicago,  Illinois area under the  Commercial
Arbitration  Rules of the American  Arbitration  Association,  provided that the
arbitrator  shall be a person of  extensive  experience  in the  arbitration  of
disputes under private employment  agreements applicable to management personnel
in industries similar to the Company's industry.

            f. This Employment Agreement shall be terminated by the death of the
Employee. In addition,  this Employment Agreement may be terminated by the Board
of  Directors  of the Company if the  Employee  shall be rendered  incapable  by
illness or any other  disability  from complying with the terms,  conditions and
provisions on his part to be kept, observed and performed for a period in excess
of one hundred  twenty (120) days (whether or not  consecutive)  during a twelve
(12)  month  period  during  the  Term  of  Employment  ("Disability").  If this
Employment Agreement is terminated by reason of Disability of the Employee,  the
Company  shall give written  notice to that effect to the Employee in the manner
provided herein.  In the event that the Employee receives  disability  insurance
benefits paid for by the Company  during any period prior to termination of this
Employment Agreement pursuant to this Section 6f, the Employee's salary shall be
reduced by an amount equal to such  disability  insurance  benefits  during such
period.

            g. In the event this  Agreement is  terminated  by Employer  without
cause, or by Employee with cause, all stock, warrants and options of Employee in
the Company shall immediately become vested.  Stock options may be exercised any
time over the time period as originally set forth at their issuance.

      7. Confidentiality.

            a.  Employee  acknowledges  that the  Company's  business and future
success depends on the preservation of the trade secrets and other  confidential
information  of the Company and its  affiliates,  suppliers and  customers  (the
"Secrets"). The Secrets include existing,  to-be-developed or acquired products,
processes,  techniques,  methods,  computer programs,  know-how,  trade secrets,
customers, suppliers, developments,  patents, equipment, or business information
made,  sold,  used,  developed  or  practiced  by the Company in its business or
proprietary to the Company or its affiliates,  suppliers or customers. "Secrets"
do not include any of the above  information  or medium  generally  known to the
industry or which comes to the attention of Employee  through sources other than
the Company.  It is  anticipated  that all  Employees of the Company,  including
Employee, will mark all items containing Secrets with prominent  confidentiality
notices in  accordance  with  policies  to be adopted by the  Company.  Employee
agrees to protect and to preserve as  confidential  during and after the term of
his  employment  all of the  Secrets  at any time  known to  Employee  or in his
possession  or control  (whether  wholly or  partially  developed by Employee or
provided  to  Employee,  and  whether  embodied  in a tangible  medium or merely
remembered).

            b.  Employee  shall  neither use nor  intentionally  allow any other
person to use any of the  Secrets  in any way,  except  for the  benefit  of the
Company.  All tangible items  embodying or disclosing any portion of the Secrets
shall be and remain the  property  of the  Company  and shall be returned to the
Company upon the termination of Employee's  employment.  At such time,  Employee
shall also assemble all tangible items of work in progress,  notes,  plans,  and

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other materials related in any way to Employee's  employment,  and will promptly
deliver  such  items  to  the  Company.  The  failure  to  mark  any  item  with
confidentiality  notice(s) shall not, ipso facto, cause such item to be excluded
from classification as a Secret for purposes of this Section 7.

            c.  Employee's  covenants in this Paragraph  shall  supplement,  and
shall not  supplant,  any other  rights or  remedies  the Company may have under
applicable law for the protection of its properties and trade secrets.

      8. Inventions.

            a.  "Invention(s)"  shall  mean  discoveries,   designs,   programs,
improvements, developments, new concepts, methods, agents, materials, and ideas,
whether  patentable or not, and products,  processes and know-how related to the
use of production thereof.

            b. Employee agrees that any Invention which Employee has made or may
make during the term of this  Agreement  shall be treated as part of the Company
Secrets and shall be the sole and exclusive property of the Company,  whether or
not (i) patent applications or copyright  registrations are filed thereon,  (ii)
the Invention is conceived or developed by Employee individually or jointly with
others.  However,  Employee  has no  obligation  to  assign to the  Company  any
Invention for which no Company Secrets and no equipment, supplies, or facilities
of the Company  were used and which was  developed  entirely on  Employee's  own
time, unless:

      (i)   the Invention relates directly to the business of the Company,

      (ii)  the Invention relates to actual or demonstrably anticipated research
            or development work of the Company, or

      (iii) the Invention  directly  results from any work performed by Employee
            for the Company.

            c. Whenever requested by the Company,  Employee agrees to assist and
cooperate  with  the  Company,  at the  Company's  expense,  in  the  obtaining,
maintaining and enforcing of the United States and foreign patents and copyright
registrations  for any  Invention  which is to be the property of the Company as
provided  above.  This  assistance and  cooperation  shall  include,  but is not
limited to:

      (i)   making   application  for  United  States  and  foreign  patents  or
            copyright  registrations  on any  Invention  if so  requested by the
            Company;

      (ii)  assigning all of Employee's right, title and interest in and to such
            Invention  and any patent  applications  or copyright  registrations
            thereon to the Company or its designees; and

      (iii) executing  all  documents  and  rendering  all  assistance as may be
            reasonably  necessary  to protect  the rights of the  Company or its
            designee and to vest in the Company or its designees,  all rights to
            any  such  Invention,  patent  application,  patent,  copyright,  or
            copyright registration.

            d. Employee has  previously  provided a list of all issued  patents,
pending patent applications,  registered copyrights,  and other inventions which
Employee has owned or has developed prior to being retained by the Company.  Any
copyright,  patent, pending application,  or prospective patent application thus
listed and not  otherwise  expressly  assigned  in writing  by  Employee  to the
Company will be excluded from the terms of this Agreement.

      9.  Property.  Upon  termination  of the Term of Employment or termination
pursuant to Section 6 hereof, the Employee or his personal  representative shall

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promptly deliver to the Company all books, memoranda, plans, records and written
data of every kind  relating to the  business and affairs of the Company and all
other property owned by the Company which is then in the Employee's possession.

      10.  Insurance.  The  Company  shall have the  right,  at its own cost and
expense, to apply for and to secure in its own name, or otherwise,  life, health
or accident  insurance  or any or all of them  covering  the  Employee,  and the
Employee  agrees  to  submit to usual and  customary  medical  examinations  and
otherwise to cooperate  with the Company in connection  with the  procurement of
any such insurance, and any claims thereunder.

      11. Covenant Not to Compete.

            a.  Applicability.  This  Paragraph  11 shall  apply  following  the
termination of Employee's  employment only in the event such  termination is (i)
by  Employer  for cause as defined in  Paragraph  6a above,  or (ii) by Employee
without cause as defined in Paragraph 6c above.

            b. Covenant. For a period beginning on the date of the Agreement and
ending one year  following the date of  termination  of  Employee's  employment,
Employee hereby agrees that he will not, directly or indirectly,  enter into the
employment,  or render services to or acquire an interest whatsoever in (whether
for his own account as an  individual  proprietor,  or as a partner,  associate,
shareholder,  officer, director,  employee, trustee or otherwise), any person or
entity  engaged in any  operations in  competition in any area of the world with
any aspect of the  business of the Company as  presently  conducted  and as said
business may evolve in the ordinary course of business  between the date of this
Agreement and the  termination  of Employee's  employment  hereunder  (including
products under active development at such time); provided, however, that nothing
herein shall prevent the purchase or ownership by Employee of shares of stock by
way of  investment  in any  corporation  or  prevent  the  employment  of or the
rendering  of services by  Employee,  including  being on boards of directors of
companies,  where he does not contribute to the  development or sale of products
which  compete with products of the Company with whose  development  or sale the
Employee was directly involved. Without limiting the foregoing,  Employee agrees
that he will not call on or otherwise solicit business from any of the customers
or potential  customers of the Company which,  at the time of termination of his
employment, were listed (or ought to have been listed) in the Company's records,
as to any product  that  competes  with any  product  provided or marketed by or
actually under development by the Company at the time of Employee's termination.
Employee  agrees  that he  will,  during  the  term of his  employment  with the
Company,  promptly and fully  disclose to the Company any  business  opportunity
coming to Employee's attention, or conceived or developed in whole or in part by
Employee,  which relates to the Company's  business or demonstrably  anticipated
business.  Employee will not at any time exploit such business opportunities for
his own gain or that of any person or entity other than the Company.

      12.  Remedies.  Employee  acknowledges  that  damages  for  breach  of his
covenants  under  Paragraphs  7, 8,  9, 10 and 11  above  will be  difficult  to
determine  and  inadequate to remedy the harm which may be caused  thereby,  and
therefore  agrees  that the  Company  may  petition or seek to enjoin a putative
violation by temporary or permanent injunction.  Any available injunctive relief
shall be in addition  to, and not in place of, any other  remedies  available at
law or equity.  Employee  believes  that the  provisions  of this  Agreement are
reasonable and that Employee is capable of gainful  employment without breaching
this  Agreement.  However,  should any court or tribunal  decline to enforce any
provision of Paragraphs 7 or 11 of this Agreement as written, the parties hereby
agree that this Agreement shall, to the extent  applicable to that  circumstance
before such court, be deemed to be modified to restrict  Employee's  competition
with the Company to the maximum  extent to time,  scope and geography  which the
court shall find enforceable, and such provisions shall be so enforced.

      13.  Entire  Agreement:  Modification.  The  provisions  contained  herein
constitute the entire Agreement  between the parties with respect to the subject
matter hereof and any waiver,  alteration or  modification  of any provisions of
this Agreement, or the replacement of this Agreement,  shall not be valid unless
in writing and signed by all the parties signing hereunder.

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      14.  Governing  Law.  This  Agreement  shall be governed and  construed in
accordance with the laws of the State of Illinois.

      15. Agreement Not Assignable. Employee may not assign any of his rights or
delegate any of his duties  hereunder.  Subject to Paragraph 6c, the Company may
assign this  Agreement to any of its  Affiliates at any time owned by, owning or
under common ownership of the Company. In the event of such an assignment by the
Company,  such  affiliates  shall be deemed  substituted for the Company at each
place where "the Company" appears herein;  provided,  however, the Company shall
not be released from its obligations hereunder.  Furthermore,  the assignment of
this  Agreement  by the  Company  shall  not  enlarge  the  business  activities
considered to be conducted by the Company for purposes of Paragraphs 7, 8 and 11
hereof.  Subject to the foregoing,  this Agreement  shall bind parties and their
respective heirs, successors, assigns and personal representatives.

      16.  Change  in  Ownership.  Upon  (a)  the  sale  or  transfer  of all or
substantially  all of the assets of the  Company  or of more than fifty  percent
(50%) of the outstanding stock of any voting class of the Company's stock to any
single   person  or  entity  (in  any  one  or  more  of  a  series  of  related
transactions),  or (b) the merger of the Company  with or into any other  entity
(except a  wholly-owned  subsidiary  or a parent  owning all of the  outstanding
stock of the Company), if the Employee maintains employment status, then: 1) all
terms of the Employment Agreement remain in effect, and 2) all stock and options
of Employee in the Company shall immediately become vested. If the Employee does
not maintain employment status, then: 1) Section 6b of the Employment Agreement,
termination by the Company without cause, will apply.

      17.  Attorney's Fees. In any action to enforce its rights  hereunder,  the
prevailing  party shall be reimbursed by the other for its costs of enforcement,
including without limitation, reasonable attorney's fees.

      18.  Jurisdiction  and Venue.  The parties  each  irrevocably  consent and
submit to the personal  jurisdiction  of the State and Federal courts sitting in
Chicago,  Illinois and agrees that any action,  suit or proceeding in connection
with this  Agreement  shall be brought in such  courts to the  exclusion  of all
other courts,  other than actions to enforce judgments or orders entered in such
courts sitting in Lake County, Illinois.

      19. Notices. All notices required or permitted hereunder shall be given in
writing and delivered in person, transmitted by facsimile, or sent by registered
or certified mail,  postage prepaid,  or reliable courier service to the parties
at the  respective  addresses  set forth on the signature  page hereof,  or such
other address as a party may specify by notice for all subsequent  notices to it
hereunder.  Notices will be effective  upon the earlier of receipt or the second
business day after mailing.

      20. No Waiver. No waiver or modification of any of the terms or provisions
hereof shall be valid unless in writing  signed by the party  against  which the
enforcement of such waiver or  modification  is sought,  not shall any waiver or
failure to enforce any right  hereunder  be deemed to be a waiver of the same or
any other right in any other instance.

AGREED:

------------------------------------
Daniel J. Kerkman

------------------------------------
John F. DeBernardis, President & CEOExhibit 10.13

                              EMPLOYMENT AGREEMENT

      THIS  EMPLOYMENT  AGREEMENT  (the  "Agreement")  is entered into as of the
first day of November,  2004,  by and between David  Ellison  ("Employee"),  and
APPLIED  NEUROSOLUTIONS,  INC.  ("APNS"),  a  Delaware  corporation  having  its
principal  place of business  in Vernon  Hills,  Illinois  (the  "Company").  In
consideration  of the mutual  covenants and  conditions  set forth  herein,  the
parties hereby agree as follows:

      1.  Employment.  The Company hereby employs Employee to serve as its Chief
Financial Officer (CFO) and Corporate Secretary and Employee hereby accepts such
employment.  In his capacity as Chief Financial Officer and Corporate Secretary,
Employee shall be responsible  for performing the duties of the Chief  Financial
Officer and Corporate Secretary as outlined in the Corporate By-Laws, and agrees
to perform such other duties during the term hereof as the Board of Directors of
the Company shall,  from time to time,  reasonably  direct.  Employee  agrees to
utilize his skills and to render  services to the best of his ability during the
term of this Agreement.

      2. Term. Unless earlier terminated pursuant to the provisions of Paragraph
6 below,  Employee's  employment  hereunder  shall be for a period  of three (3)
years  commencing  on November 1, 2004 and shall be extended  automatically  for
additional  three (3) year  periods,  unless  either the Company or the Employee
delivers  written  notice to the other of its or his  election  not to extend at
least ninety (90) days prior to the end of either the initial or any  additional
term, as applicable.  If the Company decides not to extend this Agreement within
the ninety (90) day period described in the immediately  preceding  sentence for
reasons  other than  "cause" (as defined in  Paragraph  6a below),  the Employee
shall  receive a  severance  payment  equal to the third  year's Base Salary (as
defined in  Paragraph 3 below) with  respect to the initial or  additional  term
that was last completed,  plus the amount of the bonus earned by the Employee in
such third year.  Such  severance  payment  shall be payable over a one (1) year
period in the same manner as the Employee had been paid under this  Agreement in
such third year,  with  payments to begin within two (2) weeks of the end of the
current term of employment under this Agreement.

      3. Compensation.

            a. Base  Salary.  For all services  rendered by Employee  under this
Agreement,  Employee  shall  receive a salary at an annual  rate of  $174,000 as
increased under Paragraphs 3b and 4c ("Base Salary"), or such higher annual rate
as the Board of Directors of the Company may from time to time  establish in its
sole direction.

            b. Annual  Increases.  The Base Salary shall be increased at the end
of each year of service by a minimum  amount equal to (i) a percentage  equal to
the increase,  if any, in the United States  Department of Labor  Consumer Price
Index for Chicago urban areas,  all items,  over the previous twelve months.  If
the index  specified  in this  paragraph is  discontinued  or not  available,  a
substitute index shall be selected by arbitration in the manner  contemplated by
Paragraph 6e unless the parties mutually agree on a substitute index.

            c. Auto and  Cellular  Phone  Allowance.  Employee  is entitled to a
monthly non-accountable  allowance not less than $300.00 to cover the use of his
automobile, cellular phone and other business related purposes.

            d. Stock Option  Plans.  The Company has adopted stock option and/or
stock  purchase  plans for the  benefit of  certain  Employees  of the  Company.
Employee  shall be entitled to participate  in such plans,  consistent  with the
terms of such plans, applicable law and Company Policy.

      4. Benefits.

            a.  Medical/Health  and  Disability  Insurance.  The  Company  shall
provide  Employee  with Company paid medical and dental  insurance  which covers

<PAGE>

Employee,  his spouse and dependents,  in accordance with such policies as shall
be maintained by the Company,  which shall be comparable to that made  available
to other  employees of the Company.  The  Company's  benefit plan shall  provide
disability  insurance  for the  benefit  of  Employee  through  a  Company  plan
reasonably acceptable to Employee.

            b. Vacation/Sick  Leave.  Employee shall be entitled to vacation and
sick leave in  accordance  with  Company  policy,  provided,  Employee  shall be
entitled annually to (i) a minimum of four (4) weeks of paid vacation,  and (ii)
a  minimum  of three  (3) days of paid  sick  leave  for each ten (10)  weeks of
consecutive  employment.  When  Employee has completed ten (10) years of service
with the Company, such paid vacation will be increased to five (5) weeks.

            c.  Expense  Reimbursement.  The  Company  shall  pay  or  reimburse
Employee  for all  reasonable  travel  and other  expenses  incurred  or paid by
Employee in connection  with the  performance  of services  under this Agreement
upon  presentation of expense vouchers and such other supporting  information as
the Company may from time to time reasonably request.

      5. Warranties and Indemnification. Employee represents to the Company that
Employee  is  free to  enter  into  this  Agreement  and  that  Employee  has no
commitment,  arrangement  or  understanding  to, or with,  any third party which
restrains  or is in conflict  with this  Agreement;  or which  would  operate to
prevent  Employee from  performing  the services to the Company  which  Employee
hereby has agreed to provide.  Employee agrees to indemnify and hold the Company
harmless from and against any and all  liabilities or claims,  including  costs,
expenses  and  reasonable  attorney's  fees  arising out of any acts by Employee
which, the foregoing representation or warranty to the contrary notwithstanding,
shall be in  violation of or shall  constitute a breach of any such  commitment,
arrangement or understanding.

      6. Termination.

            a. The Company may terminate  Employee's  employment  hereunder upon
thirty (30) days' prior  written  notice to  Employee  for cause,  and except as
provided below, the salary and benefits  referred to in Paragraphs 3 and 4 above
shall cease upon the effective date of any such  termination  for just cause. As
used herein, with respect to termination by the Company,  the term "cause" shall
mean (i) any material breach hereof by Employee which is not cured within thirty
(30) days following written notice of such breach given by the Company, provided
that no such  prior  notice  and  opportunity  to cure need be given  where such
breach, or similar breach, has been the subject of such a notice and cure period
on more than two prior occasions;  or (ii) conviction of Employee for commitment
of a felony; or (iii) any act of Employee, which in the reasonable judgment of a
majority  of the Board of  Directors  of the  Company,  constitutes  dishonesty,
larceny, fraud, deceit or gross negligence by Employee in the performance of his
duties to the Company or willful misrepresentation to shareholders, directors or
officers of the Company.

            b.  The  Company  may,  by  action  of a  majority  of the  Board of
Directors,  terminate  Employee's  employment at any time upon thirty (30) days'
prior written  notice and without cause;  provided,  that prior to the effective
date of  termination,  the Company  shall pay to Employee an amount equal to the
greater of (i) the total Base Salary otherwise payable through the expiration of
the term of this  Agreement  as set forth at  Paragraph 2 above;  or (ii) twelve
(12)  months' Base Salary and bonus - both based on the prior year's Base Salary
plus bonus. Health disability and life insurance, as described in Paragraph 4(a)
above,  equivalent to that provided to Employee during last month of employment,
will be provided to Employee for up to twelve  months  following  the  effective
date of termination.

            c. Employee may terminate his employment  hereunder at any time upon
thirty (30) days'  prior  written  notice to the Company for cause.  The amounts
identified in Paragraph 6b shall be paid to Employee as of the effective date of
termination,  together  with  the  continuing  benefits  described  therein,  as
Employee's sole remedy.  As used herein with respect to termination by Employee,
"cause"  shall mean (i) any material  breach  hereof by the Company which is not
cured within thirty (30) days  following  written notice of such breach given by
Employee;  (ii)  repeated  and  consistent  bad faith  attempts  to bring  about

<PAGE>

Employee's  resignation  through  obstruction  by the Company of operations  and
programs of Employee in his  capacity  hereunder;  (iii) the removal of Employee
from the position of Chief  Financial  Officer and Corporate  Secretary,  or the
appointment of another person to perform the duties  ordinarily  associated with
such position(s) without the formal removal of Employee's title(s);  or (iv) the
transfer of Employee or the  relocation of the principal  offices from which the
activities  of the Company are  conducted  to an area more than fifty (50) miles
outside the Village of Vernon Hills.

            d.  If  Employee  terminates  his  employment  without  cause,  such
termination  shall be treated as a  termination  with cause by the  Company,  as
provided in Subparagraph 6a above (but without the necessity of any prior notice
by the Company).

            e. Any dispute  between the parties as to the meaning or presence of
"cause"  for  termination  shall be resolved  by binding  arbitration  conducted
before a single  arbitrator in the Chicago,  Illinois area under the  Commercial
Arbitration  Rules of the American  Arbitration  Association,  provided that the
arbitrator  shall be a person of  extensive  experience  in the  arbitration  of
disputes under private employment  agreements applicable to management personnel
in industries similar to the Company's industry.

            f. This Employment Agreement shall be terminated by the death of the
Employee. In addition,  this Employment Agreement may be terminated by the Board
of  Directors  of the Company if the  Employee  shall be rendered  incapable  by
illness or any other  disability  from complying with the terms,  conditions and
provisions on his part to be kept, observed and performed for a period in excess
of one hundred  twenty (120) days (whether or not  consecutive)  during a twelve
(12)  month  period  during  the  Term  of  Employment  ("Disability").  If this
Employment Agreement is terminated by reason of Disability of the Employee,  the
Company  shall give written  notice to that effect to the Employee in the manner
provided herein.  In the event that the Employee receives  disability  insurance
benefits paid for by the Company  during any period prior to termination of this
Employment Agreement pursuant to this Section 6f, the Employee's salary shall be
reduced by an amount equal to such  disability  insurance  benefits  during such
period.

            g. In the event this  Agreement is  terminated  by Employer  without
cause, or by Employee with cause, all stock, warrants and options of Employee in
the Company shall immediately become vested.  Stock options may be exercised any
time over the time period as originally set forth at their issuance.

      7. Confidentiality.

            a.  Employee  acknowledges  that the  Company's  business and future
success depends on the preservation of the trade secrets and other  confidential
information  of the Company and its  affiliates,  suppliers and  customers  (the
"Secrets"). The Secrets include existing,  to-be-developed or acquired products,
processes,  techniques,  methods,  computer programs,  know-how,  trade secrets,
customers, suppliers, developments,  patents, equipment, or business information
made,  sold,  used,  developed  or  practiced  by the Company in its business or
proprietary to the Company or its affiliates,  suppliers or customers. "Secrets"
do not include any of the above  information  or medium  generally  known to the
industry or which comes to the attention of Employee  through sources other than
the Company.  It is  anticipated  that all  Employees of the Company,  including
Employee, will mark all items containing Secrets with prominent  confidentiality
notices in  accordance  with  policies  to be adopted by the  Company.  Employee
agrees to protect and to preserve as  confidential  during and after the term of
his  employment  all of the  Secrets  at any time  known to  Employee  or in his
possession  or control  (whether  wholly or  partially  developed by Employee or
provided  to  Employee,  and  whether  embodied  in a tangible  medium or merely
remembered).

            b.  Employee  shall  neither use nor  intentionally  allow any other
person to use any of the  Secrets  in any way,  except  for the  benefit  of the
Company.  All tangible items  embodying or disclosing any portion of the Secrets
shall be and remain the  property  of the  Company  and shall be returned to the
Company upon the termination of Employee's  employment.  At such time,  Employee
shall also assemble all tangible items of work in progress,  notes,  plans,  and

<PAGE>

other materials related in any way to Employee's  employment,  and will promptly
deliver  such  items  to  the  Company.  The  failure  to  mark  any  item  with
confidentiality  notice(s) shall not, ipso facto, cause such item to be excluded
from classification as a Secret for purposes of this Section 7.

            c.  Employee's  covenants in this Paragraph  shall  supplement,  and
shall not  supplant,  any other  rights or  remedies  the Company may have under
applicable law for the protection of its properties and trade secrets.

      8. Inventions.

            a.  "Invention(s)"  shall  mean  discoveries,   designs,   programs,
improvements, developments, new concepts, methods, agents, materials, and ideas,
whether  patentable or not, and products,  processes and know-how related to the
use of production thereof.

            b. Employee agrees that any Invention which Employee has made or may
make during the term of this  Agreement  shall be treated as part of the Company
Secrets and shall be the sole and exclusive property of the Company,  whether or
not (i) patent applications or copyright  registrations are filed thereon,  (ii)
the Invention is conceived or developed by Employee individually or jointly with
others.  However,  Employee  has no  obligation  to  assign to the  Company  any
Invention for which no Company Secrets and no equipment, supplies, or facilities
of the Company  were used and which was  developed  entirely on  Employee's  own
time, unless:

      (i)   the Invention relates directly to the business of the Company,

      (ii)  the Invention relates to actual or demonstrably anticipated research
            or development work of the Company, or

      (iii) the Invention  directly  results from any work performed by Employee
            for the Company.

            c. Whenever requested by the Company,  Employee agrees to assist and
cooperate  with  the  Company,  at the  Company's  expense,  in  the  obtaining,
maintaining and enforcing of the United States and foreign patents and copyright
registrations  for any  Invention  which is to be the property of the Company as
provided  above.  This  assistance and  cooperation  shall  include,  but is not
limited to:

      (i)   making   application  for  United  States  and  foreign  patents  or
            copyright  registrations  on any  Invention  if so  requested by the
            Company;

      (ii)  assigning all of Employee's right, title and interest in and to such
            Invention  and any patent  applications  or copyright  registrations
            thereon to the Company or its designees; and

      (iii) executing  all  documents  and  rendering  all  assistance as may be
            reasonably  necessary  to protect  the rights of the  Company or its
            designee and to vest in the Company or its designees,  all rights to
            any  such  Invention,  patent  application,  patent,  copyright,  or
            copyright registration.

            d.  Attached  hereto as Exhibit A is a list of all  issued  patents,
pending patent applications,  registered copyrights,  and other inventions which
Employee has owned or has developed prior to being retained by the Company.  Any
copyright,  patent, pending application,  or prospective patent application thus
listed and not  otherwise  expressly  assigned  in writing  by  Employee  to the
Company will be excluded from the terms of this Agreement.

      9.  Property.  Upon  termination  of the Term of Employment or termination
pursuant to Section 6 hereof, the Employee or his personal  representative shall
promptly deliver to the Company all books, memoranda, plans, records and written
data of every kind  relating to the  business and affairs of the Company and all
other property owned by the Company which is then in the Employee's possession.

<PAGE>

      10.  Insurance.  The  Company  shall have the  right,  at its own cost and
expense, to apply for and to secure in its own name, or otherwise,  life, health
or accident  insurance  or any or all of them  covering  the  Employee,  and the
Employee  agrees  to  submit to usual and  customary  medical  examinations  and
otherwise to cooperate  with the Company in connection  with the  procurement of
any such insurance, and any claims thereunder.

      11. Covenant Not to Compete.

            a.  Applicability.  This  Paragraph  11 shall  apply  following  the
termination of Employee's  employment only in the event such  termination is (i)
by  Employer  for cause as defined in  Paragraph  6a above,  or (ii) by Employee
without cause as defined in Paragraph 6c above.

            b. Covenant. For a period beginning on the date of the Agreement and
ending one year  following the date of  termination  of  Employee's  employment,
Employee hereby agrees that he will not, directly or indirectly,  enter into the
employment,  or render services to or acquire an interest whatsoever in (whether
for his own account as an  individual  proprietor,  or as a partner,  associate,
shareholder,  officer, director,  employee, trustee or otherwise), any person or
entity  engaged in any  operations in  competition in any area of the world with
any aspect of the  business of the Company as  presently  conducted  and as said
business may evolve in the ordinary course of business  between the date of this
Agreement and the  termination  of Employee's  employment  hereunder  (including
products under active development at such time); provided, however, that nothing
herein shall prevent the purchase or ownership by Employee of shares of stock by
way of  investment  in any  corporation  or  prevent  the  employment  of or the
rendering  of services by  Employee,  including  being on boards of directors of
companies,  where he does not contribute to the  development or sale of products
which  compete with products of the Company with whose  development  or sale the
Employee was directly involved. Without limiting the foregoing,  Employee agrees
that he will not call on or otherwise solicit business from any of the customers
or potential  customers of the Company which,  at the time of termination of his
employment, were listed (or ought to have been listed) in the Company's records,
as to any product  that  competes  with any  product  provided or marketed by or
actually under development by the Company at the time of Employee's termination.
Employee  agrees  that he  will,  during  the  term of his  employment  with the
Company,  promptly and fully  disclose to the Company any  business  opportunity
coming to Employee's attention, or conceived or developed in whole or in part by
Employee,  which relates to the Company's  business or demonstrably  anticipated
business.  Employee will not at any time exploit such business opportunities for
his own gain or that of any person or entity other than the Company.

      12.  Remedies.  Employee  acknowledges  that  damages  for  breach  of his
covenants  under  Paragraphs  7, 8,  9, 10 and 11  above  will be  difficult  to
determine  and  inadequate to remedy the harm which may be caused  thereby,  and
therefore  agrees  that the  Company  may  petition or seek to enjoin a putative
violation by temporary or permanent injunction.  Any available injunctive relief
shall be in addition  to, and not in place of, any other  remedies  available at
law or equity.  Employee  believes  that the  provisions  of this  Agreement are
reasonable and that Employee is capable of gainful  employment without breaching
this  Agreement.  However,  should any court or tribunal  decline to enforce any
provision of Paragraphs 7 or 11 of this Agreement as written, the parties hereby
agree that this Agreement shall, to the extent  applicable to that  circumstance
before such court, be deemed to be modified to restrict  Employee's  competition
with the Company to the maximum  extent to time,  scope and geography  which the
court shall find enforceable, and such provisions shall be so enforced.

      13.  Entire  Agreement:  Modification.  The  provisions  contained  herein
constitute the entire Agreement  between the parties with respect to the subject
matter hereof and any waiver,  alteration or  modification  of any provisions of
this Agreement, or the replacement of this Agreement,  shall not be valid unless
in writing and signed by all the parties signing hereunder.

      14.  Governing  Law.  This  Agreement  shall be governed and  construed in
accordance with the laws of the State of Illinois.

<PAGE>

      15. Agreement Not Assignable. Employee may not assign any of his rights or
delegate any of his duties  hereunder.  Subject to Paragraph 6c, the Company may
assign this  Agreement to any of its  Affiliates at any time owned by, owning or
under common ownership of the Company. In the event of such an assignment by the
Company,  such  affiliates  shall be deemed  substituted for the Company at each
place where "the Company" appears herein;  provided,  however, the Company shall
not be released from its obligations hereunder.  Furthermore,  the assignment of
this  Agreement  by the  Company  shall  not  enlarge  the  business  activities
considered to be conducted by the Company for purposes of Paragraphs 7, 8 and 11
hereof.  Subject to the foregoing,  this Agreement  shall bind parties and their
respective heirs, successors, assigns and personal representatives.

      16.  Change  in  Ownership.  Upon  (a)  the  sale  or  transfer  of all or
substantially  all of the assets of the  Company  or of more than fifty  percent
(50%) of the outstanding stock of any voting class of the Company's stock to any
single   person  or  entity  (in  any  one  or  more  of  a  series  of  related
transactions),  or (b) the merger of the Company  with or into any other  entity
(except a  wholly-owned  subsidiary  or a parent  owning all of the  outstanding
stock of the Company), if the Employee maintains employment status, then: 1) all
terms of the Employment Agreement remain in effect, and 2) all stock and options
of Employee in the Company shall immediately become vested. If the Employee does
not maintain employment status, then: 1) Section 6b of the Employment Agreement,
termination by the Company without cause, will apply.

      17.  Attorney's Fees. In any action to enforce its rights  hereunder,  the
prevailing  party shall be reimbursed by the other for its costs of enforcement,
including without limitation, reasonable attorney's fees.

      18.  Jurisdiction  and Venue.  The parties  each  irrevocably  consent and
submit to the personal  jurisdiction  of the State and Federal courts sitting in
Chicago,  Illinois and agrees that any action,  suit or proceeding in connection
with this  Agreement  shall be brought in such  courts to the  exclusion  of all
other courts,  other than actions to enforce judgments or orders entered in such
courts sitting in Lake County, Illinois.

      19. Notices. All notices required or permitted hereunder shall be given in
writing and delivered in person, transmitted by facsimile, or sent by registered
or certified mail,  postage prepaid,  or reliable courier service to the parties
at the  respective  addresses  set forth on the signature  page hereof,  or such
other address as a party may specify by notice for all subsequent  notices to it
hereunder.  Notices will be effective  upon the earlier of receipt or the second
business day after mailing.

      20. No Waiver. No waiver or modification of any of the terms or provisions
hereof shall be valid unless in writing  signed by the party  against  which the
enforcement of such waiver or  modification  is sought,  not shall any waiver or
failure to enforce any right  hereunder  be deemed to be a waiver of the same or
any other right in any other instance.

AGREED:

-------------------------------------
David Ellison

-------------------------------------
John F. DeBernardis, President & CEO

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