Exhibit 10.2
EMPLOYMENT
AGREEMENT
This Employment Agreement (the
“Agreement”) dated as of November 21, 2008 (the
“Execution Date”) is made by and between
ArQule, Inc., a Delaware corporation (the
“Company”) with its principal offices at 19
Presidential Way, Woburn, Massachusetts 01801, and Thomas
Chan (“Executive”) whose current principal residential
address is 7 Stoney Brook Road, Hopkinton, MA
01748.
WHEREAS, the Company desires to
employ Executive as its Chief Scientific Officer (CSO) and to enter
into an agreement embodying the terms of such employment;
and
WHEREAS, Executive desires to accept
such employment and enter into such an agreement;
NOW, THEREFORE, in consideration of
the mutual covenants and agreements contained herein and for other
good and valuable consideration, the receipt, adequacy and
sufficiency of which are hereby acknowledged, the Company and
Executive (collectively, the “Parties”) hereby agree as
follows:
1.
Term of Employment
. The Company hereby agrees to
employ Executive, and Executive hereby accepts such employment with
the Company, upon the terms and subject to the conditions set forth
in this Agreement. The Agreement shall continue until
November 17, 2012 unless earlier terminated in accordance with
the provisions of Section 5 of this Agreement (the
“Employment Term”).
2.
Title; Duties
. During the Employment Term,
Executive shall serve as the CSO of the Company, reporting directly
to its Chief Executive Officer (CEO). Executive hereby agrees
to undertake the duties and responsibilities inherent in such
position and such other duties and responsibilities consistent with
such position as CEO shall from time to time reasonably assign to
Executive.
3.
No Conflict
. During the Employment Term,
Executive shall devote substantially all of Executive’s
business time and efforts to the performance of Executive’s
duties hereunder and shall not, directly or indirectly, engage in
any other business, profession or occupation for compensation or
otherwise which would conflict with the rendition of such
duties. Notwithstanding the foregoing, Executive may engage
in other activities, such as activities involving charitable,
educational, religious, trade association, civic and similar types
of organizations, speaking engagements and membership on the Board
of Directors or equivalent of other organizations (“Outside
Activities”), provided that Executive shall obtain
CEO’s written consent before engaging in any such Outside
Activities and provided further that Executive’s
participation in such Outside Activities shall not be in violation
of any of Executive’s obligations to the Company, including
but not limited to those set forth in the Company’s Code of
Conduct. Executive represents and warrants that
Exhibit A attached hereto states all Outside Activities which
Executive is participating in as of the Effective Date, and to
which the Company hereby consents.
4.
Compensation and
Benefits .
4.1.
Base Salary
. During the Employment Term,
the Company shall pay Executive for Executive’s services
hereunder a base salary at the initial annual rate of $309,000.00,
payable in substantially equal installments in accordance with the
Company’s usual payment practices and subject to annual
review and adjustment upward or downward by the Company in its sole
discretion; provided, however, that an adjustment downward shall
only occur in connection with a percentage decrease in salary
affecting all or substantially all senior management employees of
the Company. Such amount (as adjusted from time to time in
accordance with this Section 4.1) shall be referred to herein
as the “Base Salary.”
4.2.
Bonus Compensation
. For each calendar year
during the Employment Term, Executive shall be eligible to receive
a discretionary annual cash bonus, the target amount of which shall
be 30 percent of Executive’s Base Salary. The award of
an annual cash bonus, if any, shall be in the Company’s sole
discretion and shall be based on Company and individual
performance. The annual cash bonus typically is paid during
the first quarter of the following calendar year, and, except as
otherwise expressly provided herein, Executive must be actively
employed with the Company as of the payment date in order to
receive the discretionary annual cash bonus, if any.
Executive shall also be eligible to participate in any and all
other bonus plans and packages that are made available to the
Company’s executives, on a basis consistent with
Executive’s position and then-current Base Salary and in
accordance with the policies and practices of the Company and the
Company’s Board of Directors.
4.3.
Stock Option Grant
. As further compensation for
Executive’s services hereunder, the Company shall grant to
Executive on the Effective Date a stock option (the
“Execution Stock Option”) to purchase 100,000 shares of
the Company’s Common Stock, $0.01 par value per share (the
“Common Stock”), pursuant to the Company’s
Amended and Restated 1994 Equity Incentive Plan (the
“Plan”) subject to a vesting schedule pursuant to which
rights to twenty-five percent of the shares shall vest annually on
the next four anniversaries of the Effective Date and the terms and
other conditions set forth in substantially the form of Option
Certificate attached hereto as Exhibit B. The method of
determining the exercise price of the Execution Stock Option is set
forth in the attached Exhibit C. In its sole discretion,
the Company may grant to Executive from time to time other stock
options to purchase additional shares of Common Stock, also
pursuant to the Plan and such other terms and conditions set forth
at the time of such grant (the Execution Stock Option and such
other stock options, collectively, the “Stock Options”)
and may also grant stock awards. The Execution Stock Option
is intended to be an “incentive stock option” to the
extent permissible under Section 422 of the Internal Revenue
Code of 1986 (the “Code”), including the $100,000
limitation of Code Section 422(d).
4.4.
Executive Benefits
. During the Employment Term,
Executive shall be eligible to participate in all employee benefit
plans and perquisite plans and policies
2
(including fringe benefits,
401(k) plan participation. life, health dental, accident and
short and long term disability insurance) which the Company may, in
its sole and absolute discretion, make available to its
similarly-situated employees, whether such benefits are now in
effect or hereafter adopted, subject to the terms and conditions of
each such plan or policy. The Company may alter, modify, add
to or delete its employee benefit plans and its perquisite plans
and policies at any time as it, in its sole judgment, determines to
be appropriate, without recourse by Executive.
4.5.
Paid Time Off
. Executive shall be entitled
to four weeks (20 working days) of paid time off
(“PTO”) per annum during the Employment Term, which
will accrue pursuant to the Company’s policies and practices
and is to be taken at such time or times as shall be mutually
convenient for the Company and Executive; provided, however, that
the Company may elect to increase the annual time to which
Executive shall be entitled to PTO. Unused PTO shall be
allocated pursuant to the Company’s policies and
practices.
4.6.
Business Expenses and
Perquisites . Upon
delivery of adequate documentation of expenses incurred in
accordance with the policies and practices of the Company,
Executive shall be entitled to reimbursement by the Company for
reasonable travel, entertainment and other business expenses
incurred by Executive in the performance of Executive’s
duties hereunder in accordance with such policies as the Company
may from time to time have in effect.
4.7.
Deductions and
Withholdings .
Notwithstanding any other provision of this Agreement, any payments
or benefits hereunder shall be subject to the withholding of such
amounts, if any, relating to tax and other payroll deductions, as
the Company reasonably determines it should withhold pursuant to
any applicable law or regulation.
4.8.
Annual Review.
Executive shall receive an
annual review of his performance by CEO of the Company.
5.
Termination
.
5.1.
Without Cause by the
Company . The Company may
terminate Executive’s employment hereunder at any time
without Cause (as defined in Section 5.2) upon not fewer than
fourteen (14) days prior written notice from the Company to
Executive. The effective date of Executive’s
termination shall be referred to herein as the “Termination
Date.” If Executive’s employment is terminated by
the Company pursuant to this Section 5.1, all compensation and
benefits provided to Executive by the Company pursuant to this
Agreement or otherwise shall cease as of the Termination Date,
except that the Company shall pay Executive all Base Salary owed to
Executive for work performed prior to the Termination Date, plus
the cash value of any accrued but unused PTO, as of the Termination
Date.
3
For purposes of clarity, a
termination of Executive’s employment by reason of the
expiration of the Employment Term as set forth in Section 1
shall not be considered a termination without Cause.
5.1.1.
The Severance Package
. In the event the Company
terminates Executive’s employment without Cause, and provided
that Executive first executes a general release in a form and of a
scope reasonably acceptable to the Company within sixty (60) days
of the Termination Date, the Company shall provide the following
severance benefits to Executive (the “Severance
Package”):
(a)
A payment (the “Severance
Payment”) in the following amount:
(i)
An amount equal to Executive’s
Base Salary through the end of the twelve - month period
commencing on the Termination Date; plus
(ii)
An amount equal to the average
annual discretionary bonus, if any, paid by the Company to
Executive with respect to the two years preceding the year in which
the Termination Date occurs. Bonus amounts paid to Executive
by the Company prior to the Effective Date shall be included in the
calculation set forth in the preceding sentence.
Attached at Exhibit D is a series of examples of the manner in
which this portion of the Severance Payment shall be
calculated.
(b)
Payment of the costs associated with
continuing the benefits which Executive is entitled to receive
pursuant to Section 4.4 of this Agreement at the level in
effect as of the Termination Date (subject to any employee
contribution requirements applicable to Executive on the
Termination Date) through the twelve-month period commencing on the
Termination Date, to the extent such benefits may continue beyond
the Termination Date (for example, among other things,
Executive’s coverage under the Company’s life and
disability insurance policies will terminate as of the Termination
Date).
(c)
The Severance Payment shall be paid
to Executive in substantially equal installments, according to the
Company’s regular payroll schedule over a twelve-month
period, beginning on the first regular payroll date following the
effective date of the general release executed by Executive as
provided above, subject to Section 5.8 below.
5.1.2.
Deemed Termination
. For purposes of this
Section 5.1, a “termination without Cause” by the
Company shall be deemed to have occurred where
4
Executive has complied with the
“Deemed Termination Process” (hereinafter defined)
following the occurrence of any of the following events (a
“Deemed Termination Condition”) without the
Executive’s prior written consent:
(a)
A diminution of Executive’s
Base Salary below $309,000 on an annualized basis (other than in
connection with a Company-wide decrease in salary affecting all or
substantially all senior management employees of the
Company);
(b)
A diminution in Executive’s
authority, duties, responsibilities without Cause;
(c)
A material change in the geographic
location of Executive’s place of employment (for purposes of
this paragraph, a “material change” shall be deemed to
occur only if the Company relocates Executive’s place of
employment by a distance of more then fifty (50) miles, excluding
any relocation to the Company’s existing offices in Woburn,
MA); or
(d)
The Company materially breaches any
of its obligations to Executive pursuant to this
Agreement.
“Deemed
Termination Process” shall mean that (i) the Executive
reasonably determines in good faith that a Deemed Termination
Condition has occurred; (ii) the Executive provides written
notice to the Company of the occurrence of the Deemed Termination
Condition within 45 days of the initial occurrence of such
condition; (iii) the Executive cooperates in good faith with
the Company’s efforts, for a period not fewer than 30 days
following such notice (the “Cure Period”), to remedy
the Deemed Termination Condition; (iv) notwithstanding such
efforts, the Deemed Termination Condition continues to exist; and
(v) the Executive provides the Company with a Notice of
Termination, which establishes a Termination Date within 30 days
after the end of the Cure Period. If the Company cures the
Deemed Termination Condition during the Cure Period, a
“termination without Cause” shall be deemed not to have
occurred.
5.2.
For Cause by the
Company .
Notwithstanding any other provision of this Agreement,
Executive’s employment hereunder may be terminated by the
Company at any time for Cause. For purposes of this
Agreement, “Cause” shall mean:
(i) Executive’s failure to follow the reasonable
instructions of CEO or otherwise perform Executive’s duties
hereunder for thirty (30) days after a written demand for
performance is delivered to Executive on behalf of the Company,
which demand specifically identifies the manner in which the
Company alleges that Executive has not substantially followed such
instructions or otherwise performed Executive’s duties;
(ii) material violation by Executive of the
5
Company’s Code of Conduct;
(iii) Executive’s willful misconduct that is materially
injurious to the Company (whether from a monetary perspective or
otherwise); (iv) Executive’s willful commission of an
act constituting fraud with respect to the Company;
(v) conviction of Executive for a felony under the laws of the
United States or any state thereof; or (vi) Executive’s
material breach of Executive’s obligations under Sections 7
or 8 hereof.
If Executive’s employment is
terminated by the Company for Cause, all compensation and benefits
provided to Executive by the Company pursuant to this Agreement or
otherwise shall cease as of the Termination Date, except that the
Company shall pay Executive all Base Salary owed to Executive for
work performed prior to the Termination Date, plus the cash value
of any accrued but unused PTO, as of the Termination
Date.
5.3.
Termination by
Executive .
Executive’s employment hereunder may be terminated by
Executive at any time upon not fewer than 30 days prior written
notice from Executive to the Board. Executive agrees that
such notice period is reasonable and necessary in light of the
duties assumed by Executive pursuant to this Agreement and fair in
light of the consideration Executive is receiving pursuant to this
Agreement. If Executive terminates Executive’s
employment with the Company pursuant to this Section 5.3, all
compensation and benefits provided to Executive by the Company
pursuant to this Agreement or otherwise shall cease as of the
Termination Date, except that the Company shall pay Executive all
amounts owed to Executive for work performed prior to the
Termination Date, plus the cash value of any accrued but unused PTO
as of the Termination Date.
5.4.
Disability
. Subject to the requirements
of the Americans with Disabilities Act, Massachusetts General Laws
Chapter 151B and any other applicable laws, Executive’s
employment hereunder may be terminated by the Company at any time
in the event of the Disability of Executive. For purposes of
this Agreement, “Disability” shall mean the inability
of Executive to perform the essential functions of
Executive’s position, with or without reasonable
accommodation, due to physical or mental disablement which
continues for a period of four (4) consecutive months during
the Employment Term, as determined by an independent qualified
physician mutually acceptable to the Company and Executive (or
Executive’s personal representative) or, if the Company and
Executive (or such representative) are unable to agree on an
independent qualified physician, as determined by a panel of three
physicians, one designated by the Company, one designated by
Executive (or such representative) and one designated by the two
physicians so designated. If Executive’s employment is
terminated by the Company for Disability, all compensation and
benefits provided to Executive by the Company pursuant to this
Agreement or otherwise shall cease as of the Termination Date,
except that (a) the Company shall pay Executive all Base
Salary owed to Executive for work performed prior to the
Termination Date, plus the cash value of any accrued but unused
PTO, as of the Termination Date; (b) in the event the Company
terminates Executive by reason of Disability after a
6
calendar year has been completed but
before the discretionary annual cash bonus, if any, relating to
that calendar year as provided in Section 4.2 above has been
paid, the Company shall pay Executive such discretionary annual
cash bonus amount, if awarded; and (c) provided that Executive
first executes a general release in a form and of a scope
reasonably acceptable to the Company within sixty (60) days of the
Termination Date, Executive shall be entitled to the Severance
Package, except that the portion of the Severance Payment based on
Executive’s Base Salary paid as a part of the Severance
Package shall be reduced by the amount of Base Salary, salary
continuation (short-term disability), and cash disability benefits
(long-term disability) paid to Executive for the corresponding
period under the Company’s employee benefit plans as then in
effect.
5.5.
Death . Executive’s employment hereunder
shall automatically terminate in the event of Executive’s
death. If Executive’s employment is terminated by the
death of Executive, all compensation and benefits provided to
Executive by the Company pursuant to this Agreement or otherwise
shall cease as of the Termination Date, except that (a) the
Company shall pay to Executive’s estate or legal
representative all Base Salary owed to Executive for work performed
prior to the Termination Date, plus the cash value of any accrued
but unused PTO, as of the Termination Date; (b) in the event
the Company terminates Executive by reason of Death after a
calendar year has been completed but before the discretionary
annual cash bonus, if any, relating to that calendar year as
provided in Section 4.2 above has been paid, the Company shall
pay Executive such discretionary annual cash bonus amount, if
awarded; and (c) provided that Executive’s estate first
executes a general release in a form and of a scope reasonably
acceptable to the Company within ninety (90) days of the
Termination Date, Executive shall be entitled to the Severance
Package.
5.6.
Notice of Termination
. Any purported termination of
employment by the Company or by Executive shall be communicated by
written Notice of Termination to the other Party in accordance with
Section 11 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
employment under the provision so indicated.
5.7.
Survival . The provisions of Sections 7, 8 and 9
shall survive the termination of this Agreement.
5.6
Section 409A of the
Code . It is the
intention of the parties to this Agreement that, to the extent
possible, no payment or entitlement pursuant to this Agreement will
give rise to any adverse tax consequences to Executive under
Section 409A of the Internal Revenue Code (“Code”)
and Department of Treasury regulations and other interpretive
guidance issued thereunder, including that issued after the date
hereof (collectively, “Section 409A”). The
Agreement shall be interpreted to that end and consistent with that
objective. Notwithstanding any other provision herein, if
Executive is a “specified employee” as defined in, and
pursuant to,
7
Treas. Reg.
Section 1.409A-1(i) on the Termination Date, no payment
of compensation under this Agreement shall be made to Executive
during the period lasting six (6)&nb
