Exhibit 10.1
EMPLOYMENT
AGREEMENT
This Employment Agreement (the
“Agreement”) dated as of June 17, 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 Brian
Schwartz (“Executive”) whose current principal
residential address is 18 October Hill Road, Woodbridge,
Connecticut 06525.
WHEREAS, the Company desires to
employ Executive as its Chief Medical Officer and Vice President
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. Executive’s employment shall
commence on July 14, 2008 (the “Effective Date”)
and shall continue until 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 Chief Medical Officer and Vice
President of the Company. Executive hereby agrees to
undertake the duties and responsibilities inherent in such position
and such other duties and responsibilities consistent with such
position as the President or Chief Executive Officer of the Company
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 the
President’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 $325,000,
payable in substantially equal installments in accordance with the
Company’s usual payment practices and subject to annual
review and adjustment by the Company in its sole discretion.
Such amount (as it may be adjusted upward or downward 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 thirty-five (35) 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. For calendar year 2008, the annual
cash bonus award, if any, shall be prorated based on the portion of
the year actually worked by Executive. 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 200,000 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”) and in accordance with the terms, and subject
to a vesting schedule pursuant to which twenty-five percent of the
shares shall vest annually commencing on the first anniversary of
the Effective Date, 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
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(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
Relocation Expenses
. Upon delivery of adequate
documentation of expenses incurred in relocation of
Executive’s primary residence to Massachusetts, the Company
shall reimburse Executive, in an amount not to exceed $75,000, for
reasonable expenses incurred by Executive in the course of such
relocation, subject to the ArQule Relocation Policy
Guidelines. The Company’s decision on which relocation
expenses are reimbursable under this paragraph shall be
conclusive. Executive shall not be entitled to reimbursement
under this paragraph if he does not submit a request and provide
documentation for such reimbursement within two years of the
Effective Date of this Agreement. The reimbursement provided
under this paragraph shall not apply to more than one relocation by
Executive. In the event that Executive resigns his employment
with the Company or is terminated for Cause within one year of
receiving any reimbursement as provided under this paragraph,
Executive shall be required to repay to the Company any and all
reimbursement amounts received pursuant to this
paragraph.
4.8
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.
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4.9
Annual Review
. Executive shall receive an
annual review of his performance by the President 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 less 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.
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, following the
effective date of such general release, 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 (12) month period
commencing on the Termination Date; plus
(ii)
An amount equal to the average
annual discretionary cash bonus, if any, awarded by the Company to
Executive with respect to the two years preceding the year in which
the Termination Date occurs, provided that, for purposes of this
paragraph only, Executive shall be deemed to have received his
thirty-five percent of Base Salary bonus target for any year within
such two-year period in which Executive was not paid a bonus solely
because Executive was not employed by the Company, and provided
further that for purposes of this sub-paragraph only, the annual
discretionary cash bonus, if any, awarded by the Company shall not
be pro-rated. 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
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(subject to any employee
contribution requirements applicable to Executive on the
Termination Date) through the twelve (12) 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 the twelve (12)
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 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 $325,000 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 or 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 less than
30 days following such notice (the “Cure Period”),
to remedy the Deemed
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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 the President or Chief Executive Officer or
otherwise perform Executive’s duties hereunder (other than as
a result of a Disability (as defined in Section 5.3)) 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 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
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
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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; and (b) 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.
5.4
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; and (b) 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.
5.5
Termination by
Executive .
Executive’s employment hereunder may be terminated by
Executive at any time upon not less than thirty (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 5.5, 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.
5.6
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.
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5.7
Survival . The provisions of Sections 7, 8 and 9
shall survive the termination of this Agreement.
5.8
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.&nbs
