Exhibit 10.2
Separation Agreement and General
Release
This agreement
(“Agreement”) is made by and between ArQule, Inc., a
Delaware corporation, with its principal place of business at 19
Presidential Way, Woburn, MA 01801 (the “Company”) and
Chiang J. Li, M.D. (“Employee”). In consideration
of the mutual covenants contained herein, the receipt and
sufficiency of which are hereby acknowledged, the parties agree as
follows:
1.
Separation of
Employment. In
order to pursue other employment opportunities with Boston
Biomedical, Inc. (“BBI”), Employee shall resign his
employment with the Company effective as of January 28, 2007
(“Separation Date”). The Company hereby waives
the three month prior notice requirement under Employee’s
Employment Agreement with the Company dated as of September 5, 2003
(the “Employment Agreement”). The Company agrees,
and Employee further acknowledges that, no later than the
Separation Date, Employee shall receive a cash payment in the gross
amount of $112,500, which represents the full amount Employee is
entitled to under the Company’s Annual Incentive
Program.
2.
Separation
Package. Regardless
of whether Employee signs this Agreement, Employee acknowledges
that, as of the Separation Date, Employee will receive any and all
wages, including accrued but unused vacation time. In the
event that Employee signs this Agreement, returns it to the Company
and does not revoke as provided in Section 18, Employee will
receive the following separation package (the “Separation
Package”):
a.
Lump Sum Separation
Payment. The
Company shall pay Employee a lump sum separation payment (the
“Separation Payment”) in the following gross amount,
which shall be subject to legally required and voluntarily
authorized deductions and withholdings:
i.
$321,048, which amount represents
Employee’s current base salary through the end of the twelve
(12) month period commencing on the Separation Date;
plus
ii.
$109,802.50, which amount represents
the average bonus paid by the Company to Executive with respect to
calendar years 2005 and 2006.
The Separation Payment shall be paid
to Employee on the date of his separation from service as defined
under Section 409A of the Internal Revenue Code of 1986, as
amended, and any regulations promulgated thereunder, as determined
in good faith by Employee and his tax counsel, subject to the
Company’s consent, which shall not be unreasonably withheld;
provided, however, if Employee is a specified employee as of such
date, the Separation Date shall be made on the date that is six
months after such date of separation from service.
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b.
Full Vesting of the Stock
Option. Pursuant to
Section 4.2.1 of Employee’s Employment Agreement, Employee
was granted a stock option (the “Stock Option”) to
purchase 115,000 shares of the Company’s common stock, $0.01
par value per share (“Common Stock”), pursuant to the
Company’s Amended and Restated 1994 Equity Incentive
Plan. Notwithstanding any vesting schedule to the contrary,
the Stock Option shall be fully vested and shall be fully and
immediately exercisable as of the Separation Date.
c.
Grant of New
Option. Subject to
approval by the Board of Directors, on January 26, 2007, Employee
will be granted a stock option (the “New Option”) to
purchase 64,375 shares of the Company’s Common Stock,
pursuant to the Company’s Amended and Restated 1994 Equity
Incentive Plan (the “Plan”) and in accordance with the
terms set forth in the form of Option Certificate attached hereto
as Exhibit A. The exercise price of the New Option will be
set at the closing price of Common Stock of the Company on the date
of grant. The New Option shall become fully vested and fully
and immediately exercisable once Employee signs this Agreement and
does not (and may no longer) revoke it as provided in Section 18,
provided that if Employee does not sign this Agreement by January
26, 2007, or signs this Agreement by January 26, 2007 and later
revokes it in accordance with its terms, the New Option shall be
forfeited in its entirety. If Employee signs this Agreement
by January 26, 2007 and does not (any may no longer) revoke it as
provided in Section 18, Employee shall have until December 31, 2008
to exercise the New Option.
d.
Extension of Time to Exercise
Current Options.
Exclusive of the New Option, Employee has been granted certain
stock options, as set forth in the attached Exhibit B, to purchase
shares of the Company’s Common Stock pursuant to the Plan
(the “Current Options”). As set forth in Exhibit
B, as of the Separation Date, 216,250 shares subject to the Current
Options will be vested and exercisable. The time in which
Employee may exercise the Current Options that have vested as of
the Separation Date shall be extended to December 31, 2007, and any
agreement or terms and conditions with respect to such Current
Options shall be amended accordingly. It is expressly agreed
that, in the absence of this extension, Employee would have had
three months from the Separation Date to exercise the Current
Options.
e.
Continuation of
Benefits. For a
period of twelve (12) months following the Separation Date, the
Company shall continue to provide coverage for Employee under its
group medical, dental, life and disability insurance policies under
the same terms and conditions as other Company employees, including
any employee contribution, subject to the applicable plan
documents.
Employee specifically acknowledges
that the Separation Package described above exceeds any legal
payment obligation of the Company and provides valid consideration
for the General Release contained in this Agreement.
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3.
Insurance and Other
Benefits. Unless
otherwise provided for expressly in this Agreement, all benefits
provided by the Company to Employee will cease as of the Separation
Date.
a.
Group Health, Dental and Vision
Coverage. A COBRA
notice will issue twelve (12) months following the Separation
Date. Except as expressly set forth in this Agreement, any
continuing coverage after the Separation Date will be at
Employee’s sole expense as provided by federal COBRA
law. Eligibility to continue insurance coverage ceases upon
the termination of any period allowed by law and is at all times
subject to the terms and conditions of the applicable
plan(s).
b.
Unemployment.
The Company shall not contest
Employee’s claim, if any, for unemployment insurance
benefits, it being understood and agreed that Employee’s
entitlement to unemployment insurance benefits shall be determined
solely by the Massachusetts Division of Unemployment
Assistance.
4.
Return of Property.
Except as expressly
authorized by the Company with respect to general categories or
specific items of Company property to be used by Employee as
“Principal Investigator” under that certain Research
Agreement between the Company and BBI of even date herewith
(“Research Agreement”), no later than the Separation
Date, Employee shall return all property belonging to the Company,
including but not limited to papers, files and documents (physical
or electronic), computers, telephones, PDAs, reference guides,
equipment, keys, identification cards, credit cards, software,
computer access codes, disks and institutional manuals.
Employee shall not retain any copies, duplicates, reproductions or
excerpts thereof. In addition, Employee warrants that
Employee has deleted any information belonging to the Company from
any personal computer that Employee may have at home or elsewhere
(other than the Company’s offices) without retaining any
copies of any such information, in electronic or other format, and
will permit the Company to have access to such computer at times
reasonably agreed to by Employee an upon reasonable notice to
confirm such deletion. Notwithstanding the foregoing, this Section
shall not apply to any “Loaned Equipment” as that term
is defined in the Research Agreement.
5.
C-MET Program Bonus.
In the event that the Company
executes a binding agreement (including a non-binding letter of
intent, provided that such letter of intent results in a binding
agreement) related to the partnering of its C-MET Program by or
before December 31, 2007, the Company shall pay Employee a lump sum
of $50,000 within ten (10) business days of the entering into of
such agreement. If the Company does not execute a binding
agreement (including letter of intent) related to the partnering of
its C-MET Program by or before December 31, 2007, no payment shall
be made to Employee.
6.
SAB Chair.
Employee agrees to serve as
the Chair of the Company’s Scientific Advisory Board
(“SAB”) for a period of one year from the Separation
Date, unless such period of service is sooner terminated by the
Company, pursuant to the terms and conditions of the consulting
agreement attached as Exhibit C to this Agreement. As set
forth more fully in the consulting agreement, on the date of
execution of such consulting
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agreement, and for each year that
Employee serves as Chair of the SAB, Employee shall receive a stock
option to purchase 12,500 shares of the Company’s Common
Stock, which options shall be fully vested and fully and
immediately exercisable on the date of grant, pursuant to the terms
of such consulting agreement and in accordance with the
Company’s then-standard form of Option Certificate for SAB
members, which currently is substantially in the form attached
hereto as Exhibit D.
7.
Nondisclosure of Confidential
Information.
Employee acknowledges that during the course of Employee’s
employment with the Company Employee has had access to and/or
developed confidential information belonging to the Company and its
customers. Employee agrees not to use to Employee’s own
advantage or to disclose, except as required by law, to any person
or entity any confidential information of the Company or of any
past or present customer of the Company, including but not limited
to financial data or projections, customer lists, projects,
economic information, systems, plans, methods, procedures,
operations, techniques, know-how, trade secrets or merchandising or
marketing strategies. Moreover, Employee agrees that, as a
condition of receipt of the benefits described in this Agreement,
Employee shall continue to be bound by the terms of the Employee
Non-Disclosure and Inventions Agreement previously executed by
Employee which is attached as Exhibit E, the terms of which are
incorporated herein by reference. Notwithstanding the foregoing,
nothing in this Section and nothing in the Employee Non-Disclosure
and Inventions Agreement shall prohibit Employee from obtaining
employment with BBI or from using Confidential Information in
connection with Employee’s performance under the Research
Agreement and to disclose Confidential Information to the extent
permitted thereby.
8.
Cooperation.
Employee agrees and covenants
as a material term of this Agreement to provide reasonable
cooperation to the Company for a period of twelve months following
the end of Employee’s engagement with BBI, including but not
limited to, with respect to matters previously within
Employee’s scope or course of employment with the
Company. The Co
