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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
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EMPLOYMENT AGREEMENT dated as of July 21, 1999 (the "Execution Date") by
and between ArQule, Inc., a Delaware corporation (the "Company") with its
principal offices at 000 Xxxxxx Xxxxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000, and Xx.
Xxxxxxxx Xxx ("Executive") whose current principal residential address is Xxx
Xxxx Xxxxx, Xxxxxxxxxxx, XX 00000.
WHEREAS, the Company desires to employ Executive in a senior executive
capacity and to enter into an Agreement embodying the terms of such employment
(the "Agreement"); and
WHEREAS, Executive desires to accept such employment and enter into such an
Agreement;
NOW, THEREFORE, in consideration of the premises, and 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
parties hereby agree as follows:
1. TERM OF EMPLOYMENT. The Company hereby agrees to employ Executive, and
Executive hereby accepts employment with the Company, upon the terms and subject
to the conditions set forth in this Agreement, for a period commencing on a
mutually acceptable date (the "Effective Date") and continuing until terminated
in accordance with the provisions of Section 5 (the "Employment Term").
2. TITLE; DUTIES. During the Employment Term, Executive shall serve as
the Chief Scientific Officer of the Company reporting directly to the Chief
Executive Officer. Within three months of the beginning of employment of
Executive, the Board of Directors (the "Board") or its designee and the
Executive shall agree upon the initial duties and responsibilities of the
Executive and such duties and responsibilities shall become part of this
Agreement and will be attached hereto as Appendix I. Subsequently, the Board or
its designee may from time to time amend such duties and responsibilities. The
Executive hereby agrees to undertake the duties and responsibilities inherent in
such position and such other duties and responsibilities as the Board or its
designee shall from time to time reasonably assign to him.
3. NO CONFLICT. During the Employment Term, Executive shall devote
substantially all of his business time and best efforts to the performance of
his 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 without the prior written consent of
the Board, which consent shall not unreasonably be withheld, delayed or
conditioned. Executive represents and warrants that Schedule A attached hereto
states all current business relationships, including, but not limited to,
consulting agreements, confidentiality agreements and non-competition agreements
that Executive is currently a party to.
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4. COMPENSATION AND BENEFITS.
4.1. BASE SALARY. During the Employment Term, the Company shall pay
Executive for his services hereunder a base salary (the "Base Salary") at the
initial annual rate of $240,000, payable in regular installments in accordance
with the Company's usual payment practices and subject to annual review and
adjustment by the Board in its sole discretion.
4.2. ADDITIONAL COMPENSATION.
4.2.1. STOCK OPTION. As further compensation for his services
hereunder, the Company shall grant to Executive, on or after the Effective Date,
a stock option (the "Stock Option") to purchase 170,000 (reduced to 150,000 in
the event that Executive is unable to commence employment on or before August
16th, 1999) 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 the
vesting schedule of twenty-five percent annually commencing on the first
anniversary of the Effective Date and other conditions, set forth in the form of
Option Certificate attached hereto as Exhibit A. The method of determining the
exercise price of such Stock Option is set forth in Exhibit B. In the event that
Executive's employment hereunder is subsequently terminated, or the scope of his
responsibilities significantly reduced, by the Company without Cause (as defined
in Section 5.2) within one year of a Change of Control of the Company (as
defined herein), the Stock Option shall become immediately exercisable as to all
option shares without regard to the vesting schedule set forth on the form of
Option Certificate.
For purposes of this Section 4.2.1, any one of the following events shall
be considered a Change of Control:
(i) the acquisition by any "person" (as such term is
defined in Section 3(a)(9) of the Securities Exchange Act of 1934) of any
amount of the Company's Common Stock so that it holds or controls fifty
percent (50%) or more of the Company's Common Stock;
(ii) a merger or consolidation after which fifty percent
(50%) or more of the voting stock of the surviving corporation is held by
persons who were not stockholders of the Company immediately prior to such
merger or combination; or
(iii) the election by the stockholders of the Company of
twenty percent (20%) or more of the directors of the Company other than
pursuant to nomination by the Company's management.
4.2.2. MILESTONE BONUS. As further compensation for his services
hereunder, the Company shall pay Executive an annual bonus (the "Bonus") of up
to $60,000, upon the achievement of certain milestones. Any Bonus due to
Executive will be paid to the Executive on the anniversary of the Effective
Date.
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4.3. EXECUTIVE BENEFITS. During the Employment Term and subject to any
contributions therefor generally required of senior executives of the Company,
Executive shall be entitled to receive such employee benefits (including fringe
benefits, 401(k) plan participation, and life, health, accident and disability
insurance) which the Company may, in its sole and absolute discretion, make
available generally to its senior executives, or for personnel similarly
situated; PROVIDED, HOWEVER, that it is hereby acknowledged and agreed that any
such employee benefit plans may be altered, modified or terminated by the
Company at any time in its sole discretion without recourse by Executive. In
addition, Executive shall be entitled to have up to $200,000 of life insurance,
payable to such beneficiaries as Executive may from time to time direct, paid
for by the Company.
4.4. VACATION. Executive shall be entitled to three weeks (15 working
days) of paid vacation per annum during the Employment Term, to be taken at such
time or times as shall be mutually convenient for the Company and Executive.
Unused vacation time will be allocated pursuant to the Company's existing
policies and practices.
4.5. EXPENSES.
4.5.1. RELOCATION. The Company shall reimburse Executive for (i)
reasonable relocation expenses incurred by Executive in connection with his
acceptance of employment hereunder, including moving expenses and travel
expenses incurred by Executive in travelling to his new location of employment,
up to a maximum of $75,000 in the aggregate, (ii) temporary living accommodation
at a maximum rate of $1,500 per month for up to six months from the Effective
Date, and (iii) any taxes payable by Executive (including any tax on the
gross-up) as a result of the reimbursement by the Company of Executive's
relocation expenses under this Section 4.5.1. The Company shall undertake to
assist and pay for any legal and other costs associated with any immigration
matters connected to Executive's relocation to the United States.
4.5.2. BUSINESS EXPENSES AND PERQUISITES. Executive shall be
entitled to reimbursement by the Company during the Employment Term for
reasonable travel, entertainment and other business expenses incurred by
Executive in the performance of his duties hereunder in accordance with such
policies as the Company may from time to time have in effect.
4.5.3 STOCK OPTION FULFILLMENT. The Company acknowledges that
Executive is entitled to stock appreciation rights and stock options allocated
by his current employer in 1998. If Executive is denied any amount of such
rights or options solely due to his execution of this Agreement, the Company
shall pay Executive up to, but no more than, $50,000, excluding any rights or
options actually granted by Executive's former employer.
5. TERMINATION.
5.1. WITHOUT CAUSE BY THE COMPANY. The Executive's employment
hereunder may be terminated by the Company at any time without Cause upon not
less than sixty (60) days
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prior written notice from the Company to Executive. If Executive's employment is
terminated by the Company without Cause due to a Change of Control, the Company
shall pay Executive a lump sum amount equal to the Base Salary plus any benefits
to which Executive is entitled under Section 4.3 of this Agreement (to the
extent permitted by the then-current terms of the applicable benefit plans and
subject to any employee contribution requirements applicable to Executive on the
date of termination) through the conclusion of a period of one year from the
date of such termination. The payment to Executive of any other benefits
following the termination of Executive's employment pursuant to this Section 5.1
shall be determined by the Board in its sole discretion in accordance with the
policies and practices of the Company.
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 willful failure to perform his duties hereunder (other than
as a result of total or partial incapacity due to physical or mental illness)
for thirty (30) days after a written demand for performance is delivered to
Executive on behalf of the Company which specifically identifies the manner in
which it is alleged that Executive has not substantially performed his duties,
(ii) Executive's dishonesty in the performance of his duties hereunder, (iii) an
act or acts on Executive's part involving moral turpitude or constituting a
felony under the laws of the United States or any state thereof, or (iv)
Executive's material breach of his obligations under Section 6 and 7 hereof,
which breach shall remain uncured by Executive for thirty (30) days following
receipt of notice from the Company specifying such breach. If Executive's
employment is terminated by the Company for Cause, the Company shall pay
Executive a lump sum amount equal to the Base Salary through the last day of his
actual employment by the Company. The payment to Executive of any other benefits
following the termination of Executive's employment pursuant to this Section 5.2
shall be determined by the Board in its sole discretion in accordance with the
policies and practices of the Company.
5.3. DISABILITY. Executive's employment hereunder may be terminated by
the Company at any time in the event of the Disability of the Executive. For
purposes of this Agreement, "Disability" shall mean the inability of Executive
to perform substantially his duties hereunder due to physical or mental
disablement which continues for a period of six (6) consecutive months during
the Employment Term, as determined by an independent qualified physician
mutually acceptable to the Company and Executive (or his 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 his personal representative) and one designated by the two physicians so
designated. If Executive's employment is terminated by the Company for
Disability, the Company shall pay Executive an amount equal to the Base Salary
plus any benefits to which Executive is entitled under Section 4.3 of this
Agreement (to the extent permitted by the then-current terms of the applicable
benefit plans and subject to any employee contribution requirements applicable
to Executive on the date of termination) through the date on which Executive is
first eligible to receive payment of disability benefits in lieu of Base Salary
under the Company's employee benefit plans as then in effect. The payment to
Executive of any other benefits following the termination of Executive's
employment pursuant to this Section 5.3
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shall be determined by the Board in its sole discretion in accordance with the
policies and practices of the Company.
5.4. DEATH. Executive's employment hereunder shall automatically
terminate in the event of the Executive's death. If Executive's employment is
terminated by the death of Executive, the Company shall pay to Executive's
estate or legal representative an amount equal to the Base Salary at the rate in
effect at the time of Executive's death through the last day of the month in
which his death occurs. The payment to Executive of any other benefits following
the termination of Executive's employment pursuant to this Section 5.4 shall be
determined by the Board in its sole discretion in accordance with the policies
and practices of the Company.
5.5. TERMINATION BY EXECUTIVE. Executive's employment hereunder may be
terminated by Executive at any time upon not less than sixty (60) days prior
written notice from Executive to the Company. If Executive terminates his
employment with the Company pursuant to this Section 5.5, the Company shall pay
Executive an amount equal to the Base Salary through the last day of his actual
employment by the Company.
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 hereto in accordance with Section 9 hereof. For
purposes of this Agreement, a "Notice of Termination" shall mean a notice which
shall indicate the specific termination provision in this Agreement relied upon
and shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of employment under the provision so indicated.
5.7. SURVIVAL. The provisions of Sections 6 and 7 shall survive the
termination of this Agreement.
6. NON-COMPETITION. Executive acknowledges and recognizes the highly
competitive nature of the businesses of the Company and accordingly agrees that
during the Employment Term and for a period of one (1) year after expiration or
termination of Executive's employment hereunder:
6.1. Executive will not engage in any activity which is competitive
with any business which is now, or is at any time during the Employment Term,
conducted by the Company, including without limitation becoming an employee,
investor (except for passive investments of not more than one percent (1%) of
the outstanding shares of, or any other equity interest in, a company or entity
listed or traded on a national securities exchange or in an over-the-counter
securities market), officer, agent, partner or director of, or other participant
in, any firm, person or other entity in any geographic area which is engaged in
any activities in the field of combinatorial chemistry. Notwithstanding any
provision of this Agreement to the contrary, upon the occurrence of any breach
of this Section 6.1, if Executive is employed by the Company, the Company may
immediately terminate the employment of Executive for Cause in accordance with
the notice provisions contained in Sections 5.6 and 9, and, whether or not
Executive is employed by the Company, the Company shall immediately cease to
have any obligations to make payments to Executive under this Agreement.
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6.2. Executive will not directly or indirectly assist others in
engaging in any of the activities in which Executive is prohibited to engage by
clause 6.1 above.
6.3. Executive will not directly or indirectly (a) induce any employee
of the Company to engage in any activity in which Executive is prohibited from
engaging by clause 6.1 above or to terminate his or her employment with the
Company, or (b) employ or offer employment to any person who was employed by the
Company unless such person shall have ceased to be employed by the Company for a
period of at least one (1) year.
6.4. It is expressly understood and agreed that (a) although Executive
and the Company consider the restrictions contained in this Section 6 to be
reasonable, if a final judicial determination is made by a court of competent
jurisdiction that the time or territory or any other restriction contained in
this Agreement is unenforceable, this Agreement shall not be rendered void but
shall be deemed to be enforceable to such maximum extent as such court may
judicially determine or indicate to be enforceable and (b) if any restriction
contained in this Agreement is determined to be unenforceable and such
restriction cannot be amended so as to make it enforceable, such finding shall
not affect the enforceability of any of the other restrictions contained herein.
7. CONFIDENTIALITY. Executive will not at any time (whether during or
after his employment with the Company) disclose or use for his own benefit or
purposes or the benefit or purposes of any other person, firm, partnership,
joint venture, association, corporation or other organization, entity or
enterprise other than the Company, any Confidential Information. As used herein,
the term "Confidential Information" shall mean, without limitation, all
Proprietary Materials (as defined below), any and all information about
inventions, improvements, modifications, discoveries, costs, profits, markets,
sales, products, key personnel, pricing policies, operational methods, concepts,
technical processes and applications, and other business affairs and methods of
the Company and of its affiliates, collaborators, consultants, suppliers, and
customers, as well as any other information not readily available to the public,
including without limitation any information supplied by third parties to the
Company under an obligation of confidence. As used in this Agreement
"Proprietary Materials" shall include, without limitation, the following
materials: any and all reagents, substances, chemical compounds, subcellular
constituents, cells or cell lines, organisms and progeny, and mutants, as well
as any and all derivatives or replications derived from or relating to such
materials. Confidential Information may be contained in various media, including
without limitation patent applications, computer programs in object and/or
source code, flow charts and other program documentation, manuals, plans,
drawings, designs, technical specifications, laboratory notebooks, supplier and
customer lists, internal financial data, and other documents and records of the
Company, whether or not in written form and whether or not labeled or identified
as confidential or proprietary. Executive further agrees that (a) upon
termination or expiration of his employment hereunder, Executive will return
immediately to the Company any Proprietary Materials and any materials
containing Confidential Information then in Executive's possession or under
Executive's control and (b) he will not retain or use for his account at any
time any trade name, trademark or other proprietary business designation used or
owned in connection with the business of the Company.
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8. SPECIFIC PERFORMANCE. Executive acknowledges and agrees that the
Company's remedies at law for a breach or threatened breach of any of the
provisions of Section 6 or Section 7 would be inadequate and, in recognition of
this fact, Executive agrees that, in the event of such a breach or threatened
breach, in addition to any remedies at law, the Company, without posting any
bond, shall be entitled to obtain equitable relief in the form of specific
performance, temporary restraining orders, temporary or permanent injunctions or
any other equitable remedy which may then be available.
9. NOTICES. Any notice hereunder by either party to the other shall be
given in writing by personal delivery, telex, telecopy or registered mail,
return receipt requested, addressed, if to the Company, to the attention of
Chairman of the Board at the Company's executive offices or to such other
address as the Company may designate in writing at any time or from time to time
to the Executive, and if to the Executive, to his most recent address on file
with the Company. Notice shall be deemed given, if by personal delivery, on the
date of such delivery or, if by telex or telecopy, on the business day following
receipt of answer back or telecopy information or, if by registered mail, on the
date shown on the applicable return receipt.
10. ASSIGNMENT. This Agreement may not be assigned by either party without
the prior written consent of the other party. The Company shall require any
persons, firm or corporation succeeding to all or substantially all of the
business or assets of the Company whether by purchase, merger or consolidation
to expressly assume and agree to perform this Agreement.
11. ENTIRE AGREEMENT. This Agreement contains the entire agreement between
the Company and Executive with respect to the subject matter thereof and there
have been no oral or other agreements of any kind whatsoever as a condition
precedent or inducement to the signing of this Agreement or otherwise concerning
this Agreement or the subject matter hereof.
12. EXPENSES. Each party shall pay its own expenses incident to the
performance or enforcement of this Agreement, including all fees and expenses of
its counsel for all activities of such counsel undertaken pursuant to this
Agreement, except as otherwise herein specifically provided. If any action at
law or equity is necessary to enforce or interpret the terms of this Agreement,
the prevailing party shall be entitled to reimbursement of reasonable attorney's
fees and other costs incurred by such party in connection with such action, in
addition to any other relief to which such party is entitled.
13. ARBITRATION. In the event any dispute shall arise between the Company
and the Executive with respect to any of the terms and conditions of this
Agreement, then such dispute shall be submitted and finally settled by
arbitration in Boston, Massachusetts under the rules of the American Arbitration
Association. The award rendered by the arbitrator shall be final and binding
upon the parties hereto, and judgment upon the award rendered may be entered by
either party in any court that would ordinarily have jurisdiction over the
parties or the subject matter of the controversy or claim. Each party shall pay
its own expenses incident to such arbitration, including attorneys' fees. The
parties agree not to institute any litigation or proceedings against each other
in connection with this Agreement except as provided in this Section 13.
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14. WAIVERS AND FURTHER AGREEMENTS. Any waiver of any terms or conditions
of this Agreement shall not operate as a waiver of any other breach of such
terms or conditions or any other term or condition, nor shall any failure to
enforce any provision hereof operate as a waiver of such provision or of any
other provision hereof; provided, however, that no such written wavier, unless
it, by its own terms, explicitly provides to the contrary, shall be construed to
effect a continuing waiver of the provision being waived and no such waiver in
any instance shall constitute a waiver in any other instance or for any other
purpose or impair the right of the party against whom such waiver is claimed in
all other instances or for all other purposes to require full compliance with
such provision. Each of the parties hereto agrees to execute all such further
instruments and documents and to take all such further action as the other party
may reasonably require in order to effectuate the terms and purposes of this
Agreement.
15. AMENDMENTS. This Agreement may not be amended, nor shall any waiver,
change, modification, consent or discharge be effected except by an instrument
in writing executed by or on behalf of the party against whom enforcement of any
waiver, change, modification, consent or discharge is sought.
16. SEVERABILITY. If any provision of this Agreement shall be held or
deemed to be, or shall in fact be, invalid, inoperative or unenforceable as
applied to any particular case in any jurisdiction or jurisdictions, or in all
jurisdictions or in all cases, because of the conflict of any provision with any
constitution or statute or rule of public policy or for any other reason, such
circumstance shall not have the effect of rendering the provision or provisions
in question invalid, inoperative or unenforceable in any other jurisdiction or
in any other case or circumstance or of rendering any other provision or
provisions herein contained invalid, inoperative or unenforceable to the extent
that such other provisions are not themselves actually in conflict with such
constitution, statute or rule of public policy, but this Agreement shall be
reformed and construed in any such jurisdiction or case as if such invalid,
inoperative or unenforceable provision had never been contained herein and such
provision reformed so that it would be valid, operative and enforceable to the
maximum extent permitted in such jurisdiction or in such case.
17. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument, and in pleading or
proving any provision of this Agreement, it shall not be necessary to produce
more than one of such counterparts.
18. SECTION HEADINGS. The headings contained in this Agreement are for
reference purposes only and shall not in any way affect the meaning or
interpretation of this Agreement.
19. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the law (other than the law governing conflict of
law questions) of the Commonwealth of Massachusetts.
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IN WITNESS WHEREOF, the parties have been executed or caused to be executed this
Agreement as of the date first above written.
ARQULE, INC.
By: /s/ Xxxxxxx X. Xxxx 7/22/99
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Name: Xxxxxxx X. Xxxx
Title: President
/s/ Xxxxxxxx Xxx
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Xx. Xxxxxxxx Xxx
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SCHEDULE A
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BUSINESS RELATIONSHIPS
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EXHIBIT A
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OPTION CERTIFICATE
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EXHIBIT B
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DETERMINATION OF OPTION PRICE
Executive shall have the choice of having either one of the following exercise
prices:
(1) The Fair Market Value of ArQule's Common Stock (as defined below) as of the
date of signing by Executive of a letter of intent to join ArQule, namely June
28th, 1999 in which case the stock options granted to the Executive may not
qualify as "Incentive Stock Options" under Section 422 of the Internal Revenue
Code of 1986, as amended (the "Code"); or
(2) The Fair Market Value of ArQule's Common Stock (as defined below) as of the
date the Board of Directors grants the stock options to the Executive (by
written consent or at a meeting) which is either on or after the Effective Date,
in which case some of the stock options granted to the Executive may qualify as
"Incentive Stock Options" under Section 422 of the Code, as permitted under the
Code.
The Fair Market Value of ArQule's Common Stock shall be the closing price of the
Common Stock as reported by the Nasdaq National Market on the trading day
immediately prior to the appropriate date discussed above.
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