Exhibit 10.53
 
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July 11, 2006 CONFIDENTIAL

 
Terence A. Rugg, M.D.
6 Erick Court
Chester, NJ 07930
 
Dear Terry:
 
SGX Pharmaceuticals is pleased to offer you the position of Vice President,
Development and Chief Medical Officer reporting to Mike Grey, Chief Executive
Officer. This position is categorized as full-time, exempt. Following are the
details of our offer.
 

  •  The salary in this position is $300,000.00 on an annualized basis, or
approximately $11,538.46 bi-weekly, subject to standard deductions and
withholdings.     •  Subject to approval by the Board of Directors, you will
receive an option to purchase 75,000 shares of the Company’s common stock
(“Option”) at a price per share equal to the market closing price of the
Company’s common stock on the last date prior to your first day of employment.
This Option will have a vesting commencement date of your first day of
employment with the Company. One quarter (1/4) of the granted shares vest one
year after the vesting commencement date and 1/48th of the shares vest monthly
thereafter over the next three years (fourth anniversary of the vesting
commencement date). The offer of these Options is conditioned upon your
acceptance of our offer of employment and subject to the terms and requirements
of the Company’s 2005 Equity Incentive Plan (the “Incentive Plan”) and the
Company’s form of stock option agreement. You are also eligible to participate
in the SGX 2005 Employee Stock Purchase Plan.     •  Included in the
compensation package is a benefits plan that offers medical, dental, vision,
life insurance, Accidental Death and Dismemberment (AD&D) insurance, long-term
disability, short-term disability insurance; and a 401(k) plan. For full-time
employees, vacation accrues on a pay period basis at the annual rate of
120 hours (three weeks). The vacation accrual increases by one day after each
anniversary with the Company, up to a maximum of 20 days per year. The Company
also provides employees with five days of sick time per year. In addition to our
vacation policy as noted above, the company is closed over the week between
Christmas and New Year.     •  You are also eligible to participate in the
Company’s cash bonus program. In your position, you are eligible to earn a cash
bonus of up to 30% of your base salary based upon corporate and individual goal
achievement.     •  You will receive a one-time conditional sign on bonus in the
amount of $100,000. This bonus is subject to federal, state and payroll tax
withholdings and will be paid to you in January 2007, provided you are still
employed by the company at said time. If you leave the company prior to
completing one year of service, you will be required to repay the full amount of
this bonus at that time.

 
You are also eligible for relocation assistance from the Chester, New Jersey
area to the San Diego area. SGX will reimburse you for expenses related to your
move as follows:
 
1. Reasonable travel and living expenses associated with one trip of five days
(four night hotel stay and travel) for up to 4 people to San Diego for the
purpose of securing a place to live, or, alternately, if you are required to
report to work prior to the sale and closure of your existing house in New
Jersey, an equivalent trip
 
 
SGX Pharmaceuticals, Inc. • www.sgxpharma.com
Corporate Headquarters • 10505 Roselle Street • San Diego, CA
92121 • 858.558.4850 • 858.558.4859 fax
SGX Beamline • Argonne National Laboratory, Bldg. 438A • 9700 S. Cass
Avenue • Argonne, IL 60439 • 630.252.0820 • 630.252.0835 fax

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Terence A. Rugg, M.D.
2 of 5
 
from San Diego back to New Jersey to finalize your affairs in New Jersey. If
needed, a second trip may be requested. Original receipts are required for
reimbursement.
 
2. Normal and customary non-recurring costs including the sales commission
associated with the sale of your home in Chester, up to 8% of the purchase
price.
 
3. Normal and customary non-recurring costs associated with the purchase of your
new home, up to 1.5% of the purchase price.
 
4. Prior to the arrival of your own vehicles to San Diego, reimbursement of the
costs of interim rental cars pending the arrival of your own vehicles, for a
period not to exceed 8 weeks.
 
SGX will gross-up the reimbursements described in Items 1-4 above (to the extent
that these reimbursements are considered taxable income) for income and
employment taxes. The income tax gross-up will be calculated using the
supplemental wage rates in effect when the payment is made. SGX will reimburse
these described relocation expenses in paragraphs 1-4 above up to $105,000.
 
In addition, you will receive the following relocation benefits:
 

  •  Reasonable costs associated with the transportation for you and your family
(including pets) with your final move trip to San Diego.     •  Household goods
move to include packing, shipping, partial unpack, 2 cars, insurance of goods
during shipment and third party services.     •  SGX has contracted with
Relocation Coordinates, Inc. to coordinate your move with a variety of
relocation assistance including finding a moving company, interim housing, a
real estate agent and general information about the San Diego area. If you use a
real estate agent associated with Relocation Coordinates for the sale and/or
purchase of a home, you can receive 25% of 1% of the purchase price towards your
closing costs. If the realtor is used on both the sale and purchase, you would
receive the benefit on each transaction.     •  Miscellaneous Expense Allowance:
SGX realizes you will incur incidental moving costs during the relocation. To
assist you with these incidental expenses, SGX will provide you with a moving
allowance of $8,000. This moving allowance is subject to required federal,
state, and payroll withholdings and will be paid with the first paycheck you
receive from SGX.     •  If you are required to report to work prior to finding
a new permanent residence, you are eligible for Temporary Housing up to a
maximum of 90 days.     •  If you are required to report to work prior to
finding a new permanent residence, you are eligible for temporary storage of
household goods up to a maximum of 90 days.

 
To receive the relocation benefits outlined above, relocation to San Diego must
occur within the first three (3) months of your employment with SGX.
 
In the event that the Company terminates your employment for cause prior to the
completion of 3 years of service or you terminate your employment prior to the
completion of 3 years of service, you will be required to reimburse SGX for the
relocation assistance described in this letter. Third party services provided by
the relocation company are not subject to payback. Repayment will be in
accordance with the following reimbursement schedule: i) if you terminate
employment or your employment is terminated prior to your first year anniversary
date of your employment, you will be required to repay 100% of the relocation
assistance ii) if you terminate employment or your employment is terminated
prior to your second year anniversary date, but after one year of employment,
you

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Terence A. Rugg, M.D.
3 of 5
 
will be required to repay two-thirds (2/3) of the relocation assistance iii) if
you terminate employment or your employment is terminated prior to your third
year anniversary date, but after your second year of employment, you will be
required to repay one-third (1/3) of the relocation assistance. SGX reserves the
right to withhold such amount from your final paycheck and you agree to also
execute any documents necessary to facilitate this reimbursement.
 
In the event of a Change of Control (as that term is defined below) the vesting
of any outstanding stock options described above will be accelerated by
12 months. In the event your employment is terminated by the Company without
cause within one year after a Change of Control, the vesting of your outstanding
stock options described above will be accelerated by a further 12 months,
provided that you comply with all surviving provisions of this letter and the
Employment, Confidential Information and Invention Assignment Agreements and
execute a full general release, releasing all claims, known or unknown, that you
may have against the Company arising out of or any way related to you employment
or termination of employment with the Company. In the event of such termination
all other obligations of the Company to you pursuant to this letter other than
the severance payments described below, will become automatically terminated and
completely extinguished.
 
A Change of Control means any one of the following occurrences:
 
(i) Any “person” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934 (the “Exchange Act”), other than a trustee or
other fiduciary holding securities of SGX under an employee benefit plan of SGX,
becomes the “beneficial owner” (as defined in Rule 13d-3 promulgated under the
Exchange Act), directly or indirectly, of the securities of SGX representing
more than 50% of (a) the outstanding shares of common stock of SGX or (b) the
combined voting power of SGX’ then-outstanding securities; or
 
(ii) The sale or disposition of all or substantially all of SGX’ assets (or any
transaction having similar effect is consummated) other than to an entity of
which SGX owns at least 50% of the Voting Stock so long as the sale or
disposition is not under duress of SGX’ financial hardship; or
 
(iii) SGX is party to a merger or consolidation that results in the holders of
voting securities of SGX outstanding immediately prior thereto failing to
continue to represent (either by remaining outstanding or by being converted
into voting securities of the surviving entity) less than 50% of the combined
voting power of the voting securities of SGX or such surviving entity
outstanding immediately after such merger or consolidation.
 
In the event that SGX terminates your employment without cause, notification may
be at any time on thirty (30) days’ advance written notice to you. In the event
of such termination, you will receive a severance payment equivalent to twelve
months of your Base Salary then in effect on the date of termination (the
“Severance Payment”) payable in accordance with SGX’ regular payroll cycle,
provided that you: (a) execute a full general release, releasing all claims,
known or unknown, that you may have against SGX arising out of or any way
related to your employment or termination of employment with SGX; and (b) agree
to act as a consultant for SGX for up to a maximum of sixty (60) days, without
additional compensation, if requested to do so by SGX. All other SGX obligations
(other than the change of control acceleration of stock provisions described
above) pursuant to your employment will become automatically terminated and
completely extinguished.
 
This offer is contingent upon the following:
 

  •  Signing a copy of our Employment, Confidential Information and Invention
Assignment Agreement, this is attached for your information.

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Terence A. Rugg, M.D.
4 of 5
 
 

  •  Conforming to the Immigration Reform and Control Act of 1986. Please bring
with you, on your start date, the original of one of the documents noted in List
A on the I-9 form attached or one document from List B and one document from
List C. If you do not have the originals of any of these documents, please call
Human Resources immediately. Please do not complete or sign the I-9 until you
begin employment. You will need to provide sufficient documentation to show
proof of eligibility for employment in the United States.     •  Receiving
satisfactory results from your background check and drug screening, as well as
any other pre-employment testing that may be required due to the specific nature
of the industry and/or your position.

 
It is the Company’s policy to fully respect the proprietary and confidential
information rights of your previous employers. You are not expected to disclose,
nor are you allowed to use for the Company’s purposes, any confidential or
proprietary information you may have acquired as a result of previous
employment.
 
If you accept our offer, your employment with SGX Pharmaceuticals will be “at
will.” This means your employment is not for any specified period of time and
can be terminated by you at any time for any reason. Likewise, SGX
Pharmaceuticals may terminate the employment relationship at any time, with or
without cause or advance notice. In addition, SGX Pharmaceuticals reserves the
right to modify your position or duties to meet business needs, providing such
changes do not result in a decrease in either your base salary or title, and
also providing that such changes are broadly within your sphere of expertise.
Any change to the at-will employment relationship must be specified in a written
agreement signed by you and an officer of SGX Pharmaceuticals.
 
I am pleased to extend this offer to you and look forward to your acceptance.
Please sign and return the attached copy of this offer letter as soon as
possible, but within at least five days of receipt, to indicate your agreement
with the terms of this offer.
 
Once signed by you, but contingent upon satisfactory results from your
background check and drug test, this letter, the Employment, Confidential
Information and Invention Assignment Agreement, will constitute the complete
agreement between you and SGX Pharmaceuticals, Inc. regarding employment matters
and will supersede all prior written or oral agreements or understandings on
these matters. This letter may only be modified by a written agreement signed by
you and an officer of SGX Pharmaceuticals, Inc.
 
We hope you will join us on or before August 14, 2006. Please contact Kristine
Figueroa in Human Resources if you have any questions. This offer is valid until
the end of business on July 21, 2006.

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Terence A. Rugg, M.D.
5 of 5
 
I feel you will be able to make an immediate contribution to our efforts, and I
think you will enjoy the rewards of working for an innovative, fast-paced
organization.
 
Sincerely,
 
/s/  Mike Grey

Mike Grey
President and CEO
 
Attachments:
 

  •  Copy of Offer Letter     •  I-9     •  Employment, Confidential Information
And Invention Assignment Agreement     •  Consumer Report Disclosure and
Authorization     •  Background check release form     •  Forensic Drug Testing
Custody and Control Form     •  Quest Diagnostic location sheet     • 
Summaries: Your rights under the Fair Employment Credit Reporting Act and
California Civil Code 1786.22

 

 
I have read and accept the terms and conditions of employment as described in
this offer letter and will start my employment on 14 August, 2006.
 
Print Name: Terence Anthony Rugg
 
Signature: /s/ Terence Anthony Rugg Date: July 22, 2006