Exhibit
10.6


 


RIGEL
PHARMACEUTICALS, INC.


 


EMPLOYMENT
AGREEMENT


 


THIS
EMPLOYMENT AGREEMENT (“Agreement”)
is entered by and between Dr. Donald G. Payan (“Executive”) and RIGEL PHARMACEUTICALS, INC. (the “Company”), a Delaware
corporation on December 17, 2007 (the “Effective
Date”).


 


WHEREAS, Executive has been providing services
to the Company under the terms of an offer letter dated January 16, 1997,
as amended (the “Existing
Agreement”); and


 


WHEREAS, in connection with certain changes to
the Internal Revenue Code of 1986, as amended (the “Code”),
and for other reasons, the Company and Executive wish to amend the terms of the
Existing Agreement as set forth herein, which terms will expressly override the
Existing Agreement.


 


NOW,
THEREFORE, in
consideration of the mutual promises and covenants contained herein, it is
hereby agreed by and between the parties hereto as follows, effective as of the
Effective Date:


 


1.             EMPLOYMENT BY THE COMPANY.


 


1.1          Title and Responsibilities.  Subject to
the terms set forth herein, Executive will continue to be employed by the
Company as the person responsible for all of the Company’s scientific research;
currently, the Executive holds the title of Executive Vice President, Chief Scientific
Officer.  Executive will report to the
Company’s Chief Executive Officer and the Company’s Board of Directors (the “Board”). During his
employment with the Company, Executive will devote his best efforts and
substantially all of his business time and attention (except for vacation
periods and reasonable periods of illness or other incapacity permitted by the
Company’s general employment policies) to the business of the Company.


 


1.2          At-Will Employment. 
Executive’s relationship with the Company is at-will.  The Company will have the right to terminate
this Agreement and Executive’s employment with the Company at any time with or
without Cause (as defined below), and with or without advance notice.  In addition, the Company retains the
discretion to modify the terms of Executive’s employment, including but not
limited to position, duties, reporting relationship, office location,
compensation, and benefits, at any time. 
Executive’s at-will employment relationship may only be changed in a
written agreement approved by the Board and signed by Executive and a duly
authorized officer of the Company.


 


1.3          Company Employment Policies.  The
employment relationship between the parties will continue to be governed by the
general employment policies and procedures of the Company, including those
relating to the protection of confidential information and assignment of
inventions.


 

















 


2.             COMPENSATION.


 


2.1          Salary.  Executive will earn a base salary in 2007 at
an annualized rate of $420,000, payable on the Company’s standard payroll
dates.  Executive will be considered for
annual increases in base salary in accordance with Company policy.


 


2.2          Target Bonus.  Subject to annual review by the
Board or a duly authorized committee thereof (either, the “Committee”),
Executive will be eligible to earn a target annual bonus of up to fifty percent
(50%) of Executive’s base salary (the “Target  Bonus”).  Whether Executive earns a Target Bonus, and
if so, in what amount, will be determined solely by the Committee in its
discretion.  Executive must remain an
active employee through the time the Committee determines bonus amounts for
executives of the Company in order to earn any bonus.


 


2.3          Equity Awards.  Executive’s
current compensatory equity awards are not affected by this Agreement and will
remain in effect in accordance with the terms of the applicable award
agreements and stock plan(s).


 


2.4          Standard Company Benefits.  Executive will
be entitled to participate in the Company’s employee benefits and compensation
plans which may be in effect from time to time and provided by the Company to
its executives, under the terms and conditions of such benefit and compensation
plans.


 


3.             CONFIDENTIAL INFORMATION.


 


3.1          Intellectual Property.         As
a condition of his continued employment, Executive must continue to comply with
the Employee Proprietary Information and Inventions Agreement (the “Proprietary Agreement”)
he has executed previously.  Nothing in
this Agreement is intended to modify in any respect the Proprietary Agreement,
and the Proprietary Agreement will remain in full force and effect.


 


3.2          Solicitation.          As a condition of receiving the Severance
Benefits (as defined below), Executive agrees that for one (1) year
following the termination of employment with the Company, Executive will not
personally initiate or participate in the solicitation of any employee of the
Company or any of its affiliates to terminate his or her relationship with the
Company or any of its affiliates in order to become an employee for any other
person or business entity.


 


4.             TERMINATION OF EMPLOYMENT; CHANGE
OF CONTROL


 


4.1          Termination Without Cause or Resignation for Good Reason – No Change of
Control.  If the Company terminates Executive’s
employment at any time without Cause (and other than as a result of death or
disability), or if Executive resigns from all positions he then holds with the
Company for Good Reason, and such termination is not a “Qualifying Termination”
(as defined below), Executive will be eligible for the following severance
benefits (the “Severance
Benefits”):  (i) the
Company will make a lump sum severance payment to Executive in an amount equal
to two (2) years of 


 


2

















 


Executive’s then-current base salary plus 200% of the Eligible
Bonus, where the Eligible Bonus is an average of the percent earned of the
Target Bonus for performance for the last two year multiplied by the current Target
Bonus, subject to withholdings and deductions, (ii) if Executive timely
elects continued health insurance coverage pursuant to the Consolidated Omnibus
Budget Reconciliation Act of 1985, as amended (together with any applicable
state law of similar effect, “COBRA”),
the Company will reimburse Executive for the COBRA premiums for himself and his
eligible dependents for eighteen (18) months following the date his employment
terminates or until such earlier date as he becomes eligible for health
insurance coverage from another source (provided that Executive must promptly
inform the Company, in writing, if he becomes eligible for health insurance
coverage from another source within eighteen (18) months after the termination),
(iii) acceleration of all then-outstanding compensatory equity awards, and
(iv) a modification of the post-termination exercise period of such equity
awards until the earlier of (a) the original end of the term of each such award
(generally 10 years from the date of grant) or (b) the one (1) year
anniversary of the date of the Qualifying Termination.  Executive will not be entitled to the
Severance Benefits unless and until the requirements set forth in Section 5
of this Agreement are satisfied.


 


(a)           Definition of Cause. 
For purposes of this Agreement, “Cause” will mean: (1) an intentional
action or intentional failure to act by Executive that was performed in bad
faith and to the material detriment of the business of the Company; (2) Executive’s
intentional refusal or intentional failure to act in accordance with any lawful
and proper direction or order of his or her superiors  that has not been cured within ten (10) days
after written notice from the Company, or that has caused irreparable damage
incapable of cure; (3) Executive’s 
habitual or gross neglect of the duties of employment that has not been
cured within ten (10) days after written notice from the Company, or that
has caused irreparable damage incapable of cure; (4) Executive’s
indictment, charge, or conviction of a felony or any crime involving moral
turpitude, or participation in any act of theft or dishonesty, in each case,
that has had or could reasonably be expected to have a material detrimental
effect on the business of the Company; or (5) Executive’s violation of any
material provision of the Proprietary Agreement or violation of any material
provision of any other written Company policy or procedure.


 


(b)           Definition of Change of
Control.  For purposes of this Agreement, a “Change of Control” has the meaning
set forth in the Severance Plan (as defined below).


 


(c)           Definition of Resignation for
Good Reason.  For purposes of this Agreement, a “Resignation for Good Reason” means
Executive has resigned from all positions he then-holds with the Company (or
any successor thereto) if (1):  (i)    
there is a material
diminution of Executive’s authority, including but not limited to decision-making
authority, duties, or responsibilities; (ii)     there is a material reduction in the
Executive’s annual base compensation (including the base salary and target
bonus opportunity), where material is considered greater than 5%; (iii)   the Executive is required to relocate his
or her primary work location to a facility or location that would increase the
Executive’s one way commute distance by more than twenty (20) miles
from the 


 


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Executive’s primary work location as of immediately prior to such
change; (iv)    A material diminution
in the authority, duties, or responsibilities of the supervisor to whom
the Executive is required to report,
including a requirement that the Executive report to a corporate officer
or employee instead of reporting directly to the board of directors of a
corporation (or similar governing body with respect to an entity other than a
corporation); (v)  a material diminution in the budget over
which the Executive retains authority; (vi)  the Executive is
required, as a condition to continued service, to enter into any agreement with
the Company or a successor thereto regarding confidentiality, non-competition,
non-solicitation or other similar restrictive covenant that is materially more
restrictive than under the Proprietary Agreement; (vii)  the Company
materially breaches its obligations under this Plan or any then-effective
written employment agreement with the Executive; or (viii) any
acquirer, successor or assign of the Company fails to assume and perform, in
all material respects, the obligations of the Company hereunder; and (2) the
Executive provides written notice to the Company’s General Counsel within the
60-day period immediately following such action; and (3) such action is
not remedied by the Company within thirty (30) days following the Company’s
receipt of such written notice; and (4) the Executive’s resignation is
effective not later than sixty (60) days after the expiration of such thirty
(30) day cure period.


 


4.2          Qualifying Termination Upon Change of Control.  Executive will be an “Eligible Employee” under the
Company’s Change of Control Severance Plan (the “Severance
Plan”).  Upon a “Qualifying
Termination” (as defined in the Severance Plan), Executive will not receive any
part of the Severance Benefits and instead Executive’s rights to receive any
severance pay or post-termination benefit continuation will be only as set
forth in the Severance Plan and as otherwise required by applicable law.


 


4.3          Other Terminations. If, at any time, the Company terminates Executive’s
employment at any time for Cause or as a result of death or disability, or if
Executive resigns other than for Good Reason, Executive’s salary will cease on
the date of termination, and Executive will not be entitled to any Severance
Benefits, severance pay, pay in lieu of notice or any other such compensation,
or any accelerated vesting of any equity awards, other than payment of accrued
salary and such other accrued benefits as expressly required in such event by
applicable law or the terms of any applicable Company benefit plans or new
agreements made at that time.


 


(a)           Certain Offsets. 
The Company will reduce Executive’s Severance Benefits, in whole or in
part, by any other severance benefits, pay in lieu of notice, or other similar
benefits payable to Executive by the Company that become payable in connection
with Executive’s termination of employment, including but not limited to any
payments that are owed pursuant to (i) any other severance plan, policy or
practice, or any individually negotiated employment contract or agreement with
the Company relating to severance benefits, in each case, as is in effect on
Executive’s termination date, (ii) any applicable legal requirement,
including, without limitation, the Worker Adjustment and Retraining
Notification Act (the “WARN Act”),
or (iii) any Company policy or practice providing for Executive to remain
on the payroll without being in active service for a limited period of time
after being given notice of the termination of Executive’s 


 


4

















 


employment.  The
termination payments and benefits provided under this Agreement are intended to
satisfy, to the greatest extent possible, any and all statutory obligations
that may arise out of Executive’s termination of employment.  In the Company’s sole discretion, such
reductions may be applied on a retroactive basis, with severance benefits
previously paid being recharacterized as payments pursuant to the Company’s
statutory obligation.  If Executive is
indebted to the Company at his or her termination date, the Company reserves
the right to offset any severance payments to Executive by the amount of such
indebtedness.


 


4.4          Code Section 409A. 
If the Company (or, if applicable, the successor entity thereto)
determines that the severance payments and benefits provided under this Agreement or the Severance Plan (any such
payments, the “Plan
Payments”) constitute “deferred compensation” under Code Section 409A
(together, with any state law of similar effect, “Section 409A”) and if Executive is
a “specified employee” of the Company or any successor entity thereto, as such
term is defined in Section 409A(a)(2)(B)(i) (a “Specified Employee”),
then, solely to the extent necessary to avoid the incurrence of the adverse
personal tax consequences under Section 409A, the timing of the Plan
Payments will be delayed as follows:  on the earliest to occur of (1) the
date that is six months and one day after the termination date, and (2) the
date of Executive’s
death (such earliest date, the “Delayed Initial Payment Date”), the Company (or the
successor entity thereto, as applicable) will (i) pay to Executive a lump sum amount equal to the sum of
the Plan Payments that Executive would otherwise have received through the Delayed
Initial Payment Date if the commencement of the payment of the Plan Payments
had not been delayed pursuant to this Section 4.5 and (ii) commence
paying the balance of the Plan Payments in accordance with the applicable
payment schedules set forth in this Agreement or the Severance Plan, as
applicable.  Prior to the imposition of
any delay on the Plan Payments as set forth above, it is intended that (A) each
installment of the Plan Payments be regarded as a separate “payment” for
purposes of Treasury Regulations Section 1.409A-2(b)(2)(i), (B) all
Plan Payments satisfy, to the greatest extent possible, the exemptions from the
application of Section 409A provided under Treasury Regulations Sections
1.409A-1(b)(4) and 1.409A-1(b)(9)(iii), and (C) the Plan Payments
consisting of COBRA premiums also satisfy, to the greatest extent possible, the
exemption from the application of Section 409A provided under Treasury
Regulations Section 1.409A-1(b)(9)(v).


 


5.             RELEASE.  As a condition of receiving the Severance Benefits,
Executive will execute, and allow to become effective, a release substantially
in the form attached hereto as EXHIBIT A (with
the Company having the authority, in its discretion, to modify the form of the
release to comply with applicable law, the “Release”) and will continue to comply
with his obligations under the Proprietary Agreement.  Unless the Release is timely executed by
Executive within the time frame set forth therein, delivered to the Company,
and becomes effective after the termination of Executive’s employment with the
Company (the date on which the Release becomes effective, the “Release Date”, which date will in no
event be later than February 28 of the year following the year in which
termination occurs), Executive will not receive any of the Severance Benefits
provided for under this Agreement.  Any
lump sum Severance Benefits owed to Executive will be paid within ten 


 


5

















 


(10) business days
following the Release Date, but in no event later than March 15 of the
year following the year in which termination occurs.


 


6.             GENERAL PROVISIONS.


 


6.1          Notices.  Any notices provided hereunder must be in
writing and will be deemed effective upon the earlier of personal delivery
(including, personal delivery by facsimile transmission), delivery by express
delivery service (e.g. Federal Express), or the third day after mailing by
first class mail, to the Company at its primary office location and to
Executive at his address as listed on the Company payroll (which address may be
changed by either party by written notice).


 


6.2          Severability.  Whenever possible, each
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law, but if any provision of this
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other provision or any other
jurisdiction, and such invalid, illegal or unenforceable provision will be
reformed, construed and enforced in such jurisdiction so as to render it valid,
legal, and enforceable consistent with the intent of the parties insofar as
possible.


 


6.3          Waiver.  If either party should waive any breach of
any provisions of this Agreement, he or it will not thereby be deemed to have
waived any preceding or succeeding breach of the same or any other provision of
this Agreement.


 


6.4          Entire Agreement.  This Agreement, including its
exhibits, constitutes the entire agreement between Executive and the Company
regarding the subject matter hereof.  As
of the Effective Date, this Agreement supersedes and replaces any and all other
agreements, promises, or representations, written or otherwise, between
Executive and the Company with regard to this subject matter, including the
Existing Agreement.  This Agreement is
entered into without reliance on any agreement, promise, or representation,
other than those expressly contained or incorporated herein, and, except for
those changes expressly reserved to the Company’s or Board’s discretion in this
Agreement, the terms of this Agreement cannot be modified or amended except in
a writing signed by Executive and a duly authorized officer of the Company
which is approved by the Board.


 


6.5          Counterparts.  This Agreement may be executed
in separate counterparts, any one of which need not contain signatures of more
than one party, but all of which taken together will constitute one and the
same Agreement.  Signatures transmitted
via facsimile will be deemed the equivalent of originals.


 


6.6          Headings and Construction.  The headings
of the sections hereof are inserted for convenience only and will not be deemed
to constitute a part hereof or to affect the meaning thereof.  For purposes of construction of this
Agreement, any ambiguities will not be construed against either party as the
drafter.


 


6

















 


6.7          Successors and Assigns.  This Agreement
is intended to bind and inure to the benefit of and be enforceable by
Executive, the Company, and their respective successors, assigns, heirs,
executors and administrators, except that Executive may not assign any of his
duties hereunder and he may not assign any of his rights hereunder without the written
consent of the Company.


 


6.8          Arbitration.  To provide a mechanism for rapid and
economical dispute resolution, Executive and the Company agree that any and all
disputes, claims, or causes of action, in law or equity, arising from or relating
to this Agreement (including the Release) or its enforcement, performance,
breach, or interpretation, or arising from or relating to Executive’s
employment with the Company or the termination of Executive’s employment with
the Company, will be resolved, to the fullest extent permitted by law, by
final, binding, and confidential arbitration held in San Francisco, California,
and conducted by JAMS, Inc. (“JAMS”), under its then-applicable Rules and
Procedures.  By agreeing to this arbitration procedure, both Executive and the Company
waive the right to resolve any such dispute through a trial by jury or judge or
by administrative proceeding. 
Executive will have the right to be
represented by legal counsel at any arbitration proceeding at his expense.  The arbitrator will:  (a) have the authority to compel
adequate discovery for the resolution of the dispute and to award such relief
as would otherwise be available under applicable law in a court proceeding; and
(b) issue a written statement signed by the arbitrator regarding the
disposition of each claim and the relief, if any, awarded as to each claim, the
reasons for the award, and the arbitrator’s essential findings and conclusions
on which the award is based.  The Company
will bear all fees for the arbitration, except for any attorneys’ fees or costs
associated with Executive’s personal representation.  The arbitrator, and not a court, will also be
authorized to determine whether the provisions of this paragraph apply to a
dispute, controversy or claim sought to be resolved in accordance with these
arbitration procedures.  Notwithstanding
the provisions of this paragraph, the parties are not prohibited from seeking
injunctive relief in a court of appropriate jurisdiction to prevent irreparable
harm on any basis, pending the outcome of arbitration.  Any awards or orders in such
arbitrations may be entered and enforced as judgments in the federal and the
state courts of any competent jurisdiction.


 


6.9          Governing Law.  All questions concerning the
construction, validity and interpretation of this Agreement will be governed by
the law of the State of California without regard to conflicts of laws
principles.


 


6.10        Term.     This Agreement will automatically terminate on December 31,
2010; provided that no such termination shall affect the right to any unpaid
benefit due the Executive under this Agreement.


 


6.11        Exhibits.


 


Exhibit A – Release Agreement


 


7

















 


IN WITNESS WHEREOF, the parties have executed this EMPLOYMENT AGREEMENT effective as of the
Effective Date written above.


 


RIGEL PHARMACEUTICALS, INC.


 


 


	
  By:

  	
  /s/
  Dolly A. Vance

  	
   

  
	
   

  	
  Dolly
  A. Vance

  
	
   

  	
  Senior Vice
  President, General Counsel and Corporate Secretar

  



 


DR. DONALD G. PAYAN


 


 


	
   

  	
  /s/
  Donald G. Payan

  	
   

  



 

















 


EXHIBIT A


 


RELEASE AGREEMENT


 


I
understand and agree completely to the terms set forth in the Rigel
Pharmaceuticals, Inc. Employment Agreement (the “Agreement”).


 


I understand that
this Release, together with the Agreement, constitutes the complete, final and
exclusive embodiment of the entire agreement between the Company, affiliates of
the Company and me with regard to the subject matter hereof.  I am not relying on any promise or
representation by the Company or the Employers that is not expressly stated
therein.  Certain capitalized terms used
in this Release are defined in the Agreement.


 


I hereby confirm
my obligations under my Proprietary Agreement with the Company and/or the
Employer.


 


Except
as otherwise set forth in this Release, I hereby generally and completely
release the Company, the Employers, and their current and former directors,
officers, employees, stockholders, shareholders, partners, agents, attorneys,
predecessors, successors, parent and subsidiary entities, insurers, affiliates,
and assigns (collectively, the “Released Parties”)
from any and all claims, liabilities and obligations, both known and unknown,
that arise out of or are in any way related to events, acts, conduct, or
omissions occurring prior to my signing this Agreement (collectively, the “Released Claims”).  The Released Claims include, but are not
limited to:  (1) all claims arising
out of or in any way related to my employment with the Company, the Employers
or their affiliates, or the termination of that employment; (2) all claims
related to my compensation or benefits, including salary, bonuses, commissions,
vacation pay, expense reimbursements, severance pay, fringe benefits, stock,
stock options, or any other ownership interests in the Company, the Employers,
or their affiliates; (3) all claims for breach of contract, wrongful
termination, and breach of the implied covenant of good faith and fair dealing;
(4) all tort claims, including claims for fraud, defamation, emotional
distress, and discharge in violation of public policy; and (5) all
federal, state, and local statutory claims, including claims for
discrimination, harassment, retaliation, attorneys’ fees, or other claims
arising under the federal Civil Rights Act of 1964 (as amended), the federal
Americans with Disabilities Act of 1990, the federal Age Discrimination in
Employment Act of 1967 (as amended) (“ADEA”), the
federal Employee Retirement Income Security Act of 1974 (as amended), and the
California Fair Employment and Housing Act (as amended).  Notwithstanding the foregoing, the following
are not included in the Released Claims (the “Excluded
Claims”): (1) any rights or claims for indemnification I
may have pursuant to any written indemnification agreement with the Company to
which I am a party, the charter, bylaws, or operating agreements of the
Company, or under applicable law;  or (2) any
rights which are not waivable as a matter of law.  In addition, nothing in this Release prevents
me from filing, cooperating with, or participating in any proceeding before the
Equal Employment Opportunity Commission, the Department of Labor, or the
California Department of Fair Employment and Housing, except that I hereby
waive my 


 

















 


right to any monetary
benefits in connection with any such claim, charge or proceeding.  I hereby represent and warrant that, other
than the Excluded Claims, I am not aware of any claims I have or might have
against any of the Released Parties that are not included in the Released
Claims.


 


I acknowledge that
I am knowingly and voluntarily waiving and releasing any rights I may have
under the ADEA.  I also acknowledge that
the consideration given for the Released Claims is in addition to anything of
value to which I was already entitled.  I
further acknowledge that I have been advised by this writing, as required by
the ADEA, that: (a) the Released Claims do not apply to any rights or
claims that arise after the date I sign this Release; (b) I should consult
with an attorney prior to signing this Release (although I may choose
voluntarily not to do so); (c) I have twenty-one (21) days to consider
this Release (although I may choose to voluntarily to sign it sooner); (d) I
have seven (7) days following the date I sign this Release to revoke the
Release by providing written notice to an officer of the Company; and (e) the
Release will not be effective until the date upon which the revocation period
has expired unexercised, which will be the eighth day after I sign this Release
(“Effective Date”).


 


I acknowledge that
I have read and understand Section 1542 of the California Civil Code which
reads as follows: “A general release does
not extend to claims which the creditor does not know or suspect to exist in
his or her favor at the time of executing the release, which if known by him or
her must have materially affected his or her settlement with the debtor.”  I hereby expressly waive and relinquish all
rights and benefits under that section and any law of any jurisdiction of
similar effect with respect to my release of any claims hereunder.


 


I hereby represent
that I have been paid all compensation owed and for all hours worked, I have
received all the leave and leave benefits and protections for which I am
eligible, and I have not suffered any on-the-job injury for which I have not
already filed a workers’ compensation claim.


 


I acknowledge that
to become effective, I must sign and return this Release to the Company so that
it is received not later than twenty-one (21) days following the date it is
provided to me, and I must not revoke it thereafter.


 


	
   

  	
  EMPLOYEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
   

  
	
   

  	
  Date:

  	
   

  
				



 


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