Exhibit 10.1


 


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 Nigel J. Rulewski (“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, Employee shall resign
his employment with the Company effective as of August 29, 2008 (the “Separation
Date”).  The Company hereby waives the
sixty (60) days prior notice requirement under Employee’s Employment Agreement
with the Company dated as of August 1, 2006 (the “Employment Agreement”).


 


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 earned but unpaid
through the Separation Date, including accrued but unused vacation time.  In the event that Employee signs this
Agreement, returns it to the Company and does not (and may no longer) revoke as
provided in Section 17, 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.                                          $325,000
which amount represents Employee’s current base salary through the end of the
twelve (12) month period commencing on the Separation Date; plus


 


ii.                                       $91,000,
which amount represents the average bonus paid by the Company to Executive with
respect to calendar years 2006 and 2007.


 


Because Employee is a
specified person for purposes of Section 409A of the Internal Revenue Code
of 1986, as amended, the Separation Payment shall be made on the date that is
six months after the date of Employee’s separation from service, as that term
is defined under Section 409A, or such earlier date, if any, compliant
with Section 409A.


 


b.                                      Extension of Time to Exercise Options.  Employee has been granted certain stock
options to purchase shares of the Company’s Common Stock pursuant to the
Plan.  As set forth in Exhibit A, as
of the Separation Date, options for 162,500 shares (the “Vested Options”) will
be vested and exercisable.  The time in
which Employee may exercise the Vested Options that have vested as of the
Separation Date shall be extended to February 26, 2010, and any agreement
or terms and conditions with respect to such Vested 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 Vested Options.


 


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.


 


3.                                       2007 Bonus.  In the
event that Employee signs this Agreement, returns it to the Company and does
not (and may no longer) revoke as provided in Section 16, the Company
shall pay Employee the following gross amount, which shall be subject to
legally required and voluntarily authorized deductions and withholdings:  $75,840, which amount represents Employee’s
estimated bonus for 2008, pro-rated from January 1, 2008 through the
Separation Date.


 


4.                                       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 on the Separation
Date.  If Employee is eligible for and
elects to continue health and/or dental insurance coverage through COBRA, the
Company will pay 80% of the monthly premium for such insurance (and Employee
shall be required to pay the remaining 20% of the monthly premium for such
insurance), as applicable, through August 31, 2009.  Any continuing coverage after August 31,
2009 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.


 


c.                                       Life Insurance Coverage. 
Upon the Separation Date, Employee may apply to convert the existing
group life insurance to an individual policy at Employee’s own expense.


 


d.                                      Disability Insurance. 
Disability insurance coverage will cease as of the Separation Date, and
there is no right of individual conversion.


 


e.                                       Retirement Plans. 
Employee shall be entitled to Employee’s vested benefit in the Company’s
401(k) plan as of the Separation Date, as determined by the plan
provision.  Service credit, salary
reduction and Company contribution shall cease as of the Separation Date.


 


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f.                                         Outplacement.  The
Company shall pay, in an amount not exceed $20,000, for outplacement services
for Employee to be performed by a consulting firm selected by the Company.


 


5.                                       Return of Property. 
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 with
reasonable notice to confirm such deletion.


 


6.                                       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/or 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
all of the terms of the Employee Non-Disclosure and Inventions Agreement
previously executed by Employee, which is attached as Exhibit B, the terms
of which are incorporated herein by reference (including, without limitation,
the confidentiality, non-competition and non-solicitation provisions of the
Employee Non-Disclosure and Inventions Agreement).


 


7.                                       Cooperation.  Employee agrees and covenants as a material term
of this Agreement to provide reasonable cooperation to the Company until August 29,
2009 including, without limitation, with respect to matters previously within
Employee’s scope or course of employment with the Company.  The Company will reimburse Employee for
out-of-pocket expenses related thereto and, after August 29, 2009, for any
time expended on behalf of the Company at the request of the Company at an
agreed-to per diem or per hour rate (or pro-rata share thereof) and reimburse
Employee.  In the event that the Company
determines that such expense reimbursement is or would be prohibited by law,
the Company promptly shall notify Employee to such effect, and such reimbursement
shall not be made to Employee.


 


8.                                       General Release. 
Except with respect to any rights, obligations or duties arising out of
this Agreement, and in consideration of the Separation Package and other
benefits set forth in this Agreement, Employee hereby unconditionally and
irrevocably releases and discharges the Company and its officers, directors,
partners, stockholders, trustees, attorneys, insurers, representatives, agents
and employees, in both their individual and 


 


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corporate
capacities (collectively, the “Releasees”), of and from any and all complaints,
charges, lawsuits, costs (including attorney fees and costs actually incurred),
debts, liabilities or claims for relief of any kind by Employee that Employee  now has or ever had against the Releasees or any one of
them, whether known or unknown, arising out of any matter or thing that has
happened before the signing of this Agreement (collectively, “Claims”),
including but not limited to (i) Claims for tort or contract, or relating
to salary, wages, bonuses, severance, commissions, stock, and stock options,
the breach of any oral or written contract or promise, misrepresentation,
defamation, and interference with prospective economic advantage, interference
with contract, intentional and negligent infliction of emotional distress,
negligence, breach of the covenant of good faith and fair dealing, medical,
disability or other leave; (ii) Claims arising out of, based on, or
connected with Employee’s  employment,
including terms and conditions of employment, by the Company and the
termination of that employment, including but not limited to claims arising
under Section 806 of the Sarbanes-Oxley Act of 2002, and any other claims
alleging retaliation of any nature; (iii) Claims under G.L. c. 93A or in
any way related to restricted stock, stock options, or vesting or exercise of
the same, or for alleged securities violations; and (iv) Claims for
unlawful employment discrimination of any kind, including discrimination due to
age, sex, disability or handicap, including failure to offer reasonable
accommodations, race, color, religion, pregnancy, sexual orientation, national
origin, or sexual or other unlawful harassment arising under or based on the
following, all as amended: Title VII of the Civil Rights Act of 1964; the Age
Discrimination in Employment Act of 1967 (“ADEA”); the Americans with
Disabilities Act (“ADA”); the Equal Pay Act of 1963; the Fair Labor Standards
Act of 1938; the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”);
the Family and Medical Leave Act; the Massachusetts Fair Employment Practices
Act; the Massachusetts Civil Rights Act; the Massachusetts Equal Rights Law;
the Massachusetts or United States Constitution, including any right of privacy
thereunder; and any other state or federal equal employment opportunity or
anti-discrimination law, policy, order, regulation or guidelines affecting or
relating to claims or rights of employees. 
It is further expressly agreed and understood by Employee  that the release contained herein is a GENERAL RELEASE.


 


9.                                       Covenant Not to Sue. 
Employee represents and warrants that Employee has not filed any
complaints, charges, or claims for relief against the Releasees, or any one of
them, with any local, state or federal court or administrative agency, any
professional or regulatory board, or any other agency or entity.  Employee  further
warrants that Employee has not previously assigned or transferred any of the
claims that are the subject of the General Release contained herein.  Employee agrees and covenants not to sue or
bring any claims or charges against the Releasees, or any one of them, with
respect to matters subject to the General Release contained herein.  Employee further agrees not to institute any
claim, charge, complaint or lawsuit to challenge the validity of the General
Release or the circumstances surrounding its execution.  In the event that Employee  institutes any action covered by this Section, that action
shall be dismissed upon presentation of this Agreement and Employee shall
reimburse the affected Releasees for all legal fees and expenses incurred in
defending such claim and obtaining its dismissal.


 


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10.                                 Exclusion.  Nothing in
this Agreement shall preclude Employee from filing a charge or complaint,
including a challenge to the validity of this Agreement, with the Equal
Employment Opportunity Commission, the Massachusetts Commission Against
Discrimination or any other state anti-discrimination agency or from participating
or cooperating in any investigation or proceeding conducted by any of such
agencies.  In the event that a charge or
complaint is filed with any administrative agency by Employee or in the event
of an authorized investigation, charge or lawsuit filed by any administrative
agency, Employee expressly waives and shall not accept any monetary award or
damages, costs or attorneys’ fees of any sort therefrom against the Company or
any of the Releasees.


 


11.                                 Nonadmissions Clause. 
It is understood and agreed that this Agreement does not constitute any
admission by the Company that any action taken with respect to Employee was
unlawful or wrongful, or that such action constituted a breach of contract or
violated any federal or state law, policy, rule or regulation.


 


12.                                 Nondisclosure of this Agreement.  Except as expressly set forth in this
Agreement and except to the extent publicly disclosed by the Company, Employee
expressly agrees that the nature and terms of this Agreement are confidential,
and expressly agrees not to discuss or disclose them, or the facts and
contentions contained therein, without the prior written consent of the
Company, with or to any person, except to Employee’s accountant, tax advisor,
attorney, immediate family, therapist or healthcare provider, if any, the
Internal Revenue Service, state tax authorities, or as required by law.  If Employee makes any disclosure authorized
by this Section, Employee  shall apprise
the person or entity to whom such disclosure is made of the confidential nature
of the terms and conditions of the Agreement and shall use reasonable and good
faith efforts to secure the confidentiality of the information so
disclosed.  In particular, if Employee is
compelled to disclose the terms or conditions of this Agreement in response to
a subpoena or discovery request issued in litigation, Employee  shall provide the Company with a copy of the subpoena or
discovery request as promptly as practicable following receipt by the Employee
in order to provide the Company with the opportunity to seek a protective order
from the appropriate court.


 


13.                                 Nondisparagement. 
Employee agrees, as a material term of this agreement, not to disparage
or make negative statements about the Company or any of the Company’s programs
or products.  The Company agrees to
instruct all members of the Company’s executive management team not to
disparage or make negative statements about Employee, provided that nothing in
this Section shall be construed in any way to restrict or prevent Employee
or the Company from providing truthful information to, or truthful responses to
requests from, their respective auditors, accountants, investment bankers,
insurers, potential purchasers, successors, acquirers, or any other persons or
entities as required by business necessity or for a legitimate business
reason.  Nothing in this Agreement shall
bar Employee or the Company from providing truthful testimony in any legal
proceeding, or in responding to any request from any governmental agency, or as
required by law, or by court order or other legal process.


 


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14.                                 References.  Any
reference request for Employee will be directed to Anthony S. Messina, or his
successor as Vice President of Human Development or a similar position, who
will respond in accordance with Company practice with only Employee’s dates of
employment and job titles and by stating that Company policy precludes the
provision of any further information to the inquirer.  However, if Employee completes and return to
the Company a reference release request in a form acceptable to the Company,
the Company will answer questions about Employee’s employment based on Employee’s
employment records.


 


15.                                 Breach.  In the event
Employee  takes any action or engages in any
conduct deemed by the Company to be in violation of this Agreement or otherwise
commits a material breach of this Agreement, (i) any consideration
(including, without limitation, rights and benefits pursuant to Sections 2, 3
and 4a) contained in this Agreement which flows to Employee  from
the Company and is unrealized as of such violation or breach, shall be
forfeited and terminated, and (ii) any such consideration which was
previously paid or provided to Employee (including, without limitation, the
Separation Payment; any shares issued upon exercise of Vested Options, or
proceeds thereof; and the value of benefits pursuant to Section 3 and 4a)
shall be disgorged and repaid to the Company by Employee. In the event that
Employee institutes legal proceedings to enforce this Agreement, Employee  agrees that the sole remedy available to Employee  shall be enforcement of the terms of this Agreement, but
that under no circumstances shall Employee be entitled to receive or collect
any damages for Claims that Employee has released under this Agreement in
accordance with the General Release contained in Section 9 of this
Agreement.


 


16.                                 Governing Law.  This Agreement shall be governed by the laws of
the Commonwealth of Massachusetts applicable to contracts made and to be
performed entirely within such jurisdiction and without giving effect to its
choice or conflict of laws rules or principles.  Each of the parties irrevocably submits to
the exclusive jurisdiction of the courts of the Commonwealth of Massachusetts
and of any United States federal court sitting in the Commonwealth of
Massachusetts in any action or proceeding arising out of or relating to this
Agreement, and irrevocably agrees that all claims in respect of such action or
proceedings shall be heard and determined in any such Massachusetts or United
States federal court.


 


17.                                 Time to Consider Agreement.


 


a.                                       Employee
acknowledges that Employee  has been given
the opportunity to consult an attorney of Employee’s choice before signing this
Agreement.


 


b.                                      Employee acknowledges
that Employee has been given the opportunity to review and consider this
Agreement for at least twenty-one (21) days before signing it and that, if
Employee has signed this Agreement in less than that time, Employee  has done so voluntarily in order to obtain sooner the
benefits of this Agreement.


 


c.                                       Employee further
acknowledges that Employee  may revoke
this Agreement within seven (7) days of signing it, provided that this
Agreement will not become effective until such seven-day period has expired.  To be effective, any such 


 


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revocation must be in writing and delivered to the Company’s principal
place of business (as set forth in the preamble to this Agreement) to the
attention of Anthony S. Messina by close of business on the seventh day after
signing and must expressly state Employee’s intention to revoke the
Agreement.  The eighth day following
Employee’s execution hereof shall be deemed the “Effective Date” of this
Agreement.


 


d.                                      The parties also
agree that the release provided by Employee in this Agreement does not include
claims under the ADEA arising after the date Employee signs this Agreement.


 


e.                                       Employee further
acknowledges and agrees that the consideration Employee  is
to receive under this Agreement exceeds the consideration to which Employee  would otherwise be entitled to upon his termination from
employment with the Company.


 


18.                                 Representations. 
Employee acknowledges that in exchange for entering into this Agreement
Employee  has received good and valuable
consideration in excess of that to which Employee  would
otherwise have been entitled in the absence of this Agreement.  This consideration includes, but is not
limited to, the Separation Package described in Section 2.  Employee further acknowledges the sufficiency
of that consideration.  The Company and
Employee attest that no other representations were made regarding this
Agreement other than those contained herein.


 


19.                                 Severability.  If any
of the terms of this Agreement shall be held to be invalid and unenforceable,
the remaining terms of this Agreement are severable and shall not be affected
thereby.  However, should the general
release or covenant not to sue provisions of this Agreement be declared or
determined by any tribunal, administrative agency or court of competent
jurisdiction to be illegal or invalid, and should Employee thereupon seek to
institute any Claims that would have been within the scope of the general
release or covenant not to sue, (i) any consideration (including, without
limitation, rights and benefits pursuant to Sections 2, 3 and 4a) contained in
this Agreement which flows to Employee  from the
Company and is unrealized as of the date of such Claim, shall be forfeited and
terminated, and (ii) any such consideration which was previously paid or
provided to Employee (including, without limitation, the Separation Payment;
any shares issued upon exercise of Vested Options, or proceeds thereof; and the
value of benefits pursuant to Section 3a) shall be disgorged and repaid to
the Company by Employee.


 


20.                                 Entire Agreement. 
This Agreement and its Exhibits constitute the entire agreement between
the parties about or relating to the Company’s obligations to Employee with
respect to Employee’s  terms and
conditions of employment, and termination of employment, and fully supersedes
any and all prior agreements or understandings between the parties other than
the Employee Non-Disclosure and Inventions Agreement, referenced in Section 5
above.  The terms of this Agreement are
contractual in nature and not a mere recital, and they shall take effect as a
sealed document.  This Agreement may not
be modified orally, but only by agreement in writing signed by both parties.


 


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21.                                 Interpretation.  Each
party agrees that in any dispute regarding the interpretation or construction
of this Agreement, no presumption shall operate in favor of or against any
party by virtue of such party’s role in drafting, or not drafting, the terms and
conditions set forth herein.


 


22.                                 Notice.  Any notice
under this Agreement given to Employee, shall be by certified mail, return
receipt requested, to the address set forth in the Employee’s personnel file at
the Company.


 


Any notice under this Agreement given to Company, shall be to:


 


Anthony S. Messina


Vice President, Human Development


ArQule, Inc.


19 Presidential Way


Woburn, MA 01801


 


23.                                 Counterparts.  This
Agreement may be executed in two or more of counterparts, each of which when
executed and delivered constitutes an original of this Agreement, but all the
counterparts shall together constitute one and the same agreement.  No counterpart shall be effective until each
party has executed at least one counterpart.


 


24.                                 Access to Legal Counsel.  EMPLOYEE
REPRESENTS, WARRANTS AND ACKNOWLEDGES THAT EMPLOYEE  HAS
CAREFULLY READ ALL OF THIS AGREEMENT, THAT EMPLOYEE  HAS
HAD THE OPPORTUNITY TO CONSULT WITH LEGAL COUNSEL CONCERNING THE LEGAL EFFECT
OF THIS AGREEMENT AND THE ADVISABILITY OF ENTERING INTO THIS AGREEMENT AND
GIVING THE GENERAL RELEASE PROVIDED FOR HEREIN, AND THAT EMPLOYEE  FULLY UNDERSTANDS THE SAME. 
EMPLOYEE FURTHER REPRESENTS, WARRANTS AND ACKNOWLEDGES THAT EMPLOYEE  IS EXECUTING THIS AGREEMENT WITH THE INTENT TO GRANT THE
GENERAL RELEASE SET FORTH HEREIN, WITHOUT RELIANCE UPON ANY STATEMENT OR
REPRESENTATION OF THE COMPANY OR ANY REPRESENTATIVE, EMPLOYEE, DIRECTOR OR
ATTORNEY OF THE COMPANY OTHER THAN AS SET FORTH HEREIN, AND THAT EMPLOYEE  HAS SIGNED THIS AGREEMENT ON EMPLOYEE’S  OWN
BEHALF AND OF EMPLOYEE’S  OWN FREE WILL.


 


IN WITNESS WHEREOF, the Company and Employee  have
duly executed this Agreement as of the day and year written below.


 


 


	
  ArQule, Inc.

  
	
   

  	
   

  
	
  By: 

  	
  /s/ Anthony S. Messina

  	
   

  
	
  Name:

  	
  Anthony S. Messina

  
	
  Title:

  	
  Vice President, Human Development

  
					



 


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Date:  July 21,
2008


 


Employee


 


	
  /s/ N. J. Rulewski

  	
   

  
	
  Name:  Nigel J. Rulewski

  
	
  Date:  July 22, 2008

  



 


 


	
  /s/ Peter S. Lawrence

  	
   

  
	
  Witness to Employee’s signature

  
	
  Date:  July 22, 2008

  



 


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Exhibit A


 


(Listing of Vested Options) 


 


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Exhibit B


 


(copy of Employee Non-Disclosure and
Inventions Agreement)


 


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