ARQULE INC (Form: 8-K, Received: 03/11/2013 16:46:10)

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): March 8, 2013

(Exact Name of Issuer as Specified in Charter)

Delaware	000-21429	04-3221586
(State or other jurisdiction of incorporation)	(Commission File Number)	(I.R.S. Employer Identification No.)

(Address of principal executive offices)

(Registrant's telephone number, including area code)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions ( see General Instruction A.2. below):

o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
¨	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
¨	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
¨	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 5 — Corporate Governance and Management

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.

(e) Amendment and Extension of Employment Agreements

On March 8, 2013, ArQule, Inc. (the “Registrant” or “ArQule”) amended certain terms of the following employment agreements:

CEO

Employment Agreement between the Registrant and Paolo Pucci, the Registrant’s Chief Executive Officer dated April 15, 2008 and amended on July 15, 2010 (as amended, the “CEO Employment Agreement”).

The March 8, 2013 amendment: (i) extends the term of the CEO Employment Agreement from June 30, 2015 to March 8, 2017; and (ii) revises the vesting events pertaining to a previously disclosed award to Mr. Pucci of 390,000 performance-based stock units. Each of the stock units constitutes a contingent right to receive one share of the Registrant’s common stock, in tranches of 300,000 and 90,00 units that vest, respectively, upon the achievement of certain performance targets related to the development of the Registrant’s products and the average price of the Registrant’s common stock. The March 8, 2013 amendment extends the period for achievement of the product development goal and reduces the target price for the stock performance goal. In addition, the March 8, 2013 amendment stipulates that all performance-based stock units will be subject to accelerated vesting if Mr. Pucci is terminated or deemed terminated without cause in connection with a change of control of the Registrant.

All other material terms of the CEO Employment Agreement that were in effect prior to the Committee’s approval of the March 8, 2013 amendment remain in effect. The foregoing summary of the material terms of the March 8, 2013 amendment to the CEO Employment Agreement is qualified by reference to the full text of the March 8, 2013 amendment which is included as Exhibit 10.1 hereto and to the terms of the CEO Employment Agreement.

COO

Employment Agreement between ArQule, Inc. and Peter S. Lawrence, the Registrant’s President and Chief Operating Officer, dated April 13, 2006 and amended October 4, 2007 and April 14, 2008 (as amended, the “COO Employment Agreement”).

The March 8, 2013 amendment provides for a term of employment through March 8, 2017 and gives effect to the award to Mr. Lawrence of 125,000 performance-based stock units, each of which constitutes a contingent right to receive one share of the Registrant’s common stock. The units will vest if, during the course of Mr. Lawrence’s employment with the Registrant, a certain performance goal related to the development of the Registrant’s products is achieved by a date specified by the Committee. In addition, the March 8, 2013 amendment stipulates that all performance-based stock units will be subject to accelerated vesting if Mr. Lawrence is terminated or deemed terminated without cause in connection with a change of control of the Registrant.

The March 8, 2013 amendment also adds a provision to the COO Employment Agreement requiring that Mr. Lawrence be terminated or deemed terminated without cause in connection with a change of control of the Registrant in order for him to receive accelerated vesting of stock options and restricted stock. Prior to this change, Mr. Lawrence would have been entitled to receive accelerated vesting solely as a result of a change of control.

All other material terms of the COO Employment Agreement that were in effect prior to the Committee’s approval of the March 8, 2013 amendment remain in effect. The foregoing summary of the material terms of the March 8, 2013 amendment to the COO Employment Agreement is qualified by reference to the full text of the March 8, 2013 amendment which is included as Exhibit 10.2 hereto and to the terms of the COO Employment Agreement.

CMO

Employment Agreement between ArQule, Inc. and Brian Schwartz, the Registrant’s Chief Medical Officer, dated June 17, 2008 and amended February 23, 2012 (as amended, the “CMO Employment Agreement”).

The March 8, 2013 amendment provides for a term of employment through March 8, 2017 and gives effect to the award to Dr. Schwartz of 120,000 performance-based stock units, each of which constitutes a contingent right to receive one share of the Registrant’s common stock. The units will vest if, during the course of Dr. Schwartz’s employment with the Registrant, a performance goal related to the development of the Registrant’s products is achieved by a date specified by the Committee. In addition, the March 8, 2013 amendment stipulates that all performance-based stock units will be subject to accelerated vesting if Dr. Schwartz is terminated or deemed terminated without cause in connection with a change of control of the Registrant.

All other material terms of the CMO Employment Agreement that were in effect prior to the Committee’s approval of the March 8, 2013 amendment remain in effect. The foregoing summary of the material terms of the March 8, 2013 amendment to the CMO Employment Agreement is qualified by reference to the full text of the current amendment which is included as Exhibit 10.3 hereto and to the terms of the CMO Employment Agreement.

Section 9 — Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

10.1 Second Amendment to Employment Agreement dated as of March 8, 2013, by and between ArQule, Inc. and Paolo Pucci, filed herewith (File No. 000-21429).

10.2 Third Amendment to Employment Agreement dated as of March 8, 2013, by and between ArQule, Inc. and Peter S. Lawrence, filed herewith (File No. 000-21429).

10.3 Second Amendment to Employment Agreement dated as of March 8, 2013, by and between ArQule, Inc. and Brian Schwartz, filed herewith (File No. 000-21429).

10.4 Employment Agreement, dated as of April 15, 2008, by and between ArQule, Inc. and Paolo Pucci. Filed as Exhibit 10.4 to the Registrant’s Current Report on Form 8-K, filed on April 18, 2008 (File No. 000-21429) and incorporated herein by reference.

10.5 Amendment to Employment Agreement, dated as of July 15, 2010, by and between ArQule, Inc. and Paolo Pucci. Filed as Exhibit 10.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2010 filed on August 4, 2010 (File No. 000-21429) and incorporated herein by reference.

10.6 Employment Agreement between ArQule, Inc. and Peter S. Lawrence, dated April 13, 2006. Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K dated April 18, 2006 (File No. 000-21429) and incorporated herein by reference.

10.7 Amendment to Employment Agreement, dated as of October 4, 2007, by and between ArQule, Inc. and Peter S. Lawrence. Filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on October 10, 2007 (File No. 000-21429) and incorporated herein by reference.

10.8 Second Amendment to Employment Agreement, dated April 14, 2008, by and between ArQule, Inc. and Peter S. Lawrence. Filed as Exhibit 10.4 to the Registrant’s Current Report on Form 8-K, filed on April 18, 2008 (File No. 000-21429) and incorporated herein by reference.

10.9 Employment Agreement, dated as of June 17, 2008, by and between ArQule, Inc. and Brian Schwartz, filed as Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed on February 24, 2012 (File No. 000-21429) and incorporated herein by reference.

10.10 Amendment to Employment Agreement dated as of February 23, 2012 by and between ArQule, Inc. and Brian Schwartz, filed as Exhibit 10.2 to Amendment No.1 to the Registrant’s Current Report on Form 8-K filed on February 27, 2012 (File No. 000-21429) and incorporated herein by reference.

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		ARQULE, INC. (Registrant)


		/s/ Peter S. Lawrence
		Peter S. Lawrence
		President and Chief Operating Officer


March 8, 2013

Exhibit 10.1

SECOND AMENDMENT TO EMPLOYMENT AGREEMENT

This Second Amendment to Employment Agreement (“Second Amendment”), effective as of March 8, 2013 (the “Effective Date”) is entered into by and between ArQule, Inc., a Delaware corporation (the "Company") with its principal offices at 19 Presidential Way, Woburn, Massachusetts 01801, and Paolo Pucci ("Executive"). The purpose of this Second Amendment is to amend the Employment Agreement dated as of April 15, 2008 between the Company and Executive (the "Employment Agreement"), as previously amended by an agreement effective as of July 15, 2010 (the “First Amendment”). Capitalized terms used but not defined in this Second Amendment shall have the meanings ascribed to them in the Employment Agreement.

In consideration of 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 Company and Executive (collectively, the "Parties") hereby agree as follows:

1.	Term of Employment. Section 1 of the Employment Agreement, as amended, is hereby amended and replaced in its entirety with the following:

“The Company hereby agrees to continue to employ Executive, and Executive hereby accepts such continued employment with the Company, upon the terms and subject to the conditions set forth in the Employment Agreement, as amended. The Parties agree that the employment term shall continue through March 8, 2017, unless earlier terminated in accordance with the provisions of Section 5 of the Employment Agreement (the “Employment Term”), provided that the Company shall provide Executive with no fewer than ninety (90) days advance written notice in the event it decides not to extend this Agreement beyond the Employment Term or negotiate in good faith a new agreement, and in the event the Company does not provide such 90-day advance notice, the Company shall pay Executive up to 90 days of his Base Salary in lieu of such advance notice.”

2.	Performance-Based Stock Units. Section 6 of the First Amendment is hereby replaced entirely with the following provision:

“In accordance with the approval of the Compensation, Nominating and Governance Committee (the "CNG Committee") of even date herewith and subject to the terms and conditions of the Amended and Restated 1994 Equity Incentive Plan (the “Plan”) and the Stock Unit Agreement that the Company shall provide to Executive (which shall be substantially in the form attached as Exhibit B to the Second Amendment), and in addition to any other equity awards for which Executive may be eligible, the CNG Committee hereby affirms the grant to Executive of 390,000 common stock units (the "Performance-Based Stock Units"), which shall vest in two tranches based on the Company's achievement of the milestones set forth on Exhibit A to this Second Amendment. Executive must be employed by the Company as of the date each milestone is achieved to be entitled to the vesting of the Performance-Based Stock Units associated with that milestone. Notwithstanding the foregoing, if there is (i) a Change of Control as defined in Section 6 of the Employment Agreement, and (ii) the Company terminates Executive’s employment without Cause (as defined in Section 5.2 of the Employment Agreement), or is deemed to terminate Executive’s employment without Cause, within the period commencing three months prior to the latest possible date of a Change of Control and ending one year after the latest possible date of a Change of Control, then the Severance Package set forth in Section 5.1.1 of the Employment Agreement shall, to the extent not previously vested or paid, incrementally include 390,000 Performance-Based Stock Units, which shall vest on the Termination Date without regard to the milestones set forth on Exhibit A , provided that Executive satisfies all conditions precedent to receiving the Severance Package as set forth in Section 5.1.1 of the Employment Agreement. For avoidance of doubt, a termination without Cause occurring during the period commencing three months prior to the latest possible date of a Change of Control and ending one year after the latest possible date of a Change of Control shall include a Deemed Termination as that term is defined in Section 5.1.2 of the Employment Agreement. Payment of the Performance-Based Stock Units as part of the Severance Package shall cancel this award.”

No tax advice. Executive acknowledges and agrees that the Company has provided no tax advice to Executive with respect to this Second Amendment and that Executive shall be solely responsible for any and all taxes attributable to Executive, including but not limited to income taxes and payroll taxes.

Entire Understanding. This Second Amendment, including its Exhibits, constitutes the entire understanding and agreement between the Parties regarding the subject matter hereof and supersedes all prior agreements, written or oral, with respect to the subject matter hereof, except that, other than as explicitly modified by the terms of this Second Amendment, the Employment Agreement shall remain in full force and effect in accordance with its provisions. This Second Amendment shall be incorporated into the Employment Agreement as an additional provision thereto.

5.	Governing Law. This Second Amendment shall be governed by and construed and enforced in accordance with the laws (other than the law governing conflict of law questions) of the Commonwealth of Massachusetts.

IN WITNESS WHEREOF, the Parties have executed or caused to be executed this Second Amendment as of the date set forth above.

ARQULE, INC.	EXECUTIVE


By: /s/ William G. Messenger	By: /s/ Paolo Pucci
Name: William G. Messenger	Name: Paolo Pucci
Title: Chairman of the Compensation,
Nominating and Governance Committee

EXHIBIT A

Vesting Schedule for Performance-Based Stock Units

The Performance-Based Stock Units described in Section 2 of this Second Amendment shall vest in two tranches according to the following schedule:

Milestone	Shares
Regulatory approval of a Company compound as set forth in votes of the CNG Committee relating thereto (the “Clinical Development Target”).	300,000
If after the Clinical Development Target is met, the Company’s common stock trades at or above a target price and for a duration as set forth in votes of the CNG Committee relating thereto.	90,000

Exhibit 10.2

THIRD AMENDMENT TO EMPLOYMENT AGREEMENT

This Third Amendment to Employment Agreement (“Third Amendment”), effective as of March 8, 2013, is entered into by and between ArQule, Inc., a Delaware corporation (the "Company") with its principal offices at 19 Presidential Way, Woburn, Massachusetts 01801, and Peter Lawrence ("Executive"). The purpose of this Third Amendment is to amend the Employment Agreement dated as of April 13, 2006 between the Company and Executive (the "Employment Agreement"), as previously amended by an agreement effective as of October 4, 2007 (the First Amendment”), and as further amended by an agreement effective as of April 14, 2008 (the “Second Amendment”). Capitalized terms used but not defined in this Third Amendment shall have the meanings ascribed to them in the Employment Agreement.

1.	Term of Employment. Section 1 of the Employment Agreement, as amended, is hereby amended and replaced in its entirety with the following:

2.	Title; Duties. Section 2 of the Employment Agreement, as amended, regarding Executive’s title and duties is hereby amended and replaced in its entirety with the following:

“During the Employment Term, Executive shall serve as President, Chief Operating Officer (“COO”), General Counsel and Secretary reporting to the Chief Executive Officer (“CEO”) of the Company. In Executive’s capacity as COO, Executive shall have management oversight of the clinical development, business and corporate development and pharmaceutical development functions of the Company. Executive hereby agrees to undertake the duties and responsibilities inherent in such positions and such other duties and responsibilities consistent with such position as the CEO shall from time to time reasonably assign to Executive.”

Performance-Based Stock Units. In accordance with the approval of the Compensation, Nominating and Governance Committee (the "CNG Committee") of even date herewith and subject to the terms and conditions of the Amended and Restated 1994 Equity Incentive Plan (the “Plan”) and the Stock Unit Agreement that the Company shall provide to Executive (which shall be substantially in the form attached as Exhibit B to this Third Amendment), and in addition to any other equity awards for which Executive may be eligible, the CN&G Committee hereby grants to Executive 125,000 common stock units (the "Performance-Based Stock Units"), which shall vest based on the Company's achievement of one or more of the milestones set forth on Exhibit A to this Third Amendment. Executive must be employed by the Company as of the date the milestone is achieved to be entitled to the vesting of the Performance-Based Stock Units. Notwithstanding the foregoing, if (i) there is a Change of Control as defined in Section 6 of the Employment Agreement, and (ii) the Company terminates Executive’s employment without Cause (as defined in Section 5.2 of the Employment Agreement), or is deemed to terminate Executive’s employment without Cause, within the period commencing three months prior to the latest possible date of a Change of Control and ending one year after the latest possible date of a Change of Control, then the Severance Package set forth in Section 5.1.1 of the Employment Agreement shall, to the extent not previously vested or paid, incrementally include 125,000 Performance-Based Stock Units, which shall vest on the Termination Date without regard to the milestones set forth on Exhibit A , provided that Executive satisfies all conditions precedent to receiving the Severance Package as set forth in Section 5.1.1 of the Employment Agreement. For avoidance of doubt, a termination without Cause occurring during the period commencing three months prior to the latest possible date of a Change of Control and ending one year after the latest possible date of a Change of Control shall include a Deemed Termination as that term is defined in Section 5.1.2 of the Employment Agreement. Payment of the Performance-Based Stock Units as part of the Severance Package shall cancel this award.

Section 409A of the Code . It is the intention of the parties to the Employment Agreement, and the First, Second and Third Amendments (jointly the “Agreements”), to the extent possible, that no payment or entitlement pursuant to the Agreements will give rise to any adverse tax consequences to Executive under Section 409A of the Internal Revenue Code (“Code”) and Department of Treasury regulations and other interpretive guidance issued thereunder, including that issued after the date hereof (collectively, “Section 409A”). The Agreements shall be interpreted to that end and consistent with that objective. Notwithstanding any other provision herein, if Executive is a “specified employee” as defined in, and pursuant to, Treas. Reg. Section 1.409A-1(i) on the Termination Date, no payment of compensation under the Agreements shall be made to Executive during the period lasting six (6) months from the Termination Date to the extent required to comply with Section 409A of the Code. If any payment to Executive is delayed pursuant to the foregoing sentence, such payment instead shall be made in a lump sum payment on the first business day following the expiration of the six-month period referred to in the prior sentence.

Each payment under the Agreements shall be designated as a “separate payment” within the meaning of Section 409A of the Code. To the extent any reimbursement or in-kind benefit due to Executive under the Agreements constitutes “deferred compensation” under Section 409A of the Code, any such reimbursement or in-kind benefit shall be paid to Executive in a manner consistent with Treas. Reg. Section 1.409A-3(i)(1)(iv).

5.	Accelerated Vesting in Change of Control. The first paragraph of Section 6 of the Employment Agreement, as amended, is hereby amended and replaced in its entirety with the following:

“In the event that both (i) a Change of Control occurs and (ii) the Company terminates Executive’s Employment without Cause (or is deemed to terminate Executive’s Employment without Cause) within the period commencing three months prior to the latest possible date of a Change of Control and ending one year after the latest possible date of a Change of Control, any Stock Option held by Executive shall become immediately exercisable as to all option shares without regard to the vesting schedule set forth on the applicable Option Certificate, and any shares of restricted stock previously granted shall immediately be free and clear of any restrictions. For purposes of this Agreement, any one of the following events shall be considered a “Change of Control” of the Company:”

6.	No tax advice. Executive acknowledges and agrees that the Company has provided no tax advice to Executive with respect to this Third Amendment and that Executive shall be solely responsible for any and all taxes attributable to Executive, including but not limited to income taxes and payroll taxes.

Entire Understanding. This Third Amendment, including its Exhibits, constitutes the entire understanding and agreement between the Parties regarding the subject matter hereof and supersedes all prior agreements, written or oral, with respect to the subject matter hereof, except that, other than as explicitly modified by the terms of this Third Amendment, the Employment Agreement (as previously amended) shall remain in full force and effect in accordance with its provisions. This Third Amendment shall be incorporated into the Employment Agreement as an additional provision thereto.

8.	Governing Law. This Third Amendment 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.

IN WITNESS WHEREOF, the Parties have executed or caused to be executed this Third Amendment as of the date set forth above.

ARQULE, INC.	EXECUTIVE


By: /s/ Paolo Pucci	By: /s/ Peter S. Lawrence
Name: Paolo Pucci	Name: Peter Lawrence
Title: Chief Executive Officer

EXHIBIT A

Vesting Schedule for Performance-Based Stock Units

The Performance-Based Stock Units described in Section 2 of this Second Amendment shall vest in two tranches according to the following schedule:

Milestone	Shares
Regulatory approval of a Company compound as set forth in votes of the CNG Committee relating thereto (the “Clinical Development Target”).	125,000

Exhibit 10.3

SECOND AMENDMENT TO EMPLOYMENT AGREEMENT

This Second Amendment to Employment Agreement (“Second Amendment”), effective as of March 8, 2013 (the “Effective Date”) is entered into by and between ArQule, Inc., a Delaware corporation (the "Company") with its principal offices at 19 Presidential Way, Woburn, Massachusetts 01801, and Brian Schwartz ("Executive"). The purpose of this Second Amendment is to amend the Employment Agreement dated as of June 17, 2008 between the Company and Executive (the "Employment Agreement"), as previously amended by an agreement effective as of February 23, 2012. Capitalized terms used but not defined in this Second Amendment shall have the meanings ascribed to them in the Employment Amendment.

1.	Term of Employment. Section 1 of the Employment Agreement, as amended, is hereby amended and replaced in its entirety with the following:

Performance-Based Stock Units. In accordance with the approval of the Compensation, Nominating and Governance Committee (the "CNG Committee") of even date herewith and subject to the terms and conditions of the Amended and Restated 1994 Equity Incentive Plan (the “Plan”) and the Stock Unit Agreement that the Company shall provide to Executive (which shall be substantially in the form attached as Exhibit B to this Second Amendment), and in addition to any other equity awards for which Executive may be eligible, the CN&G Committee hereby grants to Executive 120,000 common stock units (the "Performance-Based Stock Units"), which shall vest upon the Company's achievement of one or more of the milestones set forth on Exhibit A to this Second Amendment. Executive must be employed by the Company as of the date that a milestone is achieved to be entitled to the vesting of the Performance-Based Stock Units associated with that milestone. Notwithstanding the foregoing, if there is (i) a Change of Control as defined in Section 6 of the Employment Agreement, and (ii) the Company terminates Executive’s employment without Cause (as defined in Section 5.2 of the Employment Agreement), or is deemed to terminate Executive’s employment without Cause, within the period commencing three months prior to the latest possible date of a Change of Control and ending one year after the latest possible date of a Change of Control, then the Severance Package set forth in Section 5.1.1 of the Employment Agreement shall, to the extent not previously vested or paid, incrementally include 120,000 Performance-Based Stock Units, which shall vest on the Termination Date without regard to the milestones set forth on Exhibit A , provided that Executive satisfies all conditions precedent to receiving the Severance Package as set forth in Section 5.1.1 of the Agreement. For avoidance of doubt, a termination without Cause occurring during within the period commencing three months prior to the latest possible date of a Change of Control and ending one year after the latest possible date of a Change of Control shall include a Deemed Termination as that term is defined in Section 5.1.2 of the Employment Agreement. Payment of the Performance-Based Stock Units as part of the Severance Package shall cancel this award.

Entire Understanding. This Second Amendment, including its Exhibits, constitutes the entire understanding and agreement between the Parties regarding the subject matter hereof and supersedes all prior agreements, written or oral, with respect to the subject matter hereof, except that, other than as explicitly modified by the terms of this Second Amendment, the Employment Agreement (as previously amended) shall remain in full force and effect in accordance with its provisions. This Second Amendment shall be incorporated into the Employment Agreement as an additional provision thereto.

5.	Governing Law. This Second Amendment 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.

IN WITNESS WHEREOF, the Parties have executed or caused to be executed this Second Amendment as of the date set forth above.

ARQULE, INC.	EXECUTIVE


By: /s/ Paolo Pucci	By: /s/ Brian Schwartz
Name: Paolo Pucci	Name: Brian Schwartz
Title: Chief Executive Officer

EXHIBIT A

Vesting Schedule for Performance-Based Stock Units

The Performance-Based Stock Units described in Section 2 of this Second Amendment shall vest in two tranches according to the following schedule:

Milestone	Shares
Regulatory approval of a Company compound as set forth in votes of the CNG Committee relating thereto (the “Clinical Development Target”).	120,000