8-K

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 8-K

CURRENT REPORT

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

Date of Report (Date of earliest event reported): January 19, 2005

ARQULE, INC.

(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.)

19 Presidential Way
Woburn, MA

(Address of principal executive offices)

01801

(Zip code)

(781) 994-0300

(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):

     ¨ 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))

TABLE OF CONTENTS

	Item 1.01 Entry Into a Material Definitive Agreement
	Item 9.01 Financial Statements and Exhibits.
SIGNATURES
Ex-99.1 Form of Agreement to the Amended and Restated 1994 Equity Incentive Plan

Section 1—Registrant’s Business and Operations

Item 1.01 Entry Into a Material Definitive Agreement

On January 19, 2005, the Compensation and Nominating Committee of the Board of Directors of ArQule, Inc. awarded cash bonuses to the Company’s named executive officers (as defined in Item 402(a)(3) of Regulation S-K promulgated by the United States Securities and Exchange Commission) in respect of the Company’s performance for the fiscal year ended December 31, 2004. Bonuses were awarded as follows:

Executive Officer	Amount
Stephen A. Hill, President
and Chief Executive Officer	$	206,000
J. David Jacobs, Vice President, Legal,
General Counsel and Secretary *	$	45,386
Chiang Li, Vice President
and Chief Scientific Officer	$	101,920
Louise A. Mawhinney, Vice President,
Treasurer and Chief Financial Officer	$	50,000

On January 19, 2005, the Compensation and Nominating Committee of the Board of Directors of ArQule, Inc. granted stock option awards under its 1994 Amended and Restated Equity Incentive Plan to the Company’s named executive officers in respect of the Company’s performance for the fiscal year ended December 31, 2004. Awards were granted as follows:

Executive Officer	Award
Stephen A. Hill, President
and Chief Executive Officer		125,000
J. David Jacobs, Vice President, Legal,
General Counsel and Secretary*		30,000
Chiang Li, Vice President
and Chief Scientific Officer		50,000
Louise A. Mawhinney, Vice President,
Treasurer and Chief Financial Officer		50,000

On January 19, 2005, the Compensation and Nominating Committee of the Board of Directors of ArQule, Inc. approved base salaries and bonus ranges for the Company’s named executive officers for fiscal year 2005. The Compensation and Nominating Committee annually evaluates the performance and determines the total compensation of the Company’s named executive officers based on the Committee’s assessment of each individual’s responsibilities and performance, the Company’s performance and compensation for comparable positions in similar, publicly-traded biotechnology and biopharmaceutical companies located in the northeastern United States. The base salaries and bonus ranges are as follows:

Executive Officer	Amount		Maximum Potential Bonus
			(% of salary)
Stephen A. Hill, President
and Chief Executive Officer	$	428,480		50	%
J. David Jacobs, Vice President,
Legal, General Counsel and Secretary*	$	236,000		20	%
Chiang Li, Vice President
and Chief Scientific Officer	$	305,760		35	%
Louise A. Mawhinney, Vice President,
Treasurer and Chief Financial Officer	$	211,302		25	%

Dr. Hill, Dr. Li, and Ms. Mawhinney have employment agreements with the Company.

* Mr. Jacobs’ employment and employment contract were terminated without cause effective
March 1, 2005

Section 9—Financial Statements and Exhibits

Item 9.01 Financial Statements and Exhibits.

99.1      Form of Agreement pursuant to the ArQule, Inc. Amended and Restated 1994 Equity Incentive Plan

SIGNATURES

     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/ Louise A. Mawhinney

Louise A. Mawhinney

Vice President and Chief Financial Officer

Date: April 6, 2005

EX-99.1

Exhibit 99.1

Form of Agreement pursuant to the ArQule, Inc. Amended and Restated 1994 Equity Incentive Plan

ARQULE, INC. AMENDED AND RESTATED 1994 EQUITY INCENTIVE PLAN

Incentive Stock Option Terms And Conditions

     1. Plan Incorporated by Reference. This Option is issued pursuant to the terms of the Plan and may be amended as provided in the Plan. Capitalized terms used and not otherwise defined in this certificate have the meanings given to them in the Plan. This certificate does not set forth all of the terms and conditions of the Plan, which are incorporated herein by reference. The Committee administers the Plan and its determinations regarding the operation of the Plan are final and binding. Copies of the Plan may be obtained upon written request without charge from the Company.

     2. Option Price. The price to be paid for each share of Common Stock issued upon exercise of the whole or any part of this Option is the Option Price set forth on the face of this certificate.

     3. Exercisability Schedule. This Option may be exercised at any time and from time to time for the number of shares and in accordance with the exercisability schedule set forth on the face of this certificate, but only for the purchase of whole shares. This Option may not be exercised as to any shares after the Expiration Date.

     4. Method of Exercise. To exercise this Option, the Optionholder shall deliver written notice of exercise to the Company specifying the number of shares with respect to which the Option is being exercised accompanied by payment of the Option Price for such shares in cash, by certified check or in such other form, including shares of Common Stock of the Company valued at their Fair Market Value on the date of delivery, as the Committee may approve. Promptly following such notice, the Company will deliver to the Optionholder a certificate representing the number of shares with respect to which the Option is being exercised.

     5. Rights as a Stockholder or Employee. The Optionholder shall not have any rights in respect of shares as to which the Option shall not have been exercised and payment made as provided above. The Optionholder shall not have any rights to continued employment by the Company or its Affiliated by virtue of the grant of this Option.

     6. Recapitalization, Mergers, Etc. As provided in the Plan, in the event of corporate transaction affecting the Company’s outstanding Common Stock, the Committee shall equitably adjust the number and kind of shares subject to this Option and the exercise price hereunder or make provision for a cash payment. If such transaction involves a consolidation or merger of the Company with another entity, the sale or exchange of all or substantially all of the assets of the Company or a reorganization or liquidation of the Company, then in lieu of the foregoing, the Committee may upon written notice to the Optionholder provide that this Option shall terminate on a date not less than 20 days after the date of such notice unless theretofore exercised. In connection with such notice, the Committee may in its discretion accelerate or waive any deferred exercise period.

     7. Option Not Transferable. This Option is not transferable by the Optionholder otherwise than by will or the laws of descent and distribution, and is exercisable, during the Optionholder’s lifetime, only by the Optionholder. The naming of a Designated Beneficiary does not constitute a transfer.

     8. Exercise of Option After Termination of Employment. If the Optionholder’s employment with (a) the Company, (b) an Affiliate, or (c) a corporation (or parent or subsidiary corporation of such corporation) issuing or assuming a stock option in a transaction to which section 424(a) of the Code applies, is terminated for any reason other than by disability (within the meaning of section 22(e)(3) of the Code) or death, the Optionholder may exercise the rights which were available to the Optionholder at the time of such termination only within three months from the date of termination. If Optionholder’s employment is terminated as a result of disability, such rights may be exercised within twelve months from the date of termination. Upon the death of the Optionholder, his or her Designated

Beneficiary shall have the right, at any time within twelve months after the date of death, to exercise in whole or in part any rights that were available to the Optionholder at the time of death. Notwithstanding the foregoing, no rights under this Option may be exercised after the Expiration Date.

     9. Compliance with Securities Laws. It shall be a condition to the Optionholder’s right to purchase shares of Common Stock hereunder that the Company may, in its discretion, require (a) that the shares of Common Stock reserved for issue upon the exercise of this Option shall have been duly listed, upon official notice of issuance, upon any national securities exchange or automated quotation system on which the Company’s Common Stock may then be listed or quoted, (b) that either (i) a registration statement under the Securities Act of 1933 with respect to the shares shall be in effect, or (ii) in the opinion of counsel for the Company, the proposed purchase shall be exempt from registration under that Act and the Optionholder shall have made such undertakings and agreements with the Company as the Company may reasonably require, and (c) that such other steps, if any, as counsel for the Company shall consider necessary to comply with any law applicable to the issue of such shares by the Company shall have been taken by the Company or the Optionholder, or both. The certificates representing the shares purchased under this Option may contain such legends as counsel for the Company shall consider necessary to comply with any applicable law.

     10. Payment of Taxes. The Optionholder shall pay to the Company, or make provision satisfactory to the Company for payment of, any taxes required by law to be withheld with respect to the exercise of this Option. The Committee may, in its discretion, require any other Federal or state taxes imposed on the sale of the shares to be paid by the Optionholder. In the Committee’s discretion, such tax obligations may be paid in whole or in part in shares of Common Stock, including shares retained from the exercise of this Option, valued at their Fair Market Value on the date of delivery. The Company and its Affiliated may, to the extent permitted by law, deduct any such tax obligations from any payment of any kind otherwise due to the Optionholder.

     11. Notice of Sale of Shares Required. The Optionholder agrees to notify the Company in writing within 30 days of the disposition of any shares purchased upon exercise of this Option if such disposition occurs within two years of the date of the grant of this Option or within one year after such purchase.