Exhibit 10.22

 

T2

 

TERMINATION PROTECTION AGREEMENT

 

 

AGREEMENT effective December 20, 2002, between Arena Pharmaceuticals, Inc. (the
“Company”) and [NAME] (“Executive”).

 

WHEREAS, Executive has important management responsibilities and talents which
benefit the Company and its affiliates; and

 

WHEREAS, the Company believes that its best interests are served if Executive is
encouraged to remain with the Company and the Company has determined that
Executive’s ability to perform Executive’s responsibilities and utilize
Executive’s talents for the benefit of the Company, and the Company’s ability to
retain Executive as an employee, will be significantly enhanced if Executive is
provided with fair and reasonable protection from the risks associated with a
change in ownership or control of the Company; and

 

WHEREAS, the Board has approved and authorized this Agreement at its meeting on
November 14, 2002,

 

NOW, THEREFORE, the Company and Executive hereby agree as follows:

 

1.             Defined Terms.

 

Unless otherwise indicated, capitalized terms used in this Agreement which are
defined in Schedule A shall have the meanings set forth in Schedule A.

 

2.             Effective Date; Term.

 

This Agreement shall commence on December 20, 2002 (the “Effective Date”) and
shall continue in effect through December 31, 2005; provided, however, the term
of this Agreement shall automatically be extended for one additional year beyond
December 31, 2005 and for successive one year periods thereafter, unless, not
later than January 30 of each calendar year, commencing in 2003 for the 2006
calendar year (e.g., 2004 for the 2007 calendar year, 2005 for the 2008 calendar
year, etc.), the Company shall have given written notice that it does not wish
to extend this Agreement for an additional year, in which event this Agreement
shall continue to be effective until December 31 of the applicable calendar
year; provided, further, that, notwithstanding any such notice by the Company
not to extend, if a Change in Control shall have occurred during the original or
any extended term of this Agreement, this Agreement shall remain in effect for a
period of two (2) years after such Change in Control.

 

3.             Change in Control Benefits.

 

If Executive’s employment with the Company or its affiliates is terminated at
any time within two (2) years following a Change in Control by the Company or
its affiliates without Cause, or by Executive for Good Reason (the effective
date of either such termination hereafter

 

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referred to as the “Termination Date”), Executive shall be entitled to the
benefits provided hereafter in this Section 3 and as otherwise set forth in this
Agreement.  If Executive’s employment is terminated within one (1) year prior to
a Change in Control, and Executive reasonably demonstrates after such Change in
Control that such termination was at the request or suggestion of any individual
or entity who or which ultimately effects a Change in Control (an “Anticipatory
Termination”), this Agreement shall become effective upon such Change in Control
involving such individual or entity, and Executive’s Termination Date shall be
deemed to have occurred immediately following the Change in Control, and
therefore Executive shall be entitled to the benefits provided hereafter in this
Section 3 and as otherwise set forth in this Agreement.  In the event that
Executive’s employment is terminated as a result of death or Disability,
Executive shall not be entitled to the benefits provided in this Section 3.

 

(a)           Severance Benefits.  Within five business days after the
Termination Date, the Company shall pay Executive a lump sum amount, in cash,
equal to Executive’s Annual Compensation.

 

(b)           Continued Health Insurance Coverage.  Until the second anniversary
of the Termination Date, the Company shall, at its expense, provide Executive
with medical and dental insurance at the highest level provided to Executive
during the period beginning immediately prior to the Change in Control and
ending on the Termination Date; provided, however, that if Executive becomes
employed by a new employer, the coverages provided by the Company pursuant to
this sentence shall become secondary to those coverages provided by the new
employer.  In addition, Executive will be entitled to full COBRA continuation
coverage commencing on the second anniversary of the Termination Date.

 

(c)           Full Vesting of All Stock Options and Restricted Shares.
Notwithstanding any provision to the contrary in the Amended and Restated Arena
Pharmaceuticals, Inc. 2000 Equity Compensation Plan (the “Option Plan”) or any
award agreement under  he Option Plan, (i) any outstanding, unexercisable stock
options or unvested restricted shares shall become fully exercisable and vested
as of the Termination Date and (ii) any stock options shall remain exercisable
until the first anniversary of the Termination Date; provided, however, that (x)
in no event shall any stock option continue to be exercisable after the
expiration of the 10th anniversary of the grant date of any such option and (y)
this section shall not restrict the Company’s ability to adjust stock options
pursuant to Section 3(b) of the Option Plan (or any successor provision under
the Option Plan or any similar provision in any other Company option plan) or to
require that optionees surrender their stock option pursuant to Section 10(b) of
the Option Plan (or any successor provision under the Option Plan or any similar
provision in any other Company option plan), so long as, in any such adjustment
or surrender, Executive is treated no less favorably than any other employee of
the Company.

 

(d)           Other Payments And Benefits.  Executive shall also be entitled to
receive any other payments or benefits Executive is entitled to pursuant to the
terms of any Company plans, programs or arrangements (other than severance
benefits).

 

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4.             Mitigation.

 

Executive shall not be required to mitigate damages or the amount of any payment
provided for under this Agreement by seeking other employment or otherwise, and
compensation earned from such employment or otherwise shall not reduce the
amounts otherwise payable under this Agreement.  No amounts payable under this
Agreement shall be subject to reduction or offset in respect of any claims which
the Company (or any other person or entity) may have against Executive.

 

5.             Severance Benefit Cap.

 

In the event that any payment or benefit (the “Payments”) received or to be
received by Executive pursuant to the terms of this Agreement or in connection
with Executive’s termination of employment or contingent upon a change in
control of the Company pursuant to any plan or arrangement or other agreement
with the Company (or any affiliate) would be subject to the excise tax (the
“Excise Tax”) imposed by Section 4999 of the Code, then Executive will receive
whichever of the following provides a greater after-tax benefit to Executive:
(i) the Payments, reduced by the minimum amount necessary so as not to be
subject to the Excise Tax, or (ii) the full amount of the Payments, with
Executive liable for any Excise Tax.

 

6.                                       Employment Status; No Effect Prior to
Change in Control; Termination for Cause.

 

Executive and the Company acknowledge and agree that prior to a Change in
Control, Executive’s employment is “at will” and may be terminated at any time,
by the Company or by Executive, with or without Cause, subject to applicable
law.  In the event Executive’s employment is terminated for any reason prior to
a Change in Control, other than in the case of an Anticipatory Termination,
Executive shall have no rights to any payments or benefits under this Agreement
and after any such termination, this Agreement shall be of no further force or
effect.

 

Following a Change in Control, nothing in this Agreement shall be construed to
prevent the Company from terminating Executive’s employment for Cause.  In the
event Executive is terminated for Cause following a Change in Control, Executive
shall have no rights to any payments or benefits under this Agreement and after
such termination, this Agreement shall be of no further force or effect.

 

7.             Indemnification; Director’s and Officer’s Liability Insurance.

 

Until the sixth anniversary of the Termination Date and for so long thereafter
as any claim for indemnification asserted on or prior to such date has not been
fully adjudicated (the “Indemnification Period”), the Company shall indemnify,
defend, and hold harmless Executive against all losses, claims, damages, costs,
expenses (including attorneys’ fees) or liabilities (including attorneys’ fees)
arising out of actions or omissions or alleged actions or omissions which have
occurred on or prior to the Termination Date to the same extent and on the same

 

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terms and conditions (including with respect to advancement of expenses) as
permitted under applicable law and the Company’s certificate of incorporation
and by-laws as in effect immediately prior to the Change in Control.  In
addition, the Company shall maintain Director’s and Officer’s liability
insurance on behalf of Executive, at the level in effect immediately prior to
the Change in Control, for the Indemnification Period.

 

8.             Confidential Information.

 

Executive acknowledges that the Proprietary Information and Inventions Agreement
previously entered into by Executive and the Company remains in full force and
effect and survives the termination of his or her employment with the Company;
provided that nothing contained in such agreement or this Section 8 shall
prevent Executive from being employed by a competitor of any of the Company or
utilizing Executive’s general skills, experience, and knowledge, including those
developed while employed by any of the Company or its affiliates.

 

9.             Disputes.

 

Any dispute or controversy arising under or in connection with this Agreement
shall be settled exclusively by arbitration in San Diego, California or, at the
option of Executive, in the county where Executive then resides, in accordance
with the Rules of the American Arbitration Association then in effect, except
that Executive may, at Executive’s option, bring that action in a court of
competent jurisdiction, even if the Company has earlier instituted an action
hereunder.  Judgment may be entered on an arbitrator’s award relating to this
Agreement in any court having jurisdiction.

 

10.           Costs of Proceedings.

 

The Company shall pay for all costs and expenses of Executive, at least monthly,
including attorneys’ fees and disbursements, in connection with any legal
proceeding (including arbitration), whether instituted by the Company or by
Executive, relating to the interpretation or enforcement of any provision of
this Agreement, except that if Executive instituted the proceeding and the
judge, arbitrator or other individual presiding over the proceeding
affirmatively finds that Executive instituted the proceeding in bad faith, then
Executive shall be required to pay all costs and expenses of Executive,
including attorney’s fees and disbursements, and shall not be entitled to
reimbursement.  The Company shall pay prejudgment interest on any money judgment
obtained by Executive as a result of such a proceeding, calculated at the prime
rate of interest as reported in the Wall Street Journal, as in effect from time
to time, from the date that payment should have been made to Executive under
this Agreement.

 

11.           Successors And Assigns.

 

Except as otherwise provided herein, this Agreement shall be binding upon, inure
to the benefit of and be enforceable by the Company and Executive and their
respective heirs, legal representatives, successors and assigns.  If the Company
shall be merged into or

 

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consolidated with another entity, the provisions of this Agreement shall be
binding upon and inure to the benefit of the entity surviving such merger or
resulting from such consolidation.  The Company shall require any successor
(whether direct or indirect, by purchase, merger, consolidation or otherwise) to
all or substantially all of the business or assets of the Company, by agreement
in form and substance satisfactory to Executive, to expressly assume and agree
to perform this Agreement in the same manner and to the same extent that the
Company would be required to perform it if no such succession had taken place. 
The provisions of this Section 11 shall continue to apply to each subsequent
employer of Executive in the event of any subsequent merger, consolidation or
transfer of assets of such subsequent employer.

 

12.           Withholding.

 

Notwithstanding the provisions of Sections 4 and 5 hereof, the Company may, to
the extent required by law, withhold applicable federal, state and local income
and other taxes from any payments due to Executive hereunder.

 

13.           Applicable Law.

 

This Agreement shall be governed by and construed in accordance with the laws of
the State of California applicable to contracts made and to be performed
therein.

 

14.           Entire Agreement.

 

This Agreement constitutes the entire agreement between the parties regarding
the subject matter hereof.  This Agreement may be changed only by a written
agreement executed by the Company and Executive.

 

15.           Notice.  Notices and all other communications provided for in this
Agreement shall be in writing and shall be deemed to have been duly given when
personally delivered, delivered by a nationally recognized overnight delivery
service, or sent by certified mail, return receipt requested, postage prepaid,
addressed to the respective addresses last given by each party to the other,
provided that all notices to the Company shall be directed to the attention of
the Board with a copy to the Secretary of the Company.  All notices and
communications shall be deemed to have been received on the date of delivery
thereof or on the third business day after the mailing thereof, except that
notice of change of address shall be effective only upon receipt.

 

16.           Severability.  The provisions of this Agreement shall be deemed
severable, and the invalidity or unenforceability of any provision hereof shall
not affect the validity or enforceability of the other provisions hereof.

 

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IN WITNESS WHEREOF, the parties have executed this Agreement on the dates set
forth below.

 

 

 

ARENA PHARMACEUTICALS, INC.

 

 

 

 

 

 

 

 

 

By:

 

 

 

Dated:  December 20, 2002

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Dated:                 , 200      

 

Executive

 

 

 

 

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Schedule A

 

CERTAIN DEFINITIONS

 

 

As used in this Agreement, and unless the context requires a different meaning,
the following terms, when capitalized, have the meaning indicated:

 

“Annual Compensation” means the sum of (i) Executive’s annual rate of base
salary in effect on the date of the Change in Control or the Termination Date,
whichever is higher, and (ii)  any bonus paid or payable to Executive for the
year preceding the Change in Control or the year preceding the Termination Date,
whichever is higher.

 

“Board” means the Company’s Board of Directors.

 

“Cause” shall mean Executive’s termination of employment due to:

 

(i) the willful and continued failure of Executive to substantially perform
Executive’s duties with the Company (other than any such failure resulting from
incapacity due to physical or mental illness), after a written demand for
substantial performance is delivered to Executive by the Chief Executive Officer
of the Company which specifically identifies the manner in which the Chief
Executive Officer believes that Executive has not substantially performed
Executive’s duties; or

 

(ii) (A) Executive’s conviction of, or plea of guilty or nolo contendere to, a
felony or (B) the willful engaging by Executive in gross misconduct which is
materially and demonstrably injurious to the Company.

 

“Change in Control” shall mean any of the following events:

 

(i) any person or group of persons acting in concert (excluding Company benefit
plans) becoming the beneficial owner of securities of the Company having at
least 30% of the voting power of the Company’s then outstanding securities
(unless the event causing the 30% threshold to be crossed is an acquisition of
voting common securities directly from the Company); or

 

(ii) any merger or other business combination of the Company, any sale or lease
of the Company’s assets or any combination of the foregoing transactions (the
“Transactions”) other than a Transaction immediately following which the
shareholders of the Company immediately prior to the Transaction own at least
60% of the voting power, directly or indirectly, of (A) the surviving
corporation in any such merger or other business combination; (B) the purchaser
or lessee of the Company’s assets; or (C) both the surviving corporation and the
purchaser or lessee in the event of any combination of Transactions; or

 

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(iii) within any 24 month period, the persons who were directors immediately
before the beginning of such period (the “Incumbent Directors”) shall cease to
constitute at least a majority of the Board or the board of directors of a
successor to the Company.  For this purpose, any director who was not a director
at the beginning of such period shall be deemed to be an Incumbent Director if
such director was elected to the Board by, or on the recommendation of or with
the approval of, at least three-quarters of the directors who then qualified as
Incumbent Directors (so long as such director was not nominated by a person who
has expressed an intent to effect a Change in Control or engage in a proxy or
other control contest).

 

“Code” means the Internal Revenue Code of 1986, as amended.

 

“Company” means Arena Pharmaceuticals, Inc. and its successors and assigns.

 

“Disability” means an illness or injury which prevents Executive from performing
his or her duties, as they existed immediately prior to the illness or injury,
on a full time basis for 180 consecutive business days.

 

“Good Reason” means any of the following actions, without Executive’s express
prior written approval, other than due to Executive’s permanent disability or
death:

 

(i)  any reduction in Executive’s annual base salary;

 

(ii)  any material reduction in Executive’s target bonus level or bonus
opportunities;

 

(iii)  Executive’s duties, titles or responsibilities are materially diminished
in comparison to the duties, titles and responsibilities enjoyed by Executive
immediately prior to the Change in Control;

 

(iv)  the assignment to Executive of any duties materially inconsistent with his
position;

 

(v)  in the event Executive is a member of the Board, any failure to elect
Executive to or Executive’s removal from the Board or, if the Company is not
publicly-held following a Change in Control, to the board of directors of the
Company’s ultimate publicly-held parent;

 

(vi)  any significant reduction, in the aggregate, in the employee benefit
programs made available to Executive other than a reduction in such employee
benefit programs affecting all employees of the Company substantially equally;

 

(vii)  the relocation of Executive’s principal place of business to a location
outside the San Diego, California metropolitan area; or

 

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(viii)  the failure of the Company to obtain a satisfactory agreement from any
successor to assume and agree to perform the Agreement, as contemplated in
Section 11 of this Agreement.

 

Executive’s continued employment shall not constitute consent to, or a waiver of
rights with respect to, any circumstances constituting Good Reason hereunder.

 

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Schedule 1

 

PARTICIPATING OFFICERS:

 

1.               Nigel Beeley

2.               Paul Maffuid

3.               Michael Lerner

 

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