Exhibit 10.2

 

T1

 

AMENDED AND RESTATED TERMINATION PROTECTION AGREEMENT

 

The Termination Protection Agreement, between Arena Pharmaceuticals, Inc.
(the “Company”) and [NAME] (“Executive”), originally effective on December 20,
2002 (the “Original Agreement”), is hereby amended and restated on December 30,
2008 (as amended, this “Agreement”).

 

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 approved and authorized the Original Agreement on
November 14, 2002, and the Compensation Committee approved this Agreement on
November 20, 2008.

 

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.

 

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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 referred to as the “Termination
Date”), then, contingent on Executive’s execution of a general waiver and
release in substantially the form attached hereto as Exhibit A within the
applicable time period set forth therein, but in no event later than sixty (60)
days following termination of Executive’s employment, and provided that such
release becomes effective, Executive shall be entitled to the benefits provided
hereafter in this Section 3 and as otherwise set forth in this Agreement. The
Company shall provide the form of such release to Executive on, or within a
reasonable time after, the Termination Date.  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 earlier
of (i) following the Termination Date, the Executive’s death or (ii) the first
business day that is six months following 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 a Company equity compensation
plan (an “Option Plan”) or any award agreement under an 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; (y) this section shall not restrict the Company’s
ability to adjust the number of stock options or restricted stock subject to a
grant pursuant to Section 3(b) of the Company’s 2000 Equity Compensation Plan
(or any successor provision under such option plan or any similar provision in
any other Option Plan) or to

 

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require that optionees surrender their stock option pursuant to Section 10(b) of
the Company’s 2000 Equity Compensation Plan (or any successor provision under
such option plan or any similar provision in any other Option Plan), so long as,
in any such adjustment or surrender, Executive is treated no less favorably than
any other employee of the Company; and (z) this section shall not apply to any
grants of performance-based restricted stock units, including any such grants
under the Company’s 2007 Performance-Based Restricted Stock Unit Grant
Agreement.

 

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

 

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.

 

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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
terms and conditions (including with respect to advancement of expenses) as
permitted under applicable law and the Company’s certificate of incorporation
and bylaws 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 and Intellectual Property Obligations.

 

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 if Executive resides in the United States, 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

 

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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 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.           Code Section 409A.

 

Notwithstanding anything to the contrary set forth herein, any payments and
benefits provided under this Agreement (the “Severance Benefits”) that
constitute “deferred compensation” within the meaning of Section 409A of the
Code and the regulations and other guidance thereunder and any state law of
similar effect (collectively “Section 409A”) shall not commence in connection
with Executive’s termination of employment unless and until Executive has also
incurred a “separation from service” (as such term is defined in Treasury
Regulation Section 1.409A-1(h)) (“Separation From Service”), unless such amounts
may be provided to Executive without causing Executive to incur the additional
20% tax under Section 409A.

 

It is intended that, if the Company (or, if applicable, the successor entity
thereto) reasonably determines that the Severance Benefits constitute “deferred
compensation” under Section 409A and Executive is, on the termination of
Executive’s service, a “specified employee” of the Company or any successor
entity thereto, as such term is defined in Section 409A(a)(2)(B)(i) of the Code,
the timing of the Severance Benefit payment complies with the payment limitation
applicable to such employees contained in Section 409A(a)(2)(B)(i).

 

14.           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.

 

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15.           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.

 

16.           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.

 

17.           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, and,
to the greatest extent legally possible, effect shall be given to the intent
manifested by the portion held invalid or inoperative.

 

18.           Counterparts.  This Agreement shall become binding when any one or
more counterparts hereof, individually or taken together, shall bear the
signatures of the parties.  This Agreement may be executed by facsimile or the
exchange of PDF copies, and in two or more counterparts, each of which will be
deemed an original document, and all of which, together with this writing, will
be deemed one instrument.

 

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

 

ARENA PHARMACEUTICALS, INC.

 

 

 

 

 

 

 

 

 

 

By:

 

 

Date: December    , 2008

Name:

 

 

 

Title:

 

 

 

 

 

 

 

 

 

 

 

 

 

Date: December    , 2008

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 Board which
specifically identifies the manner in which the Board 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.

 

In each of (i) and (ii) above, for a termination of employment to be for Cause:
(a) Executive must receive a written notice which indicates in reasonable detail
the facts and circumstances claimed to provide a basis for the termination of
Executive’s employment for Cause; (b) Executive must be provided with an
opportunity to be heard no earlier than 30 days following the receipt of such
notice (during which notice period Executive has the opportunity to cure and has
failed to cure or resolve the behavior in question); and (c) there must be a
good faith determination of Cause by at least three-quarters of the non-employee
outside director members of the Board.

 

“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

 

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(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

 

(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

 

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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 office or place of business to a
location that would cause an increase by more than twenty (20) miles in
Executive’s one-way commuting distance from Executive’s personal residence to
the principal office or place of business at which Executive is required to
perform services, except for required travel for the Company’s business to an
extent substantially consistent with Executive’s prior business travel
obligations; or

 

(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 the 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 Executive Officers:

 

1.               Jack Lief

2.               Dominic Behan

3.               Robert Hoffman

4.               Louis Scotti

5.               Steven Spector

 

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Exhibit A

 

RELEASE AGREEMENT

 

I understand and agree completely to the terms set forth in the Termination
Protection Agreement, as Amended, between Arena Pharmaceuticals, Inc. (the
“Company”) and me (the “Agreement”).  I understand that this release and waiver
(the “Release”), together with the Agreement, constitutes the complete, final
and exclusive embodiment of the entire agreement between the Company and me with
regard to the subject matter hereof.  I am not relying on any promise or
representation by the Company that is not expressly stated herein or in the
Agreement.

 

In consideration of benefits I will receive under the Agreement, I hereby
generally and completely release the Company and its directors, officers,
employees, agents, attorneys, predecessors, successors, parent and subsidiary
entities, insurers, and affiliates from any and all claims, liabilities and
obligations, both known and unknown, that arise out of or are in any way related
to (i) my employment, (ii) the termination of my employment or (iii) events,
acts, conduct, or omissions between Arena and me occurring prior to my signing
this Release, except for claims under the Agreement or any severance benefit
plan or other severance arrangement applicable to me, applicable equity
compensation plans and grants, and any applicable indemnification agreement or
other indemnification obligation under the Company’s charter documents.  Subject
to the foregoing, this Release includes, but is not limited to: (1) all claims
arising out of or in any way related to my employment with the Company or the
termination of that employment; (2) all claims related to my compensation or
benefits from the Company, including, but not limited to, salary, bonuses,
commissions, vacation pay, expense reimbursements, severance pay, fringe
benefits, stock, stock options, or any other ownership interests in the Company;
(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,
but not limited to, claims for fraud, defamation, emotional distress, and
discharge in violation of public policy; and (5) all federal, state, and local
statutory claims, including, but not limited to, 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”), and the California Fair Employment and Housing Act
(as amended).

 

I acknowledge that the consideration given under the Release for the waiver and
release in the preceding paragraph hereof is in addition to anything of value to
which I was already entitled.

 

If I am over the age of 40 years at my Termination Date (as that term is defined
in the Agreement), I acknowledge that I am knowingly and voluntarily waiving and
releasing any rights I may have under the ADEA.  I further acknowledge that I
have been advised by this writing, as required by the ADEA, that:  (A) my waiver
and release do not apply to any rights or claims that may arise on or after the
date I execute this Release; (B) 

 

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I should consult with an attorney prior to executing this Release; (C) I have
twenty-one (21) days (or such greater time as may be required by law) to
consider this Release (although I may choose to voluntarily execute this Release
earlier); (D) I have seven (7) days following my execution of this Release to
revoke the Release; and (E) this Release shall not be effective until the date
upon which the revocation period has expired, which shall be the eighth (8th)
day after I execute this Release.

 

If I am not over the age of 40 years at the time of my Termination Date (as that
term is defined in the Agreement), I understand and agree that I will have ten
days to consider and execute this release and that it shall be effective upon
such execution.

 

Except if prohibited by law or regulation, (i) I represent that I have not filed
any claims against the Company and agree that I will not file any claim against
the Company or seek any compensation for any claim other than the payments and
benefits referenced herein and (ii) I agree to indemnify and hold the Company
harmless from and against any and all loss, cost, and expense, including, but
not limited to court costs and attorney’s fees, arising from or in connection
with any action which may be commenced, prosecuted, or threatened by me or for
my benefit, upon my initiative, or with my voluntary aid or approval, contrary
to the provisions of this Release.

 

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 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 I may
have against the Company, its affiliates, and the entities and persons specified
above.

 

The provisions of the Release 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, and, to the greatest extent
legally possible, effect shall be given to the intent manifested by the portion
held invalid or inoperative.

 

The Release shall become binding when signed by Executive, and may be executed
by facsimile or a PDF sent by email.

 

EXECUTIVE

 

 

 

 

 

 

 

Print Name:

 

 

 

 

 

 

 

Date:

 

 

 

 

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