Exhibit 10.2


 


ARENA
PHARMACEUTICALS, INC.


 


SEVERANCE
BENEFIT PLAN


 


Section 1.                              INTRODUCTION.


 


The Arena Pharmaceuticals, Inc.
Severance Benefit Plan (the “Plan”) was established effective January 20, 2006
(the “Effective Date”).  The purpose of the Plan is to provide
severance benefits to certain eligible employees of the Company and its
subsidiaries upon selected terminations of service.  This Plan document is also the Summary Plan
Description for the Plan.


 


Section 2.                              DEFINITIONS.


 


The following shall be defined terms for
purposes of the Plan:


 


(a)           “Base Salary” means a
Participant’s monthly base salary in effect immediately prior to the Covered
Termination (including without limitation any cash compensation that is
deferred by Participant into a Company-sponsored retirement or deferred
compensation plan, exclusive of any employer matching contributions by the
Company associated with any such retirement or deferred compensation plan and
exclusive of any other Company contributions) and excludes all bonuses, commissions,
expatriate premiums, fringe benefits (including without limitation car
allowances), option grants, equity awards, employee benefits and other similar
items of compensation.


 


(b)           “Board” means the Board
of Directors of the Company, or a committee or subcommittee of such Board.


 


(c)           “Bonus Amount”
means, with respect to a Participant, one-twelfth (1/12th) of the
greater of (i) the average of the three (3) annual bonuses paid to
the Participant by the Company prior to the date of such Participant’s Covered
Termination, and (ii) the last annual bonus paid to the Participant by the
Company prior to the date of such Participant’s Covered Termination.


 


(d)           “Cause”
for the Company to terminate a Participant’s employment hereunder shall mean
the occurrence of one or more of the following events if such event results in
a demonstrably harmful impact on the Company’s business or reputation, as
reasonably determined by the Board:


 


(1)           Participant’s
willful and continued failure to substantially perform his or her 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 the Participant by the Board which specifically identifies the
manner in which the Board believes that the Participant has not substantially
performed his or her duties.  For a
termination of employment to be for Cause pursuant to this subsection (2)(d)(1),
the Participant must (a) receive a written notice which indicates in
reasonable detail the facts and circumstances claimed to provide a basis for
the termination of his or her employment for Cause; and (b) be provided
with


 


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an opportunity to be heard no earlier than 30 days
following the receipt of such notice (during which notice period the
Participant has the opportunity to cure and has failed to cure or resolve the
behavior in question).


 


(2)           Participant’s
conviction of, or plea of guilty or nolo contendere to, a felony or any crime
involving fraud, dishonesty or moral turpitude;


 


(3)           Participant’s
willful engaging in gross misconduct; or


 


(4)           Participant’s
unauthorized use or disclosure of material confidential information or material
trade secrets of the Company.


 


The
determination under this Plan that a Participant’s termination is with or
without Cause shall be made by the Plan Administrator in good faith, and any
such determination shall have no effect upon any determination of the rights or
obligations of the Company or the Participant for any other purpose.


 


(e)           “Change in Control” shall
have the meaning ascribed to it in the Company’s standard form of Termination
Protection Agreement in effect on the Effective Date, or as amended from time
to time.


 


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


 


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


 


(h)           “Covered Termination”
means, with respect to a Participant who immediately prior to a termination of employment
was an employee of the Company, such Participant’s termination of employment by
the Company without Cause or such Participant’s voluntary termination with Good
Reason (excluding terminations due to Disability or death).


 


(i)            “Disability” means, with respect to a Participant,
the inability of such Participant to perform satisfactorily all of the
Participant’s usual services for the Company because the Participant has become
permanently disabled within the meaning of any policy of disability income
insurance covering employees of the Company then in force.  In the event the Company has no policy of
disability income insurance covering employees of the Company in force when the
Participant becomes disabled, then such term shall mean the Participant’s
permanent and total disability within the meaning of Section 22(e)(3) of
the Code.


 


(j)            “Good Reason” means,
with respect to a Participant, any one of the following:


 


(1)           any
reduction in Participant’s annual base salary (except for salary decreases generally applicable to the Company’s other
similarly-situated employees);


 


(2)           any
material reduction in the Participant’s target bonus level or bonus
opportunities;


 


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(3)           Participant’s
duties or responsibilities are materially diminished (and not simply a change
in title or reporting relationships); provided,
however, that the Participant shall not have “Good Reason” to
terminate if the Company is retained as a separate legal entity or business
unit following the effective date of a Change of Control and the Participant
holds the same position in such legal entity or business unit as the eligible
employee held before the effective date of such Change of Control;


 


(4)           in
the event the Participant is a member of the Board, any failure of the Board or
one if its committees to re-nominate the Participant for election to the Board;


 


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


 


(6)           an
increase in the Participant’s one-way driving distance from the Participant’s
principal personal residence to the principal office or business location at
which the Participant is required to perform services of more than 20 miles,
except for required travel for the Company’s business to an extent
substantially consistent with the Participant’s prior business travel
obligations; or


 


(7)           the
failure of the Company to obtain a satisfactory agreement from any successor to
assume and agree to perform under the terms of the Plan.


 


The determination under this Plan that a Participant’s
termination is with or without Good Reason shall be made by the Plan
Administrator in good faith, and any such determination shall have no effect
upon any determination of the rights or obligations of the Company or the
Participant for any other purpose. 
Participant’s continued employment shall not constitute consent to, or a
waiver of rights with respect to, any circumstances constituting Good Reason
hereunder.


 


(k)           “Participant”
means each individual hereafter designated by the Board and
listed on Exhibit A attached
hereto.


 


(l)            “Plan Administrator” means
Arena Pharmaceuticals, Inc.


 


(m)          “Severance Period” means,
with respect to a Participant, the period of time following the Participant’s
Covered Termination for which a Participant may be eligible to receive the
benefits provided in Section 4 herein. 
The Severance Period shall be the number of months corresponding to such
Participant’s name on Exhibit A attached
hereto.


 


Section 3.                              ELIGIBILITY
FOR BENEFITS.


 


Subject to the requirements set forth in this
Section, the Company shall provide severance benefits under the Plan to the
Participants. In order to be eligible to receive benefits under the Plan, a
Participant must (i) experience a Covered Termination (ii) execute a
general waiver and release in substantially the form attached hereto as Exhibit B (or as then may be required
by law to effect a release of claims), as appropriate, and such release must
become effective in accordance with its terms, and (iii) return all
Company-owned property to the


 


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Company as instructed by the
Company. The Company, in its sole discretion, may at any time modify the forms
of the required release to effect a release of claims consistent with this Section 3.  In the event that a Participant’s employment
is terminated as a result of such Participant’s death or Disability, then such
Participant shall not be entitled to the benefits provided in this Plan.


 


Section 4.                              AMOUNT
OF BENEFIT.


 


Subject to the limitations and reductions
provided in this Plan, benefits under this Plan, if any, shall be
provided to the Participants described in Section 3 in the following
amounts:


 


(a)           Covered Termination Benefits.  Upon a Participant’s
Covered Termination, such Participant shall receive the following severance
package:


 


(1)           Cash Severance Benefits.  As soon as administratively practicable, but
no later than fifteen (15) days following the effective date of the general
waiver and release referenced in Section 3 of the Plan, each Participant listed on Exhibit A
will receive a cash payment in an amount equal to the sum of Participant’s Base
Salary and Bonus Amount multiplied
by the number of months in the Participant’s Severance Period.


 


(2)           COBRA Benefits.  If such Participant timely elects to continue
coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended (“COBRA”),
then for the term of the Participant’s Severance Period, the Company will
directly pay all premiums for medical, dental and vision coverage paid by such
Participant (a) under COBRA and, to the extent applicable, any similar
applicable state statute, and (b) to the extent that such coverage under
COBRA and any such applicable state statute has been exhausted or is no longer
available, then under any individual policy providing group medical, dental and
vision benefits substantially similar to those provided to Participant
immediately prior to his or her termination of Service.


 


(3)           Equity Acceleration and Continued Stock Option
Post-Termination Exercise Period. 
The Participant will receive immediate vesting of all stock options and
other equity awards issued by the Company and held by such Participant that
would have vested had the Participant remained employed by the Company through
the end of the Severance Period.  In
addition, with respect to stock options granted to the Participant, the Participant
shall be entitled to exercise all of his or her vested stock options until the
later of (i) the original post-termination exercise period provided in
such Participant’s stock option agreement or (ii) the number of months
equal to the Severance Period (but not beyond the original contractual life of
the option); provided, however, that
notwithstanding the foregoing, with respect to each stock option granted to the
Participant before the Effective Date, such stock option (to the extent vested)
shall remain exercisable until the later of: (x) the original post-termination
exercise period provided in such Participant’s stock option agreement or (y)
the number of months equal to the Severance Period (but not beyond the original
contractual life of the option) or, if earlier, the latest date possible that
would not cause such option to be treated as deferred compensation under 409A
of the Code.


 


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All cash severance payment referenced in this Section 4
shall be subject to all applicable tax withholdings and deductions required by
law.  Except as provided herein, all
terms, conditions and limitations applicable to a Participant’s stock options
and/or equity awards shall remain in full force and effect.


 


(b)           Certain
Reductions. 
Notwithstanding any other provision of the Plan to the contrary, any
benefits payable to a Participant under Sections 4(a)(1) and 4(a)(2) of
this Plan shall be reduced (but not below zero) by any severance benefits
payable by the Company or an affiliate of the Company to such Participant under
any other policy, plan, program, agreement or arrangement, including, without
limitation, an employment agreement or Termination Protection Agreement between such Participant and the
Company.  In addition, to the extent that
any federal, state or local laws, including, without limitation the Worker
Adjustment Retraining Notification Act, 29 U.S.C. Section 2101 et seq., or any similar state statute,
require the Company to give advance notice or make a payment of any kind to a
Participant because of that Participant’s involuntary termination due to a
layoff, reduction in force, plant or facility closing, sale of business, change
of control, or any other similar event or reason, the benefits payable under Sections

4(a)(1) and 4(a)(2) of this Plan shall be reduced (but not below
zero) by such required payments or notice. 
The benefits provided under this Plan are intended to satisfy any and
all statutory obligations that may arise out of a Participant’s involuntary
termination of employment for the foregoing reasons, and the Plan Administrator
shall so construe and implement the terms of the Plan.


 


Section 5.                              LIMITATIONS ON BENEFITS.


 


(a)           Mitigation.  Except as otherwise specifically provided
herein, a Participant shall not be required to mitigate damages or the amount
of any payment provided under the Plan by seeking other employment or
otherwise, nor shall the amount of any payment provided for under the Plan be
reduced by any compensation earned by a Participant as a result of employment
by another employer or any retirement benefits received by such Participant
after the date of service or employment termination.


 


(b)           Termination
of Benefits.  Benefits
under the Plan shall terminate immediately if the Participant, at any time, (i) engages
in the unauthorized use or disclosure of the Company’s material confidential information, material trade secrets or material proprietary
information under any written agreement under which the Participant has a such
an obligation to the Company that survives the Participant’s termination of
service to the Company, (ii) engages in any prohibited or unauthorized
competitive activities or solicitation or recruitment of employees, in
violation of any written agreement under which Participant has such an
obligation to the Company that survives the Participant’s termination of
service to the Company; (iii) violates any term or condition of this Plan
or (iv) violates any term of the applicable general waiver and release
referenced in Section 3 above.


 


(c)           Non-Duplication
of Benefits.  No
Participant is eligible to receive benefits under this Plan more than one time.


 


(d)           Indebtedness
of Participants.  If a
Participant is indebted to the Company or an affiliate of the Company on the date
of his or her termination of employment or


 


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service, the Company reserves
the right to offset any severance benefits payable in cash under the Plan by
the amount of such indebtedness.


 


(e)           Parachute
Payments.  If any
payment or benefit a Participant would receive in connection with a change in
control from the Company or otherwise (a “Payment”) would (i) constitute a “parachute
payment” within the meaning of Section 280G of the Code, and (ii) but
for this sentence, be subject to the excise tax imposed by Section 4999 of
the Code (the “Excise
Tax”), then such Payment shall be equal to the Reduced
Amount.  The “Reduced Amount” shall
be either (x) the largest portion of the Payment that would result in no portion
of the Payment being subject to the Excise Tax or (y) the largest portion of
the Payment, up to and including the total Payment, whichever amount, after
taking into account all applicable federal, state and local employment taxes,
income taxes, and the Excise Tax (all computed at the highest applicable
marginal rate), results in the Participant’s receipt, on an after-tax basis, of
the greater amount of the Payment notwithstanding that all or some portion of
the Payment may be subject to the Excise Tax. If a reduction in payments or
benefits constituting “parachute payments” is necessary so that the Payment
equals the Reduced Amount, reduction shall occur in the following order unless
the Participant elects in writing a different order (provided,
however, that such election shall be subject to Company approval if
made on or after the date on which the event that triggers the Payment
occurs):  reduction of cash payments;
cancellation of accelerated vesting of stock awards; reduction of employee
benefits.  If acceleration of vesting of
stock award compensation is to be reduced, such acceleration of vesting shall
be cancelled in the reverse order of the date of grant of the Participant’s
stock awards unless the Participant elects in writing a different order for
cancellation.


 


The Company shall appoint a nationally
recognized independent accounting firm to make the determinations required
hereunder, which accounting firm shall not then be serving as accountant or
auditor for the individual, entity or group that effected the Change in
Control.  The Company shall bear all
expenses with respect to the determinations by such accounting firm required to
be made hereunder.


 


The accounting firm engaged to make the
determinations hereunder shall provide its calculations, together with detailed
supporting documentation, to the Company and the Participant within ten (10) calendar
days after the date on which the Participant’s right to a Payment is triggered
(if requested at that time by the Company or the Participant) or such other
time as requested by the Company or the Participant.  If the accounting firm determines that no
Excise Tax is payable with respect to a Payment, either before or after the
application of the Reduced Amount, it shall furnish the Company and the Participant
with an opinion reasonably acceptable to the Participant that no Excise Tax
will be imposed with respect to such Payment. 
Any good faith determinations of the accounting firm made hereunder
shall be final, binding and conclusive upon the Company and the Participant.


 


Section 6.                              RIGHT
TO INTERPRET PLAN; AMENDMENT AND TERMINATION.


 


(a)           Exclusive
Discretion.  The Plan
Administrator shall have the exclusive discretion and authority to establish
rules, forms, and procedures for the administration of the Plan and to construe
and interpret the Plan and to decide any and all questions of fact,
interpretation, definition, computation or administration arising in connection
with the operation


 


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of the Plan, including, but not limited to, the
eligibility to participate in the Plan and amount of benefits paid under the
Plan.  The rules, interpretations,
computations and other actions of the Plan Administrator shall be binding and
conclusive on all persons. Unless otherwise determined by the Board, the
General Counsel of the Company shall perform the duties of the Plan
Administrator under this Plan.


 


(b)           Amendment.  The Board reserves the right to amend this
Plan or the benefits provided hereunder at any time; provided,
however, that no such amendment shall impair or reduce the rights of
a Participant unless such Participant consents to such amendment of the Plan in
writing.


 


(c)           Term of Plan. Notwithstanding
the foregoing, the Plan and each Participant’s participation herein shall
continue in effect through December 31, 2009; provided, however, that the term of this Plan and such
participation shall automatically be extended for one additional year beyond December 31,
2008 and for successive one year periods thereafter, unless, not later than January 30
of each calendar year, commencing in 2007 for the 2010 calendar year (e.g., 2008 for the 2011 calendar year,
2009 for the 2012 calendar year, etc.), the Company shall have given written
notice that it does not wish to extend this Plan or a Participant’s right to
participate hereunder for an additional year, in which event this Plan (or such
Participant’s participation, as the case may be) 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 Plan, this Agreement
shall remain in effect for a period of two (2) years after such Change in
Control.


 


(d)           Deferred Compensation.  In the event that the payment of any benefits
provided herein are subject to Section 409A(a)(1) of the Code, the
payment of such benefits shall not be made pursuant to the payment schedule provided
herein and instead the payment of such benefits shall be delayed to the minimum
extent necessary so that such benefits are not subject to the provisions of Section 409A(a)(1) of
the Code.  The Board may attach
conditions to or adjust the amounts paid pursuant to this Section 6(d) to
preserve, as closely as possible, the economic consequences that would have
applied in the absence of this Section

6(d); provided, however, that no
such condition or adjustment shall result in the payments being subject to Section 409A(a)(1) of
the Code.


 


Section 7.                              CONTINUATION
OF CERTAIN EMPLOYEE BENEFITS.


 


(a)           COBRA
Continuation.  Each
Participant who is enrolled in a group medical, dental or vision plan sponsored
by the Company or an affiliate of the Company may be eligible to continue
coverage under such group medical, dental or vision plan (or to convert to an
individual policy), at the time of the Participant’s termination of employment
under COBRA.  The Company will notify the
Participant of any such right to continue group medical coverage at the time of
termination.  No provision of this Plan
will affect the continuation coverage rules under COBRA.  Therefore, the period during which a
Participant may elect to continue the Company’s group medical, dental or vision
coverage at his or her own expense under COBRA, the length of time during which
COBRA coverage will be made available to the Participant, and all other rights
and obligations of the Participant under COBRA will be applied in the same


 


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manner that such rules would apply in the absence
of this Plan.  At the conclusion of the
payments made by the Company pursuant to Section 4 herein, if any, the
Participant will be responsible for the entire payment of premiums required
under COBRA for the duration, if any, of the COBRA period.


 


(b)           Other
Employee Benefits.  All
non-health benefits (such as life insurance, disability and 401(k) plan
coverage) terminate as of an employee’s termination date (except to the extent
that a conversion privilege may be available thereunder).


 


Section 8.                              NO
IMPLIED EMPLOYMENT CONTRACT.


 


The Plan shall not be deemed (i) to give
any employee or other person any right to be retained in the employ or service
of the Company or (ii) to interfere with the right of the Company to
discharge any employee or other person at any time and for any reason, which
right is hereby reserved.


 


Section 9.                              LEGAL
CONSTRUCTION.


 


This Plan is intended to be governed by and
shall be construed in accordance with the Employee Retirement Income Security
Act of 1974, as amended (“ERISA”)
and, to the extent not preempted by ERISA, the laws of the State of California.


 


Section 10.                            CLAIMS,
INQUIRIES AND APPEALS.


 


(a)           Applications
for Benefits and Inquiries. 
Any application for benefits, inquiries about the Plan or inquiries
about present or future rights under the Plan must be submitted to the Plan
Administrator in writing by an applicant (or his or her authorized
representative).  The Plan Administrator
is:


 


Arena Pharmaceuticals, Inc.


6166 Nancy Ridge Drive


San Diego, CA 92121


Attn: General Counsel


 


(b)           Denial
of Claims.  In the
event that any application for benefits is denied in whole or in part, the Plan
Administrator must provide the applicant with written or electronic notice of
the denial of the application, and of the applicant’s right to review the
denial.  Any electronic notice will
comply with the regulations of the U.S. Department of Labor.  The written notice of denial will be set
forth in a manner designed to be understood by the employee and will include
the following:


 


(1)           the
specific reason or reasons for the denial;


 


(2)           references
to the specific Plan provisions upon which the denial is based;


 


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(3)           a
description of any additional information or material that the Plan
Administrator needs to complete the review and an explanation of why such
information or material is necessary; and


 


(4)           an
explanation of the Plan’s review procedures and the time limits applicable to
such procedures, including a statement of the applicant’s right to bring a
civil action under section 502(a) of ERISA following a denial on
review of the claim, as described in Section 10(d) below.


 


This written notice will be given to the
applicant within ninety (90) days after the Plan Administrator receives the
application, unless special circumstances require an extension of time, in
which case, the Plan Administrator has up to an additional ninety (90) days for
processing the application.  If an extension
of time for processing is required, written notice of the extension will be
furnished to the applicant before the end of the initial ninety (90) day
period.


 


This notice of extension will describe the
special circumstances necessitating the additional time and the date by which
the Plan Administrator is to render its decision on the application.


 


(c)           Request
for a Review.  Any
person (or that person’s authorized representative) for whom an application for
benefits is denied, in whole or in part, may appeal the denial by submitting a
request for a review to the Plan Administrator within sixty (60) days after the
application is denied.  A request for a
review shall be in writing and shall be addressed to:


 


Arena Pharmaceuticals, Inc.


6166 Nancy Ridge Drive


San Diego, CA 92121


Attn: General Counsel


 


A request for review must set forth all of
the grounds on which it is based, all facts in support of the request and any
other matters that the applicant feels are pertinent.  The applicant (or his or her representative)
shall have the opportunity to submit (or the Plan Administrator may require the
applicant to submit) written comments, documents, records, and other
information relating to his or her claim. 
The applicant (or his or her representative) shall be provided, upon
request and free of charge, reasonable access to, and copies of, all documents,
records and other information relevant to his or her claim.  The review shall take into account all
comments, documents, records and other information submitted by the applicant
(or his or her representative) relating to the claim, without regard to whether
such information was submitted or considered in the initial benefit
determination.


 


(d)           Decision
on Review.  The Plan
Administrator will act on each request for review within sixty (60) days after
receipt of the request, unless special circumstances require an extension of
time (not to exceed an additional sixty (60) days), for processing the request
for a review.  If an extension for review
is required, written notice of the extension will be furnished to the applicant
within the initial sixty (60) day period. 
This notice of extension will describe the


 


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special circumstances necessitating the additional time
and the date by which the Plan Administrator is to render its decision on the
review.  The Plan Administrator will give
prompt, written or electronic notice of its decision to the applicant. Any
electronic notice will comply with the regulations of the U.S. Department of
Labor.  In the event that the Plan
Administrator confirms the denial of the application for benefits in whole or
in part, the notice will set forth, in a manner calculated to be understood by
the applicant, the following:


 


(1)           the
specific reason or reasons for the denial;


 


(2)           references
to the specific Plan provisions upon which the denial is based;


 


(3)           a
statement that the applicant is entitled to receive, upon request and free of
charge, reasonable access to, and copies of, all documents, records and other
information relevant to his or her claim; and


 


(4)           a
statement of the applicant’s right to bring a civil action under section 502(a) of
ERISA.


 


(e)           Rules and
Procedures.  The Plan
Administrator will establish rules and procedures, consistent with the
Plan and with ERISA, as necessary and appropriate in carrying out its
responsibilities in reviewing benefit claims. 
The Plan Administrator may require an applicant who wishes to submit
additional information in connection with an appeal from the denial of benefits
to do so at the applicant’s own expense.


 


(f)            Exhaustion
of Remedies.  No legal
action for benefits under the Plan may be brought until the claimant (i) has
submitted a written application for benefits in accordance with the procedures
described by Section 10(a) above, (ii) has been notified by the
Plan Administrator that the application is denied, (iii) has filed a
written request for a review of the application in accordance with the appeal
procedure described in Section 10(c) above, and (iv) has been
notified in writing that the Plan Administrator has denied the appeal.  Notwithstanding the foregoing, if the Plan
Administrator does not respond to a Participant’s claim or appeal within the
relevant time limits specified in this Section 10, then the Participant
may bring legal action for benefits under the Plan pursuant to Section 502(a) of
ERISA.


 


Section 11.            BASIS
OF PAYMENTS TO AND FROM PLAN.


 


All benefits under the Plan shall be paid by
the Company.  The Plan shall be unfunded,
and benefits hereunder shall be paid only from the general assets of the
Company.


 


Section 12.            OTHER
PLAN INFORMATION.


 


(a)           Employer
and Plan Identification Numbers.  The Employer Identification Number assigned
to the Company (which is the “Plan Sponsor” as that term is used in ERISA) by
the Internal Revenue Service is 23-2908305. The Plan Number assigned to the
Plan by the Plan Sponsor pursuant to the instructions of the Internal Revenue
Service is 501.


 


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(b)           Ending
Date for Plan’s Fiscal Year. 
The date of the end of the fiscal year for the purpose of maintaining
the Plan’s records is December 31.


 


(c)           Agent
for the Service of Legal Process.  The agent for the service of legal process
with respect to the Plan is Arena Pharmaceuticals, Inc., Attn: General
Counsel, 6166 Nancy Ridge Drive, San Diego, CA 92121.


 


(d)           Plan
Sponsor and Administrator. 
The “Plan Sponsor”
and the “Plan
Administrator” of the Plan is Arena Pharmaceuticals, Inc.,
6166 Nancy Ridge Drive, San Diego, CA 92121. 
The Plan Sponsor’s and Plan Administrator’s telephone number is (858)
453-7200.  The Plan Administrator is the
named fiduciary charged with the responsibility for administering the Plan.


 


Section 13.                            STATEMENT
OF ERISA RIGHTS.


 


Participants in this Plan (which is a welfare
benefit plan sponsored by the Company) are entitled to certain rights and
protections under ERISA.  If you are a
Participant in the Plan, under ERISA you are entitled to:


 


Receive
Information about the Plan and Your Benefits


 


(a)           Examine,
without charge, at the Plan Administrator’s office and at other specified
locations, such as work sites, all documents governing the Plan and a copy of
the latest annual report (Form 5500 Series) filed by the Plan
Administrator with the U.S. Department of Labor and available at the Public
Disclosure Room of the Pension and Welfare Benefit Administration;


 


(b)           Obtain,
upon written request to the Plan Administrator, copies of documents governing
the operation of the Plan and copies of the latest annual report (Form 5500
Series).  The Plan Administrator may make
a reasonable charge for the copies; and


 


(c)           Receive
a summary of the Plan’s annual financial report.  The Plan Administrator is required by law to
furnish each Participant with a copy of this summary annual report.


 


Prudent
Actions by Plan Fiduciaries


 


In addition to creating rights for Plan
participants, ERISA imposes duties upon the people who are responsible for the
operation of the employee benefit plan. 
The people who operate the Plan, called “fiduciaries” of the Plan, have
a duty to do so prudently and in the interest of you and other Plan
participants and beneficiaries.


 


Enforce
Your rights


 


No one, including your employer or any other
person, may fire you or otherwise discriminate against you in any way to
prevent you from exercising your rights under ERISA.


 


11

















 


Under ERISA, there are steps you can take to
enforce the above rights.  For instance,
if you request a copy of Plan documents or the latest annual report from the
Plan and do not receive them within 30 days, you may file suit in a
Federal court.  In such a case, the court
may require the Plan Administrator to provide the materials and pay you up to
$110 a day until you receive the materials, unless the materials were not sent
because of reasons beyond the control of the Plan Administrator.


 


If you have a claim for benefits that is
denied or ignored, in whole or in part, you may file suit in a state or Federal
court.


 


If you are discriminated against for
asserting your rights, you may seek assistance from the U.S. Department of
Labor, or you may file suit in a Federal court. 
The court will decide who should pay court costs and legal fees.  If you are successful, the court may order
the person you have sued to pay these costs and fees.  If you lose, the court may order you to pay
these costs and fees, for example, if it finds your claim is frivolous.


 


Assistance
with Your Questions


 


If you have any questions about the Plan, you
should contact the Plan Administrator. 
If you have any questions about this statement or about your rights
under ERISA, or if you need assistance in obtaining documents from the Plan
Administrator, you should contact the nearest office of the Pension and Welfare
Benefits Administration, U.S. Department of Labor, listed in your telephone
directory or the Division of Technical Assistance and Inquiries, Pension and
Welfare Benefits Administration, U.S. Department of Labor, 200 Constitution
Avenue N.W., Washington, D.C. 20210.  You
may also obtain certain publications about your rights and responsibilities
under ERISA by calling the publications hotline of the Pension and Welfare
Benefits Administration.


 


Section 14.                            EXECUTION.


 


To record the adoption of the Plan as set
forth herein, effective as of the Effective Date, Arena
Pharmaceuticals, Inc. has caused its duly authorized officer to execute
the same this 20th day of January, 2006.


 


	
   

  	
  Arena Pharmaceuticals, Inc.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  /s/ Robert E. Hoffman

  	
   

  
	
   

  	
  Robert E. Hoffman

  
	
   

  	
  Vice President, Finance and

  
	
   

  	
  Chief Financial Officer

  



 


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EXHIBIT A


 


	
  PARTICIPANT:

  	
   

  	
  SEVERANCE PERIOD (IN MONTHS):

  
	
   

  	
   

  	
   

  
	
  JACK
  LIEF

  	
   

  	
  18

  
	
   

  	
   

  	
   

  
	
  DOMINIC
  BEHAN

  	
   

  	
  12

  
	
   

  	
   

  	
   

  
	
  STEVEN
  SPECTOR

  	
   

  	
  12

  
	
   

  	
   

  	
   

  
	
  WILLIAM
  SHANAHAN

  	
   

  	
  12

  
	
   

  	
   

  	
   

  
	
  ROBERT
  HOFFMAN

  	
   

  	
  12

  



 

















 


EXHIBIT B


 


RELEASE
AGREEMENT


 


I understand and agree completely to the
terms set forth in the Arena
Pharmaceuticals, Inc. Severance Benefit Plan (the “Plan”). I understand that this release and
waiver (the “Release”), together
with the Plan, 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.


 


In consideration of benefits I will receive
under the Plan, 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 for
benefits set forth in the Severance Plan, any Termination Protection Agreement
applicable to me and applicable equity compensation plans and grants.  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 the time
of an Covered Termination (as that term is defined in the Plan), 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) 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


 


2

















 


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 an Covered Termination (as that term is defined in the Plan), 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 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 favor at the time of executing the release, which if known by him 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.


 


 


	
   

  	
  EMPLOYEE

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  	
   

  
	
   

  	
  Date:

  	
   

  	
   

  
					



 


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