Document:

Exhibit 10.21

 

T1

 

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 

 

 

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 the 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

  	
   

  	
   

  	
   

  

 

6

 

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

 

A-1

 

(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 

 

A-2

 

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

 

(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.

 

A-3

 

Schedule
1

 

Participating
Officers:

 

1.               Jack Lief

2.               Derek Chalmers

3.               Dominic Behan

4.               Robert Hoffman

5.               Joseph Mooney

6.               Louis Scotti

7.               Steven Spector

8.               Joyce WilliamsExhibit 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 

 

 

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 

 

4

 

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.

 

5

 

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

  	
   

  	
   

  	
   

  
						

 

6

 

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

 

A-1

 

(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

 

A-2

 

(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.

 

A-3

Schedule 1

 

Participating
Officers:

 

1.               Nigel Beeley

2.               Paul Maffuid

3.               Michael Lerner

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