Exhibit 10.29
ARENA PHARMACEUTICALS,
INC.
DEFERRED COMPENSATION
PLAN
Effective Date: November
11, 2003
ARTICLE 1
INTRODUCTION
Arena Pharmaceuticals, Inc. wishes
to establish a deferred compensation plan as set forth herein to
provide deferred compensation for a select group of management or
highly compensated employees of the Company and certain members of
the Company’s Board of Directors, effective as of November
11, 2003. The Participants in the Plan have entered into
agreements with the Company to receive the Company’s Common
Stock in exchange for services. This stock is not vested and
is subject to forfeiture unless the Participants continue to
perform services on behalf of the Company through vesting dates
that are scheduled to occur in 2004 and thereafter, or unless
certain other specified events occur.
The Company has determined that it
will permit the Participants to defer the delivery of these
non-vested, or “restricted,” shares that they would
otherwise become entitled to receive in 2004 or later. This
deferral opportunity has been established in part to encourage the
Participants to continue to hold rights to own Common Stock in the
future that may otherwise be sold to satisfy a Participant’s
tax withholding or other financial obligations upon vesting, and
for the purpose of rewarding and incentivizing the
Participants.
ARTICLE 2
DEFINITIONS
“Beneficiary”
or
“Beneficiaries” means the person or persons
designated by a Participant in an Election Form to receive any
distribution under the Plan that is payable upon the death of the
Participant.
“Board”
means the Board of Directors of the
Company.
“Board
Member” means an
individual non-employee member of the Board.
“Change of
Control” for
purposes of the Plan shall have the meaning set forth in the
Participant’s Termination Protection Agreement, or if no such
agreement exists, the Company’s 2002 Equity Compensation
Plan.
“Code”
means the Internal Revenue Code of
1986, as amended from time to time.
“Committee” means the Board, the Compensation Committee of
the Board, or such other administrative committee of the Board as
appointed from time to time by the Board to control and manage the
operation and administration of the Plan, as set forth in Article
8.
“Common
Stock” means the
common stock of Arena Pharmaceuticals, Inc.
“Company”
means Arena Pharmaceuticals, Inc., a
Delaware corporation, and any successor or continuing
corporation.
“Designated Distribution
Date” means the
date on which the Participant elects to begin to receive a
distribution of his or her Designated Shares.
“Designated
Shares ” means
those shares of Restricted Stock (together with any dividends
attributable to such Designated Shares) the receipt of which a
Participant has elected to defer in accordance with the Plan, by
completing an Election Form.
“Effective
Date” means
November 11, 2003.
“Election
Form” means the
form entered into by a Participant confirming the
Participant’s election to defer the receipt of Designated
Shares and specifying, among other things, the number of shares to
be deferred, the Designated Distribution Date, the
Participant’s Beneficiary, and related matters. A copy
of the Election Form for the Plan is attached as Exhibit A
hereto.
“Eligible
Employee” means an
employee of the Company who is a member of a select group of
management or a highly compensated Employee of the Company, and who
has been chosen by the Committee, in the Committee’s sole
discretion, to be eligible to participate in the Plan.
“Eligible Restricted
Stock” means
Restricted Stock that, at the time of an election to defer under
this Plan, is subject to restrictions, including forfeiture, that
are scheduled to lapse in the future based upon the Eligible
Employee’s or Board Member’s continued provision of
Services to the Company through the Vesting Date, or based upon the
occurrence of other specified events. The only Restricted
Stock that is eligible to be deferred under this Plan (and which
qualifies as “Eligible Restricted Stock”) is Restricted
Stock with a Vesting Date that occurs in a Plan Year after the Plan
Year in which the election to defer is made and which has a Vesting
Date that is at least three months after the date of such
election. Notwithstanding the foregoing, with respect to the
initial Plan Year of the Plan, or in the case of an Employee who is
hired or promoted to a position of eligibility for participation in
the Plan (or a Board Member who is first elected to become a Board
Member during a Plan Year), such person may elect to defer the
receipt of Eligible Restricted Stock with a Vesting Date that
occurs in a Plan Year after the Plan Year in which the election to
defer is made and which has a Vesting Date that is at least one
month after the date of such election.
“Employee”
means a person employed by the
Company on a regular, full-time, salaried basis, including any
Employee who is on an approved leave of absence from the Company,
whether paid or unpaid.
“Hardship”
means an unforeseeable financial
emergency for a Participant which he or she cannot meet through
loans, insurance or liquidation of the Participant’s assets
(to the extent such liquidation would not itself cause a financial
hardship). An unforeseeable financial emergency is a severe
financial hardship to the Participant resulting from a sudden and
unexpected illness or accident of the Participant or of a dependent
of the Participant (as defined in Section 152(a) of the Code), loss
of the Participant’s property due to casualty, or other
similar extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Participant.
Examples of circumstances that are not considered to be
unforeseeable financial
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emergencies include the need to send a child of
the Participant to college or the desire to purchase a
home.
“Participant”
means any Eligible Employee or Board
Member who has elected to participate in the Plan by completing,
executing and returning an Election Form and other required forms
to the Committee, or its designee.
“Plan”
means this Arena Pharmaceuticals,
Inc. Deferred Compensation Plan, as amended from time to
time.
“Plan
Year” means the
year beginning each January 1 and ending December 31;
notwithstanding the foregoing, the initial Plan Year shall mean the
period beginning with the Effective Date and ending on December 31,
2003.
“Restricted
Stock” means Common
Stock that has been awarded to an Eligible Employee and Board
Member.
“Restricted Stock
Agreement” means
the form of agreement entered into by the Company and a Participant
which sets forth the applicable terms and conditions of a
Participant’s award of Restricted Stock, including vesting
and other requirements.
“Service”
means employment as an Employee,
service to the Company as a consultant or service as a Board
Member, as applicable. An Participant shall not be deemed to
terminate Service if the Participant converts from a Board Member
to an Employee, from an Employee to a Board Member, or either to a
consultant of the Company.
“Top Hat
Plan” means a
non-qualified deferred compensation plan for a select group of
management or highly compensated employees within the meaning of
Section 401(a)(1) of ERISA and Section 2520.104-23(d) of the
Department of Labor Regulations.
“Vesting
Date” means the
date on which restrictions on the Restricted Stock
lapse.
ARTICLE 3
DEFERRALS
3.1
Election to Defer .
(a)
Each Eligible Employee who is
notified of his or her eligibility to participate in the Plan and
each Board Member may elect to defer the receipt of Eligible
Restricted Stock until a Designated Distribution Date. The
Committee shall designate Eligible Employees and Board Members who
shall be covered by this Plan. A Participant’s
participation in the Plan shall commence as of the date such
Participant has complied with the election procedures set forth
herein by completing an Election Form. Nothing in the Plan or
in the Election Form should be construed to require any
contributions to the Plan on behalf of the Participant by the
Company.
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(b)
For a deferral hereunder to be
effective, such Eligible Employee or Board Member must designate
the shares of Eligible Restricted Stock that he or she desires to
defer by completing and signing an Election Form and returning it
to the Company’s Vice President, Finance or Chief Financial
Officer, at 6166 Nancy Ridge Drive, San Diego, CA 92121.
(c)
For the Plan Year in which this Plan
is first implemented, and in the case of an Employee who is hired
or promoted to a position of eligibility for participation in the
Plan or a Board Member who is elected to become a Board Member
during a Plan Year, such person shall have thirty (30) days from
the date of notification of eligibility for participation in the
Plan in which to submit the required election documents for the
then Plan Year.
3.2
Deferral Election is Irrevocable. A Participant’s election to defer
Eligible Restricted Stock is irrevocable.
3.3
Changes to Deferral Elections. A Participant’s Election Form shall remain
in effect until modified as herein permitted. A Participant
may modify his or her existing Election Form only in the following
manner:
(a)
to provide for a later Designated
Distribution Date than is currently provided for under the
Participant’s existing Election Form. This modification
may only be made with respect to such Participant’s
Designated Shares that are otherwise scheduled to be distributed to
the Participant in a Plan Year after the Plan Year in which the
election is modified, and may be made only if the original
Designated Distribution Date is scheduled to occur at least three
months after the date of any such modification;
(b)
subject to the limitations contained
in Section 3.1(c), to designate additional shares of Eligible
Restricted Stock that the Participant wishes to defer under the
Plan.
(c)
to provide for a different form of
distribution, as set forth in Article 6.
Subject to the limitations contained
herein, any change to an Election Form shall only be effective upon
the completion and execution of a new Election Form and the
Participant’s submission of this agreement to the
Company’s Vice President, Finance or Chief Financial Officer,
at 6166 Nancy Ridge Drive, San Diego, CA 92121. Forms
submitted after the dates specified in Section 3.1(c) will not be
accepted.
3.4
Administrative Rules .
The Committee has the power to establish rules and
from time to time to modify or change such rules governing the
manner and method by which deferrals of a Participant’s
Restricted Stock may be changed.
ARTICLE 4
RESTRICTED STOCK
4.1
Lapse of Restrictions on Restricted Stock. Notwithstanding this Plan, Restricted
Stock that has been deferred pursuant to the Plan shall continue to
be subject to the terms and conditions, including forfeiture or
other vesting requirements, set forth in the applicable Restricted
Stock Agreement. If a Participant’s Service with the
Company is
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terminated before the Vesting Date for any
reason, whether initiated by the Company or the Participant, then
none of the Restricted Stock, whether or not subject to accelerated
vesting at the time of the Participant’s termination or
cessation of Services, shall be eligible for continued deferral
under the Plan, even if an Election Form has been previously
completed. In that event, and Designated Shares shall no
longer be subject to the Plan and the vested portion of the
Designated Shares (including any Designated Shares the vesting of
which has been accelerated as a result of such termination) shall
be promptly distributed to the Participant.
4.2
Stock Certificates. Stock certificates evidencing the
Designated Shares shall not be issued to Participants, or
registered in a Participant’s name, until the Designated
Distribution Date.
4.3
Dividends. If the
Company pays dividends paid on its Common Stock, then such
dividends shall become a portion of the Designated
Shares.
4.4
Restriction on Transferability. The Designated Shares may not be sold,
transferred, pledged, assigned, or otherwise alienated at any time
prior to the Designated Distribution Date. Any attempt to do
so contrary to the provisions hereof shall be null and
void.
4.5
Voting Rights.
Participants shall not have voting or other rights as a stockholder
of the Company with respect to the Designated Shares until the
Designated Distribution Date, at which time the Participant will
obtain full voting and other rights as a stockholder of the
Company.
ARTICLE 5
DISTRIBUTIONS AND
WITHDRAWALS
5.1
Designated Distributions. A Participant’s Designated Shares
will be distributed to such Participant on the Designated
Distribution Date set forth in the Participant’s Election
Form. Notwithstanding the above, earlier distributions may be
permitted under the circumstances set forth in Article 5.2 to 5.5
below.
5.2
Hardship Withdrawals. A Participant may request a Hardship withdrawal
of some or all of his or her Designated Shares, which request may
be approved or denied by the Committee. The value of the
Designated Shares so distributed to the Participant for a Hardship
shall not exceed the amount needed to satisfy the unforeseeable
financial emergency (after deducting any and all taxes as may be
required to be withheld).
5.3
Non-Hardship In-Service Withdrawals. A Participant may elect to receive a withdrawal
of some or all of his or her Designated Shares from the Plan at any
time not otherwise expressly authorized by the Plan upon prior
written notice to the Committee; provided, however, that ten
percent (10%) of the value of the Designated Shares being requested
as part of the withdrawal shall be permanently forfeited to the
Company and the Participant shall have no further rights to
forfeited amounts. If a Participant elects to receive a
withdrawal under this Article 5.3, then such Participant shall not
be permitted to defer additional Restricted Stock hereunder for the
remainder of the then current Plan Year, or the Plan Year
immediately
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following the year in which the Hardship
withdrawal occurs. No more than one Non-Hardship In-Service
withdrawal may be taken by a Participant under this
Plan.
5.4
Change of Control Provisions.
(a)
A Participant may make an election
to receive his or her Designated Shares under the Plan upon or
following a Change of Control, even if the Participant does not
terminate employment with the Company or the acquiring entity as a
result of the Change of Control. Such Change of Control
election shall be made on the Participant’s Election Form (or
on any other form provided by the Company for this
purpose).
(b)
The timing of distributions in the
event of a Change of Control that may be elected by a Participant
are as follows:
(1)
Payment in the form of distribution
of the Participant’s Designated Shares as soon as
administratively feasible to the Participant upon the occurrence of
a Change of Control without regard to whether the Participant
continues to be employed by the Company or the acquiring entity at
the time of the Change of Control.
(2)
Payment in the form of distribution
of the Participant’s Designated Shares as soon as
administratively feasible to the Participant following the
Participant’s termination of Service for any reason upon or
following a Change of Control.
A Participant who does not elect
either (1) or (2) above, shall not be eligible to receive a
dis
