Exhibit 10.36

Arena Pharmaceuticals, Inc.

Non-employee Director Compensation

 

Equity:

 

·                  Initial Grant to New Directors:  18,000 options to purchase
Arena common stock. The options vest in equal annual installments over two
years.

 

·                  Annual Grant to Continuing Directors:  12,000 options to
purchase Arena common stock, except for the first annual grant. The annual
grants shall be made in the beginning of each calendar year in accordance with
Arena’s Stock Option Grant Policy Statement. The options vest in equal monthly
installments over one year.

 

·                  The first annual grant to a director shall be reduced pro
rata based on the number of months such director served as a director in the
prior year, if any. For example, if a new director is appointed in August of a
particular year, the director shall receive, in addition to the director’s
initial grant, 5/12 of the annual equity grant at the same time the annual
equity grants are awarded to the other continuing directors.

 

·                  Duration and Price of Options: The director options are
10-year options with an exercise price equal to the fair market value of Arena
common stock as determined under Arena’s 2006 Long-Term Incentive Plan, as
amended (the “LTIP”).

 

A form of the stock option grant agreement for director option grants under the
LTIP is included as Exhibit 10.2 to the Form 8-K Arena filed with the Securities
and Exchange Commission on August 1, 2006. Arena’s Stock Option Grant Policy
Statement includes additional information on option grants, including the timing
of option grants.

 

Cash:

 

·                  Retainer:  $20,000 annually, paid quarterly, subject to
continuing service as a director. If a director joins the Board after the first
quarter of a calendar year, such directors’ retainer shall be reduced pro rata
on a quarterly basis.

 

·                  Prior to the beginning of any calendar year or, in the case
of a new director, to the extent permitted, upon joining the Board of Directors,
each director can irrevocably elect to receive 25%, 50%, 75% or 100% of his or
her annual cash retainer for the following, or, in the case of a new director,
the remaining portion of the, calendar year in (i) deferred stock units, or
DSUs, on a $1-for-$1 basis, (ii) the number of options (vesting in approximately
equal monthly installments over one year) determined by dividing three times the
retainer amount elected by the fair market value of Arena common stock, computed
at the time the options are granted, or (iii) a combination of cash, DSUs and
options.

 

·                  Meeting Attendance Fee:

 

·                  General:

·                  In-Person:  $1,000

·                  Telephonic:  $500

 

·                  Exceptions:

·                  Audit Chairperson Meeting Attendance Fee:

 

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·                  In-Person:  $3,000

·                  Telephonic:  $1,500

 

·                  Other Chairperson Meeting Attendance Fee:

·                  In-Person:  $2,000

·                  Telephonic:  $1,000

 

In addition, the Board of Directors or the Compensation Committee may authorize
additional fees for significant work in informal meetings or for other service
to Arena in the recipient’s capacity as a director or committee member. Each
non-employee director is entitled to reimbursement for all of such director’s
reasonable out-of-pocket expenses incurred in connection with serving on the
Board of Directors.

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