Exhibit 10.1

PURCHASE AND EXCHANGE AGREEMENT

PURCHASE AND EXCHANGE AGREEMENT (this “Agreement”), dated as of June 2, 2010,
between Arena Pharmaceuticals, Inc., a Delaware corporation (the “Company”) and
the parties identified on the Schedule of Purchasers attached hereto (each
individually, a “Purchaser” and together, the “Purchasers” and, together with
the Company, the “Parties”). Capitalized terms used but not defined herein shall
have the meanings given to them in the Facility Agreement (as defined below).

W I T N E S S E T H

WHEREAS, the Company and each Purchaser is executing and delivering this
Agreement in reliance upon the exemption from registration afforded by
Section 4(2) of the Securities Act, and Rule 506 of Regulation D (“Regulation
D”) as promulgated by the SEC under the Securities Act;

WHEREAS, each Purchaser, severally and not jointly, wishes to purchase, and the
Company wishes to sell, upon the terms and conditions stated in this Agreement,
the number of shares of the Common Stock, par value $0.0001 per share, of the
Company (the “Common Stock”), set forth opposite such Purchaser’s name under
“Common Shares” on the Schedule of Purchasers attached hereto (which aggregate
amount for all Purchasers together shall be 11,000,000 shares of Common Stock
and shall collectively be referred to herein as the “Common Shares”);

WHEREAS, the Company previously issued to the Purchasers warrants to purchase an
aggregate of 28,000,000 shares of Common Stock (the “Prior Warrants”) in
connection with that certain Facility Agreement, dated June 17, 2009, between
the Parties (the “Facility Agreement”); and

WHEREAS, as an inducement for the Purchasers to purchase the Common Shares
pursuant to this Agreement, the Company is willing to exchange a portion of the
Prior Warrants held by each Purchaser for new warrants in the form attached
hereto as Exhibit A (the “New Warrants” and together with the Common Shares, the
“Securities”).

NOW, THEREFORE, in consideration of the mutual agreements set forth herein, the
Purchasers and the Company agree as follows:

ARTICLE I

PURCHASE AND SALE OF COMMON SHARES

Section 1.1 Purchase of Common Shares. Subject to the satisfaction (or waiver)
of the conditions set forth in Sections 4.1 and 4.2 below, the Company shall
issue and sell to each Purchaser, and each Purchaser severally, but not jointly,
shall purchase from the Company on the Closing Date (as defined below), that
number of Common Shares as is set forth opposite such Purchaser’s name under
“Common Shares” on the Schedule of Purchasers (the “Closing”).

 

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Section 1.2 Closing. The date and time of the Closing (the “Closing Date”) shall
be the Business Day next following the satisfaction (or waiver) of the
conditions to the Closing set forth in Sections 4.1 and 4.2 below and shall take
place at the offices of Cooley LLP, 4401 Eastgate Mall, Suite 400, San Diego, CA
92121, or at such other date, time and place as the Parties may mutually agree.
The Parties agree to use reasonable best effort to satisfy their respective
conditions to the Closing set forth in Sections 4.1 and 4.2 as soon as possible
after the date hereof.

Section 1.3 Purchase Price. The aggregate purchase price for the Common Shares
to be purchased by each such Purchaser at the Closing (each, a “Purchase Price”)
shall be the amount set forth opposite each Purchaser’s name under “Purchase
Price” on the Schedule of Purchasers, which shall be equal to the amount of
$3.23 per Common Share times the number of Common Shares purchased.

Section 1.4 Form of Payment. On the Closing Date, (i) each Purchaser shall pay
its respective Purchase Price to the Company for the Common Shares to be issued
and sold to such Purchaser at the Closing, by wire transfer of immediately
available funds in accordance with the Company’s written wire instructions and
(ii) the Company shall instruct its transfer agent to deliver to each Purchaser
a certificate or certificates representing the Common Shares which such
Purchaser is then purchasing hereunder, in each case duly executed on behalf of
the Company and registered in the name of such Purchaser or its designee.

ARTICLE II

ISSUANCE OF NEW WARRANTS

Section 2.1 Delivery and Cancellation of Prior Warrants. On the Closing Date,
the Company shall have received from each Purchaser for cancellation a portion
of such Purchaser’s Prior Warrants covering a number of shares of Common Stock
equal to the number of shares of Common Stock covered by the New Warrants to be
issued to such Purchaser as set forth opposite such Purchaser’s name on the
Schedule of Purchasers (such portion, the “Canceled Prior Warrants”), and in
connection therewith each such Purchaser shall deliver to the Company on or
prior to the Closing Date the certificates representing all of the Prior
Warrants held by such Purchaser. On the Closing Date, the certificates
representing all of the Prior Warrants shall be void and of no further force or
effect.

Section 2.2 Issuance of New Warrants. On the Closing Date, the Company shall
issue to each Purchaser a New Warrant to purchase the number of shares of Common
Stock set forth opposite such Purchaser’s name under “New Warrants” on the
Schedule of Purchasers. The New Warrants shall have an initial exercise price of
$3.45 per share of Common Stock. On the Closing Date, the Company shall deliver
to each Purchaser a new certificate, identical in form to the Prior Warrants,
representing the number of remaining Prior Warrants set forth opposite such
Purchaser’s name under “Remaining Prior Warrants” on the Schedule of Purchasers
(“Remaining Prior Warrants”).

 

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Section 2.3 The Company and the Purchasers agree that the exchange of the
portion of the Prior Warrants for New Warrants made pursuant to this Agreement
represents an isolated transaction that is not part of a plan to periodically
increase any Purchaser’s proportionate interest in the assets or earnings and
profits of the Company. Therefore, the Company shall not report dividend income
for federal, and any applicable state and local, income tax purposes to the
Purchasers except to the extent that cash, stock or property dividends are paid
on the Shares (as defined below) owned by the Purchasers. Notwithstanding
the foregoing, neither the Purchasers nor the Company shall be required to take
any action pursuant to this Section 2.3 if doing so would be reasonably likely,
based upon the advice of the Company’s tax advisers after consulting with the
Purchasers and their tax advisers, to be unfounded, unlawful or potentially
subject the Purchasers or the Company to a material penalty.

ARTICLE III

REPRESENTATIONS AND WARRANTIES

Section 3.1 Representations and Warranties of the Company. The Company
represents and warrants as of the date hereof and as of the Closing Date as
follows:

(a) The Company is a corporation duly organized and validly existing under the
laws of the State of Delaware.

(b) The Company is conducting its business in compliance with its Organizational
Documents. The Organizational Documents of the Company (including all amendments
thereto) as currently in effect have been made available to the Purchasers and
remain in full force and effect with no defaults outstanding thereunder.

(c) The Company has full power and authority to enter into this Agreement and
the Registration Rights Agreement in the form attached hereto as Exhibit B (the
“Registration Rights Agreement” and together with this Agreement, the
“Transaction Documents”) and to issue the Securities in accordance with the
terms hereof. The execution and delivery of the Transaction Documents by the
Company and the consummation by the Company of the transactions contemplated
thereby, including, without limitation, the issuance of the Common Shares and
the New Warrants have been duly authorized by the Company’s Board of Directors
or a duly authorized committee thereof and no further consent or authorization
is required by the Company, its Board of Directors or its stockholders. This
Agreement has been and, on the Closing Date, the Registration Rights Agreement
and the New Warrants shall be, duly executed and delivered by the Company, and
constitute the legal, valid and binding obligations of the Company, enforceable
against the Company in accordance with their respective terms, except as such
enforceability may be limited by general principles of equity or applicable
bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws
relating to, or affecting generally, the enforcement of applicable creditors’
rights and remedies.

(d) All authorizations, consents, approvals, registrations, exemptions and
licenses that are necessary for the issuance of the Securities hereunder, the
execution and delivery of the Transaction Documents and the performance by the
Company of its obligations thereunder, have been obtained and are in full force
and effect, except for registrations and filings in connection with the issuance
of the Common Shares and New Warrants and shares of Common Stock issuable upon
exercise of the New Warrants, and filings necessary to comply with laws, rules,
regulations and orders required in the ordinary course of business.

 

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(e) All authorizations, consents, approvals, registrations, exemptions and
licenses with or from Government Authorities that are necessary for the conduct
of its business as currently conducted have been obtained and are in full force
and effect, except to the extent any failure to so obtain would not reasonably
be expected to have a Material Adverse Effect. For purposes of this Agreement,
“Material Adverse Effect” means a material adverse effect on (a) the business,
operations or financial condition of the Company and its Subsidiaries taken as a
whole, (b) the validity or enforceability of any provision of any Transaction
Document, (c) the ability of the Company to timely perform its obligations under
the Transaction Documents or (d) the rights and remedies of the Purchasers under
any Transaction Document; provided, however, that none of the following shall be
deemed either alone or in combination to constitute, and none of the following
shall be taken into account in determining whether there has been or would be, a
Material Adverse Effect: (A) any adverse effect that results directly or
indirectly from general economic, business, financial or market conditions; and
(B) any adverse effect arising directly or indirectly from or otherwise relating
to any of the industries or industry sectors in which the Company operates.

(f) The Common Shares are duly authorized and, upon issuance in accordance with
the terms hereof, shall be validly issued and free from all preemptive or
similar rights, taxes, liens and charges with respect to the issue thereof and
the Common Shares shall be fully paid and nonassessable with the holders being
entitled to all rights accorded to a holder of Common Stock. Assuming the
accuracy of each of the representations and warranties set forth in Section 3.3
of this Agreement, the offer and issuance by the Company of the Securities is
exempt from registration under the 1933 Act.

(g) Neither the entering into any of the Transaction Documents nor the
compliance with any of the terms therein conflicts with, violates or results in
a breach of any of the terms of, or constitutes a default or event of default
(however described) or requires any consent under, to the extent applicable,
(i) any agreement to which the Company is a party or by which it is bound,
(ii) any of the terms of the Organizational Documents or (iii) any judgment,
decree, resolution, award or order or any statute, rule or regulation applicable
to the Company or its assets, except where such conflicts, violations, breaches
or defaults, individually or in the aggregate, would not reasonably be expected
to have a Material Adverse Effect.

(h) The Company is not engaged in or the subject of any litigation, arbitration,
or administrative regulatory compliance proceeding, nor are there any
litigation, arbitration, administrative, regulatory, compliance proceedings or
investigations pending or, to the knowledge of the Company, threatened before
any court or arbitrator or before or by any Government Authority against the
Company, that would reasonably be expected to result in a Material Adverse
Effect and the Company is not aware of any facts reasonably likely to give rise
to any such proceeding.

 

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(i) The Company (i) is capable of paying its debts as they fall due and is not
unable and has not admitted its inability to pay debts as they fall due, (ii) is
not bankrupt or insolvent and (iii) has not taken action, and no such action has
been taken by a third party, for the Company’s winding up, dissolution, or
liquidation or similar executory or judicial proceeding or for the appointment
of a liquidator, custodian, receiver, trustee, administrator or other similar
officer for the Company or any or all of its assets or revenues.

(j) Neither the Company nor any of its Subsidiaries, or to the Company’s
knowledge, any of its or their Affiliates, nor any Person acting on its or their
behalf, has engaged in any form of general solicitation or general advertising
(within the meaning of Regulation D) in connection with the offer or sale of the
Securities. Neither the Company nor any of its Subsidiaries has engaged any
placement agent, finder or broker in connection with the sale of the Securities.

(k) During the one year prior to the date hereof, the Company has timely filed
all reports, schedules, forms, statements and other documents required to be
filed by it with the SEC pursuant to the reporting requirements of the Exchange
Act (all of the foregoing filed during the one year prior to the date hereof or
prior to the date of the Closing and all financial statements, notes and
schedules thereto being hereinafter referred to as the “SEC Documents”). As of
their respective filing dates, the SEC Documents complied in all material
respects with the requirements of the Exchange Act and the rules and regulations
of the SEC promulgated thereunder applicable to the SEC Documents, and none of
the SEC Documents, at the time they were filed with the SEC, contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not misleading. As of
their respective filing dates, the financial statements of the Company included
in the SEC Documents complied as to form in all material respects with
applicable accounting requirements and the published rules and regulations of
the SEC with respect thereto. Such financial statements have been prepared in
accordance with generally accepted accounting principles, consistently applied,
during the periods involved (except (i) as may be otherwise indicated in such
financial statements or the notes thereto, or (ii) in the case of unaudited
interim statements, to the extent they may exclude footnotes or may be condensed
or summary statements) and fairly present in all material respects the financial
position of the Company as of the dates thereof and the results of its
operations and cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments and to the extent
that such unaudited statements do not include footnotes).

(l) Neither the Company nor any of its Subsidiaries nor, to the Company’s
knowledge, any director, officer, agent, employee or other Person acting on
behalf of the Company or any of its Subsidiaries has, in the course of its
actions for, or on behalf of, the Company or any of its Subsidiaries (i) used
any corporate funds for any unlawful contribution, gift, entertainment or other
unlawful expenses relating to political activity; (ii) made any direct or
indirect unlawful payment to any foreign or domestic government official or
employee from corporate funds; (iii) violated or is in violation of any
provision of the U.S. Foreign Corrupt Practices Act of 1977, as amended; or
(iv) made any unlawful bribe, rebate, payoff, influence payment, kickback or
other unlawful payment to any foreign or domestic government official or
employee.

 

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(m) The Company is in compliance with any and all applicable requirements of the
Sarbanes-Oxley Act of 2002 that are effective as of the date hereof, and any and
all applicable rules and regulations promulgated by the SEC thereunder that are
effective as of the date hereof.

(n) The Company and its Subsidiaries have good and marketable title in fee
simple to all real property and good and marketable title to all personal
property owned by them which is material to the business of the Company and its
Subsidiaries, in each case free and clear of all liens, encumbrances and defects
except pursuant to the Securities Agreement or such as do not materially affect
the value of such property and do not interfere with the use made and proposed
to be made of such property by the Company and any of its Subsidiaries. Any real
property and facilities held under lease by the Company and any of its
Subsidiaries are held by them under valid, subsisting and enforceable leases
with such exceptions as are not material and do not interfere with the use made
and proposed to be made of such property and buildings by the Company and its
Subsidiaries.

(o) The Company or one or more of its Subsidiaries owns or possesses adequate
rights to use the patents, patent rights, licenses, inventions, copyrights,
know-how (including trade secrets and other unpatented and/or unpatentable
proprietary or confidential information, systems or procedures), trademarks,
service marks, trade names, trade dress, logos, copyrights and other
intellectual property, including, without limitation, all of the intellectual
property described in the SEC Documents as being owned or licensed by the
Company (collectively, “Intellectual Property”), necessary to carry on the
business now operated by it, except where failure to own, license or have such
rights would not, individually or in the aggregate, have a Material Adverse
Effect. Except as set forth in the SEC Documents, there are no actions, suits or
judicial proceedings pending, or to the Company’s knowledge threatened in
writing, relating to patents or proprietary information to which the Company or
any of its Subsidiaries is a party or of which any property of the Company or
any of its Subsidiaries is subject, and neither the Company nor any of its
Subsidiaries has received any notice or is otherwise aware of any infringement
of or conflict with asserted rights of others with respect to any Intellectual
Property or of any facts or circumstances which would render any Intellectual
Property invalid or inadequate to protect the interest of the Company and its
Subsidiaries therein, and which infringement or conflict (if the subject of any
unfavorable decision, ruling or finding) or invalidity or inadequacy,
individually or in the aggregate, would have a Material Adverse Effect.

(p) The Company is not, and upon consummation of the sale of the Securities will
not be, an “investment company,” a company controlled by an “investment company”
or an “affiliated person” of, or “promoter” or “principal underwriter” for, an
“investment company” as such terms are defined in the Investment Company Act of
1940, as amended.

 

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(q) The Company is eligible to register the Common Shares and the shares of
Common Stock issuable upon exercise of the New Warrants for resale by the
Purchasers using Form S-3 promulgated under the Securities Act. To the Company’s
knowledge, there exist no facts or circumstances (including without limitation
any required approvals or waivers or any circumstances that may delay or prevent
the obtaining of accountant’s consents) that reasonably could be expected to
prohibit the preparation and filing of a registration statement on Form S-3 that
will be available for the resale of the Common Shares and the shares of Common
Stock issuable upon exercise of the New Warrants by the Purchasers.

Section 3.2 Company Acknowledgment. The Company acknowledges that it has made
the representations and warranties referred to in Section 3.1 with the intention
of persuading the Purchasers to enter into the Transaction Documents and that
the Purchasers have entered or will enter into the Transaction Documents on the
basis of, and in full reliance on, each of such representations and warranties.

Section 3.3 Representations and Warranties of the Purchasers. Each of the
Purchasers represents and warrants to the Company as of the date hereof and as
of the Closing Date, and agrees that:

(a) It is acquiring the Common Shares, the New Warrants and the shares of Common
Stock issued pursuant to the New Warrants, whether upon exercise or otherwise
(the “Warrant Shares” and together with the Common Shares, the “Shares”), solely
for its account for investment and not with a view to or for sale or
distribution of the New Warrants or Shares or any part thereof. Each of the
Purchasers also represents that the entire legal and beneficial interests of the
Shares and New Warrants such Purchaser is acquiring is being acquired for, and
will be held for, its account only.

(b) The Shares and New Warrants have not been registered under the Securities
Act on the basis that no distribution or public offering of the stock of the
Company is to be effected. Each of the Purchasers realizes that the basis for
the exemptions may not be present, if notwithstanding its representations such
Purchaser has a present intention of acquiring the securities for a fixed or
determinable period in the future, selling (in connection with a distribution or
otherwise), granting any participation in, or otherwise distributing the Shares
or New Warrants. None of the Purchasers has such present intention. Each of the
Purchasers understands (i) that the Shares and New Warrants are not registered
under the Securities Act or qualified under applicable state securities laws on
the ground that the issuance thereof will be exempt from the registration and
qualifications requirements thereof and (ii) that the Company’s reliance on such
exemptions is predicated on the representations set forth in this Section 3.3.

(c) It has such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of its investment and has the
ability to bear the economic risks of its investment.

 

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(d) The Shares and New Warrants must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption for such
registration is available.

(e) Neither the Shares or New Warrants may be sold pursuant to Rule 144 adopted
under the Securities Act unless certain conditions are met, including, among
other things, the existence of a public market for the shares, the availability
of certain current public information about the Company and the resale following
the required holding period under Rule 144.

(f) It will not make any disposition of all or any part of the Shares or New
Warrants until:

(i) There is then in effect a registration statement under the Securities Act
covering such proposed disposition and such disposition is made in accordance
with said registration statement; or

(ii) Such Purchaser shall have notified the Company of the proposed disposition
and, in the case of a sale or transfer in a so called “4(1) and a half”
transaction, shall have furnished counsel for the Company with an opinion of
counsel, substantially in the form annexed as Exhibit C to the New Warrant. The
Company agrees that it will not require an opinion of counsel with respect to
transactions under Rule 144 of the Securities Act.

(g) (i) All certificates evidencing the Shares may bear the following legend.

“THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE
SECURITIES MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, PLEDGED, HYPOTHECATED OR
OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT FOR
THE SECURITIES UNDER SAID ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION
UNDER SAID ACT INCLUDING, WITHOUT LIMITATION, PURSUANT TO RULES 144 OR 144A
UNDER SAID ACT OR PURSUANT TO A PRIVATE SALE EFFECTED UNDER APPLICABLE FORMAL OR
INFORMAL SEC INTERPRETATION OR GUIDANCE, SUCH AS A SO-CALLED “4(1) AND A HALF”
SALE, SUBJECT TO DELIVERY OF AN OPINION, AS PROVIDED IN THE PURCHASE AND
EXCHANGE AGREEMENT, DATED AS OF JUNE 2, 2010.”

 

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(ii) Subject to the provisions of this paragraph, the certificates evidencing
the Shares shall not contain any legend restricting the transfer thereof:
(A) while a registration statement (including a Registration Statement, as
defined in the Registration Rights Agreement) covering the resale of such
security is effective under the Securities Act, or (B) following any sale of
such Shares pursuant to Rule 144, or (C) if such Shares are eligible for sale
under Rule 144(b)(1), or (D) if such legend is not required under applicable
requirements of the Securities Act (including judicial interpretations and
pronouncements issued by the staff of the SEC) (collectively, the “Unrestricted
Conditions”). If the Unrestricted Conditions are satisfied, the Company shall
cause its counsel to issue a legal opinion to its transfer agent (“Transfer
Agent”) promptly after the Unrestricted Conditions are satisfied, if required
and to the extent permitted by the Transfer Agent, to effect the issuance of the
Shares without a restrictive legend or removal of the legend hereunder. The
Company agrees that, following the Effective Date, at such time as the
Unrestricted Conditions are met or such legend is otherwise no longer required
under this Section 3.3(g), it will, no later than five (5) Trading Days
following the delivery (the “Unlegended Shares Delivery Deadline”) by the
Purchaser to the Company of a certificate representing the Shares containing a
restrictive legend (such fifth Trading Day, the “Legend Removal Date”), deliver
or cause to be delivered to such Purchaser a certificate (or electronic
transfer) representing such shares that is free from all restrictive and other
legends. For purposes hereof, “Effective Date” shall mean the date that the
Registration Statement that the Company is required to file pursuant to the
Registration Rights Agreement has been declared effective by the SEC.

(h) Such Purchaser is an “accredited investor” as defined in Regulation D
promulgated the Securities Act.

(i) Such Purchaser is a limited partnership or corporation duly organized and
validly existing under the laws of the jurisdiction of its formation.

(j) This Agreement has been and the Registration Rights Agreement will be as of
the Closing Date, duly authorized, executed and delivered by such Purchaser and
constitutes the valid and legally binding obligation of such Purchaser,
enforceable in accordance with its terms, except as such enforceability may be
limited by (i) applicable insolvency, bankruptcy, reorganization, moratorium or
other similar laws affecting creditors’ rights generally, and (ii) applicable
equitable principles (whether considered in a proceeding at law or in equity).

(k) In consideration of each Purchaser’s execution and delivery of the
Transaction Documents and acquiring the Securities thereunder and in addition to
all of the Company’s other obligations under the Transaction Documents, the
Company shall defend, protect, indemnify and hold harmless each Purchaser and
all of their respective stockholders, partners, members, officers, directors,
employees and direct or indirect investors and any of the foregoing persons’
agents or other representatives (including, without limitation, those retained
in connection with the transactions contemplated by this Agreement)
(collectively, the “Indemnitees”) from and against any and all actions, causes
of action, suits, claims, losses, costs, penalties, fees, liabilities and
damages, and expenses in connection therewith (irrespective of whether any such
Indemnitee is a party to the action for which indemnification hereunder is
sought), and including reasonable attorneys’ fees and disbursements (the
“Indemnified Liabilities”), incurred by any Indemnitee to the extent as a result
of, or arising out of, or relating to (a) any breach of any representation or
warranty made by the Company in any of the Transaction Documents, (b) any breach
of any covenant, agreement or obligation of the Company contained in any of the
Transaction Documents or (c) any cause of action, suit or claim brought or made
against such Indemnitee by a third party (including for these purposes a
derivative action brought on behalf of the Company) and arising out of or
resulting from the execution, delivery, performance or enforcement of any of the
Transaction Documents. To the extent that the foregoing undertaking by the
Company may be unenforceable for any reason, the Company shall make the maximum
contribution to the payment and satisfaction of each of the Indemnified
Liabilities which is permissible under applicable law.

 

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Section 3.4 Purchasers Acknowledgement. Each of the Purchasers acknowledges that
it has made the representations and warranties referred to in Section 3.3 with
the intention of persuading the Company to enter into the Transaction Documents
and that the Company has entered into or will enter into the Transaction
Documents on the basis of, and in full reliance on, each of such representations
and warranties. Each of the Purchasers also acknowledges that the
representations and warranties made by the Company in Section 3.1, to the extent
that they pertain to the New Warrants or the Registration Rights Agreement (with
the exception of Subsection (d) of Section 3.1), are made solely to the extent,
and will only survive for so long as, any of the Purchasers remains a party to
the Registration Rights Agreement or a holder of the New Warrants.

ARTICLE IV

CONDITIONS OF CLOSING

Section 4.1 Conditions to the Company’s Obligations to Sell the Common Shares
and Issue the New Warrants. The obligation of the Company hereunder to issue and
sell the Common Shares and issue the New Warrants to the Purchasers at the
Closing is subject to the satisfaction, at or before the Closing Date, of each
of the following conditions, provided that these conditions are for the
Company’s sole benefit and may be waived by the Company at any time in its sole
discretion by providing each Purchaser with prior written notice thereof:

(a) Each Purchaser shall have executed each of the Transaction Documents to
which it is a party and delivered the same to the Company.

(b) Each Purchaser shall have delivered to the Company the Purchase Price for
the Common Shares being purchased by such Purchaser at the Closing by wire
transfer of immediately available funds pursuant to the wire instructions
provided by the Company.

(c) Each Purchaser shall have delivered to the Company such Purchaser’s Canceled
Prior Warrants pursuant to Section 2.1 hereof.

(d) The representations and warranties of such Purchaser shall be true and
correct in all material respects (except for those representations and
warranties that are qualified by materiality or material adverse effect, which
shall be true and correct in all respects) as of the date when made and as of
the Closing Date as though made at that time (except for representations and
warranties that speak as of a specific date, which shall be true and correct as
of such specified date), and such Purchaser shall have performed, satisfied and
complied in all material respects with the covenants, agreements and conditions
required by this Agreement to be performed, satisfied or complied with by such
Purchaser at or prior to the Closing Date.

 

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Section 4.2 Conditions to each Purchaser’s Obligation to Purchase the Common
Shares. The obligation of each Purchaser hereunder to purchase the Common Shares
at the Closing is subject to the satisfaction, at or before the Closing Date, of
each of the following conditions, provided that these conditions are for each
Purchaser’s sole benefit and may be waived by such Purchaser at any time in its
sole discretion by providing the Company with prior written notice thereof:

(a) The Company shall have duly executed and delivered to such Purchaser
(i) each of the Transaction Documents, (ii) the New Warrants (iii) the Remaining
Prior Warrants and (iv) certificates representing the Common Shares being
purchased by such Purchaser at the Closing pursuant to this Agreement.

(b) The Common Stock (i) shall be listed on the Nasdaq Global Market and
(ii) shall not have been suspended, as of the Closing Date, by the SEC or the
Nasdaq Global Market from trading on such market nor shall suspension by the SEC
or the Nasdaq Global Market have been threatened, as of the Closing Date, either
(A) in writing by the SEC or the Nasdaq Global Market or (B) by falling below
the minimum listing maintenance requirements of the Nasdaq Global Market.

(c) The Company shall have delivered to such Purchaser a certificate, executed
by the Secretary of the Company and dated as of the Closing Date, in the form
attached hereto as Exhibit C.

(d) The representations and warranties of the Company shall be true and correct
in all material respects (except for those representations and warranties that
are qualified by materiality or Material Adverse Effect, which shall be true and
correct in all respects) as of the date when made and as of the Closing Date as
though made at that time (except for representations and warranties that speak
as of a specific date, which shall be true and correct as of such specified
date) and the Company shall have performed, satisfied and complied in all
material respects with the covenants, agreements and conditions required by the
Transaction Documents to be performed, satisfied or complied with by the Company
at or prior to the Closing Date.

 

11

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ARTICLE V

MISCELLANEOUS

Section 5.1 Notices. Any notice, request or other communication to be given or
made under this Agreement shall be in writing. Such notice, request or other
communication shall be deemed to have been duly given or made when it shall be
delivered by hand, international courier (confirmed by facsimile), or facsimile
(with a hard copy delivered within two (2) Business Days) to the Party to which
it is required or permitted to be given or made at such Party’s address
specified below or at such other address as such Party shall have designated by
notice to the other Parties.

For the Company:

Arena Pharmaceuticals, Inc.

6166 Nancy Ridge Drive

San Diego, CA 92121

Attention: Chief Financial Officer and General Counsel

Facsimile: (858) 677-0065

with a courtesy copy (not constituting notice) to:

Cooley LLP

4401 Eastgate Mall

San Diego, CA 92121

Attention: Steven M. Przesmicki

Facsimile: (858) 550-6420

For the Purchasers c/o:

Deerfield Private Design Fund, L.P.

780 Third Avenue, 37th Floor

New York, New York 10017

Attention: James E. Flynn

Facsimile: (212) 573-8111

with a courtesy copy (not constituting notice) to:

Katten Muchin Rosenman LLP

575 Madison Avenue

New York, New York 10022-2585

Facsimile: (212) 894-5827

Attention: Mark I. Fisher

                 Elliot Press

Section 5.2 Waiver of Notice. Whenever any notice is required to be given to the
Purchasers or the Company under the any of the Transaction Documents, a waiver
thereof in writing signed by the person or persons entitled to such notice,
whether before or after the time stated therein, shall be deemed equivalent to
the giving of such notice.

 

12

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Section 5.3 Applicable Law and Consent to Non-Exclusive New York Jurisdiction.
This Agreement shall be governed by and construed in accordance with the laws of
the State of New York, without giving effect to the conflicts of laws principles
thereof other than Sections 5-1401 and 5-1402 of the General Obligations Law of
such State.

(a) Each Party hereby irrevocably submits to the jurisdiction of the state and
federal courts sitting in The City of New York, borough of Manhattan or the
County of San Diego for the adjudication of any dispute hereunder or in
connection herewith or with any transaction contemplated hereby or discussed
herein, and hereby irrevocably waives, and agrees not to assert in any suit,
action or other proceeding, any claim that it is not personally subject to the
jurisdiction of any such court, or that such court, action or other proceeding
is improper. Final non-appeal able judgment against any Party in any such
action, suit or other proceeding shall be conclusive and may be enforced in any
other jurisdiction by suit on the judgment. Nothing contained in any Transaction
Document shall affect the right of any Party to commence legal proceedings in
any court having jurisdiction, or concurrently in more than one jurisdiction, or
to serve process, pleadings and other legal papers upon the other Party(ies) in
any manner authorized by the laws of any such jurisdiction. Each Party
irrevocably waives, to the fullest extent permitted by applicable law, any
objection which it may now or hereafter have to the laying of venue of any such
action, suit or other proceeding brought in the courts in the State of New York,
in the County of San Diego or in the United States District Court for the
Southern District of New York, and any claim that any such action, suit or other
proceeding brought in any such court has been brought in an inconvenient forum.

(b) EACH PARTY HEREBY WAIVES ANY AND ALL RIGHTS TO DEMAND A TRIAL BY JURY IN ANY
ACTION, SUIT OR OTHER PROCEEDING ARISING OUT OF ANY TRANSACTION DOCUMENT OR THE
TRANSACTIONS CONTEMPLATED BY ANY TRANSACTION DOCUMENT.

(c) To the extent that the Parties may, in any suit, action or other proceeding
brought in any court arising out of or in connection with any Transaction
Document, be entitled to the benefit of any provision of law requiring the
Company or the Purchasers, as applicable, in such suit, action or other
proceeding to post security for the costs of the Company or the Purchasers, as
applicable, or to post a bond or to take similar action, the Parties hereby
irrevocably waive such benefit, in each case to the fullest extent now or
hereafter permitted under any applicable laws.

 

13

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Section 5.4 Successors and Assigns. This Agreement shall bind and inure to the
respective successors and assigns of the Parties. The Company may not assign or
otherwise transfer all or any part of its rights under this Agreement without
the prior written consent of the Purchasers. Any attempted assignment or
participation in violation of this Section 5.4 shall be void and of no further
effect.

Section 5.5 Entire Agreement. The Transaction Documents contain the entire
understanding of the Parties with respect to the matters covered thereby and
supersede any and all other written and oral communications, negotiations,
commitments and writings with respect thereto. This Agreement may be amended,
and any provision may be waived, by a writing signed by the Company and the
Purchasers.

Section 5.6 Severability. If any provision contained in this Agreement shall be
invalid, illegal or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby. The Parties shall endeavor in good faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provision.

Section 5.7 Counterparts. This Agreement may be executed in several
counterparts, and by each Party on separate counterparts, each of which shall be
deemed an original, but all of which together shall constitute one and the same
agreement. Facsimile signatures or the exchange of .pdf copies of signatures
shall be treated as original signatures.

Section 5.8 Survival. This Agreement and all agreements, representations and
warranties made in the Transaction Documents, and in any document, certificate
or statement delivered pursuant thereto or in connection therewith shall be
considered to have been relied upon by the Parties and shall survive the
execution and delivery of this Agreement regardless of any investigation made by
any Party or on its behalf, and shall continue in force until the termination or
exercise in full of the New Warrants.

Section 5.9 Waiver. Neither the failure of, nor any delay on the part of, any
Party in exercising any right, power or privilege hereunder, or under any
agreement, document or instrument mentioned herein, shall operate as a waiver
thereof, nor shall any single or partial exercise of any right, power or
privilege hereunder, or under any agreement, document or instrument mentioned
herein, preclude other or further exercise thereof or the exercise of any other
right, power or privilege; nor shall any waiver of any right, power, privilege
or default hereunder, or under any agreement, document or instrument mentioned
herein, constitute a waiver of any other right, power, privilege or default or
constitute a waiver of any default of the same or of any other term or
provision. No course of dealing and no delay in exercising, or omission to
exercise, any right, power or remedy accruing to the Purchasers upon any default
under this Agreement or any other agreement shall impair any such right, power
or remedy or be construed to be a waiver thereof or an acquiescence therein; nor
shall the action of the Purchasers in respect of any such default, or any
acquiescence by it therein, affect or impair any right, power or remedy of the
Purchasers in respect of any other default. All rights and remedies herein
provided are cumulative and not exclusive of any rights or remedies otherwise
provided by law.

 

14

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Section 5.10 Further Assurances. From time to time, each Party hereto shall
perform any and all acts and execute and deliver to the other Party such
additional documents as may be necessary or as requested by the other Party to
carry out the purposes of any Transaction Document or to preserve and protect
such other Party’s rights as contemplated therein.

[SIGNATURE PAGE FOLLOWS]

 

15

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IN WITNESS WHEREOF, the Parties, acting through their duly authorized
representatives, have caused this Agreement to be signed in their respective
names as of the date first above written.

 

COMPANY:    

PURCHASER:

ARENA PHARMACEUTICALS, INC.    

DEERFIELD PRIVATE DESIGN FUND, L.P.

By:

 

/s/ ROBERT E. HOFFMAN

     

Name:

 

Robert F. Hoffman

   

By:

 

Deerfield Capital, L.P., General Partner

Title:

 

VP, Finance and CFO

   

By:

 

J.E. Flynn Capital, LLC, General Partner

PURCHASER:

   

By:

 

/s/ DAVID J. CLARK

 

DEERFIELD PRIVATE DESIGN INTERNATIONAL, L.P.

     

David J. Clark, Authorized Signatory

By:

 

Deerfield Capital, L.P., General Partner

   

PURCHASER:

By:

 

J.E. Flynn Capital, LLC, General Partner

   

 

DEERFIELD PARTNERS, L.P.

By:

 

/s/ DAVID J. CLARK

   

By:

 

Deerfield Capital, L.P., General Partner

 

David J. Clark, Authorized Signatory

   

By:

 

J.E. Flynn Capital, LLC, General Partner

               

PURCHASER:

   

By:

 

/s/ DAVID J. CLARK

 

DEERFIELD INTERNATIONAL LIMITED

     

David J. Clark, Authorized Signatory

       

By:

 

/s/ DAVID J. CLARK

   

PURCHASER:

 

David J. Clark, Authorized Signatory

   

 

DEERFIELD SPECIAL SITUATIONS FUND, L.P.

PURCHASER:

   

By:

 

Deerfield Capital, L.P., General Partner

 

DEERFIELD SPECIAL SITUATIONS FUND INTERNATIONAL LIMITED

   

By:

 

J.E. Flynn Capital, LLC, General Partner

By:

 

/s/ DAVID J. CLARK

   

By:

 

/s/ DAVID J. CLARK

 

David J. Clark, Authorized Signatory

     

David J. Clark, Authorized Signatory

--------------------------------------------------------------------------------

SCHEDULE OF PURCHASERS

 

Purchaser

   Common
Shares    Purchase
Price    New
Warrants    Remaining
Prior
Warrants

Deerfield Private Design Fund, L.P.

   1,853,720    $ 5,987,515.60    2,730,024    1,988,536

Deerfield Private Design International, L.P.

   2,986,280    $ 9,645,684.40    4,397,976    3,203,464

Deerfield Partners, L.P.

   2,178,000    $ 7,034,940.00    3,207,600    2,336,400

Deerfield International Limited

   3,322,000    $ 10,730,060.00    4,892,400    3,563,600

Deerfield Special Situations Fund, L.P.

   232,320    $ 750,393.60    342,144    249,216

Deerfield Special Situations Fund International Limited

   427,680    $ 1,381,406.40    629,856    458,784

Total

   11,000,000    $ 35,530,000.00    16,200,000    11,800,000

--------------------------------------------------------------------------------

EXHIBIT A

FORM OF NEW WARRANT

[Provided separately]

--------------------------------------------------------------------------------

EXHIBIT B

REGISTRATION RIGHTS AGREEMENT

[Provided separately]

--------------------------------------------------------------------------------

EXHIBIT C

FORM OF SECRETARY’S CERTIFICATE

--------------------------------------------------------------------------------

SECRETARY’S CERTIFICATE

ARENA PHARMACEUTICALS, INC.

June     , 2010

I, Steven W. Spector, Senior Vice President, General Counsel and Secretary of
Arena Pharmaceuticals, Inc., a Delaware corporation (the “Company”), do hereby
certify, as an officer of the Company, and not in my individual capacity,
pursuant to Section 4.2(c) of that Purchase and Exchange Agreement, dated as of
June 2, 2010, between the Company and the purchasers listed on the Schedule of
Purchasers thereto (the “Purchase Agreement”), as follows:

The Company’s Fifth Amended and Restated Certificate of Incorporation, filed
with the Secretary of State of the State of Delaware on June 11, 2002, was
amended by the Company’s Certificates of Designation as filed with the Secretary
of State of the State of Delaware on November 4, 2002 and December 24, 2003 and
by the Certificates of Amendment filed on June 15, 2006 and June 26, 2009
(collectively, the “Charter”). There have been no amendments to the Certificate
since June 26, 2009, nor has any action been taken or, to the undersigned’s
knowledge, contemplated by the Board of Directors of the Company (the “Board”)
or the stockholders of the Company since such date for the purpose of effecting
any amendment or modification thereof. The Charter is in full force and effect
as of the date hereof. A true, correct and complete copy of the Charter as in
effect on the date hereof, certified by the Secretary of State of the State of
Delaware, is attached hereto as Exhibit A.

The Company’s Amended and Restated Bylaws (the “Bylaws”) were duly adopted by
the Board on October 1, 2007 and have not been amended or modified since such
date, and are currently in full force and effect. A copy of the Bylaws is
attached hereto as Exhibit B.

The resolutions of the Board adopted at a meeting held on April 30, 2010 and
resolutions of the Financing Committee of the Board adopted at a meeting held on
June 2, 2010 approving the Purchase Agreement, all documents, certificates and
instruments executed in connection therewith and all transactions contemplated
thereby, substantially in the form attached hereto as Exhibit C, remain in full
force and effect, and have not been rescinded, altered, or modified in any
manner.

[Signature Page Follows]

--------------------------------------------------------------------------------

IN WITNESS WHEREOF, I have hereunto signed my name as of the date set forth
above.

 

ARENA PHARMACEUTICALS, INC.

By:

 

 

 

Name:

 

Steven W. Spector

 

Title:

 

Senior Vice President, General Counsel and Secretary

The undersigned, being the duly elected and qualified President and Chief
Executive Officer of the Company, hereby certifies that Steven W. Spector is the
duly elected and qualified Senior Vice President, General Counsel and Secretary
of the Company, and that the foregoing signature appearing above his name is his
genuine signature.

IN WITNESS WHEREOF, I have hereunto signed my name as of the date set forth
above.

 

ARENA PHARMACEUTICALS, INC.

By:

 

 

 

Name:

 

Jack Lief

 

Title:

 

President and Chief Executive Officer

--------------------------------------------------------------------------------

EXHIBIT A

FIFTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION OF THE

COMPANY, AS AMENDED

--------------------------------------------------------------------------------

EXHIBIT B

AMENDED AND RESTATED BYLAWS OF THE COMPANY

--------------------------------------------------------------------------------

EXHIBIT C

BOARD AND COMMITTEE RESOLUTIONS