Exhibit 10.1


 


Arena
Pharmaceuticals, Inc. 2006 Long-Term Incentive Plan


 


Stock
Option Grant Agreement


 


THIS GRANT
AGREEMENT (this “Agreement”), effective as of                               
(the “Grant Date”), is entered into by and between Arena Pharmaceuticals, Inc.,
a Delaware corporation (the “Company”), and                               
(the “Grantee”).


 


1. Grant of Options. The
Company hereby grants to the Grantee a non-qualified stock option (the “Option”)
to purchase                             shares
of common stock of the Company, par value $0.0001 per share (the “Shares”), at
the exercise price of $         per Share
(the “Exercise Price”). The Option is not intended to qualify as an incentive
stock option under Section 422 of the Code.


 


2. Subject to the Plan.
This Agreement is subject to the provisions of the Arena Pharmaceuticals, Inc.
2006 Long-Term Incentive Plan (the “Plan”),
and, unless the context requires otherwise, terms used herein shall have the
same meaning as in the Plan. In the event of a conflict between the provisions
of the Plan and this Agreement, the Plan shall control.


 


3. Term of Options.
Unless the Option terminates earlier pursuant to the provisions of this
Agreement, the Option shall expire on the tenth anniversary of the Grant Date.


 


4. Vesting. Except as
otherwise provided in Sections 6(b), (c) or (d) of this Agreement, provided the
Grantee is then an Employee or, if applicable, a Director, the Option shall
become vested and exercisable on the following dates:


 




	
  Vest Date

  	
   

  	
  Vested Options

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  






 


5. Exercise of Option


 


(a)  Manner of Exercise. To the extent vested,
the Option may be exercised, in whole or in part, by delivering written notice
to the Company in accordance with paragraph (f) of Section 8 in such form as the
Company may require from time to time. Such notice shall specify the number of Shares
subject to the Option as to which the Option is being exercised, and shall be accompanied
by full payment of the Exercise Price of such Shares in a manner permitted under
the terms of Section 5.5 of the Plan, except that payment with previously
acquired Shares may only be made with the consent of the Committee. The Option may be exercised only in multiples of whole Shares
and no partial Shares shall be issued.


 

















 


(b)  Issuance of Shares. Upon exercise of
the Option and payment of the Exercise Price for the Shares as to which the
Option is exercised, the Company shall issue to the Grantee the applicable number
of Shares in the form of fully paid and nonassessable Shares.


 


(c)  Capitalization Adjustments. The number
of Shares subject to the Option and the exercise price per Share shall be
equitably and appropriately adjusted as provided in Section 12.2 of the Plan.


 


 (d)  Withholding.
No Shares will be issued on exercise of the Option unless and until the Grantee
pays to the Company, or makes satisfactory arrangement with the Company for
payment of, any federal, state or local taxes required by law to be withheld in
respect of the exercise of the Option. The Grantee hereby agrees that the
Company may withhold from the Grantee’s wages or other remuneration the
applicable taxes. At the discretion of the Company, the applicable taxes may be
withheld in kind from the Shares otherwise deliverable to the Grantee on
exercise of the Option, up to the Grantee’s minimum required withholding rate
or such other rate that will not trigger a negative accounting impact.


 


6. Termination of Option


 


(a) Termination of Employment
Other Than Due to Retirement, Death, Disability or Cause. Unless the Option
has earlier terminated, the Option shall terminate in its entirety, regardless
of whether the Option is vested, ninety (90) days after the date the Grantee ceases
to be an Employee and, if applicable, a Director, for any reason other than the
Grantee’s Retirement, death, Disability or termination by the Company for Cause.
Except as provided below in Section 6(b), (c) or (d), any portion of the Option
that is not vested at the time the Grantee ceases to be an Employee or, if
applicable, a Director, shall immediately terminate.


 


(b)  Retirement. Upon the Retirement of the
Grantee, unless the Option has earlier terminated, the Option shall continue in
effect (and for purposes of vesting pursuant to Section 4 the Grantee shall be
deemed to continue to be an Employee) until the earlier of (i) two (2) years
after the Grantee’s Retirement (or, if later, the fifth anniversary of the
Grant Date) or (ii) the expiration of the Option’s term pursuant to Section 3. For
purposes of this Agreement, “Retirement” shall mean termination of the Grantee’s
employment with the Company and its Subsidiaries other than for Cause if (i)
the Grantee is then at least age 60 and (ii) the Grantee has provided at least ten
(10) years of continuous service to the Company and its Subsidiaries.


 


(c)  Death. Upon the Grantee’s death,
unless the Option has earlier terminated, to the extent the Option is not fully
vested the installment of the Option that would vest on the next anniversary of
the Grant Date following the Grantee’s death shall become vested and
exercisable based on a fraction, the
numerator of which is the number of whole months elapsed since the prior
anniversary of the Grant Date (or, if applicable, the Grant Date) and the
denominator of which is 12. Notwithstanding the foregoing, if on the date of
the Grantee’s death the Grantee was eligible for Retirement the installments of
the Option that would vest in the next two (2) years following the date of the
Grantee’s death shall become vested and exercisable. The Grantee’s executor or
personal representative, the person to whom the Option shall have been
transferred by will or the laws of descent and distribution, or such other
permitted transferee, as


 


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the
case may be, may exercise the Option in accordance with paragraph (a) of
Section 5, to the extent vested, provided such exercise occurs within
twelve (12) months (twenty-four (24) months if the Grantee was eligible for
Retirement) after the date of the Grantee’s death or the end of the term of the
Option pursuant to Section 3, whichever is earlier.


 


(d)  Disability. In the event that the
Grantee ceases to be an Employee by reason of Disability, unless the Option has
earlier terminated (i) to the extent the Option is not fully vested the
installment of the Option that would vest on the next anniversary of the Grant
Date following the Grantee’s Disability shall become vested and exercisable
based on a fraction, the numerator of which is the number of whole months
elapsed since the prior anniversary of the Grant Date (or, if applicable, the
Grant Date) and the denominator of which is 12 and (ii) the Option may be
exercised, in accordance with paragraph (a) of Section 5, to the extent vested,
provided such exercise occurs within twelve (12) months after the date
of Disability or the end of the term of the Option pursuant to Section 3,
whichever is earlier. Notwithstanding the foregoing, if on the date of the
Grantee’s Disability the Grantee was eligible for Retirement (x) the installments
of the Option that would vest in the next two (2) years following the date of
the Grantee’s Disability shall become vested and exercisable and (y) the Option
may be exercised within twenty-four (24) months after the date of the Grantee’s
Disability or the end of the term of the Option pursuant to Section 3,
whichever is earlier.


 


For purposes of this
Agreement, “Disability” shall mean the Grantee’s becoming disabled within the
meaning of Section 22(e)(3) of the Code, or as otherwise determined by the
Committee in its discretion. The Committee may require such proof of Disability
as the Committee in its sole and absolute discretion deems appropriate and the Committee’s
determination as to whether the Grantee has incurred a Disability shall be final
and binding on all parties concerned.


 


(e)  Termination for Cause. Upon the
termination of the Grantee’s employment by the Company or a Subsidiary for
Cause, unless the Option has earlier terminated, the Option shall immediately
terminate in its entirety and shall thereafter not be exercisable to any extent
whatsoever. For purposes of this Agreement, except as otherwise provided in a
written employment or severance agreement between the Grantee and the Company
or a severance plan of the Company covering the Grantee (including a change in
control severance agreement or plan), “Cause” shall mean: a finding by the
Committee that the Grantee has breached his or her employment agreement with
the Company, or has been engaged in disloyalty to the Company, including,
without limitation, fraud, embezzlement, theft, commission of a felony or
proven dishonesty in the course of his or her employment, or has disclosed
trade secrets or confidential information of the Company to persons not
entitled to receive such information, or has breached any written
noncompetition or nonsolicitation agreement between the Grantee and the Company
or has engaged in such other behavior detrimental to the interests of the
Company as the Committee determines.


 


(f)  Extension of Exercise Period. Notwithstanding
any provisions of paragraphs (a), (b), (c) or (d) of this Section to the
contrary, if exercise of the Option following termination of employment or
service during the time period set forth in the applicable paragraph or sale
during such period of the Shares acquired on exercise would violate any of the
provisions of the federal


 


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securities
laws (or any Company policy related thereto), the time period to exercise the
Option shall be extended until the later of (i) forty-five (45) days after the
date that the exercise of the Option or sale of the Shares acquired on exercise
would not be a violation of the federal securities laws (or a related Company
policy), or (ii) the end of the time period set forth in the applicable
paragraph.


 


7. Change in Control;
Corporate Transaction.


 


(a)  Effect of Change in Control on Option.
In the event of a Change in Control, the Surviving Corporation or the Parent
Corporation, if applicable, may assume, continue or substitute for the Option
on substantially the same terms and conditions (which may include the right to
acquire the same consideration paid to the stockholders of the Company pursuant
to the Change in Control). In the event of a Change in Control, to the extent
the Surviving Corporation or the Parent Corporation, if applicable, does not
assume, continue or substitute for the Option on substantially the same terms
and conditions (which may include settlement in the common stock of the Surviving
Corporation or the Parent Corporation), the Option shall (i) become fully vested
and exercisable immediately prior to the Change in Control if the Grantee is
then an Employee or, if applicable, a Director, and (ii) terminate on the date
of the Change in Control. In the event of a Change in Control, to the extent
the Surviving Corporation or the Parent Corporation, if applicable, assumes or
substitutes for the Option on substantially the same terms and conditions
(which may include providing for settlement in the common stock of the Surviving
Corporation or the Parent Corporation), if within 24 months following the date
of the Change in Control the Grantee ceases to be an Employee by reason of (i)
an involuntary termination without Cause, or (ii) a voluntary termination in
connection with a Relocation Requirement, the Option shall become fully vested
and exercisable, and may be exercised by the Grantee at any time until the first
anniversary of the date the Grantee ceases to be an Employee or the end of the
term of the Option pursuant to Section 3, whichever is earlier.


 


For purposes of this Agreement
(i) if the Company is the Surviving Corporation or the Parent Corporation, if
applicable, it shall be deemed to have assumed the Option unless it takes
explicit action to the contrary and (ii) “Relocation Requirement” shall mean a
requirement by the Company, the Surviving Corporation or an affiliate thereof
that the Grantee be based anywhere more than fifty (50) miles from both the
Grantee’s primary office location at the time of the Change in Control and the
Grantee’s principal residence at the time of the Change in Control.


 


Notwithstanding the
foregoing, if on the date of the Change in Control the Fair Market Value of one
Share is less than the Exercise Price, then the Option shall terminate as of
the date of the Change in Control, except as otherwise determined by the
Committee.


 


(b)  Effect of Corporate Transaction on Option.
In the event of a Corporate Transaction that is not a Change in Control, any
surviving corporation or acquiring corporation (or the surviving or acquiring
corporation’s parent company) may assume, continue or substitute for the Option
on substantially the same terms and conditions (which may include the right to
acquire the same consideration paid to the stockholders of the Company pursuant
to the Corporate Transaction). In the event of a Corporate Transaction that is
not a Change in Control, then notwithstanding Section 11 of the Plan and
paragraph (a) of this Section, to the extent that the 


 


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surviving
corporation or acquiring corporation (or its parent company) does not assume,
continue or substitute for the Option on substantially the same terms and
conditions (which may include the right to acquire the same consideration paid
to the stockholders of the Company pursuant to the Corporate Transaction), then
the Option shall (i) become fully vested and exercisable immediately prior to the Corporate Transaction if the Grantee is then
an Employee or, if applicable, a Director, and (ii) terminate on the date of
the Corporate Transaction.


 


For purposes of this
Agreement, “Corporate Transaction” means (i) the consummation of a merger,
consolidation or similar transaction following which the Company is not the
surviving corporation; or (ii) the consummation of a merger, consolidation or
similar transaction following which the Company is the surviving corporation
but the Shares outstanding immediately preceding the merger, consolidation or
similar transaction are converted or exchanged by virtue of the merger,
consolidation or similar transaction into other property, whether in the form
of securities, cash or otherwise. Notwithstanding the foregoing, a “Corporate
Transaction” shall not include a transaction that is effected exclusively for
the purpose of changing the domicile of the Company.


 


(c)  Other Agreement or Plan. The
provisions of this Section (including the definition of Cause), shall be
superseded by the specific provisions, if any, of a written employment or
severance agreement between the Grantee and the Company or a severance plan of
the Company covering the Grantee, including a change in control severance
agreement or plan, to the extent such a provision in such other agreement or
plan provides a greater benefit to the Grantee.


 


8. Miscellaneous.


 


(a)  No Rights of Stockholder. The Grantee
shall not have any of the rights of a stockholder with respect to the Shares subject
to this Option until such Shares have been issued upon the due exercise of the
Option.


 


(b)  Nontransferability of Option. Except
to the extent and under such terms and conditions as determined by the
Committee, the Option shall be nontransferable otherwise than by will or the
laws of descent and distribution, and during the lifetime of the Grantee, the
Option may be exercised only by the Grantee or, during the period the Grantee
is under a legal disability, by the Grantee’s guardian or legal representative.
Notwithstanding the foregoing, the Grantee may, by
delivering written notice to the Company, in a form provided by or otherwise
satisfactory to the Company, designate a third party who, in the event of the Grantee’s
death, shall thereafter be entitled to exercise the Option.


 


(c)  Severability. If any provision of this
Agreement shall be held unlawful or otherwise invalid or unenforceable in whole
or in part by a court of competent jurisdiction, such provision shall (i) be
deemed limited to the extent that such court of competent jurisdiction deems it
lawful, valid and/or enforceable and as so limited shall remain in full force
and effect, and (ii) not affect any other provision of this Agreement or part
thereof, each of which shall remain in full force and effect.


 


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(d)  Governing Law. This Agreement shall be
governed by, and interpreted in accordance with, the laws of the State of Delaware,
other than its conflict of laws principles.


 


(e)  Headings. The headings in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.


 


(f)  Notices. All notices required or permitted
under this Agreement shall be in
writing and shall be sufficiently made or given if hand delivered or mailed by
registered or certified mail, postage prepaid. Notice by mail shall be deemed
delivered on the date on which it is postmarked.


 


Notices to the Company
should be addressed to:


 


Arena Pharmaceuticals, Inc.


6150 Nancy Ridge Drive


San Diego, California 92121


Attention:  Chief Financial Officer


 


With a copy to:  General Counsel


 


Notice to the Grantee should
be addressed to the Grantee at the Grantee’s address as it appears on the
Company’s records.


 


The Company or the Grantee
may by writing to the other party, designate a different address for notices.


 


If the receiving party
consents in advance, notice may be transmitted and received via telecopy or via
such other electronic transmission mechanism as may be available to the parties.
Such notices shall be deemed delivered when received.


 


(g)  Agreement Not a
Contract.  This Agreement (and the grant of the Option) is not an employment or service contract,
and nothing in the Option shall
be deemed to create in any way whatsoever any obligation on Grantee’s part to continue as an Employee, or of the
Company or a Subsidiary to
continue Grantee’s service as an
Employee.


 


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(h)  Entire Agreement; Modification. This
Agreement and the Plan contain the entire agreement between the parties with
respect to the subject matter contained herein and may not be modified, except
as provided in the Plan or in a written document signed by each of the parties
hereto, and may be rescinded only by a written agreement signed by both parties.


 


IN WITNESS WHEREOF, the
parties have executed this Agreement effective as of the Grant Date.


 


 


	
   

  	
   

  	
  ARENA PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Grantee

  	
   

  



 


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