Exhibit
10.2


Arena Pharmaceuticals, Inc. 2006 Long-Term Incentive Plan


2007
Performance-Based 


Restricted
Stock Unit Grant Agreement


(Executives)


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


1.             Grant of Restricted Stock Units.  The Company hereby grants to the Participant                        Restricted
Stock Units.  Each Restricted Stock Unit
shall be deemed to be the equivalent of one Share.


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.  Capitalized terms not explicitly defined in
this Agreement but defined in the Plan shall have the same definitions as in
the Plan.


3.             Account.  The Company shall credit to a bookkeeping
account (the “Account”) maintained by the Company for the Participant’s benefit
the Restricted Stock Units. On each date that cash dividends are paid on the
Shares, the Company will credit the Account with a number of additional
Restricted Stock Units equal to the result of dividing (i) the product of
the total number of Restricted Stock Units credited to the Account on the
record date for such dividend and the per Share amount of such dividend by
(ii) the Fair Market Value of one Share on the date such dividend is paid
by the Company to stockholders.  The
additional Restricted Stock Units shall be or become vested to the same extent
as the Restricted Stock Units that resulted in the crediting of such additional
Restricted Stock Units.


4.             Vesting.  Except as provided in Sections 6(b), 6(c) and
10 of this Agreement, provided (i) the
Committee determines that one or more of the Performance Goals are achieved on
or before February 26, 2012 and (ii) the Participant is an Employee or, if
applicable, a Director, on February 26, 2012, the Restricted Stock Units
shall vest in the following percentages:




	
  Number of

  	
   

  	
  Vested Restricted

  	
   

  
	
  Performance Goals Achieved

  	
   

  	
  Stock Units

  	
   

  
	
  1

  	
   

  	
  25

  	
  %

  
	
  2

  	
   

  	
  50

  	
  %

  
	
  3

  	
   

  	
  87.5

  	
  %

  
	
  4

  	
   

  	
  100

  	
  %

  






 













For
purposes of this Section 4, the “Performance Goals” are as follows:


1.             Approval of lorcaserin (the Company’s
drug candidate for obesity) by the U.S. Food and Drug Administration, which
approval continues to be in effect on the applicable vesting date;


2.             Net sales of lorcaserin by the
Company or, if applicable, its partners or licensors, equal to $250,000,000
during any consecutive six-month period, determined in accordance with
Generally Accepted Accounting Principles and consistent with the Company’s or
the partners’ or licensors’ revenue recognition policies;


3.             One successful phase 3 (as defined
by 21 C.F.R. section 312.21(c)) clinical trial of a drug candidate (other than lorcaserin)
of the Company or, if applicable, under one of its partnerships or license
arrangements. “Successful” means the phase 3 clinical trial results meet the
primary efficacy endpoint and could be used, or were used, as a pivotal study
in support of a New Drug Application; and


4.             Successful phase 2 (as defined by
21 C.F.R. section 312.21(b)) clinical trials on two drug candidates (other than
lorcaserin or a drug candidate that satisfied goal 3 above) of the Company or
under one of its partnerships or license arrangements. “Successful” means
either that (i) there were statistically significant efficacy results and such
results support proceeding with an additional phase 2 or a phase 3 (as defined
by 21 C.F.R. section 312.21(b) or (c), respectively) clinical trial or (ii)
screening of patients in a phase 3 clinical trial has been commenced.


The Committee shall have the right to determine, in its sole and
exclusive discretion, whether a Performance Goal has been achieved.  In addition, the Committee reserves the right
to reasonably determine, in its sole and exclusive discretion, whether a
Performance Goal is not achievable on or before February 26, 2012.  If the Committee determines that a particular
Performance Goal is not achievable on or before February 26, 2012, then the
number of Restricted Stock Units subject to this Agreement shall be reduced, as
applicable, to reflect the failure to achieve such Performance Goal, and the
Restricted Stock Units associated with achieving such Performance Goal will expire
immediately upon such determination.


5.             Capitalization Adjustments. The number of Restricted Stock Units
credited to the Account shall be
equitably and appropriately adjusted as provided in Section 12.2 of the Plan.


6.             Termination
of Employment.


(a)  Termination of Employment Other Than Due to Death or Disability.  In
the event the Participant ceases to be an Employee and, if applicable, a
Director, for any reason other than as a result of death or Disability, the
Restricted Stock Units credited to the Account that were not vested on the date
of such termination shall be immediately forfeited.


(b)  Death.  In the event of the Participant’s death,
provided that one or more of the Performance Goals has been achieved on or
before such date, the number of Restricted Stock 



 2
 









Units credited to the
Account that would vest
had the Participant remained an employee of the Company through February 26,
2012 (based on the achievement of only those Performance Goals actually
achieved as of the date of death) shall instead vest immediately upon the date
of such Participant’s death or, if applicable, the date after such death that
the Committee determines the Performance Goals had been achieved as of the date
of death.


(c)  Disability. In the
event that the Participant ceases to be an Employee by reason of Disability,
provided that one or more of the Performance Goals has been achieved on or
before such date, the number of Restricted Stock Units credited to the
Account that would vest had the
Participant remained an employee of the Company through February 26, 2012
(based on the achievement of only those Performance Goals actually achieved as
of the date of Disability) shall instead vest immediately upon the date of
Disability or, if applicable, the date after such disability that the Committee
determines the Performance Goals had been achieved as of the date of
Disability. For purposes of this Agreement, “Disability” shall mean the
Participant’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 Participant has incurred a Disability shall be final and binding on
all parties concerned.


7.             Payment of Shares.  The
Company shall make a payment to the Participant of Shares based on the number
of the vested Restricted Stock Units credited to the Participant’s Account upon
the date the Restricted Stock Units vest. 
Notwithstanding the foregoing, in the event that the Company determines
that any Shares are scheduled under this Agreement to be delivered on a day
(the “Original Distribution Date”) on which a sale by the Participant of Shares
would violate any of the provisions of the federal securities laws (or any
Company policy related thereto), as determined by the Company, then such Shares
shall not be delivered on such Original Distribution Date and shall instead be
delivered as soon as practicable on the date on which the sale of Shares would
not be a violation of the federal securities laws (or a related Company
policy); provided, however, that in no event shall the delivery of the Shares
be delayed pursuant to this provision beyond the later of: (a) December 31st of
the same calendar year of the Original Distribution Date, or (b) the 15th day
of the third calendar month following the Original Distribution Date.


The Participant may elect, in
accordance with procedures adopted by the Company, to change the payment date
determined in accordance with the first sentence of the preceding paragraph by
written notice to the Company at least 12 months prior to the payment date,
provided that the new payment date must be at least five years after the
previously applicable payment date.


8.             Form of Payment.  Payments pursuant to Section 7 shall be made in Shares equal to the
number of vested Restricted Stock Units credited to the Account.  Payment shall be made as soon as practicable
after the applicable payment date, but in no event later than 30 days after the
date established pursuant to Section 7.



 3
 









9.             Beneficiary.  In  the event of the Participant’s death prior to payment of
the Restricted Stock Units credited to the Account, payment shall be made to
the last beneficiary designated in writing that is received by the Company
prior to the Participant’s death or, if no designated beneficiary survives the
Participant, such payment shall be made to the Participant’s estate.


10.          Change in Control;
Corporate Transaction.


(a)  Effect of Change
in Control on Restricted
Stock Units.  In the event of a Change in Control, the
Surviving Corporation or the Parent Corporation, if applicable, may
assume or substitute for the Restricted Stock Units credited to the Account on
substantially the same terms and conditions (which may include payment in
shares of the common stock of the Surviving
Corporation or the Parent Corporation). 
In the event of a Change in
Control, to the extent the Surviving Corporation or the Parent Corporation, if
applicable, does not assume or substitute for the Restricted Stock Units
credited to the Account on substantially the same terms and conditions (which
may include payment in shares of the common stock of the Surviving Corporation or the Parent
Corporation), that portion of the Restricted Stock Units that would have
vested had (i) the Surviving Corporation or the Parent Corporation, if
applicable, assumed the Restricted Stock Units and (ii) the Participant
remained an Employee through February 26, 2012 (based in the achievement of
only those Performance Goals actually achieved as of the date of the Change in
Control), shall become vested immediately prior to the Change in Control,
provided the Participant is then an Employee or, if applicable, a Director. In the event of a Change in Control, to the
extent the Surviving Corporation
or the Parent Corporation, if applicable, does assume or substitute for
the Restricted Stock Units credited to the Account on substantially the same
terms and conditions (which may include payment in shares of the common stock
of the Surviving Corporation or the
Parent Corporation) and within 24 months thereafter the Participant
ceases to be an Employee by reason of (x)
an involuntary termination without Cause, or (y) a voluntary termination with Good Reason, that portion
of the Restricted Stock Units that would have vested had (I) the Surviving
Corporation or the Parent Corporation, if applicable, assumed the Restricted
Stock Units and (II) the Participant remained an Employee through February 26,
2012 (based in the achievement of only those Performance Goals actually
achieved as of the date of such termination), shall become fully vested on the
date Participant ceases to be an Employee.


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 Restricted Stock Units
unless it takes explicit action to the contrary; (ii) “Good Reason” shall mean,
with respect to a Participant, any one of the following: (a) any reduction in
Participant’s annual base salary (except for salary decreases generally
applicable to the Company’s other similarly-situated employees); (b) any
material reduction in the Participant’s target bonus level or bonus
opportunities; (c) Participant’s duties or responsibilities are materially
diminished (and not simply a change in title or reporting relationships);
provided, however, that the Participant shall not have “Good Reason” to
terminate if the Company is retained as a separate legal entity or business
unit following the effective date of a Change of Control and the Participant
holds the same position in such legal entity or business unit as the eligible
employee held before the effective date of such Change of Control; (d) in the
event the Participant is a member of the Board, any failure of the Board or one




 4
 









if
its committees to re-nominate the Participant for election to the Board; (e)
any significant reduction, in the aggregate, in the employee benefit programs
made available to the Participant other than a reduction in such employee
benefit programs affecting all employees of the Company substantially equally;
or (f) a change in the location of the Participant’s principal office or
business resulting in an increase in the Participant’s one-way driving distance
from the  Participant’s principal
personal residence to the principal office or business location at which the
Participant is required to perform services of more than 20 miles, except for
required travel for the Company’s business to an extent substantially
consistent with the Participant’s prior business travel obligations; and (iii) “Cause”
shall have the meaning provided in the Company’s severance benefit plan, but
only if such plan is applicable to the Participant and, if not, then it shall
mean: a finding by the Committee that the Participant 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 Participant and the
Company or has engaged in such other behavior detrimental to the interests of
the Company as the Committee determines.


(b)  Effect of Corporate
Transaction on Restricted Stock Units.  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 Restricted
Stock Units credited to the Account on
substantially the same terms and conditions (which may include payment
in shares of the common stock of the surviving
corporation, acquiring corporation, or the surviving or acquiring corporation’s
parent company).   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 surviving corporation or acquiring corporation (or its parent company) does
not assume, continue or substitute for the Restricted Stock Units
credited to the Account on
substantially the same terms and conditions (which may include payment
in shares of the common stock of the surviving
corporation, acquiring corporation, or the surviving or acquiring corporation’s
parent company), then that portion of the Restricted Stock Units that
would have vested had (i) the Surviving Corporation or the Parent Corporation,
if applicable, assumed the Restricted Stock Units and (ii) the Participant remained
an Employee through February 26, 2012 (based in the achievement of only those
Performance Goals actually achieved as of the date of the Corporate
Transaction), shall become fully vested immediately  prior to the Corporate Transaction if the Participant is
then an Employee or, if applicable, a Director.


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 



 5
 









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, shall not  be superseded by the specific provisions, if any, of a
written employment or severance agreement between the Participant and the
Company or a severance plan of the Company covering the Participant, including
a change in control severance agreement or plan, even if such a provision in
such other agreement or plan provides a greater benefit to the Participant.


11.          Source of Payments.  The Participant’s right to receive payment
under this Agreement shall be an unfunded entitlement and shall be an unsecured
claim against the general assets of the Company.  The Participant has only the status of a
general unsecured creditor hereunder, and this Agreement constitutes only a
promise by the Company to pay the value of the Account on the payment date.


12.          Nontransferability. 
Except to the extent and under such terms and conditions as determined
by the Committee, the Restricted Stock Units shall not be transferable
otherwise than by will or the laws of descent and distribution or as provided
in Section 9.


13.          Withholding.   The Participant agrees to pay to the
Company, or to make satisfactory arrangement with the Company for payment of,
any federal, state or local taxes, if any, required by law to be withheld in
respect of the payment of the Restricted Stock Units. The Participant hereby
agrees that the Company may withhold from Participant’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 Participant on the payment of the Restricted Stock Units.


14.          No Rights of a Stockholder.  The Participant shall not have any of the rights
of a stockholder with respect to the Shares subject to the Restricted Stock
Units until such Shares have been issued.


15.          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 at
the time and on the date the same is postmarked.


Notices to the Company should be addressed to:


Arena Pharmaceuticals,
Inc.


6166 Nancy Ridge Drive


San Diego, California
92121


Attention:  Chief Financial
Officer


With a copy to:  General Counsel



 6
 









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


The Company or the
Participant 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.


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


17.              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.


18.              Agreement Not a Contract.  This Agreement (and the grant of Restricted
Stock Units) is not an employment or service contract, and nothing in this
Agreement shall be deemed to create in any way whatsoever any obligation on
Participant’s part to continue as an Employee, or of the Company or a
Subsidiary to continue Participant’s service as an Employee.  The grant of the Restricted Stock Units, or
any modification thereof, is not is intended to confer, nor shall it be
construed to confer, any legal or equitable rights to continued
employment.  Participant’s employment
shall remain at-will, if applicable, and subject to termination by the Company
at any time, with or without cause or notice.


19.              Entire Agreement; Modification.  This Agreement and the Plan constitute the
entire agreement between the parties relative to the subject matter 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 executed by both parties.


 



 7
 









 


20.              Compliance with Section 409A of the Code.


(a)  Automatic Delay of Payment.  Notwithstanding anything contained in this
Agreement to the contrary, if the Company determines that as of the date of
payment the Participant is a “specified employee” (as such term is defined
under Section 409A of the Code), any Shares (or shares of the common stock of
the successor company in the event of a Change in Control) payable by reason of
the Participant’s termination of employment with the Company and its
Subsidiaries for any reason other than death or “disability” (as such term is
defined under Section 409A of the Code) will not be paid until the date that is
six months following the date of termination of employment (or such earlier
time permitted under Section 409A of the Code without the imposition of any
accelerated or additional taxes under Section 409A of the Code).


(b)  General. This Agreement is intended to
comply and shall be administered in a manner that is intended to comply with
section 409A of the Code and shall be construed and interpreted in accordance
with such intent.  Payment under this
Agreement shall be made in a manner that will comply with section 409A of the
Code, including regulations or other guidance issued with respect thereto, as
determined by the Committee.  Any
provision of this Agreement that would cause the payment or settlement thereof
to fail to satisfy section 409A of the Code shall be amended to comply with
section 409A of the Code on a timely basis, which may be made on a retroactive
basis, in accordance with regulations and other guidance issued under section
409A of the Code.


21.              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.


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


	
  

  	
   

  	
  ARENA PHARMACEUTICALS, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  Participant

  



 



 8