Exhibit
10.1


 


	
  Grantee:

  	
  <name>

  	
  Option
  Number:

  	
  <number>

  
	
  Date of
  Grant:

  	
  <date>

  



 





 


ARENA
PHARMACEUTICALS, INC.


2002
EQUITY COMPENSATION PLAN


 


INITIAL
NONQUALIFIED STOCK OPTION GRANT


TO NON-EMPLOYEE DIRECTOR


 


 


This NONQUALIFIED STOCK
OPTION GRANT (“Grant Instrument”), dated as of 
<date> (the “Date of Grant”), is delivered by Arena
Pharmaceuticals, Inc. (the “Company”) to <name> (the “Grantee”).


 


RECITALS


 


A.                                   The
Arena Pharmaceuticals, Inc. 2002 Equity Compensation Plan (the “Plan”) provides
for the grant of options to purchase shares of common stock of the
Company.  The Board of Directors of the
Company (the “Board”) has decided to make a stock option grant as an inducement
for the Grantee to promote the best interests of the Company and its
stockholders.  A copy of the Plan is
attached as Appendix A to this Grant
Instrument.


 


B.                                     The
Board is authorized to appoint a committee to administer the Plan.  If a committee is appointed, all references
in this Grant Instrument to the “Board” shall be deemed to refer to the
committee.


 


NOW, THEREFORE, the
parties to this Grant Instrument, intending to be legally bound hereby, agree
as follows:


 


1.                                       Grant
of Option.  Subject to the terms and
conditions set forth in this Grant Instrument and in the Plan, the Company
hereby grants to the Grantee a nonqualified stock option (the “Option”) to
purchase <total shares> shares of common stock of the Company (“Shares”)
at an exercise price of $<price per share> per Share.  The Option shall become vested and
exercisable according to Paragraph 2 below.


 





















 


2.                                       Vesting
of Option.


 


(a)                                  The
Option shall become vested on the following Vesting Date if the Grantee has
been continuously a director of the Company (as defined in the Plan) from the
Date of Grant through the applicable Vesting Date:


 


	
  Vesting
  Date

  	
   

  	
  Vested Shares

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  



 


(b)                                 The
Grantee may exercise the Option before or after it becomes vested, provided
that if the Grantee exercises any portion of the Option before it has become
vested, the Shares received upon the exercise of the nonvested Option (“Nonvested
Shares”) shall be subject to the restrictions described in Subsection (c) below
until the date on which the applicable portion of the Option would have
vested.  The period before the applicable
portion of the Option would have vested is referred to as the “Restriction
Period.”


 


(c)                                  During
the Restriction Period, the Grantee may not sell, assign, encumber or otherwise
transfer the Nonvested Shares, notwithstanding anything in the Plan to the
contrary.  If the Grantee ceases to be a
director of the Company for any reason during the Restriction Period, the
Grantee shall immediately return the Nonvested Shares to the Company and the
Company shall pay to the Grantee, as consideration for the return of the
Nonvested Shares, $<per share price> per share for each returned
Share.  If the Grantee continues to be a
director of the Company through the vesting dates described in Subsection (a)
above, the restrictions on the Nonvested Shares shall lapse according to the
vesting schedule.


 


(d)                                 If
the Grantee exercises the Option and receives Nonvested Shares, the Grantee
shall have the right to vote any Nonvested Shares and to receive dividends and
distributions on Nonvested Shares during the Restriction Period, provided that
all dividends and distributions payable on Nonvested Shares during the
Restriction Period shall be held by the Company subject to the same
restrictions as the underlying Nonvested Shares.


 


(e)                                  Any
stock certificates representing Nonvested Shares shall be held in escrow by the
Company or by an escrow agent designated by the Company until the Nonvested
Shares vest.  When the Grantee obtains a
vested right to the Nonvested Shares, a certificate representing the vested
Shares shall be issued to the Grantee. 
The certificate representing the vested Shares shall be duly endorsed
(or accompanied by an executed stock power) so as to transfer to the Grantee
all right, title and interest in and to the Shares represented by such
certificate.


 


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3.                                       Term
of Option.


 


(a)                                  The
Option shall have a term of ten (10) years from the Date of Grant and shall
terminate at the expiration of that period (<grant date + 10>), unless it
is terminated at an earlier date pursuant to the provisions of this Grant
Instrument or the Plan.


 


(b)                                 The
Option shall automatically terminate upon the happening of the first of the
following events:


 


(i)                                     The
expiration of the three-year period after the Grantee ceases to be a director
of the Company (x) due to involuntary termination or self-termination occurring
with the permission of a majority of the Board; (y) on account of the Grantee’s
disability (as defined in the Plan); or (z) if the Grantee dies while a
director of the Company; or


 


(ii)                                  The
expiration of the 90-day period after the Grantee ceases to be a director
of the Company for a reason other than those listed in Subsection (i) above.


 


Notwithstanding the
foregoing, in no event may the Option be exercised after the date that is ten
(10) years from the Date of Grant.  Any
portion of the Option that is not vested at the time the Grantee ceases to be a
director of the Company shall immediately terminate.


 


4.                                       Exercise
Procedures.


 


(a)                                  Subject
to the provisions of Paragraphs 2 and 3 
above, the Grantee may exercise part or all of the Option by giving the
Company written notice of intent to exercise in the manner provided in
Paragraph 13 below, specifying the number of Shares as to which the Option is
to be exercised.  On the delivery date,
the Grantee shall pay the exercise price (i) in cash, (ii) with the approval of
the Board, by delivering Shares of the Company which shall be valued at their
fair market value on the date of delivery, or (iii) by such other method as the
Board may approve.  The Board may impose
from time to time such limitations as it deems appropriate on the use of Shares
of the Company to exercise the Option.


 


(b)                                 The
obligation of the Company to deliver Shares upon exercise of the Option shall
be subject to all applicable laws, rules, and regulations and such approvals by
governmental agencies as may be deemed appropriate by the Board, including such
actions as Company counsel shall deem necessary or appropriate to comply with
relevant securities laws and regulations. 
The Company may require that the Grantee (or other person exercising the
Option after the Grantee’s death) represent that the Grantee is purchasing
Shares for the Grantee’s own account and not with a view to or for sale in
connection with any distribution of the Shares, or such other representation as
the Board deems appropriate.  All
obligations of the Company under this Grant Instrument shall be subject to the
rights of the Company as set forth in the Plan to withhold amounts required to
be withheld for any taxes, if applicable. 
Subject to Board approval, the Grantee may elect to satisfy any income
tax


 


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withholding obligation of
the Company with respect to the Option by having Shares withheld up to an
amount that does not exceed the applicable withholding tax rate for federal
(including FICA), state and local tax liabilities.


 


5.                                       Change
of Control.  The provisions of the
Plan applicable to a Change of Control shall apply to the Option, and, in the
event of a Change of Control, the Board may take such actions as it deems
appropriate pursuant to the Plan.


 


6.                                       Stockholder’s
Agreement.  As a condition of
receiving this Option, the Grantee hereby agrees that, if requested by the
Company prior to any public offering of the Company’s stock, the Grantee (or
other person exercising the Option after the Grantee’s death) will execute a
stockholder’s agreement, on such terms as may be approved by the Company, with
respect to all Shares issued upon the exercise of the Option.


 


7.                                       Restrictions
on Exercise.  Only the Grantee may
exercise the Option during the Grantee’s lifetime.  After the Grantee’s death, the Option shall
be exercisable (subject to the limitations specified in the Plan) solely by the
legal representatives of the Grantee, or by the person who acquires the right
to exercise the Option by will or by the laws of descent and distribution, to
the extent that the Option is exercisable pursuant to this Grant Instrument.


 


8.                                       Grant
Subject to Plan Provisions.  This
grant is made pursuant to the Plan, the terms of which are incorporated herein
by reference, and in all respects shall be interpreted in accordance with the
Plan.  The grant and exercise of the
Option are subject to the provisions of the Plan and to interpretations,
regulations and determinations concerning the Plan established from time to
time by the Board in accordance with the provisions of the Plan, including, but
not limited to, provisions pertaining to (i) rights and obligations with
respect to withholding taxes, (ii) the registration, qualification or listing
of the Shares, (iii) capital or other changes of the Company and (iv) other
requirements of applicable law.  The
Board shall have the authority to interpret and construe the Option pursuant to
the terms of the Plan, and its decisions shall be conclusive as to any
questions arising hereunder.


 


9.                                       No
Employment or Other Rights.  The
grant of the Option shall not confer upon the Grantee any right to be retained
by or in the employ or service of the Company and shall not interfere in any
way with the Company’s right, if any, to terminate the Grantee’s employment or
service at any time.  The Company’s
right, if any, to terminate at will the Grantee’s employment or service at any
time for any reason is specifically reserved.


 


10.                                 No
Stockholder Rights.  Neither the
Grantee, nor any person entitled to exercise the Grantee’s rights in the event
of the Grantee’s death, shall have any of the rights and privileges of a
stockholder with respect to the Shares subject to the Option, until Shares have
been issued upon the exercise of the Option.


 


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11.                                 Assignment
and Transfers.  The rights and
interests of the Grantee under this Grant Instrument may not be sold, assigned,
encumbered or otherwise transferred except as permitted by the Board, or
except, in the event of the death of the Grantee, by will or by the laws of
descent and distribution.  In the event
of any attempt by the Grantee to alienate, assign, pledge, hypothecate, or
otherwise dispose of the Option or any right hereunder, except as provided for
in this Grant Instrument, or in the event of the levy or any attachment,
execution or similar process upon the rights or interests hereby conferred, the
Company may terminate the Option by notice to the Grantee, and the Option and
all rights hereunder shall thereupon become null and void.  The rights and protections of the Company
hereunder shall extend to any successors or assigns of the Company and to the
Company’s parents, subsidiaries, and affiliates.  This Grant Instrument may be assigned by the
Company without the Grantee’s consent.


 


12.                                 Applicable
Law.  The validity, construction,
interpretation and effect of this instrument shall be governed by and
determined in accordance with the laws of the State of California.


 


13.                                 Notice.  Any notice to the Company provided for in
this instrument shall be addressed to the Company in care of the Vice President
of Finance at 6166 Nancy Ridge Drive, San Diego, CA  92121 (with a copy also sent to the attention
of the General Counsel at the same address), and any notice to the Grantee
shall be addressed to such Grantee at the current address shown on the payroll
of the Company, or to such other address as the Grantee may designate to the
Company in writing.  Any notice shall be
delivered by hand, sent by telecopy or enclosed in a properly sealed envelope
addressed as stated above, registered and deposited, postage prepaid, in a post
office regularly maintained by the United States Postal Service.


 


IN WITNESS WHEREOF, the
Company has caused its duly authorized officers to execute and attest this
Grant Instrument, and the Grantee has executed this Grant Instrument, effective
as of the Date of Grant.


 


 


	
  Attest:

  	
  ARENA PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Accepted:

  	
   

  	
   

  
	
   

  	
   

  	
  Grantee

  	
   

  
						



 


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