2009 Annual Incentive Plan



 Exhibit 10.1 
 Arena Pharmaceuticals, Inc. 
 — 2009 Annual Incentive Plan — 







 2009 Annual Incentive Plan - Overview 
 Overview 
  

	 	•	 	 Each participant is assigned an incentive target, expressed as a percentage of annual salary. 


  

	 	•	 	 Arena Pharmaceuticals, Inc. (“Arena”) sets corporate and individual goals (which may include subparts), each individually weighted.



  

	 	•	 	 Goals will be specific and measurable. 


  

	 	•	 	 At the end of the year, individual incentive awards are determined based upon the level of goal achievement, the quality of achievement, and the weighting of each
goal. 


  

	 	•	 	 No award is earned/paid if weighted average combined corporate and individual goal completion is less than 50%. 


  

	 	•	 	 Certain combinations of goal-achievement may create “multipliers” of up to 125% of the target award. 


  

	 	•	 	 The Compensation Committee has the discretion to modify awards up to a 125%-of-target maximum funding level. 


 Individual Incentive Targets 
  

	 	•	 	 Targets are based on role, level, and the market. 


 Target Award as a % Salary 
  

				
	 CEO
	  	55	%
	 CFO, CMO, CSO, General Counsel
	  	40	%
	 VP, Quality Systems
	  	30	%

  

 1 








 Annual Incentive Plan – Mix of Goals 
 Corp. vs. Individual Goals 
  

	 	•	 	 Each participant’s goals are divided into corporate and individual components, weighted based on role. 


  

							
	 	  	Corporate	 	 	Individual (MBOs)	 
	 CEO
	  	75	%	 	25	%
	 CFO, CSO, General Counsel
	  	60	%	 	40	%
	 CMO, VP, Quality Systems
	  	50	%	 	50	%

  

	 	•	 	 All participants have the same corporate goals, which aligns their interests with one another and stockholders. 


  

	 	•	 	 Corporate goals are proposed by the CEO and approved by the Compensation Committee and/or the Board. 


  

	 	•	 	 Individual goals are set by the CEO in partnership with each participant and reviewed by the Compensation Committee. The CEO’s individual goals are proposed by
the CEO and approved by the Compensation Committee and/or the Board. 


  

	 	•	 	 The categories of corporate goals are set forth on Annex I. 


 Plan-year Goal Adjustment 
  

	 	•	 	 If a goal becomes irrelevant during the year or if a strategic change affects a goal (or more than one), then the Compensation Committee, in concert with the CEO,
will: 


  

	 	1.	Substitute a new goal with an appropriate weighting (the weighting of the existing goals will be proportionately adjusted if the new goal has a different weighting than its
predecessor); or, 

  

	 	2.	Eliminate the irrelevant goal and re-weight all other goals proportionately. 

  

 2 








 Annual Incentive Plan - Funding 
 Threshold 
  

	 	•	 	 The minimum total weighted average completion percentage is 50% for any award to be earned. 


 Cap 
  

	 	•	 	 Total award funding is capped at 125% of target. 


 Funding Relationship 
  

	 	•	 	 When total weighted average completion is above 50%, the funded award will equal weighted average completion percentage. 


  

	 	•	 	 For example, if weighted average completion is 95% of the total, then the award would fund at 95% of target (subject to the review and approval of the Compensation
Committee). 


 Discretionary Adjustment 
  

	 	•	 	 The Compensation Committee may use its judgment and discretion to modify or adjust the annual incentive award. 


  

 3 








 Rules Governing the Plan 
  

	 	•	 	 Eligible plan participants must be actively employed at Arena on the last day of the fiscal year to receive an award. Plan participants who leave Arena prior to the
end of the fiscal year are not eligible to receive an award. 


  

	 	•	 	 Eligible plan participants whose first date of employment is between January 1, 2009 and September 30, 2009 will participate on a prorated basis based on
their date of hire. 


  

	 	•	 	 Plan participants who are promoted to incentive-eligible positions (or positions with a higher incentive target) before December 31, 2009 will participate in
the plan on a prorated basis, based on the effective date of the promotion. 


  

	 	•	 	 Payment of an incentive to eligible plan participants who take a leave of absence for any reason during the year will be prorated based on the time worked during
the year. 


  

	 	•	 	 The Compensation Committee and the Board have the right to exclude participants and exercise discretion, including canceling the plan or any earned awards.



  

	 	 •
	 	 Awards earned under this plan will be paid prior to the 15th
 day of March 2010. 


  

	 	•	 	 Participation in the Annual Incentive Plan is not a guarantee of continued employment. Arena reserves the right to terminate employment and/or participation in the
Annual Incentive Plan at any time and for any reason. 


  

	 	•	 	 Arena and the Board reserve the right to change or waive any provision in the incentive plan at any time, including (but not limited to) its award formula,
performance measures and payout schedule. Although Arena intends to pay incentives at levels indicated by the plan, this plan shall not obligate Arena to grant the benefits contemplated under its provisions. 


  

	 	•	 	 This plan is not a contract and in no way represents a contractual obligation to pay any amount under the plan, regardless of the performance achieved during the
plan period. 


  

 4 








 Annex I 
 The corporate goals relate to the following categories: 
 (i) progress and plans relating to internal clinical programs; 
 (ii) progress of programs with partners; 
 (iii) budget, finance, and
financial controls and reporting; and 
 (iv) progress and plans relating to research programs. 
  

 5