Exhibit
10.1


 


February 5, 2004


 


William R. Shanahan, Jr., M.D.,
J.D.


15 Ellicott Way


Sugar Land TX 77479


281-565-2647


 


 


Re: Amended Offer


 


Dear William:


 


I am pleased to offer you the full-time, exempt position of Chief
Medical Officer, reporting to Jack Lief, President and CEO.


 


You will receive a semi-monthly salary of $12,500.00 which annualized
is $300,000. In addition, subject to approval by the Compensation Committee of
the Board of Directors, you will be granted 60,000  stock options that entitle you to purchase
Arena stock at a price and on terms to be determined by such committee. The
stock options will be subject to a four-year vesting schedule (25% every 12
months), contingent upon your remaining an Arena employee. You will also be
eligible to participate in the employee benefit programs provided by Arena,
which currently include medical, dental/vision reimbursement, life, short-term
and long-term disability insurance programs, a 401(k) plan, and Employee Stock
Purchase Plan (ESPP).


 


Arena will also pay up to $100,000 of your qualified moving expenses
for relocation to the San Diego area. Qualified moving expenses include actual
moving expenses from Sugar Land, Texas to San Diego and are summarized in the
Internal Revenue Service Publication 521. If your qualified moving expenses are
less than $100,000 the company will pay you any unused portion as a bonus,
subject to regular payroll taxes. The entire sum will be repayable to Arena if
you voluntarily choose to terminate your employment within 24 months of your
hire date.


 


Arena will also pay an additional amount of $25,000 to be used for
temporary housing and personal travel expenses. This amount will be taxable as
regular wages and will be paid up to a maximum of $7,500 per month.


 


This offer is subject to:


 


•                  Verification
of your eligibility to work in the United States, as required by the
Immigration Reform and Control Act of 1986. You must complete section 1 only of the attached* I-9 form
and provide the required documentation on your first day of employment. For
assistance with work visa issues, please contact Christine Pizzo at extension
1654.


 

















 


•                  Execution
of the attached* Arena Employee Proprietary- Information and Inventions
Agreement. In addition to other information, this agreement specifies your
responsibilities regarding the improper use or disclosure of any proprietary
information or trade secrets of Arena or any former or concurrent employer,
individuals, or entities.


 


•                  Completion
and confirmation of all other required employment and benefits forms, including
the attached* Policy-Protection of Material/Prevention of Insider Trading,
Lab Notebook Policy, and Arena Policy Regarding Regulatory Matters.


 


All other forms will be included in your new hire package and must be
completed on
or  before your first
day of employment.


 


Consistent with Arena policy, your employment will be terminable at
will and is guaranteed for no specified period. This means that you may resign
at any time and Arena may terminate your employment at any time without cause
and without notice. Notwithstanding this, we agree to pay you six (6) months
salary in the event you are terminated other than for cause during the first
two years of your employment with us. “Cause” means (i) your willful and
continued failure to substantially perform your duties with Arena (other than
any such failure resulting from incapacity due to physical or mental illness),
(ii) your willful engaging in gross misconduct which is materially and
demonstrably injurious to Arena or (ii) your conviction of, or plea of guilty
or nolo contendere to, a felony.


 


This employment status may not be changed except by written agreement
signed by both you and the Chief Executive Officer of Arena Pharmaceuticals. By
signing this offer letter, you acknowledge that no representative of Arena has
made any statement to the contrary in discussing prospective employment with
you.


 


You represent that your employment with Arena will not conflict with or
violate any agreement or understanding with a former employer or other person
or entity.


 


If you accept this offer, please sign both copies of this letter
signifying your agreement, and return one copy on or before February 20, 2004,
as well as the attached legal documents. Please contact me if you have any
questions or concerns.


 


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William, we look forward to having you as a member of the Arena team
and hope our future association will be rewarding for you as well as the
company.


 


	
  Sincerely,

  
	
   

  
	
  /s/ Jack Lief

  	
   

  
	
   

  
	
  Jack Lief

  
	
  President and CEO

  



 


Acceptance:


I accept the offer as stated in this letter and I agree to the terms of
employment described, including that my employment relationship is terminable
at will by either me or the company, with or without cause or notice.


 


	
  /s/ William R. Shanahan, Jr.

  	
   

  
	
   

  
	
  Name

  	
  Date

  
			



 


Offer Expiration Date: February 20, 2004


Proposed Start Date: March 29, 2004


 












*These forms will not be attached to faxed or emailed copies of the
offer letter.


 


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