Exhibit 10.2


 


REGISTRATION
RIGHTS AGREEMENT


 


This
Registration Rights Agreement (this “Agreement”) is made and entered into
as of December 24, 2003, among Arena Pharmaceuticals, Inc., a Delaware
corporation (the “Company”), and the investors
signatory hereto (each such investor is a “Purchaser” and all such investors are,
collectively, the “Purchasers”).


 


WHEREAS, the
parties have agreed to enter into this Agreement in connection with, and as a
condition to the Closing under, the Securities Purchase Agreement, dated as of
the date hereof, among the Company and the Purchasers (the “Purchase Agreement”);


 


NOW,
THEREFORE, IN CONSIDERATION of the mutual covenants contained in this
Agreement, and for other good and valuable consideration the receipt and
adequacy of which are hereby acknowledged, the Company and the Purchasers agree
as follows:


 


1.     Definitions.  In addition to the terms defined elsewhere
in this Agreement, (a) capitalized terms that are not otherwise defined herein
have the meanings given to such terms in the Purchase Agreement, and (b) the
following terms have the meanings indicated:


 


“Filing Date”
means, with respect to the initial Registration Statement required to be filed
pursuant to Section 2, February 7, 2004, and, with respect to any additional
Registration Statements that may be required pursuant to Section 3(c),
the 30th day following the date on which the Company first knows, or reasonably
should have known, that such additional Registration Statement is required
under such Section.


 


“Holder”
means any holder, from time to time, of Registrable Securities.


 


“Prospectus”
means the prospectus included in the Registration Statement (including, without
limitation, a prospectus that includes any information previously omitted from
a prospectus filed as part of an effective registration statement in reliance
upon Rule 430A promulgated under the Securities Act), as amended or
supplemented by any prospectus supplement, with respect to the terms of the
offering of any portion of the Registrable Securities covered by the
Registration Statement, and all other amendments and supplements to the
Prospectus, including post-effective amendments, and all material incorporated
by reference or deemed to be incorporated by reference in such Prospectus.


 


“Purchaser Counsel”
means each counsel designated by each Holder and set forth in a written notice
to the Company.  Mainfield Enterprises,
Inc. has initially designated Proskauer Rose LLP as its Purchaser Counsel.


 


“Registrable Securities”
means any Common Stock (including Underlying Shares) issued or issuable
pursuant to the Transaction Documents, together with any securities issued or
issuable upon any stock split, dividend or other distribution, recapitalization
or similar event with respect to the foregoing.


 


“Registration Statement”
means the initial registration statement required to be filed hereunder and any
additional registration statements contemplated by Section 3(c),


 

















 


including (in each case) the Prospectus, amendments and supplements to
such registration statement or Prospectus, including pre- and post-effective
amendments, all exhibits thereto, and all material incorporated by reference or
deemed to be incorporated by reference in such registration statement.


 


“Required Effectiveness Date”
means, with respect to the initial Registration Statement required to be filed
hereunder, April 22, 2004(1), and, with respect to any additional Registration
Statements that may be required pursuant to Section 3(c), the 75th day
following the date on which the Company first knows, or reasonably should have
known, that such additional Registration Statement is required under such
Section.


 


“Rule 415,” “Rule 424”
and “Rule
461” means Rule 415, Rule 424 and Rule 461, respectively,
promulgated by the Commission pursuant to the Securities Act, as such Rules may
be amended from time to time, or any similar rule or regulation hereafter
adopted by the Commission having substantially the same effect as such Rule.


 


2.     Shelf Registration


 


(a)  As promptly as possible, and in any event on
or prior to each Filing Date, the Company shall prepare and file with the
Commission a “Shelf” Registration Statement covering the resale of all
Registrable Securities for an offering to be made on a continuous basis
pursuant to Rule 415.  The Registration
Statement shall be on Form S-3 (except if the Company is not then eligible to
register for resale the Registrable Securities on Form S-3, in which case such
registration shall be on another appropriate form in accordance herewith as the
Holders may consent) and shall contain (except if otherwise directed by the
Holders) the “Plan of Distribution” attached hereto as Annex A.  The Company shall use its commercially
reasonable efforts to cause the Registration Statement to be declared effective
under the Securities Act as promptly as possible after the filing thereof, but
in any event prior to the Required Effectiveness Date, and shall use its best
efforts to keep such Registration Statement continuously effective under the
Securities Act until the earlier of (i) the fifth anniversary of the
Effective Date and (ii) when all Registrable Securities covered by such
Registration Statement have been sold or can be sold under Rule 144(k) (the “Effectiveness Period”). 
The Company shall notify each Holder in writing promptly (and in any
event within two Trading Days) after receiving notification from the Commission
that a Registration Statement has been declared effective.


 


(b)  The initial Registration Statement to be
filed hereunder shall cover the sale by the Holders of at least the Required
Minimum number of shares of Common Stock.


 












(1) 120 days following Closing.


 


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(c)  Upon the occurrence of any Event (as defined
below) and on every monthly anniversary thereof until the applicable Event is
cured, as partial relief for the damages suffered therefrom by the Holders
(which remedy shall not be exclusive of any other remedies available at law or
in equity), the Company shall pay to each Holder an amount in cash, as
liquidated damages and not as a penalty, equal to 1.0% of the aggregate
purchase price paid under the Purchase Agreement for the Securities held by
such Holder for each of the first and second months and 2.0% for each month
thereafter.  The liquidated damages
payable pursuant to the terms hereof shall apply on a pro-rata basis for any
portion of a month prior to the cure of an Event.  For such purposes, each of the following shall constitute an “Event”:


 


(i)            a Registration Statement is not filed on or prior to the
applicable Filing Date or is not declared effective on or prior to the
applicable Required Effectiveness Date;


 


(ii)           subject to Section 2(g) below, after the Effective Date
for a Registration Statement, a Holder is not permitted to sell Registrable
Securities under such Registration Statement (or a subsequent Registration
Statement filed in replacement thereof) for any reason for seven consecutive
Trading Days or 30 days in aggregate in any 12 month period;


 


(iii)          the Common Stock is not listed or quoted, or is suspended
from trading, on an Eligible Market for five consecutive Trading Days or 10
days in aggregate in any 12 month period;


 


(iv)          the Company fails for any reason to deliver a certificate
evidencing any Securities to a Holder within seven Trading Days after delivery
of such certificate is required pursuant to any Transaction Document or the
exercise or conversion rights of the Holders pursuant to the Transaction
Documents are otherwise suspended for any reason, except in accordance with
Section 18 of the Certificate of Designations or Section 11 of the Warrant;


 


(v)           the Company fails to have available a sufficient number of
authorized but unissued and otherwise unreserved shares of Common Stock
available to issue Underlying Shares upon any exercise of the Warrants or any
conversion of convertible Securities; or


 


(vi)          after the Effective Date for a Registration Statement, any
Registrable Securities covered by such Registration Statement are not listed on
an Eligible Market.


 


(d)  At the election of the Company, any amount
required to be paid by the Company to such Holder pursuant to Section 2(c)
may instead be added to the Stated Value of the outstanding Shares then owned
by such Holder.  Notwithstanding
anything to the contrary, the Events set forth in clauses (i) and (ii) of
Section 2(c) above shall not apply following the date when all the Securities
can be sold pursuant to Rule 144 (k).


 


(e)  The Company shall not, prior to the
Effective Date of the Registration Statement, prepare and file with the
Commission a registration statement relating to an offering


 


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for its own account or the
account of others under the Securities Act of any of its equity securities,
other than on Form S-8 (as promulgated under the Securities Act).


 


(f)  If any Event occurs and remains uncured for
60 days, then at any time or times thereafter any Holder may deliver to the
Company a notice (a “Repurchase Notice”)
requiring the Company to repurchase all or any portion of the shares of Series
B Preferred Stock and any Underlying Shares previously issued to such Holder
upon conversion of Series B Preferred Stock then beneficially owned by such
Holder at a price per share equal to (i) with respect to all shares of Series B
Preferred Stock held by such Holder the greater of (A) 115% of the Stated Value
plus all accrued but unpaid dividends thereon through the date of payment, or
(B) the product of (x) the Event Equity Value and (y) the Underlying Shares
then issuable upon conversion of such Series B Preferred Stock (including such
accrued but unpaid dividends thereon) (without regard to any limitation on
conversion or issuance of such shares), and (ii) with respect to any Underlying
Shares issued to such Holder and then beneficially owned by such Holder, at a
price per share equal to the Event Equity Value of such Underlying Shares.  If a Holder delivers a Repurchase Notice
pursuant to this Section, the Company shall pay the aggregate repurchase price
(together with any other payments, expenses and liquidated damages then due and
payable pursuant to the Transaction Documents) to such Holder no later than the
fifth Trading Day following the date of delivery of the Repurchase Notice, and
upon receipt thereof such Holder shall deliver original certificates evidencing
the Securities so repurchased to the Company (to the extent such certificates
have been delivered to such Holder). 
Notwithstanding the foregoing, (x) immediately upon the occurrence of a
Bankruptcy Event, each Holder will automatically be deemed to have delivered a
Repurchase Notice pursuant to this Section and will be entitled to receive the
corresponding repurchase price without any further action or notice to the
Company, and (y) a Holder shall not be permitted to deliver a Repurchase Notice
following receipt of a notice from the Company of the cure of such Event.


 


(g)  Notwithstanding anything in this Agreement
to the contrary, after 60 consecutive Trading Days of continuous effectiveness
of the initial Registration Statement filed and declared effective pursuant to
this Agreement, the Company may, by written notice to the Purchasers, suspend
sales under a Registration Statement after the Effective Date thereof and/or
require that the Purchasers immediately cease the sale of shares of Common
Stock pursuant thereto and/or defer the filing of any subsequent Registration
Statement if the Company is engaged in a material merger, acquisition, sale or
financing or is in possession of other material nonpublic information and the
Board of Directors determines in good faith, by appropriate resolutions, that,
as a result of such activity or information, (A) (x) it would be
materially detrimental to the Company (other than as relating solely to the
price of the Common Stock) to file a Registration Statement at such time and
(y) it is in the best interests of the Company to defer proceeding with
such registration at such time, or (B) it would be materially detrimental to
the Company (other than as relating solely to the price of the Common Stock) to
amend or supplement an effective Registration Statement or the related
prospectus to disclose such activity or information, as applicable.  Upon receipt of such notice, each Purchaser shall
immediately discontinue any sales of Registrable Securities pursuant to such
registration until such Purchaser has received copies of a supplemented or
amended Prospectus or until such Purchaser is advised in writing by the Company
that the then-current Prospectus may be used and has received copies of any
additional or supplemental filings that are incorporated or deemed incorporated
by reference in such Prospectus. In no event, however, shall this right be
exercised to suspend sales


 


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beyond the period during which
(in the good faith determination of the Company’s Board of Directors) the
failure to require such suspension would be materially detrimental to the
Company.  The Company’s rights under this
Section 2(g) may be exercised for no more than 2 times and a period of no more
than 30 days in any twelve-month period. 
Immediately after the end of any suspension period under this Section
2(g), the Company shall take all necessary actions (including filing any
required supplemental prospectus) to restore the effectiveness of the
applicable Registration Statement and the ability of the Purchasers to publicly
resell their Registrable Securities pursuant to such effective Registration
Statement.


 


3.     Registration Procedures.  In connection with the Company’s
registration obligations hereunder, the Company shall:


 


(a)  Not less than three Trading Days prior to
the filing of each Registration Statement or any related Prospectus or any
amendment or supplement thereto (including any document that would be
incorporated or deemed to be incorporated therein by reference), the Company
shall (i) furnish to the Holders and their respective Purchaser Counsel copies
of all such documents proposed to be filed, which documents (other than those
incorporated or deemed to be incorporated by reference) will be subject to the
review of such Holders and their respective Purchaser Counsel, and (ii) cause
its officers and directors, counsel and independent certified public
accountants to respond to such inquiries as shall be necessary, in the
reasonable opinion of respective counsel, to conduct a reasonable investigation
within the meaning of the Securities Act. 
The Company shall not file the Registration Statement or any such Prospectus
or any amendments or supplements thereto to which the Holders of a majority of
the Registrable Securities and their respective Purchaser Counsel shall
reasonably object; provided that such Holders shall provide any such objections
within three Trading Days following receipt of any such documents.


 


(b)  (i) Prepare and file with the Commission
such amendments, including post-effective amendments, to the Registration
Statement and the Prospectus used in connection therewith as may be necessary
to keep the Registration Statement continuously effective as to the applicable
Registrable Securities for the Effectiveness Period and prepare and file with
the Commission such additional Registration Statements in order to register for
resale under the Securities Act all of the Registrable Securities; (ii) cause
the related Prospectus to be amended or supplemented by any required Prospectus
supplement, and as so supplemented or amended to be filed pursuant to Rule 424;
(iii) respond as promptly as reasonably possible, and in any event within ten
Trading Days, to any comments received from the Commission with respect to the
Registration Statement or any amendment thereto and as promptly as reasonably
possible provide the Holders true and complete copies of all correspondence
from and to the Commission relating to the Registration Statement, unless such
correspondence contains material non-public information as determined by the
Company and its counsel; and (iv) comply in all material respects with the
provisions of the Securities Act and the Exchange Act with respect to the
disposition of all Registrable Securities covered by the Registration Statement
during the applicable period in accordance with the intended methods of
disposition by the Holders thereof set forth in the Registration Statement as
so amended or in such Prospectus as so supplemented.


 


(c)  If, on any date, the number of shares of
Common Stock previously registered under all existing Registration Statements
is less than 125% of the Actual Minimum on such


 


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date, then the Company shall
file an additional Registration Statement covering a number of shares of Common
Stock at least equal to (i) the Required Minimum on such date, less (ii) the
number of shares of Common Stock previously registered under all existing
Registration Statements; provided that the Company will not be required at any
time to register a number of shares of Common Stock greater than the maximum
number of shares of Common Stock that could possibly be issued pursuant to the Transaction
Documents.


 


(d)  Notify the Holders of Registrable Securities
to be sold and their respective Purchaser Counsel as promptly as reasonably
possible, and (if requested by any such Person) confirm such notice in writing
no later than one Trading Day thereafter, of any of the following events: (i)
the Commission notifies the Company whether there will be a “review” of any
Registration Statement; (ii) the Commission comments in writing on any
Registration Statement (in which case the Company shall deliver to each Holder
a copy of such comments and of all written responses thereto, unless such
correspondence contains material non-public information as determined by the
Company and its counsel); (iii) any Registration Statement or any
post-effective amendment is declared effective; (iv) the Commission or any
other Federal or state governmental authority requests any amendment or
supplement to a Registration Statement or Prospectus or requests additional
information related thereto; (v) the Commission issues any stop order
suspending the effectiveness of any Registration Statement or initiates any
Proceedings for that purpose; (vi) the Company receives notice of any
suspension of the qualification or exemption from qualification of any
Registrable Securities for sale in any jurisdiction, or the initiation or
threat of any Proceeding for such purpose; or (vii) the financial statements
included in any Registration Statement become ineligible for inclusion therein
or any statement made in any Registration Statement or Prospectus or any
document incorporated or deemed to be incorporated therein by reference is
untrue in any material respect or any revision to a Registration Statement,
Prospectus or other document is required so that it will not contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.


 


(e)  Use its best efforts to avoid the issuance
of or, if issued, obtain the withdrawal of (i) any order suspending the
effectiveness of any Registration Statement or (ii) any suspension of the
qualification (or exemption from qualification) of any of the Registrable
Securities for sale in any jurisdiction, at the earliest practicable moment.


 


(f)  Furnish to each Holder and their respective
Purchaser Counsel, without charge, at least one conformed copy of each
Registration Statement and each amendment thereto, including financial
statements and schedules, all documents incorporated or deemed to be
incorporated therein by reference, and all exhibits to the extent requested by
such Person (including those previously furnished or incorporated by reference)
promptly after the filing of such documents with the Commission.


 


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(g)  Promptly deliver to each Holder and their
respective Purchaser Counsel, without charge, as many copies of the Prospectus
or Prospectuses (including each form of prospectus) and each amendment or
supplement thereto as such Persons may reasonably request.  The Company hereby consents to the use of
such Prospectus and each amendment or supplement thereto by each of the selling
Holders in connection with the offering and sale of the Registrable Securities
covered by such Prospectus and any amendment or supplement thereto.


 


(h)  (i) In the time and manner required by each
Trading Market, if at all, prepare and file with such Trading Market an
additional shares listing application covering all of the Registrable
Securities; (ii) use its best efforts to approve for listing and to list the
Registrable Securities covered by such Registration Statement with each Trading
Market as soon as reasonably practicable; (iii) to the extent available to the
Company, provide to the Purchasers evidence of such listing; and (iv) maintain
the listing of such Registrable Securities on each such Trading Market or
another Eligible Market.


 


(i)  Prior to any public offering of Registrable
Securities, use its commercially reasonable efforts to register or qualify or
cooperate with the selling Holders and their respective Purchaser Counsel in
connection with the registration or qualification (or exemption from such
registration or qualification) of such Registrable Securities for offer and
sale under the securities or Blue Sky laws of such jurisdictions within the
United States as any Holder requests in writing, to keep each such registration
or qualification (or exemption therefrom) effective during the Effectiveness
Period and to do any and all other acts or things necessary or advisable to
enable the
disposition in such jurisdictions of the Registrable Securities covered by a
Registration Statement, except that the Company shall not for any such purpose
be required (A) to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not but for the requirements of this
paragraph (i) be obligated to be so qualified, (B) to subject itself to
taxation in any such jurisdiction, or (C) to consent to general service of
process in any jurisdiction.


 


(j)  Cooperate with the Holders to facilitate the
timely preparation and delivery of certificates representing Registrable
Securities to be delivered to a transferee pursuant to a Registration
Statement, which certificates shall be free, to the extent permitted by the
Purchase Agreement, of all restrictive legends, and to enable such Registrable
Securities to be in such denominations and registered in such names as any such
Holders may request.


 


(k)  Upon the occurrence of any event described
in Section 3(d)(vii), as promptly as reasonably possible, prepare a
supplement or amendment, including a post-effective amendment, to the
Registration Statement or a supplement to the related Prospectus or any
document incorporated or deemed to be incorporated therein by reference, and
file any other required document so that, as thereafter delivered, neither the
Registration Statement nor such Prospectus will contain an untrue statement of
a material fact or omit to state a material fact required to be stated therein
or necessary to make the statements therein, in light of the circumstances
under which they were made, not misleading.


 


(l)  Cooperate with any reasonable due diligence
investigation undertaken by the Holders in connection with the sale of
Registrable Securities, including without limitation by making available any
documents and information reasonably requested; provided that the


 


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Company will not deliver or
make available to any Holder material, nonpublic information unless such Holder
specifically requests in advance to receive material, nonpublic information.


 


(m)  Comply with all applicable rules and
regulations of the Commission.


 


4.     Registration Expenses.  Except as otherwise provided in the
Transaction Documents, all fees and expenses incident to the performance of or
compliance with this Agreement by the Company shall be borne by the Company
whether or not any Registrable Securities are sold pursuant to the Registration
Statement.  The fees and expenses
referred to in the foregoing sentence shall include, without limitation, (a)
all registration and filing fees (including, without limitation, fees and
expenses (i) with respect to filings required to be made with any Trading
Market, and (ii) in compliance with applicable state securities or Blue Sky
laws (including, without limitation, fees and disbursements of counsel for the
Company in connection with Blue Sky qualifications or exemptions of the
Registrable Securities and determination of the eligibility of the Registrable
Securities for investment under the laws of such jurisdictions as requested by
the Holders )), (b) printing expenses (including, without limitation, expenses
of printing certificates for Registrable Securities and of printing
prospectuses requested by the Holders), (c) messenger, telephone and delivery
expenses, (d) fees and disbursements of counsel for the Company, and (e) fees
and expenses of all other Persons retained by the Company in connection with
the consummation of the transactions contemplated by this Agreement.  The Holders shall be responsible for all
fees and expenses of Purchaser Counsel.


 


5.     Indemnification


 


(a)  Indemnification by the Company.  The Company shall, notwithstanding any
termination of this Agreement, indemnify and hold harmless each Holder, the
officers, directors, partners, members, agents, brokers (including brokers who
offer and sell Registrable Securities as principal as a result of a pledge or
any failure to perform under a margin call of Common Stock), investment
advisors and employees of each of them, each Person who controls any such
Holder (within the meaning of Section 15 of the Securities Act or Section 20 of
the Exchange Act) and the officers, directors, partners, members, agents and
employees of each such controlling Person, to the fullest extent permitted by
applicable law, from and against any and all Losses, as incurred, arising out
of or relating to any untrue or alleged untrue statement of a material fact
contained in the Registration Statement, any Prospectus or any form of
prospectus or in any amendment or supplement thereto or in any preliminary
prospectus, or arising out of or relating to any omission or alleged omission
of a material fact required to be stated therein or necessary to make the
statements therein (in the case of any Prospectus or form of prospectus or
supplement thereto, in light of the circumstances under which they were made)
not misleading, except to the extent, but only to the extent, that (i) such
untrue statements or omissions are based solely upon information regarding such
Holder furnished in writing to the Company by such Holder expressly for use
therein, or to the extent that such information relates to such Holder or such
Holder’s proposed method of distribution of Registrable Securities and was
reviewed and expressly approved in writing by such Holder expressly for use in
the Registration Statement, such Prospectus or such form of Prospectus or in
any amendment or supplement thereto or (ii) in the case of an occurrence of an
event of the type specified in Section 3(d)(v)-(vii), the use by such
Holder of an outdated or defective Prospectus after the Company has notified
such Holder in writing that the Prospectus is outdated or defective and prior
to the receipt by such Holder of


 


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the Advice contemplated in Section
6(f).  The Company shall notify the
Holders promptly of the institution, threat or assertion of any Proceeding of
which the Company is aware in connection with the transactions contemplated by
this Agreement.


 


(b)  Indemnification by Holders.  Each Holder shall, severally and not
jointly, indemnify and hold harmless the Company, its directors, officers,
agents and employees, each Person who controls the Company (within the meaning
of Section 15 of the Securities Act and Section 20 of the Exchange Act), and
the directors, officers, agents or employees of such controlling Persons, to
the fullest extent permitted by applicable law, from and against all Losses (as
determined by a court of competent jurisdiction in a final judgment not subject
to appeal or review) arising solely out of any untrue statement of a material
fact contained in any Registration Statement, any Prospectus, or any form of
prospectus, or in any amendment or supplement thereto, or arising solely out of
any omission of a material fact required to be stated therein or necessary to
make the statements therein not misleading to the extent, but only to the
extent, that such untrue statement or omission is contained in any information
so furnished in writing by such Holder to the Company specifically for
inclusion in such Registration Statement or such Prospectus.  In no event shall the liability of any
selling Holder hereunder be greater in amount than the dollar amount of the net
proceeds received by such Holder upon the sale of the Registrable Securities
giving rise to such indemnification obligation.


 


(c)  Conduct of Indemnification Proceedings.  If any Proceeding shall be brought or
asserted against any Person entitled to indemnity hereunder (an “Indemnified Party”), such Indemnified Party shall promptly
notify the Person from whom indemnity is sought (the “Indemnifying
Party”) in writing, and the Indemnifying Party shall assume the
defense thereof, including the employment of counsel reasonably satisfactory to
the Indemnified Party and the payment of all fees and expenses incurred in
connection with defense thereof; provided, that the failure of any Indemnified
Party to give such notice shall not relieve the Indemnifying Party of its
obligations or liabilities pursuant to this Agreement, except (and only) to the
extent that it shall be finally determined by a court of competent jurisdiction
(which determination is not subject to appeal or further review) that such
failure shall have proximately and materially adversely prejudiced the
Indemnifying Party.


 


An Indemnified
Party shall have the right to employ separate counsel in any such Proceeding
and to participate in the defense thereof, but the fees and expenses of such
counsel shall be at the expense of such Indemnified Party or Parties
unless:  (i) the Indemnifying Party has
agreed in writing to pay such fees and expenses; or (ii) the Indemnifying Party
shall have failed promptly to assume the defense of such Proceeding and to
employ counsel reasonably satisfactory to such Indemnified Party in any such
Proceeding; or (iii) the named parties to any such Proceeding (including any
impleaded parties) include both such Indemnified Party and the Indemnifying
Party, and such Indemnified Party shall have been advised by counsel that a
conflict of interest is likely to exist if the same counsel were to represent
such Indemnified Party and the Indemnifying Party (in which case, if such
Indemnified Party notifies the Indemnifying Party in writing that it elects to
employ separate counsel at the expense of the Indemnifying Party, the
Indemnifying Party shall not have the right to assume the defense thereof and
such counsel shall be at the expense of the Indemnifying Party).  The Indemnifying Party shall not be liable
for any settlement of any such Proceeding effected without its written consent,
which consent shall not be unreasonably withheld.  No Indemnifying Party shall, without the prior


 


9

















 


written
consent of the Indemnified Party, effect any settlement of any pending
Proceeding in respect of which any Indemnified Party is a party, unless such
settlement includes an unconditional release of such Indemnified Party from all
liability on claims that are the subject matter of such Proceeding.


 


All fees and
expenses of the Indemnified Party (including reasonable fees and expenses to
the extent incurred in connection with investigating or preparing to defend
such Proceeding in a manner not inconsistent with this Section, provided that
it shall not include  the costs of more
than one law firm) shall be paid to the Indemnified Party, as incurred, within
ten Trading Days of written notice thereof to the Indemnifying Party
(regardless of whether it is ultimately determined that an Indemnified Party is
not entitled to indemnification hereunder; provided, that the Indemnifying
Party may require such Indemnified Party to undertake to reimburse all such
fees and expenses to the extent it is finally judicially determined that such
Indemnified Party is not entitled to indemnification hereunder).


 


(d)  Contribution.  If a claim for indemnification under Section
5(a) or 5(b) is unavailable to an Indemnified Party (by reason of
public policy or otherwise), then each Indemnifying Party, in lieu of
indemnifying such Indemnified Party, shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses (not including the
cost of more than one law firm for the Holders of the Company), in such
proportion as is appropriate to reflect the relative fault of the Indemnifying
Party and Indemnified Party in connection with the actions, statements or omissions
that resulted in such Losses as well as any other relevant equitable
considerations.  The relative fault of
such Indemnifying Party and Indemnified Party shall be determined by reference
to, among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of
a material fact, has been taken or made by, or relates to information supplied
by, such Indemnifying Party or Indemnified Party, and the parties’ relative
intent, knowledge, access to information and opportunity to correct or prevent
such action, statement or omission.  The
amount paid or payable by a party as a result of any Losses shall be deemed to
include, subject to the limitations set forth in Section 5(c), any
reasonable attorneys’ or other reasonable fees or expenses incurred by such
party in connection with any Proceeding to the extent such party would have
been indemnified for such fees or expenses if the indemnification provided for
in this Section was available to such party in accordance with its terms.


 


The parties
hereto agree that it would not be just and equitable if contribution pursuant
to this Section 5(d) were determined by pro  rata
allocation or by any other method of allocation that does not take into account
the equitable considerations referred to in the immediately preceding
paragraph.  Notwithstanding the
provisions of this Section 5(d), no Holder shall be required to
contribute, in the aggregate, any amount in excess of the amount by which the
proceeds actually received by such Holder from the sale of the Registrable
Securities subject to the Proceeding exceeds the amount of any damages that
such Holder has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission.  No Person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Securities Act)
shall be entitled to contribution from any Person who was not guilty of such
fraudulent misrepresentation.


 


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The indemnity
and contribution agreements contained in this Section are in addition to any
liability that the Indemnifying Parties may have to the Indemnified Parties.


 


6.     Miscellaneous


 


(a)  Remedies.  In the event of a breach by the Company or by a Holder of any of
their obligations under this Agreement, each Holder or the Company, as the case
may be, in addition to being entitled to exercise all rights granted by law and
under this Agreement, including recovery of damages, will be entitled to
specific performance of its rights under this Agreement.  The Company and each Holder agree that
monetary damages would not provide adequate compensation for any losses
incurred by reason of a breach by it of any of the provisions of this Agreement
and hereby further agrees that, in the event of any action for specific
performance in respect of such breach, it shall waive the defense that a remedy
at law would be adequate.


 


(b)  Amendments and Waivers.  The provisions of this Agreement, including
the provisions of this sentence, may not be amended, modified or supplemented,
and waivers or consents to departures from the provisions hereof may not be
given, unless the same shall be in writing and signed by the Company and the
Holders of at least a majority of the then outstanding Registrable
Securities.  Notwithstanding the
foregoing, a waiver or consent to depart from the provisions hereof with
respect to a matter that relates exclusively to the rights of Holders and that
does not directly or indirectly affect the rights of other Holders may be given
by Holders of at least a majority of the Registrable Securities to which such
waiver or consent relates; provided, however, that the provisions
of this sentence may not be amended, modified, or supplemented except in
accordance with the provisions of the immediately preceding sentence.


 


(c)  No Inconsistent Agreements.  Neither the Company nor any of its
subsidiaries has entered, as of the date hereof, nor shall the Company or any
of its subsidiaries, on or after the date of this Agreement, enter into any
agreement with respect to its securities that would have the effect of
impairing the rights granted to the Holders in this Agreement or otherwise
conflicts with the provisions hereof. 
Except as and to the extent specified in the applicable schedule to the
Purchase Agreement, neither the Company nor any Subsidiary has previously
entered into any agreement granting any registration rights with respect to any
of its securities to any Person that have not been satisfied in full.


 


(d)  No Piggyback on Registrations.  Except as and to the extent specified in
Schedule 3.1(w) to the Purchase Agreement, neither the Company nor any of its
security holders (other than the Holders in such capacity pursuant hereto) may
include securities of the Company in the Registration Statement other than the
Registrable Securities, and the Company shall not after the date hereof enter
into any agreement providing any such right to any of its security holders.


 


(e)  Compliance.  Each Holder covenants and agrees that it will comply with the
prospectus delivery requirements of the Securities Act as applicable to it in
connection with sales of Registrable Securities pursuant to the Registration
Statement.


 


11

















 


(f)  Discontinued Disposition.  Each Holder agrees by its acquisition of
such Registrable Securities that, upon receipt of a notice from the Company of
the occurrence of any event of the kind described in Sections 2(g), 3(d)(v),
3(d)(vi), or 3(d)(vii), such Holder will forthwith discontinue
disposition of such Registrable Securities under the Registration Statement
until such Holder’s receipt of the copies of the supplemented Prospectus and/or
amended Registration Statement contemplated by Section 3(k), or until it
is advised in writing (the “Advice”)
by the Company that the use of the applicable Prospectus may be resumed, and,
in either case, has received copies of any additional or supplemental filings
that are incorporated or deemed to be incorporated by reference in such
Prospectus or Registration Statement. 
The Company may provide appropriate stop orders to enforce the
provisions of this paragraph.


 


(g)  Piggy-Back Registrations.  If at any time during the Effectiveness
Period there is not an effective Registration Statement covering all of the
Registrable Securities and the Company shall determine to prepare and file with
the Commission a registration statement relating to an offering for its own
account or the account of others under the Securities Act of any of its equity
securities, other than on Form S-4 or Form S-8 (each as promulgated under the
Securities Act) or their then equivalents relating to equity securities to be
issued solely in connection with any acquisition of any entity or business or
equity securities issuable in connection with stock option or other employee
benefit plans, then the Company shall send to each Holder written notice of
such determination and, if within fifteen days after receipt of such notice,
any such Holder shall so request in writing, the Company shall include in such
registration statement all or any part of such Registrable Securities such
holder requests to be registered.


 


(h)  Notices. Any and all notices or other
communications or deliveries required or permitted to be provided hereunder
shall be in writing and shall be deemed given and effective on the earliest of
(a) the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Section prior to
5:30 p.m. (New York City time) on a Trading Day, (b) the next Trading Day after
the date of transmission, if such notice or communication is delivered via
facsimile at the facsimile telephone number specified in this Agreement on a
day that is not a Trading Day or later than 5:30 p.m. (New York City time) and
earlier than 11:59 p.m. (New York City time) on any Trading Day, (c) the
Trading Day following the date of mailing, if sent by U.S. nationally recognized
overnight courier service, or (d) upon actual receipt by the party to whom such
notice is required to be given.  The
address for such notices and communications shall be as set forth in the
Purchase Agreement.


 


(i)  Successors and Assigns.  This Agreement shall inure to the benefit of
and be binding upon the successors and permitted assigns of each of the parties
and shall inure to the benefit of each Holder. 
The Company may not assign its rights or obligations hereunder without
the prior written consent of each Holder. 
Each Holder may assign its rights and obligations hereunder in the
manner and to the extent permitted under the Purchase Agreement.


 


(j)  Counterparts.  This Agreement may be executed in any number
of counterparts, each of which when so executed shall be deemed to be an
original and, all of which taken together shall constitute one and the same
Agreement.  In the event that any
signature is delivered by facsimile transmission, such signature shall create a
valid binding obligation of the


 


12

















 


party executing (or on whose
behalf such signature is executed) the same with the same force and effect as
if such facsimile signature were the original thereof.


 


(k)  Governing
Law; Venue; Waiver Of Jury Trail. 
ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND
INTERPRETATION OF THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND
ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.  EACH PARTY HEREBY IRREVOCABLY SUBMITS TO THE
EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF
NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER
OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR
DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE
TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT
IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT
TO THE JURISDICTION OF ANY SUCH COURT, THAT SUCH SUIT, ACTION OR PROCEEDING IS
IMPROPER.  EACH PARTY HEREBY IRREVOCABLY
WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY
SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR
CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PARTY
AT THE ADDRESS IN EFFECT FOR NOTICES TO IT UNDER THIS AGREEMENT AND AGREES THAT
SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE
THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT
TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW.  THE COMPANY HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.


 


(l)    Cumulative Remedies.  The remedies provided herein are cumulative
and not exclusive of any remedies provided by law.


 


(m) Severability.  If any term, provision, covenant or
restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction.  It is hereby stipulated and declared to be
the intention of the parties that they would have executed the remaining terms,
provisions, covenants and restrictions without including any of such that may
be hereafter declared invalid, illegal, void or unenforceable.


 


13

















 


(n)  Headings.  The headings in this Agreement are for convenience of reference
only and shall not limit or otherwise affect the meaning hereof.


 


 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES TO FOLLOW]


 


14

















 


IN WITNESS
WHEREOF, the parties have executed this Registration Rights Agreement as of the
date first written above.


 


 


	
   

  	
  ARENA PHARMACEUTICALS, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ Jack Lief

  	
   

  
	
   

  	
  Name:

  	
      Jack Lief

  	
   

  
	
   

  	
  Title:

  	
    President and Chief Executive Officer

  	
   

  
						



 


 


[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK

SIGNATURE PAGES OF PURCHASERS TO FOLLOW]


 


15

















 


	
   

  	
  MAINFIELD ENTERPRISES, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Aui Vigder

  	
   

  
	
   

  	
  Name:

  	
  Aui Vigder

  	
   

  
	
   

  	
  Title:

  	
  Authorized Signatory

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address for Notice:

  
	
   

  	
   

  
	
   

  	
  Mainfield Enterprises, Inc.

  
	
   

  	
  c/o Sage Capital Growth, Inc.

  
	
   

  	
  660 Madison Avenue

  
	
   

  	
  New York, NY 10022

  
	
   

  	
  Telephone No.: (212) 651-9000

  
	
   

  	
  Facsimile No.: (212) 651-9010

  
	
   

  	
  Attn:  Eldad Gal

  
	
   

  	
   

  
	
   

  	
  With copies to:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Proskauer Rose LLP

  
	
   

  	
  1585 Broadway

  
	
   

  	
  New York, New York 10036-8299

  
	
   

  	
  Facsimile No.:  (212) 969-2900

  
	
   

  	
  Telephone No.:  (212) 969-3000

  
	
   

  	
  Attn:  Adam J. Kansler, Esq.

  
						



 


16

















 


	
   

  	
  SMITHFIELD FIDUCIARY LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Adam J. Chill

  	
   

  
	
   

  	
  Name: Adam J. Chill

  
	
   

  	
  Title: Authorized Signatory

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Address for Notice:

  
	
   

  	
   

  
	
   

  	
  c/o Highbridge Capital Management, LLC

  
	
   

  	
  9 West 57th Street, 27th floor

  
	
   

  	
  New York, NY 10019

  
	
   

  	
  Facsimile No.:  (212) 287-4720

  
	
   

  	
  Telephone No.: (212) 751-0755

  
	
   

  	
  Attn:  Ari J. Storch / Adam J.
  Chill

  



 


17

















 


Annex A


 


 


Plan
of Distribution


 


The selling
stockholders may, from time to time, sell any or all of their shares of common
stock on any stock exchange, market or trading facility on which the shares are
traded or in private transactions. 
These sales may be at fixed or negotiated prices.  The selling stockholders may use any one or
more of the following methods when selling shares:


 


•                                          ordinary
brokerage transactions and transactions in which the broker-dealer solicits
purchasers;


 


•                                          block
trades in which the broker-dealer will attempt to sell the shares as agent but
may position and resell a portion of the block as principal to facilitate the
transaction;


 


•                                          purchases
by a broker-dealer as principal and resale by the broker-dealer for its
account;


 


•                                          an
exchange distribution in accordance with the rules of the applicable exchange;


 


•                                          privately
negotiated transactions;


 


•                                          short
sales;


 


•                                          broker-dealers
may agree with the selling stockholders to sell a specified number of such
shares at a stipulated price per share;


 


•                                          a
combination of any such methods of sale; and


 


•                                          any
other method permitted pursuant to applicable law.


 


The selling
stockholders may also sell shares under Rule 144 under the Securities Act, if
available, rather than under this prospectus.


 


The selling
stockholders may also engage in short sales against the box, puts and calls and
other transactions in our securities or derivatives of our securities and may
sell or deliver shares in connection with these trades.


 


Broker-dealers
engaged by the selling stockholders may arrange for other brokers-dealers to
participate in sales.  Broker-dealers
may receive commissions or discounts from the selling stockholders (or, if any
broker-dealer acts as agent for the purchaser of shares, from the purchaser) in
amounts to be negotiated.  The selling
stockholders do not expect these commissions and discounts to exceed what is
customary in the types of transactions involved.  Any profits on the resale of shares of common stock by a
broker-dealer acting as principal might be deemed to be underwriting discounts
or commissions under the Securities Act. 
Discounts, concessions, commissions and similar selling expenses, if
any, attributable to the sale of shares will be borne by a selling stockholder.  The selling stockholders may agree to
indemnify any


 


18

















 


agent, dealer or broker-dealer
that participates in transactions involving sales of the shares if liabilities
are imposed on that person under the Securities Act.


 


The selling
stockholders may from time to time pledge or grant a security interest in some
or all of the shares of common stock owned by them and, if they default in the
performance of their secured obligations, the pledgees or secured parties may
offer and sell the shares of common stock from time to time under this
prospectus after we have filed an amendment to this prospectus under Rule
424(b)(3) or other applicable provision of the Securities Act of 1933 amending
the list of selling stockholders to include the pledgee, transferee or other
successors in interest as selling stockholders under this prospectus.


 


The selling
stockholders also may transfer the shares of common stock in other
circumstances, in which case the transferees, pledgees or other successors in
interest will be the selling beneficial owners for purposes of this prospectus
and may sell the shares of common stock from time to time under this prospectus
after we have filed an amendment to this prospectus under Rule 424(b)(3) or
other applicable provision of the Securities Act of 1933 amending the list of
selling stockholders to include the pledgee, transferee or other successors in
interest as selling stockholders under this prospectus.


 


The selling
stockholders and any broker-dealers or agents that are involved in selling the
shares of common stock may be deemed to be “underwriters” within the meaning of
the Securities Act in connection with such sales.  In such event, any commissions received by such broker-dealers or
agents and any profit on the resale of the shares of common stock purchased by
them may be deemed to be underwriting commissions or discounts under the
Securities Act.


 


We are
required to pay all fees and expenses incident to the registration of the
shares of common stock, other than the fees and disbursements of counsel to the
selling stockholders.  We have agreed to
indemnify the selling stockholders against certain losses, claims, damages and
liabilities, including liabilities under the Securities Act.


 


The selling
stockholders have advised us that they have not entered into any agreements,
understandings or arrangements with any underwriters or broker-dealers
regarding the sale of their shares of common stock, nor is there an underwriter
or coordinating broker acting in connection with a proposed sale of shares of
common stock by any selling stockholder. 
If we are notified by any selling stockholder that any material
arrangement has been entered into with a broker-dealer for the sale of shares
of common stock, if required, we will file a supplement to this
prospectus.  If the selling stockholders
use this prospectus for any sale of the shares of common stock, they will be
subject to the prospectus delivery requirements of the Securities Act.


 


The
anti-manipulation rules of Regulation M under the Securities Exchange Act of
1934 may apply to sales of our common stock and activities of the selling
stockholders.


 


19