Arena Pharmaceuticals, Inc. 2006 Long-Term Incentive Plan 2007 Performance-Based Restricted Stock Unit Grant Agreement

Exhibit 10.1

Arena Pharmaceuticals, Inc. 2006 Long-Term Incentive Plan

2007 Performance-Based

Restricted Stock Unit Grant Agreement

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 :

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.

T he 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 Paymen t .   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