Arena Pharmaceuticals, Inc. -- Annual Incentive Plan --

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

The Compensation Committee assigns corporate goals and, in the discretion of the Compensation Committee, individual goals. The goals are individually weighted and may include subparts. The categories of corporate goals for 2016 are set forth in Annex I.

Goals will be specific and measurable, but there may be subjectivity in scoring some goals for the Company and individuals.

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

At the end of the applicable fiscal year, individual incentive awards are determined by the Compensation Committee based upon the level of goal achievement, the quality of achievement, the participant’s role in goal achievement, the weighting of each goal, the importance of the goal to the Company’s current and future success, and/or such factors relevant to the goal achievement that the Compensation Committee believes is appropriate. The “applicable fiscal year” means the year within which the goals are required to be achieved.

The Compensation Committee has the discretion to decrease (including to zero) any participant’s award or to increase any participant’s award up to 150% of their target bonus.

Targets are based on role and the market.

Total award funding is capped at 150% of target goal achievement.

Subject to other provisions of this plan, the funded award will be based on the goal completion percentage.

For example, if goal completion is 95% of the total target, then the award would fund at 95% of target (subject to the approval of the Compensation Committee and any adjustments under this plan).

The Compensation Committee may use its judgment and discretion to modify or adjust the annual incentive awards as provided in this plan, subject to the 150% of target maximum payout.

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

Eligible plan participants whose first date of employment or of eligibility is between January 1 and September 30 of the applicable fiscal year will participate on a prorated basis based on their date of hire or date of eligibility.

Plan participants who are promoted to a position with a higher incentive target or have their incentive target increased outside of the regular cycle but before December 31 of the applicable fiscal year 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 applicable fiscal year will be prorated based on the time worked during such year.

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

Awards under this plan will be paid prior to March 15 of the year following the applicable fiscal year.

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.

The Compensation Committee and the Board each 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 applicable fiscal year.

plans and progress relating to research, development and commercialization;

licensing and collaboration efforts; and

budget and finance.