SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2001
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 0-18311
NEUROGEN CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 22-2845714
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
35 Northeast Industrial Road
Branford, Connecticut 06405
(Address of principal executive offices) (Zip Code)
(203) 488-8201
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
As of November 14, 2001 the registrant had 17,609,352 shares of Common
Stock outstanding.
NEUROGEN CORPORATION
INDEX
Part I - Financial Information
Item 1. Consolidated Financial Statements
Consolidated Balance Sheets at September 30, 2001 and
December 31, 2000
Consolidated Statements of Operations for the three-month and
nine-month periods ended September 30, 2001 and 2000
Consolidated Statements of Cash Flows for the nine-month
periods ended September 30, 2001 and 2000
Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Part II - Other Information
Item 1. Legal Proceedings
Item 2. Changes in Securities and Use of Proceeds
Item 3. Defaults upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signature
Exhibit Index
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
NEUROGEN CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
(UNAUDITED)
SEPTEMBER 30, 2001 DECEMBER 31, 2000
--------------- ---------------
Assets
Current assets:
Cash and cash equivalents $ 25,336 $ 48,086
Marketable securities 62,715 60,670
Receivables from corporate partners 243 1,517
Other current assets 745 1,364
--------------- ---------------
Total current assets 89,039 111,637
Property, plant & equipment:
Land, building and improvements 22,987 17,949
Construction in progress 7,814 6,471
Leasehold improvements - 4,026
Equipment and furniture 15,841 14,213
--------------- ----------------
46,642 42,659
Less accumulated depreciation & amortization 12,320 12,079
--------------- ----------------
Net property, plant and equipment 34,322 30,580
Other assets, net 321 371
--------------- ----------------
Total assets $ 123,682 $ 142,588
=============== ================
See accompanying notes to consolidated financial statements.
NEUROGEN CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
(UNAUDITED)
SEPTEMBER 30, 2001 DECEMBER 31, 2000
------------------ -----------------
Liabilities & Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 2,856 $ 5,014
Unearned revenue from corporate partner 6,881 9,542
----------------- ------------------
Total current liabilities 9,737 14,556
Loans payable 4,941 1,912
----------------- ------------------
Total liabilities 14,678 16,468
Commitments and Contingencies
Stockholders' Equity:
Preferred stock, par value $.025 per share
Authorized 2,000 shares; none issued - -
Common stock, par value $.025 per share
Authorized 30,000 shares; issued and outstanding
17,609 shares at September 30, 2001 and 17,386
shares at December 31, 2000 440 434
Additional paid-in capital 173,034 169,440
Accumulated deficit (62,546) (42,323)
Deferred compensation (2,810) (1,706)
Accumulated other comprehensive income 886 275
----------------- ------------------
Total stockholders' equity 109,004 126,120
----------------- ------------------
Total liabilities and stockholders' equity $ 123,682 $ 142,588
================= ==================
See accompanying notes to consolidated financial statements.
NEUROGEN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(UNAUDITED)
THREE MONTHS THREE MONTHS NINE MONTHS NINE MONTHS
ENDED ENDED ENDED ENDED
SEPT 30, 2001 SEPT 30, 2000* SEPT 30, 2001 SEPT 30, 2000*
---------------- --------------- -------------- -------------
Operating revenues:
License fees $ 2,386 $ 5,390 $ 6,131 $ 7,613
Research and development 720 2,341 2,160 7,329
---------------- --------------- ------------- -------------
Total operating revenues 3,106 7,731 8,291 14,942
Operating expenses:
Research and development
Stock compensation 12 72 915 4,715
Other research and development 8,635 6,975 25,949 20,063
---------------- --------------- ------------- -------------
Total research and development 8,647 7,047 26,864 24,778
General and administrative:
Stock compensation 422 51 494 2,078
Other general and administrative 1,685 1,251 4,946 4,172
---------------- --------------- ------------- -------------
Total general and administrative 2,107 1,302 5,440 6,250
---------------- --------------- ------------- -------------
Total operating expenses 10,754 8,349 32,304 31,028
---------------- --------------- ------------- -------------
Operating loss (7,648) (618) (24,013) (16,086)
Other income:
Investment income 1,040 1,796 3,791 3,803
---------------- --------------- ------------- -------------
Total other income 1,040 1,796 3,791 3,803
---------------- --------------- ------------- -------------
Net income (loss) before cumulative effect
of change in accounting principle (6,608) 1,178 (20,222) (12,283)
Cumulative effect on prior years of the
application of SAB No. 101, Revenue Recognition
in Financial Statements - - - (500)
---------------- --------------- ------------- -------------
Net income (loss) $ (6,608) $ 1,178 $ (20,222) $ (12,783)
================ =============== ============= =============
Basic earnings (loss) per share:
Before cumulative effect of change in
accounting principle $ (0.38) $ 0.07 $ (1.16) $ (0.76)
Change in accounting principle - - - (0.03)
---------------- --------------- ------------- -------------
Basic earnings (loss) per share $ (0.38) $ 0.07 $ (1.16) $ (0.79)
================ =============== ============= =============
Diluted earnings (loss) per share:
Before cumulative effect of change in
accounting principle $ (0.38) $ 0.06 $ (1.16) $ (0.76)
Change in accounting principle - - - (0.03)
---------------- --------------- ------------- -------------
Diluted earnings (loss) per share $ (0.38) $ 0.06 $ (1.16) $ (0.79)
================ =============== ============= =============
Shares used in calculation of earnings
(loss) per share:
Basic 17,492 17,284 17,435 16,151
================ =============== ============= =============
Diluted 17,492 18,878 17,435 16,151
================ =============== ============= =============
* The 2000 third quarter and year to date financial data, as reported in the
Company's Form 10-Q for the nine months ended September 30, 2000, has been
adjusted to reflect the adoption of SAB No. 101 in the fourth quarter of 2000,
retroactive to January 1, 2000.
See accompanying notes to consolidated financial statements.
NEUROGEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(UNAUDITED)
NINE MONTHS NINE MONTHS
ENDED ENDED
SEPTEMBER 30, 2001 SEPTEMBER 30, 2000
------------------ ------------------
Cash flows from operating activities:
Net loss $ (20,222) $ (12,783)
Adjustments to reconcile net loss to net cash (used in)
provided by operating activities:
Depreciation and amortization expense 1,981 2,016
Stock compensation expense 1,409 6,793
Other noncash expense 709 1,067
Changes in operating assets and liabilities:
(Decrease) increase in accounts payable and accrued expenses (2,157) 289
(Decrease) increase in unearned revenue from corporate partner (2,661) 8,888
Decrease (increase) in receivables from corporate partners 1,274 (1,130)
Decrease (increase) in other assets, net 510 (277)
----------------- ---------------
Net cash (used in) provided by operating activities (19,157) 4,863
Cash flows from investing activities:
Purchase of plant and equipment (5,770) (4,011)
Purchases of marketable securities (63,611) (26,129)
Maturities and sales of marketable securities 62,051 21,321
Proceeds from sales of assets 30 -
----------------- ---------------
Net cash used in investing activities (7,300) (8,819)
Cash flows from financing activities:
Proceeds from issuance of debt 3,088 -
Principal payments under loan payable (59) -
Exercise of warrants and employee stock options 678 10,018
Proceeds from private placement of common stock - 38,698
----------------- ---------------
Net cash provided by financing activities 3,707 48,716
----------------- ---------------
Net (decrease) increase in cash and cash equivalents (22,750) 44,760
Cash and cash equivalents at beginning of period 48,086 31,588
----------------- ---------------
Cash and cash equivalents at end of period $ 25,336 $ 76,348
================= ===============
See accompanying notes to consolidated financial statements.
Neurogen Corporation
Notes to Consolidated Financial Statements
September 30, 2001
(Unaudited)
(1) BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The unaudited financial statements have been prepared from the
books and records of Neurogen Corporation (the "Company") in
accordance with generally accepted accounting principles for interim
financial information pursuant to Rule 10-01 of Regulation S-X.
Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments
(consisting of normal recurring accruals) considered necessary for a
fair presentation have been included. These interim financial
statements should be read in conjunction with the audited financial
statements for the year ended December 31, 2000 included in the
Company's Annual Report on Form 10-K and 10-K/A. Interim results are
not necessarily indicative of the results that may be expected for the
full fiscal year.
(2) PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of the
parent company and a subsidiary, Neurogen Properties LLC, after
elimination of intercompany transactions.
(3) RECLASSIFICATIONS
Certain reclassifications have been made to the 2000 financial
statements in order to conform to the 2001 presentation.
(4) REVENUE RECOGNITION
Revenue under research and development arrangements is recognized
as earned under the terms of the respective agreements. Product
research funding is recognized as revenue, generally on a quarterly
basis, as research effort is performed. License and technology
transfer revenue is recognized when a contractual arrangement exists,
fees are fixed and determinable, delivery of the technology has
occurred and collectibility is reasonably assured. If customer
acceptance is required, revenue is deferred until acceptance occurs.
If there are on-going services or obligations after delivery, revenue
is recognized over the related term of the service on a percentage of
completion basis, unless such obligation is maintenance which is
recognized on a straight line basis. For contracts with multiple
elements, total contract fees are allocated to the different elements
based on evidence of fair value. Deferred revenue arises from the
payments received for research and development to be conducted in
future periods or for licenses of Neurogen rights or technology where
Neurogen has continuing involvement. Deferred revenue is generally
expected to be recognized within the next twelve months.
In December 1999, the staff of the Securities and Exchange
Commission issued its Staff Accounting Bulletin ("SAB") No. 101,
Revenue Recognition in Financial Statements. SAB No. 101, as amended
by SAB No. 101A and 101B, provides guidance on the measurement and
timing of revenue recognition in financial statements of public
companies. SAB No. 101 permits application of its guidance to be
treated as a change in accounting principle in accordance with APB
Opinion No. 20, Accounting Changes.
The Company adopted the guidance of SAB No. 101 in the fourth
quarter of 2000, retroactive to January 1, 2000 and reflected a
cumulative effect of the change in accounting principle on prior years
of $500,000, related to timing of revenue recognition on certain
non-refundable up-front payments previously recognized on a technology
transfer agreement. The Company also adjusted its 2000 quarterly
financial data to reflect the adoption of SAB No. 101, resulting in an
increase in revenue previously reported for the nine months ended
September 30, 2000 of $337,000 and an increase in revenue previously
reported for the three months ended September 30, 2000 of $481,000.
(5) NON-CASH COMPENSATION CHARGE
On January 15, 2001 and September 7, 2001, certain modifications
were made to stock options previously granted to each of two executive
officers of the Company. Non-recurring, non-cash charges to income of
$803,000 and $174,000 were recorded in the first and third quarters of
2001, respectively, for extending the life of each of the officers'
unvested options.
In September 2001, 150,000 shares of restricted stock were
granted to certain executive officers at an exercise price of zero and
a vesting term of five years. The vesting provisions were 10% at date
of grant, 45% after four years and 45% after five years for 100,000
shares issued; and 50% after four years and 50% after five years for
50,000 shares issued. In connection with this grant, the Company
recorded fixed deferred compensation totaling $2,908,000, which is to
be amortized ratably over the service period required for the shares
to vest. For the three and nine months ending September 30, 2001, the
Company has recorded $235,000 in non-cash compensation expense related
to these restricted stock awards.
(6) BUILDING PURCHASE
In 1995, the Company entered into a ten year operating lease
agreement to lease 24,000 square feet of space in a building adjacent
to the Company's existing research facility. The Company had an option
to purchase the building beginning in the sixth year of the lease. On
January 11, 2001, the Company exercised its option, purchasing the
building for $2,437,500 and thereby terminating the lease. Unamortized
leasehold improvement costs were also capitalized into the building at
time of purchase.
(7) DEBT ISSUANCE
In July of 2001, Connecticut Innovations, Inc. advanced
approximately $3.1 million to the Company representing the remainder
of a $5.0 million loan commitment made in October of 1999. Beginning
in August of 2001, the loan balance of $5.0 million became repayable
in monthly installments over 15 years, bearing interest at an annual
rate of 7.5%.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Since its inception in September 1987, Neurogen has been engaged
in the discovery and development of drugs. The Company has not derived
any revenue from product sales and expects to incur significant losses
in most years prior to deriving any such product revenues. Revenues to
date have come from four collaborative research agreements, one
license agreement and one technology transfer agreement.
RESULTS OF OPERATIONS
Results of operations may vary from period to period depending on
numerous factors, including the timing of income earned under existing
or future strategic alliances, technology transfer agreements, joint
ventures or financings, if any, the progress of the Company's research
and development and technology transfer projects, technological
advances and determinations as to the commercial potential of proposed
products. Neurogen expects research and development costs to increase
significantly over the next several years as its drug development
programs progress. In addition, general and administrative expenses
necessary to support the expanded research and development activities
are generally expected to increase for the foreseeable future.
THREE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
The Company's operating revenues decreased to $3.1 million for
the three months ended September 30, 2001 as compared to $7.7 million
for the same period in 2000. The decrease in operating revenues is due
to a scheduled reduction in the Company's staffing on collaborative
programs with Pfizer (the GABA and NPY programs described below) and
the related reduction in discovery research funding. The recognition
of license fees pursuant to the Pfizer Technology Transfer Agreement
(described below) also decreased in the third quarter of 2001. License
fees of $2.4 million were recognized in the three months ended
September 30, 2001 as compared to $5.4 million in the same period in
2000.
Research and development expenses increased 23 percent to $8.6
million for the third quarter of 2001 as compared to $7.0 million for
the third quarter of 2000. The increase is primarily due to further
development of potential drug candidates and the Company's continued
expansion of its AIDD (Accelerated Intelligent Drug Design) Program
for the discovery of new drug candidates. Research and development
expenses represented 84 percent and 85 percent of total expenses
(excluding non-cash compensation charges) in the three-month periods
ended September 30, 2001 and 2000, respectively.
General and administrative expenses, excluding non-cash stock
compensation charges, increased 35 percent to $1.7 million for the
three-month period ended September 30, 2001 as compared to $1.3
million for the same period in 2000. This increase is attributed to
additional administrative and technical services and personnel to
support the protection of Neurogen's growing intellectual property
estate and to support Neurogen's expanding research pipeline.
Other income, consisting primarily of interest income from
invested cash and marketable securities, decreased 42 percent for the
third quarter of 2001 as compared to the same period in 2000 due
primarily to a decrease in yield rates and a lower level of invested
funds.
The Company recognized a net loss of $6.6 million for the three
months ended September 30, 2001 as compared with a net income of $1.2
million for the same period in 2000. The change in earnings is
primarily due to the decrease in revenues and the increases in
research and development and general and administrative expenses
described above.
NINE MONTHS ENDED SEPTEMBER 30, 2001 AND 2000
The Company's operating revenues decreased to $8.3 million for
the nine months ended September 30, 2001 from $14.9 million for the
same period in 2000. The decrease in operating revenues is due to a
scheduled reduction in the Company's staffing on collaborative
programs with Pfizer (the GABA and NPY programs described below) and
the related reduction in discovery research funding. The recognition
of license fees pursuant to the Pfizer Technology Transfer Agreement
(described below) also decreased in the first three quarters of 2001.
License fees of $6.1 million were recognized in the nine months ended
September 30, 2001 as compared to $7.6 million in the same period in
2000.
Research and development expenses, excluding non-cash stock
compensation charges, increased 29 percent to $25.9 million for the
nine-month period ended September 30, 2001 as compared to $20.1
million for the same period in 2000. The increase is primarily due to
further development of potential drug candidates, as well as the
Company's continued expansion of its AIDD Program for the discovery of
new drug candidates. Research and development expenses represented 84
percent and 83 percent of total operating expenses (excluding non-cash
compensation charges) in the nine-month periods ended September 30,
2001 and 2000, respectively.
General and administrative expenses, excluding non-cash stock
compensation charges, increased 19 percent to $4.9 million for the
nine-month period ended September 30, 2001 as compared to $4.2 million
for the same period in 2000. This increase is attributed to additional
administrative and technical services and personnel to support the
protection of Neurogen's growing intellectual property estate and to
support Neurogen's expanding research pipeline.
Other income, consisting primarily of interest income from
invested cash and marketable securities, remained at $3.8 million for
the nine-month periods ended September 30, 2001 and 2000.
The Company recognized a net loss of $20.2 million for the nine
months ended September 30, 2001 as compared with a net loss of $12.8
million for the same period in 2000. The increase in net loss is
primarily due to the decrease in revenues and the increases in
research and development and general and administrative expenses
described above.
In December 1999, the staff of the Securities and Exchange
Commission issued its Staff Accounting Bulletin ("SAB") No. 101,
Revenue Recognition in Financial Statements. SAB No. 101, as amended
by SAB No. 101A and 101B, provides guidance on the measurement and
timing of revenue recognition in financial statements of public
companies. SAB No. 101 permits application of its guidance to be
treated as a change in accounting principle in accordance with APB
Opinion No. 20, Accounting Changes.
The Company adopted the guidance of SAB No. 101 in the fourth
quarter of 2000, retroactive to January 1, 2000, and reflected a
cumulative effect of change in accounting principle on prior years of
$500,000, related to timing of revenue recognition on certain
non-refundable up-front payments previously recognized on a technology
transfer agreement. The Company also adjusted its 2000 quarterly
financial data to reflect the adoption of SAB No. 101, resulting in an
increase in revenue previously reported for the three and nine month
periods ended September 30, 2000 of $481,000 and $337,000,
respectively.
LIQUIDITY AND CAPITAL RESOURCES
At September 30, 2001 and December 31, 2000, cash, cash
equivalents and marketable securities were in the aggregate $88.0
million and $108.8 million, respectively. A total amount of $43.4
million of the marketable securities at September 30, 2001 have
maturities greater than one year; however, the Company can and may
liquidate such investments prior to maturity to meet its strategies or
investment objectives. While the Company's aggregate level of cash,
cash equivalents and marketable securities decreased during the first
nine months of 2001, these levels have fluctuated significantly in the
past and are expected to do so in the future as a result of the
factors described below.
Neurogen's cash requirements to date have been met by the
proceeds of its financing activities, amounts received pursuant to
collaborative research, licensing or technology transfer arrangements
and interest earned on invested funds. The Company's financing
activities include underwritten public offerings of common stock,
private placement offerings of common stock and private sales of
common stock in connection with collaborative research and licensing
agreements. Total funding received from these financing activities was
approximately $146.6 million. The Company's expenditures have been
primarily to fund research and development and general and
administrative expenses and to construct and equip its research and
development facilities.
The Company plans to use its cash, cash equivalents and
marketable securities for its research and development activities,
working capital and general corporate purposes. Neurogen anticipates
that its current cash balance will be sufficient to fund its current
and planned operations through at least 2003. However, Neurogen's
funding requirements may change and will depend upon numerous factors,
including, but not limited to, the progress of the Company's research
and development programs, the timing and results of pre-clinical
testing and clinical studies, the timing of regulatory approvals,
technological advances, determinations as to the commercial potential
of its proposed products, the status of competitive products and the
ability of the Company to establish and maintain collaborative
arrangements with others for the purpose of funding certain research
and development programs, conducting clinical studies, obtaining
regulatory approvals and, if such approvals are obtained,
manufacturing and marketing products. The Company anticipates that it
may augment its cash balance through financing transactions, including
the issuance of debt or equity securities and further corporate
alliances. No assurances can be given that adequate levels of
additional funding can be obtained on favorable terms, if at all.
As of December 31, 2000, the Company had approximately $62.7
million and $4.2 million of net operating loss and research and
development credit carryforwards, respectively, available for federal
income tax purposes, which expire in the years 2004 through 2020. The
Company also had approximately $51.2 million and $1.3 million of
Connecticut state tax net operating loss and research and development
credit carryforwards, respectively, which expire in the years 2001
through 2020. The Company has also applied to exchange 2000
Connecticut research and development credits of $4.2 million for cash
proceeds of $2.7 million under new Connecticut tax law provisions.
Because of "change in ownership" provisions of the Tax Reform Act of
1986, the Company's utilization of its net operating loss and research
and development credit carryforwards may be subject to an annual
limitation in future periods.
COLLABORATIVE RESEARCH AGREEMENTS
In 1992, Neurogen entered into a collaborative research agreement
with Pfizer (the "1992 Pfizer Agreement") pursuant to which Pfizer
made a $13.8 million equity investment in the Company and agreed,
among other things, to fund a specified level of resources for up to
five years (later extended as described below) for Neurogen's research
programs for the discovery of GABA-based drugs for the treatment of
anxiety and cognitive disorders. In 1994, Neurogen and Pfizer entered
into a second collaborative research agreement (the "1994 Pfizer
Agreement") pursuant to which Pfizer made an additional $9.9 million
equity investment in the Company and agreed, among other things, to
fund a specified level of resources for up to four years (later
extended as described below) for Neurogen's research program for the
development of GABA-based drugs for the treatment of sleep disorders.
As of September 30, 2001, Pfizer had provided $43.2 million and $14.1
million of research funding to the Company and $0.5 million and $0.3
million for the achievement of certain clinical development and
regulatory milestones pursuant to the 1992 and 1994 Pfizer Agreements,
respectively. Neurogen is eligible to receive additional milestone
payments of up to $12.0 million and $3.0 million under the 1992 and
1994 Pfizer Agreements, respectively, if certain development and
regulatory objectives are achieved regarding its products subject to
the collaboration. In return, under the two agreements, Pfizer
received the exclusive rights to manufacture and market collaboration
drugs that act through the GABA system for the treatment of anxiety,
cognition enhancement, depression or insomnia. Pfizer will pay
Neurogen royalties based upon net sales levels, if any, for such
products. Under the agreements, Pfizer is responsible for funding the
cost of all clinical development and the manufacturing and marketing,
if any, of drugs developed from the collaborations.
On three occasions, Neurogen and Pfizer extended Neurogen's
research efforts under the 1992 and 1994 Pfizer Agreements. Pursuant
to the extension agreements, which currently terminate in December
2001, Neurogen has received $2.9 million in the first nine months of
2001 (which amount is included in the above-described cumulative
totals received for the 1992 and 1994 Pfizer Agreements) for research
and development funding of the Company's GABA-based anxiolytic,
cognitive enhancer and sleep disorders projects.
In 1995, Neurogen and Pfizer entered into a third collaborative
agreement (the "1995 Pfizer Agreement") pursuant to which Pfizer made
an additional $16.5 million equity investment in the Company, paid a
$3.5 million license fee and agreed, among other things, to fund a
specified level of resources for Neurogen's research program for the
discovery of drugs which work through the neuropeptide Y (NPY)
mechanism for the treatment of obesity and other disorders. In October
2000, Neurogen and Pfizer concluded the research phase of their
NPY-based collaboration according to schedule and the annual research
funding received from Pfizer came to its scheduled conclusion on
October 31, 2000. Should Pfizer in the future elect to continue the
development of any drug candidates subject to collaboration, Neurogen
could also receive development and regulatory milestone payments and
would be entitled to royalty, profit sharing and manufacturing rights.
In June 1999, Neurogen and Pfizer entered into a technology
transfer agreement (the "Pfizer Technology Transfer Agreement"). Under
the terms of this agreement, Pfizer has agreed to pay Neurogen a total
of up to $27.0 million over a three year period for the licensing and
transfer to Pfizer of certain of Neurogen's AIDD technologies for the
discovery of new drugs, along with the installation of an AIDD system.
Additional payments are also possible upon Pfizer's successful
utilization of this technology. Pfizer has received a non-exclusive
license to certain AIDD intellectual property and the right to employ
this technology in its own drug development programs. As of September
30, 2001, Pfizer had provided $23.5 million in license fees pursuant
to the Pfizer Technology Transfer Agreement, of which $17.3 million
has been recognized as revenue to date. Remaining revenues associated
with amounts received under the Pfizer Technology Transfer Agreement
will be recognized in future periods and may fluctuate significantly
depending on the timing and completion of the Company's transfer of
technology and systems pursuant to the agreement.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Interest rate risk. The Company's investment portfolio includes
investment grade debt instruments. These securities are subject to
interest rate risk, and could decline in value if interest rates
fluctuate. Due to the short duration and conservative nature of these
instruments, the Company does not believe that it has a material
exposure to interest rate risk. Additionally, funds available from
investment activities are dependent upon available investment rates.
These funds may be higher or lower than anticipated due to interest
rate volatility.
Capital market risk. The Company currently has no product
revenues and is dependent on funds raised through other sources. One
source of funding is through further equity offerings. The ability of
the Company to raise funds in this manner is dependent upon capital
market forces affecting the stock price of the Company.
Part II - Other Information
Item 1. Legal Proceedings
Not applicable for the third quarter ended September 30, 2001.
Item 2. Changes in Securities
Not applicable for the third quarter ended September 30, 2001.
Item 3. Defaults upon Senior Securities
Not applicable for the third quarter ended September 30, 2001.
Item 4. Submission of Matters to a Vote of Security Holders
On July 16, 2001, the Company held its annual meeting of
stockholders (i) to elect a board of twelve directors (Proposal
1);(ii)to adopt the Neurogen Corporation 2001 Stock Option Plan
(Proposal 2) and (iii) to ratify the appointment by the Board of
Directors of PricewaterhouseCoopers LLP as the independent auditors
for the Company for the fiscal year ended December 31, 2001 (Proposal
3).
Proposal 1
The stockholders elected the persons named below, the Company's
nominees for directors, as directors of the Company, casting votes in
favor of such nominees or withholding votes as indicated:
Votes in Favor Votes Withheld
-------------- --------------
Felix J. Baker, Ph.D. 9,660,379 11,250
Julian C. Baker 9,660,379 11,250
Barry M. Bloom, Ph.D. 9,660,379 11,250
Robert N. Butler, M.D. 9,660,379 11,250
Frank C. Carlucci 9,646,814 24,815
Jeffrey J. Collinson 9,646,814 24,815
Mark Novitch, M.D. 9,660,379 11,250
Harry H. Penner, Jr. 9,519,492 152,137
Robert H. Roth, Ph.D. 9,660,379 11,250
John Simon 9,660,379 11,250
John F. Tallman, Ph.D. 9,660,379 11,250
Suzanne H. Woolsey, Ph.D. 9,660,379 11,250
The Stockholders approved Proposal 2, voting as follows:
Affirmative Votes Negative Votes Votes Abstained
----------------- -------------- ---------------
Proposal 2 7,561,797 2,107,629 2,203
The Stockholders approved Proposal 3, voting as follows:
Affirmative Votes Negative Votes Votes Abstained
----------------- -------------- ---------------
Proposal 3 9,660,529 100 11,000
Item 5. Other information
Not applicable for the third quarter ended September 30, 2001.
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index.
(b) The Company filed a current report on Form 8-K on September 19,
2001 to submit for filing a News Release of the Company dated
September 10, 2001 announcing the appointment, by the Company's Board
of Directors, of Dr. William H. Koster to the position of Chief
Executive Officer of Neurogen Corporation. The Company also announced
the promotion of Stephen R. Davis to Executive Vice President, as well
as the appointment of Dr. Koster and Mr. Davis to the Company's Board
of Directors.
SAFE HARBOR STATEMENT
Statements which are not historical facts, including statements about
the Company's confidence and strategies, the status of various product
development programs, the sufficiency of cash to fund planned
operations and the Company's expectations concerning its development
compounds, drug discovery technologies and opportunities in the
pharmaceutical marketplace are "forward looking statements" within the
meaning of the Private Securities Litigations Reform Act of 1995 that
involve risks and uncertainties and are not guarantees of future
performance. These risks include, but are not limited to, difficulties
or delays in development, testing, regulatory approval, production and
marketing of any of the Company's drug candidates, the failure to
attract or retain scientific management personnel, any unexpected
adverse side effects or inadequate therapeutic efficacy of the
Company's drug candidates which could slow or prevent product
development efforts, competition within the Company's anticipated
product markets, the Company's dependence on corporate partners with
respect to research and development funding, regulatory filings and
manufacturing and marketing expertise, the uncertainty of product
development in the pharmaceutical industry, inability to obtain
sufficient funds through future collaborative arrangements, equity or
debt financings or other sources to continue the operation of the
Company's business, risk that patents and confidentiality agreements
will not adequately protect the Company's intellectual property or
trade secrets, dependence upon third parties for the manufacture of
potential products, inexperience in manufacturing and lack of internal
manufacturing capabilities, dependence on third parties to market
potential products, lack of sales and marketing capabilities,
potential unavailability or inadequacy of medical insurance or other
third-party reimbursement for the cost of purchases of the Company's
products, and other risks detailed in the Company's Securities and
Exchange Commission filings, including its Annual Report on Form 10-K
and 10-K/A for the year ended December 31, 2000, each of which could
adversely affect the Company's business and the accuracy of the
forward-looking statements contained herein.
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NEUROGEN CORPORATION
By:/s/ STEPHEN R. DAVIS
------------------------
Stephen R. Davis
Executive Vice President
and Chief Business Officer
Date: November 14, 2001
Exhibit Index
Exhibit
- -------
Number
- ------
10.1 - Neurogen Corporation Stock Option Plan, as amended (incorporated by
reference to Exhibit 10.1 to the Company's Form 10-K for the fiscal
year ended December 31, 1991).
10.2 - Form of Stock Option Agreement currently used in connection with the
grant of options under Neurogen Corporation Stock Option Plan
(incorporated by reference to Exhibit 10.2 to the Company's Form 10-K
for the fiscal year ended December 31, 1992).
10.3 - Neurogen Corporation 1993 Omnibus Incentive Plan, as amended
(incorporated by reference to Exhibit 10.3 to the Company's Form 10-K
for the fiscal year ended December 31, 1993).
10.4 - Form of Stock Option Agreement currently used in connection with the
grant of options under Neurogen Corporation 1993 Omnibus Incentive
Plan (incorporated by reference to Exhibit 10.4 to the Company's Form
10-K for the fiscal year ended December 31, 1993).
10.5 - Neurogen Corporation 1993 Non-Employee Directors Stock Option
Program (incorporated by reference to Exhibit 10.5 to the Company's
Form 10-K for the fiscal year ended December 31, 1993).
10.6 - Form of Stock Option Agreement currently used in connection with the
grant of options under Neurogen Corporation 1993 Non-Employee
Directors Stock Option Program (incorporated by reference to Exhibit
10.6 to the Company's Form 10-K for the fiscal year ended December 31,
1993).
10.7 - Employment Contract between the Company and Harry H. Penner, Jr.,
dated as of October 12, 1993 (incorporated by reference to Exhibit
10.7 to the Company's Form 10-K for the fiscal year ended December 31,
1993).
10.8 - Employment Contract between the Company and John F. Tallman, dated as
of December 1, 1993 (incorporated by reference to Exhibit 10.25 to the
Company's Form 10-Q for the quarterly period ended September 30,1994).
10.9 - Form of Proprietary Information and Inventions Agreement
(incorporated by reference to Exhibit 10.31 to Registration Statement
No. 33-29709 on Form S-1).
10.10 - Collaborative Research Agreement and License and Royalty Agreement
between the Company and Pfizer Inc, dated as of January 1, 1992
(CONFIDENTIAL TREATMENT REQUESTED) (incorporated by reference to
Exhibit 10.35 to the Company's Form 10-K for the fiscal year ended
December 31, 1991).
10.11 - Letter Agreement between the Company and Barry M. Bloom, dated January
12, 1994 (incorporated by reference to Exhibit 10.25 to the Company's
Form 10-K for the fiscal year ended December 31, 1993).
10.12 - Letter Agreement between the Company and Robert H. Roth, dated April
14, 1994 (incorporated by reference to Exhibit 10.26 to the Company's
Form 10-K for the fiscal year ended December 31, 1994).
10.13 - Collaborative Research Agreement and License and Royalty Agreement
between the Company and Pfizer Inc, dated as of July 1, 1994
(CONFIDENTIAL TREATMENT REQUESTED) (incorporated by reference of
Exhibit 10.1 to the Company's Form 10-Q for the quarterly period ended
June 30, 1994).
10.14 - Stock Purchase Agreement between the Company and Pfizer dated as of
July 1, 1994 (incorporated by reference to Exhibit 10.2 to the
Company's Form 10-Q for the quarterly period ended June 30, 1994).
10.15 - Collaboration and License Agreement and Screening Agreement between
the Company and Schering-Plough Corporation (CONFIDENTIAL TREATMENT
REQUESTED) (incorporated by reference to Exhibit 10.1 to the Company's
Form 8-K dated July 28, 1995).
10.16 - Lease Agreement between the Company and Commercial Building Associates
dated as of August 30, 1995 (incorporated by reference to Exhibit
10.27 to the Company's Form 10-Q for the quarterly period ended
September 30, 1995).
10.17 - Collaborative Research Agreement between the Company and Pfizer dated
as of November 1, 1995 (CONFIDENTIAL TREATMENT REQUESTED)
(incorporated by reference to Exhibit 10.1 of the Company's Form 8-K
dated November 1, 1995).
10.18 - Development and Commercialization Agreement between the Company and
Pfizer dated as of November 1, 1995 (CONFIDENTIAL TREATMENT REQUESTED)
(incorporated by reference to Exhibit 10.2 of the Company's Form 8-K
dated November 1, 1995).
10.19 - Stock Purchase Agreement between the Company and Pfizer dated as of
November 1, 1995 (incorporated by reference to Exhibit 10.3 of
the Company's Form 8-K dated November 1, 1995).
10.20 - Stock Purchase Agreement dated as of November 25, 1996 between
American Home Products Corporation, acting through its Wyeth-Ayerst
Laboratories Division, and Neurogen Corporation (CONFIDENTIAL
TREATMENT REQUESTED) (incorporated by reference to Exhibit 10.1 of the
Company's Form 8-K dated March 31, 1997).
10.21 - Technology agreement between the Company and Pfizer Inc, dated as
of June 15, 1999 (CONFIDENTIAL TREATMENT REQUESTED) (incorporated by
reference to Exhibit 10.27 to the Company's Form 10-Q for the
quarterly period ended June 30, 1999).
10.22 - Employment Contract between the Company and Alan J. Hutchison, dated
as of December 1, 1997 (incorporated by reference to Exhibit 10.28
to the Company's Form 10-K for the fiscal year ended December 31,
1999).
10.23 - Employment Contract between the Company and Stephen R. Davis, dated
as of December 1, 1997 (incorporated by reference to Exhibit 10.29
to the Company's Form 10-K for the fiscal year ended December 31,
1999).
10.24 - Employment Contract between the Company and Kenneth R. Shaw, dated
as of December 1, 1999 (incorporated by reference to Exhibit 10.30
to the Company's Form 10-K for the fiscal year ended December 31,
1999).
10.25 - Neurogen Corporation 2000 Non-Employee Directors Stock Option Program
(incorporated by reference to Exhibit 10.31 to the Company's Form
10-Q for the quarterly period ended June 30, 2000).
10.26 - Form of the Non-Qualified Stock Option Agreement currently used in
connection with the grant of options under the Neurogen Corporation
2000 Non-Employee Directors Stock Option Program (incorporated by
reference to Exhibit 10.32 to the Company's Form 10-Q for the
quarterly period ended June 30,2000).
10.27 - Registration Rights Agreement dated as of June 26, 2000 between the
Company and the Purchasers listed on Exhibit A thereto (incorporated
by reference to Exhibit 10.33 to the Company's Form 10-Q for the
quarterly period ended June 30, 2000).
10.28 - Severance Agreement between the Company and John F. Tallman, dated as
of January 15, 2001 (incorporated by reference to Exhibit 10.28 to the
Company's Form 10-Q for the quarterly period ended March 31, 2001).
10.29 - Amended and Restated Neurogen Corporation 2001 Stock Option Plan, as
amended and restated effective September 4, 2001.
10.30 - Form of Incentive Stock Option Agreement currently used in connection
with the grant of options under the Amended and Restated Neurogen
Corporation 2001 Stock Option Plan.
10.31 - Form of the Non-Qualified Stock Option Agreement currently used in
connection with the grant of options under the Amended and Restated
Neurogen Corporation 2001 Stock Option Plan.
10.32 - Form of Neurogen Special Committee Stock Option Plan.
10.33 - Employment Agreement between the Company and William H. Koster, dated
as of September 4, 2001.
10.34 - Severance Agreement between the Company and Harry H. Penner, Jr.,
dated as of September 7, 2001.
Exhibit 10.29
AMENDED AND RESTATED
NEUROGEN CORPORATION
2001 STOCK OPTION PLAN
(as amended and restated effective September 4, 2001)
* * * * *
1. Purpose. The purpose of the Amended and Restated Neurogen Corporation 2001
Stock Option Plan (as amended and restated effective September 4, 2001)
(the "Plan") is to attract and retain the best available personnel, to
provide additional incentive to employees and consultants and to promote
the success of the business of Neurogen Corporation (the "Company") and its
Subsidiaries (as defined below).
2. Certain Definitions. For purposes of the Plan, the following terms shall
have the meanings set forth below:
2.1 "Award Agreement" shall mean the agreement executed by a Participant
pursuant to the provisions of Sections 3.2 and 12.4 of the Plan in
connection with the granting of a Stock Option or of Restricted
Shares.
2.2 "Board" shall mean the Board of Directors of the Company, as
constituted from time to time.
2.3 "Cause" shall mean, for purposes of this Plan, either of the
following: (a) if a Participant is a party to an employment or
consulting agreement with the Company or with any Subsidiary, the
meaning as defined in such agreement; or (b) if the Participant is not
party to such an agreement, (i) commission of a felony or misdemeanor;
(ii) failure to abide by any material Company policy; (iii) gross
negligence or willful misconduct in connection with job duties; or
(iv) continuing refusal to perform job duties after written notice of
such failure and an opportunity to cure such non-performance. In the
event that a Participant is party to an employment or consulting
agreement with the Company or with any Subsidiary, and such employment
or consulting agreement permits the Participant to terminate his or
her employment for "good reason" (as defined in such agreement) or
under any constructive termination provision permitting the employee
to terminate his or her employment and receive severance benefits,
then if the Participant terminates his or her employment or consulting
relationship with the Company or with any Subsidiary for "good reason"
or under any such constructive termination provision, he or she shall
be deemed to have been terminated by the Company or its Subsidiary
without Cause for purposes of this Plan. Any determination of Cause by
the Compensation Committee or its designee shall be conclusive, final
and binding on the Participant, and on all persons claiming under or
through such Participant, for purposes of this Plan.
2.4 "Change of Control" shall, for purposes of this Plan, be deemed to
have occurred (i) when any person or persons acting in concert (within
the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act),
excluding Company benefit plans, becomes the beneficial owner of
securities of the Company having more than fifty percent (50%) of the
voting power of the Company's then-outstanding securities; (ii) upon
the consummation of any merger or other business combination of the
Company (a "Transaction"), other than a Transaction immediately
following which those persons who were shareholders of the Company and
any trustee or fiduciary of any Company employee benefit plan
immediately prior to the Transaction own more than fifty percent (50%)
of the voting power, directly or indirectly, of the surviving
corporation in any such merger or other business combination; (iii)
when, within any twelve (12) month period, the persons who were
directors immediately before the beginning of such period (the
"Incumbent Directors") shall cease (for any reason other than death)
to constitute at least a majority of the Board or the board of
directors of a successor to the Company. For this purpose, any
director who was not a director at the beginning of such period shall
be deemed to be an Incumbent Director if such director was elected to
the Board by, or on the recommendation of or with the approval of, at
least two-thirds of the directors who then qualified as Incumbent
Directors (so long as such director was not nominated by a person who
has expressed an intent to effect a Change of Control or engage in a
proxy or other control contest); or (iv) when a plan of complete
liquidation of the Company shall have been adopted or the holders of
voting securities of the Company shall have approved an agreement for
the sale or disposition by the Company (in one transaction or through
a series of transactions) of all or substantially all of the Company's
assets.
2.5 "Code" shall mean the Internal Revenue Code of 1986, as in effect and
as amended from time to time, or any successor statute thereto,
together with any rules, regulations and interpretations promulgated
thereunder or with respect thereto.
2.6 "Committee" shall mean the committee established from time to time in
the sole discretion of the Board to administer the Plan, as described
in Section 3 of the Plan, and consisting solely of two or more
directors who are non-employee directors for purposes of SEC Rule
16b-3, and who are outside directors for purposes of Section 162(m) of
the Code and the regulations promulgated thereunder.
2.7 "Common Stock" shall mean the common stock, par value $0.025 per
share, of the Company or any security of the Company issued by the
Company in substitution or exchange therefor.
2.8 "Company" shall mean Neurogen Corporation, a Delaware corporation, or
any successor corporation to Neurogen Corporation.
2.9 "Disability" shall mean disability as defined in the Participant's
then-effective employment or consulting agreement. If the participant
is not then a party to an effective employment or consulting agreement
with the Company which defines disability, "Disability" shall mean
disability as determined by the Committee in accordance with standards
and procedures similar to those under the Company's long-term
disability plan, if any. Subject to the first sentence of this Section
2.8, at any time that the Company does not maintain a long-term
disability plan, "Disability" shall mean any physical or mental
disability which is determined to be total and permanent by a
physician selected in good faith by the Company.
2.10 "Exchange Act" shall mean the Securities Exchange Act of 1934, as in
effect and as amended from time to time, or any successor statute
thereto, together with any rules, regulations and interpretations
promulgated thereunder or with respect thereto.
2.11 "Fair Market Value" shall mean, on or with respect to any given
date(s), the closing price for the Common Stock, as reported on the
NASDAQ Stock Market for such date(s) or, if the Common Stock was not
traded on such date(s), on the immediately preceding day (or days) on
which the Common Stock was traded. If at any time the Common Stock is
not traded on the NASDAQ Stock Market, the Fair Market Value of a
share of Common Stock shall be determined in good faith by the
Committee.
2.12 "Incentive Stock Option" means any Stock Option granted pursuant to
the provisions of Section 6 of the Plan (and the relevant Award
Agreement) that is intended to be (and is specifically designated as)
an "incentive stock option" within the meaning of Section 422 of the
Code.
2.13 "Non-Qualified Stock Option" means any Stock Option granted pursuant
the provisions of Section 6 of the Plan (and the relevant Award
Agreement) that is not (and is specifically designated as not being)
an Incentive Stock Option.
2.14 "Participant" shall mean any individual who is selected from time to
time under Section 5 to receive a Stock Option or a grant of
Restricted Shares under the Plan.
2.15 "Plan" shall mean the Neurogen Corporation 2001 Stock Option Plan, as
set forth herein and as in effect and as amended from time to time
(together with any rules and regulations promulgated by the Committee
with respect thereto).
2.16 "Restricted Shares" shall mean the restricted shares of Common Stock
granted pursuant to the provisions of Section 7 of the Plan and the
relevant Award Agreement.
2.17 "Retirement" shall mean the voluntary retirement by the Participant
from active employment with the Company and its Subsidiaries on or
after the attainment of age sixty-five (65).
2.18 "SEC" shall mean the Securities and Exchange Commission, or any
successor governmental agency.
2.19 "SEC Rule 16b-3" shall mean Rule 16b-3, as promulgated by the SEC
under Section 16(b) of the Exchange Act, or any successor rule or
regulation thereto, as such Rule is amended or applied from time to
time.
2.20 "Stock Option" shall mean an award granted to a Participant pursuant
to the provisions of Section 6 of the Plan.
2.21 "Subsidiary(ies)" shall mean any corporation (other than the Company),
partnership or limited liability company in an unbroken chain of
entities, including and beginning with the Company, if each of such
entities, other than the last entity in the unbroken chain, owns,
directly or indirectly, more than fifty percent (50%) of the voting
stock, partnership or membership interests in one of the other
entities in such chain.
3. Administration.
3.1 General. The Plan shall be administered by the Committee.
3.2 Plan Administration and Plan Rules. The Committee is authorized to
construe and interpret the Plan and to promulgate, amend and rescind
rules and regulations relating to the implementation and
administration of the Plan. Subject to the terms and conditions of the
Plan, the Committee shall make all determinations necessary or
advisable for the implementation and administration of the Plan
including, without limitation, (a) selecting the Plan's Participants,
(b) granting Stock Options and making grants of Restricted Shares in
such amounts and form as the Committee shall determine, (c) imposing
such restrictions, terms and conditions upon such Stock Options and
upon grants of Restricted Shares as the Committee shall deem
appropriate, and (d) correcting any technical defect(s) or technical
omission(s), or reconciling any technical inconsistency(ies), in the
Plan and any Award Agreement. The Committee may designate persons
other than members of the Committee to carry out the day-to-day
ministerial administration of the Plan under such conditions and
limitations as it may prescribe. The Committee may (i) delegate to the
Company's President and Chief Executive Officer and to a Vice
President of the Company (as designated by the Committee), acting
together, the authority to grant Stock Options or Restricted Shares to
those eligible employees and consultants who are not subject to
Section 16 of the Exchange Act or (ii) adopt a resolution to
automatically provide to an employee or consultant, upon the initial
employment of such person or performance of services by such person, a
grant of Stock Options or Restricted Shares: provided, however, that
such delegation or adoption will not be effective if it would
disqualify the Plan, or any other plan of the Company (or of any
Subsidiary) intended to be so qualified, from (i) the exemption
provided by SEC Rule 16b-3, (ii) the benefits provided under Section
422 of the Code, or any successor provisions thereto or (iii)
entitlement to deductions under Code Section 162(m), or any successor
provision thereto. The Committee's determinations under the Plan need
not be uniform and may be made selectively among Participants, whether
or not such Participants are similarly situated. Any determination,
decision or action of the Committee in connection with the
construction, interpretation, administration, or implementation of the
Plan shall be final, conclusive and binding upon all Participants and
any person(s) claiming under or through any Participants. The Company
shall effect the granting of Stock Options and Restricted Shares under
the Plan, in accordance with the determinations made by the Committee,
by execution of written agreements and/or other instruments in such
form as is approved by the Committee.
3.3 Liability Limitation. Neither the Board nor the Committee, nor any
member of either, shall be liable for any act, omission,
interpretation, construction or determination made in good faith in
connection with the Plan (or with any Award Agreement), and the
members of the Board and the Committee shall be entitled to
indemnification and reimbursement by the Company in respect of any
claim, loss, damage or expense (including, without limitation,
attorneys' fees) arising or resulting therefrom to the fullest extent
permitted by law, by the Company's Certificate of Incorporation, as
amended, and/or under any directors' and officers' liability insurance
coverage which may be in effect from time to time.
4. Term of Plan/Common Stock Subject to Plan.
4.1 Term. The Plan shall terminate on June 29, 2011, except with respect
to Stock Options and grants of Restricted Shares then outstanding.
After such date no further Stock Options or Restricted Shares shall be
granted under the Plan.
4.2 Common Stock. The maximum number of shares of Common Stock in respect
of which Stock Options and Restricted Shares may be granted under the
Plan, subject to adjustment as provided in Section 9.2 of the Plan,
shall not exceed two million (2,000,000) shares of Common Stock;
provided, however, that no more than fifty percent (50%) of that total
may be issued in the form of Restricted Shares pursuant to the
provisions of Section 7 of the Plan. Common Stock which may be issued
under the Plan may be either authorized and unissued shares or issued
shares which have been reacquired by the Company and which are being
held as treasury shares. No fractional shares of Common Stock shall be
issued under the Plan. If any Stock Options expire unexercised or if
any Stock Options or grants of Restricted Shares are forfeited,
surrendered, canceled, terminated or settled in cash in lieu of Common
Stock, the shares of Common Stock which were theretofore subject (or
potentially subject) to such Stock Options or to such grants of
Restricted Shares shall again be available for grants of Stock Options
or of Restricted Shares under the Plan to the extent of such
expiration, forfeiture, surrender, cancellation, termination or
settlement.
5. Eligibility. Individuals eligible for Stock Options and grants of
Restricted Shares under the Plan shall be determined by the Committee in
its sole discretion and shall be limited to employees of and consultants to
the Company and its Subsidiaries, and persons who may become such employees
or consultants.
6. Stock Options.
6.1 Terms and Conditions. Stock Options granted under the Plan shall be in
respect of Common Stock and may be in the form of Incentive Stock
Options or Non-Qualified Stock Options (sometimes referred to
collectively herein as "Stock Options"). Such Stock Options shall be
subject to the terms and conditions set forth in this Section 6 and to
any additional terms and conditions, not inconsistent with the express
terms and provisions of the Plan, as the Committee shall set forth in
the relevant Award Agreement.
6.2 Grant. Stock Options may be granted under the Plan in such form as the
Committee may from time to time approve. Special provisions shall
apply to Incentive Stock Options granted to any employee who owns
(within the meaning of Section 422(b)(6) of the Code) more than ten
percent (10%) of the total combined voting power of all classes of
stock of the Company or its parent corporation or any Subsidiary of
the Company, within the meaning of Section 424(e) and (f) of the Code
(a "10% Shareholder").
6.3 Exercise Price. The exercise price per share of Common Stock subject
to a Stock Option shall be determined by the Committee, including,
without limitation, a determination based on a formula determined by
the Committee at the time of grant and indicated in the Participant's
Award Agreement; provided, however, that the exercise price of an
Incentive Stock Option shall not be less than one hundred percent
(100%) of the Fair Market Value of the Common Stock on the date of the
grant of such Incentive Stock Option; provided, further, however, that
in the case of a 10% Shareholder, the exercise price of an Incentive
Stock Option shall not be less than one hundred ten percent (110%) of
the Fair Market Value of the Common Stock on the date of grant.
6.4 Term. In respect of any Stock Option granted under the Plan, unless
otherwise (a) determined by the Committee (in its sole discretion) at
or prior to the time of grant of a Stock Option or (b) provided in the
Award Agreement or in the Participant's employment, severance or
consulting agreement in respect of any such Stock Option, the term of
each Stock Option shall be ten (10) years; provided, however, that the
term of any Incentive Stock Option shall not exceed ten (10) years
(five (5) years, in the case of a 10% Shareholder) after the date
immediately preceding the date on which the Incentive Stock Option is
granted.
6.5 Method of Exercise. A Stock Option may be exercised, in whole or in
part, by giving written notice of exercise to the Secretary of the
Company (or to the Secretary's designee) specifying the number of
shares to be purchased. Such notice shall be accompanied by payment in
full of the exercise price in cash, or by certified or personal check,
bank draft, money order or wire transfer to the Company or, if
permitted by the Committee (in its sole discretion) and by applicable
law, by delivery of, alone or in conjunction with a partial cash or
instrument payment, (a) a fully-secured promissory note or notes, (b)
shares of Common Stock already owned by the Participant for at least
six (6) months or (c) any other form of payment acceptable to the
Committee. Payment instruments shall be received by the Company
subject to collection. The proceeds received by the Company upon
exercise of any Stock Option may be used by the Company for general
corporate purposes. Any portion of a Stock Option that is exercised
may not be exercised again.
6.6 Maximum Grant. During any calendar year, no Participant may receive
Stock Options to purchase more than five hundred thousand (500,000)
shares of Common Stock under the Plan.
6.7 Exercisability. In respect of any Stock Option granted under the Plan,
unless otherwise (a) determined by the Committee (in its sole
discretion) at any time and from time to time in respect of any such
Stock Option or (b) provided in the Award Agreement or in the
Participant's employment, severance or consulting agreement in respect
of any such Stock Option, such Stock Option shall become exercisable
as to the aggregate number of shares of Common Stock underlying such
Stock Option, as determined on the date of grant, as follows:
o twenty percent (20%) on the first anniversary of the date of
grant of the Stock Option, provided the Participant is then
employed by or providing consulting services for the Company
and/or one of its Subsidiaries;
o forty percent (40%) on the second anniversary of the date of
grant of the Stock Option, provided the Participant is then
employed by or providing consulting services for the Company
and/or one of its Subsidiaries;
o sixty percent (60%) on the third anniversary of the date of grant
of the Stock Option, provided the Participant is then employed by
or providing consulting services for the Company and/or one of
its Subsidiaries;
o eighty percent (80%) on the fourth anniversary of the date of
grant of the Stock Option, provided the Participant is then
employed by or providing consulting services for the Company
and/or one of its Subsidiaries; and
o one hundred percent (100%) on the fifth anniversary of the date
of grant of the Stock Option, provided the Participant is then
employed by or providing consulting services for the Company
and/or one of its Subsidiaries.
Notwithstanding anything to the contrary contained in this
section 6.7, unless otherwise provided in the Award Agreement or in
the Participant's employment, severance or consulting agreement in
respect of such Stock Option, such Stock Option shall become one
hundred percent (100%) exercisable as to the aggregate number of
shares of Common Stock underlying such Stock Option upon the death,
Disability or Retirement of the Participant.
7. Restricted Shares.
7.1 Terms and Conditions. Awards of Restricted Shares shall be subject to
the terms and conditions set forth in this Section 7 and any
additional terms and conditions, not inconsistent with the express
terms and provisions of the Plan, as the Committee shall set forth in
the relevant Award Agreement. Subject to the terms of the Plan, the
Committee shall determine the number of Restricted Shares to be
granted to a Participant and the Committee may provide or impose
different terms and conditions on any particular Restricted Share
grant made to any Participant. With respect to each Participant
receiving an award of Restricted Shares, there shall be issued a stock
certificate (or certificates) in respect of such Restricted Shares.
Such stock certificate(s) shall be registered in the name of such
Participant, shall be accompanied by a stock power duly executed by
such Participant, and shall bear, among other required legends, the
following legend:
"THE TRANSFERABILITY OF THIS CERTIFICATE AND THE SHARES OF STOCK
REPRESENTED HEREBY ARE SUBJECT TO THE TERMS AND CONDITIONS (INCLUDING,
WITHOUT LIMITATION, FORFEITURE EVENTS) CONTAINED IN THE NEUROGEN
CORPORATION 2001 STOCK OPTION PLAN AND AN AWARD AGREEMENT ENTERED INTO
BETWEEN THE REGISTERED OWNER HEREOF AND NEUROGEN CORPORATION. COPIES
OF SUCH PLAN AND AWARD AGREEMENT ARE ON FILE IN THE OFFICE OF THE
SECRETARY OF NEUROGEN CORPORATION, BRANFORD, CT. NEUROGEN CORPORATION
WILL FURNISH TO THE RECORDHOLDER OF THE CERTIFICATE, WITHOUT CHARGE
AND UPON WRITTEN REQUEST AT ITS PRINCIPAL PLACE OF BUSINESS, A COPY OF
SUCH PLAN AND AWARD AGREEMENT. NEUROGEN CORPORATION RESERVES THE RIGHT
TO REFUSE TO RECORD THE TRANSFER OF THIS CERTIFICATE UNTIL ALL SUCH
RESTRICTIONS ARE SATISFIED, ALL SUCH TERMS ARE COMPLIED WITH AND ALL
SUCH CONDITIONS ARE SATISFIED."
Such stock certificate evidencing such shares shall, in the sole
discretion of the Committee, be deposited with and held in custody by
the Company until the restrictions thereon shall have lapsed and all
of the terms and conditions applicable to such grant shall have been
satisfied.
7.2 Restricted Share Grants. A grant of Restricted Shares is an award of
shares of Common Stock granted to a Participant, subject to such
restrictions, terms and conditions, if any, as the Committee deems
appropriate, including, without limitation, (a) restrictions on the
sale, assignment, transfer, hypothecation or other disposition of such
shares, (b) the requirement that the Participant deposit such shares
with the Company while such shares are subject to such restrictions,
and (c) the requirement that such shares be forfeited upon termination
of employment or service for any reason or for specified reasons
within a specified period of time (including, without limitation, the
failure to achieve designated performance goals).
7.3 Restriction Period. In accordance with the provisions of Sections 7.1
and 7.2 of the Plan and unless otherwise determined by the Committee
in its sole discretion (subject to the provisions of Section 10.2 of
the Plan) at any time and from time to time, Restricted Shares shall
only become unrestricted and vested in the Participant in accordance
with such vesting schedule and any other applicable restrictions,
terms and conditions relating to such Restricted Shares, if any, as
the Committee may establish in the relevant Award Agreement (the
"Restriction Period"). During the Restriction Period, such stock shall
be and remain unvested and a Participant may not sell, assign,
transfer, pledge, encumber or otherwise dispose of or hypothecate such
stock. Upon satisfaction of the vesting schedule and any other
applicable restrictions, terms and conditions, the Participant shall
be entitled to receive the Restricted Shares or a portion thereof, as
the case may be, as provided in Section 7.4 of the Plan.
7.4 Payment of Restricted Share Grants. After the satisfaction and/or
lapse of the restrictions, terms and conditions established by the
Committee in respect of a grant of Restricted Shares, a new
certificate, without the legend set forth in Section 7.1 of the Plan,
for the number of shares of Common Stock which are no longer subject
to such restrictions, terms and conditions shall, as soon as
practicable thereafter, be delivered to the Participant.
7.5 Shareholder Rights. A Participant shall have, with respect to the
shares of Common Stock underlying a grant of Restricted Shares, all of
the rights of a shareholder of such stock (except as such rights are
limited or restricted under the Plan or in the relevant Award
Agreement). Any stock dividends paid in respect of unvested Restricted
Shares shall be treated as additional Restricted Shares and shall be
subject to the same restrictions and other terms and conditions that
apply to the unvested Restricted Shares in respect of which such stock
dividends are issued.
7.6 Maximum Grant. During any calendar year, no Participant may receive
grants of Restricted Shares awarding more than two hundred fifty
thousand (250,000) shares of Common Stock under the Plan.
8. Non-transferability. Unless otherwise provided in a Participant's Award
Agreement, no Stock Option or unvested Restricted Shares under the Plan or
any Award Agreement, and no rights or interests herein or therein, shall or
may be assigned, transferred, sold, exchanged, encumbered, pledged, or
otherwise hypothecated or disposed of by a Participant or any
beneficiary(ies) of any Participant, except by testamentary disposition by
a Participant or pursuant to the laws of intestate succession. No such
interest shall be subject to execution, attachment or similar legal
process, including, without limitation, seizure for the payment of a
Participant's debts, judgments, alimony, or separate maintenance. Any
attempt to sell, exchange, transfer, assign, pledge, encumber or otherwise
dispose of or hypothecate in any way any such awards, rights or interests
or the levy of any execution, attachment or similar legal process thereon,
contrary to the terms of this Plan, shall be null and void and without
legal force or effect. Unless otherwise provided in a Participant's Award
Agreement, Stock Options are exercisable only by the Participant during the
lifetime of the Participant.
9. Changes in Capitalization and Other Matters.
9.1 No Corporate Action Restriction. The existence of the Plan, any Award
Agreement and/or the Stock Options or Restricted Shares granted
hereunder or thereunder shall not limit, affect or restrict in any way
the right or power of the Board to make or authorize (a) any
adjustment, recapitalization, reorganization or other change in the
Company's or any Subsidiary's capital structure or its business, (b)
any merger, consolidation or change in the ownership of the Company or
any Subsidiary, (c) any issue of bonds, debentures, capital, preferred
or prior preference stocks ahead of or affecting the Company's or any
Subsidiary's capital stock or the rights thereof, (d) any dissolution
or liquidation of the Company or any Subsidiary, (e) any sale or
transfer of all or any part of the Company's or any Subsidiary's
assets or business, or (f) any other corporate act or proceeding by
the Company or any Subsidiary. No Participant, beneficiary or any
other person shall have any claim against any member of the Board, the
Committee, the Company or any Subsidiary, or any employees, officers,
shareholders or agents of the Company or any Subsidiary, as a result
of any such action.
9.2 Changes in Capital Structure. Stock Options and Restricted Shares
granted under the Plan and under any Award Agreements evidencing such
Stock Options or Restricted Shares, the maximum number of shares of
Common Stock subject to all Stock Options and grants of Restricted
Shares stated in Section 4.2, and the maximum number of shares subject
to Stock Options or represented by grants of Restricted Shares that a
Participant can receive in any calendar year pursuant to the
provisions of Section 6.6 or Section 7.6, as applicable, shall be
subject to adjustment or substitution, as determined by the Committee
in its sole discretion, as to the number, price or kind of a share of
stock or other consideration subject to such Stock Options or grants
of Restricted Shares or as otherwise determined by the Committee to be
equitable (i) in the event of changes in the outstanding stock or in
the capital structure of the Company by reason of stock or
extraordinary cash dividends, stock splits, reverse stock splits,
recapitalizations, reorganizations, mergers, consolidations,
combinations, exchanges, or other relevant changes in capitalization
occurring after the date of grant of any such Stock Option or
Restricted Shares or (ii) in the event of any change in applicable
laws or any change in circumstances which results in or would result
in any substantial dilution or enlargement of the rights granted to,
or available for, Participants, or which otherwise warrants equitable
adjustment because it interferes with the intended operation of the
Plan, in either case where such adjustment shall substantially
preserve the value, rights and benefits of any affected Stock Options
or Restricted Shares. The Company shall give each Participant notice
of an adjustment hereunder and, upon notice, such adjustment shall be
conclusive and binding for all purposes.
9.3 Change of Control.
(a) If a Change of Control occurs and outstanding Stock Options under
the Plan are converted, assumed, replaced or continued by the
Company, a successor or an acquirer, then, in the case and only
in the case of a Participant whose employment or consulting
relationship with the Company and its Subsidiaries is terminated
by the Company and its Subsidiaries (or any successors thereto)
without Cause prior to the second anniversary of such Change of
Control
(i) any outstanding Stock Options then held by such Participant
which are unexercisable or otherwise unvested shall
automatically be deemed to be exercisable or otherwise
vested, as the case may be, as of the date immediately prior
to the date of such termination of employment or cessation
of services and
(ii) unless otherwise provided in the Award Agreement or in the
Participant's employment, severance or consulting agreement
in respect of such Participant's Restricted Shares, all
restrictions, terms and conditions applicable to all
Restricted Shares then outstanding and held by such
Participant shall lapse and be deemed to be satisfied as of
the date immediately prior to the date of such termination
of emplyment or cessation of services.
(b) If a Change of Control occurs and the Stock Options outstanding
under the Plan are not converted, assumed, replaced or continued
by the Company, a successor or an acquirer, then
(i) all outstanding Stock Options shall automatically be deemed
to be exercisable or otherwise vested immediately prior to
the consummation of the Change of Control and all
Participants shall be permitted to exercise their Stock
Options immediately prior to or concurrent with the
consummation of the Change of Control; and
(ii) all restrictions, terms and conditions applicable to
outstanding Restricted Shares shall lapse and be deemed to
be satisfied immediately prior to the consummation of the
Change of Control.
(c) To the extent that the implementation of the terms of (a) or (b)
above causes an Incentive Stock Option to exceed the dollar
limitation set forth in Section 422(d) of the Code, or any
successor provision thereto, the excess Stock Options shall be
deemed to be Non-Qualified Stock Options.
(d) Upon entering into an agreement to effect a Change of Control,
referred to in Section 9.3(b), the Committee may, subject to the
consummation of the Change of Control, cause all outstanding
Stock Options to terminate upon the consummation of the Change of
Control. If the Committee acts pursuant to the preceding
sentence, each affected Participant shall have the right to
exercise his or her outstanding Stock Options during a period of
time determined by the Committee in its sole discretion.
Notwithstanding the above, in the event of a Change of Control,
then the Committee may, in its discretion, cancel any or all
outstanding Stock Options and cause the holders thereof to be
paid, in cash or stock (including any stock of a successor or
acquirer), or any combination thereof, the value of such Stock
Options, including any unvested portion thereof, based upon the
excess of the value, as determined by the Committee in good
faith, of a share of Common Stock over the exercise price.
10. Amendment, Suspension and Termination.
10.1 In General. The Board may suspend or terminate the Plan (or any
portion thereof) at any time and may amend the Plan at any time and
from time to time in such respects as the Board may deem advisable or
in the best interests of the Company or any Subsidiary; provided,
however, that without majority shareholder approval no such amendment
may (i) increase the number of shares of Common Stock available for
Stock Options or grants of Restricted Shares under Section 4.2, or
(ii) increase the maximum annual grant under Section 6.6 or Section
7.6, as applicable. In addition, no such amendment, suspension or
termination shall materially and adversely affect the rights of any
Participant under any outstanding Stock Options or grants of
Restricted Shares, without the consent of such Participant.
10.2 Award Agreement Modifications. The Committee may, in its sole
discretion, amend or modify at any time and from time to time the
restrictions, terms and conditions of any outstanding Stock Option or
grant of Restricted Shares in any manner to the extent that the
Committee under the Plan or any Award Agreement could have initially
established the restrictions, terms and conditions of such Stock
Option or grant of Restricted Shares. No such amendment or
modification shall, however, materially and adversely affect the
rights of any Participant under any such Stock Option or grant of
Restricted Shares without the consent of such Participant.
Nothwithstanding anything to the contrary in this Section 10.2, no
Stock Option may be repriced, replaced, regranted through
cancellation, or modified without shareholder approval (except in
connection with Section 9.2 herein, a change in the capital structure
of the Company), if the effect would be to reduce the exercise price
for the shares underlying such Stock Option.
11. Termination of Employment or Services.
11.1 In General. Except as is otherwise provided (a) in the relevant Award
Agreement as determined by the Committee (in its sole discretion) or
(b) in the Participant's then-effective employment, severance or
consulting agreement, if any, the following terms and conditions shall
apply as appropriate and as not inconsistent with the terms and
conditions, if any, contained in such Award Agreement and/or such
employment or consulting agreement.
11.2 Stock Options. Except as otherwise provided in the relevant Award
Agreement or in a Participant's employment, severance or consulting
agreement in respect of such Stock Options, and subject to any
determination of the Committee pursuant to the provisions of Section
6.7 of the Plan, if a Participant's employment with or performance of
services for the Company and its Subsidiaries terminates for any
reason, then (i) any then-unexercisable Stock Options shall be
forfeited by the Participant and canceled by the Company, and (ii)
such Participant's rights, if any, to exercise any then-exercisable
Stock Options, if any, shall terminate six (6) months after the later
of the date of such termination or the last day on which services were
performed (but not beyond the stated term of any such Stock Option as
determined under Section 6.4 of the Plan; provided, however, that if
such termination or cessation of service is due to death, Disability
or Retirement, the exercise period for any exercisable Stock Option
shall in no case be less than one (1) year after the date of such
termination or cessation of service (but not beyond the stated term of
any such Stock Option as determined under Section 6.4 of the Plan).
Notwithstanding the above, the Committee, in its sole discretion, may
determine that any such Participant's Stock Options may, to the extent
exercisable immediately prior to any termination of employment or
cessation of services, remain exercisable for an additional period of
time after any period set forth above expires (subject to any other
applicable terms and provisions of the Plan and the relevant Award
Agreement), but not beyond the stated term of any such Stock Option.
11.3 Restricted Shares. Subject to the provisions of Section 9.3 herein, if
a Participant's employment with or performance of services for the
Company and its Subsidiaries terminates for any reason (other than due
to death, Disability or Retirement) prior to the satisfaction and/or
lapse of the restrictions, terms and conditions applicable to a grant
of Restricted Shares, such Restricted Shares shall immediately be
canceled and the Participant (or such Participant's estate, designated
beneficiary or other legal representative, as the case may be and as
determined by the Committee) shall forfeit any rights or interests in
and with respect to any such Restricted Shares. Notwithstanding
anything to the contrary in this Section 11.3, the Committee, in its
sole discretion, may determine that all or a portion of any such
Participant's Restricted Shares shall not be so canceled and
forfeited. If the Participant's employment or performance of services
terminates due to death, Disability or Retirement, the Participant
(and such Participant's estate, designated beneficiary or other legal
representative, as the case may be and as determined by the Committee)
shall become one hundred percent (100%) vested in any such
Participant's Restricted Shares as of the date of any such
termination.
11.4 Leaves of Absence/Transfers. The Committee shall have the power to
promulgate rules and regulations and to make determinations under the
Plan, as it deems appropriate, in respect of any leave of absence from
the Company or any Subsidiary granted to a Participant. Without
limiting the generality of the foregoing, the Committee may determine
whether any such leave of absence shall be treated as if the
Participant has been terminated by the Company or any such Subsidiary.
If a Participant transfers within the Company, or to or from any
Subsidiary, such Participant shall not be deemed to have been
terminated as a result of such transfers.
12. Miscellaneous.
12.1 Tax Withholding. The Company shall have the right to deduct from any
payment or settlement under the Plan, including, without limitation,
the exercise of any Stock Option or the vesting of any Restricted
Shares, any federal, state, local, foreign or other taxes of any kind
which the Committee, in its sole discretion, deems necessary to be
withheld to comply with the Code and/or any other applicable law, rule
or regulation. In addition, the Company shall have the right to
require payment from a Participant to cover any applicable withholding
or other employment taxes due upon any payment or settlement under the
Plan.
12.2 No Right to Employment. Neither the adoption of the Plan, the granting
of any Stock Option or Restricted Shares, nor the execution of any
Award Agreement, shall confer upon any employee or consultant of the
Company or any Subsidiary any right to continued employment or
consulting relationship with the Company or any Subsidiary, as the
case may be, nor shall it interfere in any way with the right, if any,
of the Company or any Subsidiary to terminate the employment or
consulting relationship of any employee or consultant at any time for
any reason, even if such termination adversely affects such
Participant's Stock Options or grants of Restricted Shares.
12.3 Listing, Registration and Other Legal Compliance. No Stock Options,
Restricted Shares or shares of the Common Stock shall be required to
be issued or granted under the Plan or any Award Agreement unless
legal counsel for the Company shall be satisfied that such issuance or
grant will be in compliance with all applicable securities laws and
regulations and any other applicable laws or regulations. The
Committee may require, as a condition of any payment or share
issuance, that certain agreements, undertakings, representations,
certificates, and/or information, as the Committee may deem necessary
or advisable, be executed or provided to the Company to assure
compliance with all such applicable laws or regulations. Certificates
for shares of Common Stock delivered under the Plan may bear
appropriate legends and may be subject to such stock-transfer orders
and such other restrictions as the Committee may deem advisable under
the rules, regulations, or other requirements of the Securities and
Exchange Commission, any stock exchange upon which the Common Stock is
listed, and any applicable securities law. In addition, if, at any
time specified herein (or in any Award Agreement or otherwise) for (a)
the granting of any Stock Option or Restricted Shares or the making of
any determination, (b) the issuance or other distribution of Common
Stock, or (c) the payment of amounts to or through a Participant with
respect to any Stock Option or grant of Restricted Shares, any law,
rule, regulation or other requirement of any governmental authority or
agency shall require either the Company, any Subsidiary or any
Participant (or any estate, designated beneficiary or other legal
representative thereof) to take any action in connection with any such
determination, any such shares to be issued or distributed, any such
payment, or the making of any such determination, as the case may be,
shall be deferred until such required action is taken.
12.4 Award Agreements. Each Participant receiving a Stock Option or grant
of Restricted Shares under the Plan shall enter into an Award
Agreement with the Company in a form specified by the Committee. Each
such Participant shall agree to the restrictions, terms and conditions
of the award set forth therein and in the Plan.
12.5 Designation of Beneficiary. Each Participant to whom a Stock Option or
Restricted Share has been granted under the Plan may designate a
beneficiary or beneficiaries to exercise any Stock Option or to
receive any payment which under the terms of the Plan and the relevant
Award Agreement may become exercisable or payable on or after the
Participant's death. At any time, and from time to time, any such
designation may be changed or cancelled by the Participant without the
consent of any such beneficiary. Any such designation, change or
cancellation must be on a form provided for that purpose by the
Committee and shall not be effective until received by the Committee.
If no beneficiary has been designated by a deceased Participant, or if
the designated beneficiaries have predeceased the Participant, the
beneficiary shall be the Participant's estate. If the Participant
designates more than one beneficiary, any payments under the Plan to
such beneficiaries shall be made in equal shares unless the
Participant has expressly designated otherwise, in which case the
payments shall be made in the shares designated by the Participant.
12.6 Governing Law. The Plan and all actions taken thereunder shall be
governed by and construed in accordance with the laws of the State of
Delaware, without reference to the principles of conflict of laws
thereof. Any titles and headings herein are for reference purposes
only, and shall in no way limit, define or otherwise affect the
meaning, construction or interpretation of any provisions of the Plan.
12.7 Effective Date. The Plan shall be effective as of the date of its
approval by the Board, subject to the approval of the Plan by the
Company's shareholders in accordance with Sections 162(m) and 422 of
the Code and the regulations promulgated thereunder. If such approval
is not obtained, this Plan and any awards granted under the Plan shall
be null and void and of no force and effect.
Exhibit 10.30
INCENTIVE STOCK OPTION AGREEMENT
pursuant to the
AMENDED AND RESTATED NEUROGEN CORPORATION
2001 STOCK OPTION PLAN
(as amended and restated effective September 4, 2001)
* * * * *
Optionee:
Grant Date:
Per Share Exercise Price:
Number of Option Shares subject to this Option:
* * * * *
THIS INCENTIVE STOCK OPTION AGREEMENT (this "Agreement"), dated as of the
Grant Date specified above, is entered into by and between Neurogen Corporation,
a Delaware corporation (the "Company"), and the Optionee specified above,
pursuant to the Amended and Restated Neurogen Corporation 2001 Stock Option
Plan, as in effect and as amended from time to time (the "Plan"); and
WHEREAS, it has been determined under the Plan that it would be in the best
interests of the Company to grant the incentive stock option provided for herein
to the Optionee;
NOW, THEREFORE, in consideration of the mutual covenants and premises
hereinafter set forth and for other good and valuable consideration, the parties
hereto hereby mutually covenant and agree as follows:
1. Incorporation By Reference; Plan Document Receipt. This Agreement is
subject in all respects to the terms and provisions of the Plan (including,
without limitation, any amendments thereto adopted at any time and from
time to time unless such amendments are expressly intended not to apply to
the grant of the option hereunder), all of which terms and provisions are
made a part of and incorporated in this Agreement as if they were each
expressly set forth herein. Any capitalized term not defined in this
Agreement shall have the same meaning as is ascribed thereto under the
Plan. The Optionee hereby acknowledges receipt of a true copy of the Plan
and that the Optionee has read the Plan carefully and fully understands its
content. In the event of any conflict between the terms of this Agreement
and the terms of the Plan, the terms of the Plan shall control.
2. Grant of Option. The Company hereby grants to the Optionee, as of the Grant
Date specified above, an incentive stock option (this "Option") to acquire
from the Company at the Per Share Exercise Price specified above the
aggregate number of shares of the Common Stock specified above (the "Option
Shares"). This Option is to be treated as (and is intended to qualify as)
an incentive stock option within the meaning of Section 422 of the Code.
3. No Dividend Equivalents. The Optionee shall not be entitled to receive a
cash payment in respect of the Option Shares underlying this Option on any
dividend payment date for the Common Stock.
4. Exercise of this Option.
4.1 Unless otherwise provided in this Section 4 or determined by the
Committee, this Option shall become exercisable in accordance with and
to the extent provided by the terms and provisions of Section 6.7 of
the Plan.
4.2 Unless earlier terminated in accordance with the terms and provisions
of the Plan and/or this Agreement, this Option shall expire and shall
no longer be exercisable after the expiration of ten years from the
Grant Date (the "Option Period").
4.3 In no event shall this Option be exercisable for a fractional share of
Common Stock.
5. Method of Exercise and Payment. This Option shall be exercised by the
Optionee by delivering to the Secretary of the Company or his designated
agent on any business day (the "Exercise Date") a written notice, in such
manner and form as may be required by the Committee, specifying the number
of the Option Shares the Optionee then desires to acquire (the "Exercise
Notice"). The Exercise Notice shall be accompanied by payment of the
aggregate Per Share Exercise Price for such number of the Option Shares to
be acquired upon such exercise. Such payment shall be made in the manner
set forth in Section 6.5 of the Plan.
6. Termination.
6.1 If the Optionee's employment with the Company and/or one of its
Subsidiaries terminates for any reason, any then-unexercisable portion
of this Option shall be forfeited by the Optionee and cancelled by the
Company.
6.2 Unless otherwise provided in this Section 6, if the Optionee's
employment with the Company and/or its Subsidiaries terminates for any
reason other than due to the Optionee's death or disability (as
defined and determined by the Company), the Optionee's rights, if any,
to exercise any then-exercisable portion of this Option, shall
terminate six (6) months after the date of such termination, but not
beyond the expiration of the Option Period, and thereafter such Option
shall be forfeited by the Optionee and cancelled by the Company.
6.3 Unless otherwise provided in this Section 6, if the Optionee's
termination of employment with the Company and/or its Subsidiaries is
due to the Optionee's death or disability, the Optionee (or the
Optionee's estate, designated beneficiary or other legal
representative, as the case may be and as determined by the Committee)
shall have the right, to the extent exercisable immediately prior to
any such termination, to exercise this Option at any time within the
one (1) year period following such termination due to death or
disability, but not beyond the expiration of the Option Period, and
thereafter such Option shall be forfeited by the Optionee and
cancelled by the Company.
6.4 The Board or the Committee, in its sole discretion, may determine that
all or any portion of this Option, to the extent exercisable
immediately prior to the Optionee's termination of employment with the
Company and/or its Subsidiaries for any reason, may remain exercisable
for an additional specified time period after the period specified
above in this Section 6 expires (subject to any other applicable terms
and provisions of the Plan and this Agreement), but not beyond the
expiration of the Option Period.
6.5 If the Optionee's employer ceases to be a Subsidiary of the Company,
that event shall be deemed to constitute a termination of employment
under Section 6.2 above.
7. Non-transferability. This Option, and any rights or interests therein,
shall not be sold, exchanged, transferred, assigned or otherwise disposed
of in any way at any time by the Optionee (or any beneficiary(ies) of the
Optionee), other than by testamentary disposition by the Optionee or the
laws of descent and distribution. This Option shall not be pledged,
encumbered or otherwise hypothecated in any way at any time by the Optionee
(or any beneficiary(ies) of the Optionee) and shall not be subject to
execution, attachment or similar legal process. Any attempt to sell,
exchange, pledge, transfer, assign, encumber or otherwise dispose of or
hypothecate this Option, or the levy of any execution, attachment or
similar legal process upon this Option, contrary to the terms of this
Agreement and/or the Plan shall be null and void and without legal force or
effect. This Option shall be exercisable during the Optionee's lifetime
only by the Optionee.
8. Entire Agreement; Amendment. This Agreement contains the entire agreement
between the parties hereto with respect to the subject matter contained
herein, and supersedes all prior agreements or prior understandings,
whether written or oral, between the parties relating to such subject
matter. The Board or the Committee shall have the right, in its sole
discretion, to modify or amend this Agreement from time to time in
accordance with and as provided in the Plan; provided, however, that no
such modification or amendment shall materially adversely affect the rights
of the Optionee under this Option without the consent of the Optionee. The
Company shall give written notice to the Optionee of any such modification
or amendment of this Agreement as soon as practicable after the adoption
thereof. This Agreement may also be modified or amended by a writing signed
by both the Company and the Optionee.
9. Notices. Any Exercise Notice or other notice which may be required or
permitted under this Agreement shall be in writing, and shall be delivered
in person or via facsimile transmission, overnight courier service or
certified mail, return receipt requested, postage prepaid, properly
addressed as follows:
9.1 If such notice is to the Company, to the attention of the Secretary of
Neurogen Corporation, Branford, CT, or at such other address as the
Company, by notice to the Optionee, shall designate in writing from
time to time.
9.2 If such notice is to the Optionee, at his or her address as shown on
the Company's records, or at such other address as the Optionee, by
notice to the Company, shall designate in writing from time to time.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to the
principles of conflict of laws thereof.
11. Compliance with Laws. The issuance of this Option (and the Option Shares
upon exercise of this Option) pursuant to this Agreement shall be subject
to, and shall comply with, any applicable requirements of any federal and
state securities laws, rules and regulations (including, without
limitation, the provisions of the Securities Act of 1933, the Exchange Act
and the respective rules and regulations promulgated thereunder) and any
other law or regulation applicable thereto. The Company shall not be
obligated to issue this Option or any of the Option Shares pursuant to this
Agreement if any such issuance would violate any such requirements.
12. Binding Agreement; Assignment. This Agreement shall inure to the benefit
of, be binding upon, and be enforceable by the Company and its successors
and assigns. The Optionee shall not assign any part of this Agreement
without the prior express written consent of the Company.
13. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same instrument.
14. Headings. The titles and headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
15. Further Assurances. Each party hereto shall do and perform (or shall cause
to be done and performed) all such further acts and shall execute and
deliver all such other agreements, certificates, instruments and documents
as any party hereto reasonably may request in order to carry out the intent
and accomplish the purposes of this Agreement and the Plan and the
consummation of the transactions contemplated hereunder and thereunder.
16. Severability. The invalidity or unenforceability of any provisions of this
Agreement in any jurisdiction shall not affect the validity, legality or
enforceability of the remainder of this Agreement in such jurisdiction or
the validity, legality or enforceability of any provision of this Agreement
in any other jurisdiction, it being intended that all rights and
obligations of the parties hereunder shall be enforceable to the fullest
extent permitted by law.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer, and the Optionee has hereunto set his hand, all as
of the Grant Date specified above.
NEUROGEN CORPORATION
By:_________________________________
Name:_________________________________
Title:_________________________________
-------------------------------------
[Optionee]
Exhibit 10.31
NON-QUALIFIED STOCK OPTION AGREEMENT
pursuant to the
AMENDED AND RESTATED
NEUROGEN CORPORATION
2001 STOCK OPTION PLAN
(as amended and restated effective September 4, 2001)
* * * * *
Optionee:
Grant Date:
Per Share Exercise Price:
Number of Option Shares subject to this Option:
* * * * *
THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this "Agreement"), dated as of
the Grant Date specified above, is entered into by and between Neurogen
Corporation, a Delaware corporation (the "Company"), and the Optionee specified
above, pursuant to the Amended and Restated Neurogen Corporation 2001 Stock
Option Plan, as in effect and as amended from time to time (the "Plan"); and
WHEREAS, it has been determined under the Plan that it would be in the best
interests of the Company to grant the non-qualified stock option provided for
herein to the Optionee;
NOW, THEREFORE, in consideration of the mutual covenants and premises
hereinafter set forth and for other good and valuable consideration, the parties
hereto hereby mutually covenant and agree as follows:
1. Incorporation By Reference; Plan Document Receipt. This Agreement is
subject in all respects to the terms and provisions of the Plan (including,
without limitation, any amendments thereto adopted at any time and from
time to time unless such amendments are expressly intended not to apply to
the grant of the option hereunder), all of which terms and provisions are
made a part of and incorporated in this Agreement as if they were each
expressly set forth herein. Any capitalized term not defined in this
Agreement shall have the same meaning as is ascribed thereto under the
Plan. The Optionee hereby acknowledges receipt of a true copy of the Plan
and that the Optionee has read the Plan carefully and fully understands its
content. In the event of any conflict between the terms of this Agreement
and the terms of the Plan, the terms of the Plan shall control.
2. Grant of Option. The Company hereby grants to the Optionee, as of the Grant
Date specified above, a non-qualified stock option (this "Option") to
acquire from the Company at the Per Share Exercise Price specified above
the aggregate number of shares of the Common Stock specified above (the
"Option Shares"). This Option is not to be treated as (and is not intended
to qualify as) an incentive stock option within the meaning of Section 422
of the Code.
3. No Dividend Equivalents. The Optionee shall not be entitled to receive a
cash payment in respect of the Option Shares underlying this Option on any
dividend payment date for the Common Stock.
4. Exercise of this Option.
4.1 Unless otherwise provided in this Section 4 or determined by the
Committee, this Option shall become exercisable in accordance with and
to the extent provided by the terms and provisions of Section 6.7 of
the Plan.
4.2 Unless earlier terminated in accordance with the terms and provisions
of the Plan and/or this Agreement, this Option shall expire and shall
no longer be exercisable after the expiration of ten years from the
Grant Date (the "Option Period").
4.3 In no event shall this Option be exercisable for a fractional share of
Common Stock.
5. Method of Exercise and Payment. This Option shall be exercised by the
Optionee by delivering to the Secretary of the Company or his designated
agent on any business day (the "Exercise Date") a written notice, in such
manner and form as may be required by the Committee, specifying the number
of the Option Shares the Optionee then desires to acquire (the "Exercise
Notice"). The Exercise Notice shall be accompanied by payment of the
aggregate Per Share Exercise Price for such number of the Option Shares to
be acquired upon such exercise. Such payment shall be made in the manner
set forth in Section 6.5 of the Plan.
6. Termination.
6.1 If the Optionee's employment with the Company and/or one of its
Subsidiaries terminates for any reason, any then-unexercisable portion
of this Option shall be forfeited by the Optionee and cancelled by the
Company.
6.2 Unless otherwise provided in this Section 6, if the Optionee's
employment with the Company and/or its Subsidiaries terminates for any
reason other than due to the Optionee's death or disability (as
defined and determined by the Company), the Optionee's rights, if any,
to exercise any then-exercisable portion of this Option, shall
terminate six (6) months after the date of such termination, but not
beyond the expiration of the Option Period, and thereafter such Option
shall be forfeited by the Optionee and cancelled by the Company.
6.3 Unless otherwise provided in this Section 6, if the Optionee's
termination of employment with the Company and/or its Subsidiaries is
due to the Optionee's death or disability, the Optionee (or the
Optionee's estate, designated beneficiary or other legal
representative, as the case may be and as determined by the Committee)
shall have the right, to the extent exercisable immediately prior to
any such termination, to exercise this Option at any time within the
one (1) year period following such termination due to death or
disability, but not beyond the expiration of the Option Period, and
thereafter such Option shall be forfeited by the Optionee and
cancelled by the Company.
6.4 The Board or the Committee, in its sole discretion, may determine that
all or any portion of this Option, to the extent exercisable
immediately prior to the Optionee's termination of employment with the
Company and/or its Subsidiaries for any reason, may remain exercisable
for an additional specified time period after the period specified
above in this Section 6 expires (subject to any other applicable terms
and provisions of the Plan and this Agreement), but not beyond the
expiration of the Option Period.
6.5 If the Optionee's employer ceases to be a Subsidiary of the Company,
that event shall be deemed to constitute a termination of employment
under Section 6.2 above.
7. Non-transferability. This Option, and any rights or interests therein,
shall not be sold, exchanged, transferred, assigned or otherwise disposed
of in any way at any time by the Optionee (or any beneficiary(ies) of the
Optionee), other than by testamentary disposition by the Optionee or the
laws of descent and distribution. This Option shall not be pledged,
encumbered or otherwise hypothecated in any way at any time by the Optionee
(or any beneficiary(ies) of the Optionee) and shall not be subject to
execution, attachment or similar legal process. Any attempt to sell,
exchange, pledge, transfer, assign, encumber or otherwise dispose of or
hypothecate this Option, or the levy of any execution, attachment or
similar legal process upon this Option, contrary to the terms of this
Agreement and/or the Plan shall be null and void and without legal force or
effect. This Option shall be exercisable during the Optionee's lifetime
only by the Optionee.
8. Entire Agreement; Amendment. This Agreement contains the entire agreement
between the parties hereto with respect to the subject matter contained
herein, and supersedes all prior agreements or prior understandings,
whether written or oral, between the parties relating to such subject
matter. The Board or the Committee shall have the right, in its sole
discretion, to modify or amend this Agreement from time to time in
accordance with and as provided in the Plan; provided, however, that no
such modification or amendment shall materially adversely affect the rights
of the Optionee under this Option without the consent of the Optionee. The
Company shall give written notice to the Optionee of any such modification
or amendment of this Agreement as soon as practicable after the adoption
thereof. This Agreement may also be modified or amended by a writing signed
by both the Company and the Optionee.
9. Notices. Any Exercise Notice or other notice which may be required or
permitted under this Agreement shall be in writing, and shall be delivered
in person or via facsimile transmission, overnight courier service or
certified mail, return receipt requested, postage prepaid, properly
addressed as follows:
9.1 If such notice is to the Company, to the attention of the Secretary of
Neurogen Corporation, Branford, CT, or at such other address as the
Company, by notice to the Optionee, shall designate in writing from
time to time.
9.2 If such notice is to the Optionee, at his or her address as shown on
the Company's records, or at such other address as the Optionee, by
notice to the Company, shall designate in writing from time to time.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to the
principles of conflict of laws thereof.
11. Compliance with Laws. The issuance of this Option (and the Option Shares
upon exercise of this Option) pursuant to this Agreement shall be subject
to, and shall comply with, any applicable requirements of any federal and
state securities laws, rules and regulations (including, without
limitation, the provisions of the Securities Act of 1933, the Exchange Act
and the respective rules and regulations promulgated thereunder) and any
other law or regulation applicable thereto. The Company shall not be
obligated to issue this Option or any of the Option Shares pursuant to this
Agreement if any such issuance would violate any such requirements.
12. Binding Agreement; Assignment. This Agreement shall inure to the benefit
of, be binding upon, and be enforceable by the Company and its successors
and assigns. The Optionee shall not assign any part of this Agreement
without the prior express written consent of the Company.
13. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same instrument.
14. Headings. The titles and headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
15. Further Assurances. Each party hereto shall do and perform (or shall cause
to be done and performed) all such further acts and shall execute and
deliver all such other agreements, certificates, instruments and documents
as any party hereto reasonably may request in order to carry out the intent
and accomplish the purposes of this Agreement and the Plan and the
consummation of the transactions contemplated hereunder and thereunder.
16. Severability. The invalidity or unenforceability of any provisions of this
Agreement in any jurisdiction shall not affect the validity, legality or
enforceability of the remainder of this Agreement in such jurisdiction or
the validity, legality or enforceability of any provision of this Agreement
in any other jurisdiction, it being intended that all rights and
obligations of the parties hereunder shall be enforceable to the fullest
extent permitted by law.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer, and the Optionee has hereunto set his hand, all as
of the Grant Date specified above.
NEUROGEN CORPORATION
By:__________________________________
Name:________________________________
Title:_______________________________
------------------------------------
[Optionee]
Exhibit 10.32
NEUROGEN SPECIAL COMMITTEE STOCK OPTION PLAN
NON-QUALIFIED STOCK OPTION AGREEMENT
* * * * *
Optionee:
Grant Date: September 25, 2000
Per Share Exercise Price: $33.375
Number of Option Shares subject to this Option:
* * * * *
THIS NON-QUALIFIED STOCK OPTION AGREEMENT (this "Agreement"), dated as of
the Grant Date specified above, is entered into by and between Neurogen
Corporation, a Delaware corporation (the "Company"), and the Optionee specified
above; and
WHEREAS, it has been determined that it would be in the best interests of
the Company to grant the non-qualified stock option provided for herein to the
Optionee;
NOW, THEREFORE, in consideration of the mutual covenants and premises
hereinafter set forth and for other good and valuable consideration, the parties
hereto hereby mutually covenant and agree as follows:
1. Grant of Option. The Company hereby grants to the Optionee, as of the Grant
Date specified above, a non-qualified stock option (this "Option") to
acquire from the Company at the Per Share Exercise Price specified above
the aggregate number of shares of the Common Stock specified above (the
"Option Shares"). This Option is not to be treated as (and is not intended
to qualify as) an incentive stock option within the meaning of Section 422
of the Code.
2. Definitions. For purposes of this Agreement, the following terms shall have
the meanings set forth below:
2.1 "Board" means the Board of Directors of the Company, as constituted
from time to time.
2.2 "Change of Control" means
(i) any individual, entity or group (within the meaning of Section
13(d)(3) or 14(d)(2) of the Exchange Act) acquires, as a result
of any purchase or exchange, or any merger, consolidation or
other reorganization, a majority of the outstanding voting
securities or assets of the Company or
(ii) the Board or the Company's shareholders, either or both, as may
be required to authorize the same, shall approve any liquidation
or dissolution of the Company or sale of all or substantially all
of the assets of the Company.
2.3 "Code" means the Internal Revenue Code of 1986, as in effect and as
amended from time to time, or any successor statute thereto, together
with any rules, regulations and interpretations promulgated thereunder
or with respect thereto.
2.4 "Common Stock" means the Common Stock, par value $.025 per share, of
the Company or any security of the Company issued by the Company in
substitution or exchange therefor. In the event of a change in the
Common Stock of the Company that is limited to a change in the
designation thereof to "Capital Stock" or other similar designation,
or to a change in the par value thereof, or from par value to no par
value, without increase or decrease in the number of issued shares,
the shares resulting from any such change shall be deemed to be the
Common Stock for purposes of this Option. Common Stock which may be
issued under this Option may be either authorized and unissued shares
or issued shares which have been reacquired by the Company (in the
open market or in private transactions).
2.5 " Exchange Act" means the Securities Exchange Act of 1934, as in
effect and as amended from time to time, or any successor statute
thereto, together with any rules, regulations and interpretations
promulgated thereunder or with respect thereto.
2.6 "Fair Market Value" means on, or with respect to, any given date(s),
the closing price for the Common Stock, as reported on the NASDAQ
National Market System for such date(s) or, if the Common Stock was
not traded on such date(s), on the next preceding day or days on which
the Common Stock was traded. If at any time the Common Stock is not
traded on the NASDAQ National Market System, the Fair Market Value of
a share of the Common Stock shall be determined in good faith by the
Board.
2.7 " SEC" means the Securities and Exchange Commission, or any successor
governmental agency.
2.8 "SEC Rule 16b-3" means Rule 16b-3, as promulgated by the SEC under
Section 16(b) of the Exchange Act, or any successor rule or regulation
thereto, as such Rule is amended or applied from time to time.
2.9 "Subsidiary(ies)" means any corporation (other than the Company) in an
unbroken chain of corporations, including and beginning with the
Company, if each of such corporations, other than the last corporation
in the unbroken chain, owns, directly or indirectly, more than fifty
percent (50%) of the voting stock in one of the other corporations in
such chain.
2.10 "Termination" means a termination of the Optionee's membership on the
Board.
3. Exercise and Construction of this Option.
3.1 One-twelfth (1/12) of this Option shall become exercisable on the last
day of each month, beginning the last day of the month in which the
Grant Date occurred.
3.2 Unless earlier terminated in accordance with the terms and provisions
of this Agreement, this Option shall expire and shall no longer be
exercisable after the expiration of ten years from the Grant Date (the
"Option Period").
3.3 The Board shall have the power to interpret and construe the terms and
provisions of, and to determine questions that arise under, this
Option and/or this Agreement. Any determination, decision or action of
the Board in connection with the construction, interpretation or
implementation of this Option and/or this Agreement shall be final,
binding and conclusive upon the Optionee and upon any person(s) or
entity(ies) claiming under or through the Optionee.
4. Method of Exercise and Form of Payment.
4.1 Upon becoming exercisable in accordance with Section 3 of this
Agreement, this Option may be exercised in whole or in part at any
time and from time to time during the Option Period by giving written
notice of exercise to the Secretary of the Company or the Secretary's
designee, specifying the number of Option Shares in respect of which
the Option is being exercised. Such notice shall be accompanied by
payment in full of the aggregate option exercise price for the Option
Shares to be acquired. The date both such notice and payment are
received by the office of the Secretary of the Company shall be the
date of exercise of the Option as to such number of Option Shares. No
Option may be exercised at any time in respect of a fractional share.
4.2 Payment of the aggregate option exercise price may be in cash or by
certified, cashier's or personal check. Payment may also be made in
whole or in part by the transfer to the Company of shares of Common
Stock already owned by the Optionee for at least six months and having
a Fair Market Value equal to all or a portion of the option exercise
price at the end of such exercise.
4.3 The right of the Optionee (or any person or entity receiving a
transfer of this Option directly from the Optionee as permitted in
Section 11 of this Agreement) to exercise this Option shall, during
the lifetime the Optionee (or transferee) be exercisable only by the
Optionee (or transferee) and shall not be assignable by the Optionee
(or transferee) other than by will or the laws of descent and
distribution or by the Optionee pursuant to Section 11.
4.4 The Company shall not be required to issue any certificate or
certificates for Option Shares upon the exercise of this Option or to
record as a holder of record of Option Shares the name of the
individual exercising this Option, without obtaining to the complete
satisfaction of the Board the approval of all regulatory bodies, if
any, deemed necessary by the Board and without complying, to the
Board's complete satisfaction, with all rules and regulations under
federal, state, or local law deemed applicable by the Board.
5. Taxes. All taxes, if any, payable in respect of this Option or the shares
subject to this Option shall be the sole responsibility of and shall be
paid by the Optionee.
6. Changes in Capitalization and Other Matters.
6.1 No Corporate Action Restriction. The existence of this Agreement shall
not limit, affect or restrict in any way the right or power of the
Board or the shareholders of the Company to make or authorize
(a) any adjustment, recapitalization, reorganization or other change
in the Company's or any Subsidiary's capital structure or its
business,
(b) any merger, consolidation or change in the ownership of the
Company or any Subsidiary,
(c) any issue of secured or unsecured indebtedness, capital,
preferred or prior preference stocks ahead of or affecting the
Company's or any Subsidiary's capital stock or the rights
thereof,
(d) any dissolution or liquidation of the Company or any Subsidiary,
(e) any sale or transfer of all or any part of the Company's or any
Subsidiary's assets or business, or
(f) any other corporate act or proceeding by the Company or any
Subsidiary.
The Optionee, any beneficiary(ies) of the Optionee or any other
person shall not have any claim against any member of the Board or any
committee thereof, the Company or any Subsidiary or any employees,
officers or agents of the Company or any Subsidiary, as a result of
any such action.
6.2 Recapitalization Adjustments. In the event of any change in
capitalization affecting the Common Stock, including, without
limitation, a stock dividend or other distribution, stock split,
reverse stock split, recapitalization, consolidation, merger,
subdivision, split-up, spin-off, split-off, combination or exchange of
shares or other form of reorganization or recapitalization, or any
other change affecting the Common Stock (any of these being an
"Adjustment Event"), the Board may make such adjustment as it deems
appropriate to reflect such change, including, without limitation, the
number and class of Option Shares (or number and kind of other
securities or property) subject to this Option and the per share (or
other security or property) exercise price specified for this Option.
In addition, upon an Adjustment Event, the Board may cancel this
Option in exchange for a payment equal to the product of
(a) the excess of
(i) the Fair Market Value of a share at the time of the
Adjustment Event, over
(ii) the per share exercise price of this Option, and
(b) the number of Option Shares subject to this Option.
7. No Right to Continue as Director. Neither the execution of this Agreement
nor any other action taken pursuant to this Agreement shall constitute or
be evidence of any agreement or understanding, express or implied, that the
Optionee has a right to continue as a director of the Company for any
period of time or at any particular rate of remuneration.
8. Listing, Registration and Other Legal Compliance. No Common Stock shall be
issued under this Option unless legal counsel for the Company shall be
satisfied that such issuance will be in compliance with all applicable
federal and state securities laws and regulations and any other applicable
laws or regulations. The Company may require, as a condition of any payment
or share issuance, that certain agreements, undertakings, representations,
certificates and/or information, as the Company may deem necessary or
advisable, in its sole discretion, be executed or provided to the Company
to assure compliance with all such applicable laws or regulations.
Certificates for any Common Stock delivered under this Agreement may be
subject to such stock-transfer orders and such other restrictions as the
Company may deem advisable under the rules, regulations or other
requirements of the SEC, any stock exchange upon or trading system in which
the Common Stock is then listed or traded and any applicable federal or
state securities law. In addition, if, at any time specified herein for
(a) the issuance or other distribution of any Common Stock or
(b) the payment of amounts to the Optionee,
any law, rule, regulation or other requirement of any governmental
authority or agency shall require either the Company, any Subsidiary or the
Optionee (or any estate, designated beneficiary or other legal
representative thereof, as the case may be and as determined by the Board)
to take any action in connection with any such determination, any such
payment or the making of any such determination, as the case may be, shall
be deferred until such required action is taken. This Agreement and all
transactions under this Agreement are intended to comply with all
applicable conditions of SEC Rule 16b-3. To the extent any provision of
this Agreement fails to so comply with such rule, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the
Company.
9. Designation of Beneficiary. The Optionee may designate a beneficiary or
beneficiaries to exercise this Option or to receive any payment which under
the terms of this Agreement may become exercisable or payable on or after
the Optionee's death. At any time, and from time to time, any such
designation may be changed or cancelled by the Optionee without the consent
of any such beneficiary. Any such designation, change or cancellation must
be on a form provided for that purpose by the Company and shall not be
effective until received by the Company. If no beneficiary has been
designated by the Optionee as of the date of his death, or if the
designated beneficiaries have predeceased the Optionee, the beneficiary
shall be the Optionee's estate. If the Optionee designates more than one
beneficiary, any payments under this Agreement to such beneficiaries shall
be made in equal shares unless the Optionee has expressly designated
otherwise, in which case the payments shall be made in the shares
designated by the Optionee.
10. Non-transferability of This Option.
10.1 Except as otherwise provided in Section 11.2, this Option, and any
rights or interests herein or therein, shall not be assigned,
transferred, sold, exchanged, encumbered, pledged or otherwise
hypothecated or disposed of by the Optionee or any beneficiary(ies) of
the Optionee, except by testamentary disposition by the Optionee or
the laws of intestate succession. No such interest shall be subject to
execution, attachment or similar legal process, including, without
limitation, seizure for the payment of the Optionee's debts,
judgments, alimony or separate maintenance. Any attempt to sell,
exchange, transfer, assign, pledge, encumber or otherwise dispose of
or hypothecate in any way such Option, rights or interests or the levy
of any execution, attachment or similar legal process thereon,
contrary to the terms of this Agreement shall be null and void and
without legal force or effect.
10.2 During the Optionee's lifetime, the Optionee may, with the consent of
the Board, transfer without consideration all or any portion of this
Option to one or more members of his or her Immediate Family, to a
trust established for the exclusive benefit of one or more members of
his or her Immediate Family, to a partnership in which all the
partners are members of his or her Immediate Family, or to a limited
liability company in which all the members are members of his or her
Immediate Family. For purposes of this Agreement, "Immediate Family"
means the Optionee's children, stepchildren, grandchildren, parents,
stepparents, grandparents, spouse, siblings (including half-brothers
and half-sisters), in-laws, and all such relationships arising because
of legal adoption; provided, however, that any such Immediate Family,
and any such trust, partnership and limited liability company, shall
agree to be and shall be bound by the terms and provisions of this
Agreement.
11. Limitation of Rights. Neither the Optionee nor an Optionee's successor or
successors in interest shall have any rights as a shareholder of the
Company with respect to any Option Shares subject to this Option until the
date of issuance of a stock certificate in respect of such Option Shares.
12. Entire Agreement; Amendment. This Agreement contains the entire agreement
between the parties hereto with respect to the subject matter contained
herein, and supersedes all prior agreements or prior understandings,
whether written or oral, between the parties relating to such subject
matter. The Board shall have the right, in its sole discretion, to modify
or amend this Agreement from time to time; provided, however, that no such
modification or amendment shall materially adversely affect the rights of
the Optionee under this Agreement without the consent of the Optionee. This
Agreement may also be modified or amended by a writing signed by both the
Company and the Optionee.
13. Notices. Any exercise notice or other notice which may be required or
permitted under this Agreement shall be in writing, and shall be delivered
in person or via facsimile transmission, overnight courier service or
certified mail, return receipt requested, postage prepaid, properly
addressed as follows:
13.1 If such notice is to the Company, to the attention of the Secretary of
Neurogen Corporation, 35 Northeast Industrial Road, Branford,
Connecticut 06405, or at such other address as the Company, by notice
to the Optionee, shall designate in writing from time to time.
13.2 If such notice is to the Optionee, at his or her address as shown on
the Company's records, or at such other address as the Optionee, by
notice to the Company, shall designate in writing from time to time.
14. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to the
principles of conflict of laws thereof.
15. Binding Agreement; Assignment. This Agreement shall inure to the benefit
of, be binding upon, and be enforceable by the Company and its successors
and assigns. The Optionee shall not assign any part of this Agreement
without the prior express written consent of the Company.
16. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute one and the same instrument.
17. Headings. The titles and headings of the various sections of this Agreement
have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
18. Further Assurances. Each party hereto shall do and perform (or shall cause
to be done and performed) all such further acts and shall execute and
deliver all such other agreements, certificates, instruments and documents
as any party hereto reasonably may request in order to carry out the intent
and accomplish the purposes of this Agreement and the Program and the
consummation of the transactions contemplated thereunder.
19. Severability. The invalidity or unenforceability of any provisions of this
Agreement in any jurisdiction shall not affect the validity, legality or
enforceability of the remainder of this Agreement in such jurisdiction or
the validity, legality or enforceability of any provision of this Agreement
in any other jurisdiction, it being intended that all rights and
obligations of the parties hereunder shall be enforceable to the fullest
extent permitted by law.
IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by
its duly authorized officer, and the Optionee has hereunto set his hand, all as
of the Grant Date specified above.
NEUROGEN CORPORATION
By:__________________________________
-------------------------------------
Optionee
Exhibit 10.33
EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT, effective as of September 4, 2001 (the
"Commencement Date"), is made by and between Neurogen Corporation, a Delaware
corporation (the "Company"), with offices at 35 Northeast Industrial Road,
Branford, Connecticut 06405, and Dr. William Koster (the "Employee"), with a
principal residence at 10 Mallard Drive, Pennington, New Jersey 08593.
WHEREAS, the Company desires to employ the Employee, and the Employee is
willing to serve as an employee of the Company, on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, the Company and the Employee agree as follows:
1. DEFINITIONS
(a) Cause
For purposes of this Agreement "Cause" means:
(i) any willful act or omission by the Employee which constitutes
gross misconduct or gross negligence and which results in
demonstrable material harm to the Company;
(ii) the Employee's habitual drug or alcohol abuse;
(iii)the Employee is convicted or enters a plea of nolo contendere
(or similar plea) in a criminal proceeding for commission of a
felony or serious misdemeanor;
(iv) the Employee's willful and continuous failure to perform his
duties and services with the Company, including, but not limited
to, the Employee's willful breach of any of the material
provisions of this Agreement or the Proprietary Information and
Inventions Agreement between the Employee and the Company (the
"Proprietary Information and Inventions Agreement"), a copy of
which is attached hereto as Annex A and incorporated by reference
herein; or
(v) the Employee's participation in any act of dishonesty intended to
result in his material personal enrichment at the expense of the
Company.
(b) Good Reason
For purposes of this Agreement "Good Reason" means and shall be deemed
to exist if, without the prior written consent of the Employee,
(i) as a result of any action or inaction on the part of the Company,
the Employee suffers a material reduction in his duties,
responsibilities or authority typically associated with his title
and position as set forth and described in Section 3 of this
Agreement (including, but not limited to, (A) ceasing to be the
Chief Executive Officer of the Company or (B) if the Company is
acquired by another company, not being appointed the Chief
Executive Officer of the acquiror upon such Change in Control or
ceasing to be the Chief Executive Officer of the acquiror
following such Change in Control);
(ii) the Employee's rate of Base Salary or target Annual Bonus (as
hereinafter defined) is decreased by the Company (other than in
connection with an across the board salary reduction approved by
the Employee);
(iii)relocation of the Employee's primary place of performance of the
duties and services specified in Section 3 of this Agreement to
any state other than Connecticut, Rhode Island, Massachusetts,
Vermont, New Hampshire or Maine;
(iv) after a Change in Control, but prior to the first anniversary of
the Commencement Date following such Change in Control on which
the Employment Period would be automatically extended, the
Company gives the Employee a Non-Renewal Notice (as hereinafter
defined);
(v) the Company fails to timely pay when due any Base Salary, Annual
Bonus awarded by the Compensation Committee (as hereinafter
defined) or other amount owed to the Employee under this
Agreement which is not cured within ten (10) days after written
notice of such failure is given by the Employee to the Company;
or
(vi) a material breach by the Company of Section 4(c) of this
Agreement which causes a material loss or damage to the Employee,
the Employee's spouse or his eligible dependents which is not
cured within ten (10) days after written notice of such breach is
given by the Employee to the Company.
(c) Change in Control
For purposes of this Agreement "Change in Control" means a Change in
Control as defined under the Neurogen Corporation 2001 Stock Option Plan.
2. TERM
The term of Employee's employment under this Agreement shall, unless
earlier terminated under Section 6 of this Agreement or extended as hereinafter
provided, be for a period commencing as of the Commencement Date and terminating
on the third anniversary of the Commencement Date, subject to the terms and
conditions contained in this Agreement (the "Employment Period"). The Employment
Period shall automatically be extended, commencing on the second anniversary of
the Commencement Date, and thereafter on each subsequent anniversary of the
Commencement Date, for successive one (1) year periods unless, not later than
three (3) months prior to any such anniversary, either party to this Agreement
shall give written notice in accordance with Section 10 of this Agreement to the
other that such party does not wish to extend or further extend the Employment
Period beyond its then term or already automatically extended term, if any (a
"Non-Renewal Notice").
3. DUTIES AND SERVICES
During the Employment Period, the Employee shall be employed as the Chief
Executive Officer of the Company and shall be appointed as a member of the Board
of Directors of the Company (the "Board"). In such position, the Employee shall
have the duties, responsibilities and authority normally associated with, or
otherwise appropriate to, the office and position of the Chief Executive Officer
of a corporation. In the performance of his duties and responsibilities as Chief
Executive Officer, the Employee shall report only to the Board. During the
Employment Period, the Employee shall devote substantially all of his business
time, during normal business hours, to the business and affairs of the Company,
and the Employee shall use his best efforts to perform faithfully and
efficiently the duties and responsibilities contemplated by this Agreement;
provided, however, that, the Employee may manage his personal, financial and
legal affairs and engage in any activities of a volunteer, civic or business
nature (including serving on the boards of directors or advisory boards of other
for-profit entities, as long as the Employee gets the prior written approval of
the Board to serve on such boards), as long as such activities do not materially
interfere with Employee's responsibilities as the Chief Executive Officer of the
Company.
4. COMPENSATION AND OTHER BENEFITS
(a) Salary
As compensation for the Employee's services under this Agreement,
beginning the Commencement Date and until the termination of the Employment
Period, the Employee shall be paid by the Company a base salary of $400,000
per annum, payable in equal semi-monthly installments in accordance with
the Company's normal payroll practices, which base salary may be increased
(based upon annual performance reviews) but not decreased (other than in
connection with an across the board salary reduction approved by the
Employee) during the Employment Period by the Compensation Committee of the
Board (the "Compensation Committee") in its sole discretion (the "Base
Salary"). Such increased (or decreased) Base Salary shall then constitute
the "Base Salary" for purposes of this Agreement.
(b) Annual Bonus
In addition to the Base Salary, the Employee is eligible to receive,
subject to achieving certain objective and/or subjective performance goals
set by the Compensation Committee in its sole discretion, an annual bonus
as determined by the Compensation Committee for each annual period ending
on an anniversary of the Commencement Date during the Employment Period
with a target level equal to 50% of Base Salary (the "Annual Bonus").
(c) Benefits
During the Employment Period, the Employee shall be eligible to
participate in all employee pension and incentive benefit plans and
programs maintained from time to time by the Company for the benefit of
senior executives. During the Employment Period, the Employee, Employee's
spouse, if any, and their eligible dependents, if any, shall be eligible to
participate in and be covered under all the employee and dependent health
and welfare benefit plans or programs maintained from time to time by the
Company for the benefit of senior executives. However, the Company shall
have no obligations under this Section 4(c) unless and until the Employee
has met any generally applicable eligibility requirements for participation
in such plans and programs.
(d) Relocation Allowance
In connection with accepting employment as set forth in this
Agreement, the Company shall pay to the Employee, within fifteen (15) days
after the Commencement Date, the sum of $60,000 to compensate him for the
expenses related to his moving and relocation, including, but not limited
to, expenses relating to moving the Employee's household items to Branford,
Connecticut, Alstead, New Hampshire or Boston, Massachusetts and the sale
of the Employee's former principal residence. To the extent permissible,
such payment shall be treated as a qualified moving expense reimbursement
benefit under Section 132(a)(6) of the Internal Revenue Code (the "Code").
(e) Upfront Stock Option Grant
On the Commencement Date, the Company shall grant the Employee stock
options entitling the Employee to acquire, in accordance with the Neurogen
Corporation 2001 Stock Option Plan and this Agreement, 400,000 shares of
the Common Stock, par value $.025 per share, of the Company ("Company
Common Stock") at a price per share equal to $19.39 (the "Upfront Stock
Options"). Subject to the provisions of Section 6 of this Agreement, such
options, as to their underlying shares, shall become exercisable 20% on
each of the first, second, third, fourth and fifth anniversary of the
Commencement Date (such stock options are "vested" when they become
exercisable). The upfront stock options shall, to the maximum extent
possible, be options intended to qualify as incentive stock options under
Section 422 of the Code.
(f) Upfront Restricted Stock Grant and Tax Loan
On the Commencement Date, the Company shall award the Employee 100,000
shares of restricted Company Common Stock (the "Upfront Restricted Stock")
in accordance with the Neurogen Corporation 2001 Stock Option Plan and this
Agreement. Subject to the provisions of Section 6 of this Agreement, 10% of
the Upfront Restricted Stock may be transferred or assigned by the Employee
on the Commencement Date, 45% of the Upfront Restricted Stock may not be
transferred or assigned by the Employee prior to the fourth anniversary of
the Commencement Date and shall be forfeited to the Company for zero (0)
consideration if the Employee's employment with the Company is terminated
for any reason prior to the fourth anniversary of the Commencement Date,
and the other 45% of the Upfront Restricted Stock may not be transferred or
assigned by the Employee prior to the fifth anniversary of the Commencement
Date and shall be forfeited to the Company for zero (0) consideration if
the Employee's employment with the Company is terminated for any reason
prior to the fifth anniversary of the Commencement Date (such restricted
stock is "vested" when it is no longer subject to such transfer
restrictions and forfeiture provisions). The Company shall grant the
Employee a fully recourse loan secured by such Upfront Restricted Stock to
pay the federal and state income taxes relating to the income derived from
the grant (but not any future gain or loss) of the 10,000 shares of Company
Common Stock that are vested on the Commencement Date. Such loan shall be
repaid in full with interest (at the relevant applicable federal rate on
the date the loan is made) on the fifth anniversary of the Commencement
Date; provided, however, that if the Employee's employment is terminated
prior to the fifth anniversary of the Commencement Date, the loan shall be
repaid in full with interest through the date of payment within thirty (30)
days of the Termination Date. Sales of the vested 10,000 shares of Company
Common Stock by Employee generally shall be permitted, subject to
applicable securities laws, so long as the net after-tax proceeds thereof
are applied to any unpaid balance of such loan.
(g) Subsequent Annual Stock Option Grants
The Company may grant the Employee (at the end of each calendar year)
stock options, in an amount determined, and on terms and conditions
specified, by the Compensation Committee in its sole discretion, entitling
the Employee to acquire shares of Company Common Stock. If the Employee
performs his duties and services specified in Section 3 of this Agreement
in a manner that is satisfactory to the Compensation Committee, it is
anticipated that the Employee will be granted additional stock options each
calendar year (provided that any grant made with respect to the 2001
calendar year shall be targeted at 16,667 stock options).
5. NON-COMPETITION, NON-SOLICITATION AND CONFIDENTIAL
INFORMATION
(a) During the Employment Period and for two (2) years after the
Termination Date, the Employee agrees that, without the prior express
written consent of the Company, he shall not, anywhere in the world,
for his own benefit or for, with or through any other person, firm,
partnership, corporation or other entity or individual (other than the
Company or its affiliates) as or in the capacity of an owner,
shareholder, employee, consultant, director, officer, trustee,
partner, agent, independent contractor and/or in any other
representative capacity or otherwise:
(i) (A) personally (or personally direct another to) engage in or
assist any individual or entity in engaging in the discovery
and/or development of therapeutic, diagnostic or prophylactic
products or services which work through a biological mechanism of
action that at the time of the Termination Date is, or during the
Employment Period has been, the targeted biological mechanism of
action of a candidate seeking program of the Company or its
affiliates (or which are substantially related to such candidate
seeking programs) or (B) be employed by any entity with revenues
of less than $5 billion for which any such candidate seeking
program is a primary and important project of such entity;
(ii) personally (or personally direct another to) solicit or hire (A)
any current employee of the Company or its affiliates or (B) any
former employee of the Company or its affiliates who had such
relationship within six (6) months prior to the date of such
solicitation or hiring, including but not limited to attempting
to induce any such employee of the Company or its affiliates to
leave the employ of the Company; and
(iii)personally (or personally direct another to) solicit any current
or prospective customer (which shall be limited to any active
prospect that has been solicited by the Employee) of the Company
or its affiliates or any other entity with whom the Company has a
collaboration, strategic partnership, joint venture or other
similar relationship (collectively, a "Customer Entity") to whom
the Employee provided services, or for whom the Employee
transacted business, or whose identity is not generally known to
the industry but whose identity became known to the Employee in
connection with Employee's employment with the Company, to reduce
or refrain from doing any business with the Company or its
affiliates or terminate the business relationship of such
Customer Entity with the Company or its affiliates.
For purposes of this Section 5, the term "solicit" means any
communication of any kind whatsoever, regardless of by whom
initiated, inviting, encouraging or requesting any person or
entity to take or refrain from taking any action, the term
"products" shall be defined by reference to the underlying
mechanisms of action (e.g. biological targets), and as of the
Commencement Date, the Company's candidate seeking programs are
GABA, CRF, C5A, VR1 and MCH.
(b) The Employee agrees to comply with the terms set forth in the
Proprietary Information and Inventions Agreement.
(c) If at any time within twenty-four (24) months after the date on which
the Employee exercises a Company stock option or stock appreciation
right, or on which Company restricted stock vests, or on which income
is realized by the Employee in connection with any other Company
stock-based award (each of which events is a "realization event"), the
Employee breaches any provision of Section 5(a) or 5(b) of this
Agreement in more than a minor, deminimus or trivial manner that
causes, or is likely to cause, more than deminimus financial or
reputational harm to the Company (and, if such breach is susceptible
to cure, the Employee does not cure such breach and such harm within
ten (10) days after the Employee's receipt of written notice of such
breach from the Company which specifies in reasonable detail the facts
and circumstances claimed to be the basis for such breach), then (i)
the Employee shall forfeit all of his unexercised (including unvested)
Upfront Stock Options, any other unexercised (including unvested)
Company stock options or stock appreciation rights and any unvested
Company restricted stock and (ii) the gain realized within the
twenty-four (24) months prior to such breach from the exercise of any
Upfront Stock Options or any other Company stock options or stock
appreciation rights or the vesting of the Upfront Restricted Stock or
any other Company restricted stock or equity-based awards by the
Employee from the realization event shall be paid by the Employee to
the Company upon written notice from the Company within ninety (90)
days of such notice (such payments may be made in increments over such
period). Such gain shall be determined after reduction for any federal
or state income taxes paid (or, if such gain is determined before such
taxes are paid, owing, provided that such taxes are actually paid in a
timely manner) by the Employee which are attributable to such gain as
of the date of the realization event, and without regard to any
subsequent change in the Fair Market Value (as defined below) of a
share of Company Common Stock; provided that any federal or state
income tax benefit actually realized by the Employee as a result of
making payments to the Company under this Section 5(c) (relating to
any of the next ten (10) tax year periods) shall also be paid to the
Company within fifteen (15) days of such realization. Such gain shall
be paid by the Employee delivering to the Company shares of Company
Common Stock with a Fair Market Value on the date of delivery equal to
the amount of such gain. The Company shall have the right to offset
such gain against any amounts otherwise owed to the Employee by the
Company (whether as wages, vacation pay, or pursuant to any benefit
plan or other compensatory arrangement). For purposes of this Section
5(c), the "Fair Market Value" of a share of Company Common Stock on
any date shall be (i) the closing sale price per share of Company
Common Stock during normal trading hours on the national securities
exchange on which the Company Common Stock is principally traded for
such date or the last preceding date on which there was a sale of such
Company Common Stock on such exchange or (ii) if the shares of Company
Common Stock are then traded on the NASDAQ Stock Market or any other
over-the-counter market, the average of the closing bid and asked
prices for the shares of Company Common Stock during normal trading
hours in such over-the-counter market for such date or the last
preceding date on which there was a sale of such Company Common Stock
in such market, or (iii) if the shares of Company Common Stock are not
then listed on a national securities exchange or traded in an
over-the-counter market, such value as the Compensation Committee, in
its sole discretion, shall determine. In the event that the Company
seeks to enforce the provisions of this Section 5(c), and such
enforcement is contested by the Employee, and it is finally determined
that the Employee is not subject to the provisions of this Section
5(c), then the Company shall (i) reimburse the Employee for reasonable
attorneys' fees incurred by the Employee in connection with such
contest; and (ii) pay to the Employee an additional amount equal to
one (1) times the amount in clause (i); provided that such payment
under this clause (ii) shall not exceed $250,000.
(d) Any termination of the Employee's employment or of this Agreement
shall have no effect on the continuing operation of this Section 5.
(e) The Employee acknowledges and agrees that the Company will have no
adequate remedy at law, and could be irreparably harmed, if the
Employee breaches or threatens to breach any of the provisions of this
Section 5. The Employee agrees that the Company shall be entitled to
equitable and/or injunctive relief to prevent any breach or threatened
breach of this Section 5, and to specific performance of each of the
terms hereof in addition to any other legal or equitable remedies that
the Company may have. The Employee further agrees that he shall not,
in any equity proceeding relating to the enforcement of the terms of
this Section 5, raise the defense that the Company has an adequate
remedy at law.
(f) The terms and provisions of this Section 5 are intended to be separate
and divisible provisions and if, for any reason, any one or more of
them is held to be invalid or unenforceable, neither the validity nor
the enforceability of any other provision of this Agreement shall
thereby be affected. The parties hereto acknowledge that the potential
restrictions on the Employee's future employment imposed by this
Section 5 are reasonable in both duration and geographic scope and in
all other respects. If for any reason any court of competent
jurisdiction shall find any provisions of this Section 5 unreasonable
in duration or geographic scope or otherwise, the Employee and the
Company agree that the restrictions and prohibitions contained herein
shall be effective to the fullest extent allowed under applicable law
in such jurisdiction.
(g) The parties acknowledge that this Agreement would not have been
entered into and the benefits described in Section 4 of this Agreement
would not have been promised in the absence of the Employee's promises
under this Section 5.
(h) Notwithstanding anything to the contrary contained herein, the
Employee shall at all times be permitted to own not more than 2% of
the outstanding common stock of any corporation, if such stock is
listed on a national securities exchange, is reported on the NASDAQ
System, or is regularly traded in the over-the-counter market.
6. TERMINATION
(a) Termination by the Company for Cause The Company may terminate the
Employee's employment hereunder for Cause. If the Company terminates
the Employee's employment hereunder for Cause, the Employment Period
shall end on the Termination Date and the Employee shall be entitled
only to any Base Salary accrued and earned but not yet paid as of the
Termination Date, except as required by applicable law.
(b) Termination by the Company Without Cause or Termination by the
Employee For Good Reason.
The Company may terminate the Employee's employment hereunder without Cause
and the Employee may terminate his employment hereunder for Good Reason. If the
Company terminates the Employee's employment hereunder without Cause (other than
for death or Disability), or if the Employee terminates his employment hereunder
for Good Reason, the Employment Period shall end on the Termination Date and,
subject to Section 6(f) below, the Employee shall be entitled only to:
(i) any Base Salary accrued and earned but not yet paid as of the
Termination Date;
(ii) on the Termination Date, a lump sum payment in an amount equal to the
sum of (A) the Employee's Base Salary that would have been paid to the
Employee if he had continued working for the Company through the end
of the Employment Period that existed prior to such termination (and
assuming no further extensions of the Employment Period after delivery
of the Notice of Termination) and (B) two times the mean average
Annual Bonus the Employee earned during the Employment Period;
provided that if the Employee has not earned an Annual Bonus prior to
the Termination Date, the mean average Annual Bonus shall be treated
as $200,000;
(iii)on the Termination Date, an additional portion of the Employee's
Upfront Stock Options shall vest equal to the amount of vesting that
would have occurred if the Employee had continued working for the
Company for two (2) additional years (and the Employee will have two
(2) years from the Termination Date, but not beyond the stated term of
the options, to exercise his vested Upfront Stock Options) and an
additional portion of the Employee's Upfront Restricted Stock shall
vest equal to the greater of (A) the amount of vesting that would have
occurred if the Employee had continued working for the Company for two
(2) additional years and (B) 25% of the aggregate of such award; and
(iv) any other compensation and benefits as may be provided in accordance
with the terms and provisions of any applicable benefit plans and
programs of the Company; provided that any severance payment made to
the Employee under such plans and programs shall be decreased, but not
below zero (0), by the lump sum payment provided in Section 6(b)(ii)
of this Agreement.
(c) Termination Due to Death or Disability
The Company may terminate the Employee's employment hereunder due to
the Employee's inability to render, for an aggregate of any one hundred
eighty (180) days in any nine (9) month period, services hereunder by
reason of permanent disability, as determined by the written medical
opinion of an independent medical physician selected in good faith by the
Company ("Disability") and within thirty (30) days after a Notice of
Termination is given to the Employee, the Employee has not returned to
active employment with the Company (the "Disability Effective Date"). In
the event of the Employee's death or a termination of the Employee's
employment by the Company due to Disability, the Employment Period shall
end on the Termination Date and the Employee, his estate or his legal
representative, as the case may be, shall be entitled only to:
(i) any Base Salary accrued and earned but not yet paid as of the
Termination Date;
(ii) on the Termination Date, a lump sum payment in the amount of the
product of (A) the mean average Annual Bonus the Employee earned
during the Employment Period (provided that if the Employee has
not earned an Annual Bonus prior to the Termination Date, the
mean average Annual Bonus shall be treated as $200,000) and (B) a
fraction, the numerator of which is the number of days in the
fiscal year in which the Termination Date occurs through the
Termination Date and the denominator of which is 365;
(iii)on the Termination Date, an additional portion of the Employee's
Upfront Stock Options shall vest equal to the amount of vesting
that would have occurred if the Employee had continued working
for the Company for two (2) additional years and an additional
portion of the Employee's Upfront Restricted Stock shall vest
equal to the greater of (A) the amount of vesting that would have
occurred if the Employee had continued working for the Company
for two (2) additional years and (B) 25% of the aggregate of such
award; and
(iv) any other compensation and benefits as may be provided in
accordance with the terms and provisions of any applicable
benefit plans and programs of the Company.
(d) Termination Following the Employee Giving a Non-Renewal Notice
(i) If the Employee gives a Non-Renewal Notice, the Employee agrees
to continue to perform his duties and services as set forth in
Section 3 of this Agreement through the end of the Employment
Period, at which time the Employee's employment with the Company
shall end. If the Employee's employment is not terminated
pursuant to another provision of Section 6 of this Agreement, on
the last day of the Employment Period, the Employee shall be
entitled, in addition to any compensation or benefits accrued and
earned through such date, only to a lump sum payment in the
amount equal to one (1) times the sum of the Employee's (A) Base
Salary and (B) mean average Annual Bonus the Employee earned
during the Employment Period; provided that such lump sum payment
will decrease any other severance payment that the Employee
otherwise would have been entitled to from the Company.
(ii) At any time after the Employee gives a Non-Renewal Notice, the
Company may terminate the Employee's employment hereunder
pursuant to this Section 6(d)(ii). If the Company terminates the
Employee's employment pursuant to this Section 6(d)(ii), the
Employment Period shall end on the Termination Date, the Employee
shall not be entitled to any payments or benefits pursuant to any
other provision of Section 6 of this Agreement, other than any
compensation or benefits accrued and earned through the
Termination Date, and the Employee shall be entitled only to a
lump sum payment in the amount equal to one (1) times the sum of
the Employee's (A) Base Salary and (B) mean average Annual Bonus
the Employee earned during the Employment Period; provided that
such lump sum payment will decrease any other severance payment
that the Employee otherwise would have been entitled to from the
Company.
(e) Termination Following the Company Giving a Non-Renewal Notice
If the Company gives a Non-Renewal Notice, the Employee agrees to
continue to perform his duties and services as set forth in Section 3 of
this Agreement through the end of the Employment Period, at which time the
Employee's employment with the Company shall end. If the Employee's
employment is not terminated pursuant to another provision of Section 6 of
this Agreement, on the last day of the Employment Period, the Employee
shall be entitled, in addition to any compensation or benefits accrued and
earned through such date, only to:
(i) a lump sum payment in the amount equal to one (1) times the sum
of the Employee's (A) Base Salary and (B) mean average Annual
Bonus the Employee earned during the Employment Period; provided
that such lump sum payment will decrease any other severance
payment that the Employee otherwise would have been entitled to
from the Company; and
(ii) an additional portion of the Employee's Upfront Stock Options
shall vest equal to the amount of vesting that would have
occurred if the Employee had continued working for the Company
for one (1) additional year and an additional portion of the
Employee's Upfront Restricted Stock shall vest equal to the
amount of vesting that would have occurred if the Employee had
continued working for the Company for one (1) additional year.
(f) Termination Following a Change in Control-by the Company Without Cause
or by the Employee for Good Reason
If, within twenty-four (24) months following a Change in Control,
the Company terminates the Employee's employment hereunder without
Cause (other than for death or Disability), or if the Employee
terminates his employment hereunder for Good Reason, the Employment
Period shall end on the Termination Date and the Employee shall be
entitled (in lieu of any benefits under Section 6(b) of this
Agreement) only to:
(i) any Base Salary accrued and earned but not yet paid as of
the Termination Date;
(ii) on the Termination Date, a lump sum payment in an amount
equal to three (3) times the sum of the Employee's (A) Base
Salary and (B) mean average Annual Bonus the Employee earned
during the Employment Period; provided that if the Employee
has not earned an Annual Bonus prior to the Termination
Date, the mean average Annual Bonus shall be treated as
$200,000;
(iii)continuation of the health and welfare benefits of the
Employee comparable to those set forth in Section 4(c) of
this Agreement at the same cost to the Employee in effect on
the Termination Date for eighteen (18) months after such
Termination Date;
(iv) pursuant to the terms of the Neurogen Corporation 2001 Stock
Option Plan, 100% vesting in the Employee's Upfront Stock
Options and any other annual stock option grants which are
made under such plan (provided that such termination occurs
within the period of time specified by such plan) and the
Employee will have two (2) years from the Termination Date,
but not beyond the stated term of the options, to exercise
his vested stock options;
(v) on the Termination Date, an additional portion of the
Employee's Upfront Restricted Stock shall vest equal to the
greater of (A) the amount of vesting that would have
occurred if the Employee had continued working for the
Company for two (2) additional years or (B) 50% of such
award;
(vi) any other compensation and benefits as may be provided in
accordance with the terms and provisions of any applicable
benefit plans and programs of the Company; provided that any
severance payment made to the Employee under such plans and
programs shall be decreased, but not below zero (0), by the
lump sum payment provided in Section 6(f)(ii) of this
Agreement; and
(vii)an excise tax gross-up as provided in Section 7 of this
Agreement.
(g) Voluntary Termination by the Employee Without Good Reason
The Employee may effect a Voluntary Termination of his employment with
the Company hereunder. A "Voluntary Termination" shall mean a termination
of employment by the Employee during the Employment Period on his own
initiative other than a termination due to death or Disability or a
termination for Good Reason. A Voluntary Termination shall be a breach of
this Agreement and shall result in the end of the Employment Period on the
Termination Date and shall entitle the Employee only to the rights and
benefits to which the Employee would be entitled in the event of a
termination of the Employee's employment by the Company for Cause under
Section 6(a) of this Agreement.
(h) Notice of Termination
Any termination of employment by the Company or by the Employee during
the Employment Period shall be communicated by Notice of Termination to the
other party hereto given in accordance with this Section 6(h). For purposes
of this agreement, a "Notice of Termination" means a written notice which
(i) indicates the specific termination provision in this Agreement relied
upon, (ii) to the extent applicable, sets forth in reasonable detail the
facts and circumstances claimed to provide a basis for termination of the
Employee's employment under the provision so indicated and (iii) if the
Termination Date (as defined below) is other than the date of receipt of
such notice, specifies the date of termination (which date shall not be
more than six (6) months after the giving of such notice). The failure by
the Employee or the Company to set forth in the Notice of Termination any
act or circumstance which contributes to a showing of Good Reason or Cause
shall not waive any right of the Employee or the Company, respectively,
hereunder or preclude the Employee or the Company, respectively, from
asserting such fact or circumstance in enforcing the Employee's or the
Company's rights thereunder.
(i) Termination Date
"Termination Date" means (i) if the Employee's employment is
terminated by the Company other than for death, Disability or Cause, the
date of termination specified in the Notice of Termination, (ii) if the
Employee's employment is terminated by the Company for Cause, the date of
delivery of the Notice of Termination (or such later date specified by the
Company), (iii) if the Employee's employment is terminated by reason of
death or Disability, the Termination Date shall be the date of death of the
Employee or the Disability Effective Date, as the case may be, (iv) if a
Non-Renewal Notice is given under Section 6(d)(i) or 6(e) of this Agreement
and the Employee continues his employment with the Company through the last
day of the Employment Period, then the last day of the Employment Period,
and (v) if the Employee's employment is terminated by the Employee, the
date of termination specified in the Notice of Termination (provided that
in the case of any Voluntary Termination, the specified date may not be
fewer than three (3) months after delivery of such Notice of Termination,
and provided, further, that, in the event of any termination under this
clause (v), the Company may elect to accelerate the Termination Date to an
earlier date by giving written notice of such election to the Employee).
The Company may elect to place the Employee on paid leave, with benefits
and other rights, for all or part of the period between the date of
delivery of the Notice of Termination and the Termination Date.
7. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY.
(a) In the event the Employee receives payments or benefits from the
Company under Section 6(f) of this Agreement (including as a result of
accelerated vesting described therein) and it shall be determined that
any payment, distribution or vesting by the Company to or for the
benefit of the Employee (whether paid or payable, distributed or
distributable or vested pursuant to the terms of this Agreement or
otherwise, but determined without regard to any additional payments
required under this Section 7) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or
penalties are incurred by the Employee with respect to such excise tax
(such excise tax, together with any such interest and penalties, are
hereinafter collectively referred to as the "Excise Tax"), then the
Employee shall be entitled to receive an additional payment (a
"Gross-Up Payment") in an amount such that after payment by the
Employee of all taxes (including any interest or penalties imposed
with respect to such taxes), the Employee retains an amount of the
Gross-Up Payment equal to the Excise Tax imposed upon the Payments,
provided, however, that the Gross-Up Payment shall not exceed
$5,000,000.
(b) All determinations required to be made under this Section 7, including
whether and when a Gross-Up Payment is required, the amount of such
Gross-Up Payment and the assumptions to be utilized in arriving at
such determination, shall be made by the Company's independent
auditors or such other certified public accounting firm reasonably
acceptable to the Employee as may be designated by the Company (the
"Accounting Firm") which shall provide detailed supporting
calculations both to the Company and the Employee within fifteen (15)
business days of the receipt of written notice from the Employee that
there has been a Payment, or such earlier time as is requested by the
Company. All fees and expenses of the Accounting Firm shall be borne
solely by the Company. Any Gross-Up Payment, as determined pursuant to
this Section 7, shall be paid by the Company to the Employee by the
later of (i) fifteen (15) days prior to the due date for the payment
of any Excise Tax, and (ii) fifteen (15) days after the receipt of the
Accounting Firm's determination. If the Accounting Firm determines
that there exists substantial authority that no Excise Tax is payable
by the Employee, it shall furnish the Employee with a written opinion
to such effect, and to the effect that failure to report the Excise
Tax, if any, on the Employee's applicable federal income tax return
will not result in the imposition of a negligence or similar penalty.
Any determination by the Accounting Firm shall be binding upon the
Company and the Employee. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the
determination by the Accounting Firm, it is possible that Gross-Up
Payments which will not have been made by the Company should have been
made ("Underpayment") or Gross-Up Payments are made by the Company
which should not have been made ("Overpayment"), consistent with the
calculations required to be made hereunder. In the event that the
Employee thereafter is required to make payment of any Excise Tax or
additional Excise Tax, the Accounting Firm shall determine the amount
of the Underpayment that has occurred and any such Underpayment
(together with interest at the rate provided in Section 1274(b)(2)(B)
of the Code and penalties payable by the Employee as a result of the
Underpayment) shall be promptly paid by the Company to or for the
benefit of the Employee, subject to the maximum amount specified in
Section 7(a) of this Agreement. In the event the amount of the
Gross-Up Payment exceeds the amount necessary to reimburse the
Employee for his Excise Tax, the Accounting Firm shall determine the
amount of the Overpayment that has been made and any such Overpayment
(together with interest at the rate provided in Section 1274(b)(2) of
the Code) shall be promptly paid by the Employee (to the extent he has
received a refund if the applicable Excise Tax has been paid to the
Internal Revenue Service) to or for the benefit of the Company. The
Employee shall cooperate, to the extent his expenses are reimbursed by
the Company, with any reasonable requests by the Company in connection
with any contests or disputes with the Internal Revenue Service in
connection with the Excise Tax.
8. SURVIVAL
The rights and obligations of the parties hereunder shall survive the
termination of the Employee's employment hereunder and the termination of this
Agreement to the extent necessary to the intended preservation of such rights
and obligations.
9. WHOLE AGREEMENT AND MODIFICATION
This Agreement sets forth the entire agreement and understanding of the
parties with respect to the subject matter contained herein, and supersedes all
prior and existing agreements, whether written or oral, between them concerning
the subject matter contained herein. This Agreement may be modified only by a
written agreement executed by each party to this Agreement or by a court in
accordance with the terms hereof.
10. NOTICES
Any notice or other communication required or permitted to be given under
this Agreement shall be in writing and shall be mailed by certified mail, return
receipt requested, or delivered against receipt to the party to whom it is to be
given at the address of such party set forth above or to such other address as
the party shall have furnished in writing in accordance with this provision.
Notice to the estate of the Employee shall be sufficient if addressed to the
Employee in accordance with this provision. Any notice or other communication
given by certified mail shall be deemed given three (3) days after posting.
However, a notice changing a party's address shall be deemed given at the time
of the receipt of the notice.
11. WAIVER
Any waiver by either party of a breach of any provision of this Agreement
shall not operate as or be construed to be a waiver of any other breach of such
provision or of any breach of any other provision of this Agreement. The failure
of a party to insist upon strict adherence to any term of this Agreement on one
or more occasions shall not be considered a waiver or deprive that party of the
right thereafter to insist upon strict adherence to that term or any other term
of this Agreement. Any waiver must be in writing, signed by the party giving
such waiver.
12. SUCCESSORS
(a) Effect on Employee
This Agreement is personal to the Employee and, without the prior
express written consent of the Company, shall not be assignable by the
Employee, except that the Employee's rights to receive any compensation or
benefits under this Agreement may be transferred or disposed of pursuant to
testamentary disposition, intestate succession or pursuant to a domestic
relations order of a court of competent jurisdiction. This Agreement shall
inure to the benefit of and be enforceable by the Employee's heirs,
beneficiaries and/or legal representatives.
(b) Effect on Company
This Agreement shall inure to the benefit of and be binding on the
Company and its successors, provided that the successor complies with the
next sentence. The Company shall require any successor to all or
substantially all of the business and assets of the Company, whether direct
or indirect, by purchase, merger, consolidation, acquisition of stock, or
otherwise, by an agreement in form and substance reasonably satisfactory to
the Employee, expressly to assume and agree to perform this Agreement in
the same manner and to the same extent as the Company would be required to
perform if no such succession had taken place.
13. NO THIRD PARTY BENEFICIARIES
This Agreement does not create, and shall not be construed as creating, any
rights enforceable by any person not a party to this Agreement except as
provided in Section 12 of this Agreement.
14. COUNTERPARTS
This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original, but all of which together shall constitute one and
the same instrument.
15. GOVERNING LAW
Except with respect to the Proprietary Information and Inventions
Agreement, which shall be governed by the laws of the State of Connecticut, this
Agreement shall be governed by and construed in accordance with the laws of the
State of New York, without giving effect to the principles of conflict of laws
thereof.
16. SEVERABILITY
The invalidity or unenforceability of any provision of this Agreement shall
not affect the validity or enforceability of any other provision of this
Agreement.
17. NO VIOLATION OF OUTSTANDING AGREEMENT(S)
Employee hereby warrants that the execution of this Agreement and the
performance of his duties hereunder do not and will not violate any agreement
with any other person or entity.
18. WITHHOLDING TAXES
All amounts payable to the Employee under this Agreement shall be subject
to applicable withholding of income, wage and other taxes.
19. ARBITRATION
Subject to the provisions of Section 20 of this Agreement, any dispute,
controversy or claim between the Employee and the Company arising out of or
relating to or concerning the provisions of this Agreement, relating to or
arising out of the Employee's employment with the Company or otherwise
concerning any rights, obligations or other aspects of Employee's employment
relationship in respect of the Company, shall be finally settled by arbitration
in New York City before, and in accordance with the rules then obtaining of the
American Arbitration Association (the "AAA") in accordance with the commercial
arbitration rules of the AAA.
20. INJUNCTIVE RELIEF; SUBMISSION TO JURISDICTION; CHOICE OF FORUM
(a) Notwithstanding the provisions of Section 19 of this Agreement, and in
addition to its right to submit any dispute or controversy to
arbitration, the Company may bring an action or special proceeding in
a state or federal court of competent jurisdiction sitting in New York
City, whether or not an arbitration proceeding has theretofore been or
is ever initiated, for the purpose of temporarily, preliminarily, or
permanently enforcing the provisions of Section 5 of this Agreement,
or to enforce an arbitration award, and the Employee may bring such an
action or proceeding to enforce an arbitration award and, for the
purposes of this Section 20, (i) the Employee and the Company
expressly consent to the application of Section 20(b) of this
Agreement to any such action or proceeding and (ii) the Employee
irrevocably appoints the General Counsel of the Company as the
Employee's agent for service of process in connection with any such
action or proceeding, who shall promptly advise the Employee of any
such service of process.
(b) The Employee and the Company hereby irrevocably submit to the
exclusive jurisdiction of any state or federal court located in New
York City over any suit, action or proceeding arising out of or
relating to or concerning this Agreement or any employment related
matter that is not otherwise arbitrated according to the provisions of
Section 19 of this Agreement. This includes any suit, action or
proceeding to compel arbitration or to enforce an arbitration award.
This also includes any suit, action, or proceeding arising out of or
relating to any post-employment employment related matters. The
Employee and the Company acknowledge that the forum designated by this
Section 20(b) has a reasonable relation to this Agreement, and to the
Employee's relationship to the Company. Notwithstanding the foregoing,
nothing herein shall preclude the Company or Employee from bringing
any action or proceeding in any other court for the purpose of
enforcing the provisions of Sections 19 or 20 of this Agreement.
(c) The agreement of the Employee and the Company as to forum is
independent of the law that may be applied in the action, and the
Employee and the Company agree to such forum even if the forum may
under applicable law choose to apply non-forum law. The Employee and
the Company hereby waive, to the fullest extent permitted by
applicable law, any objection which the Employee or the Company now or
hereafter may have to personal jurisdiction or to the laying of venue
of any such suit, action or proceeding in any court referred to in
Section 20(b) of this Agreement. The Employee and the Company
undertake not to commence any action arising out of or relating to or
concerning this Agreement in any forum other than a forum described in
Section 20(b) of this Agreement. The Employee and the Company agree
that, to the fullest extent permitted by applicable law, a final and
non-appealable judgment in any such suit, action or proceeding in any
such court shall be conclusive and binding upon the Employee and the
Company.
IN WITNESS WHEREOF, the parties have duly executed this Agreement which
shall be effective as of the effective date noted above.
NEUROGEN CORPORATION
By:/S/ STEVE DAVIS
---------------------------------
Name: Steve Davis
Title: Chief Business Officer
By:/S/ JULIAN BAKER
---------------------------------
Name: Julian Baker
Title: Director and Chairman of the
Executive Committee
/S/ WILLIAM KOSTER
------------------------------------
Dr. William Koster
Exhibit 10.34
SEVERANCE AGREEMENT
This agreement (the "Agreement'), effective as of September 7, 2001, (the
"Effective Date') is made by and between Neurogen Corporation, a Delaware
corporation (the Company'), and Harry H. Penner, Jr., an individual
(`Employee').
Whereas, the Employee and the Company have mutually agreed that the
Employees status as an employee of the Company will terminate on the Effective
Date.
Now, the Company and the Employee agree as follows:
1. Termination of Employment Agreement. Except as specifically set forth
herein, the Employment Agreement, dated as of December 1, 1993, as
previously amended, (the "Employment Agreement") between the Company and
the Employee shall be terminated as of the Effective Date arid,
notwithstanding anything in the Employment Agreement to the contrary, the
Employee shall be entitled only to the rights and benefits specified in
this Agreement and any other rights, benefits or obligations specified in
the Employment Agreement shall be void.
2. Salary Through the Effective Date. The Employees current salary shall be
paid through the Effective Date.
3. Additional Severance Benefits. Employee also shall be entitled to the
following benefits:
(i) For twelve months following the Effective Date, so long as the
Employee remains eligible for coverage under the Company's insurance
plans (pursuant to COBRA or otherwise), the Company will assume
responsibility for the cost of continued medical, dental, disability,
and life (up to a maximum death benefit of $1,000,000.00) insurance
coverage under such plans. Employee and the Company acknowledge that
in order to continue eligibility for some or all of such plans the
Employee may be required to elect to continue such coverage pursuant
to COBRA.
(ii) The remaining balance of $28,571.43, of the Employees $200,000.00
seven-year forgivable loan dated August 1, 1995, shall be forgiven in
full on the Effective Date.
(iii)The unvested Neurogen employee stock options currently held by the
Employee, as specified in the attached Schedule A (the `Options'),
shall be fully vested and exercisable as of the Effective Date. In all
other respects, each of such Options shall continue to be subject to
the terms (including without limitation, terms relating to the timing
of expiration of options held by former employees) of the Neurogen
Corporation 1993 Omnibus Incentive Plan.
(iv) The Company shall pay Employee a gross bonus of $207,000.00 (less
customary withholdings) within 10 business days of the Effective Date.
(v) Employee shall be entitled to keep the Company computer equipment he
is currently using.
3. Board of Directors. The employee hereby resigns from the Neurogen
Corporation Board of Directors, effective as of the Effective Date.
4. Release.
(a) The Employee and his heirs, assigns and agents irrevocably and
unconditionally releases any and all claims described in subsection
(b), below, that the Employee may have against the Company and all of
its employees, officers, directors, insurers, employee benefit
programs (and the trustees, administrators and fiduciaries of such).
(b) Except as provided in subsection (6), the claims released include all
claims, promises, debts, causes of action or similar rights of any
type or nature the Employee has or had which in any way relate to (1)
the Employee's employment with the Company, or the termination of that
employment, such as claims for compensation, bonuses, commissions,
lost wages or unused accrued vacation or sick pay, (2) the design or
administration of any employee benefit program or the Employees
entitlement to benefits under any such program, (3) any rights the
Employee has to severance or similar benefits under any program,
policy or procedure of the Company, including the Employment
Agreement, (4) any rights the Employee may have to the continued
receipt of health or life insurance-type benefits, (5) any claims to
attorneys fees or other indemnities, and (6) any other claims or
demands the Employee may on any basis have. The Employee acknowledges
that his release covers both claims that the Employee knows about and
those the Employee does not know about and understands the
significance of releasing claims he may have. The claims released, for
example, may have arisen under any of the following statutes or common
law doctrines: (i) anti-discrimination statutes, such as the Age
Discrimination in Employment Act and Executive Order 11141, which
prohibit age discrimination in employment; Title VII of the Civil
Rights Act of 1964, § 1981 of the Civil Rights Act of 1S66 and
Executive Order 11246, which prohibit discrimination based on race,
color, national origin, religion or sex; the Equal Pay Act, which
prohibits paying men and women unequal pay for equal work; the
American With Disabilities Act and § § 503 and 504 of the
Rehabilitation Act of 1973, which prohibit discrimination against the
disabled; and any other federal, state or local laws or regulations
prohibiting employment discrimination and (ii) other employment laws,
such as any federal, state or local law (including public policy or
common law) or regulation providing workers compensation benefits,
restricting an employers right to terminate employees or otherwise
regulating employment; any federal state or local law enforcing
express or implied employment contracts or requiring an employer to
deal with employees fairly or in good faith; and any other federal,
state or local laws providing recourse for alleged wrongful discharge
(including any whistle blower claim), physical or personal injury,
emotional distress and similar or related claims.
(c) Notwithstanding the above, this Agreement does not release the
Employee's right to enforce this Agreement.
5. General Provisions.
(a) This is the entire Agreement between the Employee and the Company
relating to the subject matter of the Agreement; it may not be
modified or canceled in any manner except by a writing signed by both
the Company and the Employee.
(b) This Agreement shall be construed as a whole according to its fair
meaning, and not strictly for or against any of the parties. Paragraph
headings used in this Agreement are intended solely for convenience of
reference and shall not be used in the interpretation of any of this
Agreement.
(c) This Agreement shall be governed by the laws of the State of
Connecticut, excluding any choice of law statutes.
(d) The Company and the Employee both agree that, without the receipt of
further consideration, they will sign and deliver any documents and do
anything else that is necessary in the future to make the provisions
of this Agreement effective.
(e) Any dispute or claim about the validity, interpretation, effect or
alleged violations of this Agreement must be submitted to arbitration
in New Haven, Connecticut before an experienced employment arbitrator
licensed to practice law in Connecticut and selected in accordance
with the Commercial Arbitration Rules of the American Arbitration
Association. Arbitration shall take place in accordance with the
Employment Dispute Resolution rules of the American Arbitration
Association. The arbitrator may not modify or change this Agreement in
any way. Each party shall pay the fees of their respective attorneys,
the expenses of their witnesses and any other expenses connected with
the arbitration, but all other costs of the arbitration, including the
fees of the arbitrator cost of any record or transcript of the
arbitration, administrative fees and other fees and costs shall be
paid in equal shares by the Employee and the Company. Arbitration in
this manner shall be the exclusive remedy for any dispute or claim
under this Agreement.
(f) Notwithstanding anything in this Agreement to the contrary, any and
all obligations of the Employee under the Proprietary Information and
Inventions Agreement between the Company and the Employee shall
survive his employment with the Company and any termination of the
Employment Agreement.
In witness whereof, the parties have duly executed this agreement as of the
date specified above.
NEUROGEN CORPORATION
By:/s/ STEPHEN R. DAVIS
------------------------
Stephen R. Davis
EMPLOYEE
By:/s/ HARRY H. PENNER
------------------------
Harry H. Penner
Schedule A
Harry H. Penner. Jr.
Previously Unvested Stock Options
Vested As of September 7, 2001
Shares
Vested
as of New
Exercise Termination Expiration
Grant Date Grant Type Price Date Date
- ---------- ---------- -------- ----------- ----------
12/3/96 Incentive $18.38 5,442 9/7/05
12/3/96 Non-qual. $18.38 10,558 9/7/05
12/31/97 Incentive $13.50 7,407 9/7/05
12/31/97 Non-qual. $13.50 16,000 9/7/05
12/31/97 Non-qual. $13.50 8,593 9/7/05
12/31/98 Non-qual. $17.50 11,250 9/7/05
12/31/98 Non-qual. $17.50 11,250 9/7/05
