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 June 30, 2000
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 August 14, 2000 the registrant had 17,265,616 shares of Common Stock
outstanding.
NEUROGEN CORPORATION
INDEX
Page
Number
Part I - Financial Information
Item 1. Consolidated Financial Statements.................................. 1
Consolidated Balance Sheets at June 30, 2000 and
December 31, 1999................................................. 1,2
Consolidated Statements of Operations for the three-month and
six-month periods ended June 30, 2000 and 1999 ................... 3
Consolidated Statements of Cash Flows for the six-month periods
ended June 30, 2000 and 1999 ..................................... 4
Notes to Consolidated Financial Statements......................... 5,6
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations............................................. 7-11
Item 3. Quantitative and Qualitative Disclosures About Market Risk......... 11
Part II - Other Information
Item 1. Legal Proceedings................................................. 12
Item 2. Changes in Securities and Use of Proceeds......................... 12
Item 3. Defaults upon Senior Securities................................... 12
Item 4. Submission of Matters to a Vote of Security Holders............... 12
Item 5. Other Information................................................. 13
Item 6. Exhibits and Reports on Form 8-K.................................. 13
Signature ................................... ........................... 15
Exhibit Index ........................................................... 16-18
PART I - FINANCIAL INFORMATION
ITEM 1 - CONSOLIDATED FINANCIAL STATEMENTS
NEUROGEN CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands)
JUNE 30, 2000 DECEMBER 31, 1999
(UNAUDITED) (AUDITED)
-------------- -----------------
Assets
Current assets:
Cash and cash equivalents $ 102,644 $ 31,588
Marketable securities 13,800 33,441
Receivables from corporate partners 1,568 286
Other current assets 676 921
------------- ---------------
Total current assets 118,688 66,236
Property, plant & equipment:
Land and land improvements 875 875
Building and building improvements 16,825 16,834
Construction in progress 2,061 1,702
Leasehold improvements 4,026 4,026
Equipment 12,257 11,440
Furniture 588 578
--------------- ----------------
36,632 35,455
Less accumulated depreciation & amortization 11,063 9,840
--------------- ----------------
Net property, plant and equipment 25,569 25,615
Other assets, net 312 283
--------------- ----------------
$ 144,569 $ 92,134
=============== ================
See accompanying notes to consolidated financial statements.
1
NEUROGEN CORPORATION
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
JUNE 30, 2000 DECEMBER 31, 1999
(UNAUDITED) (AUDITED)
----------------- -----------------
Liabilities & Stockholders' Equity
Current liabilities:
Accounts payable and accrued expenses $ 5,020 $ 2,704
Unearned revenue from corporate partners, current portion 9,393 1,260
----------------- ------------------
Total current liabilities 14,413 3,964
Loans payable 1,912 1,912
Unearned revenue from corporate partners, long term portion 6,250 1,500
Other compensation 23 48
----------------- ------------------
Total liabilities 22,598 7,424
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
17,254 shares at June 30, 2000 and 14,800 shares
at December 31, 1999 431 370
Subscription receivable (3,750) -
Additional paid-in capital 167,125 114,519
Accumulated deficit (40,169) (26,852)
Deferred compensation (1,457) (3,076)
Accumulated other comprehensive income (209) (251)
----------------- ------------------
Total stockholders' equity 121,971 84,710
----------------- ------------------
$ 144,569 $ 92,134
================= ==================
See accompanying notes to consolidated financial statements.
2
NEUROGEN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
THREE MONTHS THREE MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30, 2000 JUNE 30, 1999 JUNE 30, 2000 JUNE 30, 1999
(UNAUDITED) (UNAUDITED) (UNAUDITED) (UNAUDITED)
---------------- --------------- -------------- -------------
Operating revenues:
License fees $ 2,117 $ - $ 2,367 $ -
Research and development 2,398 2,343 4,989 4,980
---------------- --------------- ------------- -------------
Total operating revenues 4,515 2,343 7,356 4,980
Operating expenses:
Research and development 6,641 5,893 13,080 11,727
General and administrative 1,525 1,022 2,929 2,121
Stock Compensation 75 29 6,671 51
---------------- ---------------- ------------- -------------
Total operating expenses 8,241 6,944 22,680 13,899
---------------- ---------------- ------------- -------------
Operating loss (3,726) (4,601) (15,324) (8,919)
Other income (expense):
Investment income 1,079 887 2,008 1,800
Interest expense (1) (2)
---------------- ---------------- ------------- -------------
Total other income, net 1,709 886 2,008 1,798
---------------- ---------------- ------------- -------------
Loss before provision for income taxes (2,647) (3,715) (13,316) (7,121)
Provision for income taxes - - - -
---------------- ---------------- ------------- -------------
Net loss $ (2,647) $ (3,715) $ (13,316) $ (7,121)
================ ================ ============= =============
Net loss per share:
Basic $ (0.17)(1) $ (0.26)(1) $ (0.86)(1) $ (0.49)(1)
================ ================ ============= =============
Diluted $ (0.17)(1) $ (0.26)(1)$ (0.86)(1)$ (0.49)(1)
================ ================ ============= =============
Shares used in calculation of loss per share:
Basic 15,592 (1) 14,554 (1) 15,512(1) 14,551(1)
================ ================ ============= =============
Diluted 15,592 (1) 14,554 (1) 15,512(1) 14,551(1)
================ ================ ============= =============
See accompanying notes to consolidated financial statements.
(1) The contingently issuable common stock securities have not been included in
accordance with FAS128.
3
NEUROGEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
SIX MONTHS SIX MONTHS
ENDED ENDED
JUNE 30, 2000 JUNE 30, 1999
(UNAUDITED) (UNAUDITED)
----------------- ---------------
Cash flows from operating activities:
Net loss $ (13,316) $ (7,121)
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Depreciation and amortization expense 1,075 1,260
Stock compensation expense 6,671 51
Other noncash compensation 287 256
Loss on disposal of assets 34 -
Changes in operating assets and liabilities:
Increase (decrease) in accounts payable and accrued expenses 37 (946)
Increase in unearned revenue from corporate partners 12,883 3,000
(Increase)decrease in receivable from corporate partners (1,282) 455
Decrease in other assets, net 153 203
----------------- ---------------
Net cash provided by (used in) operating activities 6,542 (2,842)
Cash flows from investing activities:
Purchase of plant and equipment (991) (605)
Purchases of marketable securities (1,578) (11,858)
Maturities and sales of marketable securities 21,261 36,316
----------------- ---------------
Net cash provided by investing activities 18,692 23,853
Cash flows from financing activities:
Exercise of employee stock options 8,622 284
Proceeds from private placement of common stock 37,200 -
Principal payments under mortgage payable - (74)
----------------- ---------------
Net cash provided by financing activities 45,822 210
----------------- ---------------
Net increase in cash and cash equivalents 71,056 21,221
Cash and cash equivalents at beginning of period 31,588 26,066
----------------- ---------------
Cash and cash equivalents at end of period $ 102,644 $ 47,287
================= ===============
See accompanying notes to consolidated financial statements.
4
Neurogen Corporation
Notes to Consolidated Financial Statements
June 30, 2000
(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, 1999 included in the
Company's Annual Report on Form 10-K. Interim results are not
necessarily indicative of the results that may be expected for the
fiscal year.
(2) REVENUE RECOGNITION
Revenue under research and development arrangements is recognized
as earned under the terms of the respective agreements. License
payments under separate license agreements are recorded when received
and the license agreements are signed and there are no continuing
obligations on the part of the Company. When further efforts are
required, the license fees are recognized over the related term.
Product research funding is recorded as revenue, generally on a
quarterly basis, as research effort is incurred. Deferred revenue
arises from payments received which have not yet been earned under
research and development as well as in arrangements in contracts where
both research and development and licensing are included and Neurogen
has some level of continued involvement.
In December 1999, the staff of the Securities and Exchange
Commission issued its Staff Accounting Bulletin ("SAB") No. 101,
REVENUE RECOGNITION. 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. Changes in accounting
policies to apply the guidance of SAB No. 101 must be adopted by
recording the cumulative effect of the change in the fiscal quarter
ending December 31, 2000.
SAB No. 101 requires that license and other up front fees from
research collaborations be recognized over the term of the agreement
unless the fee is in exchange for products delivered or services
performed that represent the culmination of a separate earnings
process. The Company believes its current revenue recognition policy
is in compliance with SAB No. 101 and the application of the guidance
to their financial statements will not result in a material change
upon adoption in the fourth quarter of 2000.
(3) 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.
(4) SEGMENT INFORMATION
In 1998, the Company adopted Statement of Financial Accounting
Standards No. 131, Disclosures about Segments of an Enterprise and
Related Information (SFAS No. 131). SFAS No. 131 supersedes SFAS No.
14, Financial Reporting for Segments of a Business Enterprise,
replacing the "industry segment" approach with the "management"
approach. The management approach designates the internal organization
that is used by management for making operating decisions and
assessing performance as the source of the Company's reportable
segments. The Company operates in one segment: drug discovery and
pharmaceutical development. SFAS No. 131 also requires disclosures
about products and services, geographic area, and major customers. The
adoption of SFAS No. 131 had no impact on the Company's financial
statements for the periods presented.
(5) RECLASSIFICATIONS
Certain reclassifications have been made to the 1999 financial
statements in order to conform to the 2000 presentation.
5
(6) NON-CASH COMPENSATION CHARGE
At December 31,1999, 137,625 shares of restricted stock were held
by certain employees. The original December 31, 1998 grant stipulated
that if the stock price closed at or above $45.00 per share within
four years from date of grant the restriction would be removed and the
employee would be able to trade the stock, but if the stock price did
not close at or above $45.00 within four years the shares would be
forfeited.
On February 18, 2000, Neurogen stock closed the trading day at
$47.25, thereby removing the restriction and vesting the stock
immediately. A non-recurring, non-cash charge to income of $6,503,000
for all 137,625 shares at $47.25 per share was recorded in the first
quarter of 2000.
(7) PRIVATE PLACEMENT
On June 30, 2000, the Company entered into a private placement
agreement with certain institutional investors, pursuant to which the
Company issued 1,638,000 shares of its common stock at $25.00 per
share for gross proceeds of $40,950,00, of which $37,200,000 was
received by June 30th. The Company also incurred cash expenses of
approximately $2,500,000 in connection with the private placement,
which will result in total net proceeds of $38,450,000.
6
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 three collaborative research agreements and one
technology transfer agreement entered into with Pfizer, one
collaboration with Schering-Plough, one license agreement with
American Home Products and from interest income.
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 expected to increase for the foreseeable future.
THREE MONTHS ENDED JUNE 30, 2000 AND 1999
The Company's operating revenues increased to $4.5 million for
the three months ended June 30, 2000 as compared to $2.3 million for
the same period in 1999. This increase in operating revenues was due
to the recognition of $2.2 million in revenue recognized under the
Pfizer Technology Transfer Agreement (described below). Operating
revenues in future periods may fluctuate significantly due to many
factors, including those described throughout this section.
Research and development expenses increased 13 percent to $6.6
million for the three-month period ended June 30, 2000 as compared to
$5.9 million for the same period in 1999. The increase is primarily
due to increases in research and development personnel as well as the
Company's further expansion of its AIDD Program for the discovery of
new drug candidates. Research and development expenses represented 81
percent and 85 percent of total expenses in the three month periods
ended June 30, 2000 and 1999, respectively.
General and administrative expenses increased 49 percent to $1.5
million for the three-month period ended June 30, 2000 as compared to
$1.0 million for the same period in 1999. This increase is attributed
to additional administrative and technical services, and personnel to
support the protection of Neurogen's growing intellectual property
estate and the pursuit of potential collaborative relationships to
support and commercialize Neurogen's expanding research pipeline.
Other income, consisting primarily of interest income and gains
and losses from invested cash and marketable securities, increased 22
percent for the second quarter of 2000 as compared to the same period
in 1999 due primarily to higher available interest rates.
The Company recognized a net loss of $2.6 million for the three
months ended June 30, 2000 as compared with a net loss of $3.7 million
for the same period in 1999. The decrease in the net loss is primarily
due to the recognition of $2.2 million in revenue under the Pfizer
Technology Transfer Agreement in the second quarter of 2000, offset by
increases in general and administrative and research and development
expenses due to the factors described above.
7
SIX MONTHS ENDED JUNE 30, 2000 AND 1999
The Company's operating revenues increased to $7.4 million for
the six months ended June 30, 2000 from $5.0 million for the same
period in 1999. The increase in operating revenues was due to the
recognition of $2.4 million in revenue under the Pfizer Technology
Transfer Agreement (described below). Operating revenues in future
periods may fluctuate significantly due to many factors, including
those described throughout this section.
Research and development expenses increased 12 percent to $13.1
million for the six months ended June 30, 2000 as compared to $11.8
million for the same period in 1999. This increase is primarily due to
increases in research and development personnel as well as the
Company's further expansion of its AIDD Program for the discovery of
new drug candidates. Research and development expenses represented 81
percent of total operating expenses (excluding a non-recurring,
non-cash compensation charge) for the six-month period ended June 30,
2000 as compared to 84 percent for the same period in 1999.
General and administrative expenses increased 38 percent to $2.9
million for the six-month period ended June 30, 2000 as compared to
$2.1 million for the same period in 1999. This increase is attributed
to additional administrative and technical services, and personnel to
support the protection of Neurogen's growing intellectual property
estate and the pursuit of potential collaborative relationships to
support and commercialize Neurogen's expanding research pipeline.
Other income, consisting primarily of interest income and gains
and losses from invested cash and marketable securities, increased to
$2.0 million for the six months ended June 30, 2000 as compared to
$1.8 million for the same period in 1999, due primarily to higher
available interest rates.
The Company recognized a net loss of $13.3 million for the six
months ended June 30, 2000 as compared with a net loss of $7.1 million
for the same period in 1999. The increase in net loss is primarily due
to a non-recurring non-cash $6.5 million charge recognized in the
first quarter of 2000 upon the vesting of 137,625 shares of restricted
stock granted to certain employees in 1998.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 2000 and December 31, 1999, cash, cash equivalents
and marketable securities were in the aggregate $116.4 million and
$65.0 million respectively. This increase was due primarily to the
receipt in the first half of 2000 of $37.2 million from a private
placement of common stock, $8.7 million in stock option exercises, and
the receipt of $14.0 million in payments from Pfizer under the
Technology Transfer Agreement described below. While the Company's
aggregate level of cash, cash equivalents and marketable securities
increased during the first half of 2000, 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 or technology transfer arrangements and interest earned
on invested funds. The Company's financing activities include private
placement offerings of its common stock, three prior to its initial
public offering and one subsequent, underwritten public offerings of
the Company's common stock in 1989, 1991 and 1995, and the private
sale of common stock to Pfizer in connection with entering into the
Pfizer Agreements and to American Home Products in a licensing
agreement. Total funding received from these financing activities was
approximately $142.8 million. The Company's expenditures to date have
been primarily to fund research and development and general and
administrative expenses and to construct and equip its research and
development facilities.
8
In the first quarter of 1992, the Company entered into 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.
As of June 30, 2000, Pfizer had provided $38.7 million of research
funding to the Company pursuant to the 1992 Pfizer Agreement, as
extended, and $0.5 million for the achievement of certain clinical
development and regulatory milestones. Neurogen is eligible to receive
additional milestone payments of up to $12.0 million if certain
development and regulatory objectives are achieved regarding its
products subject to the collaboration. In return, Pfizer received the
exclusive rights to manufacture and market collaboration anxiolytics
and cognition enhancers that act through the family of receptors which
interact with the neuro-transmitter GABA. Pfizer will pay Neurogen
royalties based upon net sales levels, if any, for such products.
Neurogen and Pfizer entered into their second collaborative
agreement, the 1994 Pfizer Agreement, in July 1994, 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 June 30, 2000, Pfizer had
provided $12.6 million of research funding to the Company pursuant to
the 1994 Pfizer Agreement, as extended, and $0.3 million for the
achievement of a clinical development milestone. Neurogen could also
receive additional milestone payments of up to $3.0 million if certain
development and regulatory objectives are achieved regarding its
products subject to the collaboration. In return, Pfizer received the
exclusive rights to manufacture and market GABA-based sleep disorder
products for which it will pay Neurogen royalties based upon net sales
levels, if any.
In December 1996 and again in December 1998, Neurogen and Pfizer
extended and combined Neurogen's research efforts under the 1992 and
1994 Agreements. Pursuant to the extension agreements, Neurogen has
received $3.1 million in the first six months of 2000 (which amount is
included in the above-described cumulative totals received for the
1992 and 1994 agreements) and under the extension expects to receive
an additional $3.1 million during the remainder of 2000 for research
and development funding of the Company's GABA-based anxiolytic,
cognitive enhancer and sleep disorders projects.
Under both the 1992 Pfizer Agreement and the 1994 Pfizer
Agreement, in addition to making the equity investments and the
research and milestone payments noted above, Pfizer is responsible for
funding the cost of all clinical development and the manufacturing and
marketing, if any, of drugs developed from the collaborations.
9
Neurogen and Pfizer entered into their third collaborative
agreement, the 1995 Pfizer Agreement, in November 1995, pursuant to
which Pfizer made an additional $16.5 million equity investment in the
Company bringing Pfizer's ownership of the Company's common stock up
to approximately 21 percent. Pfizer also paid a $3.5 million license
fee. Additionally Pfizer agreed, among other things, to fund a
specified level of resources for up to five years 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. As of June 30, 2000, Pfizer had provided $13.0 million in
research funding pursuant to the 1995 Pfizer Agreement. In 1998,
Pfizer exercised its option under the 1995 Pfizer Agreement to extend
the NPY research program and also agreed to fund increased Neurogen
staffing on the program and thereby pay Neurogen $3.1 million to fund
a fourth year of research, through October 1999. In 1999, Pfizer
elected to further extend the research program through October 2000
and to pay Neurogen $2.6 million in 2000 for research done through
that date. Neurogen could also receive milestone payments of up to
approximately $28.0 million if certain development and regulatory
objectives are achieved regarding its products subject to the
collaboration. As part of this third collaboration, Pfizer received
the exclusive worldwide rights to manufacture and market NPY-based
collaboration compounds, subject to certain rights retained by
Neurogen. Pursuant to the 1995 Pfizer Agreement, Neurogen will fund a
minority share of early stage clinical development costs and has
retained the right to manufacture any collaboration products in NAFTA
countries. Neurogen has also retained a profit sharing option with
respect to product sales in NAFTA countries. If Neurogen exercises the
profit sharing option, it will fund a portion of the cost of late
stage clinical trials and marketing costs and in return receive a
specified percentage of any profit generated by sales of collaboration
products in NAFTA countries. If Neurogen chooses not to exercise its
profit-sharing option, Pfizer would pay Neurogen royalties on drugs
marketed in NAFTA countries and will fund a majority of early stage
and all late stage development and marketing expenses. In either case
Neurogen would be entitled to royalties on drugs marketed in non-NAFTA
countries.
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 $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 June 30,
2000, Pfizer had provided $17.0 million in license fees pursuant to
the Pfizer AIDD agreement of which $2.9 million has been recognized 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.
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, as supplemented by research funding
pursuant to the Pfizer Agreements and fees it expects to receive under
the Pfizer Technology Transfer Agreement, will be sufficient to fund
its current and planned operations through 2002. 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 preclinical
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.
10
As of December 31, 1999, the Company had approximately $37.1
million and $2.8 million of net operating loss carryforwards and
research and development credits, respectively, available for federal
income tax purposes which expire in the years 2004 through 2019. The
Company also had approximately $25.6 million and $0.7 million of
Connecticut state tax net operating loss carryforwards and research
and development credits, respectively, which expire in the years 2000
through 2014. Because of "change in ownership" provisions of the Tax
Reform Act of 1986, our utilization of our net operating loss and
research and development credit carryforwards may be subject to an
annual limitation in future periods.
DISCUSSION OF THE YEAR 2000 ISSUE
Neurogen's program to address the Year 2000 issue consisted of
assessment, remediation, testing and contingency planning. The
Company's program was initiated and executed to prevent major
interruptions in the business due to Year 2000 problems. As of
December 31, 1999, all phases were completed. The Company did not
experience any significant disruption as a result of the Year 2000
issue. The total cost of the Year 2000 program was approximately
$200,000, primarily for the cost of replacing/upgrading noncompliant
software.
The Company completed its assessment of Year 2000 risks related
to significant relationships with critical third party suppliers and
customers. Despite these efforts, there can be no assurance that all
supplier and customer Year 2000 compliance plans were successfully
completed in a timely manner, although the Company is not currently
aware of any problems which would significantly impact operations.
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.
11
Part II - Other Information
Item 1. Legal Proceedings
Not applicable for the second quarter ended June 30, 2000.
Item 2. Changes in Securities
On June 28, 2000, the Company entered into definitive purchase
agreements with selected institutional investors for the sale of
newly-issued common stock in the aggregate of 1,638,000 shares at a
price of $25.00 per share, resulting in total cash proceeds of
$40,950,000. The net proceeds will be utilized in applying the
Company's AIDD technologies to new drug discovery targets emerging
from the sequencing of the human genome.
The shares of common stock sold in the offering were not
registered pursuant to the exemptions in section 4(2) of Regulation D
under the Securities Act of 1993 as amended, and could not be offered
or sold absent registration or an applicable exemption from
registration. The Company filed a registration statement on July 14,
2000, to register the shares for resale.
Item 3. Defaults upon Senior Securities
Not applicable for the second quarter ended June 30, 2000.
Item 4. Submission of Matters to a Vote of Security Holders
On June 19, 2000, the Company held its annual meeting of
stockholders (i) to elect a board of twelve directors (Proposal
1);(ii)to adopt the Neurogen Corporation 2000 Non-Employee Directors
Stock Option Program (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 ending
December 31, 2000 (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. 11,522,406 10,128
Julian C. Baker 11,522,406 10,128
Barry M. Bloom, Ph.D. 11,522,406 10,128
Robert N. Butler 11,522,406 10,128
Frank C. Carlucci 11,522,506 10,028
Jeffrey J. Collinson 11,522,606 9,928
Mark Novitch, M.D. 11,522,606 9,928
Harry H. Penner, Jr. 11,522,606 9,928
Robert H. Roth, Ph.D. 11,522,606 9,928
John Simon 11,522,606 9,928
John F. Tallman, Ph.D. 11,522,606 9,928
Suzanne H. Woolsey, Ph.D. 11,522,606 9,928
All of the Directors elected are continuing their term of office as
Directors after the annual meeting.
The Stockholders approved Proposal 2, voting as follows:
Affirmative Votes Negative Votes Votes Abstained
----------------- -------------- ---------------
Proposal 2 10,885,742 640,267 6,525
The Stockholders approved Proposal 3, voting as follows:
Affirmative Votes Negative Votes Votes Abstained
----------------- -------------- ---------------
Proposal 3 11,526,951 2,303 3,280
12
Item 5. Other Information
Not applicable for the second quarter ended June 30, 2000.
Item 6. Exhibits and Reports on Form 8-K
(a) See Exhibit Index on page 16.
(b) The Company filed a Current Report on Form 8-K on July 12,
2000 to submit for filing a News Release of the Company
dated June 29, 2000 disclosing definitive purchase agreements
for the sale of newly-issued common stock by the Company
to selected institutional investors on June 28, 2000.
13
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
for the year ended December 31, 1999, each of which could adversely
affect the Company's business and the accuracy of the forward-looking
statements contained herein.
14
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
Senior Vice President
and Chief Business Officer
Date: August 14, 2000
15
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 - Open-End Mortgage Deed and Security Agreement between the Company and
Orion Machinery & Engineering Corp., dated March 16, 1989
(incorporated by reference to Exhibit 10.15 to Registration Statement
No. 33-29709 on Form S-1).
10.10 - Form of Proprietary Information and Inventions Agreement
(incorporated by reference to Exhibit 10.31 to Registration Statement
No. 33-29709 on Form S-1).
10.11 - Warrant to Purchase 47,058 Shares of Common Stock to MMC/GATX
Partnership No. I, dated February 20, 1991 (incorporated by reference
to Exhibit 10.34 to the Company's Form 10-K for the fiscal year ended
December 31, 1990).
10.12 - 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).
10.13 - License Agreement between the Company and the National Technical
Information Service, dated as of January 1, 1992 (incorporated by
reference to Exhibit 10.36 to the Company's Form 10-K for the fiscal
year ended December 31, 1991).
10.14 - Cooperative Research and Development Agreement between the Company and
the National Institutes of Health, dated as of January 21, 1993
(incorporated by reference to Exhibit 10.37 to the Company's Form 10-K
for the fiscal year ended December 31, 1991).
10.15 - 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).
10.16 - 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).
16
10.17 - 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).
10.18 - 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).
10.19 - Registration Rights and Standstill Agreement among the Company and the
Persons and Entities listed on Schedule I thereto, dated as of July
11, 1994 (incorporated by reference to Exhibit 10.29 to the Company's
Form 10-Q for the quarterly period ended September 30, 1994).
10.20 - 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).
10.21 - 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).
10.22 - 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).
10.23 - 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).
10.24 - 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).
10.25 - Licensing 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).
10.26 - 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).
10.27 - Technology Agreement dated as of June 15, 1999 between the Company
and Pfizer Inc (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).
10.28 - 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).
10.29 - 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).
10.30 - 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).
17
10.31 - Neurogen Corporation 2000 Non-Employee Directors Stock Option Program.
10.32 - Form of 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.
10.33 - Registration Rights Agreement dated as of June 26, 2000 between the
Company and the Purchasers listed on Exhibit A thereto.
27.1 - Financial Data Schedule
18
EXHIBIT 10.31
NEUROGEN CORPORATION
2000 NON-EMPLOYEE DIRECTORS STOCK OPTION PROGRAM
1. Purpose. The purpose of the Neurogen Corporation 2000 Non-Employee
Directors Stock Option Program (the "Program") is to promote the interests
of Neurogen Corporation (the "Company") and its shareholders by
strengthening the Company's ability to attract and retain the services of
experienced and knowledgeable non-employee directors through formula grants
of non-qualified stock options to acquire the Company's Common Stock, par
value $.025 per share. In addition, such grants will encourage the closer
alignment of the interests of such directors with those of the Company's
shareholders.
2. Definitions. For purposes of the Program, the following terms shall have
the meanings set forth below:
2.1 "Annual Grant" shall have the meaning set forth in Section
4.3 of the Program. 2.2 "Annual Meeting" means the annual
meeting of the Company's shareholders for any fiscal year as
determined by the Company's By-Laws.
2.3 "Award Agreement" means the stock option agreement executed
by each of the Eligible Directors pursuant to Sections 4 and
10.3 of the Program in connection with the granting of the
options hereunder.
2.4 "Board" means the Board of Directors of the Company, as
constituted from time to time.
2.5 "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.
2.6 "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.
2.7 "Committee" shall have the meaning set forth in Section 3.3
of the Program.
2.8 "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.
2.9 "Company" means Neurogen Corporation, a Delaware
corporation, or any successor corporation to Neurogen
Corporation.
2.10 "Eligible Director" means any Non-Employee Director of the
Company who becomes a member of the Board.
2.11 "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.
2.12 "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.
2.13 "Grant Date" means the date on which an Initial Grant or an
Annual Grant is made to an Eligible Director.
2.14 "Initial Grant" shall have the meaning set forth in Section
4.2 of the Program.
2.15 "Non-Employee Director" means any director of the Company
who is not, and who has not been for at least one year
preceding the commencement of his or her membership on the
Board, an employee of the Company, or any parent or
subsidiary companies of the Company.
2.16 "Option Period" shall have the meaning set forth in Section
4.7 of the Program.
2.17 "Option Shares" shall have meaning set forth in Section 3.2
of the Program.
2.18 "Option(s)" means the stock option(s) to acquire shares of
Common Stock granted pursuant to the provisions of Section 4
of the Program and the relevant Award Agreement.
2.19 "Program" means the Neurogen Corporation 2000 Non-Employee
Directors Stock Option Program, 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 in
accordance with Section 3.4 of the Program).
2.20 "Reelected Director" means an Eligible Director who
previously received an Initial Grant, terminated service as
a director of the Company and is subsequently elected or
appointed to the Board.
2.21 "SEC" means the Securities and Exchange Commission, or any
successor governmental agency.
2.22 "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.
2.23 "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.
2.24 "Termination" means a termination of an Eligible Director's
membership on the Board.
3. Term of the Program; Common Stock Subject to the Program; Administration.
3.1 Term. The Program shall continue in effect until it is
terminated by action of the Board or of the Company's
shareholders, but any such termination shall not affect the
terms of any then outstanding Options.
3.2 Common Stock. The maximum number of shares of Common Stock
in respect of which Options may be granted under the
Program, subject to adjustment as provided in Section 8.2 of
the Program, shall not exceed two hundred thousand (200,000)
shares (the "Option Shares"). 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 the Program. Common Stock which
may be issued under the Program 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) and which are being held as treasury shares.
No fractional shares of Common Stock shall be issued under
the Program. If any Option granted under the Program expires
or terminates for any reason without having been exercised
in full, the Option Shares subject to, but not delivered
under, any such Option may become available for the grant of
other Options under the Program.
3.3 The Committee. Subject to the terms and provisions of the
Program, the Program shall be administered by a committee
selected by the Board (the "Committee").
3.4 Program Administration and Program Rules. The Committee
shall have the power to interpret and construe the terms and
provisions of the Program, to determine questions that arise
thereunder, to designate persons to carry out the day-to-day
ministerial administration of the Program under such
conditions and limitations as it may prescribe, and to
promulgate, adopt, amend and rescind such rules and
regulations for implementing and administering the Program
as the Committee deems necessary or desirable. Any
determination, decision or action of the Committee in
connection with the construction, interpretation,
administration or implementation of the Program shall be
final, binding and conclusive upon all Eligible Directors
and any person(s) claiming under or through any Eligible
Directors.
4. Non-Qualified Stock Option Grants.
4.1 Term. All Options granted under the Program shall be
nonstatutory options that are not "incentive stock options"
within the meaning of Section 422 of the Code.
4.2 Initial Grant. An initial Option to acquire five thousand
(5,000) Option Shares (as adjusted pursuant to Section 8.2
of the Program) shall be granted (an "Initial Grant") to
each Eligible Director immediately following any Annual
Meeting at which such Eligible Director is first elected by
the Company's shareholders or when such Eligible Director is
otherwise first elected or appointed by the Board to be a
director, whichever is applicable; provided, however, that a
Reelected Director shall not receive a second Initial Grant.
4.3 Annual Grant. An annual Option to acquire five thousand
(5,000) Option Shares (as adjusted pursuant to Section 8.2
of the Program) shall be granted (an "Annual Grant")
automatically each year on the anniversary of each Eligible
Director's election, reelection, appointment or
reappointment to the Board.
4.4 Exercise Price. The option exercise price per Option Share
for an Initial Grant and an Annual Grant shall be the Fair
Market Value on the Grant Date.
4.5 Method of Exercise. Upon becoming exercisable in accordance
with Section 5 of the Program, an 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.
4.6 Form of Payment. 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 an Eligible Director for at least six months and
having a Fair Market Value equal to all or a portion of the
option exercise price at the time of such exercise.
4.7 Option Period. Each Option shall expire ten years from its
Grant Date (the "Option Period"); provided, however in the
event of the Termination of an Eligible Director, any
outstanding unexercised Option of such Eligible Director
that has not vested pursuant to Section 5 of the Program
shall be deemed to be vested and shall be exercisable upon
the effectiveness of such Termination and all outstanding
and unexercised Options of such Eligible Director (whether
such Options vested prior to or at Termination) shall expire
one (1) year after the date of any such Termination or on
the stated grant expiration date, whichever is earlier.
4.8 Right to Exercise. The right of any Eligible Director (or
any person or entity receiving a transfer of an Option
directly from an Eligible Director as permitted in Section
10.5(b)) to exercise an Option granted under the Program
shall, during the lifetime of such Eligible Director (or
direct transferee) be exercisable only by such Eligible
Director (or transferee) and shall not be assignable by such
Eligible Director (or transferee) other than by will or the
laws of descent and distribution or by the Eligible director
pursuant to Section 10.5(b).
4.9 Limitation of Rights. Neither the recipient of an Option
under the Program nor an Eligible Director's transferee or
successor or successors in interest shall have any rights as
a shareholder of the Company with respect to any Option
Shares subject to an Option granted to such person until the
date of issuance of a stock certificate in respect of such
Option Shares.
4.10 Regulatory Approval. The Company shall not be required to
issue any certificate or certificates for Option Shares upon
the exercise of an Option granted under the Program or to
record as a holder of record of Option Shares the name of
the individual exercising an Option under the Program,
without obtaining to the complete satisfaction of the
Committee the approval of all regulatory bodies, if any,
deemed necessary by the Committee and without complying, to
the Committee's complete satisfaction, with all rules and
regulations under federal, state, or local law deemed
applicable by the Committee.
5. Vesting. Subject to Section 4.7 and Section 6 of the Program, one-twelfth
(1/12) of each Option (in respect of the aggregate underlying Option
Shares) shall become exercisable on the last day of each month, beginning
the last day of the month in which such Option Shares were granted.
6. Acceleration of Vesting Upon Change of Control. Anything in the Program to
the contrary notwithstanding, if a Change of Control of the Company occurs
all Options then unexercised and outstanding shall become fully vested and
exercisable as of the date of the Change of Control. The immediately
preceding sentence shall apply to only those Eligible Directors who are
members of the Board as of the date of the Change of Control.
7. Tax Reimbursement. All taxes, if any, in respect of any Option(s) granted
hereunder to the Eligible Director hereunder shall be the sole
responsibility of and shall be paid by the Eligible Director.
8. Changes in Capitalization and Other Matters.
8.1 No Corporate Action Restriction. The existence of the
Program, any Award Agreement and/or the formula grants made
hereunder 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.
An Eligible Director, any transferee or beneficiary(ies) of
any such Eligible Director 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.
8.2 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 Committee may make such adjustment
as it deems appropriate to reflect such change, including,
without limitation, with respect to the aggregate number and
class of shares of the Common Stock (or number and kind of
other securities or property) subject to and authorized by
the Program, the number and class of shares of Common Stock
(or number and kind of other securities or property) in
respect of which an Option may be granted to an Eligible
Director under the Program as provided in Section 4, the
number and class of Option Shares (or number and kind of
other securities or property) subject to each Option
outstanding and the per share (or other security or
property) exercise price specified for each Option
outstanding. In addition, upon an Adjustment Event, the
Committee may cancel any or all outstanding Options in
exchange for a payment in respect of each such Option 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 such Option and
(b) the number of shares subject to such Option.
9. Amendment; Termination. The Board may suspend or terminate the Program (or
any portion thereof) at any time and may amend the Program at any time and
from time to time in such respects as the Board may deem advisable;
provided, however, that the terms and provisions of the Program which
determine the eligibility of directors and the amount, price and timing of
the formula grants hereunder shall not be amended more than once every six
months, other than to comport with changes in the Code or the Employee
Retirement Income Security Act of 1974, as amended, and the rules
thereunder; provided, further, that without majority shareholder approval,
no such amendment shall
(a) except as provided in Section 8.2 of the Program,
materially increase the number of shares of Common
Stock which may be issued under the Program,
(b) modify in any way the requirements as to eligibility
for grants under the Program, or
(c) increase the benefits accruing to Eligible Directors
under the Program. In addition, no such amendment,
suspension or termination shall be effective if it
would materially adversely affect the rights of any
Eligible Director in respect of any outstanding Option,
without the consent of such Eligible Director.
10. Miscellaneous.
10.1 No Right to Continue as Director. Neither the adoption of
the Program, the granting of an Option, nor any other action
taken pursuant to the Program shall constitute or be
evidence of any agreement or understanding, express or
implied, that an Eligible Director has a right to continue
as a director of the Company for any period of time or at
any particular rate of remuneration.
10.2 Listing, Registration and Other Legal Compliance. No Options
or Common Stock shall be issued under the Program 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 Options and/or
Common Stock delivered under the Program 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 (or in any
Award Agreement or otherwise) for
(a) the issuance or other distribution of any Options
and/or Common Stock or
(b) the payment of amounts to any Eligible Director,
any law, rule, regulation or other requirement of any
governmental authority or agency shall require either the
Company, any Subsidiary or any Eligible Director (or any
estate, designated beneficiary or other legal representative
thereof, as the case may be and as determined by the
Committee) to take any action in connection with any such
determination, any Options 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. The Program and all transactions under the Program
are intended to comply with all applicable conditions of SEC
Rule 16b-3. To the extent any provision of the Program 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.
10.3 Award Agreements. Each Eligible Director shall, at the
request of the Company, enter into an Award Agreement with
the Company in a form specified by the Company. Each such
Eligible Director shall agree to the restrictions, terms and
conditions set forth in such Award Agreement and/or the
Program.
10.4 Designation of Beneficiary. Each Eligible Director may
designate a beneficiary or beneficiaries to exercise an
Option or to receive any payment which under the terms of
the Program and the relevant Award Agreement may become
exercisable or payable on or after the Eligible Director's
death. At any time, and from time to time, any such
designation may be changed or cancelled by the Eligible
Director 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 a deceased Eligible Director, or if
the designated beneficiaries have predeceased the Eligible
Director, the beneficiary shall be the Eligible Director's
estate. If the Eligible Director designates more than one
beneficiary, any payments under the Program to such
beneficiaries shall be made in equal shares unless the
Eligible Director has expressly designated otherwise, in
which case the payments shall be made in the shares
designated by the Eligible Director.
10.5 Non-transferability of Awards.
(a) Except as otherwise provided in clause (b) below, no
Option under the Program 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 any
Eligible Director or any beneficiary(ies) of any
Eligible Director, except by testamentary disposition
by the Eligible Director 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 an Eligible Director's debts, judgements, 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 Program shall be null and void and without legal
force or effect.
(b) During the Eligible Director's lifetime, the Eligible
Director may, with the consent of the Committee,
transfer without consideration all or any portion of an
Option to one or more members of his or her Immediate
Family (as defined below), 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; provided,
however, that any such Immediate Family, trust,
partnership or limited liability company shall agree to
be and shall be bound by the terms and provisions of
the Program, and by the terms and provisions of any
applicable outstanding Award Agreements or other
agreements covering the Options or the shares subject
to the options. For purposes of this Agreement,
"Immediate Family" means the Eligible Director'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.
10.6 Governing Law. The Program 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
Program.
10.7 Effective Date. The Program shall be effective upon its
adoption by the Board, subject to the approval of the
Program by the Company's shareholders.
EXHIBIT 10.32
NON-QUALIFIED STOCK OPTION AGREEMENT
pursuant to the
NEUROGEN CORPORATION
2000 NON-EMPLOYEE DIRECTORS STOCK OPTION PROGRAM
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 Neurogen Corporation
2000 Non-Employee Directors Stock Option Program, as in effect and as
amended from time to time (the "Program"); and
WHEREAS, it has been determined under the Program that it would
be in the best interests of the Company to grant automatically 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
considerations, the parties hereto hereby mutually convenant and agree
as follows:
1. Incorporation By Reference: Program Document Receipt. This
agreement is subject in all respect to the terms and provisions of the
Program (including, without limitation, any amendments thereto adopted
at any time and from time to time if such amendments are expressly
intended 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 Program. The Optionee hereby
acknowledges receipt of a true copy of the Program and that the
Optionee has read the Program carefully and fully understands its
content. In the event of any conflict between the terms of this
Agreement and the terms of the Program, the terms of the Program 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 4.22 of the Code.
3. Exercise of this Option.
3.1 This Option shall become exercisable in accordance with
and to the extent provided by the terms and provisions of Section
5 of the Program.
3.2 Unless earlier terminated in accordance with the terms
and provisions of the Program, 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 In no event shall this Option be exercisable for a
fractional share of Common Stock.
4. Method of Exercise and Payment. This Option shall be exercised
by the Optionee by delivering to the Secretary of the Company or his
or her designated agent on any business day (the "Exercise Date") a
written notice, in such manner and form as may be required by the
Company, specifying the number of the Option Shares the Optionee then
desires to acquire (the "Exercise Notice"). The Exercise Notice shall
be accompanied by payment in full 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 4.6 of the Program.
5. Termination. This Option shall terminate and be of no force or
effect in accordance with and to the extent provided by the terms and
provisions of Section 4.7 of the Program. In any event, this option
shall terminate upon the expiration of the Option Period.
6. 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 intestate succession. 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 in any way, or the levy of any execution, attachment or similar
legal process upon this Option, contrary to the terms of this
Agreement and/or the Program 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.
7. 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. This Agreement may only be modified
or amended by a writing-signed by both the Company and the Optionee.
8. 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.
8.1 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.
8.2 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.
9. 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.
10. Compliance wiith 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, as amended, 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.
11. 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.
12. 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.
13. Headings. The titles and heading 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.
14. 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.
15. 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: _________________________________
Stephen R. Davis
Senior Vice President and Chief
Business Officer
_________________________________
Optionee
EXHIBIT 10.33
REGISTRATION RIGHTS AGREEMENT
This REGISTRATION RIGHTS AGREEMENT (this "Agreement") is made as
of June 26, 2000 by and among (i) Neurogen Corporation, a Delaware
corporation (the "Company"), (ii) each person listed on Exhibit A
attached hereto (collectively, the "Initial Investors" and each
individually, an "Initial Investor"), and (iii) each person or entity
that subsequently becomes a party to this Agreement pursuant to, and
in accordance with, the provisions of Section 12 hereof (collectively,
the "Investor Permitted Transferees" and each individually an
"Investor Permitted Transferee").
WHEREAS, the Company has agreed to issue and sell to the Initial
Investors, and the Initial Investors have agreed to purchase from the
Company, 1,638,000 shares (the "Purchased Shares") of the Company's
common stock, $0.025 par value per share (the "Common Stock"), all
upon the terms and conditions set forth in that certain Stock Purchase
Agreement, dated of even date herewith, between the Company and the
Initial Investors (the "Stock Purchase Agreement"); and
WHEREAS, the terms of the Stock Purchase Agreement provide that
it shall be a condition precedent to the closing of the transactions
thereunder, for the Company and the Initial Investors to execute and
deliver this Agreement.
NOW, THEREFORE, in consideration of the premises and mutual
covenants contained herein, the parties hereto hereby agree as
follows:
1. DEFINITIONS. The following terms shall have the meanings
provided therefor below or elsewhere in this Agreement as described
below:
"Board" shall mean the board of directors of the Company.
"Closing" shall have the meaning ascribed to such term in the
Stock Purchase Agreement.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and all of the rules and regulations promulgated thereunder.
"Investors" shall mean, collectively, the Initial Investors and
the Investor Permitted Transferees; provided, however, that the term
"Investors" shall not include any of the Initial Investors or any of
the Investor Permitted Transferees that ceases to own or hold any
Purchased Shares.
"Majority Holders" shall mean, at the relevant time of reference
thereto, those Investors holding and/or having the right to acquire,
as the case may be, more than fifty percent (50%) of the Registrable
Shares held by all of the Investors.
"Qualifying Holder" shall have the meaning ascribed thereto in
Section 12 hereof.
"Registrable Shares" shall mean the Purchased Shares, provided,
however, such term shall not, after the Mandatory Registration
Termination Date, include any of the Purchased Shares that become or
have become eligible for resale pursuant to Rule 144 or pursuant to
Regulation S.
"Regulation S" shall mean Regulation S promulgated under the
Securities Act and any successor or substitute rule, law or provision.
"Rule 144" shall mean Rule 144 promulgated under the Securities
Act and any successor or substitute rule, law or provision.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall mean the Securities Act of 1933, as
amended, and all of the rules and regulations promulgated thereunder.
2. EFFECTIVENESS; TERMINATION. This Agreement shall become
effective and legally binding only if the Closing occurs. This
Agreement shall terminate and be of no further force or effect,
automatically and without any action being required of any party
hereto, upon the termination of the Stock Purchase Agreement pursuant
to Section 7 thereof.
3. MANDATORY REGISTRATION.
(a) Within ten (10) business days after the Closing, the Company
will prepare and file with the SEC a registration statement on Form
S-3 for the purpose of registering under the Securities Act all of the
Registrable Shares for resale by, and for the account of, the
Investors as selling stockholders thereunder (the "Registration
Statement"). The Registration Statement shall permit the Investors to
offer and sell, on a delayed or continuous basis pursuant to Rule 415
under the Securities Act, any or all of the Registrable Shares. The
Company agrees to use reasonable efforts to cause the Registration
Statement to become effective as soon as practicable. The Company
shall be required to keep the Registration Statement effective until
such date that is the earlier of (i) the date when all of the
Registrable Shares registered thereunder shall have been sold or are
eligible for resale pursuant to Section (k) of Rule 144 or (ii) the
second anniversary of the Closing, subject to extension as set forth
below (such date is referred to herein as the "Mandatory Registration
Termination Date"). Thereafter, the Company shall be entitled to
withdraw the Registration Statement and the Investors shall have no
further right to offer or sell any of the Registrable Shares pursuant
to the Registration Statement (or any prospectus relating thereto). In
the event the right of the selling Investors to use the Registration
Statement (and the prospectus relating thereto) is delayed or
suspended pursuant to Sections 5(c) or 11 hereof for a period in
excess of 60 days, the Company shall be required to extend the
Mandatory Registration Termination Date beyond the second anniversary
of the Closing by the same number of days as such delay or Suspension
Period (as defined in Section 11 hereof).
(b) The offer and sale of the Registrable Shares pursuant to the
Registration Statement shall not be underwritten.
4. "PIGGYBACK" REGISTRATION RIGHTS.
(a) If, at any time after the Mandatory Registration Termination
Date, the Company proposes to register any of its Common Stock under
the Securities Act, whether as a result of a primary or secondary
offering of Common Stock or pursuant to registration rights granted to
holders of other securities of the Company (but excluding in all cases
any registrations to be effected on Forms S-4 or S-8 or other
applicable successor Forms), the Company shall, each such time, give
to the Investors holding Registrable Shares written notice of its
intent to do so. Upon the written request of any such Investor given
within 20 days after the giving of any such notice by the Company, the
Company shall use reasonable efforts to cause to be included in such
registration the Registrable Shares of such selling Investor, to the
extent requested to be registered; provided that (i) the number of
Registrable Shares proposed to be sold by such selling Investor is
equal to at least seventy-five percent (75%) of the total number of
Registrable Shares then held by such participating selling Investor,
(ii) such selling Investor agrees to sell those of its Registrable
Shares to be included in such registration in the same manner and on
the same terms and conditions as the other shares of Common Stock
which the Company proposes to register, and (iii) if the registration
is to include shares of Common Stock to be sold for the account of the
Company or any party exercising demand registration rights pursuant to
any other agreement with the Company, the proposed managing
underwriter does not advise the Company that in its opinion the
inclusion of such selling Investor's Registrable Shares (without any
reduction in the number of shares to be sold for the account of the
Company or such party exercising demand registration rights) is likely
to affect materially and adversely the success of the offering or the
price that would be received for any shares of Common Stock offered,
in which case the rights of such selling Investor shall be as provided
in Section 4(b) hereof.
(b) If a registration pursuant to Section 4(a) hereof involves an
underwritten offering and the managing underwriter shall advise the
Company in writing that, in its opinion, the number of shares of
Common Stock requested by the Investors to be included in such
registration is likely to affect materially and adversely the success
of the offering or the price that would be received for any shares of
Common Stock offered in such offering, then, notwithstanding anything
in Section 4(a) to the contrary, the Company shall only be required to
include in such registration, to the extent of the number of shares of
Common Stock which the Company is so advised can be sold in such
offering, (i) first, the number of shares of Common Stock proposed to
be included in such registration for the account of the Company and/or
any stockholders of the Company (other than the Investors) that have
exercised demand registration rights, in accordance with the
priorities, if any, then existing among the Company and/or such
stockholders of the Company with registration rights (other than the
Investors), and (ii) second, the shares of Common Stock requested to
be included in such registration by all other stockholders of the
Company who have piggyback registration rights (including, without
limitation, the Investors), pro rata among such other stockholders
(including, without limitation, the Investors) on the basis of the
number of shares of Common Stock that each of them requested to be
included in such registration.
(c) In connection with any offering involving an underwriting of
shares, the Company shall not be required under Section 4 hereof or
otherwise to include the Registrable Shares of any Investor therein
unless such Investor accepts and agrees to the terms of the
underwriting as agreed upon between the Company and the underwriters
selected by the Company.
5. OBLIGATIONS OF THE COMPANY. In connection with the Company's
obligation under Section 3 and 4 hereof to file the Registration
Statement with the SEC and to use its best efforts to cause the
Registration Statement to become effective as soon as practicable, the
Company shall, as expeditiously as reasonably possible:
(a) Prepare and file with the SEC such amendments and supplements
to the Registration Statement and the prospectus used in connection
therewith as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all Registrable
Shares covered by the Registration Statement;
(b) Furnish to the selling Investors such number of copies of a
prospectus, including a preliminary prospectus, in conformity with the
requirements of the Securities Act, and such other documents
(including, without limitation, prospectus amendments and supplements
as are prepared by the Company in accordance with Section 5(a) above)
as the selling Investors may reasonably request in order to facilitate
the disposition of such selling Investors' Registrable Shares;
(c) Notify the selling Investors, at any time when a prospectus
relating to the Registration Statement is required to be delivered
under the Securities Act, of the happening of any event as a result of
which the prospectus included in or relating to the Registration
Statement contains an untrue statement of a material fact or omits any
fact necessary to make the statements therein not misleading; and,
thereafter, subject to the provisions of Section 11 hereof, if the
Company has delivered the certificate referred to therein, the Company
will promptly prepare (and, when completed, give notice to each
selling Investor) a supplement or amendment to such prospectus so
that, as thereafter delivered to the purchasers of such Registrable
Shares, such prospectus will not contain an untrue statement of a
material fact or omit to state any fact necessary to make the
statements therein not misleading; provided that upon such
notification by the Company, the selling Investors will not offer or
sell Registrable Shares until the Company has notified the selling
Investors that it has prepared a supplement or amendment to such
prospectus and delivered copies of such supplement or amendment to the
selling Investors (it being understood and agreed by the Company that
the foregoing proviso shall in no way diminish or otherwise impair the
Company's obligation to promptly prepare a prospectus amendment or
supplement as above provided in this Section 5(c) and deliver copies
of same as above provided in Section 5(b) hereof); and
(d) Use commercially reasonable efforts to register and qualify
the Registrable Shares covered by the Registration Statement under
such other securities or Blue Sky laws of such jurisdictions as shall
be reasonably appropriate in the opinion of the Company and the
managing underwriters, if any, provided that the Company shall not be
required in connection therewith or as a condition thereto to qualify
to do business or to file a general consent to service of process in
any such states or jurisdictions, and provided further that
(notwithstanding anything in this Agreement to the contrary with
respect to the bearing of expenses) if any jurisdiction in which any
of such Registrable Shares shall be qualified shall require that
expenses incurred in connection with the qualification therein of any
such Registrable Shares be borne by the selling Investors, then the
selling Investors shall, to the extent required by such jurisdiction,
pay their pro rata share of such qualification expenses.
6. FURNISH INFORMATION. It shall be a condition precedent to the
obligations of the Company to take any action pursuant to this
Agreement that the selling Investors shall furnish to the Company such
information regarding them and the securities held by them as the
Company shall reasonably request and as shall be required in order to
effect any registration by the Company pursuant to this Agreement.
7. EXPENSES OF REGISTRATION. All expenses incurred in connection
with the registration of the Registrable Shares pursuant to this
Agreement (excluding underwriting, brokerage and other selling
commissions and discounts), including without limitation all
registration and qualification and filing fees, printing, and fees and
disbursements of counsel for the Company, shall be borne by the
Company.
8. DELAY OF REGISTRATION. The Investors shall not take any action
to restrain, enjoin or otherwise delay any registration as the result
of any controversy which might arise with respect to the
interpretation or implementation of this Agreement.
9. INDEMNIFICATION.
(a) To the extent permitted by law, the Company will indemnify
and hold harmless each selling Investor, any investment banking firm
acting as an underwriter for the selling Investors, any broker/dealer
acting on behalf of any selling Investors and each officer and
director of such selling Investor, such underwriter, such
broker/dealer and each person, if any, who controls such selling
Investor, such underwriter or broker/dealer within the meaning of the
Securities Act, against any losses, claims, damages or liabilities,
joint or several, to which they may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages
or liabilities (or actions in respect thereof) arise out of or are
based upon any untrue or alleged untrue statement of any material fact
contained in the Registration Statement, in any preliminary prospectus
or final prospectus relating thereto or in any amendments or
supplements to the Registration Statement or any such preliminary
prospectus or final prospectus, or arise out of or are based upon the
omission or alleged omission to state therein a material fact required
to be stated therein, or necessary to make the statements therein not
misleading; and will reimburse such selling Investor, such
underwriter, broker/dealer or such officer, director or controlling
person for any legal or other expenses reasonably incurred by them in
connection with investigating or defending any such loss, claim,
damage, liability or action; provided, however, that the indemnity
agreement contained in this Section 9(a) shall not apply to amounts
paid in settlement of any such loss, claim, damage, liability or
action if such settlement is effected without the consent of the
Company, nor shall the Company be liable in any such case for any such
loss, damage, liability or action to the extent that it arises out of
or is based upon an untrue statement or alleged untrue statement or
omission made in connection with the Registration Statement, any
preliminary prospectus or final prospectus relating thereto or any
amendments or supplements to the Registration Statement or any such
preliminary prospectus or final prospectus, in reliance upon and in
conformity with written information furnished expressly for use in
connection with the Registration Statement or any such preliminary
prospectus or final prospectus by the selling Investors, any
underwriter for them or controlling person with respect to them.
(b) To the extent permitted by law, each selling Investor will
severally and not jointly indemnify and hold harmless the Company,
each of its directors, each of its officers who have signed the
Registration Statement, each person, if any, who controls the Company
within the meaning of the Securities Act, any investment banking firm
acting as underwriter for the Company or the selling Investors, or any
broker/dealer acting on behalf of the Company or any selling
Investors, and all other selling Investors against any losses, claims,
damages or liabilities to which the Company or any such director,
officer, controlling person, underwriter, or broker/dealer or such
other selling Investor may become subject to, under the Securities Act
or otherwise, insofar as such losses, claims, damages or liabilities
(or actions in respect thereto) arise out of or are based upon any
untrue or alleged untrue statement of any material fact contained in
the Registration Statement or any preliminary prospectus or final
prospectus, relating thereto or in any amendments or supplements to
the Registration Statement or any such preliminary prospectus or final
prospectus, or arise out of or are based upon the omission or alleged
omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in
each case to the extent and only to the extent that such untrue
statement or alleged untrue statement or omission or alleged omission
was made in the Registration Statement, in any preliminary prospectus
or final prospectus relating thereto or in any amendments or
supplements to the Registration Statement or any such preliminary
prospectus or final prospectus, in reliance upon and in conformity
with written information furnished by the selling Investor expressly
for use in connection with the Registration Statement, or any
preliminary prospectus or final prospectus; and such selling Investor
will reimburse any legal or other expenses reasonably incurred by the
Company or any such director, officer, controlling person,
underwriter, broker/dealer or other selling Investor in connection
with investigating or defending any such loss, claim, damage,
liability or action, provided, however, that the liability of each
selling Investor hereunder shall be limited to the proceeds (net of
underwriting discounts and commissions, if any) received by such
selling Investor from the sale of Registrable Shares covered by the
Registration Statement, and provided, further, however, that the
indemnity agreement contained in this Section 9(b) shall not apply to
amounts paid in settlement of any such loss, claim, damage, liability
or action if such settlement is effected without the consent of those
selling Investor(s) against which the request for indemnity is being
made.
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action, such
indemnified party will, if a claim in respect thereof is to be made
against any indemnifying party under this Section 9, notify the
indemnifying party in writing of the commencement thereof and the
indemnifying party shall have the right to participate in and, to the
extent the indemnifying party desires, jointly with any other
indemnifying party similarly noticed, to assume at its expense the
defense thereof with counsel mutually satisfactory to the indemnifying
parties with the consent of the indemnified party which consent will
not be unreasonably withheld, conditioned or delayed. In the event
that the indemnifying party assumes any such defense, the indemnified
party may participate in such defense with its own counsel and at its
own expense, provided, however, that the counsel for the indemnifying
party shall act as lead counsel in all matters pertaining to such
defense or settlement of such claim and the indemnifying party shall
only pay for such indemnified party's expenses for the period prior to
the date of such indemnifying party's participation in such defense.
The failure to notify an indemnifying party promptly of the
commencement of any such action, if prejudicial to his ability to
defend such action, shall relieve such indemnifying party of any
liability to the indemnified party under this Section 9, but the
omission so to notify the indemnifying party will not relieve him of
any liability which he may have to any indemnified party otherwise
other than under this Section 9.
(d) Notwithstanding anything to the contrary herein, the
indemnifying party shall not be entitled to settle any claim, suit or
proceeding unless in connection with such settlement the indemnified
party receives an unconditional release with respect to the subject
matter of such claim, suit or proceeding and such settlement does not
contain any admission of fault by the indemnified party.
10. REPORTS UNDER THE EXCHANGE ACT. With a view to making
available to the Investors the benefits of Rule 144 and any other rule
or regulation of the SEC that may at any time permit the Investors to
sell the Purchased Shares to the public without registration, the
Company agrees to use commercially reasonable efforts: (i) to make and
keep public information available, as those terms are understood and
defined in the General Instructions to Form S-3, or any successor or
substitute form, and in Rule 144, (ii) to file with the SEC in a
timely manner all reports and other documents required to be filed by
an issuer of securities registered under the Securities Act or the
Exchange Act, (iii) as long as any Investor owns any Purchased Shares,
to furnish in writing upon such Investor's request a written statement
by the Company that it has complied with the reporting requirements of
Rule 144 and of the Securities Act and the Exchange Act, and to
furnish to such Investor a copy of the most recent annual or quarterly
report of the Company, and such other reports and documents so filed
by the Company as may be reasonably requested in availing such
Investor of any rule or regulation of the SEC permitting the selling
of any such Purchased Shares without registration and (iv) undertake
any additional actions reasonably necessary to maintain the
availability of the Registration Statement or the use of Rule 144.
11. DEFERRAL AND LOCK-UP.
Notwithstanding anything in this Agreement to the contrary, if
the Company shall furnish to the selling Investors a certificate
signed by the President or Chief Executive Officer of the Company
stating that, after consultation with counsel, he has made the good
faith determination (i) that continued use by the selling Investors of
the Registration Statement for purposes of effecting offers or sales
of Registrable Shares pursuant thereto would require, under the
Securities Act, premature disclosure in the Registration Statement (or
the prospectus relating thereto) of material, nonpublic information
concerning the Company, its business or prospects or any proposed
material transaction involving the Company, (ii) that such premature
disclosure would be materially adverse to the Company, its business or
prospects or any such proposed material transaction or would make the
successful consummation by the Company of any such material
transaction significantly less likely and (iii) that it is therefore
essential to suspend the use by the Investors of such Registration
Statement (and the prospectus relating thereto) for purposes of
effecting offers or sales of Registrable Shares pursuant thereto, then
the right of the selling Investors to use the Registration Statement
(and the prospectus relating thereto) for purposes of effecting offers
or sales of Registrable Shares pursuant thereto shall be suspended for
a period (the "Suspension Period") of not more than 90 days after
delivery by the Company of the certificate referred to above in this
Section 11. During the Suspension Period, none of the Investors shall
offer or sell any Registrable Shares pursuant to or in reliance upon
the Registration Statement (or the prospectus relating thereto).
12. TRANSFER OF REGISTRATION RIGHTS. None of the rights of any
Investor under this Agreement shall be transferred or assigned to any
person unless (i) such person is a Qualifying Holder (as defined
below), and (ii) such person agrees to become a party to, and bound
by, all of the terms and conditions of, this Agreement by duly
executing and delivering to the Company an Instrument of Adherence in
the form attached as Exhibit B hereto. For purposes of this Section
12, the term "Qualifying Holder" shall mean, with respect to any
Investor, (i) any partner thereof, (ii) any corporation, partnership
controlling, controlled by, or under common control with, such
Investor or any partner thereof, or (iii) any other direct transferee
from such Investor of at least 50% of those Registrable Shares held or
that may be acquired by such Investor. None of the rights of any
Investor under this Agreement shall be transferred or assigned to any
Person (including, without limitation, a Qualifying Holder) that
acquires Registrable Shares in the event that and to the extent that
such Person is eligible to resell such Registrable Shares pursuant to
Rule 144(k) of the Securities Act or may otherwise resell such
Registrable Shares pursuant to an exemption from the registration
provisions of the Securities Act.
13. ENTIRE AGREEMENT. This Agreement constitutes and contains the
entire agreement and understanding of the parties with respect to the
subject matter hereof, and it also supersedes any and all prior
negotiations, correspondence, agreements or understandings with
respect to the subject matter hereof.
14. MISCELLANEOUS.
(a) This Agreement may not be amended, modified or terminated,
and no rights or provisions may be waived, except with the written
consent of the Majority Holders and the Company.
(b) This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of New York, and
shall be binding upon and inure to the benefit of the parties hereto
and their respective heirs, personal representatives, successors or
assigns, provided that the terms and conditions of Section 12 hereof
are satisfied. This Agreement shall also be binding upon and inure to
the benefit of any transferee of any of the Purchased Shares provided
that the terms and conditions of Section 12 hereof are satisfied.
Notwithstanding anything in this Agreement to the contrary, if at any
time any Investor shall cease to own any Purchased Shares, all of such
Investor's rights under this Agreement shall immediately terminate.
(c) (i) Any notices, reports or other correspondence (hereinafter
collectively referred to as "correspondence") required or permitted to
be given hereunder shall be sent by courier (overnight or same day) or
telecopy or delivered by hand to the party to whom such correspondence
is required or permitted to be given hereunder. The date of giving any
notice shall be the date of its actual receipt.
(ii) All correspondence to the Company shall be addressed as
follows:
Neurogen Corporation
35 Northeast Industrial Road
Branford, CT 06405
Attention: Harry H. Penner, Jr.
President and Chief Executive Officer
Telecopier: 203-481-8683
with a copy to:
Milbank, Tweed, Hadley & McCloy LLP
1 Chase Manhattan Plaza
New York, NY 10005
Attention: Donald B. Brant Jr.
Title: Partner
Telecopier: 212-530-5219
(iii) All correspondence to any Investor shall be sent to such
Purchaser at the address set forth in Exhibit A.
(d) Any entity may change the address to which correspondence to
it is to be addressed by notification as provided for herein.
(e) The parties acknowledge and agree that in the event of any
breach of this Agreement, remedies at law may be inadequate, and each
of the parties hereto shall be entitled to seek specific performance
of the obligations of the other parties hereto and such appropriate
injunctive relief as may be granted by a court of competent
jurisdiction.
(f) This Agreement may be executed in a number of counterparts,
an of which together shall for all purposes constitute one Agreement,
binding on all the parties hereto notwithstanding that all such
parties have not signed the same counterpart.
IN WITNESS WHEREOF, the parties hereto have executed this
Registration Rights Agreement as of the date and year first above
written.
Neurogen Corporation
By: /s/Harry H. Penner, Jr.
--------------------------------------------
Name: Harry H. Penner, Jr.
Title: President and Chief Executive Officer
THE INITIAL INVESTOR'S SIGNATURE TO THE INVESTOR QUESTIONNAIRE
DATED EVEN DATE HEREWITH SHALL CONSTITUTE THE INITIAL INVESTOR'S
SIGNATURE TO THIS REGISTRATION RIGHTS AGREEMENT.
EXHIBIT A
Name and Address
Clarion Capital Corporation
ATT: Thomas Niehaus
555 Westbury Avenue
Carl Place, NY 11514
Clarion Offshore Fund LTD.
ATT: Thomas Niehaus
555 Westbury Avenue
Carl Place, NY 11514
Clarion Partners, L.P.
ATT: Thomas Niehaus
555 Westbury Avenue
Carl Place, NY 11514
DWS Investments Gmbh
ATT: Andreas Kraft
Gruneburgweg 113-115
60612 Frankfurt AM MAIN
Germany
Munder Framlington Healthcare
ATT: Antony Milford
155 Bishops Gate
London, EC2M 3XJ
Jackson Square Partners, L.P.
ATT: Will Weinstein
909 Montgomery Street
Suite 600
San Francisco, CA 94133
Marcuard Cook &CIEE, S.A.
7 Rue des Alpes
P.O. Box 1380
1211 General
Geneva Switzerland
Metzler Investments
ATT: Klaus Hagedorn
Grosse Gallustrasse, 18
Frankfurt, Germany 60311
HCI Healthcare Investments Ltd.
c/o New Medical Technologies
ATT: DR. Philipp Meckler
Elisabethenstrasse 23
CH-4051 Basel Switzerland
Oppenheimer & Co.
ATT: Frank Jennings/George Evans
Two World Trade Center
New York, NY 10048
Veritas SG Investment Trust GMBH
ATT: Ralf Von Ziegesar
Bettinastrasse, 62
Frankfurt, Germany 60325
EXHIBIT B
Instrument of Adherence
Reference is hereby made to that certain Registration Rights Agreement,
dated as of ______________ ___, 2000, among Neurogen Corporation, a Delaware
corporation (the "Company"), the Initial Investors and the Investor Permitted
Transferees, as amended and in effect from time to time (the "Registration
Rights Agreement"). Capitalized terms used herein without definition shall have
the respective meanings ascribed thereto in the Registration Rights Agreement.
The undersigned, in order to become the owner or holder of [___________]
shares of common stock, par value $0.025 per share (the "Common Stock"), of the
Company], hereby agrees that, from and after the date hereof, the undersigned
has become a party to the Registration Rights Agreement in the capacity of an
Investor Permitted Transferee, and is entitled to all of the benefits under, and
is subject to all of the obligations, restrictions and limitations set forth in,
the Registration Rights Agreement that are applicable to Investor Permitted
Transferees. This Instrument of Adherence shall take effect and shall become a
part of the Registration Rights Agreement immediately upon execution.
Executed under seal as of the date set forth below under the laws of
_____________________.
Signature:__________________________
Name:
Title:
Accepted:
Neurogen Corporation
By:___________________________________________
Harry H. Penner, Jr.
President and Chief Executive Officer
Date:_________________________________