Document:

exhibit101.htm

    SECURITIES
PURCHASE AGREEMENT

     

    This
SECURITIES PURCHASE AGREEMENT (this “Agreement”) is dated as of
April 7, 2008, by and between Neurogen Corporation, a Delaware corporation (the “Company”), and the several
purchasers identified in the attached Exhibit A
(individually, a “Purchaser” and collectively,
the “Purchasers”).

     

    RECITALS

     

    A.           The
Company and the Purchasers are executing and delivering this Agreement in
reliance upon the exemption from securities registration afforded by the
provisions of Regulation D (“Regulation D”), as promulgated
by the U.S. Securities and Exchange Commission (the “SEC”) under the Securities Act
of 1933, as amended (the “Securities Act”).

    

    B.           The
Purchasers wish to purchase from the Company, and the Company wishes to sell and
issue to the Purchasers, upon the terms and conditions stated in this Agreement:
(i) up to an aggregate of 981,411 shares (the “Shares”) of the Company’s
Series A Exchangeable Preferred Stock, par value $0.025 per share (the “Series A Preferred Stock”) and (ii)
warrants in the form attached hereto as Exhibit B (the “Warrants”) to purchase shares
of the Company’s common stock, par value $0.025 per share (the “Common Stock”). Solely for
descriptive purposes as set forth herein, the Shares and Warrants may be
denominated in “Units”,
with each Unit consisting of one Share and one Warrant exercisable for a number
of shares of Common Stock equal to 50% of the number of shares of Common Stock
into which one Share is exchangeable. Subject to the transfer restrictions set
forth herein, the Shares and the Warrants will be immediately separable upon
issuance. The Common Stock issuable upon Exchange shall be referred to herein as
the “Exchange Shares”
and the shares of Common Stock underlying the Warrants shall be referred to
herein as the “Warrant
Shares.” The Shares, the Warrants, the Exchange Shares and the Warrant
Shares shall collectively be referred to herein as the “Securities.”

    

    C.           Subject
to the terms and conditions set forth herein, 981,411 Units will be issued and
sold to the Purchasers on the Closing Date (as defined below) for a per Unit
purchase price equal to $31.20 (the “Per Unit Purchase Price”), or
$30,620,023.20 in
the aggregate.

    

    D.           Contemporaneously
with the sale of the Units, the parties hereto will execute and deliver a
Registration Rights Agreement, in the form attached hereto as Exhibit C (the “Registration Rights Agreement”), pursuant
to which the Company will agree to provide certain registration rights under the
Securities Act, and the rules and regulations promulgated thereunder, and
applicable state securities laws.

    

    AGREEMENT

    

    In
consideration of the mutual agreements, representations, warranties and
covenants herein contained, the parties hereto agree as follows:

     

    
      	
              1.  

            	
              Definitions.  As
      used in this Agreement, the following terms shall have the following
      respective meanings:

            

    

     

    (a) “Business Day” means a day,
other than a Saturday or Sunday, on which banks in New York City are open for
the general transaction of business.

     

    (b) “Certificate of Designations”
means the Certificate of Designations, Number, Voting Powers, Preferences and
Rights of Series A Preferred Stock of the Company, substantially in the form
attached hereto as Exhibit
D.

     

    (c) “Exchange” means the exchange
of the Series A Preferred Stock for shares of Common Stock in accordance with
the terms of the Certificate of Designations.

     

    (d) “Exchange Act” means the
Securities Exchange Act of 1934, as amended, and all of the rules and
regulations promulgated thereunder.

     

    (e) “Majority Purchasers” shall
mean Purchasers holding a majority of the Shares issued hereunder; provided however, that with
respect to any amendment to Exhibit A or the proviso of this definition (other
than immaterial changes to correct definitive legal names of the Purchasers set
forth in Exhibit A) it shall mean a unanimous vote of all of the
Purchasers.

     

    (f) “Registration Rights Agreement”
shall mean that certain Registration Rights Agreement, dated as of the date
hereof, among the Company and the Purchasers.

     

    (g) “Registration Statement” shall
mean any registration statement
to be filed by the Company pursuant to Registration Rights
Agreement.

     

    (h) “SEC Documents” shall mean: (i)
the Company’s Annual Report on Form 10-K for the year ended December 31, 2007,
as amended on April 4, 2008; and (ii) any other statement, report, registration
statement (other than registration statements on Form S-8) or definitive proxy
statement filed by the Company with the SEC following the date
hereof.

     

    (i) “Transaction Agreements” shall
mean this Agreement, the Warrants and the Registration Rights
Agreement.

     

    
      	
              2.  

            	
              Authorization of
      Shares; Purchase and Sale of
Units.

            

    

     

    2.1 Authorization of
Shares.  On or prior to the Closing, the Company shall have
authorized the sale and issuance of up to an aggregate of 981,411 Units, on the
terms and conditions set forth in this Agreement. The terms, limitations and
relative rights and preferences of the Shares shall be as set forth in the
Certificate of Designations.

     

    2.2 Purchase and Sale.
Subject to and upon the terms and conditions set forth in this Agreement, the
Company agrees to issue and sell to each Purchaser, and each Purchaser,
severally and not jointly with the other Purchasers, hereby agrees to purchase
from the Company, at the Closing (as defined below), the number of Units set
forth opposite the name of such Purchaser under the heading “Number of Units to be
Purchased” on Exhibit A
hereto, for a per Unit purchase price equal to the Per Unit Purchase
Price.  The total purchase price payable by each Purchaser for the
Units that such Purchaser is hereby agreeing to purchase at the Closing is set
forth opposite the name of such Purchaser under the heading “Aggregate Purchase
Price” on Exhibit A hereto
(such Purchaser’s “Closing
Purchase Price”).

     

    2.3 Closing.  Upon
confirmation that all of the conditions to closing specified in Sections 5.1
and/or 5.2 have been satisfied or duly waived by the Purchasers and/or the
Company, as applicable, the Company shall deliver to Latham & Watkins
LLP, counsel to the Company, in trust, a certificate or certificates, registered
in such name or names as the Purchasers may designate, representing the Units,
with instructions that such certificates are to be held for release to the
Purchasers only upon payment in full of the Closing Purchase Price to the
Company by all the Purchasers.  Upon such receipt by Latham &
Watkins LLP of such certificates, each Purchaser shall promptly, but no more
than one Business Day thereafter, cause a wire transfer in same day funds to be
sent to the account of the Company as instructed in writing by the Company, in
the amount representing such Purchaser’s Closing Purchase Price as set forth on
Exhibit A
hereto.  On the date (the “Closing Date”) the Company
receives the Closing Purchase

     

    2.4 Price
from all of the Purchasers, the certificates evidencing the Units shall be
released to the Purchasers (the “Closing”).  The
Closing shall take place at the offices of Latham & Watkins LLP, 650
Town Center Drive, 20th Floor, Costa Mesa, CA 92626-1925, or at such other
location and on such other date as the Company and the Purchasers shall mutually
agree.

     

    
      	
              3.  

            	
              Representations and
      Warranties of the Company.

            

    

     

    Except as otherwise described in the
SEC Documents or in the Disclosure Schedule delivered herewith (and dated as of
the date of this Agreement), the Company hereby represents and warrants to each
of the Purchasers as follows:

     

    3.1 Financial Statements.
The financial statements of the Company included in the SEC Documents, together
with the related schedules and notes, present fairly the financial position of
the Company and its consolidated subsidiaries at the dates indicated and the
statement of operations, stockholders’ equity and cash flows of the Company and
its consolidated subsidiaries for the periods specified; said financial
statements have been prepared in conformity with generally accepted accounting
principles (“GAAP”)
applied on a consistent basis throughout the periods involved. No other
financial statements or schedules are required to be included in the SEC
Documents. Any disclosures contained in the SEC Documents regarding “non-GAAP
financial measures” (as such term is defined by the rules and regulations of the
Commission) comply with Regulation G of the Exchange Act and Item 10 of
Regulation S-K under the Securities Act, to the extent applicable. There are no
material off-balance sheet transactions, arrangements, obligations (including
contingent obligations), or any other relationships with unconsolidated entities
or other persons, that may have a material effect on the Company’s financial
condition, changes in financial condition, results of operations, liquidity,
capital expenditures, capital resources or significant components of revenue or
expenses.

     

    3.2 No Material Adverse Change
in Business. Since December 31, 2007: (a) there has been no material
adverse change, or any development that would be reasonably expected to result
in a material adverse change, in the condition, financial or otherwise, or in
the earnings or business affairs of the Company and the Subsidiary (as defined
below) taken as a whole, whether or not arising in the ordinary course of
business (a “Material Adverse
Effect”); (b) there have been no transactions entered into by the Company
or any the Subsidiary, other than those in the ordinary course of business,
which are material with respect to the Company and the Subsidiary taken as a
whole; (c) there has been no dividend or distribution of any kind declared, paid
or made by the Company on any class of its capital stock; and (d) the Company
has not incurred any debt (excluding accrued expenses and trade payables) or
other liability (whether or not required to be reflected on a balance sheet) for
borrowed funds at any time outstanding, exceeding $1.0 million.

     

    3.3 Good Standing of the
Company. The Company has been duly organized and is validly existing as a
corporation in good standing under the laws of the State of Delaware and has
full corporate power and authority to own, lease and operate its properties and
to conduct its business as described in the SEC Documents and to enter into and
perform its obligations under the Transaction Agreements; and the Company is
duly qualified as a foreign corporation to transact business and is in good
standing in each other jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing would
not reasonably be expected to result in a Material Adverse Effect.

     

    3.4 Good Standing of
Subsidiary. Neurogen Properties, LLC (the “Subsidiary”) has been duly
formed and is validly existing as a limited liability company in good standing
under the laws of the jurisdiction of its formation, has limited liability
company power and authority to own, lease and operate its properties and to
conduct its business as described in the SEC Documents, and is duly qualified as
a foreign limited liability company to transact business and is in good standing
in each jurisdiction in which

     

    3.5 such
qualification is required, whether by reason of the ownership or leasing of
property or the conduct of business, except where the failure so to qualify or
to be in good standing would not reasonably be expected to result in a Material
Adverse Effect; all of the issued and outstanding membership interests of the
Subsidiary have been duly authorized and are validly issued, fully-paid and
non-assessable and are owned by the Company free and clear of any security
interest, mortgage, pledge, lien, encumbrance, claim or equity; and none of the
outstanding membership interests of the Subsidiary were issued in violation of
the preemptive or similar rights of any securityholder of the Subsidiary. The
Subsidiary is the only subsidiary of the Company.

     

    3.6 Capitalization.
Immediately prior to the Closing, the authorized capital stock of the Company
consisted of 75,000,000 shares of Common Stock and 2,000,000 shares of preferred
stock, par value $0.025 per share (the “Preferred Stock”), of which
981,411 shares have been designated as Series A Preferred Stock. As of
immediately following the Closing and assuming all Purchasers purchase the Units
indicated on Exhibit
A:

     

    (a) The
issued and outstanding capital stock of the Company will consist of: (x)
42,051,770 shares of Common Stock; and (y) 981,411 shares of Series A Preferred
Stock; and

     

    (b) The
Company will have an aggregate of: (x) 5,174,348 shares of Common Stock reserved
for issuance upon the exercise of outstanding options granted under the
Company’s outstanding option plans and employee stock purchase programs
(collectively, the “Option Plans”); (y) no Exchange
Shares reserved for issuance upon the Exchange and (z) 12,758,343 Warrant Shares
reserved for issuance upon exercise of the Warrants.

     

    Except
for the warrants and options granted under the Option Plans, the Company does
not have outstanding any options to purchase, any securities or obligations
convertible into, or any contracts or commitments to issue or sell, shares of
its capital stock. All of the shares of issued and outstanding capital stock of
the Company have been duly authorized and validly issued and are fully paid and
non assessable, and none of the outstanding shares of capital stock of the
Company was issued in violation of the preemptive or other similar rights of any
securityholder of the Company.

     

    3.7 Authorization of
Agreement. The Company has full corporate power and authority to (a)
enter into the Transaction Agreements and to consummate the transactions
contemplated hereby and thereby and (b) authorize, execute, issue, and deliver
the Units as contemplated by the Transaction Agreements. The Transaction
Agreements have been duly authorized, executed and delivered by the Company, and
constitute legal and binding obligations of the Company, enforceable in
accordance with their terms, except to the extent that rights to indemnity
hereunder may be limited by federal or state securities laws and except as such
enforceability may be limited by bankruptcy, fraudulent conveyance, insolvency,
reorganization or similar laws affecting the rights of creditors generally and
subject to general principles of equity.

     

    3.8 Authorization of the
Securities.

     

    (a) The Units
to be issued at the Closing have been duly authorized and reserved for issuance
and sale to the Purchasers pursuant to this Agreement, and, when issued and
delivered by the Company pursuant to this Agreement against payment of the
consideration set forth herein, the Closing will be duly and validly issued and
fully paid and non-assessable.

     

    (b) After
giving effect to the stockholder approval of the Proposal,  the
Exchange shares will be duly authorized and
reserved for issuance to the holders of the Shares, and, when issued and
delivered by the Company pursuant to the terms of the Shares, will be duly and
validly issued and fully paid and non-assessable.

     

    (c) The
Warrant Shares underlying the Warrants to be issued at the Closing have been
duly and validly authorized and reserved for issuance upon exercise of the
Warrants, and, when issued and delivered by the Company pursuant to the holder
of such Warrant against payment of the consideration set forth therein, the
Warrant Shares will be duly and validly issued and fully paid and
non-assessable.

     

    (d) No holder
of the Securities will be subject to personal liability by reason of being such
a holder, and the issuance of the Securities is not and will not be subject to
preemptive or other similar rights of any securityholder of the
Company.

     

    3.9 Absence of Defaults and
Conflicts. Neither the Company nor the Subsidiary is (A) in violation of
its charter or by-laws, or (B) except for such defaults that would not,
individually or in the aggregate, reasonably be expected to result in a Material
Adverse Effect, in default in the performance or observance of any obligation,
agreement, covenant or condition contained in any material contract, indenture,
mortgage, deed of trust, loan or credit agreement, note, lease or other
agreement or instrument to which the Company or the Subsidiary is a party or by
which it or any of them may be bound, or to which any of the property or assets
of the Company or the Subsidiary is subject (collectively, “Agreements and Instruments”)
and the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated herein and compliance by the
Company with its obligations hereunder, do not and will not, whether with or
without the giving of notice or passage of time or both, conflict with or
constitute a breach of, or default or Repayment Event (as defined below) under,
or result in the creation or imposition of any lien, charge or encumbrance upon
any property or assets of the Company or the Subsidiary pursuant to, the
Agreements and Instruments (except for such conflicts, breaches, defaults or
Repayment Events or liens, charges or encumbrances that would not be reasonably
likely to result in a Material Adverse Effect), nor will such action result in
(C) any violation of the provisions of the charter or by laws of the Company or
the Subsidiary or (D) except for such violations that would not, individually or
in the aggregate, reasonably be expected to result in a Material Adverse Effect,
a violation of any applicable law, statute, rule, regulation, judgment, order,
writ or decree of any government, government instrumentality or court, domestic
or foreign, having jurisdiction over the Company or the Subsidiary or any of
their assets, properties or operations. As used herein, a “Repayment Event” means any
event or condition which gives the holder of any note, debenture or other
evidence of indebtedness (or any person acting on such holder’s behalf) the
right to require the repurchase, redemption or repayment of all or a portion of
such indebtedness by the Company or the Subsidiary.

     

    3.10 Absence of Labor
Dispute. No material labor dispute with the employees of the Company or
the Subsidiary exists or, to the knowledge of the Company, is imminent, and the
Company is not aware of any existing or imminent labor disturbance by the
employees of any of its or any of the Subsidiary’s principal suppliers,
manufacturers, customers or contractors, which, in either case, would result in
a Material Adverse Effect.

     

    3.11 Absence of
Proceedings. There is no claim, action, suit, proceeding, inquiry, audit,
review or investigation before or brought by any court or governmental agency or
body, domestic or foreign, now pending, or, to the knowledge of the Company,
threatened against the Company or the Subsidiary, or, to the knowledge of the
Company, otherwise involving the Company or the Subsidiary which is required to
be disclosed in the SEC Documents (other than as disclosed therein), or which
would be reasonably likely to result in a Material Adverse Effect, or which
would be reasonably likely to materially and adversely affect the consummation
of the transactions contemplated in this Agreement or the performance by the
Company of its obligations hereunder; the aggregate of all pending legal or
governmental proceedings to which the Company or the Subsidiary is a party or of
which any of their respective property or assets is the subject which are not
described in the SEC Documents, including ordinary routine litigation
incidental

     

    3.12 to the
Company’s conduct of its business, would not be reasonably likely to result in a
Material Adverse Effect.

     

    3.13 Absence of Rulemaking or
Similar Proceedings. To the Company’s knowledge, there are no rulemaking
or similar proceedings before the Food and Drug Administration, the Department
of Health and Human Services, the Centers for Medicare and Medicaid Services or
any other federal, state, local or foreign governmental bodies that regulate the
Company’s or the Subsidiary’s activities, which would reasonably be expected to
have a Material Adverse Effect.

     

    3.14 Accuracy of Descriptions and
Exhibits. There are no statutes, regulations, contracts or documents
which are required to be described in the SEC Documents or to be filed as
exhibits thereto which have not been so described and filed as
required.

     

    3.15 Possession of Intellectual
Property. The Company and the Subsidiary own or license or have rights to
use, make, sell, and otherwise exploit, all Intellectual Property necessary for
the conduct of the Company’s business as now conducted except as such failure to
own or license such rights would not have a Material Adverse Effect. To the
knowledge of the Company, there is no infringement, misappropriation or
violation by other parties of any Intellectual Property described in the
preceding sentence, except as such infringement, misappropriation or violation
would not reasonably be expected to have a Material Adverse Effect. Except as
previously disclosed in the Company’s filings with the SEC, there is no pending,
or, to the knowledge of the Company, threatened action, suit, proceeding or
claim by others to which the Company or the Subsidiary is a party, or to the
knowledge of the Company, otherwise challenging the Company’s or the
Subsidiary’s rights in or to, or exploitation of, any such Intellectual
Property, and the Company has no knowledge of any facts which would form a
reasonable basis for any such claim. The Intellectual Property owned by the
Company and, to the knowledge of the Company, the Intellectual Property licensed
to the Company have not been adjudged invalid or unenforceable, in whole or in
part, and there is no pending or, to the knowledge of the Company, threatened
action, suit, proceeding or claim by others challenging the validity or scope of
any Intellectual Property, and the Company has no knowledge of any facts which
would form a reasonable basis for any such claim. There is no pending or to the
knowledge of the Company, threatened action, suit, proceeding or claim by others
that the Company infringes, misappropriates or otherwise violates any
Intellectual Property or other proprietary rights of others, and the Company has
not received any written notice of such claim and has no knowledge of any other
fact which would form a reasonable basis for any such claim. To the Company’s
knowledge, no employee or independent contractor of the Company is in violation
of any term of any employment contract, patent disclosure agreement, invention
assignment agreement, non-competition agreement, non-solicitation agreement,
nondisclosure agreement or any restrictive covenant to or with a former employer
or independent contractor where the basis of such violation relates to such
employee’s employment or independent contractor’s engagement with the Company or
actions undertaken while employed or engaged with the Company, except as such
violation would not reasonably be expected to have a Material Adverse Effect.
“Intellectual Property”
shall mean all patents, patent rights, patent applications, trade and service
marks, trade and service mark registrations, trade names, copyrights, licenses,
inventions, trade secrets, technology, know-how and other unpatented and/or
unpatentable proprietary or confidential information, systems or procedures
owned, licensed or used by the Company.

     

    3.16 Absence of Further
Requirements. No filing with, or authorization, approval, consent,
license, order, registration, qualification or decree of, any court or
governmental authority or agency is necessary or required for the performance by
the Company of its obligations hereunder, in connection with the offering,
issuance or sale of the Units hereunder or the consummation of the transactions
contemplated by this Agreement, except such as: (a) have been already obtained
or made; or (b) as may

     

    3.17 be
required under the Securities Act, the rules and regulations promulgated
thereunder or state securities laws.

     

    3.18 Absence of
Manipulation. Neither the Company nor, to the knowledge of the Company
any affiliate of the Company has taken, nor will the Company or, to the
knowledge of the Company, any affiliate take, directly or indirectly, any action
which is designed to or which has constituted or which would be expected to
cause or result in stabilization or manipulation of the price of any security of
the Company to facilitate the sale or resale of the Securities.

     

    3.19 Possession of Licenses and
Permits. The Company and the Subsidiary possess such regulatory and
quasi-regulatory permits, licenses, approvals, consents and other authorizations
(collectively, “Governmental
Licenses”) issued by the appropriate federal, state, local or foreign
regulatory agencies or bodies necessary to conduct the business now operated by
them, except where the failure so to possess would not, singly or in the
aggregate, reasonably be expected to result in a Material Adverse Effect; the
Company and the Subsidiary are in compliance with the terms and conditions of
all such Governmental Licenses, except where the failure so to comply would not,
singly or in the aggregate, reasonably be expected to result in a Material
Adverse Effect; all of the Governmental Licenses are valid and in full force and
effect, except when the invalidity of such Governmental Licenses or the failure
of such Governmental Licenses to be in full force and effect would not, singly
or in the aggregate, reasonably be expected to result in a Material Adverse
Effect; and neither the Company nor the Subsidiary has received notice of any
proceedings relating to the revocation or modification of any such Governmental
Licenses which, singly or in the aggregate, if the subject of an unfavorable
decision, ruling or finding, would reasonably be expected to result in a
Material Adverse Effect.

     

    3.20 Regulatory
Authorities.

     

    (a) The
Company and the Subsidiary: (A) are and at all times have been in material
compliance with all statutes, rules or regulations applicable to the ownership,
testing, development, manufacture, packaging, processing, use, distribution,
marketing, labeling, promotion, sale, offer for sale, storage, import, export or
disposal of any product manufactured or distributed by the Company (“Applicable Laws”); (B) have
not received any FDA Form 483, notice of adverse finding, warning letter,
untitled letter or other written correspondence or written notice from the U.S.
Food and Drug Administration or any other federal, state or foreign governmental
authority having authority over the Company (“Governmental Authority”)
alleging or asserting material noncompliance with any Applicable Laws or any
licenses, certificates, approvals, clearances, authorizations, permits and
supplements or amendments thereto required by any such Applicable Laws (“Authorizations”); (C) possess
all Authorizations (except as would not reasonably be expected to have a
Material Adverse Effect) and such Authorizations are valid and in full force and
effect and are not in material violation of any term of any such Authorizations
(except as would not reasonably be expected to have a Material Adverse Effect);
(D) have not received written notice of any claim, action, suit, proceeding,
hearing, enforcement, investigation, arbitration or other action from any
Governmental Authority or third party alleging that any product, operation or
activity is in violation of any Applicable Laws or Authorizations and has no
knowledge that any such Governmental Authority or third party is considering any
such claim, litigation, arbitration, action, suit, investigation or proceeding;
(E) have not received written notice that any Governmental Authority has taken,
is taking or intends to take action to limit, suspend, modify or revoke any
Authorizations and has no knowledge that any such Governmental Authority is
considering such action; and (F) have filed, obtained, maintained or submitted
all material reports, documents, forms, notices, applications, records, claims,
submissions and supplements or amendments as required by any Applicable Laws or
Authorizations and that all such reports, documents, forms, notices,
applications, records, claims, submissions and supplements or amendments were
materially complete and correct on the date filed (or were corrected or
supplemented by a subsequent submission).

     

    (b) The
studies, tests and preclinical and clinical trials conducted by or on behalf of
the Company and the Subsidiary were and, if still pending, are being conducted
in all material respects in accordance with experimental protocols, procedures
and controls pursuant to accepted professional scientific standards and all
Applicable Laws and Authorizations, including, without limitation, the Federal
Food, Drug and Cosmetic Act and implementing regulations at 21 C.F.R. Parts 50,
54, 56, 58 and 312; the descriptions of the results of such studies, tests and
trials contained in the SEC Documents are accurate and complete in all material
respects and fairly present the data derived from such studies, tests and
trials; the Company is not aware of any studies, tests or trials the results of
which the Company believes reasonably call into question the study, test, or
trial results described or referred to in the SEC Documents when viewed in the
context in which such results are described and the clinical state of
development; and neither the Company nor the Subsidiary has received any notices
or correspondence from any Governmental Authority requiring the termination,
suspension or material modification of any studies, tests or preclinical or
clinical trials after they were initiated and which were conducted by or on
behalf of the Company or the Subsidiary.

     

    3.21 Compliance with Health Care
Laws. Neither the Company or the Subsidiary, nor their respective
officers, directors, employees, agents and contractors (exercising their
respective duties on behalf of the Company or the Subsidiary), nor the Company’s
or the Subsidiary’s business operations, is, or at any time has been, in
violation of any Health Care Laws, except where such violation would not
reasonably be expected to result in a Material Adverse Effect. “Health Care Laws” shall mean
(A) the federal Food, Drug and Cosmetic Act (21 U.S.C. §321 et seq.), and the
regulations promulgated thereunder, (B) all federal and state fraud and abuse
laws, including, without limitation, the federal Anti-Kickback Statute (42
U.S.C. §1320a-7b(b)), the Stark Law (42 U.S.C. §1395nn), the Civil False Claims
Act (31 U.S.C. §3729 et seq.), the Administrative False Claims Law (42 U.S.C.
§1320a-7b(a)), the Anti-Inducement Law (42 U.S.C. §1320a-7a(a)(5)), Sections
1320a-7 and 1320a-7a of Title 42 of the United States Code and the regulations
promulgated pursuant to such statutes, (C) the administrative simplification
provisions of the Health Insurance Portability and Accountability Act of 1996
(42 U.S.C. §§1320d-1320d-8), the regulations promulgated thereunder and
comparable state laws, (D) the Controlled Substances Act (21 U.S.C. §801 et
seq.), (E) Titles XVIII (42 U.S.C. §1395 et seq.) and XIX (42 U.S.C. §1396 et
seq.) of the Social Security Act and the regulations promulgated thereunder, (F)
quality, safety and accreditation standards and requirements of all applicable
foreign or state laws or regulatory bodies, and (G) any and all other applicable
health care laws, regulations, manual provisions, policies and administrative
guidance, each of (A) through (F) as may be amended from time to
time.

     

    3.22 Title to Property.
The Company and the Subsidiary have good and marketable title to all real
property owned by the Company and the Subsidiary and good title to all other
properties owned by them, in each case, free and clear of all mortgages,
pledges, liens, security interests, claims, restrictions or encumbrances of any
kind except such as would not, singly or in the aggregate, materially adversely
affect the value of such property, and do not interfere with the use made and
proposed to be made of such property by the Company or the Subsidiary; and all
of the leases and subleases material to the business of the Company and the
Subsidiary, taken as a whole, and under which the Company or the Subsidiary
holds properties described in the SEC Documents, are in full force and effect,
and neither the Company nor the Subsidiary has any notice of any material claim
of any sort that has been asserted by anyone adverse to the rights of the
Company or the Subsidiary under any of the leases or subleases mentioned above,
or affecting or questioning the rights of the Company or the Subsidiary to the
continued possession of the leased or subleased premises under any such lease or
sublease.

     

    3.23 Investment Company
Act. The Company is not required, and upon the issuance and sale of the
Securities as contemplated hereunder, will not be required to register as an
“investment company” under the Investment Company Act of 1940, as
amended.

     

    3.24 Environmental Laws.
Except as would not, singly or in the aggregate, reasonably be expected to
result in a Material Adverse Effect, (A) neither the Company nor the Subsidiary
is in violation of any federal, state, local or foreign statute, law, rule,
regulation, ordinance, code, policy or rule of common law or any judicial or
administrative interpretation thereof, including any judicial or administrative
order, consent, decree or judgment, relating to pollution or protection of human
health, the environment (including, without limitation, ambient air, surface
water, groundwater, land surface or subsurface strata) or wildlife, including,
without limitation, laws and regulations relating to the release or threatened
release of chemicals, pollutants, contaminants, wastes, toxic substances,
hazardous substances, petroleum or petroleum products, asbestos-containing
materials or mold (collectively, “Hazardous Materials”) or to the
manufacture, processing, distribution, use, treatment, storage, disposal,
transport or handling of Hazardous Materials (collectively, “Environmental Laws”), (B) the
Company and the Subsidiary have all permits, authorizations and approvals
required under any applicable Environmental Laws (except where the absence of
such permits, authorizations and approvals would not reasonably be expected to
have a Material Adverse Effect) and are each in compliance with their
requirements in all material respects, (C) there are no pending or, to the
knowledge of the Company, threatened administrative, regulatory or judicial
actions, suits, demands, demand letters, claims, liens, notices of noncompliance
or violation, investigation or proceedings relating to any Environmental Law
against the Company or the Subsidiary and (D) to the knowledge of the Company,
there are no events or circumstances that would reasonably be expected to form
the basis of an order for clean-up or remediation, or an action, suit or
proceeding by any private party or governmental body or agency, against or
affecting the Company or the Subsidiary relating to Hazardous Materials or any
Environmental Laws.

     

    3.25 Registration Rights.
There are no persons with registration rights or other similar rights to have
any securities registered pursuant to the SEC Documents or otherwise registered
by the Company under the Securities Act, except under the Securities Purchase
Agreement by and between the Company and the investors listed on the signature
pages thereto dated as of March 19, 2004 as amended on March 26, 2004, which
rights have been waived in connection with the transactions contemplated under
the Transaction Agreements.

     

    3.26 ERISA. Each employee
benefit plan, within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended (“ERISA”), that is or has been
maintained, administered or contributed to by the Company or any member of any
group that includes or has included the Company (as determined under Section
414(b), (c), (m), or (o) of the Internal Revenue Code of 1986, as amended (the
“Code”)) (a “Company Affiliate”) for their
employees or former employees has been maintained in compliance in all material
respects with its terms and the requirements of any applicable statutes, orders,
rules and regulations, including but not limited to ERISA and the Code to the
knowledge of the Company; no prohibited transaction, within the meaning of
Section 406 of ERISA or Section 4975 of the Code, has occurred with respect to
any such plan, excluding transactions effected pursuant to a statutory or
administrative exemption; and for each such plan that is subject to the funding
rules of Section 412 of the Code or Section 302 of ERISA, there has not occurred
any “accumulated funding deficiency” within the meaning of Section 412 of the
Code or Section 302 of ERISA, respectively, whether or not waived, and the fair
market value of the assets of each such plan (excluding for these purposes
accrued but unpaid contributions) exceeds the present value of all benefits
accrued under such plan determined as of the plan’s most recent actuarial report
using the actuarial assumptions set forth therein, and such actuarial
assumptions are reasonable in the aggregate. Neither the Company nor any Company
Affiliate has incurred or is reasonably expected to incur any liability to any
“multiemployer plan” within the meaning of Section 3(37) or 4001(a)(3) of ERISA.
Neither the Company nor any Company Affiliate has incurred or is reasonably
expected to incur any liability under any “welfare plan” within the meaning of
Section 3(1) of ERISA that provides benefits to retired or terminated employees
(other than as required by Section 4980B of the Code or Title I, Subtitle B,
Part 6 of ERISA).

     

    3.27 Accounting Controls.
The Company and the Subsidiary maintain a system of internal accounting controls
sufficient to provide reasonable assurances that (A) transactions are executed
in accordance with management’s general or specific authorization; (B)
transactions are recorded as necessary to permit preparation of financial
statements in conformity with generally accepted accounting principles and to
maintain accountability for assets; (C) access to assets is permitted only in
accordance with management’s general or specific authorization; and (D) the
recorded value for assets is compared with existing assets at reasonable
intervals and appropriate action is taken with respect to any
differences.

     

    3.28 Insurance. The
Company and the Subsidiary carry, or are covered by, insurance issued by
insurers in such amounts and covering such risks as the Company has determined
is reasonably adequate for the conduct of its business and the value of its
properties and as is customary for companies engaged in similar businesses in
similar industries; and neither the Company nor the Subsidiary have (i) received
written notice from any insurer or agent of such insurer that material capital
improvements or other material expenditures are required or necessary to be made
in order to continue such insurance or (ii) any reason to believe that it will
not be able to renew its existing insurance coverage as and when such coverage
expires or to obtain similar coverage at reasonable cost from similar insurers
as may be necessary to continue its business. All such insurance is outstanding
and duly in force on the date hereof.

     

    3.29 Related Party
Transactions. No relationship, direct or indirect, exists between or
among the Company or the Subsidiary, on the one hand, and the directors,
officers, stockholders, customers or suppliers of the Company or the Subsidiary,
on the other, that is required by the Securities Act to be described in the SEC
Documents and that is not so described therein.

     

    3.30 Foreign Corrupt Practices
Act. Neither the Company nor the Subsidiary nor, to the knowledge of the
Company, any director, officer, agent, employee acting on behalf of the Company
or the Subsidiary has (A) used any corporate funds for any unlawful
contribution, gift, entertainment or other unlawful expense relating to
political activity; (B) made any direct or indirect unlawful payment to any
foreign or domestic government official or employee from corporate funds; (C)
violated or is in violation of any provision of the Foreign Corrupt Practices
Act of 1977; or (D) made any bribe, rebate, payoff, influence payment, kickback
or other unlawful payment.

     

    3.31 Money Laundering
Laws. The operations of the Company and the Subsidiary are and have been
conducted at all times in compliance with applicable financial recordkeeping and
reporting requirements of the Currency and Foreign Transactions Reporting Act of
1970, as amended, the money laundering statutes of all jurisdictions, the rules
and regulations thereunder and any related or similar rules, regulations or
guidelines, issued, administered or enforced by any governmental agency
(collectively, the “Money
Laundering Laws”) and no action, suit or proceeding by or before any
court or governmental agency, authority or body or any arbitrator involving the
Company or the Subsidiary with respect to the Money Laundering Laws is pending
or, to the best knowledge of the Company, threatened.

     

    3.32 Statistical and Market
Data. Nothing has come to the attention of the Company that has caused
the Company to believe that the statistical and market-related data included in
the SEC Documents is not based on or derived from sources that are reliable and
accurate in all material respects.

     

    3.33 Sarbanes-Oxley Act.
There has been no failure on the part of the Company or to the knowledge of the
Company, on the part of any of the Company’s directors or officers, in their
capacities as such, to comply in all material respects with any applicable
provision of the Sarbanes-Oxley Act, including without limitation Section 402
related to loans.

     

    3.34 S-3 Eligibility. The
Company is eligible to use Form S-3 to register the Registrable Securities (as
such term is defined in the Registration Rights Agreement) for resale by the
Purchasers as

     

    3.35 contemplated
by the Registration Rights Agreement, according to the eligibility requirements
for the use of Form S-3 in transactions involving secondary offerings as set
forth in General Instructions I.A, II.B.3 and II.B.4(a)(3) of Form
S-3.

     

    3.36 Insider Trading. The
Company has a written insider trading policy applicable to all officers and
directors of the Company.

     

    3.37 Taxes. The Company
the Subsidiary have timely filed all federal, state, local and foreign income
and franchise tax returns required to be filed and are not in default in the
payment of any taxes which were payable pursuant to said returns or any
assessments with respect thereto, other than any which the Company or the
Subsidiary are contesting in good faith or which are not material. There is no
pending dispute with any taxing authority relating to any of such returns and
the Company has no knowledge of any proposed liability for any tax to be imposed
upon the properties or assets of the Company or the Subsidiary for which there
is not an adequate reserve reflected in the Company’s financial statements
included in the SEC Documents.

     

    3.38 Stock Options. All
Company options have been appropriately authorized by the board of directors of
the Company or an appropriate committee thereof, including approval of the
option exercise price or the methodology for determining the option exercise
price and the substantive option terms. All Company options reflect the fair
market value of the Company’s Common Stock as determined under Section 409A of
the Code on the date the option was granted (within the meaning of Treasury
Regulation §1.421-1(c)). No Company options have been retroactively granted, or
the exercise price of any Company option determined retroactively. All Company
options have been properly accounted for by the Company in accordance with GAAP,
and no change is expected in respect of any prior Company Financial Statement
relating to expenses for stock compensation. There is no pending audit,
investigation or inquiry by any governmental agency or by the Company with
respect to the Company’s stock option granting practices or other equity
compensation practices.

     

    3.39 Listing on Nasdaq Global
Market. The Common Stock of the Company is listed on the Nasdaq Global
Market under the ticker symbol “NRGN.” The Company has not received any notice
that it is not in compliance with the listing requirements of the Nasdaq Global
Market. The Company is, and has no reason to believe that it will not in the
foreseeable future continue to be (except as a result of minimum trading price
requirements), in compliance with all such listing requirements. There are no
affiliations with FINRA among the Company’s officers or directors or, to the
Company’s knowledge, any of the Company’s 5%-or-greater security
holders.  The execution, delivery and
performance of this Agreement and the consummation of the transactions
contemplated herein and compliance by the Company with its obligations hereunder
will not cause the Company to fail to be in compliance with the listing
requirements of the Nasdaq Global Market.

     

    3.40 No Manipulation of Common
Stock.
The Company has not taken any action outside the ordinary course of business
designed to or that might reasonably be expected to cause or result in unlawful
manipulation of the price of the Common Stock to facilitate the sale or resale
of the Shares or the Exchange Shares.

     

    3.41 Vote Required. A
quorum of the holders of the outstanding Common Stock, represented in person or
by proxy, is necessary to hold a meeting of the Company’s stockholders to
approve the Exchange contemplated by both this Agreement and by the Certificate
of Designations, and a vote of the majority of the holders of the outstanding
Common Stock, whether in person or by proxy, is required to approve the Exchange
contemplated by both this Agreement and by the Certificate of
Designations.  No other vote of the holders of any class or series of
the Company securities is necessary to approve the transaction documents and the
transactions contemplated hereby and thereby.

     

    3.42 

     

    3.43 Brokers or
Finders.  Except for Pacific Growth Equities, LLC, Leerink
Swann LLC, Oppenheimer & Co. and Merriman Curhan Ford & Co. (the “Placement Agents”), the
Company has not dealt with any broker or finder in connection with the
transactions contemplated by this Agreement, and, except for certain fees and
expenses payable by the Company to the Placement Agents, the Company has not
incurred, and shall not incur, directly or indirectly, any liability for any
brokerage or finders’ fees or agents commissions or any similar charges in
connection with this Agreement or any transaction contemplated
hereby.

     

    3.44 Private
Placement.  Assuming the accuracy of the Purchasers’
representations and warranties under Section 5, the offer and sale of the Shares
to the Purchasers as contemplated hereby is exempt from the registration
requirements of the Securities Act.

     

    3.45 Non-Public
Information.  Except with respect
to the material terms and conditions of the transactions contemplated by the
Transaction Agreements, and the information set forth on the Disclosure
Schedule, the Company represents, covenants and agrees that neither it nor any
other person acting on its behalf has provided any Purchaser or
its agents or counsel with any information that the Company believes constitutes
material non-public information.  The Company understands and confirms
that each Purchaser shall be relying on the foregoing representation and
covenant in effecting transactions in securities of the
Company.

     

    
      	
              4.  

            	
              Representations and
      Warranties of the
Purchasers.

            

    

     

    Each
Purchaser severally for itself, and not jointly with the other Purchasers,
represents and warrants to the Company as follows:

     

    4.1 Authorization.  All
action on the part of such Purchaser and, if applicable, its officers, directors
and shareholders necessary for the authorization, execution, delivery and
performance of the Transaction Agreements and the consummation of the
transactions contemplated therein has been taken.  When executed and
delivered, each of the Transaction Agreements will constitute the legal, valid
and binding obligation of such Purchaser, enforceable against such Purchaser in
accordance with its terms, except as such may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors’ rights generally
and by general equitable principles.  Such Purchaser has all requisite
corporate power to enter into each of the Transaction Agreements and to carry
out and perform its obligations under the terms of the Transaction
Agreements.  Such Purchaser has the knowledge and experience in
financial and business matters as to be capable of evaluating the merits and
risks of an investment in the Shares and has the ability to bear the economic
risks of an investment in the Shares for an indefinite period of
time.  The Purchaser acknowledges that the Placement Agents have made
no representations or warranties regarding the Company; the Purchaser agrees
that neither the Placement Agents nor any of their respective controlling
persons, affiliates, directors, officers, employees or consultants shall have
any liability to the Purchaser or any person asserting claims on behalf of or in
right of the Purchaser for any losses, claims, damages, liabilities or expenses
arising out of or relating to this Agreement or the Purchaser’s purchase of
Shares.

     

    4.2 Purchase Entirely for Own
Account.  Such Purchaser is acquiring the Securities being
purchased by it hereunder for investment, for its own account, and not for
resale or with a view to distribution thereof in violation of the Securities
Act. Such Purchaser has not entered into an agreement or understanding with any
other party to resell or distribute such shares.

     

    4.3 Investor Status;
Etc.  Such Purchaser certifies and represents to the Company
that it is an “Accredited Investor” as defined in Rule 501 of Regulation D
promulgated under the Securities Act and

     

    4.4 was not
organized for the purpose of acquiring the Securities.  Such
Purchaser’s financial condition is such that it is able to bear the risk of
holding the Securities for an indefinite period of time and the risk of loss of
its entire investment.  Such Purchaser has received, reviewed and
considered all information it deems necessary in making an informed decision to
make an investment in the Securities and has been afforded the opportunity to
ask questions of and receive answers from the management of the Company
concerning this investment and has sufficient knowledge and experience in
investing in companies similar to the Company in terms of the Company’s stage of
development so as to be able to evaluate the risks and merits of its investment
in the Company.

     

    4.5 Confidential
Information.  Each Purchaser understands that the existence and
nature of this offering and the Transaction Agreements, is strictly confidential
and proprietary to the Company and is being submitted to the Purchaser solely
for such Purchaser’s confidential use in connection with its investment decision
regarding the Securities.  Such Purchaser agrees to use such
information for the sole purpose of evaluating a possible investment in the
Securities and such Purchaser hereby acknowledges that it is prohibited from
reproducing or distributing the Transaction Agreements, or any other offering
materials, in whole or in part, or divulging or discussing any of their contents
except for use internally and by its legal counsel and except as required by law
or legal process.  Such Purchaser understands that the federal
securities laws prohibit any person who possesses material nonpublic information
about a company from trading in securities of such company.  Such
Purchaser understands that the Company deems the information in the Disclosure
Schedule delivered herewith to be material nonpublic information.

     

    4.6 Securities Not
Registered.  Such Purchaser understands that the Securities
have not been registered under the Securities Act, by reason of their issuance
by the Company in a transaction exempt from the registration requirements of the
Securities Act, and that the Securities must continue to be held by such
Purchaser unless a subsequent disposition thereof is registered under the
Securities Act or is exempt from such registration.  The Purchaser
understands that the exemptions from registration afforded by Rule 144 (the
provisions of which are known to it) promulgated under the Securities Act depend
on the satisfaction of various conditions, and that, if applicable, Rule 144 may
afford the basis for sales only in limited amounts.

     

    4.7 No
Conflict.  The execution and delivery of the Transaction
Agreements by such Purchaser and the consummation of the transactions
contemplated thereby will not conflict with or result in any violation of or
default by such Purchaser (with or without notice or lapse of time, or both)
under, or give rise to a right of termination, cancellation or acceleration of
any obligation or to a loss of a material benefit under (i) any provision
of the organizational documents of such Purchaser, (ii) any material
agreement or instrument, permit, franchise, or license or (iii) any judgment,
order, statute, law, ordinance, rule or regulations, applicable to such
Purchaser or its respective properties or assets.

     

    4.8 Consents.  All
consents, approvals, orders and authorizations required on the part of such
Purchaser in connection with the execution, delivery or performance of this
Agreement and the consummation of the transactions contemplated herein have been
obtained and are effective as of the Closing Date.

     

    
      	
              5.  

            	
              Conditions
      Precedent.

            

    

     

    5.1 Conditions to the Obligation
of the Purchasers to Consummate the Closing.  The obligation of
each Purchaser to consummate the Closing and to purchase and pay for the Units
being purchased by it pursuant to this Agreement is subject to the satisfaction
of the following conditions precedent:

     

    5.2 The
representations and warranties of the Company contained herein shall be true and
correct on and as of the Closing Date with the same force and effect as though
made on and as of the Closing Date (it being understood and agreed by each
Purchaser that, in the case of any representation and warranty of the Company
contained herein which is not hereinabove qualified by application thereto of a
materiality standard, such representation and warranty need be true and correct
only in all material respects in order to satisfy as to such representation or
warranty the condition precedent set forth in the foregoing provisions of this
Section 5.1(a)).

     

    (a) The
Company shall have obtained any and all consents, permits, approvals,
registrations and waivers necessary or appropriate for consummation of the
purchase and sale of the Units and the consummation of the other transactions
contemplated herein to be consummated on or prior to the Closing Date, all of
which shall be in full force and effect.

     

    (b) The
Registration Rights Agreement shall have been executed and delivered by the
Company.

     

    (c) In
connection with the issuance of the Shares and the transactions contemplated
hereby, the Company shall have submitted or shall submit on the date hereof to
the NASDAQ Stock Market a “Notification Form: Listing of Additional Shares” as
well as any necessary supporting documentation.

     

    (d) The
Company shall not be in breach of any of its obligations under any of the
Transaction Agreements and shall have performed all obligations and conditions
herein and therein required to be performed or observed by the Company on or
prior to the Closing Date.

     

    (e) The
Certificate of Designations shall have been filed with the Secretary of State of
the State of Delaware and shall continue to be in full force and effect as of
the Closing Date.

     

    (f) There
shall be no effective injunction, writ, preliminary restraining order or any
order of any nature issued by a court of competent jurisdiction directing that
the transactions provided for herein or any of them not be consummated as herein
provided.

     

    (g) The
purchase of and payment for the Units by the Purchasers shall not be prohibited
by any law or governmental order or regulation.  All necessary
consents, approvals, licenses, permits, orders and authorizations of, or
registrations, declarations and filings with, any governmental or administrative
agency or of any other person with respect to any of the transactions
contemplated hereby shall have been duly obtained or made and shall be in full
force and effect.

     

    (h) All
instruments and corporate proceedings in connection with the transactions
contemplated by this Agreement to be consummated at the Closing shall be
satisfactory in form and substance to such Purchaser, the Purchasers shall have
received an opinion of legal counsel to the Company substantially in the form of
Exhibit E
attached hereto, and such Purchaser shall have received such certificates of the
Company’s officers certifying the conditions specified in Section 5.1(a)
above.

     

    (i) No stop
order or suspension of trading shall have been imposed by the NASDAQ Stock
Market, the SEC or any other governmental regulatory body with respect to public
trading in the Common Stock.

     

    5.3 Conditions to the Obligation
of the Company to Consummate the Closing.  The obligation of
the Company to consummate the Closing and to issue and sell to each of the
Purchasers the Units to be purchased by it at the Closing is subject to the
satisfaction of the following conditions precedent:

     

    5.4 The
representations and warranties contained herein of such Purchaser shall be true
and correct on and as of the Closing Date with the same force and effect as
though made on and as of the Closing Date (it being understood and agreed by the
Company that, in the case of any representation and warranty of each Purchaser
contained herein which is not hereinabove qualified by application thereto of a
materiality standard, such representation and warranty need be true and correct
only in all material respects in order to satisfy as to such representation or
warranty the condition precedent set forth in the foregoing provisions of this
Section 5.2(a)).

     

    (a) The
Company shall have obtained any and all consents, permits, approvals,
registrations and waivers necessary or appropriate for consummation of the
purchase and sale of the Units and the consummation of the other transactions
contemplated herein to be consummated on or prior to the Closing Date, all of
which shall be in full force and effect.

     

    (b) The
Registration Rights Agreement shall have been executed and delivered by each
Purchaser.

     

    (c) The
Purchasers shall have performed all obligations and conditions herein required
to be performed or observed by the Purchasers on or prior to the Closing
Date.

     

    (d) There
shall be no effective injunction, writ, preliminary restraining order or any
order of any nature issued by a court of competent jurisdiction directing that
the transactions provided for herein or any of them not be consummated as herein
provided.

     

    (e) The sale
of the Units by the Company shall not be prohibited by any law or governmental
order or regulation.  All necessary consents, approvals, licenses,
permits, orders and authorizations of, or registrations, declarations and
filings with, any governmental or administrative agency or of any other person
with respect to any of the transactions contemplated hereby shall have been duly
obtained or made and shall be in full force and effect.

     

    (f) Each of
the Purchasers shall have executed and delivered to the Company an Investor
Questionnaire, in the form attached hereto as Appendix I, pursuant
to which each such Purchaser shall provide information necessary to confirm each
such Purchaser’s status as an “accredited investor” (as such term is defined in
Rule 501 promulgated under the Securities Act) and to enable the Company to
comply with the Registration Rights Agreement.

     

    (g) [intentionally
omitted]

     

    (h) All
instruments and corporate proceedings in connection with the transactions
contemplated by this Agreement to be consummated at the Closing shall be
satisfactory in form and substance to the Company, and the Company shall have
received counterpart originals, or certified or other copies of all documents,
including without limitation records of corporate or other proceedings, which it
may have reasonably requested in connection therewith.

     

    
      	
              6.  

            	
              Transfer,
      Legends.

            

    

     

    6.1 Securities Law Transfer
Restrictions.

     

    (a) Each
Purchaser understands that the Securities have not been registered under the
Securities Act or any state securities laws, and each Purchaser agrees that it
will not dispose of the Securities unless (a) the resale of the Securities
is registered under the Securities Act, or (b) such registration is not
required under the Securities Act or any applicable state securities law due to
the

     

    (b) applicability
of an exemption therefrom.  In that connection, such Purchaser is
aware of Rule 144 under the Securities Act and the restrictions imposed
thereby.

     

    (c) Each
Purchaser acknowledges that no action has been or will be taken in any
jurisdiction outside the United States by the Company or the Placement Agents
that would permit an offering of the Securities, or possession or distribution
of offering materials in connection with the issue of Securities, in any
jurisdiction outside of the United States where action for that purpose is
required.  Each Purchaser outside the United States will comply with
all applicable laws and regulations in each foreign jurisdiction in which it
purchases, offers, sells or delivers Securities or has in its possession or
distributes any offering material, in all cases at its own expense.

     

    6.2 Legends.

     

    (a) Each
certificate representing any of the Securities shall be endorsed with the
legends set forth below, and each Purchaser covenants that, except to the extent
such restrictions are waived by the Company, it shall not transfer the
Securities represented by any such certificate without complying with the
restrictions on transfer described in this Agreement and the legends endorsed on
such certificate:

     

    “THE
SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933 AND MAY NOT BE OFFERED, SOLD, ASSIGNED, PLEDGED,
TRANSFERRED OR OTHERWISE DISPOSED OF IN THE ABSENCE OF AN EFFECTIVE REGISTRATION
STATEMENT UNDER SAID ACT OR PURSUANT TO AN AVAILABLE EXEMPTION FROM REGISTRATION
UNDER SAID ACT AND, IF REQUESTED BY THE COMPANY, UPON DELIVERY OF AN OPINION OF
COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT THE PROPOSED TRANSFER IS
EXEMPT FROM SAID ACT. THIS SECURITY MAY BE PLEDGED
IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT WITH A REGISTERED BROKER-DEALER OR
OTHER LOAN WITH A FINANCIAL INSTITUTION THAT IS AN “ACCREDITED INVESTOR” AS
DEFINED IN RULE 501(a) UNDER THE SECURITIES ACT OR OTHER LOAN SECURED BY SUCH
SECURITIES. ”

     

    (b) After the
earlier of: (i) the effectiveness of any Registration Statement and receipt by
the Company of a Purchaser’s written confirmation that the Exchange Shares or
Warrant Shares covered thereby will not be disposed of except in compliance with
the prospectus delivery requirements of the Securities Act; or (ii) Rule 144
under the Securities Act becoming available to a Purchaser, the Company shall,
upon such Purchaser’s written request, promptly deliver to the transfer agent
for the Common Stock (the “Transfer Agent”) irrevocable
instructions that the Transfer Agent shall reissue a certificate representing
shares of Common Stock without legends upon receipt by such Transfer Agent of
the legended certificates for such shares.  From and after the earlier
of such dates, upon a Purchaser’s written request, the Company shall promptly,
and in any event within 3 business days of receipt of such certificates, cause
certificates evidencing the Purchaser’s Securities to be replaced with
certificates which do not bear such restrictive legends, and Securities
subsequently issued, including upon exercise of the Warrants, shall not bear
such restrictive legends.  If the Securities may be issued without
restrictive legends, the Company shall use its commercially reasonable best
efforts to deliver, or cause to be delivered, Securities electronically through
the Depository Trust and Clearing Corporation or another established clearing
corporation performing similar functions, if available.  If (1) an
unlegended certificate is not delivered to a Purchaser within three (3) Business
Days of submission by that Purchaser of a legended certificate and supporting
documentation to the Transfer Agent as provided above as a result of a breach of
the Company’s covenants above and (2) prior to the time such unlegended
certificate is received by the Purchaser, the Purchaser, or any third party on
behalf of such Purchaser or for the

     

    (c) Purchaser’s
account, purchases (in an open market transaction or otherwise) shares of Common
Stock to deliver in satisfaction of a sale by the Purchaser of shares
represented by such certificate (a “Buy-In”), then the Company
shall pay in cash to the Purchaser (for costs incurred either directly by such
Purchaser or on behalf of a third party) the amount by which the total purchase
price paid for Common Stock as a result of the Buy-In (including brokerage
commissions, if any) exceeds the proceeds received by such Purchaser as a result
of the sale to which such Buy-In relates.  The Purchaser shall provide
the Company written notice indicating the amounts payable to the Purchaser in
respect of the Buy-In. The Company shall pay all transfer agent fees, stamp
taxes and other taxes and duties levied in connection with the delivery of any
Securities to the Purchasers.  Notwithstanding the foregoing, the
Company’s obligation to issue unlegended certificates pursuant to this
Paragraph 6.2(b) shall be excused, and the Purchaser shall have no Buy-In
rights in respect thereto, if: (i) the SEC promulgates any rule or
interpretation expressly prohibiting removal of legends in such circumstances;
(ii) the SEC or other regulatory authority instructs the Company or its transfer
agent not to remove such legends; or (iii) the SEC makes it a condition to the
effectiveness of any Registration Statement to that the Company continue to keep
such legends in place.

     

    (d) The
Company acknowledges and agrees that a Purchaser may from time to time pledge
pursuant to a bona fide margin agreement with a registered broker-dealer or
grant a security interest in some or all of the Securities to a financial
institution that is an “accredited investor” as defined in Rule 501(a) under the
Securities Act and who agrees to be bound by the provisions of this Agreement
and the Registration Rights Agreement and, if required under the terms of such
arrangement, such Purchaser may transfer pledged or secured Securities to the
pledgees or secured parties.  Such a pledge or transfer would not be
subject to approval of the Company and no legal opinion of legal counsel of the
pledgee, secured party or pledgor shall be required in connection
therewith.  Further, no notice shall be required of such
pledge.  At the appropriate Purchaser’s expense, the Company will
execute and deliver such reasonable documentation as a pledgee or secured party
of Securities may reasonably request in connection with a pledge or transfer of
the Securities, including, if the Securities are subject to registration
pursuant to the Registration Rights Agreement, the preparation and filing of any
required prospectus supplement under Rule 424(b)(3) under the Securities Act or
other applicable provision of the Securities Act to appropriately amend the list
of Selling Stockholders thereunder.

     

    
      	
              7.  

            	
              Covenants and
      Agreements of the Company.

            

    

     

    7.1 No Conflicting
Agreements.  The Company will not take any action, enter into
any agreement or make any commitment that would conflict or interfere in any
material respect with the Company’s obligations to the Purchasers under the
Transaction Agreements.

     

    7.2 Compliance with
Laws.  The Company will comply in all material respects with
all applicable laws, rules, regulations, orders and decrees of all governmental
authorities.

     

    7.3 Listing of Exchange Shares
and Warrant Shares and Related Matters.  Subject to official
notice of issuance, the Company shall take all necessary action to cause the
Exchange Shares and Warrant Shares to be listed on the Nasdaq Global Market no
later than the issuance date for such Exchange Shares and Warrant
Shares.  In addition, if the Company applies to have shares of its
Common Stock or other securities traded on any other principal stock exchange or
market, the Company shall include in such application the Exchange Shares and
Warrant Shares and will take such other action as is necessary to cause such
Exchange Shares and Warrant Shares to be so listed.  The Company will
use best efforts to continue the listing and trading of its Common Stock on the
Nasdaq Global Market and, in accordance, therewith, will use best efforts to
comply in all respects with the Company’s reporting, filing and other
obligations under the bylaws or rules of such market or exchange, as
applicable.

     

    7.4 Proxy Statement;
Stockholders Meeting.

     

    (a) On or
before the 120th day
following the Closing (the “Stockholders Meeting
Deadline”), the Company shall hold a meeting of its stockholders (which
meeting may be an annual or special meeting) (the “Stockholders Meeting”) at
which the Company shall seek, and use its best efforts to obtain, approval from
the Company’s stockholders for: (i) amendments to the Company’s Certificate of
Incorporation to increase the total number of shares of Common Stock authorized
for issuance by the Company to not less than 100,000,000 shares; (ii) the
Exchange; and (iii) any stockholder approvals required by the listing standards
of the Nasdaq Global Market (together, the “Proposals”).  In
connection therewith, the Company will prepare and promptly file with the SEC
proxy materials (including a proxy statement and form of proxy) for use at the
Stockholders Meeting and, after receiving and promptly responding to any
comments of the SEC thereon, shall promptly mail such proxy materials to the
stockholders of the Company.  Each Purchaser shall promptly furnish in
writing to the Company such information relating to such Purchaser and its
investment in the Company as the Company may reasonably request for inclusion in
the Proxy Statement.  The Company will comply with Section 14(a) of
the Exchange Act and the rules promulgated thereunder in relation to any proxy
statement (as amended or supplemented, the “Proxy Statement”) and any form
of proxy to be sent to the stockholders of the Company in connection with the
Stockholders Meeting, and the Proxy Statement shall not, on the date that the
Proxy Statement (or any amendment thereof or supplement thereto) is first mailed
to stockholders or at the time of the Stockholders Meeting, contain any untrue
statement of a material fact or omit to state any material fact necessary in
order to make the statements made therein not false or misleading, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies or the Stockholders
Meeting which has become false or misleading.  If the Company should
discover at any time prior to the Stockholders Meeting, any event relating to
the Company or the Subsidiary or any of their respective affiliates, officers or
directors that is required to be set forth in a supplement or amendment to the
Proxy Statement, in addition to the Company’s obligations under the Exchange
Act, the Company will promptly inform the Purchasers thereof.

     

    (b) Subject
to their fiduciary obligations under applicable law (as determined in good faith
by the Company’s Board of Directors after consultation with the Company’s
outside counsel), the Company’s Board of Directors shall recommend to the
Company’s stockholders that the stockholders vote in favor of the Proposals (the
“Company Board
Recommendation”) and take all commercially reasonable action to solicit
the approval of the stockholders for the Proposals unless the Board of Directors
shall have modified, amended or withdrawn the Company Board Recommendation
pursuant to the provisions of the immediately succeeding
sentence.  Whether or not the Company’s Board of Directors modifies,
amends or withdraws the Company Board Recommendation pursuant to the immediately
preceding sentence, the Company shall, in accordance with Section 146 of the
Delaware General Corporation Law and the provisions of its Certificate of
Incorporation and Bylaws, (i) take all action necessary to convene the
Stockholders Meeting on or prior to the Stockholders Meeting Deadline, to
consider and vote upon the approval of the Proposals and (ii) submit the
Proposals at the Stockholders Meeting to the stockholders of the Company for
their approval.

     

    (c) The
Company and the Purchasers hereby declare that it is impossible to measure in
money the damages which will accrue to the parties hereto by reason of the
failure of any party to perform any of its obligations set forth in this
Section 7.3. Therefore, the Purchasers shall have the right to specific
performance of such obligations, and if the Purchasers shall institute any
action or proceeding to enforce the provisions hereof, the Company hereby waives
the claim or defense that the party instituting such action or proceeding has an
adequate remedy at law.

     

    7.5 Equal Treatment of
Purchasers.  No consideration shall be offered or paid to any
Person to amend or consent to a waiver or modification of any provision of any
of the Transaction Agreements or in

     

    7.6 consideration
of the exchange, redemption or repurchase of any Security unless the same
consideration is also offered to all of the parties to the Transaction
Agreements.  For clarification purposes, this provision constitutes a
separate right granted to each Purchaser by the Company and negotiated
separately by each Purchaser, and is intended for the Company to treat the
Purchasers as a class and shall not in any way be construed as the Purchasers
acting in concert or as a group with respect to the purchase, disposition or
voting of Securities or otherwise.

     

    7.7 HSR Filing. If
required, the Company and any required Purchaser shall (i) as soon as
practicable after the date of the Exchange, but in no event later than 20 days
following the Exchange, file Notification and Report Forms under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the “HSR Act”) with the Federal
Trade Commission relating to the transaction contemplated by this Agreement,
(ii) use their best efforts to respond as promptly as practicable to all
inquiries received from the Federal Trade Commission for additional information
or documentation and (iii) request that the waiting period under the HSR
Act be terminated early.

     

    7.8 Covenants Pending
Closing. The Company shall use its reasonable efforts to fulfill or
obtain the fulfillment of the conditions to the Closing as promptly as
practicable.

     

    7.9 Tax Covenants. The
Purchasers and the Company agree not to treat the Shares as “preferred stock”
within the meaning of Treasury Regulation Section 1.305-5 for United States
income tax purposes. Based upon the terms of the Shares as of the Closing Date,
the Company shall report dividend income for federal, and any applicable state
and local income tax purposes to the Purchasers solely to the extent that cash
dividends are paid on the Shares. Neither the Company nor the Purchasers shall
take any position contrary to the foregoing on any tax return. Notwithstanding
the foregoing, neither the Purchasers nor the Company shall be required to take
any action pursuant to this Section 7.8 if doing so would be reasonably
likely, based upon advice of the Company’s tax advisers, to be unfounded,
unlawful or potentially subject the Purchasers or the Company to a material
penalty.

     

    
      	
              8.  

            	
              Termination of
      Obligations to Effect the
Closing.

            

    

     

    8.1 The
obligations of the Company, on the one hand, and the Purchasers, on the other
hand, to effect the Closing shall terminate as follows:

     

    (a) Upon the
mutual written consent of the Company and the Majority Purchasers;

     

    (b) By the
Company if any of the conditions set forth in Section 5.2 shall have become
incapable of fulfillment, and shall not have been waived by the
Company;

     

    (c) By any
Purchaser (with respect to itself only) if any of the conditions set forth in
Section 5.1 shall have become incapable of fulfillment, and shall not have been
waived by the Purchaser; or

     

    (d) By either
the Company or any Purchaser (with respect to itself only) if the Closing has
not occurred on or prior to 7th Business Day following the date of this
Agreement;

     

    provided, however, that, except in the
case of clause (a) above, the party seeking to terminate its obligation to
effect the Closing shall not then be in breach of any of its representations,
warranties, covenants or agreements contained in this Agreement or the other
Transaction Agreements if such breach has resulted in the circumstances giving
rise to such party’s seeking to terminate its obligation to effect the
Closing.

     

    In the
event of termination by any Purchaser of its obligations to effect the Closing
pursuant to this Section 8 (such Purchaser, a “Non-Participating Purchaser”),
written notice thereof shall forthwith be given by the Non-Participating
Purchaser to the Company and the other Purchasers, and each other Purchaser
shall have the right (but not the obligation) to purchase a pro rata portion of the
Non-Participating Purchaser’s allocated portion of the total number of Units to
be acquired by all Purchasers under this Agreement (or such greater portion of
the Non-Participating Purchaser’s allocated portion of the Units as otherwise
agreed to among each of the other Purchasers electing to purchase a portion of
the Non-Participating Purchaser’s allocated portion of the
Units).  Nothing in this Section 8 shall be deemed to terminate the
Company’s other obligations hereunder of under the other Transaction Agreements
(including the Company’s obligations under Section 7 hereof), or to release any
party from any liability for any breach by such party of the terms and
provisions of this Agreement or the other Transaction Agreements.

     

    
      	
              9.  

            	
              Miscellaneous
      Provisions.

            

    

     

    9.1 Public Statements or
Releases.  Except as set forth below, no public release or
announcement concerning the transactions contemplated hereby shall be issued by
the Company or the Purchasers without the prior consent of the Company (in the
case of a release or announcement by the Purchasers) or the Majority Purchasers
(in the case of a release or announcement by the Company) (which consents shall
not be unreasonably withheld), except as such release or announcement may be
required by law or the applicable rules or regulations of any securities
exchange or securities market, in which case the Company or the Purchasers, as
the case may be, shall allow the Purchasers or the Company, as applicable, to
the extent reasonably practicable in the circumstances, reasonable time to
comment on such release or announcement in advance of such
issuance.  By 9:30 a.m. (New York City time) on April 9, 2008, the
Company shall issue a press release disclosing the transactions contemplated by
this Agreement and the information on the Disclosure Schedule.  In
addition, the Company will make such other filings and notices relating to the
Transaction Agreements and the transactions contemplated thereby in the manner
and time required by the SEC or the Nasdaq Global Market.

     

    9.2 Further
Assurances.  Each party agrees to cooperate fully with the
other party and to execute such further instruments, documents and agreements
and to give such further written assurances, as may be reasonably requested by
the other party to better evidence and reflect the transactions described herein
and contemplated hereby, and to carry into effect the intents and purposes of
this Agreement.

     

    9.3 Rights
Cumulative.  Each and all of the various rights, powers and
remedies of the parties shall be considered to be cumulative with and in
addition to any other rights, powers and remedies which such parties may have at
law or in equity in the event of the breach of any of the terms of this
Agreement.  The exercise or partial exercise of any right, power or
remedy shall neither constitute the exclusive election thereof nor the waiver of
any other right, power or remedy available to such party.

     

    9.4 Pronouns.  All
pronouns or any variation thereof shall be deemed to refer to the masculine,
feminine or neuter, singular or plural, as the identity of the person, persons,
entity or entities may require.

     

    9.5 Notices.  Any
notices, reports or other correspondence (hereinafter collectively referred to
as “correspondence”) required or permitted to be given hereunder shall be in
writing and shall be sent by postage prepaid first class mail, courier or
telecopy or delivered by hand to the party to whom such correspondence is
required or permitted to be given hereunder, and shall be deemed sufficient upon
receipt when delivered personally or by courier, overnight delivery service or
confirmed facsimile, or three business days after being deposited in the regular
mail as certified or registered mail (airmail if sent internationally) with
postage prepaid, if such notice is addressed to the party to be notified at such
party’s address or facsimile number as set forth below:

     

    9.6 All
correspondence to the Company shall be addressed as follows:

     

    Neurogen
Corporation

    35 NE
Industrial Road

    Branford,
CT 06405

    ATTN:
Stephen R. Davis, President and Chief Executive Officer

    

    with a
copy (not constituting notice) addressed to:

     

    Latham
& Watkins LLP

    650 Town
Center Drive, 20th Floor

    Costa
Mesa, CA 92626-1925

    ATTN: B.
Shayne Kennedy, Esq.

    

    (a) All
correspondence to any Purchaser shall be sent to such Purchaser at the address
set forth in Exhibit A.

     

    (b) Any
entity may change the address to which correspondence to it is to be addressed
by written notification as provided for herein.

     

    9.7 Captions.  The
captions and paragraph headings of this Agreement are solely for the convenience
of reference and shall not affect its interpretation.

     

    9.8 Severability.  Should
any part or provision of this Agreement be held unenforceable or in conflict
with the applicable laws or regulations of any jurisdiction, the invalid or
unenforceable part or provisions shall be replaced with a provision which
accomplishes, to the extent possible, the original business purpose of such part
or provision in a valid and enforceable manner, and the remainder of this
Agreement shall remain binding upon the parties hereto.

     

    9.9 Governing Law. THIS
AGREEMENT (INCLUDING ANY CLAIM OR CONTROVERSY ARISING OUT OF OR RELATING TO THIS
AGREEMENT) SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
STATE OF NEW YORK, WITHOUT GIVING EFFECT TO CONFLICT OF LAWS PRINCIPLES THAT
WOULD RESULT IN THE APPLICATION OF ANY LAW OTHER THAN THE LAW OF THE STATE OF
NEW YORK.

     

    9.10 Amendments. This
Agreement may not be amended or modified except pursuant to an instrument in
writing signed by the Company and the Majority Purchasers.

     

    9.11 Waiver.  No
waiver of any term, provision or condition of this Agreement, whether by conduct
or otherwise, in any one or more instances, shall be deemed to be, or be
construed as, a further or continuing waiver of any such term, provision or
condition or as a waiver of any other term, provision or condition of this
Agreement.

     

    9.12 Expenses.  Each
party will bear its own costs and expenses in connection with this
Agreement.

     

    9.13 Assignment.  The
rights and obligations of the parties hereto shall inure to the benefit of and
shall be binding upon the authorized successors and permitted assigns of each
party.  No party may assign its rights or obligations under this
Agreement or designate another person: (i) to perform all or part of its
obligations under this Agreement; or (ii) to have all or part of its rights
and benefits under this Agreement, in each case without the prior written
consent of the other party, provided, however, that a

     

    9.14 Purchaser
may assign its rights hereunder with respect to any Securities transferred to a
“Qualified Holder” pursuant to and in compliance with Section 13 of the
Registration Rights Agreement, and may designate such Qualified Holder to
perform the duties of the Purchaser hereunder with respect to such transferred
Units; provided, further that irrespective of
such transfer and designation the Purchaser shall remain obligated hereunder
with respect to all of such Purchaser’s purchased Units.  In the event
of any assignment in accordance with the terms of this Agreement, the assignee
shall specifically assume and be bound by the provisions of the Agreement by
executing and agreeing to an assumption agreement reasonably acceptable to the
other party.

     

    9.15 Survival.  The
respective representations and warranties given by the parties hereto, and the
other covenants and agreements contained herein required to be performed prior
to Closing, shall survive the Closing Date and the consummation of the
transactions contemplated herein for a period of two years and the other
covenants and agreements contained herein shall survive indefinitely, without
regard to any investigation made by any party.

     

    9.16 Limitation on Enforcement of
Remedies. The Company hereby agrees that it will not assert against the
limited partners of any of the Purchasers any claim it may have under this
Agreement by reason of any failure or alleged failure by such Purchaser to meet
its obligations hereunder.

     

    9.17 No Effect on Securities
Purchase Agreement. Notwithstanding anything to the contrary in this
Agreement, all of the terms, covenants, agreements, conditions and provisions of
that certain Securities Purchase Agreement, dated as of March 19, 2004, as
amended on March 26, 2004, by and between the Company and each of the investors
listed on the signature pages thereto, including any rights of any Purchaser
that currently holds shares of Common Stock that were purchased thereunder,
shall remain in full force and effect in accordance with their
terms.

     

    9.18 Counterparts. This
Agreement may be executed in two or more counterparts, each of which shall be
deemed an original and all of which together shall constitute one
instrument.

     

    9.19 Entire
Agreement.  This Agreement and the Registration Rights
Agreement constitute the entire agreement between the parties hereto respecting
the subject matter hereof and supersede all prior agreements, negotiations,
understandings, representations and statements respecting the subject matter
hereof, whether written or oral.  No modification, alteration, waiver
or change in any of the terms of this Agreement shall be valid or binding upon
the parties hereto unless made in writing and duly executed by the Company and
the Majority Purchasers.

     

    [Signature
Pages Follow]

     

    IN WITNESS WHEREOF, the parties hereto
have executed this Securities Purchase Agreement as of the day and year first
above written.

     

    

     

    NEUROGEN
CORPORATION

    

    

    By:         /s/ STEPHEN R.
DAVIS            

    Name:           Stephen
R. Davis

    Title:             President
and Chief Executive Officer

    

     

    

     

    THE
PURCHASER’S SIGNATURE TO THE INVESTOR QUESTIONNAIRE DATED OF EVEN DATE HEREWITH
SHALL CONSTITUTE THE PURCHASER’S SIGNATURE TO THIS SECURITIES PURCHASE
AGREEMENT.

     

    Exhibit
A

     

    SCHEDULE
OF PURCHASERS

     

    
      	
              Purchaser Name and Address

            	
              Number of Units to be
    Purchased

            	
              Aggregate Purchase Price

            
	
              Warburg

            	
              192,307

            	
              $5,999,978.40

            
	
              Tang
      Capital Mgmt

            	
              128,205

            	
              $3,999,996.00

            
	
              Baker
      Brothers

            	
              117,628

            	
              $3,669,993.60

            
	
              Orbimed

            	
              96,154

            	
              $3,000,004.80

            
	
              Domain

            	
              96,154

            	
              $3,000,004.80

            
	
              Tisch
      Family/Tommy Tisch

            	
              96,154

            	
              $3,000,004.80

            
	
              Special
      Situations

            	
              96,154

            	
              $3,000,004.80

            
	
              Chartwell

            	
              64,103

            	
              $2,000,013.60

            
	
              Perceptive
      Life

            	
              38,462

            	
              $1,200,014.40

            
	
              PGEM

            	
              22,437

            	
              $700,034.40

            
	
              Griffin
      Capital

            	
              16,025

            	
              $499,980.00

            
	
              Mr
      X Board Member

            	
              9,615

            	
              $299,988.00

            
	
              Clarion

            	
              8,013

            	
              $250,005.60

            

    

    

     

    

     

    Exhibit
B

     

    FORM OF
WARRANT

     

    Exhibit
C

     

    REGISTRATION
RIGHTS AGREEMENT

     

    Exhibit
D

     

    CERTIFICATE
OF DESIGNATIONS

     

    Exhibit
E

     

    FORM OF
LEGAL OPINION

     

    Appendix
I

     

    DISCLOSURE
SCHEDULE

     

    This is
the Disclosure Schedule referred to in the Securities Purchase Agreement (the
“Agreement”),
dated as of April 7, 2008, by and among Neurogen Corpration, a Delaware
corporation (the “Company”) and the
several purchasers named on Exhibit A thereto.  Capitalized terms not
defined in this Disclosure Schedule shall have the meanings ascribed to such
terms in the Agreement.  It is understood and agreed that (i) the
disclosure of any fact or item in any section of the Disclosure Schedule shall
be deemed disclosure with respect to any Section or subsection of the Agreement
to which the relevance of such information is reasonably apparent on its face
and (ii) the disclosure of any matter or item in the Disclosure Schedule shall
not be deemed to constitute an acknowledgement that such matter or item is
required to be disclosed therein or is material to a representation or warranty
set forth in the Agreement and shall not be used as a basis for interpreting the
terms “material,” “materially,” “materiality” or “Material Adverse Effect” or
any word or phrase of similar import and does not mean that such matter or item
would, alone or together with any other matter or item, reasonably be expected
to have a Material Adverse Effect.

     

    Matters
reflected in the Disclosure Schedule are not necessarily limited to matters
required by the Agreement to be reflected in the Disclosure
Schedule.  Such additional matters are set forth for informational
purposes and do not necessarily include other matters of a similar
nature.  In no event shall the listing of such matters in the
Disclosure Schedule be deemed or interpreted to expand the scope of the
Company’s representations and warranties contained in the
Agreement.

     

    

    Proposed
Reduction in Work Force

    

    On
February 6, 2008 the Company announced that it had reduced its workforce by
approximately 70 employees, as part of a restructuring plan to focus the
Company’s resources on its advancing of clinical assets. Affected employees will
be eligible for a severance package that includes severance pay, continuation of
benefits and outplacement services.  The Company estimates that the
aggregate restructuring charges associated with the reduction will be
approximately $2.5 million of which the majority will be paid in the first and
second quarters of 2008. This estimate includes, for employees whose positions
are being eliminated, approximately $1.0 million in salaries and benefits for
the period of time between notification that their position is being eliminated
and their actual termination.

    

    The
Company is contemplating and may imminently publicly announce a further
reduction in its work force by approximately 45 employees.  Following such
a reduction the Company would have approximately 30 employees, all dedicated to
programs in drug development or administration.  The purpose of this
further reduction would be to focus the Company’s resources on its development
programs for insomnia, anxiety, Parkinson’s disease and Restless Legs
Syndrome.  This reduction in work force would entail an elimination of
the Company’s research function.  The Company would also defer clinical
trials that were previously contemplated in 2008 for
schizophrenia.  Affected employees will be eligible for a severance
package that includes severance pay, continuation of benefits and outplacement
services.  The Company currently estimates that the aggregate
restructuring charges associated with such a reduction would be approximately
$2.5 million of which the majority would be paid in the second and third
quarters of 2008. This estimate includes, approximately $0.9 for three
executives with employment contracts that include pre-specified severance terms
and, for employees whose positions would be eliminated, approximately $0.8
million in salaries and benefits for the period of time between notification
that their position is being eliminated and their actual
termination.  The Company expects that it may take a non-cash charge
to write down the value of certain property, plant and equipment associated with
its research operations but cannot predict at this time the amount of any such
write down.exv10w1

 

Exhibit 10.1

Brandywine Realty Trust

Performance Share Award

          This is a Performance Share Award dated as of April 8, 2008 (the “Date of Grant”),
from Brandywine Realty Trust, a Maryland real estate investment trust (the “Company”) to
                                         (“Grantee”). Terms used herein as defined terms and not
defined herein have the meanings assigned to them in the Brandywine Realty Trust Amended and
Restated 1997 Long-Term Incentive Plan, as amended from time to time (the “Plan”).

          1. Definitions. As used herein:

               (a) “Award” means the award of Performance Shares hereby granted.

               (b) “Board” means the Board of Trustees of the Company, as constituted from time to
time.

               (c) “Cause” means “Cause” as defined in the Employment Agreement or the Plan.

               (d) “Change of Control” means “Change of Control” as defined in the Plan.

               (e) “Code” means the Internal Revenue Code of 1986, as amended from time to time, and
any successor thereto.

               (f) “Committee” means the Committee appointed by the Board in accordance with Section
2 of the Plan, if one is appointed and in existence at the time of reference. If no Committee has
been appointed pursuant to Section 2, or if such a Committee is not in existence at the time of
reference, “Committee” means the Board.

               (g) “Date of Grant” has the meaning shown above.

               (h) “Deferred Compensation Plan” means the Brandywine Realty Trust Executive Deferred
Compensation Plan, as in effect from time to time.

               (i) “Disability” means “Disability” as defined in the Plan.

               (j) “Employer” means the Company or the Subsidiary for which Grantee is performing
services on the applicable Vesting Date.

               (k) “Employment Agreement” means the Amended and Restated Employment Agreement between
Grantee and the Company, dated as of                                         , as amended from time to time, or any
subsequent

 

 

employment agreement between Grantee and the Company as in effect at the time of
determination.

               (l) “Fair Market Value” means “Fair Market Value” as defined in the Plan.

               (m) “Performance Period” means, with respect to each Performance Share, the period
beginning on the Date of Grant and ending on the applicable Vesting Date for such Performance
Share.

               (n) “Performance Shares” means the                      Shares which are subject to vesting and
forfeiture in accordance with the terms of this Award.

               (o) “Resignation for Good Reason” means “Resignation for Good Reason” as defined in
the Employment Agreement.

               (p) “Rule 16b-3” means Rule 16b-3 promulgated under the 1934 Act, as in effect from
time to time.

               (q) “Share” means a common share of beneficial interest, $.01 par value per share, of
the Company, subject to substitution or adjustment as provided in Section 3(c) of the Plan.

               (r) “Subsidiary” means, with respect to the Company, a subsidiary company, whether now
or hereafter existing, as defined in section 424(f) of the Code, and any other entity 50% or more
of the economic interests in which are owned, directly or indirectly, by the Company.

               (s) “Vesting Date” means the date(s) on which Grantee vests in all or a portion of the
Performance Shares, as provided in Paragraph 3.

          2. Grant of Performance Shares. Subject to the terms and conditions set forth herein
and in the Plan, the Company hereby grants to Grantee the Performance Shares.

          3. Vesting of Performance Shares.

               (a) Subject to the terms and conditions set forth herein and in the Plan, Grantee shall vest
in the Performance Shares on the Vesting Date set forth in Paragraph 3(b) and as of the Vesting
Date set forth in Paragraph 3(b) shall be entitled to the delivery of Shares with respect to such
Performance Shares, provided that either (i) on the Vesting Date, Grantee is, and has from the Date
of Grant continuously been, an employee of the company or a Subsidiary during the Performance
period, or (ii) Grantee’s termination of employment before the Vesting Date occurred because of
Grantee’s death or Disability.

               (b) Subject to Paragraphs 3(a) and 3(c), a Vesting Date for Performance Shares subject to the
Award shall occur on April 8, 2011.

 

 

               (c) Notwithstanding Paragraphs 3(a) and 3(b), a Vesting Date for all Performance Shares shall
occur upon the occurrence of any of the following events, and the Performance Shares, to the extent
not previously vested, shall thereupon vest in full:

	 	(i)	 	A Change of Control,
provided that (A) as of the date of the Change of Control,
Grantee is, and has from the Date of Grant continuously been,
an employee of the Company or a Subsidiary or (B) Grantee’s
termination of employment before the date of the Change of
Control occurred because of Grantee’s death or Disability;
	 
	 	(ii)	 	The purchase of any common
share of beneficial interest of the Company pursuant to a
tender or exchange offer other than an offer by the Company,
provided that (A) as of the date of such purchase, Grantee
is, and has from the Date of Grant, continuously been, an
employee of Company or a Subsidiary or (B) Grantee’s
termination of employment before the date of such purchase
occurred because of Grantee’s death or Disability;
	 
	 	(iii)	 	Termination of the
Grantee’s employment by the Employer without Cause; or
	 
	 	(iv)	 	The Grantee’s resignation
from the Employer if such resignation is a Resignation for
Good Reason.

               (d) To the extent provided under the Deferred Compensation Plan, Grantee may elect to defer
receipt of Shares issuable with respect to Performance Shares. To the extent Grantee has elected
to defer the receipt of such Shares, such Shares shall be delivered at the time or times designated
pursuant to the Deferred Compensation Plan.

          4. Forfeiture of Performance Shares.

               (a) Subject to the terms and conditions set forth herein, if Grantee terminates employment
with the Company and all Subsidiaries prior to the Vesting Date for a Performance Share for reasons
other than as described in Paragraph 3(c)(iii) or (iv) Grantee shall forfeit any such Performance
Share which has not vested as of such termination of employment, provided that Grantee shall not,
on account of such termination, forfeit Performance Shares which have not vested as of Grantee’s
termination of employment with the Employer because of death or Disability. Upon a forfeiture of
the Performance Shares as provided in this Paragraph 4, the Performance Shares shall be deemed
canceled.

 

 

               (b) The provisions of this Paragraph 4 shall not apply to Performance Shares as to which a
Vesting Date has occurred.

          5. Rights of Grantee. During the Performance Period, with respect to the Performance
Shares, Grantee shall have the right to receive a cash payment equal to the value of any
distributions or dividends payable with respect to Shares.

          6. Notices. Any notice to the Company under this Award shall be made to:

Brandywine Realty Trust

555 East Lancaster Avenue

Suite 100

Radnor, PA 19087

Attention: Chief Executive Officer

or such other address as may be provided to Grantee by written notice. Any notice to Grantee under
this Award shall be made to Grantee at the address listed in the Company’s personnel files. All
notices under this Award shall be deemed to have been given when hand-delivered, telecopied or
delivered by first class mail, postage prepaid, and shall be irrevocable once given.

          7. Securities Laws. The Committee may from time to time impose any conditions on the
Performance Shares as it deems necessary or advisable to ensure that the Plan satisfies the
conditions of Rule 16b-3, and that Shares are issued and resold in compliance with the Securities
Act of 1933, as amended.

          8. Delivery of Shares. Upon a Vesting Date, the Company shall notify Grantee (or
Grantee’s legal representatives, estate or heirs, in the event of Grantee’s death before a Vesting
Date) that the Performance Shares have vested. Except to the extent that Grantee has elected to
defer the delivery of Shares under the Deferred Compensation Plan, within ten (10) business days of
a Vesting Date, the Company shall, without payment from Grantee, deliver to Grantee a certificate
for a number of Shares equal to the number of vested Performance Shares without any legend or
restrictions, except for such restrictions as may be imposed by the Committee, in its sole
judgment, under Paragraph 7, provided that no certificates for Shares will be delivered to Grantee
until appropriate arrangements have been made with Employer for the withholding of any taxes which
may be due with respect to such Shares. The Company is authorized to withhold from any cash
remuneration then or thereafter payable to Grantee an amount sufficient to cover required tax
withholdings and is further authorized to cancel a number of Shares for which the restrictions have
lapsed having an aggregate Fair Market Value equal to the required tax withholdings. The Company
may condition delivery of certificates for Shares upon the prior receipt from Grantee of any
undertakings which it may determine are required to assure that the certificates are being issued
in compliance with federal and state securities laws. The right to payment of any fractional
Shares shall be satisfied in cash, measured by the product of the fractional amount times the fair
market value of a Share on the Vesting Date, as determined by the Committee.

 

 

          9. Award Not to Affect Employment. The Award granted hereunder shall not confer upon
Grantee any right to continue in the employment of the Company or any Subsidiary.

          10. Miscellaneous.

               (a) The address for Grantee to which notice, demands and other communications are to be given
or delivered under or by reason of the provisions hereof shall be the Grantee’s address as
reflected in the Company’s personnel records.

               (b) This Award and all questions relating to its validity, interpretation, performance and
enforcement shall be governed by and construed in accordance with the laws of Pennsylvania.

	 	 	 	 	 	 	 
	 	 	BRANDYWINE REALTY TRUST	 	 
	 
	 	 	 	 	 	 
	 

	 	BY:	 	 	 	 
	 

	 	 	 	 	 	 
	 
	 	 	 	 	 	 
	 

	 	 TITLE:	 	 	 	 
	 

	 	 	 	 	 	 

 

			
	**	 	This form is being filed pursuant to a compensation arrangement.

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