Document:

Exhibit 10.4

    EXHIBIT
      10.4

    
 

    EMPLOYMENT
      AGREEMENT

     

    This
      EMPLOYMENT AGREEMENT, effective as of May 8, 2007 (the “Commencement Date”), is
      made by and between Neurogen Corporation, a Delaware corporation (the “Company”)
      with offices at 35 Northeast Industrial Road, Branford, Connecticut 06405,
      and
      James E. Krause, who currently resides at 123 Five Field Road, Madison, CT
      06443
      (the “Employee”).

     

    WHEREAS,
      the Company and the Employee desire to maintain an employment relationship;
      and

     

    WHEREAS,
      the Company and the Employee desire to enter into this Agreement to address,
      on
      the terms and conditions hereinafter set forth, certain matters relating to
      such
      employment.

     

    NOW,
      THEREFORE, the Company and the Employee agree as follows:

     

    
      	1.  	
              DEFINITIONS

            

    

     

    
      	(a)  	
              Cause

            

    

     

    For
      purposes of this Agreement “cause” means:

     

    (i)  the
      Employee is convicted of a felony or entry of a plea of nolo contendere (or
      similar plea) in a criminal proceeding for commission of a felony or serious
      misdemeanor;

     

    (ii)  any
      willful act or omission by the Employee which constitutes gross misconduct
      or
      gross negligence and which results in demonstrable material harm to the
      Company;

     

    (iii)  the
      Employee’s habitual drug or alcohol abuse;

     

    (iv)  the
      Employee’s willful and continuous failure to perform his duties with the Company
      after reasonable notice of such failure;

     

    (v)  the
      Employee’s participation in any act of dishonesty intended to result in his
      material personal enrichment at the expense of the Company; or

     

    (vi)  the
      Employee’s failure to substantially comply with the terms set forth in the
      Proprietary Information and Inventions Agreement between the Employee and the
      Company.

     

    No
      act,
      or failure to act, by the Employee shall be considered “willful” unless
      committed in bad faith and without a reasonable belief that the act or omission
      was in the Company’s best interest.

     

    
      	(b)  	
              Good
                Reason

            

    

    
      
         

        
          For
            purposes of this Agreement “good reason” means and shall be deemed to exist if,
            without the prior written consent of the Employee,

        

         

        (i) the
          Company relocates the primary place of performance of the duties specified
          in
          Section 3 of this Agreement to a location more than fifty (50) miles from
          its
          current offices located in Branford, Connecticut;

        
          
            
            

          

          
            
            

            
            

          

          
            
            

          

        

        (ii) as
          a
          result of any action or inaction on the part of the Company the Employee
          suffers
          a material reduction in Employee’s duties, responsibilities or effective
          authority typically associated with his title and position as set forth
          and
          described in Section 3 of this Agreement;

         

        (iii) the
          Employee’s rate of Base Salary (as hereinafter defined) is decreased by the
          Company (other than in connection with an across the board salary reduction
          agreed to by the Employee);

         

        (iv) the
          Company fails to obtain the full assumption of this Agreement by a successor
          entity in accordance with Section 12(b) of this Agreement; or

         

        (v) the
          Board
          of Directors of the Company (the “Board”) or the Company’s stockholders, either
          or both, as may be required to authorize the same, shall approve any liquidation
          or dissolution of the Company, or the sale of all or substantially all
          of the
          assets of the Company.

         

      

    

    
      	2.  	
              TERM

            

    

     

    The
      term
      of Employee’s employment under this Agreement shall, unless earlier terminated
      under Section 7 herein or extended as hereinafter provided, be for a period
      commencing as of (the “Commencement Date”) and terminating on May __, 2008,
      subject to the terms and conditions contained in this Agreement (the “Employment
      Period”). The Employment Period shall automatically be extended commencing on
      May __, 2008 and thereafter on the relevant anniversary of the Commencement
      Date, for successive one (1) year periods unless, not later than ninety (90)
      days prior to May __, 2008 or any such anniversary, either party to this
      Agreement shall give written notice to the other that such party does not wish
      to extend or further extend the Employment Period beyond its then already
      automatically extended term, if any.

     

    
      	3.  	
              DUTIES
                AND SERVICES

            

    

     

    During
      the Employment Period, the Employee shall devote substantially all of his
      business time, during normal business hours, to the business and affairs of
      the
      Company and the Employee shall use his best efforts to perform faithfully and
      efficiently the duties and responsibilities contemplated by this Agreement;
      provided, however, the Employee may manage his personal, financial and legal
      affairs and engage in any activities of a volunteer, civic or business nature,
      as long as such activities do not materially interfere with Employee’s
      responsibilities.

     

    
      	4.  	
              COMPENSATION
                AND OTHER BENEFITS

            

    

     

    
      	(a)  	
              Salary

            

    

     

    As
      compensation for the Employee’s services under this Agreement, beginning on the
      Commencement Date and until the termination of the Employment Period, the
      Employee shall be paid by the Company a base salary of $270,842 per annum,
      payable in equal semi-monthly installments in accordance with the Company’s
      normal payroll practices, which base salary may be increased but not decreased
      (other than in connection with an across the board salary reduction
      agreed to by the Employee) during the Employment Period at the sole discretion
      of the Board or the Board’s designee (the “Base Salary”). Such increased (or
      decreased) Base Salary shall then constitute the “Base Salary’ for purposes of
      this Agreement. 

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    
      	(b)  	
              Annual
                Bonus

            

    

     

    In
      addition to the Base Salary, at the sole discretion of the Board of Directors
      or
      its designee, the Employee is eligible to receive such annual bonuses during
      the
      Employment Period as the Board or its designee, in its sole discretion, may
      approve. It is anticipated that annual bonus awards, if any, will be calculated
      on the basis of both Company and individual performance and that Employee’s
      annual target bonus for complete achievement of all Company and individual
      objectives will be targeted at a level equal to twenty-five percent (25%) of
      Base Salary. Notwithstanding anything in this agreement to the contrary, the
      Company reserves the right at the sole discretion of the Board or its designee
      at any time and without notice to change or abandon altogether any or all of
      it’s incentive compensation policies and practices, including the award of any
      annual bonuses or the determination not to make any such awards in any
      year.

     

    
      	(c)  	
              Benefits

            

    

     

    During
      the Employment Period, the Employee shall be eligible to participate in all
      employee and incentive benefit plans and programs maintained from time to time
      by the Company for the benefit of senior executives. During the Employment
      Period, the Employee, Employee’s spouse, if any, and their eligible dependents,
      if any, shall be eligible to participate in and be covered under all the
      employee and dependent health and welfare benefit plans or programs maintained
      from time to time by the Company. However, the Company shall have no obligations
      under this Section 4(c) unless and until the Employee has met any generally
      applicable eligibility requirements for participation in such plans and
      programs.

     

    
      	(d)  	
              Equity

            

    

     

    At
      the
      sole discretion of the Board of Directors or its designee, the Employee is
      eligible to receive such stock option grants during the Employment Period as
      the
      Board or its designee, in its sole discretion, may approve. It is anticipated
      that stock option awards, if any, will be calculated on the basis of both
      Company and individual performance. Notwithstanding anything in this agreement
      to the contrary, the Company reserves the right at the sole discretion of the
      Board or its designee at any time and without notice to change or abandon
      altogether any or all of it’s incentive compensation policies and practices,
      including the award of any stock options or the determination not to make any
      such awards in any year.

     

    
      	5.  	
              NON-COMPETITION

            

    

     

    (a)  During
      the Employment Period and for one year after the date of any such termination
      of
      employment, the Employee agrees that, without the prior express written consent
      of the Company, he shall not, directly or indirectly, for his own benefit or
      as
      an employee, owner, shareholder, partner, consultant, (or in any other
      representative capacity) for any other person, firm, partnership, corporation
      or
      other entity (other than the Company), (i) engage in the discovery, research
      and/or development of therapeutic, diagnostic or prophylactic products which
      work through the same biological mechanisms as products which at the time of
      such termination
      are under active clinical or pre-clinical development or have been
      pre-clinically or clinically developed by the Company and which the Company
      has
      not abandoned (“Related Programs”) or (ii) solicit or hire (or direct another to
      solicit or hire) the services of any employee of the Company or attempt to
      induce any such employee or any consultant to the Company to leave the employ
      of
      the Company (except when such acts are performed in good faith by the Employee
      on behalf of the Company). Notwithstanding the above, this provision shall
      not
      be deemed to prevent or prohibit Employee from being employed during such one
      year period by another entity in a managerial role where Employee has overall
      responsibility for managing (or assisting in the management of) a research
      and
      development portfolio which includes one or more Related Programs, provided
      that
      Employee does not violate the terms of Section 6 hereof and does not during
      such
      one year term actively advise or direct the discovery, research or development
      efforts of such other entity in the Related Program(s). During the Employment
      Period, the Employee shall not own more than 2% of the outstanding common stock
      of any corporation. The provisions of this Section 5 shall not be deemed to
      reduce in any way any other fiduciary, contractual or other legal obligation
      the
      Employee may have to the Company, including without limitation any obligation
      which may arise by virtue of any corporation law, securities law, patent or
      intellectual property law or right, the common law, other agreements with the
      Company or otherwise.

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    For
      purposes of Section 5 of this Agreement, the term “solicit” shall mean any
      communication of any kind whatsoever, regardless of by whom initiated, inviting,
      encouraging, or requesting any person or entity to take or refrain from taking
      any action.

     

    (b)  The
      Employee agrees to comply with the terms set forth in the Proprietary
      Information and Inventions Agreement previously entered into by the Company
      and
      Employee.

     

    (c)  If
      at any
      time within twelve (12) months after the date on which the Employee exercises
      a
      Company stock option or stock appreciation right, or on which Company restricted
      stock vests, or on which income is realized by the Employee in connection with
      any other Company equity-based award (each of which events is a “Realization
      Event”), the Employee breaches any provision of Section 5(a) or 5(b) of the
      Agreement in more than a minor, deminimus or trivial manner that causes or
      is
      likely it cause, more than deminimus financial or reputational harm to the
      Company (and, if such breach is susceptible to cure, the Employee does not
      cure
      such breach and harm within ten (10) days after the Employee’s receipt of
      written notice of such breach of the Company which specifies in reasonable
      detail the facts and circumstances claimed to be the basis for such breach),
      then (i) the Employee shall forfeit all of Employee’s unexercised (including
      unvested) Neurogen Corporation stock options and restricted stock and (ii)
      any
      gain realized within the twelve (12) months prior to such breach from the
      exercise of any Company stock options or the vesting of any Company restricted
      stock or other equity-based awards by the Employee from the Realization Event
      shall be paid by the Employee to the Company upon written notice from the
      Company within ninety (90) days of such notice (such payments may be made in
      increments over such period). Such gain shall be determined after reduction
      for
      any taxes paid (or, if such gain is determined before such taxes are paid,
      owing, provided that such taxes are actually paid in a timely manner) by the
      Employee which are attributable to such gain as of the date of the Realization
      Event, and without regard to any subsequent change in the Fair Market Value
      (as
      defined below) of a share of Company common stock; provided that any federal
      or
      state income tax benefit actually realized by the Employee as a
      result
      of making payments to the Company under this Section 5(c) (relating to any
      of
      the next ten (10) tax year periods) shall also be paid to the Company within
      fifteen (15) days of such realization. Such gain shall be paid by the Employee
      delivering to the Company shares of Company Common Stock with a Fair Market
      Value on the date of delivery equal to the amount of such gain. To the extent
      permitted by applicable law, the Company shall have the right to offset such
      gain against any amounts otherwise owed to the Employee by the Company (whether
      as wages, vacation pay, or pursuant to any benefit plan or other compensatory
      arrangement). For purposes of this Section 5(c), the “Fair Market Value” of a
      share of Company Common Stock on any date shall be (i) the closing sale price
      per share of Company Common Stock during normal trading hours on the national
      securities exchange on which the Company Common Stock is principally traded
      for
      such date or the last preceding date on which there was a sale of such Company
      Common Stock on such exchange or (ii) if the shares of Company Common Stock
      are
      then traded on the NASDAQ Stock Market or any other over-the-counter market,
      the
      average of the closing bid and asked prices for the shares of Company Common
      Stock during normal trading hours in such over-the-counter market for such
      date
      or the last preceding date on which there was a sale of such Company Common
      Stock in such market, or (iii) if the shares of Company Common Stock are not
      then listed on a national securities exchange or traded in an over-the-counter
      market, such value as the Compensation Committee, in its sole discretion, shall
      reasonably determine. In the event that the Company seeks to enforce the
      provisions of this Section 5(c), and such enforcement is contested by the
      Employee, and it is finally determined that the Employee is not subject to
      the
      provisions of this Section 5(c), then the Company shall (i) reimburse the
      Employee for reasonable attorneys’ fees incurred by the Employee in connection
      with such contest; and (ii) pay to the Employee an additional amount equal
      to
      one (1) times the amount in clause (i); provided
      that
      such payment under this clause (ii) shall not exceed $250,000.

     

    (d)  Any
      termination of the Employee’s employment or of this Agreement shall have no
      effect on the continuing operation of this Section 5.

     

    (e)  The
      Employee acknowledges and agrees that the Company will have no adequate remedy
      at law, and could be irreparably harmed, if the Employee breaches or threatens
      to breach any of the provisions of this Section 5. The Employee agrees that
      the
      Company shall be entitled to equitable and/or injunctive relief to prevent
      any
      breach or threatened breach of this Section 5, and to specific performance
      of
      each of the terms hereof in addition to any other legal or equitable remedies
      that the Company may have. The Employee further agrees that Employee shall
      not,
      in any equity proceeding relating to the enforcement of the terms of this
      Section 5, raise the defense that the Company has an adequate remedy at
      law.

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    (f)  The
      terms
      and provisions of this Section 5 are intended to be separate and divisible
      provisions and if, for any reason, any one or more of them is held to be invalid
      or unenforceable, neither the validity nor the enforceability of any other
      provision of this Agreement shall thereby be affected. The parties hereto
      acknowledge that the potential restrictions on the Employee’s future employment
      imposed by this Section 5 are reasonable in both duration and geographic scope
      and in all other respects. If for any reason any court of competent jurisdiction
      shall find any provisions of this Section 5 unreasonable in duration or
      geographic scope or otherwise, the Employee and the Company agree that the
      restrictions and prohibitions
      contained herein shall be effective to the fullest extent allowed under
      applicable law in such jurisdiction.

     

    (g)  The
      parties acknowledge that this Agreement would not have been entered into and
      the
      benefits described in Section 4 of this Agreement would not have been promised
      in the absence of the Employee’s promises under this Section 5.

     

    
      	6.  	
              CONFIDENTIAL
                INFORMATION

            

    

     

    The
      Employee agrees to substantially comply with the terms set forth in the
      Proprietary Information and Inventions Agreement between the Employee and the
      Company, a copy of which is attached hereto as Exhibit A and incorporated by
      reference herein.

     

    
      	7.  	
              TERMINATION

            

    

     

    
      	(a)  	
              Termination
                by the Company for Cause

            

    

     

    The
      Company may terminate the Employee’s employment hereunder for cause. If the
      Company terminates the Employee’s employment hereunder for cause, the Employment
      Period shall end and the Employee shall only be entitled to any Base Salary
      accrued or annual bonus awarded and earned but not yet paid as of the date
      of
      termination of the Employee’s employment with the Company.

     

    If
      the
      Employee’s employment is to be terminated for cause, the Company shall give
      written notice of such termination to the Employee. Such notice shall specify
      the particular act or acts, or failure to act, which is or are the basis for
      the
      decision to so terminate the Employee’s employment for cause.

     

    
      	(b)  	
              Termination
                Without Cause or Termination For Good
                Reason

            

    

     

    The
      Company may terminate the Employee’s employment hereunder without cause and the
      Employee may terminate Employee’s employment hereunder for good reason. If the
      Company terminates the Employee’s employment hereunder without cause, or if the
      Employee terminates Employee’s employment hereunder for good reason, the
      Employment Period shall end and the Employee shall only be entitled to (i)
      any
      Base Salary accrued or annual bonus awarded and earned but not yet paid as
      of
      the actual date of termination of the Employee’s employment with the Company;
      (ii) a lump sum payment in an amount equal to the Employee’s annual Base Salary
      as provided in Section 4(a) above; (iii) continuation of the health and welfare
      benefits of the Employee, Employee’s spouse and their eligible dependents, if
      any, as set forth in Section 4(c) above (except for Disability Insurance),
      or
      the economic equivalent thereof, at the same cost and level in effect on the
      date of termination of the Employee’s employment with the Company for one (1)
      year after such date of termination; and (iv) the right to exercise immediately
      any stock options and to freely trade any restricted stock granted to the
      Employee which, but for such termination, would have become exercisable or
      tradable, as the case may be, within one year of the date of such termination
      without cause or for good reason. Notwithstanding any other provision of this
      Agreement, in addition to the benefits described above, if Employee is
      terminated without cause or terminates his employment for good reason as a
      result of a Change in Control of the Company (including without limitation
      any
      termination within
      two (2) years of a Change in Control which shall be deemed to be as a result
      of
      a Change in Control) then Employee shall also be entitled to a lump sum payment
      in an amount equal to the greater of (i) the Employee’s then targeted annual
      bonus or (ii) the Employee’s targeted annual bonus immediately prior to the
      Change in Control.

     

    If
      the
      Employee’s employment is to be terminated without cause, the Company shall give
      the Employee thirty (30) days prior written notice of its intent to so terminate
      the Employee’s employment. If the Employee intends to terminate Employee’s
      employment for good reason, the Employee agrees to give the Company at least
      thirty (30) days prior written notice.

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    
      	(c)  	
              Termination
                Due to Death or Disability

            

    

     

    The
      Company may terminate the Employee’s employment hereunder due to the Employee’s
      inability to render, for a period of three consecutive months or an aggregate
      of
      any on hundred twenty (120) days within any six (6) month period, services
      hereunder by reason of permanent disability, as determined by the written
      medical opinion of an independent medical physician selected in good faith
      by
      the Company (“Disability”). In the event of the Employee’s death or a
      termination of the Employee’s employment by the Company due to Disability, the
      Employment Period shall end and the Employee, Employee’s estate or Employee’s
      legal representative, as the case may be, shall only be entitled to (i) (a)
      any
      Base Salary accrued or annual bonus awarded and earned but not yet paid as
      of
      the actual date of termination of the Employee’s employment with the Company,
      and (b) any other compensation and benefits as may be provided in accordance
      with the terms and provisions of any applicable plans and programs of the
      Company; and (ii) in the case of Disability, (a) continuation of payment of
      the
      Employee’s Base Salary, Employee’s spouse and their eligible dependents, if any,
      as set forth in Section 4(a) above, until the Employee commences to receive
      payments under the Company’s long-term disability plan, (b) continuation of the
      health and welfare benefits of the Employee, as set forth in Section 4(c) above
      (except for Disability Insurance), or the economic equivalent thereof, at the
      same cost and level in effect on the date of termination for one (1) year after
      the date of termination and (c) the right to exercise immediately that
      proportion of the stock options (rounded up to the nearest whole number of
      shares) granted to the Employee which would become exercisable on or before
      the
      May __ immediately following the date of termination of the Employee’s
      employment with the Company due to Disability which is equal to the number
      of
      days worked by the Employee from, but excluding, the May __ immediately
      preceding such termination date to, and including, such termination date divided
      by 365 days.

     

    
      	(d)  	
              Voluntary
                Termination

            

    

     

    The
      Employee may affect a Voluntary Termination of Employee’s employment with the
      Company hereunder. A “Voluntary Termination” shall mean a termination of
      employment by the Employee on Employee’s own initiative other than a termination
      due to death or Disability or a termination for good reason. A Voluntary
      Termination shall not be, and shall not be deemed to be, a breach of this
      Agreement and shall result in the end of the Employment Period and only entitle
      the Employee to all of the rights and benefits which the Employee would be
      entitled in the event of a termination of the Employee’s employment by the
      Company for cause.

     

    
      	(e)  	
              Termination
                by the Company at End of Employment
                Period

            

    

     

    Notwithstanding
      any provision of this Agreement to the contrary, if (a) the Employment Period
      is
      not terminated early under Sections 7(a), 7(b), 7(c) or 7(d) above and (b)
      the
      Company provides written notice to the Employee, pursuant to Section 2 above,
      that it does not wish to extend or further extend the Employment Period, then
      the Employee’s employment with the Company shall end on the last day of the
      Employment Period and the Employee shall be entitled to (x) continuation of
      payment of the Employee’s Base Salary, as provided in Section 4(a) above, as of
      the date of termination of the Employee’s employment with the Company for a
      period equal to (1) one year less the number of days notice given by the Company
      to the Employee that it does not wish to extend or further extend the Employment
      Period (such notice period shall be deemed to commence as of the date of such
      written notice by the Company); (y) continuation of the health and welfare
      benefits of the Employee, Employee’s spouse and their eligible dependents, if
      any, as set forth in 4(c) above (except for Disability Insurance), or the
      economic equivalent thereof, at the same cost and level in effect on the date
      of
      termination of the Employee’s employment with the Company for one (1) year after
      such termination; and (z) the right to exercise immediately any stock options
      and to trade freely any restricted stock granted to the Employee which, but
      for
      such termination, would have become exercisable or freely tradable, as the
      case
      may be, on or before the May __ immediately following the date on which the
      one
      (1) year period referred to the preceding subclause (x) ends; provided, however,
      that the severance payment by the Company to the Employee under subclause (x)
      of
      this Section 7(e) shall be offset on a dollar for dollar basis by any cash,
      or
      the fair market value of any non-cash, remuneration, benefit or other
      entitlement earned, received or receivable by the Employee in connection with
      the employment of such Employee in any capacity, other than dividends, interest
      income or other passive investment income earned as a result of an interest
      in a
      business or entity of which the Employee owns less than 2% of the beneficial
      ownership. If the Employee shall be entitled to any such severance payment
      from
      the Company after the termination of the Employment Period, the Employee shall
      have the obligation to notify the Company of any employment, consultation or
      other activity which may involve any remuneration, benefits or other
      entitlements as described above, and as to which the Company may be entitled
      to
      an offset.

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    
      	8.  	
              SURVIVAL

            

    

     

    The
      rights and obligations of the parties hereunder shall survive the termination
      of
      the Employee’s employment hereunder and the termination of this Agreement to the
      extent necessary to the intended preservation of such rights and
      obligations.

     

    
      	9.  	
              WHOLE
                AGREEMENT AND MODIFICATION

            

    

     

    This
      Agreement, including the “Proprietary
      Information and Inventions Agreement”,
      sets
      forth the entire agreement and understanding of the parties with respect to
      the
      subject matter contained herein, and supersedes all prior and existing
      agreements except as set forth above, whether written or oral, between them
      concerning the subject matter contained herein. This Agreement may be modified
      only by a written agreement executed by each party to this
      Agreement.

     

    
      	10.  	
              NOTICES

            

    

     

    Any
      notice or other communication required or permitted to be given under this
      Agreement shall be in writing and shall be mailed by certified mail, return
      receipt requested, or delivered against receipt to the party to whom it is to be
      given at the address of such party set forth above or to such other address
      as
      the party shall have furnished in writing in accordance with this provision.
      Notice to the estate of the Employee shall be sufficient if addressed to the
      Employee in accordance with this provision. Any notice or other communication
      given by certified mail shall be deemed given three (3) days after posting.
      However, a notice changing a party’s address shall be deemed given at the time
      of the receipt of the notice.

     

    
      	11.  	
              WAIVER

            

    

     

    Any
      waiver by either party of a breach of any provision of this Agreement shall
      not
      operate as or be construed to be a waiver of any other breach of such provision
      or of any breach of any other provision of this Agreement. The failure of a
      party to insist upon strict adherence to any term of this Agreement on one
      or
      more occasions shall not be considered a waiver or deprive that party of the
      right thereafter to insist upon strict adherence to that term or any other
      term
      of this Agreement. Any waiver must be in writing, signed by the party giving
      such waiver.

     

    
      	12.  	
              SUCCESSORS

            

    

     

    
      	(a)  	
              Effect
                on Employee

            

    

     

    This
      Agreement is personal to the Employee and, without the prior express written
      consent of the Company, shall not be assignable by the Employee, except that
      the
      Employee’s rights to receive any compensation or benefits under this Agreement
      may be transferred or disposed of pursuant to testamentary disposition,
      intestate succession or pursuant to a domestic relations order of a court of
      competent jurisdiction. This Agreement shall inure to the benefit of and be
      enforceable by the Employee’s heirs, beneficiaries and/or legal
      representatives.

     

    
      	(b)  	
              Effect
                on Company

            

    

     

    This
      Agreement shall inure to the benefit of and be binding on the Company and its
      successors and assigns. The Company shall reasonably require any successor
      to
      all or substantially all of the business and/or assets of the Company, whether
      direct or indirect, by purchase, merger, consolidation, acquisition of stock,
      or
      otherwise, by an agreement in form and substance reasonably satisfactory to
      the
      Employee, expressly to assume and agree to perform this Agreement
      in the same manner and to the same extent as the Company would be required
      to
      perform if no such succession had taken place.

     

    
      	13.  	
              NO
                THIRD PARTY BENEFICIARIES

            

    

     

    This
      Agreement does not create, and shall not be construed as creating, any rights
      enforceable by any person not a party to this Agreement except as provided
      in
      Section 12 of this Agreement.

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    
      	14.  	
              COUNTERPARTS

            

    

     

    This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed an original, but all of which together shall constitute one and the
      same
      instrument.

     

    
      	15.  	
              GOVERNING
                LAW

            

    

     

    This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of Connecticut, without giving effect to the principles of conflict of
      laws thereof.

     

    
      	16.  	
              SEVERABILITY

            

    

     

    The
      invalidity or unenforceability of any provision of this Agreement shall not
      affect the validity or enforceability of any other provision of this
      Agreement.

     

    
      	17.  	
              NO
                VIOLATION OF OUTSTANDING
                AGREEMENT(S)

            

    

     

    Employee
      hereby warrants that the execution of this Agreement and the performance of
      his
      duties hereunder do not and will not violate any agreement with any other person
      or entity.

     

    IN
      WITNESS WHEREOF, the parties have duly executed this Agreement which shall
      be
      effective as of the effective date noted above.

     

    
      	
            	
              NEUROGEN
                CORPORATION

            
	 	 
	
              By:

            	
              /s/
                William H. Koster

            
	 	
              William
                H. Koster

            
	 	
              President
                and Chief Executive Officer

            
	 	 
	 	 
	 	
              /s/
                James E. Krause

            
	 	
              James
                E. KrauseExhibit 10.5

    EXHIBIT
      10.5

    EMPLOYMENT
      AGREEMENT

     

    This
      EMPLOYMENT AGREEMENT, effective as of May 8, 2007 (the “Commencement Date”), is
      made by and between Neurogen Corporation, a Delaware corporation (the “Company”)
      with offices at 35 Northeast Industrial Road, Branford, Connecticut 06405,
      and
      Bertrand L. Chenard, who currently resides at 7 Whaling Dr., Waterford, CT
      06385
      (the “Employee”).

     

    WHEREAS,
      the Company and the Employee desire to maintain an employment relationship;
      and

     

    WHEREAS,
      the Company and the Employee desire to enter into this Agreement to address,
      on
      the terms and conditions hereinafter set forth, certain matters relating to
      such
      employment.

     

    NOW,
      THEREFORE, the Company and the Employee agree as follows:

     

    
      	1.  	
              DEFINITIONS

            

    

     

    
      	(a)  	
              Cause

            

    

     

    For
      purposes of this Agreement “cause” means:

     

    (i)  the
      Employee is convicted of a felony or entry of a plea of nolo contendere (or
      similar plea) in a criminal proceeding for commission of a felony or serious
      misdemeanor;

     

    (ii)  any
      willful act or omission by the Employee which constitutes gross misconduct
      or
      gross negligence and which results in demonstrable material harm to the
      Company;

     

    (iii)  the
      Employee’s habitual drug or alcohol abuse;

     

    (iv)  the
      Employee’s willful and continuous failure to perform his duties with the Company
      after reasonable notice of such failure;

     

    (v)  the
      Employee’s participation in any act of dishonesty intended to result in his
      material personal enrichment at the expense of the Company; or

     

    (vi)  the
      Employee’s failure to substantially comply with the terms set forth in the
      Proprietary Information and Inventions Agreement between the Employee and the
      Company.

     

    No
      act,
      or failure to act, by the Employee shall be considered “willful” unless
      committed in bad faith and without a reasonable belief that the act or omission
      was in the Company’s best interest.

     

    
      	(b)  	
              Good
                Reason

            

    

     

    For
      purposes of this Agreement “good reason” means and shall be deemed to exist if,
      without the prior written consent of the Employee,

     

    (i) the
      Company relocates the primary place of performance of the duties specified
      in
      Section 3 of this Agreement to a location more than fifty (50) miles from its
      current offices located in Branford, Connecticut;

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    (ii) the
      Employee’s rate of Base Salary (as hereinafter defined) is decreased by the
      Company (other than in connection with an across the board salary reduction
      agreed to by the Employee);

     

    (iii) the
      Company fails to obtain the full assumption of this Agreement by a successor
      entity in accordance with Section 12(b) of this Agreement; or

     

    (iv) the
      Board
      of Directors of the Company (the “Board”) or the Company’s stockholders, either
      or both, as may be required to authorize the same, shall approve any liquidation
      or dissolution of the Company, or the sale of all or substantially all of the
      assets of the Company.

     

    
      	2.  	
              TERM

            

    

     

    The
      term
      of Employee’s employment under this Agreement shall, unless earlier terminated
      under Section 7 herein or extended as hereinafter provided, be for a period
      commencing as of (the “Commencement Date”) and terminating on May __, 2008,
      subject to the terms and conditions contained in this Agreement (the “Employment
      Period”). The Employment Period shall automatically be extended commencing on
      May __, 2008 and thereafter on the relevant anniversary of the Commencement
      Date, for successive one (1) year periods unless, not later than ninety (90)
      days prior to May __, 2008 or any such anniversary, either party to this
      Agreement shall give written notice to the other that such party does not wish
      to extend or further extend the Employment Period beyond its then already
      automatically extended term, if any.

     

    
      	3.  	
              DUTIES
                AND SERVICES

            

    

     

    During
      the Employment Period, the Employee shall devote substantially all of his
      business time, during normal business hours, to the business and affairs of
      the
      Company and the Employee shall use his best efforts to perform faithfully and
      efficiently the duties and responsibilities contemplated by this Agreement;
      provided, however, the Employee may manage his personal, financial and legal
      affairs and engage in any activities of a volunteer, civic or business nature,
      as long as such activities do not materially interfere with Employee’s
      responsibilities.

     

    
      	4.  	
              COMPENSATION
                AND OTHER BENEFITS

            

    

     

    
      	(a)  	
              Salary

            

    

     

    As
      compensation for the Employee’s services under this Agreement, beginning on the
      Commencement Date and until the termination of the Employment Period, the
      Employee shall be paid by the Company a base salary of $262,650 per annum,
      payable in equal semi-monthly installments in accordance with the Company’s
      normal payroll practices, which base salary may be increased but not decreased
      (other than in connection with an across the board salary reduction agreed
      to by
      the Employee) during the Employment Period at the sole discretion of the Board
      or the Board’s designee (the “Base Salary”). Such increased (or decreased) Base
      Salary shall then constitute the “Base Salary’ for purposes of this Agreement.

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    
      	(b)  	
              Annual
                Bonus

            

    

     

    In
      addition to the Base Salary, at the sole discretion of the Board of Directors
      or
      its designee, the Employee is eligible to receive such annual bonuses during
      the
      Employment Period as the Board or its designee, in its sole discretion, may
      approve. It is anticipated that annual bonus awards, if any, will be calculated
      on the basis of both Company and individual performance and that Employee’s
      annual target bonus for complete achievement of all Company and individual
      objectives will be targeted at a level equal to twenty-five percent (25%) of
      Base Salary. Notwithstanding anything in this agreement to the contrary, the
      Company reserves the right at the sole discretion of the Board or its designee
      at any time and without notice to change or abandon altogether any or all of
      it’s incentive compensation policies and practices, including the award of any
      annual bonuses or the determination not to make any such awards in any
      year.

     

    
      	(c)  	
              Benefits

            

    

     

    During
      the Employment Period, the Employee shall be eligible to participate in all
      employee and incentive benefit plans and programs maintained from time to time
      by the Company for the benefit of senior executives. During the Employment
      Period, the Employee, Employee’s spouse, if any, and their eligible dependents,
      if any, shall be eligible to participate in and be covered under all the
      employee and dependent health and welfare benefit plans or programs maintained
      from time to time by the Company. However, the Company shall have no obligations
      under this Section 4(c) unless and until the Employee has met any generally
      applicable eligibility requirements for participation in such plans and
      programs.

     

    
      	(d)  	
              Equity

            

    

     

    At
      the
      sole discretion of the Board of Directors or its designee, the Employee is
      eligible to receive such stock option grants during the Employment Period as
      the
      Board or its designee, in its sole discretion, may approve. It is anticipated
      that stock option awards, if any, will be calculated on the basis of both
      Company and individual performance. Notwithstanding anything in this agreement
      to the contrary, the Company reserves the right at the sole discretion of the
      Board or its designee at any time and without notice to change or abandon
      altogether any or all of it’s incentive compensation policies and practices,
      including the award of any stock options or the determination not to make any
      such awards in any year.

     

    
      	5.  	
              NON-COMPETITION

            

    

     

    (a)  During
      the Employment Period and for one year after the date of any such termination
      of
      employment, the Employee agrees that, without the prior express written consent
      of the Company, he shall not, directly or indirectly, for his own benefit or
      as
      an employee, owner, shareholder, partner, consultant, (or in any other
      representative capacity) for any other person, firm, partnership, corporation
      or
      other entity (other than the Company), (i) engage in the discovery, research
      and/or development of therapeutic, diagnostic or prophylactic products which
      work through the same biological mechanisms as products which at the time of
      such termination are under active clinical or pre-clinical development or have
      been pre-clinically or clinically developed by the Company and which the Company
      has not abandoned (“Related Programs”) or (ii) solicit or hire (or direct
      another to solicit or hire) the services of any employee of the Company or
      attempt to induce any such employee or any consultant to the Company to leave
      the employ of the Company (except when such acts are performed in good faith
      by
      the Employee on behalf of the Company). Notwithstanding the above, this
      provision shall not be deemed to prevent or prohibit Employee from being
      employed during such one year period by another entity in a managerial role
      where Employee has overall responsibility for managing (or assisting in the
      management of) a research and development portfolio which includes one or more
      Related Programs, provided that Employee does not violate the terms of Section
      6
      hereof and does not during such one year term actively advise or direct the
      discovery, research or development efforts of such other entity in the Related
      Program(s). During the Employment Period, the Employee shall not own more than
      2% of the outstanding common stock of any corporation. The provisions of this
      Section 5 shall not be deemed to reduce in any way any other fiduciary,
      contractual or other legal obligation the Employee may have to the Company,
      including without limitation any obligation which may arise by virtue of any
      corporation law, securities law, patent or intellectual property law or right,
      the common law, other agreements with the Company or otherwise.

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    For
      purposes of Section 5 of this Agreement, the term “solicit” shall mean any
      communication of any kind whatsoever, regardless of by whom initiated, inviting,
      encouraging, or requesting any person or entity to take or refrain from taking
      any action.

     

    (b)  The
      Employee agrees to comply with the terms set forth in the Proprietary
      Information and Inventions Agreement previously entered into by the Company
      and
      Employee.

     

    (c)  If
      at any
      time within twelve (12) months after the date on which the Employee exercises
      a
      Company stock option or stock appreciation right, or on which Company restricted
      stock vests, or on which income is realized by the Employee in connection with
      any other Company equity-based award (each of which events is a “Realization
      Event”), the Employee breaches any provision of Section 5(a) or 5(b) of the
      Agreement in more than a minor, deminimus or trivial manner that causes or
      is
      likely it cause, more than deminimus financial or reputational harm to the
      Company (and, if such breach is susceptible to cure, the Employee does not
      cure
      such breach and harm within ten (10) days after the Employee’s receipt of
      written notice of such breach of the Company which specifies in reasonable
      detail the facts and circumstances claimed to be the basis for such breach),
      then (i) the Employee shall forfeit all of Employee’s unexercised (including
      unvested) Neurogen Corporation stock options and restricted stock and (ii)
      any
      gain realized within the twelve (12) months prior to such breach from the
      exercise of any Company stock options or the vesting of any Company restricted
      stock or other equity-based awards by the Employee from the Realization Event
      shall be paid by the Employee to the Company upon written notice from the
      Company within ninety (90) days of such notice (such payments may be made in
      increments over such period). Such gain shall be determined after reduction
      for
      any taxes paid (or, if such gain is determined before such taxes are paid,
      owing, provided that such taxes are actually paid in a timely manner) by the
      Employee which are attributable to such gain as of the date of the Realization
      Event, and without regard to any subsequent change in the Fair Market Value
      (as
      defined below) of a share of Company common stock; provided that any federal
      or
      state income tax benefit actually realized by the Employee as a result of making
      payments to the Company under this Section 5(c) (relating to any of the next
      ten
      (10) tax year periods) shall also be paid to the Company within fifteen (15)
      days of such realization. Such gain shall be paid by the Employee delivering
      to
      the Company shares of Company Common Stock with a Fair Market Value on the
      date
      of delivery equal to the amount of such gain. To the extent permitted by
      applicable law, the Company shall have the right to offset such gain against
      any
      amounts otherwise owed to the Employee by the Company (whether as wages,
      vacation pay, or pursuant to any benefit plan or other compensatory
      arrangement). For purposes of this Section 5(c), the “Fair Market Value” of a
      share of Company Common Stock on any date shall be (i) the closing sale price
      per share of Company Common Stock during normal trading hours on the national
      securities exchange on which the Company Common Stock is principally traded
      for
      such date or the last preceding date on which there was a sale of such Company
      Common Stock on such exchange or (ii) if the shares of Company Common Stock
      are
      then traded on the NASDAQ Stock Market or any other over-the-counter market,
      the
      average of the closing bid and asked prices for the shares of Company Common
      Stock during normal trading hours in such over-the-counter market for such
      date
      or the last preceding date on which there was a sale of such Company Common
      Stock in such market, or (iii) if the shares of Company Common Stock are not
      then listed on a national securities exchange or traded in an over-the-counter
      market, such value as the Compensation Committee, in its sole discretion, shall
      reasonably determine. In the event that the Company seeks to enforce the
      provisions of this Section 5(c), and such enforcement is contested by the
      Employee, and it is finally determined that the Employee is not subject to
      the
      provisions of this Section 5(c), then the Company shall (i) reimburse the
      Employee for reasonable attorneys’ fees incurred by the Employee in connection
      with such contest; and (ii) pay to the Employee an additional amount equal
      to
      one (1) times the amount in clause (i); provided
      that
      such payment under this clause (ii) shall not exceed $250,000.

     

    (d)  Any
      termination of the Employee’s employment or of this Agreement shall have no
      effect on the continuing operation of this Section 5.

     

    (e)  The
      Employee acknowledges and agrees that the Company will have no adequate remedy
      at law, and could be irreparably harmed, if the Employee breaches or threatens
      to breach any of the provisions of this Section 5. The Employee agrees that
      the
      Company shall be entitled to equitable and/or injunctive relief to prevent
      any
      breach or threatened breach of this Section 5, and to specific performance
      of
      each of the terms hereof in addition to any other legal or equitable remedies
      that the Company may have. The Employee further agrees that Employee shall
      not,
      in any equity proceeding relating to the enforcement of the terms of this
      Section 5, raise the defense that the Company has an adequate remedy at
      law.

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    (f)  The
      terms
      and provisions of this Section 5 are intended to be separate and divisible
      provisions and if, for any reason, any one or more of them is held to be invalid
      or unenforceable, neither the validity nor the enforceability of any other
      provision of this Agreement shall thereby be affected. The parties hereto
      acknowledge that the potential restrictions on the Employee’s future employment
      imposed by this Section 5 are reasonable in both duration and geographic scope
      and in all other respects. If for any reason any court of competent jurisdiction
      shall find any provisions of this Section 5 unreasonable in duration or
      geographic scope or otherwise, the Employee and the Company agree that the
      restrictions and prohibitions contained herein shall be effective to the fullest
      extent allowed under applicable law in such jurisdiction.

     

    (g)  The
      parties acknowledge that this Agreement would not have been entered into and
      the
      benefits described in Section 4 of this Agreement would not have been promised
      in the absence of the Employee’s promises under this Section 5.

     

    
      	6.  	
              CONFIDENTIAL
                INFORMATION

            

    

     

    The
      Employee agrees to substantially comply with the terms set forth in the
      Proprietary Information and Inventions Agreement between the Employee and the
      Company, a copy of which is attached hereto as Exhibit A and incorporated by
      reference herein.

     

    
      	7.  	
              TERMINATION

            

    

     

    
      	(a)  	
              Termination
                by the Company for Cause

            

    

     

    The
      Company may terminate the Employee’s employment hereunder for cause. If the
      Company terminates the Employee’s employment hereunder for cause, the Employment
      Period shall end and the Employee shall only be entitled to any Base Salary
      accrued or annual bonus awarded and earned but not yet paid as of the date
      of
      termination of the Employee’s employment with the Company.

     

    If
      the
      Employee’s employment is to be terminated for cause, the Company shall give
      written notice of such termination to the Employee. Such notice shall specify
      the particular act or acts, or failure to act, which is or are the basis for
      the
      decision to so terminate the Employee’s employment for cause.

     

    
      	(b)  	
              Termination
                Without Cause or Termination For Good
                Reason

            

    

     

    The
      Company may terminate the Employee’s employment hereunder without cause and the
      Employee may terminate Employee’s employment hereunder for good reason. If the
      Company terminates the Employee’s employment hereunder without cause, or if the
      Employee terminates Employee’s employment hereunder for good reason, the
      Employment Period shall end and the Employee shall only be entitled to (i)
      any
      Base Salary accrued or annual bonus awarded and earned but not yet paid as
      of
      the actual date of termination of the Employee’s employment with the Company;
      (ii) a lump sum payment in an amount equal to the Employee’s annual Base Salary
      as provided in Section 4(a) above; (iii) continuation of the health and welfare
      benefits of the Employee, Employee’s spouse and their eligible dependents, if
      any, as set forth in Section 4(c) above (except for Disability Insurance),
      or
      the economic equivalent thereof, at the same cost and level in effect on the
      date of termination of the Employee’s employment with the Company for one (1)
      year after such date of termination; and (iv) the right to exercise immediately
      any stock options and to freely trade any restricted stock granted to the
      Employee which, but for such termination, would have become exercisable or
      tradable, as the case may be, within one year of the date of such termination
      without cause or for good reason. Notwithstanding any other provision of this
      Agreement, in addition to the benefits described above, if Employee is
      terminated without cause or terminates his employment for good reason as a
      result of a Change in Control of the Company (including without limitation
      any
      termination within two (2) years of a Change in Control which shall be deemed
      to
      be as a result of a Change in Control) then Employee shall also be entitled
      to a
      lump sum payment in an amount equal to the greater of (i) the Employee’s then
      targeted annual bonus or (ii) the Employee’s targeted annual bonus immediately
      prior to the Change in Control.

     

    If
      the
      Employee’s employment is to be terminated without cause, the Company shall give
      the Employee thirty (30) days prior written notice of its intent to so terminate
      the Employee’s employment. If the Employee intends to terminate Employee’s
      employment for good reason, the Employee agrees to give the Company at least
      thirty (30) days prior written notice.

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    
      	(c)  	
              Termination
                Due to Death or Disability

            

    

     

    The
      Company may terminate the Employee’s employment hereunder due to the Employee’s
      inability to render, for a period of three consecutive months or an aggregate
      of
      any on hundred twenty (120) days within any six (6) month period, services
      hereunder by reason of permanent disability, as determined by the written
      medical opinion of an independent medical physician selected in good faith
      by
      the Company (“Disability”). In the event of the Employee’s death or a
      termination of the Employee’s employment by the Company due to Disability, the
      Employment Period shall end and the Employee, Employee’s estate or Employee’s
      legal representative, as the case may be, shall only be entitled to (i) (a)
      any
      Base Salary accrued or annual bonus awarded and earned but not yet paid as
      of
      the actual date of termination of the Employee’s employment with the Company,
      and (b) any other compensation and benefits as may be provided in accordance
      with the terms and provisions of any applicable plans and programs of the
      Company; and (ii) in the case of Disability, (a) continuation of payment of
      the
      Employee’s Base Salary, as set forth in Section 4(a) above, until the Employee
      commences to receive payments under the Company’s long-term disability plan, (b)
      continuation of the health and welfare benefits of the Employee, Employee’s
      spouse and their eligible dependents, if any, as set forth in Section 4(c)
      above
      (except for Disability Insurance), or the economic equivalent thereof, at the
      same cost and level in effect on the date of termination for one (1) year after
      the date of termination and (c) the right to exercise immediately that
      proportion of the stock options (rounded up to the nearest whole number of
      shares) granted to the Employee which would become exercisable on or before
      the
      May __ immediately following the date of termination of the Employee’s
      employment with the Company due to Disability which is equal to the number
      of
      days worked by the Employee from, but excluding, the May __ immediately
      preceding such termination date to, and including, such termination date divided
      by 365 days.

     

    
      	(d)  	
              Voluntary
                Termination

            

    

     

    The
      Employee may affect a Voluntary Termination of Employee’s employment with the
      Company hereunder. A “Voluntary Termination” shall mean a termination of
      employment by the Employee on Employee’s own initiative other than a termination
      due to death or Disability or a termination for good reason. A Voluntary
      Termination shall not be, and shall not be deemed to be, a breach of this
      Agreement and shall result in the end of the Employment Period and only entitle
      the Employee to all of the rights and benefits which the Employee would be
      entitled in the event of a termination of the Employee’s employment by the
      Company for cause.

     

    
      	(e)  	
              Termination
                by the Company at End of Employment
                Period

            

    

     

    Notwithstanding
      any provision of this Agreement to the contrary, if (a) the Employment Period
      is
      not terminated early under Sections 7(a), 7(b), 7(c) or 7(d) above and (b)
      the
      Company provides written notice to the Employee, pursuant to Section 2 above,
      that it does not wish to extend or further extend the Employment Period, then
      the Employee’s employment with the Company shall end on the last day of the
      Employment Period and the Employee shall be entitled to (x) continuation of
      payment of the Employee’s Base Salary, as provided in Section 4(a) above, as of
      the date of termination of the Employee’s employment with the Company for a
      period equal to (1) one year less the number of days notice given by the Company
      to the Employee that it does not wish to extend or further extend the Employment
      Period (such notice period shall be deemed to commence as of the date of such
      written notice by the Company); (y) continuation of the health and welfare
      benefits of the Employee, Employee’s spouse and their eligible dependents, if
      any, as set forth in 4(c) above (except for Disability Insurance), or the
      economic equivalent thereof, at the same cost and level in effect on the date
      of
      termination of the Employee’s employment with the Company for one (1) year after
      such termination; and (z) the right to exercise immediately any stock options
      and to trade freely any restricted stock granted to the Employee which, but
      for
      such termination, would have become exercisable or freely tradable, as the
      case
      may be, on or before the May __ immediately following the date on which the
      one
      (1) year period referred to the preceding subclause (x) ends; provided, however,
      that the severance payment by the Company to the Employee under subclause (x)
      of
      this Section 7(e) shall be offset on a dollar for dollar basis by any cash,
      or
      the fair market value of any non-cash, remuneration, benefit or other
      entitlement earned, received or receivable by the Employee in connection with
      the employment of such Employee in any capacity, other than dividends, interest
      income or other passive investment income earned as a result of an interest
      in a
      business or entity of which the Employee owns less than 2% of the beneficial
      ownership. If the Employee shall be entitled to any such severance payment
      from
      the Company after the termination of the Employment Period, the Employee shall
      have the obligation to notify the Company of any employment, consultation or
      other activity which may involve any remuneration, benefits or other
      entitlements as described above, and as to which the Company may be entitled
      to
      an offset.

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    
      	8.  	
              SURVIVAL

            

    

     

    The
      rights and obligations of the parties hereunder shall survive the termination
      of
      the Employee’s employment hereunder and the termination of this Agreement to the
      extent necessary to the intended preservation of such rights and
      obligations.

     

    
      	9.  	
              WHOLE
                AGREEMENT AND MODIFICATION

            

    

     

    This
      Agreement, including the “Proprietary
      Information and Inventions Agreement”,
      sets
      forth the entire agreement and understanding of the parties with respect to
      the
      subject matter contained herein, and supersedes all prior and existing
      agreements except as set forth above, whether written or oral, between them
      concerning the subject matter contained herein. This Agreement may be modified
      only by a written agreement executed by each party to this
      Agreement.

     

    
      	10.  	
              NOTICES

            

    

     

    Any
      notice or other communication required or permitted to be given under this
      Agreement shall be in writing and shall be mailed by certified mail, return
      receipt requested, or delivered against receipt to the party to whom it is
      to be
      given at the address of such party set forth above or to such other address
      as
      the party shall have furnished in writing in accordance with this provision.
      Notice to the estate of the Employee shall be sufficient if addressed to the
      Employee in accordance with this provision. Any notice or other communication
      given by certified mail shall be deemed given three (3) days after posting.
      However, a notice changing a party’s address shall be deemed given at the time
      of the receipt of the notice.

     

    
      	11.  	
              WAIVER

            

    

     

    Any
      waiver by either party of a breach of any provision of this Agreement shall
      not
      operate as or be construed to be a waiver of any other breach of such provision
      or of any breach of any other provision of this Agreement. The failure of a
      party to insist upon strict adherence to any term of this Agreement on one
      or
      more occasions shall not be considered a waiver or deprive that party of the
      right thereafter to insist upon strict adherence to that term or any other
      term
      of this Agreement. Any waiver must be in writing, signed by the party giving
      such waiver.

     

    
      	12.  	
              SUCCESSORS

            

    

     

    
      	(a)  	
              Effect
                on Employee

            

    

     

    This
      Agreement is personal to the Employee and, without the prior express written
      consent of the Company, shall not be assignable by the Employee, except that
      the
      Employee’s rights to receive any compensation or benefits under this Agreement
      may be transferred or disposed of pursuant to testamentary disposition,
      intestate succession or pursuant to a domestic relations order of a court of
      competent jurisdiction. This Agreement shall inure to the benefit of and be
      enforceable by the Employee’s heirs, beneficiaries and/or legal
      representatives.

     

    
      	(b)  	
              Effect
                on Company

            

    

     

    This
      Agreement shall inure to the benefit of and be binding on the Company and its
      successors and assigns. The Company shall reasonably require any successor
      to
      all or substantially all of the business and/or assets of the Company, whether
      direct or indirect, by purchase, merger, consolidation, acquisition of stock,
      or
      otherwise, by an agreement in form and substance reasonably satisfactory to
      the
      Employee, expressly to assume and agree to perform this Agreement in the same
      manner and to the same extent as the Company would be required to perform if
      no
      such succession had taken place.

     

    
      	13.  	
              NO
                THIRD PARTY BENEFICIARIES

            

    

     

    This
      Agreement does not create, and shall not be construed as creating, any rights
      enforceable by any person not a party to this Agreement except as provided
      in
      Section 12 of this Agreement.

    
      
        
        

      

      
        
        

        
        

      

      
        
        

      

    

    
      	14.  	
              COUNTERPARTS

            

    

     

    This
      Agreement may be executed in any number of counterparts, each of which shall
      be
      deemed an original, but all of which together shall constitute one and the
      same
      instrument.

     

    
      	15.  	
              GOVERNING
                LAW

            

    

     

    This
      Agreement shall be governed by and construed in accordance with the laws of
      the
      State of Connecticut, without giving effect to the principles of conflict of
      laws thereof.

     

    
      	16.  	
              SEVERABILITY

            

    

     

    The
      invalidity or unenforceability of any provision of this Agreement shall not
      affect the validity or enforceability of any other provision of this
      Agreement.

     

    
      	17.  	
              NO
                VIOLATION OF OUTSTANDING
                AGREEMENT(S)

            

    

     

    Employee
      hereby warrants that the execution of this Agreement and the performance of
      his
      duties hereunder do not and will not violate any agreement with any other person
      or entity.

     

    IN
      WITNESS WHEREOF, the parties have duly executed this Agreement which shall
      be
      effective as of the effective date noted above.

     

    
      
        	 	
                NEUROGEN
                  CORPORATION

              
	 	 
	
                By:

              	
                /s/
                  William H. Koster

              
	 	
                William
                  H. Koster

              
	 	
                President
                  and Chief Executive Officer

              
	 	 
	 	 
	 	
                /s/
                  Bertrand L. Chenard

              
	 	
                Bertrand
                  L. Chenard

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